What changed in this filing

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Item 1A. Risk Factors

2021-04-29 compared with 2021-01-28 · 59 added, 79 removed, 422 unchanged (25% of the section changed)

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The descriptions below include any material changes to and supersede the description of the risk factors affecting our business previously disclosed in "Part I, Item 1A.

Risk Factors" of our Annual Report on Form 10-K for the fiscal year ended June 28, 2020.

Risk Factors" of the 2020 Form 10-K.

If any of the risks described below actually occurs, our business, financial condition or results of operations could be materially and adversely affected.

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Risks related to the effects of COVID-19 and other potential future public health crises, pandemics or similar events.

Our financial condition and results of operations for fiscal 2021 and future periods may be adversely affected by the recent COVID-19 outbreak or other outbreak of infectious disease or similar public health threat.

COVID-19 continues to spread globally and has resulted in authorities implementing numerous measures to try to contain the virus, such as travel bans and restrictions, quarantines, shelter in place orders, and shutdowns.

Our financial condition and results of operations for fiscal 2021 and future periods may be adversely affected by the recent COVID-19 pandemic or other outbreak of infectious disease or similar public health threat.

Although vaccines are becoming increasingly available, COVID-19 continues to spread globally and has resulted in authorities implementing numerous measures to try to contain the virus and the variants of the virus that cause COVID-19, such as travel bans and restrictions, quarantines, shelter in place orders, and shutdowns.

These measures have impacted and may continue to impact our workforce and operations, the operations of our customers, and those of our respective vendors and suppliers.

We have significant manufacturing operations in the United States and China, and each of these countries has been affected by the outbreak and taken measures to try to contain it.

We have significant manufacturing operations in the United States which has been affected by the pandemic and have taken measures to try to contain it.

We have experienced some limited disruptions in supply from some of our suppliers, although the disruptions to date have not been significant.

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Restrictions on access to our manufacturing facilities or on our support operations or workforce, or similar limitations for our vendors and suppliers, and restrictions or disruptions of transportation, such as reduced availability of air transport, port closures, and increased border controls or closures, could limit our capacity to meet customer demand, lead to increased costs and have a material adverse effect on our financial condition and results of operations.

The outbreak has significantly increased economic and demand uncertainty.

The pandemic has significantly increased economic and demand uncertainty.

These uncertainties also make it more difficult for us to assess the quality of our product order backlog and to estimate future financial results.

The current outbreak of COVID-19 has caused an economic slowdown, and it is increasingly likely that its continued spread will lead to a global recession, which could have a material adverse effect on demand for our products and on our financial condition and results of operations.

The COVID-19 pandemic initially caused an economic slowdown, and the continued spread of COVID-19 and its variants could lead to a global recession, which could have a material adverse effect on demand for our products and on our financial condition and results of operations.

The spread of COVID-19 has caused us to modify our business practices (including employee travel, employee work locations, and cancellation of physical participation in meetings, events, and conferences), and we may take further actions as may be required by government authorities or that we determine are in the best interests of our employees, customers, partners, and suppliers.

There is no certainty that such measures will be sufficient to mitigate the risks posed by the virus, and our ability to perform critical functions could be harmed.

In addition, in light of concerns about the spread of COVID-19, our workforce has at times been operating at reduced levels at our manufacturing facilities, which may continue to have an adverse impact on our ability to timely meet future customer orders.

In addition, in light of concerns about the spread of COVID-19 (including the increasing prevalence of its variants), our workforce has at times been operating at reduced levels at our manufacturing facilities, which may continue to have an adverse impact on our ability to timely meet future customer orders.

The duration of the business disruption and related financial impact cannot be reasonably estimated at this time.

However, it may materially affect our ability to obtain raw materials, manage customer credit risk, manufacture products or deliver inventory in a timely manner, and it also may impair our ability to meet customer demand for products, result in lost sales, additional costs, or penalties, or damage our reputation.

The extent to which COVID-19 or any other health epidemic will further impact our results will depend on future developments, which are highly uncertain and cannot be predicted, including new information which may emerge concerning the severity of COVID-19 and the actions to contain COVID-19 or treat its impact, among others.

The extent to which COVID-19, its variants or any other health epidemic will further impact our results will depend on future developments, which are highly uncertain and cannot be predicted, including new information which may emerge concerning the severity of COVID-19, the efficacy and effectiveness of vaccines, and the actions to contain COVID-19 or treat its impact, among others.

Risks related to sales, product development and manufacturing

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In order to manage our growth and business strategy effectively relative to the uncertain pace of adoption, we must continue to:

• maintain, expand, construct and purchase adequate manufacturing facilities and equipment, as well as secure sufficient third-party manufacturing resources, to meet customer demand, including specifically the expansion of our silicon carbide capacity with the construction of a state-of-the-art, automated 200mm capable silicon carbide fabrication facility and a large materials factory;

• manage an increasingly complex supply chain that has the ability to supply an increasing number of raw materials, subsystems and finished products with the required specifications and quality, and deliver on time to our manufacturing facilities, our third-party manufacturing facilities, or our logistics operations;

• expand the capability of our information systems to support a more complex business, such as our current initiative to upgrade our company-wide ERP system;

• maintain, expand, construct and purchase adequate manufacturing facilities and equipment, as well as secure sufficient third-party manufacturing resources, to meet customer demand, including specifically the expansion of our silicon carbide capacity with the construction of a state-of-the-art, automated 200mm capable silicon carbide device fabrication facility and a large materials factory;

• expand the capability of our information systems to support a more complex business, such as our current initiative to implement a new company-wide ERP system;

• be successful in the qualification and acceptance of our new product and systems designs, including those entering into automotive applications which require even more stringent levels of qualification and standards;

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Such investments take time to become fully operational, and we may not be able to expand quickly enough to exploit targeted market opportunities.

For example, we continue converting our remaining Wolfspeed power

production from 100mm to 150mm substrates.

If we are unable to complete this transition in a timely or cost-effective manner, our results could be negatively impacted.

In connection with our efforts to cost-effectively manage our growth, we have increasingly relied on contractors for production capacity, logistics support and certain administrative functions including hosting of certain information technology software applications.

In connection with our efforts to cost-effectively manage our growth,

we have increasingly relied on contractors for production capacity, logistics support and certain administrative functions including hosting of certain information technology software applications.

If our contract manufacturers, original design manufacturers (ODMs) or other service providers do not perform effectively, we may not be able to achieve the expected cost savings and may incur additional costs to correct errors or fulfill customer demand.

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In addition, our ability to convert volume manufacturing to larger diameter substrates can be an important factor in providing a more cost-effective manufacturing process.

We continue converting our remaining Wolfspeed power production from 100mm to 150mm substrates, as well as continue to prepare for production using 200mm substrates.

If we are unable to make this transition in a timely or cost-effective manner, our results could be negatively impacted.

We continue to prepare for production using 200mm substrates and if we are unable to make this transition in a timely or cost-effective manner, our results could be negatively impacted.

Our results of operations, financial condition and business could be harmed if we are unable to balance customer demand and capacity.

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We operate in industries that are subject to significant fluctuation in supply and demand and ultimately pricing that affects our revenue and profitability.

The industries we serve are in different stages of adoption and are characterized by constant and rapid technological change, rapid product obsolescence and price erosion, evolving standards, short product life-cycles in the case of the LED industry and fluctuations in product supply and demand.

The power, RF, and LED industries have experienced, and may in the future experience, significant fluctuations, often in connection with, or in anticipation of, product cycles and changes in general economic conditions.

The power, and RF industries have experienced, and may in the future experience, significant fluctuations, often in connection with, or in anticipation of, product cycles and changes in general economic conditions.

The semiconductor industry is characterized by rapid technological change, high capital expenditures, short product life cycles and continuous advancements in process technologies and manufacturing facilities.

As the markets for our products mature, additional fluctuations may result from variability and consolidations within the industry’s customer base.

These fluctuations have been characterized by lower product demand, production overcapacity, higher inventory levels and increased pricing pressure as currently seen in the LED market.

These fluctuations have been characterized by lower product demand, production overcapacity, higher inventory levels and increased pricing pressure.

These fluctuations have also been characterized by higher demand for key components and equipment used in, or in the manufacture of, our products resulting in longer lead times, supply delays and production disruptions.

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Certain distributors have limited rights to return inventory under stock rotation programs and have limited price protection rights for which we make estimates.

We evaluate inventory levels in the distribution channel, current economic

trends and other related factors in order to account for these factors in our judgments and estimates.

As inventory levels and product return trends change or we make changes to our distributor roster, we may have to revise our estimates and incur additional costs, and our gross margins and operating results could be adversely impacted.

We evaluate inventory levels in the distribution channel, current economic trends and other related factors in order to account for these factors in our judgments and estimates.

As inventory levels and

product return trends change or we make changes to our distributor roster, we may have to revise our estimates and incur additional costs, and our gross margins and operating results could be adversely impacted.

Additionally, our distributors have in the past and may in the future choose to drop our product lines from their portfolio to avoid losing access to our competitors’ products, resulting in a disruption in the project pipeline and lower than targeted sales for our products.

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As competition increases, we need to continue to develop new products that meet or exceed the needs of our customers.

Therefore, our ability to continually produce more efficient and lower cost power, RF and LED products that meet the evolving needs of our customers will be critical to our success.

Therefore, our ability to continually produce more efficient and lower cost power and RF products that meet the evolving needs of our customers will be critical to our success.

Competitors may also try to align with some of our strategic customers.

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Any of these developments could have an adverse effect on our business, results of operations or financial condition.

We will continue to face increased competition in the future across our businesses.

If the investment in capacity exceeds the growth in demand, such as exists in the current LED market, the LED market is likely to become more competitive with additional pricing pressures.

Additionally, new technologies could emerge or improvements could be made in existing technologies that may also reduce the demand for LEDs in certain markets.

We depend on a limited number of customers, including distributors, for a substantial portion of our revenue, and the loss of, or a significant reduction in purchases by, one or more of these customers could adversely affect our operating results.

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Additionally, general shortages in the marketplace of certain raw materials or key components may adversely impact our business.

In the past, we have

experienced decreases in our production yields when suppliers have varied from previously agreed upon specifications or made other modifications we do not specify, which impacted our cost of revenue.

In the past, we have experienced decreases in our production yields when suppliers have varied from previously agreed upon specifications or made other modifications we do not specify, which impacted our cost of revenue.

Additionally, the inability of our suppliers to access capital efficiently could cause disruptions in their businesses, thereby negatively impacting ours.

This risk may increase if an economic downturn negatively affects key suppliers or a significant number of our other suppliers.

Any delay in product delivery or other interruption or variation in supply from these suppliers could prevent us from meeting commercial demand for our products.

Any delay in product delivery or other interruption or variation in supply from these suppliers

could prevent us from meeting commercial demand for our products.

If we were to lose key suppliers, if our key suppliers were unable to support our demand for any reason or if we were unable to identify and qualify alternative suppliers, our manufacturing operations could be interrupted or hampered significantly.

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We may also be adversely affected by an increase in freight surcharges due to rising fuel costs and added security.

The risks mentioned above, including our sole source or limited source suppliers' ability to produce products and adequately access capital, and our ability to arrange effective shipping arrangements, may further increase due to the COVID-19 pandemic.

In our fabrication process, we consume a number of precious metals and other commodities, which are subject to high price volatility.

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A significant product recall could also result in adverse publicity, damage to our reputation and a loss of customer or consumer confidence in our products.

We also may be the target of product liability lawsuits or regulatory proceedings by the Consumer Product Safety Commission (CPSC) and could suffer losses from a significant product liability judgment or adverse CPSC finding against us if the use of our products at issue is determined to have caused injury or contained a substantial product hazard.

We provide warranty periods ranging from 90 days to 5.5 years on our products.

We also may be the target of product liability lawsuits against us if the use of our products at issue is determined to have caused injury or contained a substantial product hazard.

We provide standard warranty periods of 90 days on our products with longer periods under a limited number of customer contracts.

Although we believe our reserves are appropriate, we are making projections about the future reliability of new products and technologies, and we may experience increased variability in warranty claims.

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Export Administration Act.

For example, on May 15, 2019, the Bureau of Industry and Security (BIS) of the U.S.

Department of Commerce added Huawei to the “Entity List” maintained by the U.S.

Department of Commerce, which imposes limitations on the supply of certain United States items and product support to Huawei.

To comply with the Entity List restrictions, we suspended shipments of all products to Huawei and cannot predict when we will be able to resume such shipments, which has reduced our revenue and profit in at least the near term and increased our inventories of product intended for Huawei.

Government maintains the restrictions on Huawei or imposes restrictions on sales to other foreign customers, as it did in October 2019 with the addition of 28 new companies to the Entity List and has continued to do so through several Entity Listings and other sanctions since then, it will

reduce company revenue and profit related to those customers at least in the short term and could have a potential longer-term impact.

In the second quarter of fiscal 2020, we recorded an $8.3 million reserve on inventory manufactured for Huawei.

Additionally, like many global manufacturers, we continue to evaluate and address the short-term and potential long-term impact of the recent change to the United States foreign direct product rule, military end-use restrictions, changes in export licensing policies, and tariffs imposed on Chinese goods and any corresponding Chinese regulations or tariffs in response.

If we fail to comply with these laws and regulations, we could be liable for administrative, civil or criminal liabilities, and, in the extreme case, we could be suspended or debarred from government contracts or have our export privileges suspended, which could have a material adverse effect on our business.

The U.S Government has imposed, and in the future may impose, restrictions on shipments to some of our current customers.

Government restrictions on sales to certain foreign customers will reduce company revenue and profit related to those customers in the short term and could have a potential long-term impact.

International sales and purchases are also subject to a variety of other risks, including risks arising from currency fluctuations, collection issues and taxes.

We have entered into and may in the future enter into foreign currency derivative financial instruments in an effort to manage or hedge some of our foreign exchange rate risk.

We may in the future enter into foreign currency derivative financial instruments in an effort to manage or hedge some of our foreign exchange rate risk.

We may not be able to engage in hedging transactions in the future, and, even if we do, foreign currency fluctuations may still have a material adverse effect on our results of operations.

Our operations in foreign countries expose us to certain risks inherent in doing business internationally, which may adversely affect our business, results of operations or financial condition.

We have revenue, operations, manufacturing facilities and contract manufacturing arrangements in foreign countries that expose us to certain risks.

We have revenue, operations and contract manufacturing arrangements in foreign countries that expose us to certain risks.

For example, fluctuations in exchange rates may affect our revenue, expenses and results of operations as well as the value of our assets and liabilities as reflected in our financial statements.

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• the burden of complying with foreign and international laws and treaties.

For example, the United States tariffs imposed on Chinese goods, among other potential countries and any corresponding tariffs from China or such other countries in response has, and may in the future, negatively impact demand and/or increase the costs for our products.

For example, the United States has imposed significant tariffs on Chinese-made goods, which the Biden administration has indicated will remain in place.

The tariffs imposed on Chinese goods, among other potential countries and any corresponding tariffs from China or such other countries in response has, and may in the future, negatively impact demand and/or increase the costs for our products.

In some instances, we have received and may continue to receive incentives from foreign governments to encourage our investment in certain countries, regions or areas outside of the United States.

In particular, we have received and may continue to receive such incentives in connection with our operations in Asia, as Asian national and local governments seek to encourage the development of the technology industry.

Government incentives may include tax rebates, reduced tax rates, favorable lending policies and other measures, some or all of which may be available to us due to our foreign operations.

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Changes in regulatory, geopolitical, social, economic, or monetary policies and other factors, including those which may result from the Biden administration and Democratic control of Congress, if any, may have a material adverse effect on our business in the future, or may require us to exit a particular market or significantly modify our current business practices.

For example, President-elect Biden has suggested the reversal or modification of some portions of the Tax Cuts and Jobs Act of 2017 (“TCJA”) and certain of these proposals, if enacted, could result in a higher U.S.

For example, President Biden has suggested the reversal or modification of a number of provisions in the Tax Cuts and Jobs Act of 2017 (TCJA) and certain of these proposals, if enacted, would result in a higher U.S.

corporate income tax rate than is currently in effect.

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We are subject to a number of risks associated with the sale of our LED Products segment, and these risks could adversely impact our operations, financial condition and business.

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

On March 1, 2021, we completed the sale of our former LED Products segment to SMART pursuant to the Asset Purchase Agreement dated October 18, 2021 (the Purchase Agreement).

We are subject to a number of risks associated with this transaction, including risks associated with:

• the failure to satisfy, on a timely basis or at all, the closing conditions set forth in the Purchase Agreement, including the receipt of governmental and regulatory consents and approvals;

• the separation of the LED Business, and related information technology, from the businesses we are retaining and the operation of our retained business without the LED Business;

• issues, delays or complications in completing required transition activities to allow the LED Business to operate under the SMART portfolio of businesses after the closing, including incurring unanticipated costs to complete such activities;

• unfavorable reaction to the sale by customers, competitors, suppliers and employees;

• the disruption to and uncertainty in our business and our relationships with our customers, including attempts by our customers to terminate or renegotiate their relationships with us or decisions by our customers to defer or delay purchases from us;

• difficulties in hiring, retaining and motivating key personnel during this process or as a result of uncertainties generated by this process or any developments or actions relating to it;

• the diversion of our management’s attention away from the operation of the business we are retaining;

• the need to incur significant transaction costs in connection with the transaction, regardless of whether it is completed;

• the restrictions on and obligations with respect to our business set forth in the Purchase Agreement and, following closing, the transition services agreement and the Wafer Supply Agreement, in each case between us and SMART;

• the need to provide transition services in connection with the transaction, which may result in the diversion of resources and focus;

• our failure to realize the full purchase price anticipated under the Purchase Agreement, including the ability of the LED Business to generate revenue and gross profit in the first four full fiscal quarters following the closing sufficient to result in payment of the targeted earnout payment or any earnout payment;

• the ability of SMART to pay the unsecured promissory note to be issued to us at the closing of the transaction and any additional unsecured promissory notes issued upon achievement of the general revenue and gross profit targets.

• the restrictions on and obligations with respect to our business set forth in the transition services agreement and the Wafer Supply Agreement, in each case between us and CreeLED;

• the need to provide transition services in connection with the transaction;

• any required payments of indemnification obligations under the Purchase Agreement for retained liabilities and breaches of representations, warranties or covenants;

• our failure to realize the full purchase price anticipated under the Purchase Agreement, including the ability of the LED Business to generate revenue and gross profit in the first four full fiscal quarters following the closing (the Earnout Period) sufficient to result in payment of the targeted earnout payment;

• the ability of SMART to pay the unsecured promissory note issued to us at the closing of the transaction and the additional unsecured promissory notes to be issued following the end of the Earnout Period.

As a result of these risks, we may be unable to realize the anticipated benefits of the transaction, including the total amount of cash we expect to realize.

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We are subject to a number of risks associated with this transaction, including risks associated with:

• the restrictions on and obligations with respect to our remaining businesses following closing set forth in the transition services agreement and the LED supply agreement, in each case between us and IDEAL, including the need to provide

transition services in connection with the transaction, which may result in the diversion of resources and focus from our remaining businesses;

• issues, delays, complications and/or additional costs associated with the transition of the operations, systems, technology infrastructure and data, third-party contracts, and personnel of the Lighting Products business unit and provision of transition services, each, as applicable, within the term of the transition services agreement;

• any required payments of indemnification obligations under the Purchase Agreement with IDEAL for retained liabilities and breaches of representations, warranties or covenants;

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From time to time, including the present, we evaluate strategic opportunities available to us for product, technology or business transactions, such as business acquisitions, investments, joint ventures, divestitures, or spin-offs.

For example, in the fourth quarter of fiscal 2019, we completed the sale of our Lighting Products business unit to IDEAL and in the second quarter of fiscal 2021 we entered into the Purchase Agreement with SMART with respect to the LED Business Divestiture.

For example, in the fourth quarter of fiscal 2019, we completed the sale of our Lighting Products business unit to IDEAL and in the third quarter of fiscal 2021, we completed the sale of our LED Business segment to SMART.

If we choose to enter into such transactions, we face certain risks including:

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• identification of additional liabilities relating to an acquired business;

• loss of existing customers of our current and acquired businesses due to concerns that new product lines may be in competition with the customers’ existing product lines or due to regulatory actions taken by governmental agencies;

• loss of existing customers of our current and acquired businesses due to regulatory actions taken by governmental agencies;

• that we are not able to enter into acceptable contractual arrangements with the significant customers of an acquired business;

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From time to time, we have also made investments in public and private companies that engage in complementary businesses.

For example, during fiscal 2015 we made an investment in Lextar, previously a publicly traded company based in Taiwan.

An investment in another company is subject to the risks inherent in the business of that company and to trends affecting the equity markets as a whole.

Investments in publicly held companies are subject to market risks and, like our investment in Lextar, may not be liquidated easily.

As a result, we may not be able to reduce the size of our position or liquidate our investments when we deem appropriate to limit our downside risk.

Should the value of any such investments we hold decline, the related write-down in value could have a material adverse effect on our financial condition and results of operations.

For example, the value of our Lextar investment declined from the date of our investment in December 2014 through the end of the second quarter of fiscal 2021 with variability between quarters, and may continue to decline in the future.

Risks associated with cybersecurity, intellectual property and litigation

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The theft and/or unauthorized use or publication of our trade secrets and other confidential business information as a result of such an incident could adversely affect our competitive position and the value of our investment in research and development could be reduced.

In addition, as a result of the COVID-19 pandemic, the increased prevalence of employees working from home may exacerbate the aforementioned cybersecurity risks.

Our business could be subject to significant disruption and we could suffer monetary or other losses.

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We periodically discover products that are counterfeit reproductions of our products or that otherwise infringe on our intellectual property rights.

The actions we take to establish and protect trademarks, patents and other intellectual property

rights may not be adequate to prevent imitation of our products by others, and therefore, may adversely affect our sales and our brand and result in the shift of customer preference away from our products.

The actions we take to establish and protect trademarks, patents and other intellectual property rights may not be adequate to prevent imitation of our products by others, and therefore, may adversely affect our sales and our brand and result in the shift of customer preference away from our products.

Further, the actions we take to establish and protect trademarks, patents and other intellectual property rights could result in significant legal expense and divert the efforts of our technical personnel and management, even if the litigation or other action results in a determination favorable to us.

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Goodwill is reviewed for impairment annually and when events or changes in circumstances indicate that the carrying value of an asset may not be recoverable.

We assess the recoverability of the unamortized balance of our finite-lived intangible assets

when indicators of potential impairment are present.

We assess the recoverability of the unamortized balance of our finite-lived intangible assets when indicators of potential impairment are present.

Factors that may indicate that the carrying value of our goodwill or other intangible assets may not be recoverable include a decline in our stock price and market capitalization and slower growth rates in our industry.

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• the jurisdiction in which profits are determined to be earned and taxed;

• potential changes in tax laws proposed by the incoming Biden administration and Democratic controlled Congress or alterations in the interpretation of such tax laws and changes in generally accepted accounting principles, for example interpretations and U.S.

• potential changes in tax laws proposed by the Biden administration and Democratic controlled Congress or alterations in the interpretation of such tax laws and changes in generally accepted accounting principles, for example interpretations and U.S.

regulations issued as a result of the significant changes to the U.S.

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In addition, the determination of our income tax provision requires complex estimations, significant judgments and significant knowledge and experience concerning the applicable tax laws.

To the extent our income tax liability materially differs from our income tax provisions due to factors, including the above, which were not anticipated at the time we estimated our tax provision, our net (loss) income or cash flows could be affected.

To the extent our income tax liability materially differs from our

income tax provisions due to factors, including the above, which were not anticipated at the time we estimated our tax provision, our net (loss) income or cash flows could be affected.

Failure to comply with applicable environmental laws and regulations worldwide could harm our business and results of operations.

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Our results could vary as a result of the methods, estimates and judgments that we use in applying our accounting policies, including changes in the accounting standards to be applied.

The methods, estimates and judgments that we use in applying our accounting policies have a significant impact on our results (see “Critical Accounting Policies and Estimates” in Item 7, "Management’s Discussion and Analysis of Financial Condition and Results of Operations").

Such methods, estimates and judgments are, by their nature, subject to substantial risks, uncertainties and assumptions, and factors may arise over time that lead us to change our methods, estimates and judgments.

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Historically, our common stock has experienced substantial price volatility, particularly as a result of significant fluctuations in our revenue, earnings and margins over the past few years, and variations between our actual financial results and the published expectations of analysts.

For example, the closing price per share of our common stock on the Nasdaq Global Select Market ranged from a low of $29.15 to a high of $104.83 during the twelve months ended December 27, 2020.

For example, the closing price per share of our common stock on the Nasdaq Global Select Market ranged from a low of $31.45 to a high of $128.28 during the twelve months ended March 28, 2021.

If our future operating results or margins are below the expectations of stock market analysts or our investors, our stock price will likely decline.

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We have outstanding debt which could materially restrict our business and adversely affect our financial condition, liquidity and results of operations.

As of December 27, 2020, our indebtedness consisted of $424.8 million aggregate principal amount of our 2023 Notes and $575.0 million aggregate principal amount of our 2026 Notes (collectively with the 2023 Notes, the Notes) and potential borrowings from our revolving line of credit.

As of March 28, 2021, our indebtedness consisted of $424.8 million aggregate principal amount of our 2023 Notes and $575.0 million aggregate principal amount of our 2026 Notes (collectively with the 2023 Notes, the Notes) and potential borrowings from our revolving line of credit.

Our ability to pay interest and repay the principal for any outstanding indebtedness under our line of credit and the Notes is dependent upon our ability to manage our business operations and generate sufficient cash flows to service such debt.

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The restrictions imposed by our line of credit and by the Indentures governing our Notes could limit our ability to plan for or react to changing business conditions, or could otherwise restrict our business activities and plans.

Our ability to comply with our loan covenants and the provisions of the Indentures governing our Notes may also be affected by events beyond our control and if any of these restrictions or terms is breached, it could lead to an event of default under our line of credit or the Notes.

of credit or the Notes.

A default, if not cured or waived, may permit acceleration of our indebtedness.

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If our indebtedness is accelerated, we cannot be certain that we will have sufficient funds to pay the accelerated indebtedness or that we will have the ability to refinance accelerated indebtedness on terms favorable to us or at all.

Our amended and restated bylaws provide that, unless we consent in writing to the selection of an alternative forum, the state courts of North Carolina will be the sole and exclusive forum for substantially all disputes between us and our shareholders, which could limit our shareholders’ ability to obtain a favorable judicial forum for disputes with us or our directors, officers, or employees or agents.

Our amended and restated bylaws provide that, unless we consent in writing to the selection of an alternative forum, the sole and exclusive forum for all litigation relating to our internal affairs, including without limitation (i) any derivative action or proceeding brought on behalf of Cree, (ii) any action asserting a claim of breach of a fiduciary duty owed by any director, officer or other employee of Cree to Cree or our shareholders, (iii) any action asserting a claim arising pursuant to any provision of the North Carolina Business Corporation Act (the NCBCA), our restated articles of incorporation, as amended, or our amended and restated bylaws, or (iv) any action asserting a claim governed by the internal affairs doctrine, shall be the state courts of North Carolina, or if such courts lack jurisdiction, a federal court located within the State of North Carolina, in all cases subject to the court’s having personal jurisdiction over the indispensable parties named as defendants.

Any such action filed in a North Carolina state court shall be designated by the party filing the action as a mandatory complex business case.

In any such action where the NCBCA specifies the division or county wherein the action must be brought, the action shall be brought in such division or county.

If a court were to find the choice of forum provision contained in our amended and restated bylaws to be inapplicable or unenforceable in an action, we may incur additional costs associated with resolving such action in other jurisdictions, which could harm our business, results of operations, and financial condition.

Even if we are successful in defending against these claims, litigation could result in substantial costs and be a distraction to management and other employees.

Unregistered Sales of Equity Securities and Use of Proceeds

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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 1A. Risk Factors