What changed in this filing

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Item 1. Financial Statements

2023-01-26 compared with 2022-10-27 · 233 added, 157 removed, 613 unchanged (39% of the section changed)

Financial Statements (Unaudited)

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

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

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

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

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

Consolidated Statements of Cash Flows for the six months ended December 25, 2022 and December 26, 2021

Notes to Unaudited Consolidated Financial Statements

2 unchanged sentences

in millions of U.S.

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

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

Current assets:

33 unchanged sentences

Preferred stock, par value $ 0.01 ;

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

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

none issued and outstanding

Common stock, par value $ 0.00125 ;

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

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

124,413 and 123,795 shares issued and outstanding at December 25, 2022 and June 26, 2022, respectively

Additional paid-in-capital 3,660.0 4,228.4

6 unchanged sentences

UNAUDITED CONSOLIDATED STATEMENTS OF OPERATIONS

Three months ended

September 25, 2022 September 26, 2021

Three months ended Six months ended

December 25, 2022 December 26, 2021 December 25, 2022 December 26, 2021

in millions of U.S.

7 unchanged sentences

Amortization or impairment of acquisition-related intangibles 2.8 3.6 5.7 7.2

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

Loss on disposal or impairment of other assets 0.1 0.5 0.2 0.3

Other operating expense 42.6 15.6 85.0 28.4

9 unchanged sentences

UNAUDITED CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS

Three months ended

Three months ended Six months ended

(in millions of U.S.

Dollars) September 25, 2022 September 26, 2021

Dollars) December 25, 2022 December 26, 2021 December 25, 2022 December 26, 2021

Net loss ($ 90.9 ) ($ 96.7 ) ($ 117.1 ) ($ 166.8 )

Other comprehensive loss:

Net unrealized loss on available-for-sale securities ( 7.0 ) ( 0.8 )

Net unrealized gain (loss) on available-for-sale securities 3.7 ( 3.6 ) ( 3.3 ) ( 4.4 )

Comprehensive loss ( 87.2 ) ( 100.3 ) ( 120.4 ) ( 171.2 )

3 unchanged sentences

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

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

(in millions of U.S.

Dollars, except share data in thousands) Number of Shares Par Value

Balance at June 26, 2022 123,795 $ 0.2 $ 4,228.4 ($ 1,764.0 ) ($ 25.3 ) $ 2,439.3

7 unchanged sentences

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

Net loss — — — ( 90.9 ) — ( 90.9 )

Unrealized gain on available-for-sale securities — — — — 3.7 3.7

Comprehensive loss ( 87.2 )

Tax withholding on vested equity awards — — ( 0.4 ) — — ( 0.4 )

Stock-based compensation — — 21.4 — — 21.4

Exercise of stock options and issuance of shares 203 — 10.7 — — 10.7

Capped call transactions related to the issuance of convertible notes due December 1, 2029 — — ( 273.9 ) — — ( 273.9 )

Balance at December 25, 2022 124,413 $ 0.2 $ 3,660.0 ($ 1,851.4 ) ($ 28.6 ) $ 1,780.2

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

2 unchanged sentences

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

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

(in millions of U.S.

Dollars, except share data in thousands) Number of Shares Par Value

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

6 unchanged sentences

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

Net loss — — — ( 96.7 ) — ( 96.7 )

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

Comprehensive loss ( 100.3 )

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

Stock-based compensation — — 15.7 — — 15.7

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

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

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

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

1 unchanged sentence

UNAUDITED CONSOLIDATED STATEMENTS OF CASH FLOWS

Three months ended

Six months ended

(in millions of U.S.

Dollars) September 25, 2022 September 26, 2021

Dollars) December 25, 2022 December 26, 2021

Operating activities:

3 unchanged sentences

Amortization of debt issuance costs and discount, net of non-cash capitalized interest 2.9 9.0

Loss on extinguishment of debt — 24.8

Stock-based compensation 43.2 30.0

20 unchanged sentences

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 )

Cash used in investing activities ( 722.0 ) ( 83.5 )

Financing activities:

3 unchanged sentences

Tax withholding on vested equity awards ( 17.3 ) ( 25.3 )

Proceeds from convertible notes 1,750.0 —

Payments of debt issuance costs ( 31.4 ) —

Cash paid for capped call transactions ( 273.9 ) —

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

Cash used in financing activities ( 17.6 ) ( 22.9 )

Cash provided by (used in) financing activities 1,437.3 ( 15.0 )

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

30 unchanged sentences

The consolidated financial statements presented herein have been prepared by the Company and have not been audited.

In the opinion of management, all normal and recurring adjustments necessary to fairly state the consolidated financial position, results of operations, comprehensive loss, shareholders' equity and cash flows at September 25, 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 December 25, 2022, and for all periods presented, have been made.

All material intercompany accounts and transactions have been eliminated.

The consolidated balance sheet at June 26, 2022 has been derived from the audited financial statements as of that date.

Certain prior period amounts in the accompanying consolidated financial statements and notes have been reclassified to conform to the current year presentation.

These reclassifications had no effect on previously reported net loss or shareholders’ equity.

These financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (U.S.

3 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 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).

The results of operations for the three and six months ended December 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

7 unchanged sentences

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.

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 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.

The Company adopted this standard on June 27, 2022 and will apply the amendments prospectively.

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

17 unchanged sentences

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.

For the three and six months ended December 25, 2022, the Company recognized $ 0.9 million and $ 1.8 million in administrative fees related to the LED RELA, respectively, of which $ 0.3 million is included in accounts receivable, net in the consolidated balance sheet as of December 25, 2022.

For the three and six months ended December 26, 2021, the Company recognized $ 0.9 million and $ 1.8 million in administrative fees related to the LED RELA, respectively.

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

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.

For the three and six months ended December 25, 2022, the Company recognized $ 1.8 million and $ 3.7 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 sheet as of December 25, 2022.

For the three and six months ended December 26, 2021, the Company recognized $ 2.4 million and $ 5.3 million in administrative fees related to the LED TSA, respectively.

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 $ 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 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.

At the inception of the Wafer Supply Agreement, the Company recorded a supply agreement liability of $ 31.0 million, none of which was outstanding as of December 25, 2022.

For the three and six months ended December 25, 2022, the Company recognized a net loss of $ 2.6 million and $ 2.5 million, respectively, in non-operating income, net related to the Wafer Supply Agreement, of which a receivable of $ 1.6 million is included in other assets in the consolidated balance sheet as of December 25, 2022.

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

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 $ 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 were $ 45.6 million as of December 25, 2022 and $ 47.8 million as of June 26, 2022.

The decrease was primarily due to decreases in ship and debit reserves and product exchange reserves.

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

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.

For the three and six months ended December 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

September 25, 2022 September 26, 2021

Three months ended Six months ended

December 25, 2022 December 26, 2021 December 25, 2022 December 26, 2021

(in millions of U.S.

Dollars) Revenue % of Revenue Revenue % of Revenue

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

Europe $ 63.6 29.4 % $ 61.7 35.6 % $ 139.3 30.5 % $ 119.8 36.3 %

13 unchanged sentences

Operating Leases:

September 25, 2022 June 26, 2022

December 25, 2022 June 26, 2022

Right-of-use asset (1)

14 unchanged sentences

Statement of Operations

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.

Operating lease expense was $ 2.5 million and $ 4.7 million for the three and six months ended December 25, 2022, respectively, and $ 3.3 million and $ 4.8 million for the three and six months ended December 26, 2021, respectively.

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

Finance lease amortization was $ 0.2 million and $ 0.4 million and interest expense was less than $ 0.1 million and $ 0.1 million for the three and six months ended December 25, 2022, respectively.

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

Cash flow information consisted of the following (1) :

Three months ended

Six months ended

(in millions of U.S.

Dollars) September 25, 2022 September 26, 2021

Cash used in operating activities:

Dollars) December 25, 2022 December 26, 2021

Cash (used in) provided by operating activities:

Cash paid for operating leases ($ 2.7 ) ($ 4.2 )

Cash received from tenant improvement allowance on operating lease 3.1 —

Cash paid for interest portion of financing leases ( 0.1 ) ( 0.1 )

3 unchanged sentences

Lease Liability Maturities

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

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

Fiscal Year Ending Operating Leases Finance Leases Total

21 unchanged sentences

The agreement does not contain any renewal provisions.

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.

The Company recognized lease income of $ 0.9 million and $ 1.8 million for the three and six months ended December 25, 2022, respectively.

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

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

Future minimum rental income relating to the LED RELA is $ 0.6 million for the remainder of fiscal 2023.

3 unchanged sentences

(in millions of U.S.

Dollars) September 25, 2022 June 26, 2022

Dollars) December 25, 2022 June 26, 2022

Billed trade receivables $ 166.6 $ 148.0

5 unchanged sentences

(in millions of U.S.

Dollars) September 25, 2022

Dollars) December 25, 2022

Balance at beginning of period $ 1.2

4 unchanged sentences

(in millions of U.S.

Dollars) September 25, 2022 June 26, 2022

Dollars) December 25, 2022 June 26, 2022

Raw material $ 84.0 $ 60.2

5 unchanged sentences

(in millions of U.S.

Dollars) September 25, 2022 June 26, 2022

Dollars) December 25, 2022 June 26, 2022

Reimbursement receivable on long-term incentive agreement $ 111.6 $ 132.5

8 unchanged sentences

(in millions of U.S.

Dollars) September 25, 2022 June 26, 2022

Dollars) December 25, 2022 June 26, 2022

Accounts payable, trade $ 132.2 $ 57.8

1 unchanged sentence

Accrued property and equipment 156.8 132.1

Accrued expenses 34.9 30.7

Other 6.3 6.5

Accrued expenses and other 45.2 37.2

Accounts payable and accrued expenses $ 389.1 $ 307.7

1 unchanged sentence

Other operating expense consisted of the following:

Three months ended

Three months ended Six months ended

(in millions of U.S.

Dollars) September 25, 2022 September 26, 2021

Restructuring costs — 2.6

Project, transformation and transaction costs 3.0 1.6

Dollars) December 25, 2022 December 26, 2021 December 25, 2022 December 26, 2021

Factory start-up costs 37.6 11.0 76.0 19.6

Project, transformation and transaction costs 4.5 2.5 7.5 4.1

Restructuring costs 0.2 2.1 0.2 4.7

Non-restructuring related executive severance 0.3 — 1.3 —

1 unchanged sentence

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.

Accumulated other comprehensive loss, net of taxes, consisted of $ 28.6 million and $ 25.3 million of net unrealized losses on available-for-sale securities as of December 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

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.

Reclassifications out of accumulated other comprehensive loss was a loss of less than $ 0.1 million for both the three and six months ended December 25, 2022 and a $ 0.1 million and $ 0.3 million gain for the three and six months ended December 26, 2021, respectively.

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

1 unchanged sentence

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

Three months ended

Three months ended Six months ended

(in millions of U.S.

Dollars) September 25, 2022 September 26, 2021

Gain on sale of investments, net — ( 0.2 )

Dollars) December 25, 2022 December 26, 2021 December 25, 2022 December 26, 2021

Gain on arbitration proceedings (1)

( 0.9 ) — ( 50.3 ) —

Loss on debt extinguishment (2)

— 24.8 — 24.8

Interest income ( 11.6 ) ( 2.4 ) ( 15.9 ) ( 5.0 )

Interest expense, net of capitalized interest 7.8 5.3 12.6 12.0

Loss on Wafer Supply Agreement 2.6 0.1 2.5 0.9

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

Other, net 1.3 0.1 0.6 ( 0.5 )

1 unchanged sentence

(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.

In the second quarter of fiscal 2023, a final payment, net of legal fees, was received.

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

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

Statements of Cash Flows - non-cash activities

Three months ended

Six months ended

(in millions of U.S.

Dollars) September 25, 2022 September 26, 2021

Dollars) December 25, 2022 December 26, 2021

Lease asset and liability additions $ 12.7 $ 5.6

Lease asset and liability modifications, net 0.6 2.9

Lease terminations — ( 0.2 )

Settlement of 2023 Notes in shares of common stock (1)

Decrease in property, plant and equipment from investment tax credit receivables 24.3 —

Decrease in property, plant and equipment from long-term incentive related receivables 49.8 81.1

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

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

Accrued property and equipment as of December 25, 2022 and December 26, 2021 was $ 156.8 million and $ 135.7 million, respectively.

Note 6 – Investments

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.

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

Short-term investments consisted of the following (in millions of U.S.

December 25, 2022

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

Corporate bonds $ 618.2 $ 0.1 ($ 20.2 ) $ — $ 598.1

Municipal bonds 156.9 — ( 6.2 ) — 150.7

treasury securities 251.2 — ( 1.1 ) — 250.1

Certificates of deposit 196.9 — — — 196.9

Municipal bonds 180.6 0.1 ( 5.0 ) — 175.7

Variable rate demand notes 94.4 — — — 94.4

Commercial paper 64.0 — — — 64.0

agency securities 20.2 — ( 0.1 ) — 20.1

8 unchanged sentences

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

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

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

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.

September 25, 2022

December 25, 2022

Less than 12 Months Greater than 12 Months Total

15 unchanged sentences

Number of securities with an unrealized loss 346 5 351

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.

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

As of December 25, 2022, the Company held ten cash equivalent securities in unrealized loss positions with an aggregate fair value of $ 104.7 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 September 25, 2022 and June 26, 2022 have been in unrealized loss positions for less than 12 months.

All cash equivalents in unrealized loss positions as of December 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.

Accrued interest receivable was $ 11.2 million and $ 5.9 million as of December 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.

There were no write-offs of noncollectable interest income during the three and six months ended December 25, 2022 and December 26, 2021.

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

2 unchanged sentences

The Company evaluates its investments for expected credit losses.

The Company believes it is able to and intends to hold each of the investments held with an unrealized loss as of September 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:

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

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

The contractual maturities of short-term investments as of December 25, 2022 were as follows:

(in millions of U.S.

1 unchanged sentence

Corporate bonds $ 298.0 $ 300.1 $ — $ — $ 598.1

Municipal bonds 52.3 98.4 — — 150.7

treasury securities 196.8 53.3 — — 250.1

Certificates of deposit 196.9 — — — 196.9

Municipal bonds 66.1 109.6 — — 175.7

Variable rate demand notes — — 14.7 79.7 94.4

Commercial paper 64.0 — — — 64.0

agency securities 15.1 5.0 — — 20.1

11 unchanged sentences

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

As of September 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 commercial paper, corporate bonds, municipal bonds, variable rate demand notes and U.S.

As of December 25, 2022 and June 26, 2022, financial assets utilizing Level 1 inputs included U.S.

treasury securities and money market funds.

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

agency securities.

1 unchanged sentence

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

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

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

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

GAAP hierarchy:

September 25, 2022 June 26, 2022

December 25, 2022 June 26, 2022

(in millions of U.S.

Dollars) Level 1 Level 2 Level 3 Total Level 1 Level 2 Level 3 Total

Dollars) Level 1 Level 2 Total Level 1 Level 2 Total

Cash equivalents:

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

treasury securities $ 307.0 $ — $ 307.0 $ 69.0 $ — $ 69.0

Money market funds 253.5 — 253.5 115.9 — 115.9

Commercial paper — 67.6 67.6 — 59.4 59.4

Certificates of deposit — 38.8 38.8 — — —

Corporate bonds — 8.4 8.4 — — —

Municipal bonds — 1.0 1.0 — — —

Total cash equivalents 560.5 115.8 676.3 184.9 59.4 244.3

1 unchanged sentence

Corporate bonds — 598.1 598.1 — 448.0 448.0

Municipal bonds — 150.7 — 150.7 — 162.2 — 162.2

treasury securities 250.1 — 250.1 65.8 — 65.8

Certificates of deposit — 196.9 196.9 — — —

Municipal bonds — 175.7 175.7 — 162.2 162.2

Variable rate demand notes — 94.4 94.4 — 69.4 69.4

Commercial paper — 64.0 64.0 — — —

agency securities — 20.1 20.1 — 3.9 3.9

2 unchanged sentences

Note 8 – Goodwill and Intangible Assets

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

There were no changes to goodwill during the six months ended December 25, 2022.

Intangible Assets, net

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

September 25, 2022 June 26, 2022

December 25, 2022 June 26, 2022

(in millions of U.S.

6 unchanged sentences

Total intangible assets $ 241.1 ($ 121.1 ) $ 120.0 $ 242.5 ($ 117.1 ) $ 125.4

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 amortization of acquisition-related intangibles assets was $ 2.8 million and $ 5.7 million for the three and six months ended December 25, 2022, respectively, and $ 3.6 million and $ 7.2 million for the three and six months ended December 26, 2021, respectively.

Total amortization of patents and licensing rights was $ 1.3 million and $ 2.5 million for the three and six months ended December 25, 2022, respectively, and $ 1.5 million and $ 2.8 million for the three and six months ended December 26, 2021, respectively.

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

11 unchanged sentences

Revolving Line of Credit

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.

As of December 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 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.

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

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

2023 Convertible Notes

49 unchanged sentences

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

Capped Call Transactions

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

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

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

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

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

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

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

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

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

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

Capped Call Transactions in relation to the 2028 Notes

In connection with the exercise by the initial purchasers of their option to purchase additional notes, the Company entered into additional privately negotiated capped call transactions (such transactions, collectively, the 2028 Notes Capped Call Transactions) with each of the 2028 Notes Capped Call Counterparties.

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

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

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

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

2029 Convertible Notes

On November 21, 2022, the Company sold $ 1,525.0 million aggregate principal amount of 1.875 % convertible senior notes due December 1, 2029 to qualified institutional buyers pursuant to Rule 144A under the Securities Act and an additional $ 225.0 million aggregate principal amount of such notes pursuant to the exercise in full of the over-allotment options of the underwriters (the 2029 Notes).

The total net proceeds from the 2029 Notes offering was approximately $ 1,718.6 million.

The Company used approximately $ 273.9 million of the net proceeds from the 2029 Notes to fund the cost of entering into capped call transactions, as described below.

The conversion rate will initially be 8.4118 shares of common stock per one thousand dollars in principal amount of 2029 Notes (equivalent to an initial conversion price of approximately $ 118.88 per share of common stock).

The conversion rate will be subject to adjustment for some events, but will not be adjusted for any accrued and unpaid interest.

In addition, following certain corporate events that occur prior to the maturity date, or following the Company's issuance of a notice of redemption, the Company will increase the conversion rate for a holder who elects to convert its 2029 Notes in connection with such a corporate event, or who elects to convert any 2029 Notes called for redemption during the related redemption period in certain circumstances.

The Company may not redeem the 2029 Notes prior to December 4, 2026.

The Company may redeem for cash all or any portion of the 2029 Notes, at its option, on a redemption date occurring on or after December 4, 2026 and on or before the 40 th scheduled trading day immediately before the maturity date, if the last reported sales price of its common stock has been at least 130 % of the conversion price then in effect for at least 20 trading days (whether or not consecutive), including the trading day immediately preceding the date on which the Company provides a notice of redemption, during any 30 consecutive trading day period ending on, and including, the trading day immediately preceding the date on which the Company provides notice of redemption.

The redemption price will be 100 % of the principal amount of the 2029 Notes to be redeemed, plus accrued and unpaid interest to, but excluding, the redemption date.

If the Company undergoes certain fundamental changes related to the Company's common stock, holders may require the Company to repurchase for cash all or any portions of their 2029 Notes at a fundamental repurchase price equal to 100 % of the principal amount of the 2029 Notes to be repurchased, plus accrued and unpaid interest to, but excluding, the fundamental change repurchase date.

Holders may convert their 2029 Notes at their option at any time prior to the close of business on the business day immediately preceding June 1, 2029 only under the following circumstances:

(1) during any calendar quarter commencing after the calendar quarter ending March 31, 2023 (and only during such calendar quarter), if the last reported sale price of the common stock for at least 20 trading days (whether or not consecutive) during a period of 30 consecutive trading days ending on, and including, the last trading day of the immediately preceding calendar quarter is greater than or equal to 130 % of the conversion price on each applicable trading day;

(2) during the five business day period after any ten consecutive trading day period in which the trading price per $1.0 thousand principal amount of 2029 Notes for each trading day of the measurement period was less than 98 % of the product of the last reported sale price of its common stock and the conversion rate on each such trading day;

(3) if the Company calls such 2029 Notes for redemption, at any time prior to the close of business on the second business day immediately preceding the redemption date;

or (4) upon the occurrence of specified corporate events.

On or after June 1, 2029 until the close of business on the second scheduled trading day immediately preceding the maturity date, holders may convert their 2029 Notes at any time, regardless of the foregoing circumstances.

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

Capped Call Transactions in relation to the 2029 Notes

On November 16, 2022, in connection with the pricing of the 2029 Notes, the Company entered into privately negotiated capped call transactions with certain of the initial purchasers or their affiliates and another financial institution (the 2029 Notes Capped Call Counterparties).

In connection with the exercise by the initial purchasers of their option to purchase additional notes, the Company entered into additional privately negotiated capped call transactions (such transactions, collectively, the 2029 Notes Capped Call Transactions) with each of the 2029 Notes Capped Call Counterparties.

The 2029 Notes Capped Call Transactions initially cover, subject to customary anti-dilution adjustments, the aggregate number of shares of the Company’s common stock that initially underlie the 2029 Notes.

The 2029 Notes Capped Call Transactions are expected generally to reduce the potential dilutive effect on the common stock upon any conversion of 2029 Notes and/or offset any potential cash payments the Company is required to make in excess of the principal amount of converted 2029 Notes, as the case may be, with such reduction and/or offset subject to a cap which initially is $ 202.538 per share, representing a premium of 130 % over the last reported sale price per share of our common stock on November 16, 2022, subject to certain adjustments under the terms of the 2029 Notes Capped Call Transactions.

The 2029 Notes Capped Call Transactions are separate transactions entered into by the Company with each of the 2029 Notes Capped Call Counterparties, are not part of the terms of the 2029 Notes, and do not affect any holder’s rights under the 2029 Notes.

Holders of the 2029 Notes do not have any rights with respect to the 2029 Notes Capped Call Transactions.

Accounting for 2023 Notes, 2026 Notes, 2028 Notes and 2029 Notes

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

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

The amounts were determined by deducting the fair value of the liability component from the par value of each of the 2023 Notes, 2026 Notes and 2028 Notes.

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

3 unchanged sentences

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

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;

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

Upon adoption of ASU 2020-06 on June 27, 2022, the first day of fiscal 2023, the unamortized discounts on the 2026 Notes and 2028 Notes were eliminated and the liability and equity components relating to the debt issuance costs for the 2026 Notes and 2028 Notes are now presented as a single liability.

Debt issuance costs in relation to the 2029 Notes were accounted for as a reduction of the principal balance and will be amortized over the term of the 2029 Notes.

The 2026 Notes, 2028 Notes and 2029 Notes (the Outstanding Notes) are equal in right of payment to any of the Company’s unsecured indebtedness;

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

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

and structurally subordinated to all indebtedness and other liabilities (including trade payables) of the Company’s subsidiaries.

The net carrying amount of the liability component of the Notes is as follows:

The net carrying amount of the liability component of the Outstanding Notes is as follows:

(in millions of U.S.

Dollars) September 25, 2022 June 26, 2022

Dollars) December 25, 2022 June 26, 2022

Principal $ 3,075.0 $ 1,325.0

1 unchanged sentence

Net carrying amount $ 3,021.0 $ 1,021.6

The net carrying amount of the equity component of the Notes is as follows:

The net carrying amount of the equity component of the Outstanding Notes is as follows:

(in millions of U.S.

Dollars) September 25, 2022 (1)

Dollars) December 25, 2022 (1)

June 26, 2022

2 unchanged sentences

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

(1) As discussed above, the equity components of the 2026 Notes and 2028 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 Outstanding Notes is as follows:

Three months ended Six months ended

(in millions of U.S.

Dollars) September 25, 2022 September 26, 2021

Dollars) December 25, 2022 December 26, 2021 December 25, 2022 December 26, 2021

Interest expense, net of capitalized interest $ 5.7 $ 0.8 $ 8.7 $ 1.9

Amortization of discount and issuance costs, net of capitalized interest 1.3 5.1

Amortization of discount and debt issuance costs, net of capitalized interest 1.6 3.9 2.9 9.0

Total interest expense, net $ 7.3 $ 4.7 $ 11.6 $ 10.9

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.

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 September 30, 2022.

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.

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

For the three and six months ended December 26, 2021, the Company capitalized $ 2.6 million and $ 4.9 million of interest expense, respectively, and $ 5.8 million and $ 11.2 million of amortization of discount and issuance costs, respectively, 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 March 31, 2023.

As of December 25, 2022, the if-converted value of the 2026 Notes exceeded their respective principal amounts by $ 303.3 million.

The estimated fair value of the Outstanding Notes is $ 3.3 billion as of December 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

Three months ended Six months ended

(in millions of U.S.

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

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

Net loss ($ 90.9 ) ($ 96.7 ) ($ 117.1 ) ($ 166.8 )

2 unchanged sentences

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

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.”

For the three and six months ended December 25, 2022, 2.8 million and 2.8 million, respectively, of weighted average shares were excluded from the calculation of diluted loss per share because their effect would be anti-dilutive.

For the three and six months ended December 26, 2021, 3.1 million and 3.3 million, respectively, of weighted average shares were excluded from the calculation of diluted loss per share because their effect would be anti-dilutive.

In addition, future earnings per share of the Company are also subject to dilution from conversion of the 2026 Notes, 2028 Notes and 2029 Notes under certain conditions as described in Note 9, “Long-term Debt.”

Note 11 – Stock-Based Compensation

6 unchanged sentences

The ESPP limits employee contributions to 15 % of each employee’s compensation (as defined in the plan) and allows employees to purchase shares at a 15 % discount to the fair market value of common stock on the purchase date two times per year.

The ESPP provides for a twelve-month participation period, divided into two equal six-month purchase periods, and also provides for a look-back feature.

The ESPP provides for a twelve-month participation period, divided into two equal six-month purchase

periods, and also provides for a look-back feature.

At the end of each six-month period in April and October, participants purchase the Company’s common stock through the ESPP at a 15 % discount to the fair market value of the common stock on the first day of the twelve-month participation period or the purchase date, whichever is lower.

1 unchanged sentence

Stock Option Awards

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

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

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

3 unchanged sentences

Forfeited or expired ( 1 ) $ 26.07

Outstanding at September 25, 2022 48 $ 25.03

Outstanding at December 25, 2022 40 $ 24.86

Restricted Stock Units

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:

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

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

3 unchanged sentences

Forfeited ( 156 ) $ 71.44

Nonvested at September 25, 2022 2,399 $ 84.98

Nonvested at December 25, 2022 2,334 $ 84.25

Stock-Based Compensation Valuation and Expense

15 unchanged sentences

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

Three months ended

Three months ended Six months ended

(in millions of U.S.

Dollars) September 25, 2022 September 26, 2021

Dollars) December 25, 2022 December 26, 2021 December 25, 2022 December 26, 2021

Cost of revenue, net $ 5.8 $ 4.2 $ 11.9 $ 7.3

9 unchanged sentences

The Company assesses all available positive and negative evidence to estimate if sufficient future taxable income will be generated to utilize the existing deferred tax assets by jurisdiction.

As of September 25, 2022, the Company has concluded that it is necessary to recognize a full valuation allowance against its U.S.

As of December 25, 2022, the Company has concluded that it is necessary to recognize a full valuation allowance against its U.S.

deferred tax assets.

3 unchanged sentences

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

During the six months ended December 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 December 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.

Although the ultimate timing of the resolution and/or closure of audits is highly uncertain, the Company believes it is reasonably possible that $ 1.7 million of gross unrecognized tax benefits will change in the next 12 months as a result of statute requirements or settlement with tax authorities.

The Company files U.S.

6 unchanged sentences

Note 13 – Commitments and Contingencies

The Company is currently a party to various legal proceedings.

The Company is currently a party to various legal proceedings, including the case described below.

While management presently believes that the ultimate outcome of such proceedings, individually and in the aggregate, will not materially harm the Company’s financial position, cash flows, or overall trends in results of operations, legal proceedings are subject to inherent uncertainties, and unfavorable rulings could occur.

2 unchanged sentences

The outcomes in these matters are not reasonably estimable.

In October 2021, The Trustees of Purdue University (Purdue) filed a complaint against the Company in the U.S.

District Court for the Middle District of North Carolina, alleging infringement of U.S.

7,498,633 (the '633 Patent), entitled "High-voltage power semiconductor device," and 8,035,112 (the '112 Patent), entitled "SIC power DMOSFET with self-aligned source contact." In the complaint, Purdue also alleges willful infringement, and seeks unspecified monetary damages and attorneys’ fees.

In August 2022, Purdue voluntarily withdrew all allegations as to the '112 Patent after having disclaimed all rights to that patent.

The Company denies Purdue’s remaining allegations and has developed numerous defenses, including non-infringement, multiple invalidity grounds, and unenforceability due to inequitable conduct before the U.S.

Patent & Trademark Office.

The litigation with Purdue is in the early stages of fact discovery, and trial is currently scheduled to begin in August 2024.

Due to the early stage of the case, the Company is unable to estimate the possible range of loss, if any, at this time.

Grant Disbursement Agreement (GDA) with the State of New York

5 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 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.

As of December 25, 2022, the Company has reduced property and equipment, net by a total of $ 334.9 million as a result of GDA reimbursements, of which $ 220.4 million has been received in cash and an additional $ 114.5 million in receivables are recorded in other current assets and in other assets in the consolidated balance sheet.

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

4 unchanged sentences

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.

The Company recorded $ 0.2 million of severance-related costs relating to this plan for both the three and six months ended December 25, 2022 and has accrued $ 0.8 million as of December 25, 2022.

Factory Optimization Restructuring

In May 2019, the Company started a significant, multi-year factory optimization plan anchored by a state-of-the-art, automated 200mm capable Silicon Carbide and GaN fabrication facility and a large materials factory at its U.S.

campus headquarters in Durham, North Carolina.

As part of the plan, the Company 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.

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

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.

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

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

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