WOLF filing — read by section

Item 1. Financial Statements

Item 1. Financial Statements (Unaudited) 
 Consolidated Balance Sheets as of December 25, 2022 and June 26, 2022 
 4 
 
 Consolidated Statements of Operations for the three and six months ended December 25, 2022 and December 26, 2021 
 5 
 
 Consolidated Statements of Comprehensive Loss for the three and six months ended December 25, 2022 and December 26, 2021 
 6 
 
 Consolidated Statements of Shareholders' Equity for the six months ended December 25, 2022 and December 26, 2021 
 7 
 
 Consolidated Statements of Cash Flows for the six months ended December 25, 2022 and December 26, 2021 
 9 
 
 Notes to Unaudited Consolidated Financial Statements 
 10 
 

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 WOLFSPEED, INC. 
 UNAUDITED CONSOLIDATED BALANCE SHEETS 
 in millions of U.S. Dollars, except share data in thousands December 25, 2022 June 26, 2022 
 Assets 
 Current assets: 
 Cash and cash equivalents $ 1,085.1 $ 449.5 
 Short-term investments 1,399.3 749.3 
 Total cash, cash equivalents and short-term investments 2,484.4 1,198.8 
 Accounts receivable, net 169.3 150.2 
 Inventories 266.6 227.0 
 Income taxes receivable 1.0 1.3 
 
 Prepaid expenses 28.0 32.1 
 Other current assets 133.4 151.4 
 Current assets held for sale 1.6 1.6 
 
 Total current assets 3,084.3 1,762.4 
 Property and equipment, net 1,649.6 1,481.1 
 Goodwill 359.2 359.2 
 Intangible assets, net 120.0 125.4 
 Long-term receivables 2.9 104.7 
 
 Deferred tax assets 1.0 1.0 
 Other assets 125.9 83.7 
 
 Total assets $ 5,342.9 $ 3,917.5 
 
 Liabilities and Shareholders' Equity 
 Current liabilities: 
 Accounts payable and accrued expenses $ 389.1 $ 307.7 
 Accrued contract liabilities 34.8 37.0 
 Income taxes payable 9.4 11.6 
 Finance lease liabilities 0.5 0.5 
 Other current liabilities 26.2 31.7 
 
 Total current liabilities 460.0 388.5 
 Long-term liabilities: 
 
 Convertible notes, net 3,021.0 1,021.6 
 Deferred tax liabilities 3.5 3.2 
 Finance lease liabilities - long-term 9.4 9.6 
 Other long-term liabilities 68.8 55.3 
 
 Total long-term liabilities 3,102.7 1,089.7 
 Commitments and contingencies 
 Shareholders’ equity: 
 Preferred stock, par value $ 0.01 ; 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 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 
 0.2 0.2 
 Additional paid-in-capital 3,660.0 4,228.4 
 Accumulated other comprehensive loss ( 28.6 ) ( 25.3 ) 
 Accumulated deficit ( 1,851.4 ) ( 1,764.0 ) 
 Total shareholders’ equity 1,780.2 2,439.3 
 
 
 Total liabilities and shareholders’ equity $ 5,342.9 $ 3,917.5 

 The accompanying notes are an integral part of the consolidated financial statements 
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 WOLFSPEED, INC. 
 UNAUDITED CONSOLIDATED STATEMENTS OF OPERATIONS 
 
 Three months ended Six months ended 
 December 25, 2022 December 26, 2021 December 25, 2022 December 26, 2021 
 in millions of U.S. Dollars, except share data 
 Revenue, net $ 216.1 $ 173.1 $ 457.4 $ 329.7 
 Cost of revenue, net 149.2 116.1 310.6 223.3 
 Gross profit 66.9 57.0 146.8 106.4 
 Operating expenses: 
 Research and development 57.0 50.2 112.2 100.1 
 Sales, general and administrative 55.7 48.0 110.7 97.0 
 Amortization or impairment of acquisition-related intangibles 2.8 3.6 5.7 7.2 
 
 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 
 
 Operating loss ( 91.3 ) ( 60.9 ) ( 167.0 ) ( 126.6 ) 
 Non-operating (income) expense, net ( 0.8 ) 27.8 ( 50.5 ) 31.9 
 Loss before income taxes ( 90.5 ) ( 88.7 ) ( 116.5 ) ( 158.5 ) 
 Income tax expense 0.4 8.0 0.6 8.3 
 
 
 Net loss ($ 90.9 ) ($ 96.7 ) ($ 117.1 ) ($ 166.8 ) 
 
 
 
 
 
 
 Basic and diluted loss per share ($ 0.73 ) ($ 0.82 ) ($ 0.94 ) ($ 1.42 ) 
 
 
 
 
 
 
 Weighted average shares - basic and diluted (in thousands) 124,344 117,218 124,190 117,068 
 
 
 

 The accompanying notes are an integral part of the consolidated financial statements 
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 WOLFSPEED, INC. 
 UNAUDITED CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS 
 
 Three months ended Six months ended 
 (in millions of U.S. 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 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 ) 
 
 

 The accompanying notes are an integral part of the consolidated financial statements 
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 WOLFSPEED, INC. 
 UNAUDITED CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY 
 Common Stock Additional Paid-in Capital Accumulated Deficit Accumulated Other Comprehensive Income Total Shareholders' Equity 
 (in millions of U.S. Dollars, except share data in thousands) Number of Shares Par Value 
 Balance at June 26, 2022 123,795 $ 0.2 $ 4,228.4 ($ 1,764.0 ) ($ 25.3 ) $ 2,439.3 
 Net loss — — — ( 26.2 ) — ( 26.2 ) 
 
 Unrealized loss on available-for-sale securities — — — — ( 7.0 ) ( 7.0 ) 
 Comprehensive loss ( 33.2 ) 
 Tax withholding on vested equity awards — — ( 16.9 ) — — ( 16.9 ) 
 
 Stock-based compensation — — 23.2 — — 23.2 
 Exercise of stock options and issuance of shares 415 — 0.5 — — 0.5 
 
 Adoption of ASU 2020-06 — — ( 333.0 ) 29.7 — ( 303.3 ) 
 
 Balance at September 25, 2022 124,210 $ 0.2 $ 3,902.2 ($ 1,760.5 ) ($ 32.3 ) $ 2,109.6 
 Net loss — — — ( 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 
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 WOLFSPEED, INC. 
 UNAUDITED CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY 
 
 Common Stock Additional Paid-in Capital Accumulated Deficit Accumulated Other Comprehensive Income Total Shareholders' Equity 
 (in millions of U.S. Dollars, except share data in thousands) Number of Shares Par Value 
 Balance at June 27, 2021 115,691 $ 0.1 $ 3,676.8 ($ 1,563.1 ) $ 2.7 $ 2,116.5 
 Net loss — — — ( 70.1 ) — ( 70.1 ) 
 
 Unrealized loss on available-for-sale securities — — — — ( 0.8 ) ( 0.8 ) 
 Comprehensive loss ( 70.9 ) 
 Tax withholding on vested equity awards — — ( 22.5 ) — — ( 22.5 ) 
 
 Stock-based compensation — — 15.6 — — 15.6 
 Exercise of stock options and issuance of shares 495 — 0.7 — — 0.7 
 
 
 
 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 
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 WOLFSPEED, INC. 
 UNAUDITED CONSOLIDATED STATEMENTS OF CASH FLOWS 
 Six months ended 
 (in millions of U.S. Dollars) December 25, 2022 December 26, 2021 
 Operating activities: 
 Net loss ($ 117.1 ) ($ 166.8 ) 
 
 
 Adjustments to reconcile net loss to cash used in operating activities: 
 Depreciation and amortization 77.1 67.5 
 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 
 
 
 
 Loss on disposal or impairment of long-lived assets, including loss on disposal portion of factory optimization and start-up costs 2.0 1.6 
 Amortization of premium/discount on investments 2.2 3.2 
 Realized gain on sale of investments — ( 0.3 ) 
 
 
 Deferred income taxes 0.3 0.4 
 Changes in operating assets and liabilities: 
 Accounts receivable, net ( 19.1 ) ( 14.1 ) 
 Inventories ( 38.2 ) ( 41.0 ) 
 Prepaid expenses and other assets ( 1.8 ) ( 5.7 ) 
 Accounts payable, trade 4.2 2.8 
 Accrued salaries and wages and other liabilities ( 33.2 ) ( 13.3 ) 
 Accrued contract liabilities ( 2.2 ) 6.9 
 
 
 Cash used in operating activities ( 79.7 ) ( 95.0 ) 
 Investing activities: 
 Purchases of property and equipment ( 237.8 ) ( 401.6 ) 
 Purchases of patent and licensing rights ( 2.9 ) ( 2.6 ) 
 Proceeds from sale of property and equipment, including insurance proceeds 1.7 2.7 
 Purchases of short-term investments ( 814.1 ) ( 29.8 ) 
 Proceeds from maturities of short-term investments 115.5 107.8 
 Proceeds from sale of short-term investments 43.1 189.2 
 Reimbursement of property and equipment purchases from long-term incentive agreement 70.7 50.8 
 Proceeds from sale of business resulting from the receipt of transaction related note receivable 101.8 — 
 
 
 
 
 Cash used in investing activities ( 722.0 ) ( 83.5 ) 
 Financing activities: 
 
 
 Proceeds from long-term debt borrowings — 20.0 
 Payments on long-term debt borrowings, including finance lease obligations ( 0.3 ) ( 20.2 ) 
 Proceeds from issuance of common stock 11.2 11.5 
 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 provided by (used in) financing activities 1,437.3 ( 15.0 ) 
 Effects of foreign exchange changes on cash and cash equivalents — ( 0.1 ) 
 Net change in cash and cash equivalents 635.6 ( 193.6 ) 
 Cash and cash equivalents, beginning of period 449.5 379.0 
 Cash and cash equivalents, end of period $ 1,085.1 $ 185.4 
 
 
 

 The accompanying notes are an integral part of the consolidated financial statements 
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 WOLFSPEED, INC. 
 NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS 
 
 
 
 
 Note 1 
 Basis of Presentation and New Accounting Standards 
 11 
 
 Note 2 
 Discontinued Operations 
 12 
 
 Note 3 
 Revenue Recognition 
 13 
 
 Note 4 
 Leases 
 14 
 
 Note 5 
 Financial Statement Details 
 16 
 
 Note 6 
 Investments 
 19 
 
 Note 7 
 Fair Value of Financial Instruments 
 21 
 
 Note 8 
 Goodwill and Intangible Assets 
 22 
 
 Note 9 
 Long-term Debt 
 23 
 
 Note 10 
 Loss Per Share 
 28 
 
 Note 11 
 Stock-Based Compensation 
 28 
 
 Note 12 
 Income Taxes 
 30 
 
 Note 13 
 Commitments and Contingencies 
 31 
 
 Note 14 
 Restructuring 
 32 
 

 
 
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 Note 1 – Basis of Presentation and New Accounting Standards 
 Overview 
 Wolfspeed, Inc. (the Company) is an innovator of wide bandgap semiconductors, focused on Silicon Carbide and gallium nitride (GaN) materials and devices for power and radio-frequency (RF) applications. The Company’s product families include Silicon Carbide and GaN materials, power devices and RF devices targeted for various applications such as electric vehicles, fast charging, 5G, renewable energy and storage, and aerospace and defense. 
 The Company’s materials products and power devices are used in electric vehicles, motor drives, power supplies, solar and transportation applications. The Company’s materials products and RF devices are used in military communications, radar, satellite and telecommunication applications. 
 The majority of the Company's products are manufactured at its production facilities located in North Carolina, California and Arkansas. The Company also uses contract manufacturers for certain products and aspects of product fabrication, assembly and packaging. Additionally, the Company recently opened its Silicon Carbide device fabrication facility in New York. The Company operates research and development facilities in North Carolina, California, Arkansas, Arizona and New York. 
 Wolfspeed, Inc. is a North Carolina corporation established in 1987, and its headquarters are in Durham, North Carolina. 
 Basis of Presentation 
 The consolidated financial statements presented herein have been prepared by the Company and have not been audited. In the opinion of management, all normal and recurring adjustments necessary to fairly state the consolidated financial position, results of operations, comprehensive loss, shareholders' equity and cash flows at December 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. GAAP) for interim information and with the instructions to Form 10-Q and Regulation S-X. Accordingly, they do not include all of the information and footnotes required by U.S. GAAP for annual financial statements. These financial statements should be read in conjunction with the consolidated financial statements and notes thereto included in the Company’s Annual Report on Form 10-K for the fiscal year ended June 26, 2022 (fiscal 2022) (the 2022 Form 10-K). The results of operations for the three and 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 
 Convertible Debt Instruments 
 In August 2020, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) 2020-06, Debt – Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging – Contracts in Entity’s Own Equity (Subtopic 815-40). This standard simplifies the accounting for convertible instruments by eliminating the cash conversion and the beneficial conversion accounting models. This update also amends the guidance for the derivatives scope exception for contracts in an entity’s own equity. The update requires an entity to use the if-converted method for all convertible instruments in the diluted earnings per share calculation. An entity may use either a modified or full retrospective approach for adoption. 
 The Company adopted this standard on June 27, 2022, the first day of its 2023 fiscal year, under the modified retrospective approach. The adoption resulted in (i) a reduction of additional paid in capital by $ 333.0 million for the recombination of the equity conversion component of the convertible notes outstanding, which was initially separated and recorded in equity, (ii) an increase in the cumulative convertible note carrying value of $ 277.9 million as a result of removing previously recorded debt discounts, (iii) a decrease in property, plant and equipment for previously capitalized non-cash interest of $ 25.4 million and (iv) a decrease to beginning accumulated deficit as of June 27, 2022 of $ 29.7 million to recognize the cumulative gain on adoption. The Company did not recognize a discrete tax impact related to the opening deferred tax balances as of June 27, 2022 due to a full U.S. valuation allowance. 
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 Government Assistance 
 In November 2021, the FASB issued ASU 2021-10, Government Assistance (Topic 832) - Disclosures by Business Entities about Government Assistance. This standard will require entities to provide annual disclosures regarding government assistance. More specifically, the amendments in the standard improve financial reporting by requiring disclosures that increase the transparency of transactions with a government accounted for by applying a grant or contribution accounting model by analogy, including (1) the types of transactions; (2) the accounting for those transactions; and (3) the effect of those transactions on an entity's financial statements. An entity can apply the amendments prospectively or retrospectively. The Company 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 
 None. 
 
 
 
 Note 2 – Discontinued Operations 
 On March 1, 2021, the Company completed the sale of certain assets and subsidiaries comprising its former LED Products segment to SMART Global Holdings, Inc. (SGH) and its wholly owned subsidiary CreeLED, Inc. (CreeLED and collectively with SGH, SMART) (the LED Business Divestiture) pursuant to the terms of the Asset Purchase Agreement (the LED Purchase Agreement), dated October 18, 2020, as amended. Pursuant to the LED Purchase Agreement, (i) the Company completed the sale to SMART of (a) certain equipment, inventory, intellectual property rights, contracts, and real estate comprising the Company’s former LED Products segment, (b) all of the issued and outstanding equity interests of Cree Huizhou Solid State Lighting Company Limited (Cree Huizhou), a limited liability company organized under the laws of the People’s Republic of China and an indirect wholly owned subsidiary of the Company, and (c) the Company’s ownership interest in Cree Venture LED Company Limited., the Company’s joint venture with San’an Optoelectronics Co., Ltd. (collectively, the LED Business); and (ii) SMART assumed certain liabilities related to the LED Business. The Company retained certain assets used in and pre-closing liabilities associated with the former LED Products segment. 
 The purchase price for the LED Business consisted of (i) a payment of $ 50 million in cash, subject to customary adjustments, (ii) an unsecured promissory note issued to the Company by SGH in the amount of $ 125 million (the Purchase Price Note), (iii) the potential to receive an earn-out payment between $ 2.5 million and $ 125 million based on the revenue and gross profit performance of the LED Business in the first four full fiscal quarters following the closing (the Earnout Period), also payable in the form of an unsecured promissory note (the Earnout Note), and (iv) the assumption of certain liabilities. The Purchase Price Note had a maturity date of August 15, 2023, and as explained further below, was prepaid by SGH in full pursuant to its terms, along with outstanding accrued and unpaid interest as of the payment date, in the third quarter of fiscal 2022. The Earnout Note was issued by CreeLED in the fourth quarter of 2022, had a maturity date of March 27, 2025 and as explained further below, was prepaid by CreeLED in full pursuant to its terms, in connection with the forgiveness by the Company of outstanding accrued and unpaid interest as of the payment date, in the first quarter of fiscal 2023. In fiscal 2021, the Company recognized a loss on sale of the LED Business of $ 29.1 million. The cost of selling the LED Business was $ 27.4 million, which was recognized throughout fiscal 2020 and 2021. 
 In connection with the closing of the LED Business Divestiture, the Company and CreeLED also entered into certain ancillary and related agreements, including (i) an Intellectual Property Assignment and License Agreement, which assigned to CreeLED certain intellectual property owned by the Company and its affiliates and licensed to CreeLED certain additional intellectual property owned by the Company, (ii) a Transition Services Agreement (LED TSA), (iii) a Wafer Supply and Fabrication Services Agreement (the Wafer Supply Agreement), pursuant to which the Company will supply CreeLED with certain Silicon Carbide materials and fabrication services for up to four years , and (iv) a Real Estate License Agreement (LED RELA), which will allow CreeLED to use certain premises owned by the Company to conduct the LED Business for a period of up to 24 months after closing. 
 In the third quarter of fiscal 2022, the Company received an early payment for the Purchase Price Note. The principal amount of $ 125.0 million was paid in full, along with outstanding accrued interest as of the payment date. 
 In the first quarter of fiscal 2023, the Company received an early payment for the Earnout Note. The principal amount of $ 101.8 million was paid in full and the Company agreed to forgo payment by CreeLED of the outstanding accrued interest as of the payment date. 
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 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 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, 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 
 The Company follows a five-step approach for recognizing revenue, consisting of the following: (1) identify the contract with a customer; (2) identify the performance obligations in the contract; (3) determine the transaction price; (4) allocate the transaction price to the performance obligations in the contract; and (5) recognize revenue when, or as, the entity satisfies a performance obligation. 
 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 $ 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 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. Revenue is attributed to a particular geographic region based on the shipping address for the products. Disaggregated revenue from external customers by geographic area is as follows: 
 
 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 Revenue % of Revenue Revenue % of Revenue 
 Europe $ 63.6 29.4 % $ 61.7 35.6 % $ 139.3 30.5 % $ 119.8 36.3 % 
 China 52.0 24.1 % 49.7 28.7 % 118.0 25.8 % 92.6 28.1 % 
 United States 53.3 24.7 % 32.7 18.9 % 103.7 22.7 % 58.7 17.8 % 
 Asia Pacific (excluding China) 46.1 21.3 % 28.5 16.5 % 93.9 20.5 % 57.9 17.6 % 
 Other 1.1 0.5 % 0.5 0.3 % 2.5 0.5 % 0.7 0.2 % 
 
 Total $ 216.1 $ 173.1 $ 457.4 $ 329.7 

 
 
 
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 Note 4 – Leases 
 The Company primarily leases manufacturing and office spaces. The Company also has a number of bulk gas leases. Lease agreements frequently include renewal provisions and require the Company to pay real estate taxes, insurance and maintenance costs. Variable costs include lease payments that were volume or usage-driven in accordance with the use of the underlying asset, as well as non-lease components incurred with respect to actual terms rather than contractually fixed amounts. 
 The Company's finance lease obligations primarily relate to contract manufacturing space in Malaysia and a 49-year ground lease on the Company's Silicon Carbide device fabrication facility in New York. 
 Balance Sheet 
 Lease assets and liabilities and the corresponding balance sheet classifications are as follows (in millions of U.S. Dollars): 
 
 Operating Leases: December 25, 2022 June 26, 2022 
 Right-of-use asset (1) 
 $ 58.1 $ 48.5 
 
 Current lease liability (2) 
 5.3 4.6 
 Non-current lease liability (3) 
 57.3 43.6 
 Total operating lease liabilities $ 62.6 $ 48.2 
 
 Finance Leases: 
 Finance lease assets (4) 
 $ 10.0 $ 10.3 
 
 Current portion of finance lease liabilities 0.5 0.5 
 Finance lease liabilities, less current portion 9.4 9.6 
 Total finance lease liabilities $ 9.9 $ 10.1 

 (1) Within other assets on the consolidated balance sheets. 
 (2) Within other current liabilities on the consolidated balance sheets. 
 (3) Within other long-term liabilities on the consolidated balance sheets. 
 (4) Within property and equipment, net on the consolidated balance sheets. 
 
 
 Statement of Operations 
 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. 
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 Cash Flows 
 Cash flow information consisted of the following (1) : 
 Six months ended 
 (in millions of U.S. 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 ) 
 Cash used in financing activities: 
 Cash paid for principal portion of finance leases ( 0.3 ) ( 0.2 ) 
 
 
 
 
 
 

 (1) See Note 5, "Financial Statement Details," for non-cash activities related to leases. 
 Lease Liability Maturities 
 Maturities of operating and finance lease liabilities as of December 25, 2022 were as follows (in millions of U.S. Dollars): 
 
 Fiscal Year Ending Operating Leases Finance Leases Total 
 June 25, 2023 (remainder of fiscal 2023) $ 3.4 $ 0.4 $ 3.8 
 June 30, 2024 9.2 0.7 9.9 
 June 29, 2025 9.9 0.7 10.6 
 June 28, 2026 9.7 0.7 10.4 
 June 27, 2027 8.4 0.4 8.8 
 Thereafter 67.1 14.2 81.3 
 Total lease payments 107.7 17.1 124.8 
 Future tenant improvement allowances ( 18.5 ) — ( 18.5 ) 
 Imputed lease interest ( 26.6 ) ( 7.2 ) ( 33.8 ) 
 Total lease liabilities $ 62.6 $ 9.9 $ 72.5 

 Supplemental Disclosures 
 Operating Leases Finance Leases 
 Weighted average remaining lease term (in months) (1) 
 134 556 
 Weighted average discount rate (2) 
 4.46 % 2.68 % 

 
 (1) Weighted average remaining lease term of finance leases excluding the 49-year ground lease is 47 months. 
 (2) Weighted average discount rate of finance leases excluding the 49-year ground lease is 3.49 %. 
 Lease Income 
 As mentioned in Note 2, "Discontinued Operations", on March 1, 2021 and in connection with the sale of its LED Business, the Company entered into the LED RELA pursuant to which the Company leases to CreeLED approximately 58,000 square feet of the Company’s property and certain facilities in Durham, North Carolina for a total of $ 3.6 million per year. The lease term is 24 months and expires on February 26, 2023. Subject to certain provisions in the LED RELA, CreeLED may terminate its rights or a portion of its rights under the agreement at any time with sixty days written notice. A notice of thirty days is permitted under certain circumstances as defined in the agreement. The agreement does not contain any renewal provisions. 
 The Company recognized lease income of $ 0.9 million and $ 1.8 million for the three and six months ended December 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. 
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 Future minimum rental income relating to the LED RELA is $ 0.6 million for the remainder of fiscal 2023. 
 
 
 
 Note 5 – Financial Statement Details 
 Accounts Receivable, net 
 Accounts receivable, net consisted of the following: 
 
 (in millions of U.S. Dollars) December 25, 2022 June 26, 2022 
 Billed trade receivables $ 166.6 $ 148.0 
 Unbilled contract receivables 2.6 2.7 
 Royalties 0.8 0.7 
 170.0 151.4 
 
 Allowance for bad debts ( 0.7 ) ( 1.2 ) 
 Accounts receivable, net $ 169.3 $ 150.2 

 
 Changes in the Company’s allowance for bad debts were as follows: 
 
 (in millions of U.S. Dollars) December 25, 2022 
 Balance at beginning of period $ 1.2 
 Current period provision change ( 0.5 ) 
 Write-offs, net of recoveries — 
 Balance at end of period $ 0.7 

 Inventories 
 Inventories consisted of the following: 
 
 (in millions of U.S. Dollars) December 25, 2022 June 26, 2022 
 Raw material $ 84.0 $ 60.2 
 Work-in-progress 146.8 135.9 
 Finished goods 35.8 30.9 
 Inventories $ 266.6 $ 227.0 

 Other Current Assets 
 Other current assets consisted of the following: 
 
 (in millions of U.S. Dollars) December 25, 2022 June 26, 2022 
 Reimbursement receivable on long-term incentive agreement $ 111.6 $ 132.5 
 Accrued interest receivable 11.2 5.9 
 Receivable on Wafer Supply Agreement 1.6 2.7 
 Inventory related to Wafer Supply Agreement 2.8 3.9 
 Deferred product costs 0.3 2.5 
 Other 5.9 3.9 
 Other current assets $ 133.4 $ 151.4 

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 Accounts Payable and Accrued Expenses 
 Accounts payable and accrued expenses consisted of the following: 
 
 (in millions of U.S. Dollars) December 25, 2022 June 26, 2022 
 Accounts payable, trade $ 132.2 $ 57.8 
 Accrued salaries and wages 54.9 80.6 
 Accrued property and equipment 156.8 132.1 
 Accrued expenses and other 45.2 37.2 
 
 Accounts payable and accrued expenses $ 389.1 $ 307.7 

 Other Operating Expense 
 Other operating expense consisted of the following: 
 
 Three months ended Six months ended 
 (in millions of U.S. 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 — 
 
 Other operating expense $ 42.6 $ 15.6 $ 85.0 $ 28.4 

 Accumulated Other Comprehensive Loss, net of taxes 
 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 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. 
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 Non-Operating (Income) Expense, net 
 The following table summarizes the components of non-operating (income) expense, net: 
 
 Three months ended Six months ended 
 (in millions of U.S. 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 ) 
 Non-operating (income) expense, net ($ 0.8 ) $ 27.8 ($ 50.5 ) $ 31.9 

 (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. 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 
 
 Six months ended 
 (in millions of U.S. 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) 
 — 416.1 
 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 

 (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. 
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 Note 6 – Investments 
 Short-term investments consisted of the following (in millions of U.S. Dollars): 
 
 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 
 U.S. 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 
 U.S. agency securities 20.2 — ( 0.1 ) — 20.1 
 
 
 Total short-term investments $ 1,425.5 $ 0.2 ($ 26.4 ) $ — $ 1,399.3 
 
 June 26, 2022 
 Amortized Cost Gross Unrealized Gains Gross Unrealized Losses Credit Loss Allowance Estimated Fair Value 
 Corporate bonds $ 465.8 $ — ($ 17.8 ) $ — $ 448.0 
 Municipal bonds 166.5 0.1 ( 4.4 ) — 162.2 
 U.S. treasury securities 66.5 — ( 0.7 ) — 65.8 
 Variable rate demand notes 69.4 — — — 69.4 
 U.S. agency securities 4.0 — ( 0.1 ) — 3.9 
 
 
 
 
 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. 
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 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. Dollars): 
 
 December 25, 2022 
 Less than 12 Months Greater than 12 Months Total 
 Fair Value Unrealized Loss Fair Value Unrealized Loss Fair Value Unrealized Loss 
 Corporate bonds $ 361.0 ($ 12.1 ) $ 146.4 ($ 8.1 ) $ 507.4 ($ 20.2 ) 
 Municipal bonds 108.5 ( 3.2 ) 35.7 ( 1.8 ) 144.2 ( 5.0 ) 
 U.S. treasury securities 133.6 ( 1.1 ) — — 133.6 ( 1.1 ) 
 U.S. agency securities 5.0 — 1.9 ( 0.1 ) 6.9 ( 0.1 ) 
 
 
 Total $ 608.1 ($ 16.4 ) $ 184.0 ($ 10.0 ) $ 792.1 ($ 26.4 ) 
 Number of securities with an unrealized loss 265 90 355 
 
 June 26, 2022 
 Less than 12 Months Greater than 12 Months Total 
 Fair Value Unrealized Loss Fair Value Unrealized Loss Fair Value Unrealized Loss 
 Corporate bonds $ 431.1 ($ 17.4 ) $ 8.3 ($ 0.4 ) $ 439.4 ($ 17.8 ) 
 Municipal bonds 150.0 ( 4.4 ) 1.0 — 151.0 ( 4.4 ) 
 U.S. treasury securities 65.8 ( 0.7 ) — — 65.8 ( 0.7 ) 
 U.S. agency securities 3.9 ( 0.1 ) — — 3.9 ( 0.1 ) 
 
 
 Total $ 650.8 ($ 22.6 ) $ 9.3 ($ 0.4 ) $ 660.1 ($ 23.0 ) 
 Number of securities with an unrealized loss 346 5 351 

 Additionally, the Company held cash equivalent securities in unrealized loss positions as of 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 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 $ 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 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. Realized gains and losses are included in non-operating (income) expense, net in the consolidated statements of operations. Unrealized gains and losses are included as a separate component of equity, net of tax, unless the Company determines there is an expected credit loss. 
 The Company evaluates its investments for expected credit losses. The Company believes it is able to and intends to hold each of the investments held with an unrealized loss as of December 25, 2022 until the investments fully recover in market value. No allowance for credit losses was recorded as of December 25, 2022. 
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 The contractual maturities of short-term investments as of December 25, 2022 were as follows: 
 
 
 
 (in millions of U.S. Dollars) Within One Year After One, Within Five Years After Five, Within Ten Years After Ten Years Total 
 Corporate bonds $ 298.0 $ 300.1 $ — $ — $ 598.1 
 U.S. 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 
 U.S. agency securities 15.1 5.0 — — 20.1 
 
 
 Total short-term investments $ 836.9 $ 468.0 $ 14.7 $ 79.7 $ 1,399.3 

 
 
 
 Note 7 – Fair Value of Financial Instruments 
 Under U.S. GAAP, fair value is defined as the price that would be received to sell an asset or paid to transfer a liability (i.e., the exit price) in an orderly transaction between market participants at the measurement date. In determining fair value, the Company uses various valuation approaches, including quoted market prices and discounted cash flows. U.S. GAAP also establishes a hierarchy for inputs used in measuring fair value that maximizes the use of observable inputs and minimizes the use of unobservable inputs by requiring that the most observable inputs be used when available. Observable inputs are obtained from independent sources and can be validated by a third party, whereas unobservable inputs reflect assumptions regarding what a third party would use in pricing an asset or liability. The fair value hierarchy is categorized into three levels based on the reliability of inputs as follows: 
 • Level 1 - Valuations based on quoted prices in active markets for identical instruments that the Company is able to access. Because valuations are based on quoted prices that are readily and regularly available in an active market, valuation of these products does not entail a significant degree of judgment. 
 • Level 2 - Valuations based on quoted prices in active markets for instruments that are similar, or quoted prices in markets that are not active for identical or similar instruments, and model-derived valuations in which all significant inputs and significant value drivers are observable in active markets. 
 • Level 3 - Valuations based on inputs that are unobservable and significant to the overall fair value measurement. 
 The financial assets for which the Company performs recurring fair value remeasurements are cash equivalents and short-term investments. 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. Level 2 assets are valued based on quoted prices in active markets for instruments that are similar or using a third-party pricing service’s consensus price, which is a weighted average price based on multiple sources. These sources determine prices utilizing market income models which factor in, where applicable, transactions of similar assets in active markets, transactions of identical assets in infrequent markets, interest rates, bond or credit default swap spreads and volatility. The Company did not have any financial assets requiring the use of Level 3 inputs as of December 25, 2022 and June 26, 2022. 
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 The following table sets forth financial instruments carried at fair value within the U.S. GAAP hierarchy: 
 
 December 25, 2022 June 26, 2022 
 (in millions of U.S. Dollars) Level 1 Level 2 Total Level 1 Level 2 Total 
 
 Cash equivalents: 
 U.S. 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 
 
 Short-term investments: 
 Corporate bonds — 598.1 598.1 — 448.0 448.0 
 U.S. 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 — — — 
 U.S. agency securities — 20.1 20.1 — 3.9 3.9 
 
 
 Total short-term investments 250.1 1,149.2 1,399.3 65.8 683.5 749.3 
 
 
 
 Total cash equivalents and short-term investments $ 810.6 $ 1,265.0 $ 2,075.6 $ 250.7 $ 742.9 $ 993.6 

 
 
 
 Note 8 – Goodwill and Intangible Assets 
 Goodwill 
 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: 
 
 December 25, 2022 June 26, 2022 
 (in millions of U.S. Dollars) Gross Accumulated Amortization Net Gross Accumulated Amortization Net 
 
 Customer relationships $ 96.8 ($ 34.3 ) $ 62.5 $ 96.8 ($ 31.2 ) $ 65.6 
 Developed technology 68.0 ( 36.2 ) 31.8 68.0 ( 33.6 ) 34.4 
 
 Non-compete agreements 12.2 ( 12.2 ) — 12.2 ( 12.2 ) — 
 
 
 Acquisition related intangible assets 177.0 ( 82.7 ) 94.3 177.0 ( 77.0 ) 100.0 
 Patent and licensing rights 64.1 ( 38.4 ) 25.7 65.5 ( 40.1 ) 25.4 
 Total intangible assets $ 241.1 ($ 121.1 ) $ 120.0 $ 242.5 ($ 117.1 ) $ 125.4 

 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. 
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 Total future amortization expense of intangible assets is estimated to be as follows: 
 
 (in millions of U.S. Dollars) 
 
 
 Fiscal Year Ending 
 Acquisition Related Intangibles Patents Total 
 June 25, 2023 (remainder of fiscal 2023) $ 5.5 $ 2.3 $ 7.8 
 June 30, 2024 10.4 4.1 14.5 
 June 29, 2025 10.4 3.1 13.5 
 June 28, 2026 9.3 2.4 11.7 
 June 27, 2027 9.3 1.9 11.2 
 Thereafter 49.4 11.9 61.3 
 Total future amortization expense $ 94.3 $ 25.7 $ 120.0 

 
 
 
 Note 9 – Long-term Debt 
 Revolving Line of Credit 
 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 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 
 On August 24, 2018, the Company sold $ 500.0 million aggregate principal amount of 0.875 % convertible senior notes due September 1, 2023 to qualified institutional buyers pursuant to Rule 144A under the Securities Act of 1933, as amended (the Securities Act), and an additional $ 75.0 million aggregate principal amount of such notes pursuant to the exercise in full of the over-allotment options of the underwriters (collectively, the 2023 Notes). The total net proceeds from the 2023 Notes offering was approximately $ 562.1 million. As discussed further below, the Company repurchased approximately $ 150.2 million aggregate principal amount of the 2023 Notes using a portion of net proceeds from the sale of an additional convertible note offering (the 2026 Notes, as defined and explained below) in April 2020. 
 On December 8, 2021 (the Redemption Notice Date), the Company issued a notice (the Redemption Notice) to holders of the 2023 Notes calling all outstanding 2023 Notes for redemption. The Redemption Notice designated December 23, 2021 as the redemption date (the Redemption Date). On the Redemption Date, the Redemption Price (as defined below) would have become due and payable on each of the 2023 Notes to be redeemed, and interest thereon would cease to accrue. However, any 2023 Notes called for redemption would not be redeemed if such note was converted before the Redemption Date. The Redemption Price for the 2023 Notes called for redemption was an amount in cash equal to the principal amount of such note plus accrued and unpaid interest on such note to, but excluding, the Redemption Date, which equated to a Redemption Price of $1,002.72222 per $1,000 principal amount of 2023 Notes (the Redemption Price). 
 As of the Redemption Notice Date, the conversion rate of the 2023 Notes was 16.6745 shares of the Company's common stock per $1,000 principal amount of such notes. However, in accordance with the Indenture, dated as of August 24, 2018, between the Company and U.S. Bank National Association, as trustee, which governed the terms of the 2023 Notes, the conversion rate for 2023 Notes that were converted after the Redemption Notice Date was increased to 16.7769 shares of the Company's common stock per $1,000 principal amount of such notes. Before the Redemption Date, all outstanding 2023 Notes were surrendered for conversion, resulting in the settlement of all outstanding 2023 Notes in approximately 7.1 million shares of the Company's common stock, with cash in lieu of any fractional shares. The fair value of shares issued upon conversion of all outstanding 2023 Notes was $ 788.0 million. The amount of cash paid for fractional shares was immaterial. 
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 2026 Convertible Notes 
 On April 21, 2020, the Company sold $ 500.0 million aggregate principal amount of 1.75 % convertible senior notes due May 1, 2026 to qualified institutional buyers pursuant to Rule 144A under the Securities Act and an additional $ 75.0 million aggregate principal amount of such notes pursuant to the exercise in full of the over-allotment options of the underwriters (the 2026 Notes). The total net proceeds from the 2026 Notes offering was approximately $ 561.4 million. 
 The conversion rate will initially be 21.1346 shares of common stock per one thousand dollars in principal amount of 2026 Notes (equivalent to an initial conversion price of approximately $ 47.32 per share of common stock). 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 2026 Notes in connection with such a corporate event, or who elects to convert any 2026 Notes called for redemption during the related redemption period in certain circumstances. The Company may not redeem the 2026 Notes prior to May 1, 2023. The Company may redeem for cash all or any portion of the 2026 Notes, at its option, on a redemption date occurring on or after May 1, 2023 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 2026 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 2026 Notes at a fundamental repurchase price equal to 100 % of the principal amount of the 2026 Notes to be repurchased, plus accrued and unpaid interest to, but excluding, the fundamental change repurchase date. 
 Holders may convert their 2026 Notes at their option at any time prior to the close of business on the business day immediately preceding November 3, 2025 only under the following circumstances: (1) during any calendar quarter commencing after the calendar quarter ending June 30, 2020 (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 2026 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 2026 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 November 3, 2025 until the close of business on the second scheduled trading day immediately preceding the maturity date, holders may convert their 2026 Notes at any time, regardless of the foregoing circumstances. Upon conversion, the Company will pay or deliver cash, shares of its common stock, or a combination of cash and shares of its common stock, at the Company's election. 
 The Company used approximately $ 144.3 million of the net proceeds from the sale of the 2026 Notes in April 2020 to repurchase approximately $ 150.2 million aggregate principal amount of the 2023 Notes, including approximately $ 0.2 million of accrued interest on such notes, in privately negotiated transactions. 
 2028 Convertible Notes 
 On February 3, 2022, the Company sold $ 650.0 million aggregate principal amount of 0.25 % convertible senior notes due February 15, 2028 to qualified institutional buyers pursuant to Rule 144A under the Securities Act and an additional $ 100.0 million aggregate principal amount of such notes pursuant to the exercise in full of the over-allotment options of the underwriters (the 2028 Notes). The total net proceeds from the 2028 Notes offering was approximately $ 732.3 million. 
 The Company used approximately $ 108.2 million of the net proceeds from the 2028 Notes to fund the cost of entering into capped call transactions, as described below. 
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 The conversion rate will initially be 7.8602 shares of common stock per one thousand dollars in principal amount of 2028 Notes (equivalent to an initial conversion price of approximately $ 127.22 per share of common stock). The conversion rate will be subject to adjustment for some events, but will not be adjusted for any accrued and unpaid interest. In addition, following certain corporate events that occur prior to the maturity date, or following the Company's issuance of a notice of redemption, the Company will increase the conversion rate for a holder who elects to convert its 2028 Notes in connection with such a corporate event, or who elects to convert any 2028 Notes called for redemption during the related redemption period in certain circumstances. The Company may not redeem the 2028 Notes prior to February 18, 2025. The Company may redeem for cash all or any portion of the 2028 Notes, at its option, on a redemption date occurring on or after February 18, 2025 and on or before the 40 th scheduled trading day immediately before the maturity date, if the last reported sales price of its common stock has been at least 130 % of the conversion price then in effect for at least 20 trading days (whether or not consecutive), including the trading day immediately preceding the date on which the Company provides a notice of redemption, during any 30 consecutive trading day period ending on, and including, the trading day immediately preceding the date on which the Company provides notice of redemption. The redemption price will be 100 % of the principal amount of the 2028 Notes to be redeemed, plus accrued and unpaid interest to, but excluding, the redemption date. If the Company undergoes certain fundamental changes related to the Company's common stock, holders may require the Company to repurchase for cash all or any portions of their 2028 Notes at a fundamental repurchase price equal to 100 % of the principal amount of the 2028 Notes to be repurchased, plus accrued and unpaid interest to, but excluding, the fundamental change repurchase date. 
 Holders may convert their 2028 Notes at their option at any time prior to the close of business on the business day immediately preceding August 16, 2027 only under the following circumstances: (1) during any calendar quarter commencing after the calendar quarter ending March 31, 2022 (and only during such calendar quarter), if the last reported sale price of the common stock for at least 20 trading days (whether or not consecutive) during a period of 30 consecutive trading days ending on, and including, the last trading day of the immediately preceding calendar quarter is greater than or equal to 130 % of the conversion price on each applicable trading day; (2) during the five business day period after any ten consecutive trading day period in which the trading price per $1.0 thousand principal amount of 2028 Notes for each trading day of the measurement period was less than 98 % of the product of the last reported sale price of its common stock and the conversion rate on each such trading day; (3) if the Company calls such 2028 Notes for redemption, at any time prior to the close of business on the second business day immediately preceding the redemption date; or (4) upon the occurrence of specified corporate events. On or after August 16, 2027 until the close of business on the second scheduled trading day immediately preceding the maturity date, holders may convert their 2028 Notes at any time, regardless of the foregoing circumstances. Upon conversion, the Company will pay or deliver cash, shares of its common stock, or a combination of cash and shares of its common stock, at the Company's election. 
 Capped Call Transactions in relation to the 2028 Notes 
 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 2028 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 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. 
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 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. 
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 As a result of the full conversion of all outstanding 2023 Notes, the Company remeasured the outstanding liability for the 2023 Notes using a market rate for debt without a conversion option (the Market Rate) as of the Redemption Notice Date. The Company performed a present value calculation using the Market Rate and determined the fair value of the debt as of the Redemption Notice Date was $ 416.1 million, $ 24.7 million higher than the carrying value of the 2023 Notes as of the Redemption Notice Date. As a result, the Company recorded a loss on extinguishment of $ 24.8 million, which included a $ 0.1 million loss on extinguishment expense related to third party fees. Additionally, the equity component of the 2023 Notes was reduced to zero. 
 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 Outstanding Notes is as follows: 
 
 (in millions of U.S. Dollars) December 25, 2022 June 26, 2022 
 Principal $ 3,075.0 $ 1,325.0 
 Unamortized discount and issuance costs ( 54.0 ) ( 303.4 ) 
 Net carrying amount $ 3,021.0 $ 1,021.6 

 The net carrying amount of the equity component of the Outstanding Notes is as follows: 
 
 (in millions of U.S. Dollars) December 25, 2022 (1) 
 June 26, 2022 
 Discount related to value of conversion option $ — $ 341.1 
 
 Debt issuance costs — ( 8.1 ) 
 Net carrying amount $ — $ 333.0 

 (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) 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 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 

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 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. 
 The last reported sale price of the Company's common stock was greater than or equal to 130 % of the applicable conversion price for the 2026 Notes for at least 20 trading days in the 30 consecutive trading days ended on December 31, 2022. 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 Six months ended 
 (in millions of U.S. 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 ) 
 
 Weighted average shares - basic and diluted (in thousands) 124,344 117,218 124,190 117,068 
 
 
 
 
 
 Loss per share - basic and diluted ($ 0.73 ) ($ 0.82 ) ($ 0.94 ) ($ 1.42 ) 
 
 
 
 

 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 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 
 Overview of Employee Stock-Based Compensation Plans 
 The Company currently has one equity-based compensation plan, the 2013 Long-Term Incentive Compensation Plan (2013 LTIP), from which stock-based compensation awards can be granted to employees and directors. The 2013 LTIP provides for awards in the form of incentive stock options, non-qualified stock options, stock appreciation rights, restricted stock, restricted stock units, performance shares, performance units and other awards. 
 The Company’s stock-based awards can be either service-based or performance-based. Performance-based conditions may be tied to future financial and/or operating performance of the Company, external based market metrics or internal performance metrics. 
 The Company also has an Employee Stock Purchase Plan (ESPP) that provides employees with the opportunity to purchase common stock at a discount. 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 
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 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. The plan also provides for an automatic reset feature to start participants on a new twelve-month participation period if the fair market value of common stock declines during the first six-month purchase period. 
 Stock Option Awards 
 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 
 Outstanding at June 26, 2022 69 $ 25.12 
 Granted — $ — 
 Exercised ( 28 ) $ 25.46 
 Forfeited or expired ( 1 ) $ 26.07 
 Outstanding at December 25, 2022 40 $ 24.86 

 Restricted Stock Units 
 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 
 Nonvested at June 26, 2022 1,894 $ 75.67 
 Granted 1,225 $ 88.41 
 Vested ( 629 ) $ 66.52 
 Forfeited ( 156 ) $ 71.44 
 Nonvested at December 25, 2022 2,334 $ 84.25 

 Stock-Based Compensation Valuation and Expense 
 The Company accounts for its employee stock-based compensation plans using the fair value method. The fair value method requires the Company to estimate the grant-date fair value of its stock-based awards and amortize this fair value to compensation expense over the requisite service period or vesting term. 
 The Company uses the Black-Scholes option-pricing model to estimate the fair value of the Company’s ESPP awards. The determination of the fair value of stock-based payment awards on the date of grant using an option-pricing model is affected by the Company’s stock price as well as assumptions regarding a number of complex and subjective variables. These variables include the expected stock price volatility over the term of the awards, the risk-free interest rate and expected dividends. Due to the inherent limitations of option-valuation models, future events that are unpredictable and the estimation process utilized in determining the valuation of the stock-based awards, the ultimate value realized by award holders may vary significantly from the amounts expensed in the Company’s financial statements. 
 For service-based RSUs and performance-based RSUs with internal metrics, the grant-date fair value is based upon the market price of the Company’s common stock on the date of the grant. For performance-based RSUs, the Company reassesses the probability of the achievement of the performance condition at each reporting period and adjusts the compensation expense for subsequent changes in the estimate or actual outcome. This fair value is then amortized to compensation expense over the requisite service period or vesting term. 
 For performance-based awards with market conditions, the Company estimates the grant date fair value using the Monte Carlo valuation model and expenses the awards over the vesting period regardless of whether the market condition is ultimately satisfied. 
 Stock-based compensation expense is recognized net of estimated forfeitures such that expense is recognized only for those stock-based awards that are expected to vest. A forfeiture rate is estimated at the time of grant and revised, if necessary, in subsequent periods if actual forfeitures differ from initial estimates. 
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 The Black-Scholes and Monte Carlo option pricing models require the input of highly subjective assumptions. These assumptions represent management's best estimates, but these estimates involve inherent uncertainties and the application of management judgment. As a result, if other assumptions had been used, recorded share-based compensation expense could have been materially different from that depicted below. 
 Total stock-based compensation expense was classified in the consolidated statements of operations as follows: 
 
 Three months ended Six months ended 
 (in millions of U.S. 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 
 Research and development 5.1 2.6 8.6 5.0 
 Sales, general and administrative 10.3 8.6 22.7 17.7 
 Total stock-based compensation expense $ 21.2 $ 15.4 $ 43.2 $ 30.0 
 
 

 Stock-based compensation expense may differ from the impact of stock-based compensation to additional paid in capital due to manufacturing related stock-based compensation capitalized within inventory. 
 
 
 
 Note 12 – Income Taxes 
 In general, the variation between the Company's effective income tax rate and the U.S. statutory rate of 21% is primarily due to: (i) changes in the Company’s valuation allowances against deferred tax assets in the U.S., (ii) projected income for the full year derived from international locations with differing tax rates than the U.S. and (iii) projected tax credits generated. 
 The Company assesses all available positive and negative evidence to estimate if sufficient future taxable income will be generated to utilize the existing deferred tax assets by jurisdiction. As of December 25, 2022, the Company has concluded that it is necessary to recognize a full valuation allowance against its U.S. deferred tax assets. 
 U.S. GAAP requires a two-step approach to recognizing and measuring uncertain tax positions. The first step is to evaluate the tax position for recognition by determining if the available evidence indicates that it is more likely than not that the position will be sustained on audit, including resolution of related appeals or litigation processes, if any. The second step is to measure the tax benefit as the largest amount that is cumulatively more than 50% likely to be realized upon ultimate settlement. 
 As of June 26, 2022, the Company's liability for unrecognized tax benefits 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 statutory requirements or settlement with tax authorities. 
 The Company files U.S. federal, U.S. state and foreign tax returns. For U.S. federal purposes, the Company is generally no longer subject to tax examinations for fiscal years prior to 2017. For U.S. state tax returns, the Company is generally no longer subject to tax examinations for fiscal years prior to 2018. For foreign purposes, the Company is generally no longer subject to examination for tax periods prior to 2012. Certain carryforward tax attributes generated in prior years remain subject to examination, adjustment and recapture. 
 
 
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 Note 13 – Commitments and Contingencies 
 Litigation 
 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. An unfavorable ruling could include monetary damages or, in matters for which injunctive relief or other conduct remedies may be sought, an injunction prohibiting the Company from selling one or more products at all or in particular ways. Were unfavorable final outcomes to occur, there exists the possibility of a material adverse impact on the Company’s business, results of operations, financial position and overall trends. 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. Patent Nos. 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 
 The Company currently has a GDA with the State of New York Urban Development Corporation (doing business as Empire State Development). The GDA provides a potential total grant amount of $ 500.0 million to partially and fully reimburse the Company for certain property, plant and equipment costs related to the Company's construction of its Silicon Carbide device fabrication facility in Marcy, New York. 
 The GDA was signed in the fourth quarter of fiscal 2020 and requires the Company to satisfy a number of objectives for the Company to receive reimbursements through the span of the 13 -year agreement. These objectives include maintaining a certain level of local employment, investing a certain amount in locally administered research and development activities and the payment of an annual commitment fee for the first six years . Additionally, the Company has agreed, under a separate agreement (the SUNY Agreement), to sponsor the creation of two endowed faculty chairs and fund a scholarship program at SUNY Polytechnic Institute. 
 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 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. 
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 Note 14 - Restructuring 
 The Company has approved various operational plans that include restructuring costs. All restructuring costs are recorded in other operating expense on the consolidated statement of operations. 
 Corporate Restructuring 
 In January 2022, the Company commenced a plan to open a global IT shared services hub in Belfast, Northern Ireland in partnership with the Northern Ireland government. The Company recorded $ 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 in Marcy, New York to complement an expansion of the Company's Silicon Carbide materials production 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 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. 
 
 
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Text extracted from the filing as submitted to EDGAR. Formatting, tables and exhibits are simplified for reading; the original document is authoritative for anything you rely on.
WOLFSPEED, INC. 10-Q

Item 1. Financial Statements
