Cree Earnings 2020-12-27

Balance Sheet	Income Statement	Cash Flow
Assets, Equity	Rev, G Profit, Net Income	Ops, Inv, Fin

cree-20201227

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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)

☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended December 27, 2020

☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to

Commission file number 0-21154

__________________________________________

CREE, INC.

(Exact name of registrant as specified in its charter)


North Carolina		56-1572719
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification No.)

4600 Silicon Drive
Durham	North Carolina	27703
(Address of principal executive offices)		(Zip Code)

(919) 407-5300

(Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:


Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common Stock, $0.00125 par value	CREE	The Nasdaq Stock Market LLC

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).

Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer”, “accelerated filer,” “smaller reporting company,” and "emerging growth company" in Rule 12b-2 of the Exchange Act.


Large accelerated filer	☒	Accelerated filer	☐

Non-accelerated filer	☐	Smaller reporting company	☐

		Emerging growth company	☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Securities Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

Yes ☐ No ☒

The number of shares outstanding of the registrant’s common stock, par value $0.00125 per share, as of January 22, 2021, was 111,016,056.

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CREE, INC.

FORM 10-Q

For the Quarterly Period Ended December 27, 2020

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PART I - FINANCIAL INFORMATION

Item 1. Financial Statements (Unaudited)


Consolidated Balance Sheets as of December 27, 2020 and June 28, 2020			4
Consolidated Statements of Operations for the three and six months ended December 27, 2020 and December 29, 2019			5
Consolidated Statements of Comprehensive Loss for the three and six months ended December 27, 2020 and December 29, 2019			6
Consolidated Statements of Shareholders' Equity for the six months ended December 27, 2020 and December 29, 2019			7
Consolidated Statements of Cash Flows for the six months ended December 27, 2020 and December 29, 2019			9
Notes to Unaudited Consolidated Financial Statements			10

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CREE, INC.

UNAUDITED CONSOLIDATED BALANCE SHEETS


in millions of U.S. Dollars, except share data in thousands	December 27, 2020	June 28, 2020
Assets
Current assets:
Cash and cash equivalents	$388.1	$448.8
Short-term investments	580.6	790.9
Total cash, cash equivalents and short-term investments	968.7	1,239.7
Accounts receivable, net	82.0	72.4
Inventories	144.3	121.9
Income taxes receivable	8.0	6.6

Prepaid expenses	26.1	26.2
Other current assets	11.2	8.7
Current assets held for sale	1.7	1.3
Current assets of discontinued operations	237.3	116.0
Total current assets	1,479.3	1,592.8
Property and equipment, net	1,036.3	770.8
Goodwill	359.2	349.7
Intangible assets, net	148.9	156.9
Other long-term investments	66.1	55.9
Deferred tax assets	1.2	1.2
Other assets	33.9	33.6
Long-term assets of discontinued operations	—	270.1
Total assets	$3,124.9	$3,231.0

Liabilities and Shareholders' Equity
Current liabilities:
Accounts payable and accrued expenses	$267.3	$189.8
Accrued contract liabilities	18.0	14.2
Income taxes payable	2.9	1.2
Finance lease liabilities	0.4	3.6
Other current liabilities	26.3	22.2
Current liabilities of discontinued operations	70.7	60.2
Total current liabilities	385.6	291.2
Long-term liabilities:

Convertible notes, net	803.5	783.8
Deferred tax liabilities	4.1	1.8
Finance lease liabilities - long-term	10.2	11.4
Other long-term liabilities	49.9	43.8
Long-term liabilities of discontinued operations	—	9.8
Total long-term liabilities	867.7	850.6
Commitments and contingencies
Shareholders’ equity:
Preferred stock, par value $0.01; 3,000 shares authorized at December 27, 2020 and June 28, 2020; none issued and outstanding	—	—
Common stock, par value $0.00125; 200,000 shares authorized at December 27, 2020 and June 28, 2020; 110,977 and 109,230 shares issued and outstanding at December 27, 2020 and June 28, 2020, respectively	0.1	0.1
Additional paid-in-capital	3,155.9	3,106.2
Accumulated other comprehensive income	15.5	16.0
Accumulated deficit	(1,306.6)	(1,039.2)
Total shareholders’ equity	1,864.9	2,083.1
Noncontrolling interest from discontinued operations	6.7	6.1
Total equity	1,871.6	2,089.2
Total liabilities and shareholders’ equity	$3,124.9	$3,231.0

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

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CREE, INC.

UNAUDITED CONSOLIDATED STATEMENTS OF OPERATIONS


	Three months ended		Six months ended
	December 27, 2020	December 29, 2019	December 27, 2020	December 29, 2019
in millions of U.S. Dollars, except share data
Revenue, net	$127.0	$120.7	$242.5	$248.4
Cost of revenue, net	85.7	85.1	165.7	160.3
Gross profit	41.3	35.6	76.8	88.1
Operating expenses:
Research and development	45.5	38.7	86.7	73.9
Sales, general and administrative	46.8	45.0	90.8	94.0
Amortization or impairment of acquisition-related intangibles	3.6	3.6	7.2	7.2
Loss on disposal or impairment of other assets	0.4	0.8	0.7	1.6


Other operating expense	2.6	10.9	11.2	17.0

Operating loss	(57.6)	(63.4)	(119.8)	(105.6)
Non-operating (income) expense, net	(3.1)	(5.0)	10.8	(6.6)
Loss before income taxes	(54.5)	(58.4)	(130.6)	(99.0)
Income tax benefit	(0.2)	(0.5)	(1.0)	(1.8)
Net loss from continuing operations	(54.3)	(57.9)	(129.6)	(97.2)
Net (loss) income from discontinued operations	(28.4)	3.9	(137.2)	5.4
Net loss	(82.7)	(54.0)	(266.8)	(91.8)
Net income from discontinued operations attributable to noncontrolling interest	0.3	0.3	0.6	0.3
Net loss attributable to controlling interest	($83.0)	($54.3)	($267.4)	($92.1)

Basic and diluted loss per share
Continuing operations	($0.49)	($0.54)	($1.18)	($0.90)

Net loss attributable to controlling interest	($0.75)	($0.50)	($2.42)	($0.86)






Weighted average shares - basic and diluted (in thousands)	110,688	107,925	110,297	107,519

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

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CREE, INC.

UNAUDITED CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS


	Three months ended		Six months ended
(in millions of U.S. Dollars)	December 27, 2020	December 29, 2019	December 27, 2020	December 29, 2019
Net loss	($82.7)	($54.0)	($266.8)	($91.8)
Other comprehensive loss:

Net unrealized (loss) gain on available-for-sale securities	(0.5)	(0.3)	(0.5)	0.2

Comprehensive loss	(83.2)	(54.3)	(267.3)	(91.6)
Net income from discontinued operations attributable to noncontrolling interest	0.3	0.3	0.6	0.3
Comprehensive loss attributable to controlling interest	($83.5)	($54.6)	($267.9)	($91.9)

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

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CREE, INC.

UNAUDITED CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY


	Common Stock		Additional Paid-in Capital	Accumulated Deficit	Accumulated Other Comprehensive Income	Total Equity - Controlled Interest	Non-controlling Interest from Discontinued Operations	Total Equity
(in millions of U.S Dollars, except share data)	Number of Shares	Par Value
Balance at June 28, 2020	109,230	$0.1	$3,106.2	($1,039.2)	$16.0	$2,083.1	$6.1	$2,089.2
Net loss	—	—	—	(184.4)	—	(184.4)	0.3	(184.1)

Unrealized gain on available-for-sale securities	—	—	—	—	—	—	—	—
Comprehensive loss						(184.4)	0.3	(184.1)
Tax withholding on vested equity awards	—	—	(22.7)	—	—	(22.7)	—	(22.7)

Stock-based compensation	—	—	16.2	—	—	16.2	—	16.2
Exercise of stock options and issuance of shares	1,066	—	16.5	—	—	16.5	—	16.5



Balance at September 27, 2020	110,296	$0.1	$3,116.2	($1,223.6)	$16.0	$1,908.7	$6.4	$1,915.1
Net (loss) income	—	—	—	(83.0)	—	(83.0)	0.3	(82.7)

Unrealized loss on available-for-sale securities	—	—	—	—	(0.5)	(0.5)	—	(0.5)
Comprehensive (loss) income						(83.5)	0.3	(83.2)
Tax withholding on vested equity awards	—	—	(1.6)	—	—	(1.6)	—	(1.6)

Stock-based compensation	—	—	18.6	—	—	18.6	—	18.6
Exercise of stock options and issuance of shares	681	—	22.7	—	—	22.7	—	22.7



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

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

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CREE, INC.

UNAUDITED CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY


	Common Stock		Additional Paid-in Capital	Accumulated Deficit	Accumulated Other Comprehensive Income	Total Equity - Controlled Interest	Non-controlling Interest from Discontinued Operations	Total Equity
(in millions of U.S. Dollars, except share data)	Number of Shares	Par Value
Balance at June 30, 2019	106,570	$0.1	$2,874.1	($847.5)	$9.5	$2,036.2	$5.0	$2,041.2
Net loss	—	—	—	(37.8)	—	(37.8)	—	(37.8)

Unrealized gain on available-for-sale securities	—	—	—	—	0.5	0.5	—	0.5
Comprehensive loss						(37.3)	—	(37.3)
Tax withholding on vested equity awards	—	—	(14.3)	—	—	(14.3)	—	(14.3)

Stock-based compensation	—	—	17.4	—	—	17.4	—	17.4
Exercise of stock options and issuance of shares	1,127	—	18.6	—	—	18.6	—	18.6



Balance at September 29, 2019	107,697	$0.1	$2,895.8	($885.3)	$10.0	$2,020.6	$5.0	$2,025.6
Net (loss) income	—	—	—	(54.3)	—	(54.3)	0.3	(54.0)

Unrealized loss on available-for-sale securities	—	—	—	—	(0.3)	(0.3)	—	(0.3)
Comprehensive (loss) income						(54.6)	0.3	(54.3)
Tax withholding on vested equity awards	—	—	(0.4)	—	—	(0.4)	—	(0.4)

Stock-based compensation	—	—	13.4	—	—	13.4	—	13.4
Exercise of stock options and issuance of shares	334	—	10.7	—	—	10.7	—	10.7



Balance at December 29, 2019	108,031	$0.1	$2,919.5	($939.6)	$9.7	$1,989.7	$5.3	$1,995.0

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

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CREE, INC.

UNAUDITED CONSOLIDATED STATEMENTS OF CASH FLOWS


	Six months ended
(in millions of U.S. Dollars)	December 27, 2020	December 29, 2019
Operating activities:
Net loss	($266.8)	($91.8)
Net (loss) income from discontinued operations	(137.2)	5.4
Net loss from continuing operations	(129.6)	(97.2)
Adjustments to reconcile net loss from continuing operations to net cash used in operating activities:
Depreciation and amortization	56.2	46.2
Amortization of debt issuance costs and discount, net of capitalized interest	18.1	11.4

Stock-based compensation	27.4	27.1



Loss on disposal or impairment of long-lived assets	1.5	1.6
Amortization of premium/discount on investments	3.2	0.2
Realized gain on sale of investments	(0.2)	(0.1)
Gain on equity investment	(7.0)	(9.9)
Foreign exchange gain on equity investment	(3.2)	(1.3)
Deferred income taxes	2.3	(2.4)
Changes in operating assets and liabilities:
Accounts receivable, net	(9.5)	(11.7)
Inventories	(21.1)	9.8
Prepaid expenses and other assets	(1.8)	7.7
Accounts payable, trade	9.9	(5.0)
Accrued salaries and wages and other liabilities	17.9	(26.0)
Accrued contract liabilities	3.8	10.0
Net cash used in operating activities of continuing operations	(32.1)	(39.6)
Net cash provided by operating activities of discontinued operations	6.2	27.8
Cash used in operating activities	(25.9)	(11.8)
Investing activities:
Purchases of property and equipment	(257.5)	(100.3)
Purchases of patent and licensing rights	(1.9)	(1.4)
Proceeds from sale of property and equipment	0.1	1.7
Purchases of short-term investments	(85.8)	(295.3)
Proceeds from maturities of short-term investments	268.5	212.6
Proceeds from sale of short-term investments	24.1	61.8



Net cash used in investing activities of continuing operations	(52.5)	(120.9)
Net cash provided by investing activities of discontinued operations	2.7	0.4
Cash used in investing activities	(49.8)	(120.5)
Financing activities:



Payments on long-term debt borrowings, including finance lease obligations	(0.2)	(0.1)
Proceeds from issuance of common stock	39.2	29.3
Tax withholding on vested equity awards	(24.0)	(14.7)



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


Cash provided by financing activities	14.5	14.5
Effects of foreign exchange changes on cash and cash equivalents	0.5	(0.1)
Net change in cash and cash equivalents	(60.7)	(117.9)
Cash and cash equivalents, beginning of period	448.8	500.5
Cash and cash equivalents, end of period	$388.1	$382.6

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

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CREE, INC.

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

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Note 1 – Basis of Presentation and New Accounting Standards

Overview

Cree, 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 silicon carbide and GaN materials and devices are targeted for applications such as transportation, power supplies, inverters and wireless systems.

In addition, the Company is an innovator of specialty lighting-class light emitting diode (LED) products. The Company's LEDs are targeted for use in indoor and outdoor lighting, electronic signs and signals and video displays.

As discussed more fully below in Note 2, “Discontinued Operations,” on October 18, 2020, the Company entered into a definitive agreement to sell certain assets and subsidiaries comprising its former LED Products segment (the LED Business) to SMART Global Holdings, Inc. (SGH) and its wholly owned newly-created acquisition subsidiary (collectively with SGH, SMART) for up to $300 million, including fixed upfront and deferred payments and contingent consideration (the LED Business Divestiture).

As a result, the Company has classified the results and cash flows of the LED Products segment as discontinued operations in its consolidated statements of operations and consolidated statements of cash flows for all periods presented. Additionally, the related assets and liabilities associated with the discontinued operations are classified as held for sale in the consolidated balance sheets. Unless otherwise noted, discussion within these notes to the consolidated financial statements relates to the Company's continuing operations.

The Company’s continuing operations consist of the Wolfspeed business, which includes silicon carbide and GaN materials, power devices and RF devices based on wide bandgap semiconductor materials and silicon. 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, Arkansas and China. The Company also uses contract manufacturers for certain products and aspects of product fabrication, assembly and packaging. Additionally, the Company is in the process of building a silicon carbide fabrication facility in New York. The Company operates research and development facilities in North Carolina, Arizona, Arkansas, New York, California and China (including Hong Kong).

Cree, 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 27, 2020, and for all periods presented, have been made. All material intercompany accounts and transactions have been eliminated. The consolidated balance sheet at June 28, 2020 has been derived from the audited financial statements as of that date.

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 28, 2020 (fiscal 2020). The results of operations for the three and six months ended December 27, 2020 are not necessarily indicative of the operating results that may be attained for the entire fiscal year ending June 27, 2021 (fiscal 2021). Additionally, the impact of the COVID-19 pandemic to the results of operations is uncertain.

The preparation of consolidated financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenue and expenses, and the disclosure of contingent assets and liabilities. Actual amounts could differ materially from those estimates.

The Company revised income tax expense for the three and six months ended December 29, 2019 to correct the income tax provision calculation for the second quarter of fiscal 2020. The Company increased income tax expense for the three and six months ended December 29, 2019, resulting in a net increase to net loss of $1.5 million in each period. The Company will also

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revise the unaudited statements of operations for the three months ended March 29, 2020 in the unaudited interim consolidated financial statements to be filed in the Quarterly Report on Form 10-Q for the corresponding period in fiscal 2021 to decrease income tax expense by $1.5 million for the three months ended March 29, 2020, which will result in a net decrease to net loss of $1.5 million for the three months ended March 29, 2020. No revision will be required to the unaudited statement of operations for the nine months ended March 29, 2020 in the unaudited interim consolidated financial statements to be filed in the Quarterly Report on Form 10-Q for the corresponding period in fiscal 2021. The Company concluded these errors were not material individually or in the aggregate to any of the periods impacted.

Certain accounting matters that generally require consideration of forecasted financial information were assessed regarding impacts from the COVID-19 outbreak as of December 27, 2020 and through the date of this Quarterly Report using reasonably available information as of those dates. The accounting matters assessed included, but were not limited to, allowance for doubtful accounts, the carrying value of goodwill and other long-lived tangible and intangible assets, the potential impact to earnings of unrealized losses on investments, valuation allowances for tax assets and the ability to estimate an annual effective tax rate. While the assessments resulted in no material impacts to the consolidated financial statements as of and for the quarter ended December 27, 2020, the Company believes the full impact of the outbreak remains uncertain and will continue to assess if ongoing developments related to the outbreak may cause future material impacts to its consolidated financial statements.

Segment Reporting

As a result of the pending LED Business Divestiture, the Company has determined that it operates a single reporting segment within continuing operations, Wolfspeed. Accordingly, the Chief Operating Decision Maker (CODM) allocates resources and assesses performance on a consolidated basis. The Company's identified CODM is the Chief Executive Officer.

Recently Adopted Accounting Pronouncements

Credit Losses

In June 2016, the Financial Accounting Standards Board (FASB) issued Accounting Standard Update (ASU) 2016-13, Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments (ASU 2016-13). This standard replaces the incurred loss impairment methodology in current U.S. GAAP with a methodology that reflects expected credit losses.

The Company adopted this standard using the modified retrospective transition method on June 29, 2020, the first day of its 2021 fiscal year. Upon adoption, prior period balances were not adjusted and the Company determined no cumulative-effect adjustment to retained earnings as of June 29, 2020 was required.

Under this new standard, expected credit losses for the Company's receivables are evaluated on a collective (pool) basis and aggregated on the basis of similar risk characteristics. These aggregated risk pools are reassessed at each measurement date. A combination of factors is considered in determining the appropriate estimate of expected credit losses, including broad-based economic indicators as well as customers' financial strength, credit standing, payment history and any historical defaults.

Available-for-sale debt securities in an unrealized loss position at each measurement date are individually evaluated for expected credit losses. The Company evaluates whether the unrealized loss is due to market factors or changes in the investment holdings' credit rating. An expected credit loss will be recorded when an investment in an unrealized loss position is determined to have lost value from a decreased credit rating and the Company does not expect to recover the fair value of the security.

Accounting Pronouncements Pending Adoption

Convertible Debt Instruments

In August 2020, the FASB issued ASU 2020-06, Debt – Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging – Contracts in Entity’s Own Equity (Subtopic 815-40). 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 expects to adopt this standard by June 27, 2022 and is currently evaluating the impact on its consolidated financial statements.

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Note 2 – Discontinued Operations

On October 18, 2020, the Company entered into an Asset Purchase Agreement (the Purchase Agreement) with SMART with respect to the LED Business Divestiture. The transaction is targeted to close in the first calendar quarter of 2021, subject to customary closing conditions and governmental approvals.

Pursuant to the Purchase Agreement, the Company will sell to SMART, and SMART will (i) purchase from the Company, (a) certain equipment, inventory, intellectual property rights, contracts, and real estate comprising the Company’s LED Products segment, (b) all of the issued and outstanding equity interests of Cree Huizhou Solid State Lighting Company Limited, 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) assume certain liabilities related to the LED Business. The Company will retain certain assets used in and pre-closing liabilities associated with the LED Products segment.

The purchase price for the LED Business consists 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 of up to $125 million based on the revenue and gross profit performance of the LED Business in the first four full fiscal quarters following the closing (the Earnout Period), also payable in the form of a unsecured promissory note of SGH (the Earnout Note), and (iv) the assumption of certain liabilities. The Purchase Price Note and the Earnout Note, if earned, will accrue interest at a rate of three-month LIBOR plus 3.0% with interest paid every three months and one bullet payment of principal and all accrued and unpaid interest will be payable on each note’s maturity date. The Purchase Price Note will mature on August 15, 2023, and the Earnout Note, if issued, will mature on the third anniversary of the completion of the Earnout Period.

In connection with the closing of the LED Business Divestiture, the Company and SMART will also enter into certain ancillary and related agreements, including (i) an Intellectual Property Assignment and License Agreement, which will assign to SMART certain intellectual property owned by the Company and its affiliates and license to SMART certain additional intellectual property owned by the Company, (ii) a Transition Services Agreement, which is designed to ensure a smooth transition of the LED Business to SMART, (iii) a Wafer Supply and Fabrication Services Agreement (the Wafer Supply Agreement), pursuant to which the Company will supply SMART with certain silicon carbide materials and fabrication services for four years, and (iv) a Real Estate License Agreement, which will allow SMART to use certain premises owned by the Company to conduct the LED Business for a period of up to 24 months after closing.

The completion of the LED Business Divestiture is subject to the satisfaction or waiver of a number of conditions set forth in the Purchase Agreement, including the receipt of governmental and regulatory consents and approvals and expiration of any mandatory waiting period related thereto, and other customary closing conditions. The Purchase Agreement provides for customary termination rights of the parties.

Because the LED Business Divestiture represents a strategic shift that will have a major effect on the Company’s operations and financial results, the Company has classified the results of the LED Business as discontinued operations in the Company’s consolidated statements of operations for all periods presented. The Company ceased recording depreciation and amortization of long-lived assets conveying in the Purchase Agreement upon classification as discontinued operations in October 2020. Additionally, the related assets and liabilities associated with discontinued operations are classified as held for sale in the consolidated balance sheets. The assets and liabilities held for sale as of December 27, 2020 are classified as current in the consolidated balance sheet as the Company expects the transaction to close and proceeds to be collected within one year.

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The following table presents the financial results of the LED Business as (loss) income from discontinued operations, net of income taxes in the Company's consolidated statements of operations:


	Three months ended		Six months ended
(in millions of U.S. Dollars)	December 27, 2020	December 29, 2019	December 27, 2020	December 29, 2019
Revenue, net	$105.2	$119.2	$206.3	$234.3
Cost of revenue, net	80.4	92.9	163.0	186.3
Gross profit	24.8	26.3	43.3	48.0
Operating expenses:
Research and development	8.0	8.6	16.4	17.1
Sales, general and administrative	9.0	7.8	16.9	16.4
Goodwill impairment	6.9	—	112.6	—
Impairment on assets held for sale	19.5	—	19.5	—
(Gain) loss on disposal or impairment of long-lived assets	(0.5)	—	(1.0)	0.2
Other operating expense	7.7	2.9	12.5	4.0
Operating (loss) income	(25.8)	7.0	(133.6)	10.3
Non-operating income	(0.1)	(0.1)	—	(0.1)


(Loss) income before income taxes	(25.7)	7.1	(133.6)	10.4
Income tax expense	2.7	3.2	3.6	5.0
Net (loss) income	(28.4)	3.9	(137.2)	5.4
Net income attributable to noncontrolling interest	0.3

Price	49.04	EPS	-4
Shares	108	P/E	-13
MCap	5,281	P/FCF	94
Net Debt	-994	EBIT	-391
TEV	4,288	TEV/EBIT	-11
TTM 2019-09-29, in MM, except price, ratios

10-Q	2020-12-27	Filed 2021-01-28
10-Q	2020-09-27	Filed 2020-10-29
10-K	2020-06-28	Filed 2020-08-19
10-Q	2020-03-29	Filed 2020-04-30
10-Q	2019-12-29	Filed 2020-01-30
10-Q	2019-09-29	Filed 2019-10-31
10-K	2019-06-30	Filed 2019-08-21
10-Q	2019-03-31	Filed 2019-05-03
10-Q	2018-12-30	Filed 2019-01-31
10-Q	2018-09-23	Filed 2018-10-17
10-K	2018-06-24	Filed 2018-08-20
10-Q	2018-03-25	Filed 2018-04-25
10-Q	2017-12-24	Filed 2018-01-24
10-Q	2017-09-24	Filed 2017-10-18
10-K	2017-06-25	Filed 2017-08-23
10-Q	2017-03-26	Filed 2017-04-26
10-Q	2016-12-25	Filed 2017-01-25
10-Q	2016-09-25	Filed 2016-10-19
10-K	2016-06-26	Filed 2016-08-25
10-Q	2016-03-27	Filed 2016-04-27
10-Q	2015-12-27	Filed 2016-01-20
10-Q	2015-09-27	Filed 2015-10-21
10-K	2015-06-28	Filed 2015-08-27
10-Q	2015-03-29	Filed 2015-04-22
10-Q	2014-12-28	Filed 2015-01-21
10-Q	2014-09-28	Filed 2014-10-22
10-K	2014-06-29	Filed 2014-08-27
10-Q	2014-03-30	Filed 2014-04-23
10-Q	2013-12-29	Filed 2014-01-22
10-Q	2013-09-29	Filed 2013-10-23
10-K	2013-06-30	Filed 2013-08-28
10-Q	2012-12-30	Filed 2013-01-23
10-Q	2012-09-23	Filed 2012-10-17
10-K	2012-06-24	Filed 2012-08-21
10-Q	2012-03-25	Filed 2012-04-18
10-Q	2011-12-25	Filed 2012-01-19
10-Q	2011-09-25	Filed 2011-10-20
10-K	2011-06-26	Filed 2011-08-17
10-Q	2011-03-27	Filed 2011-04-20
10-Q	2010-12-26	Filed 2011-01-19
10-Q	2010-09-26	Filed 2010-10-21
10-K	2010-06-27	Filed 2010-08-18
10-Q	2010-03-28	Filed 2010-04-21
10-Q	2009-12-27	Filed 2010-01-20

8-K	2021-02-18	Other Events, Exhibits
8-K	2021-02-11	Other Events, Exhibits
8-K	2021-02-11	Other Events, Exhibits
8-K	2021-01-27	Earnings, Exhibits
8-K	2021-01-25	Officers, Other Events, Exhibits
8-K	2020-10-28
8-K	2020-10-26	Shareholder Vote, Other Events, Exhibits
8-K	2020-10-18
8-K	2020-09-01
8-K	2020-08-24
8-K	2020-08-18
8-K	2020-04-29
8-K	2020-04-21
8-K	2020-04-16
8-K	2020-04-16
8-K	2020-04-02
8-K	2020-03-27
8-K	2020-01-29
8-K	2020-01-27
8-K	2019-12-16
8-K	2019-11-20
8-K	2019-10-30
8-K	2019-10-28
8-K	2019-08-26
8-K	2019-08-20
8-K	2019-06-11
8-K	2019-05-13
8-K	2019-05-01
8-K	2019-03-14
8-K	2019-01-30
8-K	2018-12-10
8-K	2018-10-22
8-K	2018-10-16
8-K	2018-08-24
8-K	2018-08-21
8-K	2018-08-20
8-K	2018-08-20
8-K	2018-08-14
8-K	2018-07-23
8-K	2018-06-05
8-K	2018-04-30
8-K	2018-04-24
8-K	2018-03-13
8-K	2018-03-06
8-K	2018-03-06
8-K	2018-02-26
8-K	2018-01-23

EX-31.1	cree12272020ex311.htm
EX-31.2	cree12272020ex312.htm
EX-32.1	cree12272020ex321.htm
EX-32.2	cree12272020ex322.htm


Part I. Financial Information
	Item 1. Financial Statements (Unaudited)	3






	Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations	33
	Item 3. Quantitative and Qualitative Disclosures About Market Risk	45
	Item 4. Controls and Procedures	45
Part II. Other Information
	Item 1. Legal Proceedings	46
	Item 1A. Risk Factors	47
	Item 2. Unregistered Sales of Equity Securities and Use of Proceeds	61
	Item 3. Defaults Upon Senior Securities	62
	Item 4. Mine Safety Disclosures	62
	Item 5. Other Information	62
	Item 6. Exhibits	63


Note 1	Basis of Presentation and New Accounting Standards	11
Note 2	Discontinued Operations	13
Note 3	Revenue Recognition	15
Note 4	Leases	16
Note 5	Financial Statement Details	18
Note 6	Investments	20
Note 7	Fair Value of Financial Instruments	23
Note 8	Goodwill and Intangible Assets	24
Note 9	Long-term Debt	25
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	31

CREE 10Q Quarterly Report

Cree Earnings 2020-12-27