What changed in this filing

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Item 1. Financial Statements

2022-05-05 compared with 2022-01-27 · 231 added, 153 removed, 705 unchanged (35% of the section changed)

Financial Statements (Unaudited)

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

Consolidated Balance Sheets as of March 27, 2022 and June 27, 2021

Consolidated Statements of Operations for the three and nine months ended March 27, 2022 and March 28, 2021

Consolidated Statements of Comprehensive Loss for the three and nine months ended March 27, 2022 and March 28, 2021

Consolidated Statements of Shareholders' Equity for the nine months ended March 27, 2022 and March 28, 2021

Consolidated Statements of Cash Flows for the nine months ended March 27, 2022 and March 28, 2021

Notes to Unaudited Consolidated Financial Statements

2 unchanged sentences

in millions of U.S.

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

Dollars, except share data in thousands March 27, 2022 June 27, 2021

Current assets:

36 unchanged sentences

Preferred stock, par value $ 0.01 ;

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

3,000 shares authorized at March 27, 2022 and June 27, 2021;

none issued and outstanding

Common stock, par value $ 0.00125 ;

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

200,000 shares authorized at March 27, 2022 and June 27, 2021;

123,599 and 115,691 shares issued and outstanding at March 27, 2022 and June 27, 2021, respectively

Additional paid-in-capital 4,204.6 3,676.8

6 unchanged sentences

UNAUDITED CONSOLIDATED STATEMENTS OF OPERATIONS

Three months ended Six months ended

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

Three months ended Nine months ended

March 27, 2022 March 28, 2021 March 27, 2022 March 28, 2021

in millions of U.S.

7 unchanged sentences

Amortization or impairment of acquisition-related intangibles 3.4 3.7 10.6 10.9

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

(Gain) loss on disposal or impairment of other assets ( 0.6 ) 0.1 ( 0.3 ) 0.8

Other operating expense 23.9 11.4 52.3 22.6

Operating loss ( 62.3 ) ( 61.4 ) ( 188.9 ) ( 181.2 )

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

Non-operating expense, net 3.8 8.1 35.7 18.9

Loss before income taxes ( 66.1 ) ( 69.5 ) ( 224.6 ) ( 200.1 )

12 unchanged sentences

UNAUDITED CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS

Three months ended Six months ended

Three months ended Nine months ended

(in millions of U.S.

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

Dollars) March 27, 2022 March 28, 2021 March 27, 2022 March 28, 2021

Net loss ($ 66.5 ) ($ 108.1 ) ($ 233.3 ) ($ 374.9 )

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 ( 16.3 ) ( 2.5 ) ( 20.7 ) ( 3.0 )

23 unchanged sentences

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

Net loss — — — ( 66.5 ) — ( 66.5 )

Unrealized loss on available-for-sale securities — — — — ( 16.3 ) ( 16.3 )

Comprehensive loss ( 82.8 )

Tax withholding on vested equity awards — — ( 0.8 ) — — ( 0.8 )

Stock-based compensation — — 15.4 — — 15.4

Exercise of stock options and issuance of shares 29 — 0.3 — — 0.3

Issuance of convertible notes due February 15, 2028 — — 187.6 — — 187.6

Capped call transactions related to the issuance of convertible notes due February 15, 2028 — — ( 108.2 ) — — ( 108.2 )

Balance at March 27, 2022 123,599 $ 0.2 $ 4,204.6 ($ 1,796.4 ) ($ 18.0 ) $ 2,390.4

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

19 unchanged sentences

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

1 unchanged sentence

UNAUDITED CONSOLIDATED STATEMENTS OF CASH FLOWS

Six months ended

Nine months ended

(in millions of U.S.

Dollars) December 26, 2021 December 27, 2020

Dollars) March 27, 2022 March 28, 2021

Operating activities:

21 unchanged sentences

Net cash used in operating activities of continuing operations ( 123.4 ) ( 58.9 )

Net cash provided by operating activities of discontinued operations — 6.2

Net cash used in operating activities of discontinued operations — ( 16.6 )

Cash used in operating activities ( 123.4 ) ( 75.5 )

7 unchanged sentences

Reimbursement of property and equipment purchases from long-term incentive agreement 83.5 —

Proceeds from sale of business, net, including receipt of note receivable 125.0 36.6

Net cash used in investing activities of continuing operations ( 378.0 ) ( 339.2 )

Net cash provided by investing activities of discontinued operations — 2.7

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

Cash used in investing activities ( 378.0 ) ( 339.5 )

4 unchanged sentences

Tax withholding on vested equity awards ( 26.1 ) ( 31.7 )

Proceeds from convertible notes 750.0 —

Payments of debt issuance costs ( 17.7 ) —

Cash paid for capped call transactions ( 108.2 ) —

Commitment fee on long-term incentive agreement ( 1.0 ) ( 0.5 )

Cash (used in) provided by financing activities ( 15.0 ) 14.5

Cash provided by financing activities 608.3 497.6

Effects of foreign exchange changes on cash and cash equivalents — 0.2

33 unchanged sentences

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.

Additionally, the Company recently opened its Silicon Carbide device fabrication facility in New York.

The Company operates research and development facilities in North Carolina, California, Arkansas, Arizona and New York.

3 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 December 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 March 27, 2022, 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 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).

The results of operations for the three and nine months ended March 27, 2022 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 December 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 March 27, 2022 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 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.

While the assessments resulted in no material impacts to the consolidated financial statements as of and for the quarter ended March 27, 2022, 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 $ 8.5 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:

This change in estimate was applied prospectively effective for the first quarter of fiscal 2022 and resulted in a decrease in depreciation expense of $ 8.3 million and $ 25.2 million for the three and nine months ended March 27, 2022, respectively.

Approximately $ 10.4 million of the decrease in depreciation expense for the nine months ended March 27, 2022 resulted in a net reduction of inventory as of March 27, 2022 and will impact cost of revenue, net in future periods as the inventory is relieved.

The remaining $ 14.8 million of the decrease in depreciation expense resulted in the following for the three and nine months ended March 27, 2022:

(1) an improvement in gross profit of $ 7.3 million and $ 12.2 million, respectively;

5 unchanged sentences

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);

Accounting for Convertible Instruments and Contracts in an Entity’s Own Equity.

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

Upon adoption of this standard, convertible debt, unless issued with a substantial premium or an embedded conversion feature that is not clearly and closely related to the host contract, will no longer be allocated between debt and equity components.

This modification will reduce the issue discount and result in less non-cash interest expense in financial statements.

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

16 unchanged sentences

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

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 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 had a maturity date of August 15, 2023, and as explained further below, was prepaid by SGH in full pursuant to its terms, along with outstanding accrued and unpaid interest as of the payment date, in the third quarter of fiscal 2022.

The Earnout Note will mature on March 27, 2025 and will accrue interest at a rate of three-month LIBOR plus 3.0 % with interest paid every three months.

One bullet payment of principal and all accrued and unpaid interest will be payable on the maturity date of the Earnout Note.

In fiscal 2021, the Company recognized a loss on sale of the LED Business of $ 29.1 million.

1 unchanged sentence

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.

In the third quarter of fiscal 2022, the Company received an early payment for the Purchase Price Note.

The principal amount of $ 125.0 million was paid in full, along with outstanding accrued interest as of the payment date (the Early Payment).

In conjunction with the Early Payment, the Company transferred naming rights and trademarks related to Cree, Inc.

and the CREE brand to SMART (the Trademark Transfer), resulting in a write-off of trademarks of $ 1.1 million and recorded within (gain) loss on disposal or impairment of other assets in the consolidated statements of operations.

Because the Early Payment did not include additional consideration in exchange for the Trademark Transfer, the Company allocated consideration from the principal amount to the value of the trademarks transferred to SMART.

The Company allocated $ 1.8 million of the Early Payment to the value of trademarks transferred to SMART, resulting in a gain recorded in (gain) loss on disposal or impairment of other assets in the consolidated statements of operations.

The remaining unallocated portion of the Early Payment of $ 123.2 million was then applied to the note receivable balance of $ 124.4 million at the time of payment, resulting in a loss of $ 1.2 million recorded in non-operating expense, net on the consolidated statements of operations.

The net impact to the consolidated statements of operations from the early payment for the Purchase Price Note was a loss of $ 0.5 million.

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 Six months ended

Three months ended Nine months ended

(in millions of U.S.

Dollars) December 27, 2020 December 27, 2020

Dollars) March 28, 2021 March 28, 2021

Revenue, net $ 66.5 $ 272.8

10 unchanged sentences

Non-operating income ( 0.3 ) ( 0.3 )

Loss before income taxes and loss on sale ( 7.5 ) ( 141.1 )

Loss on sale 26.3 26.3

Loss before income taxes ( 33.8 ) ( 167.4 )

6 unchanged sentences

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.

For the three and nine months ended March 27, 2022, the Company recognized $ 0.9 million and $ 2.7 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 March 27, 2022.

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.

For the three and nine months ended March 27, 2022, the Company recognized $ 2.1 million and $ 7.4 million in administrative fees related to the LED TSA, respectively, of which $ 0.6 million is included in accounts receivable, net in the consolidated balance sheets as of March 27, 2022.

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.

At the inception of the Wafer Supply Agreement, the Company recorded a supply agreement liability of $ 31.0 million, of which $ 10.2 million was outstanding as of March 27, 2022.

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.

For the three and nine months ended March 27, 2022, the Company recognized a net loss of $ 0.5 million and $ 1.4 million, respectively, in non-operating expense, net related to the Wafer Supply Agreement.

A receivable of $ 2.4 million was included in other assets in the consolidated balance sheets as of March 27, 2022.

Note 3 – Revenue Recognition

6 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 $ 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 were $ 41.9 million as of March 27, 2022 and $ 45.2 million as of June 27, 2021.

The decrease was primarily due to decreased customer deposits offset by 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 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.

For the three and nine months ended March 27, 2022, the Company recognized an immaterial amount of deferred revenue that was included in contract liabilities as of June 27, 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 Six months ended

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

Three months ended Nine months ended

March 27, 2022 March 28, 2021 March 27, 2022 March 28, 2021

(in millions of U.S.

12 unchanged sentences

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

The Company's finance lease obligations 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.

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 in New York.

Balance Sheet

1 unchanged sentence

Operating Leases:

December 26, 2021 June 27, 2021

March 27, 2022 June 27, 2021

Right-of-use asset (1)

14 unchanged sentences

Statement of Operations

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.

Operating lease expense was $ 1.8 million and $ 6.6 million for the three and nine months ended March 27, 2022, respectively, and $ 1.3 million and $ 4.1 million for the three and nine months ended March 28, 2021, respectively.

Short-term lease expense was $ 0.3 million and $ 0.7 million for the three and nine months ended March 27, 2022, respectively.

Short-term lease expense was immaterial for the three and nine months ended March 28, 2021.

Finance lease amortization was $ 0.2 million and $ 0.9 million and interest expense was less than $0.1 million and $ 0.2 million for the three and nine months ended March 27, 2022, respectively.

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.

Cash flow information consisted of the following (1) :

Six months ended

Nine months ended

(in millions of U.S.

Dollars) December 26, 2021 December 27, 2020

Dollars) March 27, 2022 March 28, 2021

Cash used in operating activities:

5 unchanged sentences

Lease Liability Maturities

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

Maturities of operating and finance lease liabilities as of March 27, 2022 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 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.

The Company recognized lease income of $ 0.9 million and $ 2.7 million for the three and nine months ended March 27, 2022, respectively.

The Company recognized lease income of $ 0.3 million for the three and nine months ended March 28, 2021.

The Company did not recognize any variable lease income for the three and nine months ended March 27, 2022 and March 28, 2021.

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) December 26, 2021 June 27, 2021

Dollars) March 27, 2022 June 27, 2021

Billed trade receivables $ 120.6 $ 95.6

5 unchanged sentences

(in millions of U.S.

Dollars) December 26, 2021

Dollars) March 27, 2022

Balance at beginning of period $ 0.8

4 unchanged sentences

(in millions of U.S.

Dollars) December 26, 2021 June 27, 2021

Dollars) March 27, 2022 June 27, 2021

Raw material $ 52.7 $ 43.3

5 unchanged sentences

(in millions of U.S.

Dollars) December 26, 2021 June 27, 2021

Dollars) March 27, 2022 June 27, 2021

Reimbursement receivable on long-term incentive agreement $ 153.7 $ 4.6

8 unchanged sentences

(in millions of U.S.

Dollars) December 26, 2021 June 27, 2021

Dollars) March 27, 2022 June 27, 2021

Accounts payable, trade $ 54.1 $ 44.2

6 unchanged sentences

Other operating expense consisted of the following:

Three months ended Six months ended

Three months ended Nine months ended

(in millions of U.S.

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

Dollars) March 27, 2022 March 28, 2021 March 27, 2022 March 28, 2021

Factory optimization restructuring $ 0.8 $ 3.8 $ 5.5 $ 6.7

3 unchanged sentences

Factory optimization start-up costs 21.4 1.8 41.0 6.0

Non-restructuring related executive severance — 2.8 — 2.8

Other operating expense $ 23.9 $ 11.4 $ 52.3 $ 22.6

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.

Accumulated other comprehensive (loss) income, net of taxes, consisted of $ 18.0 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 March 27, 2022 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.

Reclassifications out of accumulated other comprehensive (loss) income were a less than $ 0.1 million gain and a $ 0.3 million gain for the three and nine months ended March 27, 2022, respectively, and a $ 0.1 million gain and a $ 0.3 million gain for each of the three and nine months ended March 28, 2021, respectively.

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 Six months ended

Three months ended Nine months ended

(in millions of U.S.

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

Dollars) March 27, 2022 March 28, 2021 March 27, 2022 March 28, 2021

Foreign currency gain, net ($ 0.3 ) ($ 0.1 ) ($ 0.6 ) ($ 2.5 )

1 unchanged sentence

Loss on debt extinguishment (1)

24.8 — 24.8 —

Gain on equity investment, net — ( 0.9 ) — ( 7.9 )

2 unchanged sentences

Loss on Wafer Supply Agreement 0.5 0.1 1.4 0.1

Loss on early payment of transaction-related note receivable (2)

Other, net 0.1 ( 0.2 ) ( 0.1 ) 0.1

1 unchanged sentence

(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.

(2) As discussed further in Note 2, "Discontinued Operations," in the third quarter of fiscal 2022, the Company recognized a loss of $ 1.2 million related to the early payment for the Purchase Price Note.

Statements of Cash Flows - non-cash activities

Six months ended

December 26, 2021 December 27, 2020

Nine months ended

(in millions of U.S.

Dollars) March 27, 2022 March 28, 2021

Lease asset and liability additions $ 6.3 $ 1.7

6 unchanged sentences

(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.

Accrued property and equipment as of March 27, 2022 and March 28, 2021 was $ 88.3 million and $ 165.6 million, respectively.

Note 6 – Investments

Investments consist of municipal bonds, corporate bonds, U.S.

Short-term investments consist of municipal bonds, corporate bonds, U.S.

agency securities, U.S.

treasury securities, certificates of deposit, commercial paper and variable rate demand notes.

treasury securities, non-U.S.

government securities, certificates of deposit, commercial paper and variable rate demand notes.

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

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

December 26, 2021

Short-term investments as of March 27, 2022 and June 27, 2021 consisted of the following (in millions of U.S.

March 27, 2022

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

3 unchanged sentences

treasury securities 99.0 — ( 0.3 ) — 98.7

government securities 7.7 — ( 0.3 ) — 7.4

Commercial paper 29.0 — — — 29.0

12 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 $ 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.

Accrued interest receivable was $ 4.4 million and $ 5.5 million as of March 27, 2022 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 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:

December 26, 2021

There were no write-offs of noncollectable interest income during the three and nine months ended March 27, 2022 and March 28, 2021.

March 27, 2022

Less than 12 Months Greater than 12 Months Total

16 unchanged sentences

Number of securities with an unrealized loss 128 — 128

Additionally, the Company held cash equivalent securities in unrealized loss positions as of March 27, 2022 and June 27, 2021.

As of March 27, 2022, the Company held six cash equivalent securities in unrealized loss positions with an aggregate fair value of $ 53.9 million and an aggregate unrealized loss of less than $ 0.1 million.

As of June 27, 2021, the Company held six cash equivalent securities in unrealized loss positions with an aggregate fair value of $ 21.4 million and an aggregate unrealized loss of less than $ 0.1 million.

All cash equivalents in unrealized loss positions as of March 27, 2022 and June 27, 2021 have been in unrealized loss positions for less than 12 months.

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 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.

Realized gains of less than $ 0.1 million and $ 0.3 million for the three and nine months ended March 27, 2022, respectively, and $ 0.1 million and $ 0.3 million for the three and nine months ended March 28, 2021, 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 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

The Company believes it is able to and intends to hold each of the investments held with an unrealized loss as of March 27, 2022 until the investments fully recover in market value.

No allowance for credit losses was recorded as of March 27, 2022.

The contractual maturities of short-term investments as of March 27, 2022 were as follows:

(in millions of U.S.

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

Municipal bonds $ 39.4 $ 131.1 $ — $ — $ 170.5

2 unchanged sentences

treasury securities 67.0 31.7 — — 98.7

government securities — — 7.4 — 7.4

Commercial paper 29.0 — — — 29.0

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• 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.

Because 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.

1 unchanged sentence

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

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

As of March 27, 2022 and June 27, 2021, 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, and variable rate demand notes.

agency securities, variable rate demand notes and non-U.S.

government securities.

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 December 26, 2021 and June 27, 2021.

The Company did not have any financial assets requiring the use of Level 3 inputs as of March 27, 2022 and June 27, 2021.

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

GAAP hierarchy:

December 26, 2021 June 27, 2021

March 27, 2022 June 27, 2021

(in millions of U.S.

3 unchanged sentences

Municipal bonds — 5.7 — 5.7 — 16.0 — 16.0

Corporate bonds — 0.6 — 0.6 — — — —

agency securities — — — — — 6.0 — 6.0

treasury securities 72.5 — — 72.5 — — — —

Commercial paper — 60.2 — 60.2 — 62.4 — 62.4

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Variable rate demand notes — 24.6 — 24.6 — 20.0 — 20.0

government securities — 7.4 — 7.4 — — — —

Total short-term investments 98.7 701.5 — 800.2 72.5 703.1 — 775.6

1 unchanged sentence

Note 8 – Goodwill and Intangible Assets

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

There were no changes to goodwill during the nine months ended March 27, 2022.

Intangible Assets, net

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

December 26, 2021 June 27, 2021

March 27, 2022 June 27, 2021

(in millions of U.S.

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Total intangible assets $ 241.2 ($ 112.9 ) $ 128.3 $ 244.1 ($ 103.6 ) $ 140.5

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 amortization of acquisition-related intangibles assets was $ 3.4 million and $ 10.6 million for the three and nine months ended March 27, 2022, respectively, and $ 3.7 million and $ 10.9 million for the three and nine months ended March 28, 2021, respectively.

Total amortization of patents and licensing rights was $ 1.3 million and $ 4.1 million for the three and nine months ended March 27, 2022, respectively, and $ 2.0 million and $ 4.6 million for the three and nine months ended March 28, 2021, respectively.

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

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Revolving Line of Credit

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.

As of March 27, 2022, 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, 2026.

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 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.

As of March 27, 2022, 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 27, 2022, the average interest rate was 0.00 % and 0.05 %, respectively.

The average interest rate for the nine months ended March 27, 2022 relates to a ten -day draw of $ 20.0 million on the line of credit in the first quarter of fiscal 2022.

As of March 27, 2022, 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 extended the maturity date by three years to January 9, 2026 and adopted secured overnight financing rate (SOFR) interest rates as the benchmark interest rate.

2023 Convertible Notes

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

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 equity component representing the conversion option was $ 110.6 million and $ 145.4 million for the 2023 and 2026 Notes, respectively.

The Company used approximately $ 144.3 million of the net proceeds from the sale of the 2026 Notes in April 2020 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.

2028 Convertible Notes

On February 3, 2022, the Company sold $ 650.0 million aggregate principal amount of 0.25 % convertible senior notes due February 15, 2028 to qualified institutional buyers pursuant to Rule 144A under the Securities Act and an additional $ 100.0 million aggregate principal amount of such notes pursuant to the exercise in full of the over-allotment options of the underwriters (the 2028 Notes).

The total net proceeds from the 2028 Notes offering was approximately $ 732.3 million.

The Company used approximately $ 108.2 million of the net proceeds from the 2028 Notes to fund the cost of entering into capped call transactions, as described below.

The conversion rate will initially be 7.8602 shares of common stock per one thousand dollars in principal amount of 2028 Notes (equivalent to an initial conversion price of approximately $ 127.22 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 2028 Notes in connection with such a corporate event, or who elects to convert any 2028 Notes called for redemption during the related redemption period in certain circumstances.

The Company may not redeem the 2028 Notes prior to February 18, 2025.

The Company may redeem for cash all or any portion of the 2028 Notes, at its option, on a redemption date occurring on or after February 18, 2025 and on or before the 40 th 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 2028 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 2028 Notes at a fundamental repurchase price equal to 100 % of the principal amount of the 2028 Notes to be repurchased, plus accrued and unpaid interest to, but excluding, the fundamental change repurchase date.

Holders may convert their 2028 Notes at their option at any time prior to the close of business on the business day immediately preceding August 16, 2027 only under the following circumstances:

(1) during any calendar quarter commencing after the calendar quarter ending March 31, 2022 (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 2028 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 2028 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 August 16, 2027 until the close of business on the second scheduled trading day immediately preceding the maturity date, holders may convert their 2028 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.

Capped Call Transactions

On January 31, 2022, in connection with the pricing of the 2028 Notes, the Company entered into privately negotiated capped call transactions with certain of the initial purchasers or affiliates thereof (the Capped Call Counterparties).

In connection with the exercise by the initial purchasers of their option to purchase additional notes, the Company entered into additional privately negotiated capped call transactions (such transactions, collectively, the Capped Call Transactions) with each of the Capped Call Counterparties.

The Capped Call Transactions initially cover, subject to customary anti-dilution adjustments, the aggregate number of shares of the Company’s common stock that initially underlie the 2028 Notes.

The Capped Call Transactions are expected generally to reduce the potential dilutive effect on the common stock upon any conversion of 2028 Notes and/or offset any potential cash payments the Company is required to make in excess of the principal amount of converted 2028 Notes, as the case may be, with such reduction and/or offset subject to a cap which initially is $ 212.04 per share, representing a premium of 125 % over the last reported sale price per share of our common stock on January 31, 2022, subject to certain adjustments under the terms of the Capped Call Transactions.

The Capped Call Transactions are separate transactions entered into by the Company with each of the Capped Call Counterparties, are not part of the terms of the 2028 Notes, and do not affect any holder’s rights under the 2028 Notes.

Holders of the 2028 Notes do not have any rights with respect to the Capped Call Transactions.

Accounting for 2023 Notes, 2026 Notes and 2028 Notes (collectively, the Notes)

In accounting for the issuance of the 2023 Notes, 2026 Notes and 2028 Notes, the Company separated the Notes into liability and equity components.

The carrying amount of the equity component representing the conversion option was $ 110.6 million, $ 145.4 million and $ 187.6 million for the 2023, 2026 and 2028 Notes, respectively.

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

2 unchanged sentences

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.

As a result, the Company recorded a loss on extinguishment of $ 24.8 million, which included 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;

senior in right of payment to the Company’s existing and future indebtedness that is expressly subordinated in right of payment to the 2026 Notes;

The equity components of the 2026 and 2028 Notes are 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 and 2028 Notes at an effective annual interest rate of 7.45 % and 5.59 %, respectively.

The 2026 and 2028 Notes are equal in right of payment to any of the Company’s unsecured indebtedness;

senior in right of payment to the Company’s existing and future indebtedness that is expressly subordinated in right of payment to the 2026 and 2028 Notes;

effectively subordinated in right of payment of any of the Company’s secured indebtedness to the extent of the value of the assets securing such indebtedness;

2 unchanged sentences

(in millions of U.S.

Dollars) December 26, 2021 June 27, 2021

Dollars) March 27, 2022 June 27, 2021

Principal $ 1,325.0 $ 999.8

3 unchanged sentences

(in millions of U.S.

Dollars) December 26, 2021 June 27, 2021

Dollars) March 27, 2022 June 27, 2021

Discount related to value of conversion option $ 341.1 $ 262.3

3 unchanged sentences

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

Three months ended Six months ended

Three months ended Nine months ended

(in millions of U.S.

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

Dollars) March 27, 2022 March 28, 2021 March 27, 2022 March 28, 2021

Interest expense, net of capitalized interest $ 0.2 $ 2.5 $ 2.1 $ 8.5

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 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.

For the three and nine months ended March 27, 2022, the Company capitalized $ 2.4 million and $ 7.3 million of interest expense, respectively, and $ 5.9 million and $ 17.1 million of amortization of discount and issuance costs, respectively.

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.

As a result, the 2026 Notes are convertible at the option of the holders through June 30, 2022.

As of March 27, 2022, the if-converted value of the 2026 Notes exceeded their respective principal amounts by $ 794.6 million.

The estimated fair value of the Notes is $ 2.3 billion as of March 27, 2022, 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 Six months ended

Three months ended Nine months ended

(in millions of U.S.

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

Dollars, except share data) March 27, 2022 March 28, 2021 March 27, 2022 March 28, 2021

Net loss from continuing operations ($ 66.5 ) ($ 66.5 ) ($ 233.3 ) ($ 196.1 )

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 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.”

For the three and nine months ended March 27, 2022, 2.3 million and 2.4 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 nine months ended March 28, 2021, 3.1 million and 3.6 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 and 2028 Notes under certain conditions as described in Note 9, “Long-term Debt.”

Note 11 – Stock-Based Compensation

2 unchanged sentences

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.

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.

Performance-based conditions may be tied to future financial and/or operating performance of the Company, external based market metrics or internal performance metrics.

The Company also has an Employee Stock Purchase Plan (ESPP) that provides employees with the opportunity to purchase common stock at a discount.

4 unchanged sentences

Stock Option Awards

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

A summary of stock option awards outstanding as of March 27, 2022 and changes during the nine months then ended is as follows:

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

3 unchanged sentences

Forfeited or expired — $ —

Outstanding at December 26, 2021 90 $ 25.44

Outstanding at March 27, 2022 81 $ 25.27

Restricted Stock Units

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

Grant-Date Fair Value

A summary of nonvested restricted stock unit awards (RSUs) outstanding as of March 27, 2022 and changes during the nine months then ended is as follows:

(awards and units in thousands) Number of RSUs Weighted Average Grant-Date Fair Value

Nonvested at June 27, 2021 2,168 $ 57.38

2 unchanged sentences

Forfeited ( 69 ) $ 74.64

Nonvested at December 26, 2021 1,993 $ 73.51

Nonvested at March 27, 2022 1,960 $ 73.84

Stock-Based Compensation Valuation and Expense

5 unchanged sentences

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.

For RSUs, the grant-date fair value is based upon the market price of the Company’s common stock on the date of the grant.

For service-based RSUs and performance-based RSUs with internal metrics, the grant-date fair value is based upon the market price of the Company’s common stock on the date of the grant.

For performance-based RSUs, 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.

This fair value is then amortized to compensation expense over the requisite service period or vesting term.

For performance-based 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.

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.

1 unchanged sentence

The Black-Scholes and Monte Carlo option pricing models require the input of highly subjective assumptions.

The assumptions listed below represent management's best estimates, but these estimates involve inherent uncertainties and the application of management judgment.

These assumptions represent management's best estimates, but these estimates involve inherent uncertainties and the application of management judgment.

As a result, if other assumptions had been used, recorded share-based compensation expense could have been materially different from that depicted below.

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

Three months ended Six months ended

Three months ended Nine months ended

(in millions of U.S.

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

Dollars) March 27, 2022 March 28, 2021 March 27, 2022 March 28, 2021

Cost of revenue, net $ 4.2 $ 4.1 $ 11.5 $ 11.2

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

As of March 27, 2022, the Company has concluded that it is necessary to recognize a full valuation allowance against its U.S.

deferred tax assets.

2 unchanged sentences

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.

As of March 27, 2022, 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 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.

During the nine months ended March 27, 2022, 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 27, 2022 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.

15 unchanged sentences

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 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 its 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.

2 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 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.

As of March 27, 2022, the Company has reduced property and equipment, net by $ 247.9 million as a result of GDA reimbursements, of which $ 94.2 million has been received in cash and an additional $ 153.7 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.

8 unchanged sentences

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 is currently evaluating the impact of the facility on future restructuring charges.

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

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.

For the three and nine months ended March 27, 2022, the Company expensed $ 0.8 million and $ 4.2 million, respectively, of restructuring charges associated with the movement of equipment related to the factory optimization plan, of which $ 1.7 million is accrued for as of March 27, 2022.

Additionally, the Company expensed $ 0.0 million and $ 1.3 million of restructuring charges associated with disposals of certain long-lived assets for the three and nine months ended March 27, 2022, respectively.

For the three and nine months ended March 28, 2021, the Company expensed and paid $ 1.2 million and $ 4.3 million, respectively, of restructuring charges associated with the movement of equipment related to the factory optimization plan.

Additionally, the Company expensed and paid $ 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, respectively.

Corporate Restructuring

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.

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, respectively.

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

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 were paid as of June 27, 2021.

In January 2022, the Company commenced a plan to open a global IT shared services hub in Belfast, Northern Ireland in partnership with the Northern Ireland government.

As a result, the Company recorded $ 0.5 million in severance-related costs for the three and nine months ended March 27, 2022, all of which is accrued for as of March 27, 2022.

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