What changed in this filing

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Item 2. Management’s Discussion and Analysis

2022-10-27 compared with 2022-05-05 · 153 added, 223 removed, 148 unchanged (72% of the section changed)

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Historical results and percentage relationships among any amounts in the financial statements are not necessarily indicative of trends in operating results for any future periods.

Wolfspeed, Inc., formerly known as Cree, Inc., (Wolfspeed, we, our, or us) 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.

Our 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.

During and prior to fiscal 2021, we 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.

On March 1, 2021, we completed the sale of certain assets and subsidiaries comprising our former LED Products segment (the LED Business) to SMART Global Holdings, Inc.

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

(CreeLED and collectively with SGH, SMART) (the LED Business Divestiture).

We retained certain assets used in and pre-closing liabilities associated with our former LED Products segment.

Unless otherwise noted, discussions within this Quarterly Report relate to our continuing operations.

Our continuing operations consist entirely of our Wolfspeed business, which includes Silicon Carbide and GaN materials, power devices and RF devices based on wide bandgap semiconductor materials and silicon.

Wolfspeed, Inc.

(Wolfspeed, we, our, or us) 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.

Our product families include Silicon Carbide and GaN materials, power devices and RF devices, and our products are targeted for various applications such as electric vehicles, fast charging, 5G, renewable energy and storage, and aerospace and defense.

Our materials products and power devices are used in electric vehicles, motor drives, power supplies, solar and transportation applications.

Our materials products and RF devices are used in military communications, radar, satellite and telecommunication applications.

On October 4, 2021, we changed our corporate name from Cree, Inc.

to Wolfspeed, Inc.

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

We 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 our products are manufactured at our production facilities located in North Carolina, California and Arkansas.

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We maintain captive lines at some of our contract manufacturers.

Additionally, we recently opened our Silicon Carbide device fabrication facility in New York.

We operate research and development facilities in North Carolina, California, Arkansas, Arizona, New York and China.

Additionally, we recently opened a Silicon Carbide device fabrication facility in New York.

We operate research and development facilities in North Carolina, California, Arkansas, Arizona and New York.

Wolfspeed, Inc.

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There are a number of industry factors that affect our business which include, among others:

• COVID-19 Pandemic.

The global health crisis caused by COVID-19 and its resurgences has impacted and may continue to negatively impact global economic activity, which, despite progress in vaccination efforts, remains uncertain and cannot be predicted with confidence.

In addition, variants of COVID-19 continue to emerge.

Early in 2022, cases of COVID-19 reached all-time highs as a result of the emergence and rapid spread of the Omicron variant.

Although cases have declined significantly in recent months, there can be no assurance that a future variant will not emerge.

In addition, while vaccines have proven effective in preventing serious illnesses and hospitalizations, there is no assurance that such vaccines will remain effective against new variants or that the protection conferred by existing vaccines will not wane over time.

Over the past two years, the COVID-19 pandemic has affected us in a number of ways including, but not limited to, the impact on employees becoming ill, quarantined, or otherwise unable to work or travel due to illness or governmental restriction, the impact on customers and their related demand and/or purchases, the impact on our suppliers' and contract manufacturers' ability to fulfill our orders on a timely basis, and the overall impact of the aforementioned items that could cause output challenges and increased costs.

We continue to pay close attention to the evolving development of, and the disruption to business and economic activities caused by, the COVID-19 pandemic.

• Overall Demand for Products and Applications Using Our Wolfspeed Materials and Devices .

Our potential for growth depends significantly on the adoption of Silicon Carbide and GaN materials and device products in the power and RF markets, the continued use of silicon devices in the RF telecommunications market and our ability to win new designs for these applications.

Demand also fluctuates based on various market cycles, continuously evolving industry supply chains, trade and tariff terms, inflationary impacts, as well as evolving competitive dynamics in each of the respective markets.

These uncertainties make demand difficult to forecast for us and our customers.

• Supply Constraints.

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The current high demand for our products has also led to supply constraints for our customers.

We continue to work closely with our customer base to best match our supply to their demand.

We are working closely with our customer base to best match our supply to their demand.

We have taken steps to provide continuity to our customers, to the extent possible, although we expect that constraints may continue to limit our shipments in the near term.

• Governmental Trade and Regulatory Conditions .

Our potential for growth, as with most multi-national companies, depends on a balanced and stable trade, political, geopolitical, economic and regulatory environment among the countries where we do business.

Changes in trade policy such as the imposition or extension of tariffs or export bans to specific customers or countries could reduce or limit demand for our products in certain markets.

• Overall Demand for Products and Applications Using Our Wolfspeed Materials and Devices .

These uncertainties make demand difficult to forecast for us and our customers.

Lately, we have seen demand increase across all our product lines, which we believe reflects the value that the industry places on a transition to Silicon Carbide materials and devices.

Particularly, we have seen significantly higher demand for our power products as the world has continued to focus on and adopt higher efficiency energy solutions, including electrical vehicle (EV) and related technologies.

We believe these trends could have a significant positive impact on revenues in future periods as we increase capacity to meet this increased demand.

• Intense and Constantly Evolving Competitive Environment.

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Market participants often undertake pricing strategies to gain or protect market share, increase the utilization of their production capacity and open new applications in the power and RF markets we serve.

• COVID-19 Pandemic.

The global health crisis caused by COVID-19 and its resurgences has impacted and may continue to negatively impact global economic activity, which, despite the effectiveness of vaccines in preventing serious illnesses and hospitalizations, remains uncertain and cannot be predicted with confidence due to the continued emergence of variants and the likelihood that the protection conferred by existing vaccines wanes over time.

Since its beginning in the early months of 2020, the COVID-19 pandemic has affected us in a number of ways including, but not limited to, the impact on employees becoming ill, quarantined, or otherwise unable to work or travel due to illness or governmental restriction, the impact on customers and their related demand and/or purchases, the impact on our suppliers' and contract manufacturers' ability to fulfill our orders on a timely basis, and the overall impact of the aforementioned items that could cause output challenges and increased costs.

The full extent to which the COVID-19 pandemic may impact our results of operations or liquidity remains uncertain.

Our operations have experienced, and likely will continue to experience, supply, labor, demand and output challenges.

We continue to monitor the impact that the COVID-19 pandemic is having on our business, the semiconductor industry, and the economies in which we operate.

• Governmental Trade and Regulatory Conditions .

Changes in trade policy such as the imposition or extension of tariffs or export bans to specific customers or countries could reduce or limit demand for our products in certain markets.

• Technological Innovation and Advancement.

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To enforce or protect intellectual property rights, litigation or threatened litigation is common.

Overview of the nine months ended March 27, 2022

The following is a summary of our financial results for the nine months ended March 27, 2022:

• Revenue increased to $517.7 million for the nine months ended March 27, 2022 from $379.8 million for the nine months ended March 28, 2021.

• Gross profit increased to $170.4 million for the nine months ended March 27, 2022 from $120.8 million for the nine months ended March 28, 2021.

Gross margin was 32.9% for the nine months ended March 27, 2022 and 31.8% for the nine months ended March 28, 2021.

• Operating loss was $188.9 million for the nine months ended March 27, 2022 compared to $181.2 million for the nine months ended March 28, 2021.

• Diluted loss per share from continuing operations was $1.96 for the nine months ended March 27, 2022 compared to $1.75 for the nine months ended March 28, 2021.

• Combined cash, cash equivalents and short-term investments was $1,286.1 million at March 27, 2022 and $1,154.6 million at June 27, 2021.

• Convertible notes, net was $1,008.4 million at March 27, 2022 and $823.9 million at June 27, 2021.

As discussed further below and in Note 9, "Long-term Debt," to our unaudited consolidated financial statements in Part I, Item 1 of this Quarterly Report, our 0.875% convertible senior notes due September 1, 2023 (2023 Notes) were converted into approximately 7.1 million shares of our common stock in the second quarter of fiscal 2022.

Additionally, in the third quarter of fiscal 2022, we sold $750.0 million aggregate principal amount of 0.25% convertible senior notes due February 15, 2028.

• Cash used in operating activities from continuing operations was $123.4 million for the nine months ended March 27, 2022 compared to $58.9 million for the nine months ended March 28, 2021.

• Purchases of property and equipment, net were $452.0 million (net of $83.5 million in reimbursements) for the nine months ended March 27, 2022 compared to $394.0 million for the nine months ended March 28, 2021.

Overview of the three months ended September 25, 2022

The following is a summary of our financial results as of and for the three months ended September 25, 2022 compared to the three months ended September 26, 2021, unless otherwise stated.

• Our revenue increased $84.7 million to $241.3 million.

• Gross margin increased to 33.1% from 31.5%.

Gross profit increased to $79.9 million from $49.4 million.

• Operating loss was $75.7 million compared to $65.7 million.

• Diluted loss per share was $0.21 compared to $0.60.

• Combined cash, cash equivalents and short-term investments was $1,197.2 million at September 25, 2022 and $1,198.8 million at June 26, 2022.

• Convertible notes, net was $1,300.8 million at September 25, 2022 and $1,021.6 million at June 26, 2022.

See Note 9, "Long-term Debt," to our unaudited consolidated financial statements in Part I, Item 1 of this Quarterly Report for a discussion of the impact of our adoption of Accounting Standards Update (ASU) 2020-06 on June 27, 2022, the first day of fiscal 2023.

• Cash used in operating activities was $12.7 million compared to $62.5 million.

• Purchases of property and equipment, net were $64.4 million (net of $46.7 million in reimbursements) compared to $208.5 million (net of $50.8 million in reimbursements).

• Design-ins were $3.5 billion compared to $0.6 billion.

Business Outlook

We believe we are uniquely positioned as an innovator in the global semiconductor industry.

The strength of our balance sheet provides us the ability to invest in our business, as indicated by our state-of-the-art, automated 200mm Silicon Carbide device fabrication facility in Marcy, New York and an expansion of our materials factory at our U.S campus headquarters in Durham, North Carolina, both of which will increase our Silicon Carbide production capacity.

Construction on the new device fabrication facility commenced in the fourth quarter of fiscal 2020 and the facility started running qualification lots in the fourth quarter of 2022.

In fiscal 2022, we expect to incur an estimated $75.0 million of start-up and pre-production costs as we ramp production at this facility.

The completion of the LED Business Divestiture on March 1, 2021 represented a key milestone in our transformation to be a global semiconductor powerhouse focused on disruptive technology solutions for high-growth applications.

This transaction positioned us with a sharpened strategic focus to lead the semiconductor industry transition from silicon to Silicon Carbide and further strengthened our financial position, which we plan to utilize in order to support continued investments to capitalize on multi-decade growth opportunities across electrical vehicles (EVs), 5G and industrial applications.

The strength of our balance sheet provides us the ability to invest in our business, as indicated by our new state-of-the-art, automated 200mm Silicon Carbide device fabrication facility in Marcy, New York, which started running qualification lots in the fourth quarter of fiscal 2022, an expansion of our materials factory at our U.S campus headquarters in Durham, North Carolina, and the recently announced plan to construct a new materials manufacturing facility in Siler City, North Carolina, all of which is expected to increase our production capacity.

In fiscal 2022, we incurred $70.0 million of start-up and pre-production costs related to the ramping of production at the Marcy, New York facility.

In fiscal 2023, we target approximately $100 million of start-up and underutilization costs primarily related to ramping of production at the Marcy, New York facility.

We are focused on investing in our business to expand the scale, further develop the technologies, and accelerate the growth opportunities of Silicon Carbide materials, Silicon Carbide power devices and modules, and GaN and silicon RF devices.

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Despite increased complexities in our manufacturing process, we believe we are in a position to improve yield levels to support our future growth, particularly as we transition to our new Silicon Carbide device fabrication facility in Marcy, New York.

In regards to COVID-19, we have instituted strict measures designed to balance employee safety with meeting the needs of business operations.

These measures include increased employee sick days, robust health screening, social distancing policies and cleaning protocols to ensure the safety of our employees and the protection of our customers, suppliers, and partners.

We believe we have the ability to navigate the current environment while maintaining our capital expenditure plans to support future growth, including the construction of new facilities in New York and additional production capacity in North Carolina.

Even so, our short-term impacts from COVID-19 to our financial position, results of operations and cash flows remain uncertain.

We believe we have the ability to navigate the current environment while maintaining our capital expenditure plans to support future growth, including the continued build out of our new facility in New York and additional production capacity in North Carolina.

We continue to closely monitor the ongoing military conflict between Russia and Ukraine to evaluate our potential exposure to this conflict.

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As a result, we do not currently expect any material impacts to our consolidated financial statements.

However, we believe the full impact of the conflict remains uncertain and we continue to assess if ongoing developments, such as further sanctions or other increased involvements from countries we operate in and do business with, may cause future material impacts to our consolidated financial statements.

Change in Estimate

As a result of the LED Business Divestiture and our continued investment in 200mm technology, we 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, we 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 six 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.

We expect the impact to gross profit to be approximately $8.0 million per quarter by the end of the fiscal year as inventory is relieved.

However, we believe the full impact of the conflict remains uncertain and we continue to assess if ongoing developments, such as further sanctions or other increased involvement from countries where we operate and do business, may cause future material impacts to our consolidated financial statements.

Design-ins are customer commitments to purchase our product and are one of the factors we use to forecast long-term demand and future revenue.

To meet the qualification of a design-in, the customer provides us with documentation (e.g., a letter of intent, statement of work or developmental contract) that can include details such as the expected delivery timeline, estimated price, necessary capacity and required support.

A design-in, even with a formal commitment, does not always convert to future revenue for a variety of reasons, including, but not limited to, the customer delaying or abandoning the project, capacity

constraints, timeline challenges, and/or technology changes.

Therefore, management uses the design-in amount as a guide to forecast future demand but it should not be taken as an absolute indicator of future revenue.

Results of Operations

Selected consolidated statements of operations data for the three and nine months ended March 27, 2022 and March 28, 2021 is as follows:

Three months ended Nine months ended

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

Selected consolidated statements of operations data for the three months ended September 25, 2022 and September 26, 2021 is as follows:

Three months ended

September 25, 2022 September 26, 2021

(in millions of U.S.

Dollars, except share data) Amount % of Revenue Amount % of Revenue Amount % of Revenue Amount % of Revenue

Dollars, except share data) Amount % of Revenue Amount % of Revenue

Revenue, net $241.3 100.0 % $156.6 100.0 %

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Amortization or impairment of acquisition-related intangibles 2.9 1.2 3.6 2.3

(Gain) loss on disposal or impairment of other assets (0.6) (0.3) 0.1 0.1 (0.3) (0.1) 0.8 0.2

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

Other operating expense 42.4 17.6 12.8 8.2

Operating loss (75.7) (31.4) (65.7) (42.0)

Non-operating expense, net 3.8 2.0 8.1 5.9 35.7 6.9 18.9 5.0

Non-operating (income) expense, net (49.7) (20.6) 4.1 2.6

Loss before income taxes (26.0) (10.8) (69.8) (44.6)

Income tax expense (benefit) 0.4 0.2 (3.0) (2.2) 8.7 1.7 (4.0) (1.1)

Net loss from continuing operations ($66.5) (35.4) ($66.5) (48.4) ($233.3) (45.1) ($196.1) (51.6)

Net loss from discontinued operations — — (41.6) (30.3) — — (178.8) (47.1)

Income tax expense 0.2 0.1 0.3 0.2

Net loss (26.2) (10.9) (70.1) (44.8)

Net income from discontinued operations attributable to noncontrolling interest — — 0.8 0.6 — — 1.4 0.4

Net loss attributable to controlling interest ($66.5) (35.4) ($108.9) (79.3) ($233.3) (45.1) ($376.3) (99.1)

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)

Revenue was as follows:

Three months ended Nine months ended

Three months ended

(in millions of U.S.

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

Dollars) September 25, 2022 September 26, 2021 Change

Revenue $241.3 $156.6 $84.7 54 %

Revenue for the three and nine months ended March 27, 2022 compared to the three and nine months ended March 28, 2021 increased due to increased demand across all of our product lines, as well as increased production capacity for our power and materials product lines to meet strong demand during the period and in future periods.

Revenue increased due to increased demand across all of our product lines, as well as increased production capacity for our power and materials product lines to meet strong demand during the period and in future periods.

Gross Profit and Gross Margin

Gross profit and gross margin were as follows:

Three months ended Nine months ended

Three months ended

(in millions of U.S.

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

Dollars) September 25, 2022 September 26, 2021 Change

Gross profit $79.9 $49.4 $30.5 62 %

Gross margin 33.1 % 31.5 %

The increases in gross profit and gross margin for the three months ended March 27, 2022 compared to the three months ended March 28, 2021 were primarily due to increased revenues in the current period, product mix and the impact of increasing the expected useful lives of certain machinery and equipment assets to more closely reflect the estimated economic lives of those assets.

The increase in gross profit for the nine months ended March 27, 2022 compared to the nine months ended March 28, 2021 was primarily due to increased revenues in the current period and lower manufacturing costs, including the impact of increasing the expected useful lives of certain machinery and equipment assets to more closely reflect the estimated economic lives of those assets.

The increase in gross margin for the nine months ended March 27, 2022 compared to the nine months ended March 28, 2021 was primarily due to the same factors as the increase to gross profit, partly offset by product mix.

The increase in gross profit was primarily due to increased revenues in the current period and the full impact of our early fiscal 2022 change in estimate to increase our expected useful lives of certain machinery and equipment assets to more closely reflect the estimated economic lives of those assets.

* The increase in gross margin was primarily due to the same factors partially offset by product mix.

* The change in our expected useful lives was applied in the first quarter of fiscal 2022 but had limited impact on that period's gross profit and gross margin because the majority of the impact in the first quarter of fiscal 2022 resulted in a reduction of inventory.

Research and Development

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These costs consisted primarily of employee salaries and related compensation costs, occupancy costs, consulting costs and the cost of development equipment and supplies.

Research and development costs also include developing supporting technologies for our expansion to a new Silicon Carbide device fabrication facility in Marcy, New York.

Research and development costs also include developing supporting technologies for expansion of our new Silicon Carbide device fabrication facility in Marcy, New York.

Research and development expenses were as follows:

Three months ended Nine months ended

Three months ended

(in millions of U.S.

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

Dollars) September 25, 2022 September 26, 2021 Change

Research and development $55.2 $49.9 $5.3 11 %

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Sales, General and Administrative

Sales, general and administrative expenses are comprised primarily of costs associated with our sales and marketing personnel and our executive and administrative personnel (for example, finance, human resources, information technology and legal) and consists of salaries and related compensation costs;

consulting and other professional services (such as litigation and other outside legal counsel fees, audit and other compliance costs);

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Sales, general and administrative expenses were as follows:

Three months ended Nine months ended

Three months ended

(in millions of U.S.

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

Dollars) September 25, 2022 September 26, 2021 Change

Sales, general and administrative $55.0 $49.0 $6.0 12 %

Percent of revenue 23 % 31 %

The increase in sales, general and administrative expenses for the three months ended March 27, 2022 compared to March 28, 2021 was primarily due to increased salaries and benefits from increased headcount, including incentive based stock-based compensation.

The increase in sales, general and administrative expenses for the nine months ended March 27, 2022 compared to March 28, 2021 was primarily due to increased salaries and benefits from increased headcount, including incentive based stock-based compensation, as well as increased consulting, legal and travel fees, partially offset by a decrease in costs related to transition services incurred in the first half of fiscal 2021 in connection with the sale of our former Lighting Products business unit.

The increase in sales, general and administrative expenses was primarily due to increased salaries and benefits from increased headcount, including incentive based stock-based compensation.

Amortization or Impairment of Acquisition-Related Intangibles

As a result of our acquisitions, we have recognized various amortizable intangible assets, including customer relationships, developed technology, non-compete agreements and trade names.

As a result of our acquisitions, we have recognized various amortizable intangible assets, including customer relationships, developed technology and non-compete agreements.

Amortization of intangible assets related to our acquisitions was as follows:

Three months ended Nine months ended

Three months ended

(in millions of U.S.

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

Dollars) September 25, 2022 September 26, 2021 Change

Customer relationships $1.5 $1.5 $— — %

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Total amortization $2.9 $3.6 ($0.7) (19) %

Amortization of acquisition-related intangible assets slightly decreased due to an intangible asset relating to non-compete agreements reaching the end of its useful life.

Amortization of acquisition-related intangible assets decreased due to an intangible asset relating to non-compete agreements reaching the end of its useful life in fiscal 2022.

No other significant acquisition-related intangible activity or impairments occurred between the periods.

(Gain) loss on Disposal or Impairment of Other Assets

Loss (gain) on Disposal or Impairment of Other Assets

We operate a capital-intensive business.

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Due to the risk of technological obsolescence or changes in our production process, we regularly review our long-lived assets and capitalized patent costs for possible impairment.

(Gain) loss on disposal or impairment of other assets were as follows:

Three months ended Nine months ended

Loss (gain) on disposal or impairment of other assets were as follows:

Three months ended

(in millions of U.S.

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

(Gain) loss on disposal or impairment of other assets ($0.6) $0.1 ($0.7) (700) % ($0.3) $0.8 ($1.1) (138) %

(Gain) loss on disposal or impairment of other assets primarily relate to proceeds from asset sales offset by write-offs of fixed asset projects, as well as the write-offs of impaired or abandoned patents.

Additionally, the gain on disposal or impairment of other assets for the three and nine months ended March 27, 2022 includes a $0.7 million net gain related to consideration received from the early payment of the unsecured promissory note issued by SGH at the closing of the LED Business Divestiture (the Purchase Price Note), as discussed in Note 2, "Discontinued Operations", to our unaudited consolidated financial statements in Part I, Item 1 of this Quarterly Report.

Dollars) September 25, 2022 September 26, 2021 Change

Loss (gain) on disposal or impairment of other assets $0.1 ($0.2) $0.3 (150) %

Loss (gain) on disposal or impairment of other assets primarily relate to proceeds from asset sales offset by write-offs of fixed asset projects, as well as the write-offs of impaired or abandoned patents.

Other Operating Expense

Other operating expense was as follows:

Three months ended Nine months ended

Three months ended

(in millions of U.S.

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

Factory optimization restructuring $0.8 $3.8 ($3.0) (79) % $5.5 $6.7 ($1.2) (18) %

Severance and other restructuring 0.5 0.6 (0.1) (17) % 0.5 3.4 (2.9) (85) %

Total restructuring costs 1.3 4.4 (3.1) (70) % 6.0 10.1 (4.1) (41) %

Dollars) September 25, 2022 September 26, 2021 Change

Restructuring costs — 2.6 (2.6) (100) %

Project, transformation and transaction costs 3.0 1.6 1.4 88 %

Factory optimization start-up costs 21.4 1.8 19.6 1,089 % 41.0 6.0 35.0 583 %

Factory start-up costs 38.4 8.6 29.8 347 %

Non-restructuring related executive severance 1.0 — 1.0 100 %

Other operating expense $42.4 $12.8 $29.6 231 %

Factory optimization restructuring costs relate to facility consolidations as well as disposals on certain long-lived assets.

Severance and other restructuring costs relate to corporate restructuring plans.

Restructuring costs relate to factory optimization facility consolidations as well as disposals on certain long-lived assets.

See Note 14, "Restructuring," to our unaudited consolidated financial statements in Part I, Item 1 of this Quarterly Report for additional information on our restructuring costs.

Project, transformation and transaction costs primarily relate to professional services fees associated with completed and potential acquisitions and divestitures, as well as internal transformation programs focused on optimizing our administrative processes.

Factory optimization start-up costs are additional start-up costs as part of our factory optimization efforts, which began in the fourth quarter of fiscal 2019.

These efforts are focused on expanding our production footprint to support expected growth.

Other operating expense for the three and nine months ended March 27, 2022 compared to the three and nine months ended March 28, 2021 increased primarily due to increased factory optimization start-up costs as we continue our expansion to a new Silicon Carbide device fabrication facility in Marcy, New York.

Non-Operating Expense, net

Non-operating expense, net was comprised of the following:

Three months ended Nine months ended

Factory start-up costs are costs related to expanding our production footprint to support expected growth.

Other operating expense increased primarily due to increased factory start-up costs as we continue our expansion to a new Silicon Carbide device fabrication facility in Marcy, New York.

Non-Operating (Income) Expense, net

Non-operating (income) expense, net was comprised of the following:

Three months ended

(in millions of U.S.

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

Dollars) September 25, 2022 September 26, 2021 Change

Gain on sale of investments, net $— ($0.2) $0.2 (100) %

Gain on equity investment, net — (0.9) 0.9 (100) % — (7.9) 7.9 (100) %

Loss on debt extinguishment related to conversion of 2023 Notes — — — — % 24.8 — 24.8 100 %

Foreign currency gain, net (0.3) (0.1) (0.2) 200 % (0.6) (2.5) 1.9 (76) %

Gain on arbitration proceedings (49.4) — (49.4) (100) %

Interest income (4.3) (2.6) (1.7) 65 %

Interest expense, net of capitalized interest 4.8 6.7 (1.9) (28) %

Loss on Wafer Supply Agreement 0.5 0.1 0.4 400 % 1.4 0.1 1.3 1,300 %

Loss on early payment of transaction-related note receivable 1.2 — 1.2 100 % 1.2 — 1.2 100 %

Other, net (0.8) 0.2 (1.0) (500) %

Non-operating expense, net $3.8 $8.1 ($4.3) (53) % $35.7 $18.9 $16.8 89 %

Gain on equity investment, net .

The gain on equity investment for the three and nine months ended March 28, 2021 relates to changes in fair value of our previously held ENNOSTAR Inc.

(ENNOSTAR) investment.

In the fourth quarter of fiscal 2021, we liquidated our common stock ownership interest in ENNOSTAR.

We no longer hold any equity interest in ENNOSTAR.

Loss on debt extinguishment related to conversion of 2023 Notes .

In the second quarter of fiscal 2022, all of our outstanding 2023 Notes were converted into shares of our common stock, which resulted in a loss on extinguishment of $24.8 million.

See Note 9, "Long-term Debt," to our unaudited consolidated financial statements in Part I, Item 1 of this Quarterly Report for additional information on this loss on debt extinguishment.

Foreign currency gain, net.

Foreign currency gain, net primarily consisted of remeasurement adjustments resulting from our international subsidiaries and from our previously held ENNOSTAR investment.

Non-operating (income) expense, net ($49.7) $4.1 ($53.8) (1,312) %

Gain on arbitration proceedings .

In the first quarter of fiscal 2023, we 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 gain recognized is net of legal fees incurred.

Interest income.

The slight increase in interest income for both periods was primarily due to interest income received on our note receivable from SGH in connection with the LED Business Divestiture, partially offset by decreased interest income on our short-term investments driven by lower average investment balances.

The increase in interest income was primarily driven by increased investment returns on our short-term investment balances, partially offset by lower average short-term investment balances.

Interest expense, net of capitalized interest .

The decrease in interest expense for both periods was primarily due to an increase in capitalized interest expense on our 1.75% convertible senior notes due May 1, 2026 (2026 Notes) in connection with the building of a new Silicon Carbide device fabrication facility in New York.

Loss on Wafer Supply Agreement .

In connection with the LED Business Divestiture, we entered into a Wafer Supply and Fabrication Services Agreement (the Wafer Supply Agreement), pursuant to which we supply CreeLED with certain Silicon Carbide materials and fabrication services for up to four years.

Loss on early payment of transaction-related note receivable .

In the third quarter of fiscal 2022, we received an early payment for the Purchase Price Note that resulted in a loss of $1.2 million.

See Note 2, "Discontinued Operations," to our unaudited consolidated financial statements in Part I, Item 1 of this Quarterly Report for additional information on this loss on early payment of transaction-related note receivable.

Income tax expense (benefit)

Income tax expense (benefit) and our effective tax rate was as follows:

Three months ended Nine months ended

The decrease in interest expense was primarily due to the adoption of ASU 2020-06, which resulted in the elimination of accretion expense starting in the first quarter of fiscal 2023.

This was partially offset by an increase in interest expense resulting from no interest on our 1.75% convertible senior notes due May 1, 2026 (the 2026 Notes) being capitalized in the first quarter of fiscal 2023.

Interest relating to the 2026 Notes was capitalized in the first quarter of fiscal 2022 in connection with the building of a new Silicon Carbide device fabrication facility in New York but was not capitalized in the first quarter of fiscal 2023 due to the construction of the facility being substantially complete.

Income Tax Expense

Income tax expense and our effective tax rate was as follows:

Three months ended

(in millions of U.S.

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

Income tax expense (benefit) $0.4 ($3.0) $3.4 (113) % $8.7 ($4.0) $12.7 (318) %

Dollars) September 25, 2022 September 26, 2021 Change

Income tax expense $0.2 $0.3 ($0.1) (33) %

Effective tax rate (1) % — %

The change in our effective tax rate for the three months ended March 27, 2022 was primarily due to an increase in projected income from international locations in fiscal 2022.

The change in our effective tax rate for the nine months ended March 27, 2022 was primarily due to $7.3 million of income tax expense recognized in the second quarter of fiscal 2022 related to the restructuring of our Luxembourg holding company.

This restructuring is discussed further in Note 12, "Income Taxes," to our unaudited consolidated financial statements included in Part I, Item 1 of this Quarterly Report.

The change in our effective tax rate was minimal.

In general, the variation between our effective income tax rate and the current U.S.

statutory rate of 21.0% is primarily due to:

(i) changes in our valuation allowances against deferred tax assets in the U.S.

and Luxembourg, (ii) projected income derived from international locations with differing tax rates than the U.S., and (iii) tax credits generated.

Net loss from discontinued operations

As discussed above, we have classified the results of our former LED Products segment as discontinued operations in our consolidated statements of operations for all periods presented.

We ceased recording depreciation and amortization of long-lived assets of the LED Business upon classification as discontinued operations in October 2020.

For the three and nine months ended March 28, 2021, we recorded a net loss from discontinued operations of $41.6 million and $178.8 million, respectively.

We did not have any discontinued operations related activity for the three and nine months ended March 27, 2022.

(i) changes in our valuation allowances against deferred tax assets in the U.S., (ii) projected income derived from international locations with differing tax rates than the U.S., and (iii) tax credits generated.

Liquidity and Capital Resources

We require cash to fund our operating expenses and working capital requirements, including outlays for research and development, capital expenditures, strategic acquisitions and investments.

Our principal sources of liquidity are cash on hand, marketable securities and availability under our line of credit.

We have a $125 million line of credit as discussed in Note 9, “Long-term Debt,” in our unaudited consolidated financial statements included in Part I, Item 1 of this Quarterly Report.

The purpose of this credit facility is to provide short-term flexibility to optimize returns on our cash and investment portfolio while funding capital expenditures and other general business needs.

On January 25, 2022, we entered into an amendment to the credit agreement governing the line of credit that extends the maturity date by three years to January 9, 2026 and adopted secured overnight financing rate (SOFR) interest rates as the benchmark interest rate under the credit agreement.

In the third quarter of fiscal 2021, we implemented an at-the-market program (the ATM program) under a shelf registration statement on Form S-3 and prospectus supplement filed with the SEC on February 11, 2021 in which we sold 4,222,511 shares of our common stock at a weighted average price of $118.41 per share for total gross proceeds of approximately $500.0 million and net proceeds of approximately $489.1 million, after $10.0 million in commissions to the managers of the program and $0.9 million in other offering costs.

In the fourth quarter of fiscal 2021, we liquidated our common stock ownership interest in ENNOSTAR and received net proceeds of $66.4 million.

In the second quarter of fiscal 2022, all outstanding 2023 Notes were surrendered for conversion following our issuance on December 8, 2021 of a notice to holders of the 2023 Notes calling for the redemption of all outstanding 2023 Notes, resulting in the settlement of the previously outstanding $424.8 million aggregate principal amount of 2023 Notes in approximately 7.1 million shares of our common stock.

We require cash to fund our operating expenses and working capital requirements, including the purchase of goods and services in the ordinary course of business such as raw materials, supplies and capital equipment, as well as outlays for research and development, strategic acquisitions and investments.

Our principal sources of liquidity are cash on hand, marketable securities and, as described further below, availability under our line of credit.

Based on past performance and current expectations, we believe our current working capital, availability under our line of credit and anticipated cash flows from operations will be adequate to meet our cash needs for our daily operations and capital expenditures for at least the next 12 months.

We believe we have the ability to continue to invest in further development of our products and, when necessary or appropriate, make selective acquisitions or other strategic investments to strengthen our product portfolio or secure key intellectual properties.

However, even with our strong working capital position, we expect to need additional funding to fully complete additional capacity expansions at our new Silicon Carbide device fabrication facility in Marcy, New York and the construction of a new materials manufacturing facility in Siler City, North Carolina, as discussed further below.

Sources of Liquidity

The following table sets forth our cash, cash equivalents and short-term investments:

(in millions of U.S.

Dollars) September 25, 2022 June 26, 2022 Change

Cash and cash equivalents $521.6 $449.5 $72.1

Short-term investments 675.6 749.3 (73.7)

Total cash, cash equivalents and short-term investments $1,197.2 $1,198.8 ($1.6)

The significant components of our working capital are liquid assets such as cash and cash equivalents, short-term investments, accounts receivable and inventories reduced by accounts payable and accrued expenses.

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 following our issuance on December 8, 2021 of a notice to holders of the 2023 Notes calling for the redemption of all outstanding 2023 Notes, resulting in the settlement of the previously outstanding $424.8 million aggregate principal amount of 2023 Notes in approximately 7.1 million shares of our common stock.

In the third quarter of fiscal 2022, we issued and sold a total of $750.0 million aggregate principal amount of 0.25% convertible senior notes due February 15, 2028 (the 2028 Notes), as discussed in Note 9, “Long-term Debt,” in our consolidated financial statements included in Part I, Item 1 of this Quarterly Report.

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We expect to use the remainder of the net proceeds for general corporate purposes.

In addition, during the third quarter of 2022, we received an early payment for the Purchase Price Note resulting in receipt of the principal amount of $125.0 million along with outstanding accrued and unpaid interest as of the payment date.

With the strength of our working capital position, we believe that we have the ability to continue to invest in further development of our products and, when necessary or appropriate, make selective acquisitions or other strategic investments to strengthen our product portfolio, secure key intellectual properties and/or expand our production capacity.

In addition, we received early payments on two unsecured promissory notes issued to us in connection with the sale of certain assets and subsidiaries comprising our former LED Products segment (the LED Business) to SMART Global Holdings, Inc.

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

(CreeLED and collectively with SGH, SMART) on March 1, 2021 (the LED Business Divestiture).

In the third quarter of fiscal 2022, we received an early payment in the amount of $125.0 million, along with outstanding accrued and unpaid interest as of the payment date, relating to the unsecured promissory note issued with the completion of the transaction.

In the first quarter of fiscal 2023, we received an early payment in the amount of $101.8 million in connection with the unsecured promissory note issued in the fourth quarter of fiscal 2022 as an earn-out payment.

We have a $125 million line of credit as discussed in Note 9, “Long-term Debt,” in our consolidated financial statements included in Part I, Item 1 of this Quarterly Report, all of which was available for borrowing as of September 25, 2022.

The purpose of this credit facility is to provide short-term flexibility to optimize returns on our cash and investment portfolio while funding capital expenditures and other general business needs.

As of September 25, 2022, we had unrealized losses on our short-term investments of $29.9 million.

All of our short-term investments had investment grade ratings, and any such investments that were in an unrealized loss position at September 25, 2022 were in such position due to interest rate changes, sector credit rating changes, company-specific rating changes or volatile market conditions related to the conflict in Ukraine and the ongoing COVID-19 pandemic.

We evaluate our short-term investments for expected credit losses.

We believe we are able to and we intend 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.

From time to time, we evaluate strategic opportunities, including potential acquisitions, joint ventures, divestitures, spin-offs or investments in complementary businesses, and we have continued to make such evaluations.

For example, in March 2021 we completed the LED Business Divestiture, which provided us with (i) $50 million in upfront payments (ii) a $125 million unsecured promissory note due in August 2023 (which amount plus accrued and unpaid interest was prepaid during the third quarter of 2022), and (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, also payable in the form of an unsecured promissory note due March 2025.

We may also access capital markets through the issuance of debt or additional shares of common stock, which we may use in connection with the acquisition of complementary businesses or other significant assets or for other strategic opportunities or general corporate purposes.

We recently opened our new Silicon Carbide device fabrication facility in Marcy, New York, to expand capacity for our Silicon Carbide device business.

We expect to invest more than $1.0 billion in construction, equipment and other related costs for the new facility through fiscal 2024, of which approximately $500 million is expected to be reimbursed over time by the State of New York through a grant program administered by the State of New York Urban Development Corporation (doing business as Empire State Development).

Given our current cash position, we believe we are positioned to adequately fund the remaining construction of the facility.

The full extent to which the COVID-19 pandemic may impact our results of operations or liquidity remains uncertain.

Our operations have, and likely will continue, to experience supply, labor, demand and output challenges.

We continue to monitor

the impact that the COVID-19 pandemic is having on our business, the semiconductor industry, and the economies in which we operate.

To the extent the COVID-19 virus and its variants continue to spread, we believe our future results of operations, including the results for fiscal 2022, could be materially impacted by the COVID-19 pandemic, but at this time we do not expect the impact from the COVID-19 pandemic will have a material effect on our liquidity or financial position.

However, given the speed and frequency of continuously evolving developments with respect to this pandemic, we cannot reasonably estimate the magnitude of the impact to our results of operations.

The ultimate extent to which the COVID-19 pandemic will impact our business depends on future developments, which include the effectiveness and utilization of vaccines and boosters for COVID-19 and its variants.

New information may emerge concerning the severity of COVID-19 and its variants, and additional actions may be taken in order to contain or limit their spread.

To the extent our suppliers continue to be materially and adversely impacted by COVID-19, this could reduce the availability, or result in delays, of materials or supplies to or from us, which in turn could materially interrupt our business operations.

The significant components of our working capital are liquid assets such as cash and cash equivalents, short-term investments, accounts receivable and inventories reduced by trade accounts payable.

The following table presents the components of our cash conversion cycle:

Three months ended

March 27, 2022 June 27, 2021 Change

Days of sales outstanding (a)

Days of supply in inventory (b)

Days in accounts payable (c)

(106) (92) (14)

Cash conversion cycle 102 107 (5)

a) Days of sales outstanding (DSO) measures the average collection period of our receivables.

DSO is based on the ending net trade receivables less receivable related accrued contract liabilities and the revenue, net for the quarter then ended.

DSO is calculated by dividing ending accounts receivable, less receivable related accrued contract liabilities, by the average net revenue per day for the respective 90-day period.

b) Days of supply in inventory (DSI) measures the average number of days from procurement to sale of our product.

DSI is based on ending inventory and cost of revenue, net for the quarter then ended.

DSI is calculated by dividing ending inventory (excluding inventory related to the Wafer Supply Agreement entered into in connection with the LED Business Divestiture) by average cost of revenue, net per day for the respective 90-day period.

c) Days in accounts payable (DPO) measures the average number of days our payables remain outstanding before payment.

DPO is based on ending accounts payable and cost of revenue, net for the quarter then ended.

Due to the significant amount of capital expenditures associated with our Silicon Carbide device fabrication facility in New York, we exclude accounts payable related to capital expenditures in connection with the facility.

DPO is calculated by dividing ending accounts payable and accrued expenses (less accounts payable balances related to our Silicon Carbide device fabrication facility in New York) by the average cost of revenue, net per day for the respective 90-day period.

Our cash conversion cycle had a slight decrease for the three months ended March 27, 2022 as compared to the three months ended June 27, 2021.

An increase in our days of supply in inventory was primarily due to increased inventory balances as we expand production globally and build a raw materials buffer to try to ensure continuity of supply.

The increase in our days in accounts payable was driven by our accounts payable balance (after excluding amounts related to capital expenditures for our Silicon Carbide device fabrication facility in Marcy, New York) increasing more than the increase to our cost of revenue, net.

Additionally, our days of sales outstanding decreased slightly as a result of our revenue increasing more than the increase to our net receivable balance.

As of March 27, 2022, we had unrealized losses on our short-term investments of $15.8 million.

All of our short-term investments had investment grade ratings, and any such investments that were in an unrealized loss position at March 27, 2022 were in such position due to interest rate changes, sector credit rating changes, company-specific rating changes or volatile market conditions related to the conflict in Ukraine and the ongoing COVID-19 pandemic.

We evaluate our short-term investments for expected credit losses.

We believe we are able to and we intend 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.

Expected Uses of Liquidity

We recently opened our new Silicon Carbide device fabrication facility in Marcy, New York, to expand capacity for production of our Silicon Carbide devices.

We expect to invest approximately $2.0 billion, an increase from our previously expected $1.0 billion, in construction, equipment and other related costs for the new facility through fiscal 2024, of which approximately $500 million is expected to be reimbursed over time by the State of New York through a grant program administered by the State of New York Urban Development Corporation (doing business as Empire State Development).

The increase is primarily due to capacity expansions at the site that have been pulled forward as a result of increased projected demand.

As of September 25, 2022, we have spent approximately $770 million and received $196.4 million in reimbursements.

Additionally, we recently announced the intention to build a new materials manufacturing facility in Siler City, North Carolina.

Starting late fiscal 2023 and through fiscal 2024, we expect to invest approximately $1.3 billion into the facility's initial construction, with the potential to invest in further expansions to add additional capacity as needed.

The facility is partially supported by an approximately $1.0 billion incentive package from state, county and local governments.

In addition, we hope to apply for federal funding from the CHIPS and Science Act of 2022 to accelerate the construction and build-out of the facility.

We also intend to apply for and potentially sell tax credits as part of the Inflation Reduction Act to further fund our expansion initiatives.

For fiscal 2023, we target approximately $1.0 billion of net capital investment, which is primarily related to capacity and infrastructure projects to support longer-term growth and strategic priorities.

This target is highly dependent on the timing and overall progress on our new Silicon Carbide fabrication facility in New York and the construction of our new materials manufacturing facility in Siler City, North Carolina.

Our target net capital investment figure is net of approximately $275 million of expected reimbursements from the State of New York Urban Development Corporation under the Grant Disbursement Agreement during the fiscal year.

Given our current cash position, we believe we will be able to fund daily operations for at least the next 12 months but may need to obtain additional funding to fully complete our intended expansion initiatives described above.

We believe we will be able to obtain the necessary funding and are exploring a variety of options, including, but not limited to, customer deposits, private funding, public markets, government reimbursements and selling transferable government tax credits.

In summary, our cash flows were as follows:

Nine months ended

March 27, 2022 March 28, 2021 Change

Three months ended

September 25, 2022 September 26, 2021 Change

Cash used in operating activities ($12.7) ($62.5) $49.8 (80) %

Cash used in investing activities (378.0) (339.5) (38.5) (11) %

Cash provided by financing activities 608.3 497.6 110.7 22 %

Cash provided by (used in) investing activities 102.8 (32.0) 134.8 (421) %

Cash used in financing activities (17.6) (22.9) 5.3 (23) %

Effect of foreign exchange changes (0.4) (0.1) (0.3) (300) %

1 unchanged sentence

Cash Flows from Operating Activities

Net cash used in operating activities increased primarily due to decreased working capital as a result of inventory growth and increased receivables related to timing of shipments.

Total cash used in operating activities included $16.6 million of cash used in operating activities from discontinued operations for the nine months ended March 28, 2021.

Net cash used in operating activities decreased primarily due to the receipt of a $49.4 million 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.

Cash Flows from Investing Activities

Our investing activities primarily relate to short-term investment transactions, purchases of property and equipment, and property related reimbursements.

Cash used in investing activities increased primarily due to an increase in property and equipment purchases of $141.5 million and an increase in net purchases of short-term investments of $71.1 million, partially offset by a net increase in proceeds from the LED Business Divestiture of $88.4 million and $83.5 million of property related reimbursements from the State of New York Urban Development Corporation under a Grant Disbursement Agreement (GDA).

For more details on the GDA, see Note 13, "Commitments and Contingencies," to our unaudited consolidated financial statements in Part I, Item 1 of this Quarterly Report.

For fiscal 2022, we target approximately $550.0 million of net capital investment, which is primarily related to capacity and infrastructure projects to support longer-term growth and strategic priorities.

This target is highly dependent on the timing and overall progress on our new Silicon Carbide fabrication facility in New York and is net of approximately $200.0 million of expected reimbursements from the State of New York Urban Development Corporation under the GDA.

Total cash used in investing activities included $0.3 million of cash used in investing activities from discontinued operations for the nine months ended March 28, 2021.

Cash provided by investing activities increased primarily due to proceeds of an earnout payment related to the LED Business Divestiture of $101.8 million and a decrease in property and equipment purchases of $148.2 million, which was partially offset by a decrease in net proceeds from short-term investments of $111.7 million.

Cash Flows from Financing Activities

For the nine months ended March 27, 2022, our financing activities primarily consisted of $732.3 million in net proceeds from issuing our 2028 Notes and $11.7 million of proceeds from the issuance of common stock, partially offset by $108.2 million in cash paid for capped call transactions and $26.1 million in tax withholdings on vested equity awards.

For the nine months ended March 28, 2021, our financing activities primarily consisted of net proceeds of $498.4 million from issuances of common stock in connection with the ATM program in the third quarter of fiscal 2021 and issuances of common stock pursuant to the exercise of employee stock options.

For the three months ended September 25, 2022 and September 26, 2021, cash used in financing activities primarily consisted of $16.9 million and $22.5 million in tax withholdings on vested equity awards, respectively.

Off-Balance Sheet Arrangements

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Accordingly, our liquidity and capital resources are not subject to off-balance sheet risks from unconsolidated entities.

As of March 27, 2022, we did not have any off-balance sheet arrangements.

As of September 25, 2022, we did not have any off-balance sheet arrangements.

Critical Accounting Policies and Estimates

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What changed 10-Q

Item 2. Management’s Discussion and Analysis