WOLF filing — read by section

Item 1. Financial Statements

Item 1. Financial Statements (Unaudited) 
 
 Consolidated Balance Sheets as of March 28, 2021 and June 28, 2020 
 4 
 
 Consolidated Statements of Operations for the three and nine months ended March 28, 2021 and March 29, 2020 
 5 
 
 Consolidated Statements of Comprehensive Loss for the three and nine months ended March 28, 2021 and March 29, 2020 
 6 
 
 Consolidated Statements of Shareholders' Equity for the nine months ended March 28, 2021 and March 29, 2020 
 7 
 
 Consolidated Statements of Cash Flows for the nine months ended March 28, 2021 and March 29, 2020 
 9 
 
 Notes to Unaudited Consolidated Financial Statements 
 10 
 

 
 
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 CREE, INC. 
 UNAUDITED CONSOLIDATED BALANCE SHEETS 
 
 in millions of U.S. Dollars, except share data in thousands March 28, 2021 June 28, 2020 
 Assets 
 Current assets: 
 Cash and cash equivalents $ 531.6 $ 448.8 
 Short-term investments 761.7 790.9 
 Total cash, cash equivalents and short-term investments 1,293.3 1,239.7 
 Accounts receivable, net 84.1 72.4 
 Inventories 147.5 121.9 
 Income taxes receivable 9.1 6.6 
 
 Prepaid expenses 23.8 26.2 
 Other current assets 38.5 8.7 
 Current assets held for sale 2.0 1.3 
 Current assets of discontinued operations — 116.0 
 Total current assets 1,598.3 1,592.8 
 Property and equipment, net 1,165.1 770.8 
 Goodwill 359.2 349.7 
 Intangible assets, net 144.6 156.9 
 Long-term receivables 137.8 — 
 Other long-term investments 67.2 55.9 
 Deferred tax assets 1.2 1.2 
 Other assets 33.0 33.6 
 Long-term assets of discontinued operations 1.3 270.1 
 Total assets $ 3,507.7 $ 3,231.0 
 
 Liabilities and Shareholders' Equity 
 Current liabilities: 
 Accounts payable and accrued expenses $ 319.5 $ 189.8 
 Accrued contract liabilities 24.5 14.2 
 Income taxes payable — 1.2 
 Finance lease liabilities 0.4 3.6 
 Other current liabilities 37.8 22.2 
 Current liabilities of discontinued operations 0.6 60.2 
 Total current liabilities 382.8 291.2 
 Long-term liabilities: 
 
 Convertible notes, net 813.7 783.8 
 Deferred tax liabilities 2.3 1.8 
 Finance lease liabilities - long-term 10.1 11.4 
 Other long-term liabilities 51.1 43.8 
 Long-term liabilities of discontinued operations 0.7 9.8 
 Total long-term liabilities 877.9 850.6 
 Commitments and contingencies 
 Shareholders’ equity: 
 Preferred stock, par value $ 0.01 ; 3,000 shares authorized at March 28, 2021 and June 28, 2020; none issued and outstanding 
 — — 
 Common stock, par value $ 0.00125 ; 200,000 shares authorized at March 28, 2021 and June 28, 2020; 115,425 and 109,230 shares issued and outstanding at March 28, 2021 and June 28, 2020, respectively 
 0.1 0.1 
 Additional paid-in-capital 3,658.9 3,106.2 
 Accumulated other comprehensive income 3.5 16.0 
 Accumulated deficit ( 1,415.5 ) ( 1,039.2 ) 
 Total shareholders’ equity 2,247.0 2,083.1 
 Noncontrolling interest from discontinued operations — 6.1 
 Total equity 2,247.0 2,089.2 
 Total liabilities and shareholders’ equity $ 3,507.7 $ 3,231.0 

 The accompanying notes are an integral part of the consolidated financial statements 
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 CREE, INC. 
 UNAUDITED CONSOLIDATED STATEMENTS OF OPERATIONS 
 
 
 Three months ended Nine months ended 
 March 28, 2021 March 29, 2020 March 28, 2021 March 29, 2020 
 in millions of U.S. Dollars, except share data 
 Revenue, net $ 137.3 $ 113.9 $ 379.8 $ 362.3 
 Cost of revenue, net 93.3 72.6 259.0 232.9 
 Gross profit 44.0 41.3 120.8 129.4 
 Operating expenses: 
 Research and development 46.0 38.6 132.7 112.5 
 Sales, general and administrative 44.2 41.7 135.0 135.7 
 Amortization or impairment of acquisition-related intangibles 3.7 3.7 10.9 10.9 
 Loss on disposal or impairment of other assets 0.1 0.1 0.8 1.7 
 
 
 Other operating expense 11.4 5.2 22.6 22.2 
 
 Operating loss ( 61.4 ) ( 48.0 ) ( 181.2 ) ( 153.6 ) 
 Non-operating expense, net 8.1 14.7 18.9 8.1 
 Loss before income taxes ( 69.5 ) ( 62.7 ) ( 200.1 ) ( 161.7 ) 
 Income tax benefit ( 3.0 ) ( 6.5 ) ( 4.0 ) ( 8.3 ) 
 Net loss from continuing operations ( 66.5 ) ( 56.2 ) ( 196.1 ) ( 153.4 ) 
 Net (loss) income from discontinued operations ( 41.6 ) ( 3.7 ) ( 178.8 ) 1.7 
 Net loss ( 108.1 ) ( 59.9 ) ( 374.9 ) ( 151.7 ) 
 Net income from discontinued operations attributable to noncontrolling interest 0.8 0.2 1.4 0.5 
 Net loss attributable to controlling interest ($ 108.9 ) ($ 60.1 ) ($ 376.3 ) ($ 152.2 ) 
 
 Basic and diluted loss per share 
 Continuing operations ($ 0.59 ) ($ 0.52 ) ($ 1.75 ) ($ 1.42 ) 
 
 Net loss attributable to controlling interest ($ 0.96 ) ($ 0.56 ) ($ 3.35 ) ($ 1.41 ) 
 
 
 
 
 
 
 Weighted average shares - basic and diluted (in thousands) 112,891 108,115 112,330 107,718 
 
 
 

 The accompanying notes are an integral part of the consolidated financial statements 
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 CREE, INC. 
 UNAUDITED CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS 
 
 
 
 Three months ended Nine months ended 
 (in millions of U.S. Dollars) March 28, 2021 March 29, 2020 March 28, 2021 March 29, 2020 
 Net loss ($ 108.1 ) ($ 59.9 ) ($ 374.9 ) ($ 151.7 ) 
 Other comprehensive loss: 
 Reclassification of currency translation gain to loss on sale of discontinued operations ( 9.5 ) — ( 9.5 ) — 
 Net unrealized loss on available-for-sale securities ( 2.5 ) ( 1.9 ) ( 3.0 ) ( 1.7 ) 
 
 Comprehensive loss ( 120.1 ) ( 61.8 ) ( 387.4 ) ( 153.4 ) 
 Net income from discontinued operations attributable to noncontrolling interest 0.8 0.2 1.4 0.5 
 Comprehensive loss attributable to controlling interest ($ 120.9 ) ($ 62.0 ) ($ 388.8 ) ($ 153.9 ) 

 The accompanying notes are an integral part of the consolidated financial statements 
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 CREE, INC. 
 UNAUDITED CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY 
 
 Common Stock Additional Paid-in Capital Accumulated Deficit Accumulated Other Comprehensive Income Total Equity - Controlled Interest Non-controlling Interest from Discontinued Operations Total Equity 
 (in millions of U.S Dollars, except share data) Number of Shares Par Value 
 Balance at June 28, 2020 109,230 $ 0.1 $ 3,106.2 ($ 1,039.2 ) $ 16.0 $ 2,083.1 $ 6.1 $ 2,089.2 
 Net loss — — — ( 184.4 ) — ( 184.4 ) 0.3 ( 184.1 ) 
 
 Unrealized gain on available-for-sale securities — — — — — — — — 
 Comprehensive loss ( 184.4 ) 0.3 ( 184.1 ) 
 Tax withholding on vested equity awards — — ( 22.7 ) — — ( 22.7 ) — ( 22.7 ) 
 
 Stock-based compensation — — 16.2 — — 16.2 — 16.2 
 Exercise of stock options and issuance of shares 1,066 — 16.5 — — 16.5 — 16.5 
 
 
 
 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 — — — ( 83.0 ) — ( 83.0 ) 0.3 ( 82.7 ) 
 
 Unrealized loss on available-for-sale securities — — — — ( 0.5 ) ( 0.5 ) — ( 0.5 ) 
 Comprehensive (loss) income ( 83.5 ) 0.3 ( 83.2 ) 
 Tax withholding on vested equity awards — — ( 1.6 ) — — ( 1.6 ) — ( 1.6 ) 
 
 Stock-based compensation — — 18.6 — — 18.6 — 18.6 
 Exercise of stock options and issuance of shares 681 — 22.7 — — 22.7 — 22.7 
 
 
 
 Balance at December 27, 2020 110,977 $ 0.1 $ 3,155.9 ($ 1,306.6 ) $ 15.5 $ 1,864.9 $ 6.7 $ 1,871.6 
 Net (loss) income — — — ( 108.9 ) — ( 108.9 ) 0.8 ( 108.1 ) 
 Reclassification of currency translation gain to loss on sale of discontinued operations — — — — ( 9.5 ) ( 9.5 ) — ( 9.5 ) 
 Unrealized loss on available-for-sale securities — — — — ( 2.5 ) ( 2.5 ) — ( 2.5 ) 
 Comprehensive (loss) income ( 120.9 ) 0.8 ( 120.1 ) 
 Tax withholding on vested equity awards — — ( 7.4 ) — — ( 7.4 ) — ( 7.4 ) 
 
 Stock-based compensation — — 19.5 — — 19.5 — 19.5 
 Exercise of stock options and issuance of shares 225 — 1.8 — — 1.8 — 1.8 
 
 Issuance of shares under the at-the-market offering program, net of issuance costs 4,223 — 489.1 — — 489.1 — 489.1 
 Reclassification of noncontrolling interest to loss on sale of discontinued operations — — — — — — ( 7.5 ) ( 7.5 ) 
 Balance at March 28, 2021 115,425 $ 0.1 $ 3,658.9 ($ 1,415.5 ) $ 3.5 $ 2,247.0 $ — $ 2,247.0 

 The accompanying notes are an integral part of the consolidated financial statements 
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 CREE, INC. 
 UNAUDITED CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY 
 
 
 
 Common Stock Additional Paid-in Capital Accumulated Deficit Accumulated Other Comprehensive Income Total Equity - Controlled Interest Non-controlling Interest from Discontinued Operations Total Equity 
 (in millions of U.S. Dollars, except share data) Number of Shares Par Value 
 Balance at June 30, 2019 106,570 $ 0.1 $ 2,874.1 ($ 847.5 ) $ 9.5 $ 2,036.2 $ 5.0 $ 2,041.2 
 Net loss — — — ( 37.8 ) — ( 37.8 ) — ( 37.8 ) 
 
 Unrealized gain on available-for-sale securities — — — — 0.5 0.5 — 0.5 
 Comprehensive loss ( 37.3 ) — ( 37.3 ) 
 Tax withholding on vested equity awards — — ( 14.3 ) — — ( 14.3 ) — ( 14.3 ) 
 
 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 September 29, 2019 107,697 $ 0.1 $ 2,895.8 ($ 885.3 ) $ 10.0 $ 2,020.6 $ 5.0 $ 2,025.6 
 Net (loss) income — — — ( 54.3 ) — ( 54.3 ) 0.3 ( 54.0 ) 
 
 Unrealized loss on available-for-sale securities — — — — ( 0.3 ) ( 0.3 ) — ( 0.3 ) 
 Comprehensive (loss) income ( 54.6 ) 0.3 ( 54.3 ) 
 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 ($ 939.6 ) $ 9.7 $ 1,989.7 $ 5.3 $ 1,995.0 
 Net (loss) income — — — ( 60.1 ) — ( 60.1 ) 0.2 ( 59.9 ) 
 
 Unrealized loss on available-for-sale securities — — — — ( 1.9 ) ( 1.9 ) — ( 1.9 ) 
 Comprehensive (loss) income ( 62.0 ) 0.2 ( 61.8 ) 
 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 
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 CREE, INC. 
 UNAUDITED CONSOLIDATED STATEMENTS OF CASH FLOWS 
 
 Nine months ended 
 (in millions of U.S. Dollars) March 28, 2021 March 29, 2020 
 Operating activities: 
 Net loss ($ 374.9 ) ($ 151.7 ) 
 Net (loss) income from discontinued operations ( 178.8 ) 1.7 
 Net loss from continuing operations ( 196.1 ) ( 153.4 ) 
 Adjustments to reconcile net loss from continuing operations to net cash used in operating activities: 
 Depreciation and amortization 88.6 73.7 
 Amortization of debt issuance costs and discount, net of capitalized interest 26.1 17.2 
 
 Stock-based compensation 40.3 36.9 
 
 
 
 Loss on disposal or impairment of long-lived assets 3.7 1.7 
 Amortization of premium/discount on investments 4.9 0.5 
 Realized gain on sale of investments ( 0.3 ) ( 1.0 ) 
 (Gain) loss on equity investment ( 7.9 ) 9.2 
 Foreign exchange gain on equity investment ( 3.4 ) ( 1.2 ) 
 Deferred income taxes 0.5 ( 0.8 ) 
 Changes in operating assets and liabilities: 
 Accounts receivable, net ( 11.7 ) ( 31.7 ) 
 Inventories ( 25.4 ) 2.2 
 Prepaid expenses and other assets ( 28.2 ) 0.9 
 Accounts payable, trade 27.2 ( 6.3 ) 
 Accrued salaries and wages and other liabilities 12.5 ( 18.7 ) 
 Accrued contract liabilities 10.3 5.9 
 Net cash used in operating activities of continuing operations ( 58.9 ) ( 64.9 ) 
 Net cash (used in) provided by operating activities of discontinued operations ( 16.6 ) 25.4 
 Cash used in operating activities ( 75.5 ) ( 39.5 ) 
 Investing activities: 
 Purchases of property and equipment ( 394.0 ) ( 166.9 ) 
 Purchases of patent and licensing rights ( 3.6 ) ( 2.8 ) 
 Proceeds from sale of property and equipment 0.2 1.8 
 Purchases of short-term investments ( 342.1 ) ( 421.2 ) 
 Proceeds from maturities of short-term investments 335.6 342.5 
 Proceeds from sale of short-term investments 28.1 96.4 
 
 Proceeds from sale of business, net 36.6 — 
 
 Net cash used in investing activities of continuing operations ( 339.2 ) ( 150.2 ) 
 Net cash used in investing activities of discontinued operations ( 0.3 ) ( 2.0 ) 
 Cash used in investing activities ( 339.5 ) ( 152.2 ) 
 Financing activities: 
 
 
 Proceeds from long-term debt borrowings 30.0 — 
 Payments on long-term debt borrowings, including finance lease obligations ( 30.3 ) ( 0.4 ) 
 Proceeds from issuance of common stock 530.1 31.0 
 Tax withholding on vested equity awards ( 31.7 ) ( 16.2 ) 
 
 
 
 Commitment fee on long-term incentive agreement ( 0.5 ) — 
 
 
 Cash provided by financing activities 497.6 14.4 
 Effects of foreign exchange changes on cash and cash equivalents 0.2 ( 0.2 ) 
 Net change in cash and cash equivalents 82.8 ( 177.5 ) 
 Cash and cash equivalents, beginning of period 448.8 500.5 
 Cash and cash equivalents, end of period $ 531.6 $ 323.0 
 
 
 

 The accompanying notes are an integral part of the consolidated financial statements 
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 CREE, INC. 
 NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS 
 
 
 
 
 
 
 Note 1 
 Basis of Presentation and New Accounting Standards 
 11 
 
 Note 2 
 Discontinued Operations 
 13 
 
 Note 3 
 Revenue Recognition 
 15 
 
 Note 4 
 Leases 
 16 
 
 Note 5 
 Financial Statement Details 
 18 
 
 Note 6 
 Investments 
 21 
 
 Note 7 
 Fair Value of Financial Instruments 
 23 
 
 Note 8 
 Goodwill and Intangible Assets 
 24 
 
 Note 9 
 Long-term Debt 
 25 
 
 Note 10 
 Loss Per Share 
 28 
 
 Note 11 
 Stock-Based Compensation 
 28 
 
 Note 12 
 Income Taxes 
 30 
 
 Note 13 
 Commitments and Contingencies 
 31 
 
 
 Note 14 
 Restructuring 
 31 
 
 Note 15 
 Shareholders' Equity 
 32 
 
 Note 16 
 Subsequent Events 
 32 
 

 
 
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 Note 1 – Basis of Presentation and New Accounting Standards 
 Overview 
 Cree, Inc. (the Company) is an innovator of wide bandgap semiconductors, focused on silicon carbide and gallium nitride (GaN) materials and devices for power and radio-frequency (RF) applications. The Company's silicon carbide and GaN materials and devices are targeted for applications such as transportation, power supplies, inverters and wireless systems. 
 Previously, the Company designed, manufactured and sold specialty lighting-class light emitting diode (LED) products targeted for use in indoor and outdoor lighting, electronic signs and signals and video displays. As discussed more fully below in Note 2, “Discontinued Operations,” on March 1, 2021, the Company completed its previously announced sale of certain assets and subsidiaries comprising its former LED Products segment to SMART Global Holdings, Inc. (SGH) and its wholly owned newly-created acquisition subsidiary CreeLED, Inc. (CreeLED and collectively with SGH, SMART) for up to $ 300 million, including fixed upfront and deferred payments and contingent consideration (the LED Business Divestiture). 
 As a result, the Company has classified the results and cash flows of the former LED Products segment as discontinued operations in its consolidated statements of operations and consolidated statements of cash flows for all periods presented. Additionally, the related assets and liabilities associated with the discontinued operations are classified as held for sale as of June 28, 2020 in the consolidated balance sheets. Unless otherwise noted, discussion within these notes to the consolidated financial statements relates to the Company's continuing operations. 
 The Company’s continuing operations consist of the Wolfspeed business, which includes silicon carbide and GaN materials, power devices and RF devices based on wide bandgap semiconductor materials and silicon. The Company’s materials products and power devices are used in electric vehicles, motor drives, power supplies, solar and transportation applications. The Company’s materials products and RF devices are used in military communications, radar, satellite and telecommunication applications. 
 The majority of the Company's products are manufactured at its production facilities located in North Carolina, California and Arkansas. The Company also uses contract manufacturers for certain products and aspects of product fabrication, assembly and packaging. Additionally, the Company is in the process of building a silicon carbide device fabrication facility in New York. The Company operates research and development facilities in North Carolina, California, Arkansas, Arizona and New York. 
 Cree, Inc. is a North Carolina corporation established in 1987, and its headquarters are in Durham, North Carolina. 
 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 28, 2021, and for all periods presented, have been made. All material intercompany accounts and transactions have been eliminated. The consolidated balance sheet at June 28, 2020 has been derived from the audited financial statements as of that date. 
 These financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (U.S. GAAP) for interim information and with the instructions to Form 10-Q and Regulation S-X. Accordingly, they do not include all of the information and footnotes required by U.S. GAAP for annual financial statements. 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 2020 Form 10-K) and the Company’s Current Report on Form 8-K filed with the Securities and Exchange Commission on February 11, 2021, which recast the relevant financial information in the 2020 Form 10-K to present the financial results of the LED Business as discontinued operations and held for sale in the Company’s consolidated financial statements for all periods presented in the 2020 Form 10-K. The results of operations for the three and nine months ended March 28, 2021 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. 
 The preparation of consolidated financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenue and expenses, and the disclosure of contingent assets and liabilities. Actual amounts could differ materially from those estimates. 
 The Company revised income tax expense for the three months ended March 29, 2020 to correct the income tax provision calculation for the third quarter of fiscal 2020. The Company decreased income tax expense for the three months ended March 29, 2020, resulting in a net decrease to net loss of $ 1.5 million for the three months ended March 29, 2020. No revision was 
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 made to income tax expense for the nine months ended March 29, 2020. The Company concluded this error was not material individually or in the aggregate. 
 Certain accounting matters that generally require consideration of forecasted financial information were assessed regarding impacts from the COVID-19 pandemic as of March 28, 2021 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 28, 2021, the Company believes the full impact of the pandemic remains uncertain and will continue to assess if ongoing developments related to the pandemic may cause future material impacts to its consolidated financial statements. 
 Segment Reporting 
 On March 1, 2021, the Company completed the LED Business Divestiture, and, as a result, now operates a single reporting segment within continuing operations, Wolfspeed. Accordingly, the Chief Operating Decision Maker (CODM) allocates resources and assesses performance on a consolidated basis. The Company's identified CODM is the Chief Executive Officer. 
 Recently Adopted Accounting Pronouncements 
 Credit Losses 
 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 its 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. 
 
 
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 Note 2 – Discontinued Operations 
 On March 1, 2021, the Company completed the LED Business Divestiture pursuant to the terms of the previously reported Asset Purchase Agreement (the Purchase Agreement), dated October 18, 2020, as amended. Pursuant to the Purchase Agreement, (i) the Company completed the sale to SMART of (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 (Cree Huizhou), 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) SMART assumed certain liabilities related to the LED Business. The Company retained certain assets used in and pre-closing liabilities associated with the LED Products segment. 
 The purchase price for the LED Business consisted 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 between $ 2.5 million and $ 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 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 the maturity date of the Purchase Price Note and Earnout Note. The Purchase Price Note will mature on August 15, 2023, and the Earnout Note will mature on March 27, 2025. The Company recognized a loss on sale of the LED Business of $ 26.3 million. The cost of selling the LED Business was $ 27.4 million, which was recognized throughout fiscal 2020 and 2021. 
 In connection with the closing of the LED Business Divestiture, the Company and CreeLED also entered into certain ancillary and related agreements, including (i) an Intellectual Property Assignment and License Agreement, which assigned to CreeLED certain intellectual property owned by the Company and its affiliates and licensed to CreeLED certain additional intellectual property owned by the Company, (ii) a Transition Services Agreement (LED TSA), (iii) a Wafer Supply and Fabrication Services Agreement (the Wafer Supply Agreement), pursuant to which the Company will supply CreeLED with certain silicon carbide materials and fabrication services for up to four years , and (iv) a Real Estate License Agreement (LED RELA), which will allow CreeLED to use certain premises owned by the Company to conduct the LED Business for a period of up to 24 months after closing. 
 Because the LED Business Divestiture represented a strategic shift that will have a major effect on the Company’s operations and financial results, the Company has classified the results of the LED Business as discontinued operations in the Company’s consolidated statements of operations for all periods presented. The Company ceased recording depreciation and amortization of long-lived assets conveying in the Purchase Agreement upon classification as discontinued operations in October 2020. Additionally, the related assets and liabilities associated with discontinued operations are classified as held for sale in the consolidated balance sheets as of June 28, 2020. 
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 The following table presents the financial results of the LED Business as (loss) income from discontinued operations, net of income taxes in the Company's consolidated statements of operations: 
 
 Three months ended Nine months ended 
 (in millions of U.S. Dollars) March 28, 2021 March 29, 2020 March 28, 2021 March 29, 2020 
 Revenue, net $ 66.5 $ 101.7 $ 272.8 $ 336.0 
 Cost of revenue, net 50.3 81.5 213.3 267.8 
 Gross profit 16.2 20.2 59.5 68.2 
 Operating expenses: 
 Research and development 5.9 8.1 22.3 25.2 
 Sales, general and administrative 12.5 8.1 29.4 24.5 
 Goodwill impairment — — 112.6 — 
 Impairment on assets held for sale — — 19.5 — 
 (Gain) loss on disposal or impairment of long-lived assets ( 0.6 ) 0.2 ( 1.6 ) 0.4 
 Other operating expense 6.2 5.6 18.7 9.6 
 Operating (loss) income ( 7.8 ) ( 1.8 ) ( 141.4 ) 8.5 
 Non-operating income ( 0.3 ) ( 0.2 ) ( 0.3 ) ( 0.3 ) 
 (Loss) income before income taxes and loss on sale ( 7.5 ) ( 1.6 ) ( 141.1 ) 8.8 
 Loss on sale 26.3 — 26.3 — 
 (Loss) income before income taxes ( 33.8 ) ( 1.6 ) ( 167.4 ) 8.8 
 Income tax expense 7.8 2.1 11.4 7.1 
 Net (loss) income ( 41.6 ) ( 3.7 ) ( 178.8 ) 1.7 
 Net income attributable to noncontrolling interest 0.8 0.2 1.4 0.5 
 Net (loss) income attributable to controlling interest ($ 42.4 ) ($ 3.9 ) ($ 180.2 ) $ 1.2 

 As of September 27, 2020, 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, the Company recorded an impairment to goodwill of $ 105.7 million. 
 As of December 27, 2020, the Company recorded an additional impairment to goodwill of $ 6.9 million and an impairment to assets held for sale associated with the pending LED Business Divestiture of $ 19.5 million. 
 For the three and nine months ended March 28, 2021, the Company recognized $ 7.8 million and $ 11.4 million of income tax expense related to discontinued operations, respectively, which primarily related to the foreign operations of the LED Business. Income tax expense related to discontinued operations for the three and nine months ended March 28, 2021 includes $4.1 million of income tax expense related to the sale of the issued and outstanding equity interests of Cree Huizhou in the third quarter of fiscal 2021. 
 For the three and nine months ended March 29, 2020, the Company recognized $ 2.1 million and $ 7.1 million of income tax expense related to discontinued operations, respectively, which primarily related to the foreign operations of the LED Business. 
 The income tax impact of the U.S. operations of the LED Business for all periods presented were offset with a valuation allowance as described in Note 12, "Income Taxes." 
 For the three and nine months ended March 28, 2021, the Company recognized $ 0.3 million and $ 1.0 million in administrative fees related to the LED RELA and the LED TSA, respectively, all of which are included in accounts receivable, net in the consolidated balance sheets as of March 28, 2021. These fees were recorded as a reduction in expense within the line item in the consolidated statements of operations in which costs were incurred. 
 At the inception of the Wafer Supply Agreement, the Company recorded a supply agreement liability of $ 31.0 million, of which $ 27.9 million was outstanding as of March 28, 2021. The supply agreement liability is recognized in other current liabilities and other long-term liabilities on the consolidated balance sheets. 
 The Company recognized a net loss of $ 0.1 million in non-operating expense, net for the three and nine months ended March 28, 2021 related to the Wafer Supply Agreement. A receivable of $ 7.2 million was included in other assets in the consolidated balance sheets as of March 28, 2021. 
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 The following table presents the assets and liabilities of the LED Business classified as discontinued operations as of June 28, 2020: 
 
 (in millions of U.S. Dollars) June 28, 2020 
 Assets 
 Short-term investments $ 12.0 
 Accounts receivable, net 41.6 
 Inventories 57.2 
 
 Prepaid expenses 0.1 
 Other current assets 5.1 
 Current assets of discontinued operations 116.0 
 
 Property and equipment, net 60.3 
 Goodwill 180.3 
 Intangible assets, net 22.7 
 Deferred tax assets 5.1 
 Other assets 1.7 
 
 Long-term assets of discontinued operations 270.1 
 
 Liabilities 
 Accounts payable and accrued expenses 31.0 
 Accrued contract liabilities 24.1 
 Income taxes payable 2.0 
 Other current liabilities 3.1 
 Current liabilities of discontinued operations 60.2 
 
 Other long-term liabilities 9.8 
 Long-term liabilities of discontinued operations 9.8 

 
 
 
 Note 3 – Revenue Recognition 
 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 standard for recognizing revenue, consisting of the following: (1) identify the contract with a customer; (2) identify the performance obligations in the contract; (3) determine the transaction price; (4) allocate the transaction price to the performance obligations in the contract; and (5) recognize revenue when, or as, the entity satisfies a performance obligation. 
 Contract liabilities primarily include various rights of return and customer deposits, as well as deferred revenue and price protection guarantees. Contract liabilities were $ 46.7 million as of March 28, 2021 and $ 47.9 million as of June 28, 2020. The decrease was primarily due to decreased customer deposits offset by increased reserve liabilities. Contract liabilities are recorded within accrued contract liabilities and other long-term liabilities on the balance sheet. Before the adoption of ASC 606, liabilities relating to various rights of return were recorded as a deduction to accounts receivable. 
 For the three and nine months ended March 28, 2021, the Company did no t recognize any revenue that was included in contract liabilities as of June 28, 2020. 
 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 28, 2021. 
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 The Company conducts business in several geographic areas. Revenue is attributed to a particular geographic region based on the shipping address for the products. Disaggregated revenue from external customers by geographic area is as follows: 
 
 Three months ended Nine months ended 
 March 28, 2021 March 29, 2020 March 28, 2021 March 29, 2020 
 (in millions of U.S. Dollars) Revenue % of Revenue Revenue % of Revenue Revenue % of Revenue Revenue % of Revenue 
 Europe $ 49.9 36.3 % $ 45.8 40.2 % $ 139.0 36.6 % $ 136.6 37.7 % 
 United States 31.2 22.7 % 22.2 19.5 % 85.1 22.4 % 78.5 21.7 % 
 China 26.9 19.6 % 13.0 11.4 % 73.5 19.4 % 46.9 12.9 % 
 Japan 10.5 7.6 % 12.5 11.0 % 31.9 8.4 % 46.9 12.9 % 
 South Korea 6.9 5.0 % 13.7 12.0 % 20.5 5.4 % 35.5 9.8 % 
 Other 11.9 8.8 % 6.7 5.9 % 29.8 7.8 % 17.9 5.0 % 
 Total $ 137.3 $ 113.9 $ 379.8 $ 362.3 

 
 
 
 
 Note 4 – Leases 
 The Company primarily leases manufacturing, office and warehousing space. Lease agreements frequently include renewal provisions and require the Company to pay real estate taxes, insurance and maintenance costs. 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 relate to manufacturing space in Malaysia and a 49-year ground lease on a future silicon carbide device fabrication facility in New York. 
 Balance Sheet 
 Lease assets and liabilities and the corresponding balance sheet classifications are as follows (in millions of U.S. Dollars): 
 
 Operating Leases: March 28, 2021 June 28, 2020 
 Right-of-use asset (1) 
 $ 10.5 $ 12.3 
 
 Current lease liability (2) 
 5.0 4.8 
 Non-current lease liability (3) 
 5.6 7.5 
 Total operating lease liabilities 10.6 12.3 
 
 Finance Leases: 
 Finance lease assets (4) 
 $ 11.1 $ 15.4 
 
 Current portion of finance lease liabilities 0.4 3.6 
 Finance lease liabilities, less current portion 10.1 11.4 
 Total finance lease liabilities 10.5 15.0 

 (1) Within other assets on the consolidated balance sheets. 
 (2) Within other current liabilities on the consolidated balance sheets. 
 (3) Within other long-term liabilities on the consolidated balance sheets. 
 (4) Within property and equipment, net on the consolidated balance sheets. 
 
 
 Statement of Operations 
 Operating lease expense was $ 1.3 million and $ 4.1 million for the three and nine months ended March 28, 2021, respectively, and $ 1.3 million and $ 3.7 million for the three and nine months ended March 29, 2020, respectively. 
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 Short-term lease expense and variable lease expense were immaterial for the three and nine months ended March 28, 2021 and March 29, 2020. 
 Finance lease amortization was $ 0.2 million and $ 0.6 million and interest expense was less than $ 0.1 million and $ 0.2 million for the three and nine months ended March 28, 2021, respectively. 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. 
 Cash Flows 
 Cash flow information consisted of the following: 
 
 Nine months ended 
 (in millions of U.S. Dollars) March 28, 2021 March 29, 2020 
 Cash used in operating activities: 
 Cash paid for operating leases $ 4.2 $ 4.0 
 Cash paid for interest portion of financing leases (1) 
 0.2 — 
 Cash used in financing activities: 
 Cash paid for principal portion of finance leases 0.3 0.4 
 Non-cash activities: 
 Operating lease additions due to adoption of ASC 842 — 11.0 
 Operating lease additions and modifications, net 2.0 5.0 
 Finance lease additions — 3.3 
 
 Transfer of finance lease liability to accounts payable and accrued expenses (2) 
 4.2 — 
 

 (1) Less than $ 0.1 million for the nine months ended March 29, 2020. 
 (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. 
 Lease Liability Maturities 
 Maturities of operating and finance lease liabilities as of March 28, 2021 were as follows (in millions of U.S. Dollars): 
 
 Fiscal Year Ending Operating Leases Finance Leases Total 
 June 27, 2021 (remainder of fiscal 2021) $ 1.6 $ 0.2 $ 1.8 
 June 26, 2022 4.5 0.7 5.2 
 June 25, 2023 2.5 0.7 3.2 
 June 30, 2024 1.2 0.7 1.9 
 June 29, 2025 0.8 0.7 1.5 
 Thereafter 0.5 15.2 15.7 
 Total lease payments 11.1 18.2 29.3 
 Imputed lease interest ( 0.5 ) ( 7.7 ) ( 8.2 ) 
 Total lease liabilities $ 10.6 $ 10.5 $ 21.1 

 Supplemental Disclosures 
 
 Operating Leases Finance Leases 
 Weighted average remaining lease term (in months) (1) 
 30 468 
 Weighted average discount rate (2) 
 3.20 % 2.70 % 

 (1) Weighted average remaining lease term of finance leases without the 49-year ground lease is 68 months. 
 (2) Weighted average discount rate of finance leases without the 49-year ground lease is 3.40 %. 
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 Lease Income 
 As mentioned in Note 2, "Discontinued Operations", on March 1, 2021 and in connection with the sale of its LED Business, the Company entered into a Real Estate License Agreement pursuant to which the Company leases to CreeLED approximately 58,000 square feet of the Company’s property and certain facilities in Durham, North Carolina for a total of $ 3.6 million per year. The lease term is 24 months and expires on February 28, 2023. The Company accounts for the lease and non-lease components under this agreement as a single lease component. Lease income is recognized on a straight-line basis over the lease term. Subject to certain provisions in the agreement, CreeLED may terminate its rights or a portion of its rights under the agreement at any time with sixty days written notice. A notice of thirty days is permitted under certain circumstances as defined in the agreement. The agreement does not contain any renewal provisions. 
 The Company recognized lease income of $ 0.3 million for the three and nine months ended March 28, 2021. The Company did no t recognize any variable lease income for the three and nine month periods ended March 28, 2021 and March 29, 2020. 
 Future minimum rental income relating to the Real Estate License Agreement is as follows (in millions of U.S. Dollars): 
 
 June 27, 2021 (remainder of fiscal 2021) 0.9 
 June 26, 2022 3.6 
 June 25, 2023 2.4 
 Total future minimum rental income 6.9 

 
 
 
 Note 5 – Financial Statement Details 
 Accounts Receivable, net 
 Accounts receivable, net consisted of the following: 
 
 (in millions of U.S. Dollars) March 28, 2021 June 28, 2020 
 Billed trade receivables $ 82.9 $ 71.5 
 Unbilled contract receivables 1.3 1.2 
 Royalties 0.6 0.4 
 84.8 73.1 
 
 Allowance for bad debts ( 0.7 ) ( 0.7 ) 
 Accounts receivable, net $ 84.1 $ 72.4 

 Changes in the Company’s allowance for bad debts were as follows: 
 
 (in millions of U.S. Dollars) March 28, 2021 
 Balance at beginning of period $ 0.7 
 Current period provision change — 
 Write-offs, net of recoveries — 
 Balance at end of period $ 0.7 

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 Inventories 
 Inventories consisted of the following: 
 
 (in millions of U.S. Dollars) March 28, 2021 June 28, 2020 
 Raw material $ 42.4 $ 36.9 
 Work-in-progress 90.2 73.9 
 Finished goods 14.9 11.1 
 Inventories $ 147.5 $ 121.9 

 In addition to inventory held by the Company associated with the Wolfspeed business, the Company holds inventory related to the Wafer Supply Agreement entered into in connection with the LED Business Divestiture as well as unallocated inventoried costs consisting primarily of manufacturing employees’ stock-based compensation, profit sharing and quarterly or annual incentive compensation, matching contributions under the Company’s 401(k) plan, and acquisition related costs. 
 
 March 28, 2021 June 28, 2020 
 Wolfspeed $ 138.8 $ 97.3 
 Wafer Supply Agreement inventory (1) 
 — 19.0 
 
 Unallocated inventories 8.7 5.6 
 Consolidated inventories $ 147.5 $ 121.9 

 (1) Inventory related to the Wafer Supply Agreement as of March 28, 2021 is recorded within other current assets in the consolidated balance sheets. 
 Accounts Payable and Accrued Expenses 
 Accounts payable and accrued expenses consisted of the following: 
 
 (in millions of U.S. Dollars) March 28, 2021 June 28, 2020 
 Accounts payable, trade $ 75.7 $ 88.1 
 Accrued salaries and wages 70.2 42.3 
 Accrued expenses 172.4 55.3 
 Other 1.2 4.1 
 Accounts payable and accrued expenses $ 319.5 $ 189.8 

 Other Operating Expense 
 Other operating expense consisted of the following: 
 
 Three months ended Nine months ended 
 (in millions of U.S. Dollars) March 28, 2021 March 29, 2020 March 28, 2021 March 29, 2020 
 Factory optimization restructuring $ 3.8 $ 1.1 $ 6.7 $ 3.5 
 
 Severance and other restructuring 0.6 — 3.4 0.8 
 Total restructuring costs 4.4 1.1 10.1 4.3 
 Project, transformation and transaction costs 2.4 1.4 3.7 10.8 
 Factory optimization start-up costs 1.8 2.1 6.0 5.0 
 
 Non-restructuring related executive severance 2.8 0.6 2.8 2.1 
 
 Other operating expense $ 11.4 $ 5.2 $ 22.6 $ 22.2 

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 Accumulated Other Comprehensive Income, net of taxes 
 Accumulated other comprehensive income, net of taxes, consisted of the following: 
 
 (in millions of U.S. Dollars) March 28, 2021 June 28, 2020 
 Currency translation gain $ — $ 9.5 
 Net unrealized gain on available-for-sale securities (1) 
 3.5 6.5 
 Accumulated other comprehensive income, net of taxes $ 3.5 $ 16.0 

 (1) Amounts as of March 28, 2021 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 
 Reclassifications out of accumulated other comprehensive income were $ 0.1 million and $ 0.3 million for the three and nine months ended March 28, 2021 and $ 0.9 million and $ 1.0 million for the three and nine months ended March 29, 2020. Amounts were reclassified to non-operating expense, net on the consolidated statements of operations. 
 Additionally, for the three and nine months ended March 28, 2021, $ 9.5 million of currency translation gain was reclassified to loss on sale of discontinued operations within net loss on discontinued operations on the consolidated statements of operations. 
 Non-Operating Expense, net 
 The following table summarizes the components of non-operating expense, net: 
 
 Three months ended Nine months ended 
 (in millions of U.S. Dollars) March 28, 2021 March 29, 2020 March 28, 2021 March 29, 2020 
 Foreign currency (gain) loss, net ($ 0.1 ) $ 0.3 ($ 2.5 ) ($ 0.9 ) 
 Gain on sale of investments, net ( 0.1 ) ( 0.9 ) ( 0.3 ) ( 1.0 ) 
 
 Gain on arbitration proceeding — ( 8.0 ) — ( 8.0 ) 
 (Gain) loss on equity investment, net ( 0.9 ) 19.1 ( 7.9 ) 9.2 
 Interest income ( 1.9 ) ( 3.2 ) ( 6.8 ) ( 13.4 ) 
 Interest expense, net of capitalized interest 11.2 7.5 36.2 22.6 
 Loss on Wafer Supply Agreement 0.1 — 0.1 — 
 Other, net ( 0.2 ) ( 0.1 ) 0.1 ( 0.4 ) 
 Non-operating expense, net $ 8.1 $ 14.7 $ 18.9 $ 8.1 

 The change in (gain) loss on equity investment, net is due to fluctuations in the Lextar Electronics Corporation (Lextar) stock price, and following January 6, 2021, ENNOSTAR Inc. (ENNOSTAR) stock price. The gain on arbitration proceeding is due to an award from an arbitration proceeding related to a claim by the Company against a contract manufacturer. 
 Statements of Cash Flows - non-cash activities 
 
 Nine months ended 
 March 28, 2021 March 29, 2020 
 Lease asset and liability additions (1) 
 $ 1.7 $ 14.6 
 Lease asset and liability modifications, net 0.3 4.7 
 
 
 Transfer of finance lease liability to accounts payable and accrued expenses (2) 
 4.2 — 
 
 

 (1) $ 11.0 million of the lease asset and liability additions for the nine months ended March 29, 2020 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. 
 (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 March 28, 2021 and March 29, 2020 was $ 165.6 million and $ 6.8 million, respectively. 
 
 
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 Note 6 – Investments 
 Investments consist of municipal bonds, corporate bonds, U.S. agency securities, U.S. treasury securities, variable rate demand notes, commercial paper and certificates of deposit. All short-term investments are classified as available-for-sale. Other long-term investments consist of the Company's ownership interest in ENNOSTAR (formerly Lextar). 
 Short-term investments as of March 28, 2021 and June 28, 2020 consisted of the following: 
 
 March 28, 2021 
 Amortized Cost Gross Unrealized Gains Gross Unrealized Losses (1) 
 Credit Loss Allowance (2) 
 Estimated Fair Value 
 Municipal bonds $ 135.6 $ 2.0 $ — $ — $ 137.6 
 Corporate bonds 470.5 3.8 ( 0.2 ) — 474.1 
 U.S. agency securities 15.3 — — — 15.3 
 U.S. treasury securities 69.4 0.3 — — 69.7 
 
 Certificates of deposit 12.8 — — — 12.8 
 
 Variable rate demand note 11.0 — — — 11.0 
 Commercial paper 41.2 — — — 41.2 
 Total short-term investments $ 755.8 $ 6.1 ($ 0.2 ) $ — $ 761.7 
 
 June 28, 2020 
 Amortized Cost Gross Unrealized Gains Gross Unrealized Losses (1) 
 Estimated Fair Value 
 Municipal bonds $ 130.0 $ 2.0 $ — $ 132.0 
 Corporate bonds 473.8 6.3 — 480.1 
 U.S. agency securities 29.1 — — 29.1 
 U.S. treasury securities 52.3 0.6 — 52.9 
 
 Certificates of deposit 83.3 — — 83.3 
 Variable rate demand note 2.5 — — 2.5 
 Commercial paper 11.0 — — 11.0 
 
 Total short-term investments $ 782.0 $ 8.9 $ — $ 790.9 

 (1) The Company had an unrealized loss of less than $ 0.1 million as of June 28, 2020. 
 (2) 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. 
 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 $ 4.0 million and $ 4.3 million as of March 28, 2021 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 and nine month periods ended March 28, 2021 and March 29, 2020. 
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 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 28, 2021 
 Less than 12 Months Greater than 12 Months Total 
 Fair Value Unrealized Loss Fair Value Unrealized Loss Fair Value Unrealized Loss 
 Municipal bonds $ 6.4 $ — $ — $ — $ 6.4 $ — 
 Corporate bonds 113.4 ( 0.2 ) — — 113.4 ( 0.2 ) 
 U.S. agency securities 13.2 — — — 13.2 — 
 U.S. treasury securities 19.4 — — — 19.4 — 
 Certificates of deposit 0.7 — — — 0.7 — 
 
 Total $ 153.1 ($ 0.2 ) $ — $ — $ 153.1 ($ 0.2 ) 
 Number of securities with an unrealized loss 104 — 104 
 
 June 28, 2020 
 Less than 12 Months Greater than 12 Months Total 
 Fair Value Unrealized Loss (1) 
 Fair Value Unrealized Loss Fair Value Unrealized Loss 
 Municipal bonds $ 14.3 $ — $ — $ — $ 14.3 $ — 
 Corporate bonds 29.1 — — — 29.1 — 
 U.S. agency securities 8.6 — — — 8.6 — 
 U.S. treasury securities 13.8 — — — 13.8 — 
 
 
 Total $ 65.8 $ — $ — $ — $ 65.8 $ — 
 Number of securities with an unrealized loss 46 — 46 

 (1) S ecurities with an unrealized loss of less than 12 months for the period 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 $ 0.1 million and $ 0.3 million for the three and nine months ended March 28, 2021 and realized gains of $ 0.9 million and $ 1.0 million for the three and nine months ended March 29, 2020 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 determines 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 March 28, 2021 until the investments fully recover in market value. None of the investments with an unrealized loss as of March 28, 2021 had credit downgrades in the current period. No allowance for credit losses was recorded as of March 28, 2021. 
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 The contractual maturities of short-term investments as of March 28, 2021 were as follows: 
 
 
 Within One Year After One, Within Five Years After Five, Within Ten Years After Ten Years Total 
 Municipal bonds $ 25.9 $ 111.7 $ — $ — $ 137.6 
 Corporate bonds 120.5 353.6 — — 474.1 
 U.S. agency securities 3.0 12.3 — — 15.3 
 U.S. treasury securities 9.6 60.1 — — 69.7 
 
 Certificates of deposit 12.8 — — — 12.8 
 
 Variable rate demand note — — — 11.0 11.0 
 Commercial paper 41.2 — — — 41.2 
 Total short-term investments $ 213.0 $ 537.7 $ — $ 11.0 $ 761.7 

 
 
 
 Note 7 – Fair Value of Financial Instruments 
 Under U.S. GAAP, fair value is defined as the price that would be received to sell an asset or paid to transfer a liability (i.e., the exit price) in an orderly transaction between market participants at the measurement date. In determining fair value, the Company uses various valuation approaches, including quoted market prices and discounted cash flows. U.S. GAAP also establishes a hierarchy for inputs used in measuring fair value that maximizes the use of observable inputs and minimizes the use of unobservable inputs by requiring that the most observable inputs be used when available. Observable inputs are obtained from independent sources and can be validated by a third party, whereas unobservable inputs reflect assumptions regarding what a third party would use in pricing an asset or liability. The fair value hierarchy is categorized into three levels based on the reliability of inputs as follows: 
 • Level 1 - Valuations based on quoted prices in active markets for identical instruments that the Company is able to access. Since valuations are based on quoted prices that are readily and regularly available in an active market, valuation of these products does not entail a significant degree of judgment. 
 • Level 2 - Valuations based on quoted prices in active markets for instruments that are similar, or quoted prices in markets that are not active for identical or similar instruments, and model-derived valuations in which all significant inputs and significant value drivers are observable in active markets. 
 • Level 3 - Valuations based on inputs that are unobservable and significant to the overall fair value measurement. 
 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 28, 2021 and June 28, 2020, financial assets utilizing Level 1 inputs included money market funds and U.S. treasury securities. Financial assets utilizing Level 2 inputs included municipal bonds, corporate bonds, certificates of deposit, commercial paper, U.S. agency securities, variable rate demand notes and common stock of non-U.S. corporations. Level 2 assets are valued based on quoted prices in active markets for instruments that are similar or using a third-party pricing service’s consensus price, which is a weighted average price based on multiple sources. 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 28, 2021 and June 28, 2020. 
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 The following table sets forth financial instruments carried at fair value within the U.S. GAAP hierarchy: 
 
 March 28, 2021 June 28, 2020 
 (in millions of U.S. Dollars) Level 1 Level 2 Level 3 Total Level 1 Level 2 Level 3 Total 
 Assets: 
 Cash equivalents: 
 Money market funds $ 290.1 $ — $ — $ 290.1 $ 199.9 $ — $ — $ 199.9 
 
 Corporate bonds — 1.5 — 1.5 — — — — 
 U.S. agency securities — 11.5 — 11.5 — 19.6 — 19.6 
 U.S. treasury securities 5.0 — — 5.0 19.0 — — 19.0 
 Certificates of deposit — — — — — 54.3 — 54.3 
 
 Commercial paper — 54.1 — 54.1 — 11.1 — 11.1 
 
 
 Total cash equivalents 295.1 67.1 — 362.2 218.9 85.0 — 303.9 
 Short-term investments: 
 Municipal bonds — 137.6 — 137.6 — 132.0 — 132.0 
 Corporate bonds — 474.1 — 474.1 — 480.1 — 480.1 
 U.S. agency securities — 15.3 — 15.3 — 29.1 — 29.1 
 U.S. treasury securities 69.7 — — 69.7 52.9 — — 52.9 
 Certificates of deposit — 12.8 — 12.8 — 83.3 — 83.3 
 
 Commercial paper — 41.2 — 41.2 — 11.0 — 11.0 
 Variable rate demand note — 11.0 — 11.0 — 2.5 — 2.5 
 
 Total short-term investments 69.7 692.0 — 761.7 52.9 738.0 — 790.9 
 Other long-term investments: 
 Common stock of non-U.S. corporations — 67.2 — 67.2 — 55.9 — 55.9 
 
 Total assets $ 364.8 $ 826.3 $ — $ 1,191.1 $ 271.8 $ 878.9 $ — $ 1,150.7 

 
 
 
 Note 8 – Goodwill and Intangible Assets 
 Goodwill 
 The following table summarizes changes in goodwill during the nine months ended March 28, 2021: 
 
 (in millions of U.S. Dollars) Total 
 Balance at June 28, 2020 $ 349.7 
 Transfer in connection with LED Business Divestiture (1) 
 9.5 
 
 Balance at March 28, 2021 $ 359.2 

 (1) In the second quarter of fiscal 2021, the Company determined that as part of its goodwill impairment analysis on held for sale assets related to the pending LED Business Divestiture, it was necessary to transfer a portion of goodwill from the former LED Products segment, then classified as discontinued operations, to goodwill associated with continuing operations. 
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 Intangible Assets, net 
 The following table presents the components of intangible assets, net: 
 
 March 28, 2021 June 28, 2020 
 (in millions of U.S. Dollars) Gross Accumulated Amortization Net Gross Accumulated Amortization Net 
 
 Customer relationships $ 96.8 ($ 23.6 ) $ 73.2 $ 96.8 ($ 19.0 ) $ 77.8 
 Developed technology 68.0 ( 26.8 ) 41.2 68.0 ( 22.8 ) 45.2 
 
 Non-compete agreements 12.2 ( 9.4 ) 2.8 12.2 ( 7.1 ) 5.1 
 
 
 Acquisition related intangible assets 177.0 ( 59.8 ) 117.2 177.0 ( 48.9 ) 128.1 
 Patent and licensing rights 66.7 ( 39.3 ) 27.4 69.3 ( 40.5 ) 28.8 
 Total intangible assets $ 243.7 ($ 99.1 ) $ 144.6 $ 246.3 ($ 89.4 ) $ 156.9 

 Total amortization of acquisition-related intangibles assets was $ 3.7 million and $ 10.9 million for the three and nine months ended March 28, 2021 and $ 3.7 million and $ 10.9 million for the three and nine months ended March 29, 2020. 
 Total amortization of patents and licensing rights was $ 2.0 million and $ 4.6 million for the three and nine months ended March 28, 2021 and $ 2.0 million and $ 4.4 million for the three and nine months ended March 29, 2020. 
 Total future amortization expense of intangible assets is estimated to be as follows: 
 
 (in millions of U.S. Dollars) 
 
 
 Fiscal Year Ending 
 Acquisition Related Intangibles Patents Total 
 June 27, 2021 $ 3.6 $ 1.3 $ 4.9 
 June 26, 2022 13.5 4.6 18.1 
 June 25, 2023 11.0 3.9 14.9 
 June 30, 2024 10.4 3.3 13.7 
 June 29, 2025 10.4 2.5 12.9 
 Thereafter 68.3 11.8 80.1 
 Total future amortization expense $ 117.2 $ 27.4 $ 144.6 

 
 
 
 Note 9 – Long-term Debt 
 Revolving Line of Credit 
 As of March 28, 2021, 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 28, 2021, 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 and nine months ended March 28, 2021, the average interest rate was 0.09 % and 0.04 %, respectively, related to a seven day draw of $ 30.0 million on the line of credit in the third quarter of fiscal 2021. As of March 28, 2021, the unused line fee on available borrowings is 25 basis points. 
 2023 Convertible Notes 
 On August 24, 2018, the Company sold $ 500.0 million aggregate principal amount of 0.875 % convertible senior notes due September 1, 2023 to qualified institutional buyers pursuant to Rule 144A under the Securities Act of 1933, as amended (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 2023 Notes). The total net proceeds from the debt offering was approximately $ 562.1 million. 
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 The conversion rate will initially be 16.6745 shares of common stock per one thousand dollars in principal amount of 2023 Notes (equivalent to an initial conversion price of approximately $ 59.97 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 2023 Notes in connection with such a corporate event, or who elects to convert any 2023 Notes called for redemption during the related redemption period in certain circumstances. The Company may not redeem the 2023 Notes prior to September 1, 2021. The Company may redeem for cash all or any portion of the 2023 Notes, at its option, on a redemption date occurring on or after September 1, 2021 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 2023 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 portion of their 2023 Notes at a fundamental change repurchase price equal to 100 % of the principal amount of the 2023 Notes to be repurchased, plus accrued and unpaid interest to, but excluding, the fundamental change repurchase date. 
 Holders may convert their 2023 Notes at their option at any time prior to the close of business on the business day immediately preceding March 1, 2023 only under the following circumstances: (1) during any calendar quarter commencing after the calendar quarter ending December 31, 2018 (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 one thousand dollars in principal amount of 2023 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 2023 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 March 1, 2023 until the close of business on the second scheduled trading day immediately preceding the maturity date, holders may convert their 2023 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. 
 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. 
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 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 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 28, 2021 June 28, 2020 
 Principal $ 999.8 $ 999.8 
 Unamortized discount and issuance costs ( 186.1 ) ( 216.0 ) 
 Net carrying amount $ 813.7 $ 783.8 

 The net carrying amount of the equity component of the Notes is as follows: 
 
 (in millions of U.S. Dollars) March 28, 2021 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, net recognized related to the Notes is as follows: 
 
 Three months ended Nine months ended 
 (in millions of U.S. Dollars) March 28, 2021 March 29, 2020 March 28, 2021 March 29, 2020 
 Interest expense, net of capitalized interest $ 2.5 $ 1.3 $ 8.5 $ 3.8 
 Amortization of discount and issuance costs, net of capitalized interest 8.0 5.8 26.1 17.2 
 Total interest expense, net $ 10.5 $ 7.1 $ 34.6 $ 21.0 

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 The Company capitalizes interest related to the Notes in connection with the building of a new silicon carbide device fabrication facility in New York. For the three and nine months ended March 28, 2021, the Company capitalized $ 1.0 million and $ 1.8 million of interest expense, respectively, and $ 2.1 million and $ 3.8 million of amortization of discount and issuance costs, respectively. No interest expense was capitalized for the three and nine months ended March 29, 2020. 
 The last reported sale price of the Company's common stock was greater than or equal to 130 % of the applicable conversion price for both the 2023 and 2026 Notes for at least 20 trading days in the 30 consecutive trading days ended on March 31, 2021. As a result, the Notes are convertible at the option of the holders through June 30, 2021. 
 The estimated fair value of the Notes is $ 2.1 billion as of March 28, 2021, 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 
 (in millions of U.S. Dollars, except share data) March 28, 2021 March 29, 2020 March 28, 2021 March 29, 2020 
 Net loss from continuing operations ($ 66.5 ) ($ 56.2 ) ($ 196.1 ) ($ 153.4 ) 
 
 Net (loss) income from discontinued operations ( 41.6 ) ( 3.7 ) ( 178.8 ) 1.7 
 Net income from discontinued operations attributable to noncontrolling interest 0.8 0.2 1.4 0.5 
 Net (loss) income from discontinued operations attributable to controlling interest ( 42.4 ) ( 3.9 ) ( 180.2 ) 1.2 
 
 
 
 Weighted average shares - basic and diluted (in thousands) 112,891 108,115 112,330 107,718 
 
 Loss per share - basic and diluted: 
 Continuing operations ($ 0.59 ) ($ 0.52 ) ($ 1.75 ) ($ 1.42 ) 
 Discontinued operations attributable to controlling interest ($ 0.38 ) ($ 0.04 ) ($ 1.60 ) $ 0.01 
 
 
 
 
 
 

 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 from continuing operations. 
 For the three and nine months ended March 28, 2021, 3.1 million and 3.6 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 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. 
 In addition, 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 
 Overview of Employee Stock-Based Compensation Plans 
 The Company currently has one equity-based compensation plan, the 2013 Long-Term Incentive Compensation Plan (2013 LTIP), from which stock-based compensation awards can be granted to employees and directors. The 2013 LTIP provides for awards in the form of incentive stock options, non-qualified stock options, stock appreciation rights, restricted stock, restricted stock units, performance shares, performance units and other awards. The Company has other equity-based compensation plans that have been terminated so that no future grants can be made under those plans, but under which stock options, restricted stock and restricted stock units are currently outstanding. 
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 The Company’s stock-based awards can be either service-based or performance-based. Performance-based conditions are generally tied to future financial and/or operating performance of the Company and/or external based market metrics. The compensation expense with respect to performance-based grants is recognized if the Company believes it is probable that the performance condition will be achieved. The Company reassesses the probability of the achievement of the performance condition at each reporting period, and adjusts the compensation expense for subsequent changes in the estimate or actual outcome. As with non-performance based awards, compensation expense is recognized over the vesting period. For performance awards with market conditions, the Company estimates the grant date fair value using the Monte Carlo valuation model and expenses the awards over the vesting period regardless of whether the market condition is ultimately satisfied. 
 The Company also has an Employee Stock Purchase Plan (ESPP) that provides employees with the opportunity to purchase common stock at a discount. The ESPP limits employee contributions to 15 % of each employee’s compensation (as defined in the plan) and allows employees to purchase shares at a 15 % discount to the fair market value of common stock on the purchase date two times per year. The ESPP provides for a twelve-month participation period, divided into two equal six-month purchase periods, and also provides for a look-back feature. At the end of each six-month period in April and October, participants purchase the Company’s common stock through the ESPP at a 15 % discount to the fair market value of the common stock on the first day of the twelve-month participation period or the purchase date, whichever is lower. The plan also provides for an automatic reset feature to start participants on a new twelve-month participation period if the fair market value of common stock declines during the first six-month purchase period. 
 Stock Option Awards 
 A summary of stock option awards outstanding as of March 28, 2021 and changes during the nine months then ended is as follows: 
 
 (shares in thousands) Number of Shares Weighted Average Exercise Price 
 Outstanding at June 28, 2020 983 $ 37.88 
 Granted — $ — 
 Exercised ( 799 ) $ 39.65 
 Forfeited or expired ( 10 ) $ 64.51 
 Outstanding at March 28, 2021 174 $ 28.08 

 Restricted Stock Awards and Units 
 A summary of nonvested restricted stock awards (RSAs) and restricted stock unit awards (RSUs) outstanding as of March 28, 2021 and changes during the nine months then ended is as follows: 
 
 (awards and units in thousands) Number of RSAs/RSUs Weighted Average 
Grant-Date Fair Value 
 Nonvested at June 28, 2020 2,932 $ 43.89 
 Granted 1,050 $ 67.00 
 Vested ( 1,345 ) $ 38.21 
 Forfeited ( 340 ) $ 53.18 
 Nonvested at March 28, 2021 2,297 $ 56.28 

 Stock-Based Compensation Valuation and Expense 
 The Company accounts for its employee stock-based compensation plans using the fair value method. The fair value method requires the Company to estimate the grant-date fair value of its stock-based awards and amortize this fair value to compensation expense over the requisite service period or vesting term. 
 The Company uses the Black-Scholes option-pricing model to estimate the fair value of the Company’s stock option and ESPP awards. The determination of the fair value of stock-based payment awards on the date of grant using an option-pricing model is affected by the Company’s stock price as well as assumptions regarding a number of complex and subjective variables. These variables include the expected stock price volatility over the term of the awards, projected employee stock option exercise term, the risk-free interest rate and expected dividends. Due to the inherent limitations of option-valuation models, future events that are unpredictable and the estimation process utilized in determining the valuation of the stock-based awards, the ultimate value realized by award holders may vary significantly from the amounts expensed in the Company’s financial statements. 
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 For RSAs and RSUs, the grant-date fair value is based upon the market price of the Company’s common stock on the date of the grant. This fair value is then amortized to compensation expense over the requisite service period or vesting term. Compensation expense for awards that have performance-based conditions is recognized if the Company believes it is probable that the performance condition will be achieved. The Company reassesses the probability of the achievement of the performance condition at each reporting period and adjusts the compensation expense for subsequent changes in the estimate or actual outcome. For performance awards with market conditions, the Company estimates the grant date fair value using the Monte Carlo valuation model and expenses the awards over the vesting period regardless of whether the market condition is ultimately satisfied. The Monte Carlo option pricing models require the input of highly subjective assumptions. The estimates involve inherent uncertainties and the application of judgment. As a result, if other assumptions had been used, recorded stock-based compensation expense could have been materially different from that depicted below. 
 Stock-based compensation expense is recognized net of estimated forfeitures such that expense is recognized only for those stock-based awards that are expected to vest. A forfeiture rate is estimated at the time of grant and revised, if necessary, in subsequent periods if actual forfeitures differ from initial estimates. 
 Total stock-based compensation expense was classified in the consolidated statements of operations as follows: 
 
 Three months ended Nine months ended 
 (in millions of U.S. Dollars) March 28, 2021 March 29, 2020 March 28, 2021 March 29, 2020 
 Cost of revenue, net $ 4.1 $ 2.7 $ 11.2 $ 7.1 
 Research and development 2.1 1.9 6.7 6.0 
 Sales, general and administrative 6.7 5.2 22.4 23.8 
 Total stock-based compensation expense $ 12.9 $ 9.8 $ 40.3 $ 36.9 
 
 

 Stock-based compensation expense may differ from the impact of stock-based compensation to additional paid in capital due to manufacturing related stock-based compensation capitalized within inventory. 
 
 
 
 Note 12 – Income Taxes 
 In general, the variation between the Company's effective income tax rate and the U.S. statutory rate of 21% is primarily due to: (i) changes in the Company’s valuation allowances against deferred tax assets in the U.S. and Luxembourg, (ii) projected income for the full year derived from international locations with differing tax rates than the U.S. and (iii) projected tax credits generated. 
 The Company did not record an income tax benefit related to the goodwill impairment expenses described in Note 2, “Discontinued Operations,” 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 28, 2021. 
 U.S. GAAP requires a two-step approach to recognizing and measuring uncertain tax positions. The first step is to evaluate the tax position for recognition by determining if the available evidence indicates that it is more likely than not that the position will be sustained on audit, including resolution of related appeals or litigation processes, if any. The second step is to measure the tax benefit as the largest amount that is cumulatively more than 50% likely to be realized upon ultimate settlement. 
 As of June 28, 2020, the Company's liability for unrecognized tax benefits was $ 7.4 million. During the nine months ended March 28, 2021, the Company did not record any material movement in its unrecognized tax benefits. As a result, the total liability for unrecognized tax benefits as of March 28, 2021 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. Although the ultimate timing of the resolution and/or closure of audits is highly uncertain, the Company believes it is reasonably possible that $ 0.6 million of gross unrecognized tax benefits will change in the next 12 months as a result of statute requirements or settlement with tax authorities. 
 The Company files U.S. federal, U.S. state and foreign tax returns. For U.S. federal purposes, the Company is generally no longer subject to tax examinations for fiscal years prior to 2017. For U.S. state tax returns, the Company is generally no longer subject to tax examinations for fiscal years prior to 2017. For foreign purposes, the Company is generally no longer subject to 
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 examination for tax periods prior to 2010. Certain carryforward tax attributes generated in prior years remain subject to examination, adjustment and recapture. 
 
 
 
 Note 13 – Commitments and Contingencies 
 Litigation 
 The Company is currently a party to various legal proceedings. While management presently believes that the ultimate outcome of such proceedings, individually and in the aggregate, will not materially harm the Company’s financial position, cash flows, or overall trends in results of operations, legal proceedings are subject to inherent uncertainties, and unfavorable rulings could occur. An unfavorable ruling could include monetary damages or, in matters for which injunctive relief or other conduct remedies may be sought, an injunction prohibiting the Company from selling one or more products at all or in particular ways. Were unfavorable final outcomes to occur, there exists the possibility of a material adverse impact on the Company’s business, results of operations, financial position and overall trends. The outcomes in these matters are not reasonably estimable. 
 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 device 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 - Restructuring 
 The Company has approved various operational plans that include restructuring costs. All restructuring costs are recorded in other operating expense on the consolidated statement of operations. 
 Factory Optimization Restructuring 
 In May 2019, the Company started a significant, multi-year factory optimization plan anchored by a state-of-the-art, automated 200mm capable silicon carbide and GaN fabrication facility and a large materials factory at its U.S. campus headquarters in Durham, North Carolina. 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. 
 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 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 and nine months ended March 28, 2021, the Company expensed $ 1.2 million and $ 4.3 million of restructuring charges associated with the movement of equipment related to the factory optimization plan, respectively, of which $ 0.1 million is accrued for as of March 28, 2021. Additionally, the Company expensed $ 2.6 million and $ 3.4 million of restructuring charges associated with disposals of certain long-lived assets for the three and nine months ended March 28, 2021. 
 For the three and nine months ended March 29, 2020, the Company expensed and paid $ 1.1 million and $ 3.5 million, respectively, of restructuring charges associated with the movement of equipment related to the factory optimization plan. 
 Corporate Restructuring 
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 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 $ 0.0 million and $ 2.8 million in severance-related costs during the three and nine months ended March 28, 2021. The plan has concluded and all expenses have been paid as of March 28, 2021. 
 Additionally, in February 2021, the Company realigned the structure of its Asia sales presence. As a result, the Company recorded $ 0.6 million in severance related costs during the three and nine months ended March 28, 2021. The plan has concluded and all expenses have been paid as of March 28, 2021. 
 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. The plan has concluded and all expenses have paid as of March 28, 2021. 
 
 
 
 Note 15 - Shareholders' Equity 
 On February 11, 2021, the Company established an “at-the-market” offering program (the ATM Program) pursuant to which the Company could offer and sell, from time to time through sales agents, up to an aggregate of $ 500 million of the Company’s common stock. The ATM Program was conducted pursuant to an equity distribution agreement (the Equity Distribution Agreement) entered into by the Company and Wells Fargo Securities, LLC, BMO Capital Markets Corp., BofA Securities Inc., Canaccord Genuity LLC, Citigroup Global Markets Inc., Credit Suisse Securities (USA) LLC, Goldman Sachs & Co. LLC, Morgan Stanley & Co. LLC and Truist Securities, Inc. (the Managers). 
 On February 19, 2021, the Company announced that it sold approximately $ 500.0 million of common stock under the ATM Program. As such, the ATM Program automatically terminated in accordance with the terms of the Equity Distribution Agreement. In total, the Company sold and received payment for 4,222,511 additional shares of common stock at a weighted average price of $ 118.41 per share through the ATM Program for total gross proceeds of approximately $ 500.0 million and net proceeds of approximately $ 489.1 million, after $ 10.0 million in commissions to the Managers and $ 0.9 million in other offering costs. The Company expects to use the net proceeds for general corporate purposes. 
 
 
 
 Note 16 - Subsequent Events 
 On March 29, 2021, the Company began liquidating its common stock ownership interest in ENNOSTAR. From March 29, 2021 to April 16, 2021, the Company sold all of its previously held 22,825,000 shares in ENNOSTAR for an average price of 82.93 New Taiwanese Dollars per share. Total net proceeds from selling the equity interest in ENNOSTAR totaled $ 66.1 million. The Company no longer holds any equity interest in ENNOSTAR. 
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Text extracted from the filing as submitted to EDGAR. Formatting, tables and exhibits are simplified for reading; the original document is authoritative for anything you rely on.
WOLFSPEED, INC. 10-Q

Item 1. Financial Statements
