What changed in this filing

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Item 1. Financial Statements

2022-01-27 compared with 2021-10-28 · 218 added, 170 removed, 640 unchanged (38% of the section changed)

Financial Statements (Unaudited)

Consolidated Balance Sheets as of September 26, 2021 and June 27, 2021

Consolidated Statements of Operations for the three months ended September 26, 2021 and September 27, 2020

Consolidated Statements of Comprehensive Loss for the three months ended September 26, 2021 and September 27, 2020

Consolidated Statements of Shareholders' Equity for the three months ended September 26, 2021 and September 27, 2020

Consolidated Statements of Cash Flows for the three months ended September 26, 2021 and September 27, 2020

Consolidated Balance Sheets as of December 26, 2021 and June 27, 2021

Consolidated Statements of Operations for the three and six months ended December 26, 2021 and December 27, 2020

Consolidated Statements of Comprehensive Loss for the three and six months ended December 26, 2021 and December 27, 2020

Consolidated Statements of Shareholders' Equity for the six months ended December 26, 2021 and December 27, 2020

Consolidated Statements of Cash Flows for the six months ended December 26, 2021 and December 27, 2020

Notes to Unaudited Consolidated Financial Statements

2 unchanged sentences

in millions of U.S.

Dollars, except share data in thousands September 26, 2021 June 27, 2021

Dollars, except share data in thousands December 26, 2021 June 27, 2021

Current assets:

36 unchanged sentences

Preferred stock, par value $ 0.01 ;

3,000 shares authorized at September 26, 2021 and June 27, 2021;

3,000 shares authorized at December 26, 2021 and June 27, 2021;

none issued and outstanding

Common stock, par value $ 0.00125 ;

200,000 shares authorized at September 26, 2021 and June 27, 2021;

116,186 and 115,691 shares issued and outstanding at September 26, 2021 and June 27, 2021, respectively

200,000 shares authorized at December 26, 2021 and June 27, 2021;

123,570 and 115,691 shares issued and outstanding at December 26, 2021 and June 27, 2021, respectively

Additional paid-in-capital 4,110.3 3,676.8

Accumulated other comprehensive income 1.9 2.7

Accumulated other comprehensive (loss) income ( 1.7 ) 2.7

Accumulated deficit ( 1,729.9 ) ( 1,563.1 )

4 unchanged sentences

UNAUDITED CONSOLIDATED STATEMENTS OF OPERATIONS

Three months ended

September 26, 2021 September 27, 2020

Three months ended Six months ended

December 26, 2021 December 27, 2020 December 26, 2021 December 27, 2020

in millions of U.S.

7 unchanged sentences

Amortization or impairment of acquisition-related intangibles 3.6 3.6 7.2 7.2

(Gain) loss on disposal or impairment of other assets ( 0.2 ) 0.3

Loss on disposal or impairment of other assets 0.5 0.4 0.3 0.7

Other operating expense 15.6 2.6 28.4 11.2

Operating loss ( 60.9 ) ( 57.6 ) ( 126.6 ) ( 119.8 )

Non-operating expense, net 4.1 13.9

Non-operating expense (income), net 27.8 ( 3.1 ) 31.9 10.8

Loss before income taxes ( 88.7 ) ( 54.5 ) ( 158.5 ) ( 130.6 )

12 unchanged sentences

UNAUDITED CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS

Three months ended

Three months ended Six months ended

(in millions of U.S.

Dollars) September 26, 2021 September 27, 2020

Dollars) December 26, 2021 December 27, 2020 December 26, 2021 December 27, 2020

Net loss ($ 96.7 ) ($ 82.7 ) ($ 166.8 ) ($ 266.8 )

8 unchanged sentences

Common Stock Additional Paid-in Capital Accumulated Deficit Accumulated Other Comprehensive Income Total Shareholders' Equity

(in millions of U.S Dollars, except share data) Number of Shares Par Value

(in millions of U.S Dollars, except share data in thousands) Number of Shares Par Value

Balance at June 27, 2021 115,691 $ 0.1 $ 3,676.8 ($ 1,563.1 ) $ 2.7 $ 2,116.5

6 unchanged sentences

Balance at September 26, 2021 116,186 $ 0.1 $ 3,670.6 ($ 1,633.2 ) $ 1.9 $ 2,039.4

Net loss — — — ( 96.7 ) — ( 96.7 )

Unrealized loss on available-for-sale securities — — — — ( 3.6 ) ( 3.6 )

Comprehensive loss ( 100.3 )

Tax withholding on vested equity awards — — ( 2.8 ) — — ( 2.8 )

Stock-based compensation — — 15.7 — — 15.7

Exercise of stock options and issuance of shares 258 — 10.7 — — 10.7

Issuance of shares related to the extinguishment of convertible notes due September 1, 2023 7,126 0.1 416.1 — — 416.2

Balance at December 26, 2021 123,570 $ 0.2 $ 4,110.3 ($ 1,729.9 ) ($ 1.7 ) $ 2,378.9

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

12 unchanged sentences

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

Net (loss) income — — — ( 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

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

1 unchanged sentence

UNAUDITED CONSOLIDATED STATEMENTS OF CASH FLOWS

Three months ended

Six months ended

(in millions of U.S.

Dollars) September 26, 2021 September 27, 2020

Dollars) December 26, 2021 December 27, 2020

Operating activities:

2 unchanged sentences

Net loss from continuing operations ( 166.8 ) ( 129.6 )

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

Adjustments to reconcile net loss from continuing operations to cash used in operating activities:

Depreciation and amortization 67.5 56.2

1 unchanged sentence

Stock-based compensation 30.0 27.4

Loss on extinguishment of debt 24.8 —

Loss on disposal or impairment of long-lived assets 1.6 1.5

1 unchanged sentence

Realized gain on sale of investments ( 0.3 ) ( 0.2 )

Loss on equity investment — 3.4

Gain on equity investment — ( 7.0 )

Foreign exchange gain on equity investment — ( 3.2 )

7 unchanged sentences

Accrued contract liabilities 6.9 3.8

Net cash (used in) provided by operating activities of continuing operations ( 62.5 ) 0.7

Net cash used in operating activities of discontinued operations — ( 0.3 )

Cash (used in) provided by operating activities ( 62.5 ) 0.4

Net cash used in operating activities of continuing operations ( 95.0 ) ( 32.1 )

Net cash provided by operating activities of discontinued operations — 6.2

Cash used in operating activities ( 95.0 ) ( 25.9 )

Investing activities:

1 unchanged sentence

Purchases of patent and licensing rights ( 2.6 ) ( 1.9 )

Proceeds from sale of property and equipment 0.5 0.6

Proceeds from sale of property and equipment, including insurance proceeds 2.7 0.1

Purchases of short-term investments ( 29.8 ) ( 85.8 )

3 unchanged sentences

Net cash used in investing activities of continuing operations ( 83.5 ) ( 52.5 )

Net cash used in investing activities of discontinued operations — ( 1.2 )

Net cash provided by investing activities of discontinued operations — 2.7

Cash used in investing activities ( 83.5 ) ( 49.8 )

26 unchanged sentences

Wolfspeed, Inc.

(the Company), formally known as Cree, Inc., 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.

(the Company), formerly known as Cree, Inc., 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 product families include Silicon Carbide and GaN materials, power-switching devices and RF devices targeted for various applications such as electric vehicles, fast charging, 5G, renewable energy and storage, and aerospace and defense.

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.

5 unchanged sentences

The Company’s materials products and RF devices are used in military communications, radar, satellite and telecommunication applications.

In January 2021, the Company announced plans to change its corporate name from Cree, Inc.

to Wolfspeed, Inc., which was completed on October 4, 2021.

On October 4, 2021, the Company changed its corporate name from Cree, Inc.

to Wolfspeed, Inc.

In addition, the Company transferred the listing of its common stock to the New York Stock Exchange (NYSE) from The Nasdaq Global Select Market (Nasdaq).

8 unchanged sentences

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 September 26, 2021, and for all periods presented, have been made.

In the opinion of management, all normal and recurring adjustments necessary to fairly state the consolidated financial position, results of operations, comprehensive loss, shareholders' equity and cash flows at December 26, 2021, and for all periods presented, have been made.

All material intercompany accounts and transactions have been eliminated.

5 unchanged sentences

These financial statements should be read in conjunction with the consolidated financial statements and notes thereto included in the Company’s Annual Report on Form 10-K for the fiscal year ended June 27, 2021 (fiscal 2021) (the 2021 Form 10-K).

The results of operations for the three months ended September 26, 2021 are not necessarily indicative of the operating results that may be attained for the entire fiscal year ending June 26, 2022 (fiscal 2022).

The results of operations for the three and six months ended December 26, 2021 are not necessarily indicative of the operating results that may be attained for the entire fiscal year ending June 26, 2022 (fiscal 2022).

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

Certain accounting matters that generally require consideration of forecasted financial information were assessed regarding impacts from the COVID-19 pandemic as of September 26, 2021 and through the date of this Quarterly Report using reasonably available information as of those dates.

Certain accounting matters that generally require consideration of forecasted financial information were assessed regarding impacts from the COVID-19 pandemic as of December 26, 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 September 26, 2021, the Company believes the full impact of the COVID-19 pandemic remains uncertain and will continue to assess if ongoing developments related to the COVID-19 pandemic may cause future material impacts to its consolidated financial statements.

While the assessments resulted in no material impacts to the consolidated financial statements as of and for the quarter ended December 26, 2021, the Company believes the full impact of the COVID-19 pandemic remains uncertain and will continue to assess if ongoing developments related to the COVID-19 pandemic may cause future material impacts to its consolidated financial statements.

Change in Estimate

4 unchanged sentences

In the first quarter of fiscal 2022, the Company increased the expected useful lives of these assets by two to five years to more closely reflect the estimated economic lives of those assets.

This change in estimate was applied prospectively effective for the first quarter of fiscal 2022 and resulted in a decrease in depreciation expense of $ 8.4 million for the first quarter of fiscal 2022.

Approximately $ 7.1 million of the decrease in depreciation expense resulted in a reduction of inventory as of September 26, 2021 and will impact cost of revenue, net in future periods as the inventory is relieved.

The remaining $ 1.3 million of reduced depreciation expense resulted in the following:

(1) an improvement in gross profit of $ 0.5 million;

(2) an improvement in both loss before income taxes and net loss of $ 1.3 million;

and (3) an improvement in basic and diluted loss per share of $ 0.01 per share.

This change in estimate was applied prospectively effective for the first quarter of fiscal 2022 and resulted in a decrease in depreciation expense of $ 8.5 million and $ 16.9 million for the three and six months ended December 26, 2021, respectively.

Approximately $ 10.3 million of the decrease in depreciation expense for the six months ended December 26, 2021 resulted in a net reduction of inventory as of December 26, 2021 and will impact cost of revenue, net in future periods as the inventory is relieved.

The remaining $ 6.6 million of the decrease in depreciation expense resulted in the following for the three and six months ended December 26, 2021:

(1) an improvement in gross profit of $ 4.4 million and $ 4.9 million, respectively;

(2) an improvement in both loss before income taxes and net loss of $ 5.3 million and $ 6.6 million, respectively;

and (3) an improvement in basic and diluted loss per share of $ 0.05 and $ 0.06 per share, respectively.

Recently Adopted Accounting Pronouncements

7 unchanged sentences

The Company will adopt this standard on June 27, 2022, as required, and is currently evaluating the impact on its consolidated financial statements.

Government Assistance

In November 2021, the FASB issued ASU 2021-10, Government Assistance (Topic 832) - Disclosures by Business Entities about Government Assistance.

This standard will require entities to provide annual disclosures regarding government assistance.

More specifically, the amendments in the standard improve financial reporting by requiring disclosures that increase the transparency of transactions with a government accounted for by applying a grant or contribution accounting model by analogy, including (1) the types of transactions;

(2) the accounting for those transactions;

and (3) the effect of those transactions on an entity's financial statements.

An entity can apply the amendments prospectively or retrospectively.

The Company will adopt this standard on June 27, 2022, as required.

Note 2 – Discontinued Operations

4 unchanged sentences

The Company retained certain assets used in and pre-closing liabilities associated with the former 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 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.

4 unchanged sentences

The following table presents the financial results of the LED Business as loss from discontinued operations, net of income taxes in the Company's consolidated statements of operations:

Three months ended

Three months ended Six months ended

(in millions of U.S.

Dollars) September 27, 2020

Dollars) December 27, 2020 December 27, 2020

Revenue, net $ 105.2 $ 206.3

5 unchanged sentences

Goodwill impairment 6.9 112.6

Impairment on assets held for sale 19.5 19.5

Gain on disposal or impairment of long-lived assets ( 0.5 ) ( 1.0 )

1 unchanged sentence

Operating loss ( 25.8 ) ( 133.6 )

Non-operating expense, net 0.1

Non-operating income ( 0.1 ) —

Loss before income taxes ( 25.7 ) ( 133.6 )

5 unchanged sentences

As a result, the Company recorded an impairment to goodwill of $ 105.7 million.

For the three months ended September 26, 2021, the Company recognized $ 0.9 million and $ 2.9 million in administrative fees related to the LED RELA and the LED TSA, respectively, of which $ 0.3 million and $ 0.9 million are included in accounts receivable, net in the consolidated balance sheets as of September 26, 2021.

Fees related to the LED RELA were recorded as lease income, see Note 4, "Leases." Fees related to the LED TSA 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 $ 17.5 million was outstanding as of September 26, 2021.

The Wafer 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 $ 0.8 million in non-operating expense, net for the three months ended September 26, 2021 related to the Wafer Supply Agreement.

A receivable of $ 3.1 million was included in other assets in the consolidated balance sheets as of September 26, 2021.

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 LED Business Divestiture of $ 19.5 million.

For the three and six months ended December 26, 2021, the Company recognized $ 0.9 million and $ 1.8 million in administrative fees related to the LED RELA, respectively, of which $ 0.3 million is included in accounts receivable, net in the consolidated balance sheets as of December 26, 2021.

Fees related to the LED RELA were recorded as lease income, see Note 4, "Leases."

For the three and six months ended December 26, 2021, the Company recognized $ 2.4 million and $ 5.3 million in administrative fees related to the LED TSA, respectively, of which $ 0.7 million is included in accounts receivable, net in the consolidated balance sheets as of December 26, 2021.

Fees related to the LED TSA 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 $ 14.0 million was outstanding as of December 26, 2021.

The Wafer Supply Agreement liability is recognized in other current liabilities on the consolidated balance sheets.

For the three and six months ended December 26, 2021, the Company recognized a net loss of $ 0.1 million and $ 0.9 million, respectively, in non-operating expense, net related to the Wafer Supply Agreement.

A receivable of $ 2.2 million was included in other assets in the consolidated balance sheets as of December 26, 2021.

Note 3 – Revenue Recognition

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

The Company follows a five-step approach for recognizing revenue, consisting of the following:

(1) identify the contract with a customer;

4 unchanged sentences

Contract liabilities primarily include various rights of return and customer deposits, as well as a reserve on the Company's "ship and debit" program.

Contract liabilities were $ 47.8 million as of September 26, 2021 and $ 45.2 million as of June 27, 2021.

Contract liabilities were $ 52.0 million as of December 26, 2021 and $ 45.2 million as of June 27, 2021.

The increase was primarily due to increased reserves on the Company's "ship and debit" program.

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

For the three months ended September 26, 2021, the Company did no t recognize any revenue that was included in contract liabilities as of June 27, 2021.

Revenue recognized related to performance obligations that were satisfied or partially satisfied in previous periods was not material for the three months ended September 26, 2021.

For the three and six months ended December 26, 2021, the Company recognized an immaterial amount of revenue that was included in contract liabilities as of June 27, 2021.

Revenue recognized related to performance obligations that were satisfied or partially satisfied in previous periods was immaterial for the three and six months ended December 26, 2021.

The Company conducts business in several geographic areas.

1 unchanged sentence

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

Three months ended

September 26, 2021 September 27, 2020

Three months ended Six months ended

December 26, 2021 December 27, 2020 December 26, 2021 December 27, 2020

(in millions of U.S.

Dollars) Revenue % of Revenue Revenue % of Revenue

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

Europe $ 61.7 35.6 % $ 53.3 42.0 % $ 119.8 36.3 % $ 89.1 36.7 %

6 unchanged sentences

Note 4 – Leases

The Company primarily leases manufacturing and office space.

The Company primarily leases manufacturing and office spaces.

The Company also has a number of bulk gas leases.

1 unchanged sentence

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 include manufacturing equipment, manufacturing space in Malaysia, and a 49-year ground lease on a future Silicon Carbide device fabrication facility in New York.

The Company's finance lease obligations include manufacturing equipment, manufacturing space in Malaysia, and a 49-year ground lease on a Silicon Carbide device fabrication facility under construction in New York.

Balance Sheet

1 unchanged sentence

Operating Leases:

September 26, 2021 June 27, 2021

December 26, 2021 June 27, 2021

Right-of-use asset (1)

14 unchanged sentences

Statement of Operations

Operating lease expense was $ 1.5 million for the three months ended September 26, 2021 and $ 1.4 million for the three months ended September 27, 2020.

Short-term lease expense, variable lease expense and sublease income were immaterial for the three months ended September 26, 2021 and September 27, 2020.

Finance lease amortization was $ 0.4 million and interest expense was $ 0.1 million for the three months ended September 26, 2021.

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

Operating lease expense was $ 3.3 million and $ 4.8 million for the three and six months ended December 26, 2021, respectively, and $ 1.4 million and $ 2.8 million for the three and six months ended December 27, 2020, respectively.

Short-term lease expense was $ 0.2 million and $ 0.4 million for the three and six months ended December 26, 2021, respectively.

Short-term lease expense was immaterial for the three and six months ended December 27, 2020.

Finance lease amortization was $ 0.3 million and $ 0.7 million and interest expense was $ 0.1 million and $ 0.2 million for the three and six months ended December 26, 2021, respectively.

Finance lease amortization was $ 0.2 million and $ 0.4 million and interest expense was $ 0.1 million and $ 0.2 million for the three and six months ended December 27, 2020, respectively.

Cash flow information consisted of the following (1) :

Three months ended

Six months ended

(in millions of U.S.

Dollars) September 26, 2021 September 27, 2020

Dollars) December 26, 2021 December 27, 2020

Cash used in operating activities:

3 unchanged sentences

Cash paid for principal portion of finance leases 0.2 0.2

Non-cash activities:

Operating lease additions and modifications, net 2.6 1.2

Finance lease additions 3.5 —

Transfer of finance lease liability to accounts payable and accrued expenses (1)

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

(1) See Note 5, "Financial Statement Details," for non-cash activities related to leases.

Lease Liability Maturities

Maturities of operating and finance lease liabilities as of September 26, 2021 were as follows (in millions of U.S.

Maturities of operating and finance lease liabilities as of December 26, 2021 were as follows (in millions of U.S.

Fiscal Year Ending Operating Leases Finance Leases Total

20 unchanged sentences

The agreement does not contain any renewal provisions.

The Company recognized lease income of $ 0.9 million for the three months ended September 26, 2021.

The Company did no t recognize lease income for the three months ended September 27, 2020.

The Company did not recognize any variable lease income for the three months ended September 26, 2021 and September 27, 2020.

The Company recognized lease income of $ 0.9 million and $ 1.8 million for the three and six months ended December 26, 2021, respectively.

The Company did no t recognize lease income for the three and six months ended December 27, 2020.

The Company did not recognize any variable lease income for the three and six months ended December 26, 2021 and December 27, 2020.

Future minimum rental income relating to the LED RELA is as follows (in millions of U.S.

6 unchanged sentences

(in millions of U.S.

Dollars) September 26, 2021 June 27, 2021

Dollars) December 26, 2021 June 27, 2021

Billed trade receivables $ 107.5 $ 95.6

5 unchanged sentences

(in millions of U.S.

Dollars) September 26, 2021

Dollars) December 26, 2021

Balance at beginning of period $ 0.8

4 unchanged sentences

(in millions of U.S.

Dollars) September 26, 2021 June 27, 2021

Dollars) December 26, 2021 June 27, 2021

Raw material $ 48.0 $ 43.3

2 unchanged sentences

Inventories $ 198.6 $ 166.6

In addition, the Company holds inventory related to the Wafer Supply Agreement entered into in connection with the LED Business Divestiture, which is recorded within other current assets on the consolidated balance sheets.

Other Current Assets

Other current assets consisted of the following:

(in millions of U.S.

Dollars) December 26, 2021 June 27, 2021

Reimbursement receivable on long-term incentive agreement $ 97.5 $ 4.6

Accrued interest receivable 3.9 5.5

Receivable on Wafer Supply Agreement 2.2 7.0

Inventory related to Wafer Supply Agreement 2.8 3.9

Deferred product costs 2.2 1.8

Other 3.4 5.1

Other current assets $ 112.0 $ 27.9

Accounts Payable and Accrued Expenses

1 unchanged sentence

(in millions of U.S.

Dollars) September 26, 2021 June 27, 2021

Dollars) December 26, 2021 June 27, 2021

Accounts payable, trade $ 46.8 $ 44.2

6 unchanged sentences

Other operating expense consisted of the following:

Three months ended

Three months ended Six months ended

(in millions of U.S.

Dollars) September 26, 2021 September 27, 2020

Dollars) December 26, 2021 December 27, 2020 December 26, 2021 December 27, 2020

Factory optimization restructuring $ 2.1 $ 1.3 $ 4.7 $ 2.9

4 unchanged sentences

Other operating expense $ 15.6 $ 2.6 $ 28.4 $ 11.2

Accumulated Other Comprehensive Income, net of taxes

Accumulated other comprehensive income, net of taxes, consisted of $ 1.9 million and $ 2.7 million of net unrealized gains on available-for-sale securities as of September 26, 2021 and June 27, 2021, respectively.

Amounts for both periods 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 $ 0.2 million for the three months ended September 26, 2021 and less than $ 0.1 million for the three months ended September 27, 2020.

Accumulated Other Comprehensive (Loss) Income, net of taxes

Accumulated other comprehensive (loss) income, net of taxes, consisted of $ 1.7 million of net unrealized losses on available-for-sale securities and $ 2.7 million of net unrealized gains on available-for-sale securities as of December 26, 2021 and June 27, 2021, respectively.

Amounts for both periods include a $ 2.4 million loss related to tax on unrealized loss on available-for-sale securities.

Reclassifications Out of Accumulated Other Comprehensive (Loss) Income

Reclassifications out of accumulated other comprehensive (loss) income were a $ 0.1 million gain and a $ 0.3 million gain for the three and six months ended December 26, 2021, respectively, and gains of $ 0.2 million for each of the three and six months ended December 27, 2020, respectively.

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

1 unchanged sentence

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

Three months ended

Three months ended Six months ended

(in millions of U.S.

Dollars) September 26, 2021 September 27, 2020

Dollars) December 26, 2021 December 27, 2020 December 26, 2021 December 27, 2020

Foreign currency gain, net ($ 0.2 ) ($ 2.2 ) ($ 0.3 ) ($ 2.4 )

Gain on sale of investments, net ( 0.1 ) ( 0.2 ) ( 0.3 ) ( 0.2 )

Loss on equity investment, net — 3.4

Loss on debt extinguishment (1)

24.8 — 24.8 —

Gain on equity investment, net — ( 10.4 ) — ( 7.0 )

Interest income ( 2.4 ) ( 2.2 ) ( 5.0 ) ( 4.9 )

3 unchanged sentences

Non-operating expense, net $ 27.8 ($ 3.1 ) $ 31.9 $ 10.8

(1) As discussed further in Note 9, "Long-term Debt," in the second quarter of fiscal 2022, all outstanding 0.875 % convertible senior notes due September 1, 2023 (the 2023 Notes) were surrendered for conversion, resulting in the settlement of all outstanding 2023 Notes in shares, with fractional shares paid in cash.

Statements of Cash Flows - non-cash activities

Three months ended

September 26, 2021 September 27, 2020

Six months ended

December 26, 2021 December 27, 2020

Lease asset and liability additions $ 5.6 $ 1.2

Lease asset and liability modifications, net 2.9 0.2

Lease terminations ( 0.2 ) —

Transfer of finance lease liability to accounts payable and accrued expenses (1)

Settlement of 2023 Notes in shares of common stock (2)

Decrease in property, plant and equipment from long-term incentive related receivables 81.1 —

Accrued property and equipment as of September 26, 2021 and September 27, 2020 was $ 128.9 million and $ 108.2 million, respectively.

(2) As discussed further in Note 9, "Long-term Debt," in the second quarter of fiscal 2022, all outstanding 2023 Notes were surrendered for conversion, resulting in the settlement of all outstanding 2023 Notes in shares, with fractional shares paid in cash.

Accrued property and equipment as of December 26, 2021 and December 27, 2020 was $ 135.7 million and $ 145.0 million, respectively.

Note 6 – Investments

3 unchanged sentences

All short-term investments are classified as available-for-sale.

Short-term investments as of September 26, 2021 and June 27, 2021 consisted of the following:

September 26, 2021

Short-term investments as of December 26, 2021 and June 27, 2021 consisted of the following:

December 26, 2021

Amortized Cost Gross Unrealized Gains Gross Unrealized Losses Credit Loss Allowance Estimated Fair Value

3 unchanged sentences

treasury securities 12.7 0.1 — — 12.8

Certificates of deposit 9.5 — — — 9.5

Commercial paper 21.0 — — — 21.0

Variable rate demand notes 17.9 — — — 17.9

11 unchanged sentences

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

Accrued interest receivable was $ 4.1 million and $ 5.5 million as of September 26, 2021 and June 27, 2021, respectively, and is recorded in other current assets on the consolidated balance sheets.

Accrued interest receivable was $ 3.9 million and $ 5.5 million as of December 26, 2021 and June 27, 2021, 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 during the three months ended September 26, 2021 and September 27, 2020.

There were no write-offs of noncollectable interest income during the three and six months ended December 26, 2021 and December 27, 2020.

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:

September 26, 2021

December 26, 2021

Less than 12 Months Greater than 12 Months Total

17 unchanged sentences

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

Realized gains of $ 0.2 million and less than $0.1 million for the three months ended September 26, 2021 and September 27, 2020, respectively, are included in non-operating expense, net in the consolidated statements of operations.

Realized gains of $ 0.1 million and $ 0.3 million for the three and six months ended December 26, 2021, respectively, and $ 0.2 million and $ 0.2 million for the three and six months ended December 27, 2020, respectively, are included in non-operating expense, net 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 September 26, 2021 until the investments fully recover in market value.

No allowance for credit losses was recorded as of September 26, 2021.

The contractual maturities of short-term investments as of September 26, 2021 were as follows:

The Company believes it is able to and intends to hold each of the investments held with an unrealized loss as of December 26, 2021 until the investments fully recover in market value.

No allowance for credit losses was recorded as of December 26, 2021.

The contractual maturities of short-term investments as of December 26, 2021 were as follows:

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

3 unchanged sentences

treasury securities 4.0 8.8 — — 12.8

Certificates of deposit 9.5 — — — 9.5

Commercial paper 21.0 — — — 21.0

Variable rate demand notes — — — 17.9 17.9

11 unchanged sentences

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

As of September 26, 2021 and June 27, 2021, financial assets utilizing Level 1 inputs included money market funds and U.S.

As of December 26, 2021 and June 27, 2021, financial assets utilizing Level 1 inputs included money market funds and U.S.

treasury securities.

3 unchanged sentences

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

The Company did not have any financial assets requiring the use of Level 3 inputs as of September 26, 2021 and June 27, 2021.

The Company did not have any financial assets requiring the use of Level 3 inputs as of December 26, 2021 and June 27, 2021.

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

GAAP hierarchy:

September 26, 2021 June 27, 2021

December 26, 2021 June 27, 2021

(in millions of U.S.

18 unchanged sentences

Note 8 – Goodwill and Intangible Assets

There were no changes to goodwill during the three months ended September 26, 2021.

There were no changes to goodwill during the six months ended December 26, 2021.

Intangible Assets, net

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

September 26, 2021 June 27, 2021

December 26, 2021 June 27, 2021

(in millions of U.S.

6 unchanged sentences

Total intangible assets $ 245.0 ($ 112.4 ) $ 132.6 $ 244.1 ($ 103.6 ) $ 140.5

Total amortization of acquisition-related intangibles assets was $ 3.6 million and $ 3.6 million for the three months ended September 26, 2021 and September 27, 2020, respectively.

Total amortization of patents and licensing rights was $ 1.3 million and $ 1.2 million for the three months ended September 26, 2021 and September 27, 2020, respectively.

Total amortization of acquisition-related intangibles assets was $ 3.6 million and $ 7.2 million for the three and six months ended December 26, 2021, respectively, and $ 3.6 million and $ 7.2 million for the three and six months ended December 27, 2020, respectively.

Total amortization of patents and licensing rights was $ 1.5 million and $ 2.8 million for the three and six months ended December 26, 2021, respectively, and $ 1.4 million and $ 2.6 million for the three and six months ended December 27, 2020, respectively.

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

11 unchanged sentences

Revolving Line of Credit

As of September 26, 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.

As of December 26, 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 September 26, 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 months ended September 26, 2021, the average interest rate was 0.15 %, related to a ten day draw of $ 20.0 million on the line of credit in the first quarter of fiscal 2022.

As of September 26, 2021, the unused line fee on available borrowings is 25 basis points.

As of December 26, 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 six months ended December 26, 2021, the average interest rate was 0.0 % and 0.07 %, respectively.

The average interest rate for the six months ended December 26, 2021 relates to a ten -day draw of $ 20.0 million on the line of credit in the first quarter of fiscal 2022.

As of December 26, 2021, the unused line fee on available borrowings is 25 basis points.

On January 25, 2022, the Company entered into an amendment to the Credit Agreement that extends the maturity date by three years to January 9, 2026 and adopts secured overnight financing rate (SOFR) interest rates as the benchmark interest rate.

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.

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.

The total net proceeds from the 2023 Notes offering was approximately $ 562.1 million.

As discussed further below, the Company repurchased approximately $ 150.2 million aggregate principal amount of the 2023 Notes using a portion of net proceeds from the sale of an additional convertible note offering (the 2026 Notes, as defined and explained below) in April 2020.

On December 8, 2021 (the Redemption Notice Date), the Company issued a notice (the Redemption Notice) to holders of the 2023 Notes calling all outstanding 2023 Notes for redemption.

The Redemption Notice designated December 23, 2021 as the redemption date (the Redemption Date).

On the Redemption Date, the Redemption Price (as defined below) would have become due and payable on each of the 2023 Notes to be redeemed, and interest thereon would cease to accrue.

However, any 2023 Notes called for redemption would not be redeemed if such note was converted before the Redemption Date.

The Redemption Price for the 2023 Notes called for redemption was an amount in cash equal to the principal amount of such note plus accrued and unpaid interest on such note to, but excluding, the Redemption Date, which equated to a Redemption Price of $1,002.72222 per $1,000 principal amount of 2023 Notes (the Redemption Price).

As of the Redemption Notice Date, the conversion rate of the 2023 Notes was 16.6745 shares of the Company's common stock per $1,000 principal amount of such notes.

However, in accordance with the Indenture, dated as of August 24, 2018, between the Company and U.S.

Bank National Association, as trustee, which governed the terms of the 2023 Notes, the conversion rate for 2023 Notes that were converted after the Redemption Notice Date was increased to 16.7769 shares of the Company's common stock per $1,000 principal amount of such notes.

Before the Redemption Date, all outstanding 2023 Notes were surrendered for conversion, resulting in the settlement of all outstanding 2023 Notes in approximately 7.1 million shares of the Company's common stock, with cash in lieu of any fractional shares.

The fair value of shares issued upon conversion of all outstanding 2023 Notes was $ 788.0 million.

The amount of cash paid for fractional shares was immaterial.

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 total net proceeds from the 2026 Notes offering 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).

15 unchanged sentences

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 carrying amount 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.

Due to the partial extinguishment of the 2023 Notes in connection with the issuance of the 2026 Notes, the equity component of the 2023 Notes was reduced by $ 27.7 million during the fourth quarter of fiscal 2020.

As a result of the full conversion of all outstanding 2023 Notes, the Company remeasured the outstanding liability for the 2023 Notes using a market rate for debt without a conversion option (the Market Rate) as of the Redemption Notice Date.

The Company performed a present value calculation using the Market Rate and determined the fair value of the debt as of the Redemption Notice Date was $ 416.1 million, $ 24.7 million higher than the carrying value of the 2023 Notes as of the Redemption Notice Date.

As a result, the Company recorded a loss on extinguishment of $ 24.8 million, which includes a $ 0.1 million loss on extinguishment expense related to third party fees.

Additionally, the equity component of the 2023 Notes was reduced to zero.

The equity component of the 2026 Notes 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 2026 Notes at an effective annual interest rate of 7.45 %.

The 2026 Notes are equal in right of payment to any of the Company’s unsecured indebtedness;

4 unchanged sentences

(in millions of U.S.

Dollars) September 26, 2021 June 27, 2021

Dollars) December 26, 2021 June 27, 2021

Principal $ 575.0 $ 999.8

3 unchanged sentences

(in millions of U.S.

Dollars) September 26, 2021 June 27, 2021

Dollars) December 26, 2021 June 27, 2021

Discount related to value of conversion option $ 149.0 $ 262.3

3 unchanged sentences

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

Three months ended

Three months ended Six months ended

(in millions of U.S.

Dollars) September 26, 2021 September 27, 2020

Dollars) December 26, 2021 December 27, 2020 December 26, 2021 December 27, 2020

Interest expense, net of capitalized interest $ 0.8 $ 2.8 $ 1.9 $ 6.0

2 unchanged sentences

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 months ended September 26, 2021 and September 27, 2020, the Company capitalized $ 2.3 million and $ 0.2 million of interest expense, respectively, and $ 5.4 million and $ 0.4 million of amortization of discount and issuance costs, respectively.

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 September 30, 2021.

As a result, the Notes are convertible at the option of the holders through December 31, 2021.

As of September 26, 2021, the if-converted values of the 2023 and 2026 Notes exceeded their respective principal amounts by $ 175.6 million and $ 455.0 million, respectively.

The estimated fair value of the Notes is $ 1.7 billion as of September 26, 2021, as determined by a Level 2 valuation.

For the three and six months ended December 26, 2021, the Company capitalized $ 2.6 million and $ 4.9 million of interest expense, respectively, and $ 5.8 million and $ 11.2 million of amortization of discount and issuance costs, respectively.

For the three and six months ended December 27, 2020, the Company capitalized $ 0.6 million and $ 0.8 million of interest expense, respectively, and $ 1.3 million and $ 1.7 million of amortization of discount and issuance costs, respectively.

The last reported sale price of the Company's common stock was greater than or equal to 130 % of the applicable conversion price for the 2026 Notes for at least 20 trading days in the 30 consecutive trading days ended on December 31, 2021.

As a result, the 2026 Notes are convertible at the option of the holders through March 31, 2022.

As of December 26, 2021, the if-converted value of the 2026 Notes exceeded the principal amount by $ 773.3 million.

The estimated fair value of the 2026 Notes is $ 1.4 billion as of December 26, 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

Three months ended Six months ended

(in millions of U.S.

Dollars, except share data) September 26, 2021 September 27, 2020

Dollars, except share data) December 26, 2021 December 27, 2020 December 26, 2021 December 27, 2020

Net loss from continuing operations ($ 96.7 ) ($ 54.3 ) ($ 166.8 ) ($ 129.6 )

7 unchanged sentences

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 months ended September 26, 2021 and September 27, 2020, 2.7 million and 4.5 million, respectively, 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.”

For the three and six months ended December 26, 2021, 3.1 million and 3.3 million, respectively, 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 six months ended December 27, 2020, 3.5 million and 3.9 million, respectively, 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 the 2026 Notes under certain conditions as described in Note 9, “Long-term Debt.”

Note 11 – Stock-Based Compensation

15 unchanged sentences

Stock Option Awards

A summary of stock option awards outstanding as of September 26, 2021 and changes during the three months then ended is as follows:

A summary of stock option awards outstanding as of December 26, 2021 and changes during the six months then ended is as follows:

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

3 unchanged sentences

Forfeited or expired — $ —

Outstanding at September 26, 2021 125 $ 25.62

Outstanding at December 26, 2021 90 $ 25.44

Restricted Stock Units

A summary of nonvested restricted stock unit awards (RSUs) outstanding as of September 26, 2021 and changes during the three months then ended is as follows:

A summary of nonvested restricted stock unit awards (RSUs) outstanding as of December 26, 2021 and changes during the six months then ended is as follows:

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

4 unchanged sentences

Forfeited ( 36 ) $ 69.34

Nonvested at September 26, 2021 2,044 $ 70.18

Nonvested at December 26, 2021 1,993 $ 73.51

Stock-Based Compensation Valuation and Expense

13 unchanged sentences

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

Three months ended

Three months ended Six months ended

(in millions of U.S.

Dollars) September 26, 2021 September 27, 2020

Dollars) December 26, 2021 December 27, 2020 December 26, 2021 December 27, 2020

Cost of revenue, net $ 4.2 $ 3.7 $ 7.3 $ 7.1

10 unchanged sentences

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.

As of September 26, 2021, 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 December 26, 2021, the Company has concluded that it is necessary to recognize a full valuation allowance against its U.S.

deferred tax assets.

As a result of the LED Business Divestiture and the liquidation of the Company’s common stock ownership interest in ENNOSTAR, Inc., the Company began reviewing its legal entity structure, including its Luxembourg holding company, during the fourth quarter of fiscal 2021.

As of September 26, 2021, the Company is still performing the due diligence necessary to understand its ability and desire to restructure its Luxembourg holding company.

If the Company determines it is willing and able to execute a restructuring of its Luxembourg holding company, it is reasonably possible the action could generate taxable income of the right character to utilize all or a portion of the Company’s existing $ 121.8 million of deferred tax assets in Luxembourg.

As a result, the Company believes it is reasonably possible within the next twelve months, and potentially as early as the second quarter of fiscal 2022, that objective positive evidence may become available to allow the Company to conclude that all or a portion of the $ 121.8 million of Luxembourg deferred tax assets are realizable.

This determination would result in the release of all or a portion of the Luxembourg valuation allowance.

The release of the Luxembourg valuation allowance could result in the recognition of $ 121.8 million of net operating loss deferred tax assets and a decrease to income tax expense in the period the release is recorded.

In the second quarter of fiscal 2022, the Company concluded its due diligence and commenced a plan to restructure its Luxembourg holding company, resulting in the recognition of $ 7.3 million of income tax expense.

The $ 7.3 million of income tax expense represents the net effect of $ 129.1 million of income tax expense generated from taxable income as a result of the restructuring plan offset by a full release of the valuation allowance against the Company’s Luxembourg net operating loss deferred tax assets, which totaled $ 121.8 million.

As of December 26, 2021, the Company has no valuation allowance against Luxembourg deferred tax assets.

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

2 unchanged sentences

As of June 27, 2021, the Company's liability for unrecognized tax benefits was $ 7.4 million.

During the three months ended September 26, 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 September 26, 2021 was $ 7.4 million.

During the six months ended December 26, 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 December 26, 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.

20 unchanged sentences

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 $ 2.5 million to $ 5.2 million per year through fiscal 2031.

As of September 26, 2021, the Company has reduced property and equipment, net by $ 101.1 million as a result of GDA reimbursements, of which $ 61.5 million has been received in cash and an additional $ 26.4 million and $ 13.2 million are recorded as receivables in other current assets and other assets, respectively, in the consolidated balance sheets.

As of December 26, 2021, the Company has reduced property and equipment, net by $ 159.0 million as a result of GDA reimbursements, of which $ 61.5 million has been received in cash and an additional $ 97.5 million is recorded as a receivable in other current assets in the consolidated balance sheets.

The Company started receiving cash reimbursements in the fourth quarter of fiscal 2021.

Note 14 - Restructuring

9 unchanged sentences

The Company expects approximately $ 90.0 million in restructuring charges related to the factory optimization plan to be incurred through 2024.

For the three months ended September 26, 2021, the Company expensed $ 1.6 million of restructuring charges associated with the movement of equipment related to the factory optimization plan, of which $ 0.3 million is accrued for as of September 26, 2021.

Additionally, the Company expensed $ 1.0 million of restructuring charges associated with disposals of certain long-lived assets for the three months ended September 26, 2021.

For the three months ended September 27, 2020, the Company expensed and paid $ 2.6 million of restructuring charges associated with the movement of equipment related to the factory optimization plan.

For the three and six months ended December 26, 2021, the Company expensed $ 1.8 million and $ 3.4 million, respectively, of restructuring charges associated with the movement of equipment related to the factory optimization plan, of which $ 0.5 million is accrued for as of December 26, 2021.

Additionally, the Company expensed $ 0.3 million and $ 1.3 million of restructuring charges associated with disposals of certain long-lived assets for the three and six months ended December 26, 2021, respectively.

For the three and six months ended December 27, 2020, the Company expensed and paid $ 0.9 million and $ 3.1 million, respectively, of restructuring charges associated with the movement of equipment related to the factory optimization plan.

Additionally, the Company expensed and paid $ 0.4 million and $ 0.8 million of restructuring charges associated with disposals of certain long-lived assets for the three and six months ended December 27, 2020, respectively.

Corporate Restructuring

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

As a result, the Company recorded $ 2.8 million in severance-related costs during the three months ended September 27, 2020.

In September 2020, the Company realigned certain resources to further focus on areas vital to its 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 six months ended December 27, 2020, respectively.

The plan has concluded and all expenses were paid as of June 27, 2021.

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

What changed 10-Q

Item 1. Financial Statements