What changed in this filing

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Item 1. Financial Statements

2022-10-27 compared with 2022-05-05 · 186 added, 352 removed, 584 unchanged (48% of the section changed)

Financial Statements (Unaudited)

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

Consolidated Balance Sheets as of September 25, 2022 and June 26, 2022

Consolidated Statements of Operations for the three months ended September 25, 2022 and September 26, 2021

Consolidated Statements of Comprehensive Loss for the three months ended September 25, 2022 and September 26, 2021

Consolidated Statements of Shareholders' Equity for the three months ended September 25, 2022 and September 26, 2021

Consolidated Statements of Cash Flows for the three months ended September 25, 2022 and September 26, 2021

Notes to Unaudited Consolidated Financial Statements

2 unchanged sentences

in millions of U.S.

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

Dollars, except share data in thousands September 25, 2022 June 26, 2022

Current assets:

15 unchanged sentences

Other assets 89.0 83.7

Long-term assets of discontinued operations — 1.2

Total assets $ 3,858.5 $ 3,917.5

6 unchanged sentences

Other current liabilities 26.8 31.7

Current liabilities of discontinued operations — 0.6

Total current liabilities 380.8 388.5

4 unchanged sentences

Other long-term liabilities 54.4 55.3

Long-term liabilities of discontinued operations — 0.6

Total long-term liabilities 1,368.1 1,089.7

2 unchanged sentences

Preferred stock, par value $ 0.01 ;

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

3,000 shares authorized at September 25, 2022 and June 26, 2022;

none issued and outstanding

Common stock, par value $ 0.00125 ;

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

200,000 shares authorized at September 25, 2022 and June 26, 2022;

124,210 and 123,795 shares issued and outstanding at September 25, 2022 and June 26, 2022, respectively

Additional paid-in-capital 3,902.2 4,228.4

Accumulated other comprehensive (loss) income ( 18.0 ) 2.7

Accumulated other comprehensive loss ( 32.3 ) ( 25.3 )

Accumulated deficit ( 1,760.5 ) ( 1,764.0 )

4 unchanged sentences

UNAUDITED CONSOLIDATED STATEMENTS OF OPERATIONS

Three months ended Nine months ended

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

Three months ended

September 25, 2022 September 26, 2021

in millions of U.S.

7 unchanged sentences

Amortization or impairment of acquisition-related intangibles 2.9 3.6

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

Loss (gain) on disposal or impairment of other assets 0.1 ( 0.2 )

Other operating expense 42.4 12.8

Operating loss ( 75.7 ) ( 65.7 )

Non-operating expense, net 3.8 8.1 35.7 18.9

Non-operating (income) expense, net ( 49.7 ) 4.1

Loss before income taxes ( 26.0 ) ( 69.8 )

Income tax expense (benefit) 0.4 ( 3.0 ) 8.7 ( 4.0 )

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

Net loss from discontinued operations — ( 41.6 ) — ( 178.8 )

Income tax expense 0.2 0.3

Net loss ($ 26.2 ) ($ 70.1 )

Net income from discontinued operations attributable to noncontrolling interest — 0.8 — 1.4

Net loss attributable to controlling interest ($ 66.5 ) ($ 108.9 ) ($ 233.3 ) ($ 376.3 )

Basic and diluted loss per share ($ 0.21 ) ($ 0.60 )

Continuing operations ($ 0.54 ) ($ 0.59 ) ($ 1.96 ) ($ 1.75 )

Net loss attributable to controlling interest ($ 0.54 ) ($ 0.96 ) ($ 1.96 ) ($ 3.35 )

Weighted average shares - basic and diluted (in thousands) 124,035 115,919

2 unchanged sentences

UNAUDITED CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS

Three months ended Nine months ended

Three months ended

(in millions of U.S.

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

Dollars) September 25, 2022 September 26, 2021

Net loss ($ 26.2 ) ($ 70.1 )

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 ( 7.0 ) ( 0.8 )

Comprehensive loss ( 33.2 ) ( 70.9 )

Net income from discontinued operations attributable to noncontrolling interest — 0.8 — 1.4

Comprehensive loss attributable to controlling interest ($ 82.8 ) ($ 120.9 ) ($ 254.0 ) ($ 388.8 )

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

10 unchanged sentences

Exercise of stock options and issuance of shares 415 — 0.5 — — 0.5

Adoption of ASU 2020-06 — — ( 333.0 ) 29.7 — ( 303.3 )

Balance at September 25, 2022 124,210 $ 0.2 $ 3,902.2 ($ 1,760.5 ) ($ 32.3 ) $ 2,109.6

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

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

1 unchanged sentence

UNAUDITED CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY

Common Stock Additional Paid-in Capital Accumulated Deficit Accumulated Other Comprehensive Income Total Equity - Controlled Interest Non-controlling Interest from Discontinued Operations Total Shareholders' Equity

(in millions of U.S.

Dollars, except share data) Number of Shares Par Value

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

(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

Net (loss) income — — — ( 184.4 ) — ( 184.4 ) 0.3 ( 184.1 )

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

Comprehensive (loss) income ( 184.4 ) 0.3 ( 184.1 )

Tax withholding on vested equity awards — — ( 22.7 ) — — ( 22.7 ) — ( 22.7 )

Stock-based compensation — — 16.2 — — 16.2 — 16.2

Exercise of stock options and issuance of shares 1,066 — 16.5 — — 16.5 — 16.5

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

Net (loss) income — — — ( 83.0 ) — ( 83.0 ) 0.3 ( 82.7 )

Unrealized loss on available-for-sale securities — — — — ( 0.5 ) ( 0.5 ) — ( 0.5 )

Comprehensive (loss) income ( 83.5 ) 0.3 ( 83.2 )

Tax withholding on vested equity awards — — ( 1.6 ) — — ( 1.6 ) — ( 1.6 )

Stock-based compensation — — 18.6 — — 18.6 — 18.6

Exercise of stock options and issuance of shares 681 — 22.7 — — 22.7 — 22.7

Balance at December 27, 2020 110,977 $ 0.1 $ 3,155.9 ($ 1,306.6 ) $ 15.5 $ 1,864.9 $ 6.7 $ 1,871.6

Net (loss) income — — — ( 108.9 ) — ( 108.9 ) 0.8 ( 108.1 )

Reclassification of currency translation gain to loss on sale of discontinued operations — — — — ( 9.5 ) ( 9.5 ) — ( 9.5 )

Net loss — — — ( 70.1 ) — ( 70.1 )

Unrealized loss on available-for-sale securities — — — — ( 0.8 ) ( 0.8 )

Comprehensive (loss) income ( 120.9 ) 0.8 ( 120.1 )

Comprehensive loss ( 70.9 )

Tax withholding on vested equity awards — — ( 22.5 ) — — ( 22.5 )

1 unchanged sentence

Exercise of stock options and issuance of shares 495 — 0.7 — — 0.7

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

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

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

1 unchanged sentence

UNAUDITED CONSOLIDATED STATEMENTS OF CASH FLOWS

Nine months ended

Three months ended

(in millions of U.S.

Dollars) March 27, 2022 March 28, 2021

Dollars) September 25, 2022 September 26, 2021

Operating activities:

Net loss ($ 26.2 ) ($ 70.1 )

Net loss from discontinued operations — ( 178.8 )

Net loss from continuing operations ( 233.3 ) ( 196.1 )

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

Adjustments to reconcile net loss to cash used in operating activities:

Depreciation and amortization 38.0 34.6

1 unchanged sentence

Stock-based compensation 22.0 14.6

Loss on extinguishment of debt 24.8 —

Loss on disposal or impairment of long-lived assets 1.0 3.7

Loss on disposal or impairment of long-lived assets, including loss on disposal portion of factory optimization and start-up costs 1.9 0.8

Amortization of premium/discount on investments 1.4 1.7

Realized gain on sale of investments — ( 0.2 )

Gain on equity investment — ( 7.9 )

Foreign exchange gain on equity investment — ( 3.4 )

Deferred income taxes 0.2 0.2

6 unchanged sentences

Accrued contract liabilities 0.4 2.7

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

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

Cash used in operating activities ( 12.7 ) ( 62.5 )

7 unchanged sentences

Reimbursement of property and equipment purchases from long-term incentive agreement 46.7 50.8

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 used in investing activities of discontinued operations — ( 0.3 )

Cash used in investing activities ( 378.0 ) ( 339.5 )

Proceeds from sale of business resulting from the receipt of transaction related note receivable 101.8 —

Cash provided by (used in) investing activities 102.8 ( 32.0 )

Financing activities:

3 unchanged sentences

Tax withholding on vested equity awards ( 16.9 ) ( 22.5 )

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 provided by financing activities 608.3 497.6

Commitment fees on long-term incentive agreement ( 1.0 ) ( 1.0 )

Cash used in financing activities ( 17.6 ) ( 22.9 )

Effects of foreign exchange changes on cash and cash equivalents ( 0.4 ) ( 0.1 )

18 unchanged sentences

Wolfspeed, Inc.

(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.

As discussed more fully below in Note 2, “Discontinued Operations,” on March 1, 2021, the Company completed the sale of certain assets and subsidiaries comprising its former LED Products segment (the LED Business Divestiture) to SMART Global Holdings, Inc.

(SGH) and its wholly owned newly-created acquisition subsidiary CreeLED, Inc.

(CreeLED and collectively with SGH, SMART).

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

(the Company) is an innovator of wide bandgap semiconductors, focused on Silicon Carbide and gallium nitride (GaN) materials and devices for power and radio-frequency (RF) applications.

The Company’s product families include Silicon Carbide and GaN materials, power devices and RF devices targeted for various applications such as electric vehicles, fast charging, 5G, renewable energy and storage, and aerospace and defense.

The Company’s materials products and power devices are used in electric vehicles, motor drives, power supplies, solar and transportation applications.

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

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).

The Company ceased trading as a Nasdaq-listed company at the end of the day on October 1, 2021 and commenced trading as a NYSE-listed company at market open on October 4, 2021 under the new ticker symbol ‘WOLF’.

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

6 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 March 27, 2022, and for all periods presented, have been made.

In the opinion of management, all normal and recurring adjustments necessary to fairly state the consolidated financial position, results of operations, comprehensive loss, shareholders' equity and cash flows at September 25, 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 26, 2022 (fiscal 2022) (the 2022 Form 10-K).

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 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 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

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

GAAP requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenue and expenses, and the disclosure of contingent assets and liabilities.

Actual amounts could differ materially from those estimates.

As a result of the LED Business Divestiture and the Company's continued investment in 200mm technology, the Company evaluated the useful lives applied to certain machinery and equipment assets by considering industry standards and reviewing the assets' historical and estimated future use.

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 $ 8.3 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;

(2) an improvement in both loss before income taxes and net loss of $ 8.2 million and $ 14.8 million, respectively;

and (3) an improvement in basic and diluted loss per share of $ 0.07 and $ 0.12 per share, respectively.

The results of operations for the three months ended September 25, 2022 are not necessarily indicative of the operating results that may be attained for the entire fiscal year ending June 25, 2023 (fiscal 2023).

Recently Adopted Accounting Pronouncements

Accounting Pronouncements Pending Adoption

Convertible Debt Instruments

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

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

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

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

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.

1 unchanged sentence

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

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

The Company adopted this standard on June 27, 2022, the first day of its 2023 fiscal year, under the modified retrospective approach.

The adoption resulted in (i) a reduction of additional paid in capital by $ 333.0 million for the recombination of the equity conversion component of the convertible notes outstanding, which was initially separated and recorded in equity, (ii) an increase in the cumulative convertible note carrying value of $ 277.9 million as a result of removing previously recorded debt discounts, (iii) a decrease in property, plant and equipment for previously capitalized non-cash interest of $ 25.4 million and (iv) a decrease to beginning accumulated deficit as of June 27, 2022 of $ 29.7 million to recognize the cumulative gain on adoption.

The Company did not recognize a discrete tax impact related to the opening deferred tax balances as of June 27, 2022 due to a full U.S valuation allowance.

Government Assistance

1 unchanged sentence

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;

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;

1 unchanged sentence

An entity can apply the amendments prospectively or retrospectively.

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

The Company adopted this standard on June 27, 2022, as required, and the required disclosures will be reflected in the Company’s Annual Report on Form 10-K for the fiscal year ending June 25, 2023.

Accounting Pronouncements Pending Adoption

Note 2 – Discontinued Operations

On March 1, 2021, the Company completed the LED Business Divestiture pursuant to the terms of the Asset Purchase Agreement (the LED Purchase Agreement), dated October 18, 2020, as amended.

On March 1, 2021, the Company completed the sale of certain assets and subsidiaries comprising its former LED Products segment to SMART Global Holdings, Inc.

(SGH) and its wholly owned subsidiary CreeLED, Inc.

(CreeLED and collectively with SGH, SMART) (the LED Business Divestiture) pursuant to the terms of the Asset Purchase Agreement (the LED Purchase Agreement), dated October 18, 2020, as amended.

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

2 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 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 an unsecured promissory note (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.

The Earnout Note was issued by CreeLED in the fourth quarter of 2022, had a maturity date of March 27, 2025 and as explained further below, was prepaid by CreeLED in full pursuant to its terms, in connection with the forgiveness by the Company of outstanding accrued and unpaid interest as of the payment date, in the first quarter of fiscal 2023.

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

2 unchanged sentences

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 Nine months ended

(in millions of U.S.

Dollars) March 28, 2021 March 28, 2021

Revenue, net $ 66.5 $ 272.8

Cost of revenue, net 50.3 213.3

Gross profit 16.2 59.5

Operating expenses:

Research and development 5.9 22.3

Sales, general and administrative 12.5 29.4

Goodwill impairment — 112.6

Impairment on assets held for sale — 19.5

Gain on disposal or impairment of long-lived assets ( 0.6 ) ( 1.6 )

Other operating expense 6.2 18.7

Operating loss ( 7.8 ) ( 141.4 )

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 )

Income tax expense 7.8 11.4

Net loss ( 41.6 ) ( 178.8 )

Net income attributable to noncontrolling interest 0.8 1.4

Net loss attributable to controlling interest ($ 42.4 ) ($ 180.2 )

As of September 27, 2020, the Company determined it would more likely than not sell all or a portion of the assets comprising its former LED Products segment below carrying value.

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

As of December 27, 2020, the Company recorded an additional impairment to goodwill of $ 6.9 million and an impairment to assets held for sale associated with the LED Business Divestiture of $ 19.5 million.

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.

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

In the first quarter of fiscal 2023, the Company received an early payment for the Earnout Note.

The principal amount of $ 101.8 million was paid in full and the Company agreed to forgo payment by CreeLED of the outstanding accrued interest as of the payment date.

For the three months ended September 25, 2022 and September 26, 2021, the Company recognized $ 0.9 million and $ 0.9 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 September 25, 2022.

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

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.

For the three months ended September 25, 2022 and September 26, 2021, the Company recognized $ 1.9 million and $ 2.9 million in administrative fees related to the LED TSA, respectively, of which $ 0.9 million is included in accounts receivable, net in the consolidated balance sheets as of September 25, 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 $ 10.2 million was outstanding as of March 27, 2022.

At the inception of the Wafer Supply Agreement, the Company recorded a supply agreement liability of $ 31.0 million, of which $ 1.1 million was outstanding as of September 25, 2022.

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

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.

For the three months ended September 25, 2022 and September 26, 2021, the Company recognized a net gain of $ 0.2 million and a net loss of $ 0.8 million, respectively, in non-operating income, net related to the Wafer Supply Agreement.

A receivable of $ 1.7 million was included in other assets in the consolidated balance sheets as of September 25, 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 $ 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 were $ 48.2 million as of September 25, 2022 and $ 47.8 million as of June 26, 2022.

The increase was primarily due to increases to ship and debit reserves partially offset by decreases in product exchange reserves.

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

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.

For the three months ended September 25, 2022, the Company did not recognize revenue that was included in contract liabilities as of June 26, 2022.

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 Nine months ended

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

Three months ended

September 25, 2022 September 26, 2021

(in millions of U.S.

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

Dollars) Revenue % of Revenue Revenue % of Revenue

Europe $ 75.7 31.4 % $ 58.1 37.1 %

United States 42.4 22.6 % 31.2 22.7 % 101.1 19.5 % 85.1 22.4 %

China 66.0 27.4 % 42.9 27.4 %

Japan 7.8 4.1 % 10.5 7.6 % 25.1 4.8 % 31.9 8.4 %

South Korea 6.7 3.6 % 6.9 5.0 % 17.8 3.4 % 20.5 5.4 %

United States 50.4 20.9 % 26.0 16.6 %

Asia Pacific (excluding China) 47.8 19.8 % 29.4 18.8 %

Other 1.4 0.6 % 0.2 0.1 %

5 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 in New York.

The Company's finance lease obligations primarily relate to contract manufacturing space in Malaysia and a 49-year ground lease on the Company's Silicon Carbide device fabrication facility in New York.

Balance Sheet

1 unchanged sentence

Operating Leases:

March 27, 2022 June 27, 2021

September 25, 2022 June 26, 2022

Right-of-use asset (1)

14 unchanged sentences

Statement of Operations

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.

Operating lease expense was $ 2.2 million for the three months ended September 25, 2022 and $ 1.5 million for the three months ended September 26, 2021.

Short-term lease expense, variable lease expense and sublease income were immaterial for the three months ended September 25, 2022 and September 26, 2021.

Finance lease amortization was $ 0.2 million and interest expense was $ 0.1 million for the three months ended September 25, 2022.

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

Cash flow information consisted of the following (1) :

Nine months ended

Three months ended

(in millions of U.S.

Dollars) March 27, 2022 March 28, 2021

Dollars) September 25, 2022 September 26, 2021

Cash used in operating activities:

5 unchanged sentences

Lease Liability Maturities

Maturities of operating and finance lease liabilities as of March 27, 2022 were as follows (in millions of U.S.

Maturities of operating and finance lease liabilities as of September 25, 2022 were as follows (in millions of U.S.

Fiscal Year Ending Operating Leases Finance Leases Total

6 unchanged sentences

Total lease payments 87.8 17.2 105.0

Future tenant improvement allowances ( 18.9 ) — ( 18.9 )

Imputed lease interest ( 21.4 ) ( 7.3 ) ( 28.7 )

5 unchanged sentences

4.24 % 2.68 %

(1) Weighted average remaining lease term of finance leases without the 49-year ground lease is 53 months.

(2) Weighted average discount rate of finance leases without the 49-year ground lease is 3.29 %.

(1) Weighted average remaining lease term of finance leases excluding the 49-year ground lease is 49 months.

(2) Weighted average discount rate of finance leases excluding the 49-year ground lease is 3.30 %.

As mentioned in Note 2, "Discontinued Operations", on March 1, 2021 and in connection with the sale of its LED Business, the Company entered into the LED RELA pursuant to which the Company leases to CreeLED approximately 58,000 square feet of the Company’s property and certain facilities in Durham, North Carolina for a total of $ 3.6 million per year.

3 unchanged sentences

The agreement does not contain any renewal provisions.

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.

June 26, 2022 (remainder of fiscal 2022) $ 0.9

June 25, 2023 2.4

Total future minimum rental income $ 3.3

The Company recognized lease income of $ 0.9 million and $ 0.9 million for the three months ended September 25, 2022 and September 26, 2021, respectively.

The Company did not recognize any variable lease income for the three months ended September 25, 2022 and September 26, 2021.

Future minimum rental income relating to the LED RELA is $ 1.5 million for the remainder of fiscal 2023.

Note 5 – Financial Statement Details

2 unchanged sentences

(in millions of U.S.

Dollars) March 27, 2022 June 27, 2021

Dollars) September 25, 2022 June 26, 2022

Billed trade receivables $ 156.3 $ 148.0

5 unchanged sentences

(in millions of U.S.

Dollars) March 27, 2022

Dollars) September 25, 2022

Balance at beginning of period $ 1.2

4 unchanged sentences

(in millions of U.S.

Dollars) March 27, 2022 June 27, 2021

Dollars) September 25, 2022 June 26, 2022

Raw material $ 73.1 $ 60.2

5 unchanged sentences

(in millions of U.S.

Dollars) March 27, 2022 June 27, 2021

Dollars) September 25, 2022 June 26, 2022

Reimbursement receivable on long-term incentive agreement $ 107.9 $ 132.5

8 unchanged sentences

(in millions of U.S.

Dollars) March 27, 2022 June 27, 2021

Dollars) September 25, 2022 June 26, 2022

Accounts payable, trade $ 55.9 $ 57.8

6 unchanged sentences

Other operating expense consisted of the following:

Three months ended Nine months ended

Three months ended

(in millions of U.S.

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

Factory optimization restructuring $ 0.8 $ 3.8 $ 5.5 $ 6.7

Severance and other restructuring 0.5 0.6 0.5 3.4

Total restructuring costs 1.3 4.4 6.0 10.1

Dollars) September 25, 2022 September 26, 2021

Restructuring costs — 2.6

Project, transformation and transaction costs 3.0 1.6

Factory optimization start-up costs 21.4 1.8 41.0 6.0

Factory start-up costs 38.4 8.6

Non-restructuring related executive severance 1.0 —

Other operating expense $ 42.4 $ 12.8

Accumulated Other Comprehensive (Loss) Income, net of taxes

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.

Accumulated Other Comprehensive Loss, net of taxes

Accumulated other comprehensive loss, net of taxes, consisted of $ 32.3 million and $ 25.3 million of net unrealized losses on available-for-sale securities as of September 25, 2022 and June 26, 2022, 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 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 Nine months ended

Reclassifications Out of Accumulated Other Comprehensive Loss

Reclassifications out of accumulated other comprehensive loss was a less than $ 0.1 million gain for the three months ended September 25, 2022 and a $ 0.2 million gain for the three months ended September 26, 2021.

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

Non-Operating (Income) Expense, net

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

Three months ended

(in millions of U.S.

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 )

Dollars) September 25, 2022 September 26, 2021

Gain on sale of investments, net — ( 0.2 )

Loss on debt extinguishment (1)

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

Gain on arbitration proceedings (1)

Interest income ( 4.3 ) ( 2.6 )

Interest expense, net of capitalized interest 4.8 6.7

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 ( 0.8 ) 0.2

Non-operating expense, net $ 3.8 $ 8.1 $ 35.7 $ 18.9

(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.

Non-operating (income) expense, net ($ 49.7 ) $ 4.1

(1) In the first quarter of fiscal 2023, the Company received an arbitration award in relation to a former customer failing to fulfill contractual obligations to purchase a certain amount of product over a period of time.

The arbitration award, net of legal fees incurred, was recognized as non-operating income.

Statements of Cash Flows - non-cash activities

Nine months ended

Three months ended

(in millions of U.S.

Dollars) March 27, 2022 March 28, 2021

Dollars) September 25, 2022 September 26, 2021

Lease asset and liability additions $ 0.4 $ 3.5

Lease asset and liability modifications, net — 2.6

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 22.1 23.2

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

(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 March 27, 2022 and March 28, 2021 was $ 88.3 million and $ 165.6 million, respectively.

Accrued property and equipment as of September 25, 2022 and September 26, 2021 was $ 146.3 million and $ 128.9 million, respectively.

Note 6 – Investments

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

agency securities, U.S.

treasury securities, non-U.S.

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

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

treasury securities, variable rate demand notes and U.S.

agency securities.

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

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

March 27, 2022

The Company did not have any long-term investments as of September 25, 2022 and June 26, 2022.

Short-term investments as of September 25, 2022 and June 26, 2022 consisted of the following (in millions of U.S.

September 25, 2022

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

Municipal bonds $ 173.5 $ 0.1 ($ 3.1 ) $ — $ 170.5

Corporate bonds $ 439.3 $ — ($ 22.4 ) $ — $ 416.9

agency securities 4.0 — ( 0.1 ) — 3.9

Municipal bonds 156.9 — ( 6.2 ) — 150.7

treasury securities 56.5 — ( 1.2 ) — 55.3

government securities 7.7 — ( 0.3 ) — 7.4

Commercial paper 29.0 — — — 29.0

Variable rate demand notes 50.8 — — — 50.8

agency securities 2.0 — ( 0.1 ) — 1.9

Total short-term investments $ 705.5 $ — ($ 29.9 ) $ — $ 675.6

1 unchanged sentence

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

Municipal bonds $ 139.4 $ 1.9 $ — $ — $ 141.3

Corporate bonds $ 465.8 $ — ($ 17.8 ) $ — $ 448.0

agency securities 15.8 — — — 15.8

Municipal bonds 166.5 0.1 ( 4.4 ) — 162.2

treasury securities 66.5 — ( 0.7 ) — 65.8

Certificates of deposit 16.5 — — — 16.5

Commercial paper 50.0 — — — 50.0

Variable rate demand notes 69.4 — — — 69.4

agency securities 4.0 — ( 0.1 ) — 3.9

Total short-term investments $ 772.2 $ 0.1 ($ 23.0 ) $ — $ 749.3

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 $ 4.4 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 nine months ended March 27, 2022 and March 28, 2021.

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 (in millions of U.S.

March 27, 2022

September 25, 2022

Less than 12 Months Greater than 12 Months Total

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

Municipal bonds $ 154.5 ($ 3.1 ) $ 1.0 $ — $ 155.5 ($ 3.1 )

Corporate bonds $ 376.5 ($ 20.3 ) $ 39.8 ($ 2.1 ) $ 416.3 ($ 22.4 )

agency securities 3.9 ( 0.1 ) — — 3.9 ( 0.1 )

Municipal bonds 146.3 ( 6.1 ) 2.9 ( 0.1 ) 149.2 ( 6.2 )

treasury securities 55.3 ( 1.2 ) — — 55.3 ( 1.2 )

agency securities — — 1.9 ( 0.1 ) 1.9 ( 0.1 )

Total $ 578.1 ($ 27.6 ) $ 44.6 ($ 2.3 ) $ 622.7 ($ 29.9 )

3 unchanged sentences

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

Municipal bonds $ 13.4 $ — $ — $ — $ 13.4 $ —

Corporate bonds $ 431.1 ($ 17.4 ) $ 8.3 ($ 0.4 ) $ 439.4 ($ 17.8 )

agency securities 10.7 — — — 10.7 —

Municipal bonds 150.0 ( 4.4 ) 1.0 — 151.0 ( 4.4 )

treasury securities 65.8 ( 0.7 ) — — 65.8 ( 0.7 )

Certificates of deposit 0.7 — — — 0.7 —

agency securities 3.9 ( 0.1 ) — — 3.9 ( 0.1 )

Total $ 650.8 ($ 22.6 ) $ 9.3 ($ 0.4 ) $ 660.1 ($ 23.0 )

Number of securities with an unrealized loss 346 5 351

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.

Additionally, the Company held cash equivalent securities in unrealized loss positions as of September 25, 2022 and June 26, 2022.

As of September 25, 2022, the Company held nine cash equivalent securities in unrealized loss positions with an aggregate fair value of $ 97.8 million and an aggregate unrealized loss of less than $ 0.1 million.

As of June 26, 2022, the Company held six cash equivalent securities in unrealized loss positions with an aggregate fair value of $ 69.0 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.

All cash equivalents in unrealized loss positions as of September 25, 2022 and June 26, 2022 have been in unrealized loss positions for less than 12 months.

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 $ 4.5 million and $ 5.9 million as of September 25, 2022 and June 26, 2022, 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 25, 2022 and September 26, 2021.

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

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.

Realized gains and losses are included in non-operating (income) 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 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:

The Company believes it is able to and intends to hold each of the investments held with an unrealized loss as of September 25, 2022 until the investments fully recover in market value.

No allowance for credit losses was recorded as of September 25, 2022.

The contractual maturities of short-term investments as of September 25, 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

Corporate bonds $ 124.5 $ 292.4 $ — $ — $ 416.9

agency securities 2.0 1.9 — — 3.9

Municipal bonds 52.3 98.4 — — 150.7

treasury securities 29.4 25.9 — — 55.3

government securities — — 7.4 — 7.4

Commercial paper 29.0 — — — 29.0

Variable rate demand notes — — 14.7 36.1 50.8

agency securities — 1.9 — — 1.9

Total short-term investments $ 206.2 $ 418.6 $ 14.7 $ 36.1 $ 675.6

10 unchanged sentences

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

As of March 27, 2022 and June 27, 2021, financial assets utilizing Level 1 inputs included money market funds and U.S.

As of September 25, 2022 and June 26, 2022, financial assets utilizing Level 1 inputs included money market funds and U.S.

treasury securities.

Financial assets utilizing Level 2 inputs included municipal bonds, corporate bonds, certificates of deposit, commercial paper, U.S.

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

government securities.

Financial assets utilizing Level 2 inputs included commercial paper, corporate bonds, municipal bonds, variable rate demand notes and U.S.

agency 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 March 27, 2022 and June 27, 2021.

The Company did not have any financial assets requiring the use of Level 3 inputs as of September 25, 2022 and June 26, 2022.

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

GAAP hierarchy:

March 27, 2022 June 27, 2021

September 25, 2022 June 26, 2022

(in millions of U.S.

2 unchanged sentences

Money market funds $ 123.1 $ — $ — $ 123.1 $ 115.9 $ — $ — $ 115.9

Municipal bonds — 5.7 — 5.7 — 16.0 — 16.0

Corporate bonds — 0.6 — 0.6 — — — —

agency securities — — — — — 6.0 — 6.0

treasury securities 117.7 — — 117.7 69.0 — — 69.0

Commercial paper — 41.9 — 41.9 — 59.4 — 59.4

Variable rate demand notes — — — — — 22.9 — 22.9

Corporate bonds — 0.7 — 0.7 — — — —

Total cash equivalents 240.8 42.6 — 283.4 184.9 59.4 — 244.3

Short-term investments:

Municipal bonds — 170.5 — 170.5 — 141.3 — 141.3

Corporate bonds — 416.9 — 416.9 — 448.0 — 448.0

agency securities — 3.9 — 3.9 — 15.8 — 15.8

Municipal bonds — 150.7 — 150.7 — 162.2 — 162.2

treasury securities 55.3 — — 55.3 65.8 — — 65.8

Certificates of deposit — — — — — 16.5 — 16.5

Commercial paper — 29.0 — 29.0 — 50.0 — 50.0

Variable rate demand notes — 50.8 — 50.8 — 69.4 — 69.4

government securities — 7.4 — 7.4 — — — —

agency securities — 1.9 — 1.9 — 3.9 — 3.9

Total short-term investments 55.3 620.3 — 675.6 65.8 683.5 — 749.3

1 unchanged sentence

Note 8 – Goodwill and Intangible Assets

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

There were no changes to goodwill during the three months ended September 25, 2022.

Intangible Assets, net

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

March 27, 2022 June 27, 2021

September 25, 2022 June 26, 2022

(in millions of U.S.

6 unchanged sentences

Total intangible assets $ 239.7 ($ 117.0 ) $ 122.7 $ 242.5 ($ 117.1 ) $ 125.4

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 amortization of acquisition-related intangibles assets was $ 2.9 million for the three months ended September 25, 2022 and $ 3.6 million for the three months ended September 26, 2021.

Total amortization of patents and licensing rights was $ 1.2 million for the three months ended September 25, 2022 and $ 1.3 million for the three months ended September 26, 2021.

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

11 unchanged sentences

Revolving Line of Credit

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.

As of September 25, 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 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.

As of September 25, 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 months ended September 25, 2022, the average interest rate was 0.00 % due to no borrowings.

As of September 25, 2022, the unused line fee on available borrowings is 25 basis points.

2023 Convertible Notes

65 unchanged sentences

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

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.

Upon adoption of ASU 2020-06 on June 27, 2022, the first day of fiscal 2023, the unamortized discounts on the outstanding Notes were eliminated and the liability and equity components relating to the debt issuance costs for the Notes are now presented as a single liability.

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

4 unchanged sentences

(in millions of U.S.

Dollars) March 27, 2022 June 27, 2021

Dollars) September 25, 2022 June 26, 2022

Principal $ 1,325.0 $ 1,325.0

3 unchanged sentences

(in millions of U.S.

Dollars) March 27, 2022 June 27, 2021

Dollars) September 25, 2022 (1)

June 26, 2022

Discount related to value of conversion option $ — $ 341.1

Partial extinguishment of 2023 Notes — ( 27.7 )

Debt issuance costs — ( 8.1 )

Net carrying amount $ — $ 333.0

(1) As discussed above, the equity components of the Notes were eliminated upon adoption of ASU 2020-06 on June 27, 2022, the first day of fiscal 2023.

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

Three months ended Nine months ended

Three months ended

(in millions of U.S.

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

Dollars) September 25, 2022 September 26, 2021

Interest expense, net of capitalized interest $ 3.0 $ 1.1

1 unchanged sentence

Total interest expense, net $ 4.3 $ 6.2

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

For the three and nine months ended March 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.

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 March 31, 2022.

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.

The Company did not capitalize interest expense for the three months ended September 25, 2022.

For the three months ended September 26, 2021, the Company capitalized $ 2.3 million of interest expense and $ 5.4 million of amortization of discount and issuance costs in connection with the building of a new Silicon Carbide device fabrication facility in New York.

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

As of September 25, 2022, the if-converted value of the 2026 Notes exceeded their respective principal amounts by $ 764.1 million.

The estimated fair value of the Notes is $ 2.2 billion as of September 25, 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 Nine months ended

Three months ended

(in millions of U.S.

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 )

Net loss from discontinued operations — ( 41.6 ) — ( 178.8 )

Net income from discontinued operations attributable to noncontrolling interest — 0.8 — 1.4

Net loss from discontinued operations attributable to controlling interest $ — ($ 42.4 ) $ — ($ 180.2 )

Dollars, except share data) September 25, 2022 September 26, 2021

Net loss ($ 26.2 ) ($ 70.1 )

Weighted average shares - basic and diluted (in thousands) 124,035 115,919

Loss per share - basic and diluted ($ 0.21 ) ($ 0.60 )

Continuing operations ($ 0.54 ) ($ 0.59 ) ($ 1.96 ) ($ 1.75 )

Discontinued operations attributable to controlling interest $ — ($ 0.38 ) $ — ($ 1.60 )

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

For the three and nine months ended March 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.

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

For the three months ended September 25, 2022 and September 26, 2021, 2.6 million and 2.7 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.”

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Stock Option Awards

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

A summary of stock option awards outstanding as of September 25, 2022 and changes during the three months then ended is as follows:

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

3 unchanged sentences

Forfeited or expired ( 1 ) $ 26.07

Outstanding at March 27, 2022 81 $ 25.27

Outstanding at September 25, 2022 48 $ 25.03

Restricted Stock Units

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

A summary of nonvested restricted stock unit awards (RSUs) outstanding as of September 25, 2022 and changes during the three months then ended is as follows:

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

Nonvested at June 26, 2022 1,894 $ 75.67

2 unchanged sentences

Forfeited ( 115 ) $ 68.35

Nonvested at March 27, 2022 1,960 $ 73.84

Nonvested at September 25, 2022 2,399 $ 84.98

Stock-Based Compensation Valuation and Expense

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

Three months ended Nine months ended

Three months ended

(in millions of U.S.

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

Dollars) September 25, 2022 September 26, 2021

Cost of revenue, net $ 6.1 $ 3.1

6 unchanged sentences

statutory rate of 21% is primarily due to:

(i) changes in the Company’s valuation allowances against deferred tax assets in the U.S.

and Luxembourg, (ii) projected income for the full year derived from international locations with differing tax rates than the U.S.

(i) changes in the Company’s valuation allowances against deferred tax assets in the U.S., (ii) projected income for the full year derived from international locations with differing tax rates than the U.S.

and (iii) projected tax credits generated.

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

As of September 25, 2022, 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.

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 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 26, 2022, the Company's liability for unrecognized tax benefits was $ 7.2 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.

During the three months ended September 25, 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 September 25, 2022 was $ 7.2 million.

If any portion of this $ 7.2 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 $ 2.7 million to $ 5.2 million per year through fiscal 2031.

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.

As of September 25, 2022, the Company has reduced property and equipment, net by a total of $ 307.2 million as a result of GDA reimbursements, of which $ 196.4 million has been received in cash and an additional $ 110.8 million in receivables are recorded in other current assets and in other assets in the consolidated balance sheets.

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

2 unchanged sentences

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

Corporate Restructuring

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.

The Company recorded less than $ 0.1 million of severance-related costs relating to this plan for the three months ended September 25, 2022 and has accrued $ 0.8 million as of September 25, 2022.

Factory Optimization Restructuring

1 unchanged sentence

campus headquarters in Durham, North Carolina.

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

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

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

In September 2019, the Company announced its intent to build a new Silicon Carbide device fabrication facility in Marcy, New York to complement the expansion of the Company's Silicon Carbide materials production capacity at its U.S.

campus headquarters in Durham, North Carolina.

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 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 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.

The factory optimization restructuring plan concluded in fiscal 2022.

For the three months ended September 26, 2021, the Company expensed and paid $ 1.6 million of restructuring charges associated with the movement of equipment related to the factory optimization plan.

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