Cree Earnings 2021-03-28

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

cree-20210328

Table of Contents

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 March 28, 2021

☐ 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 April 23, 2021, was 115,470,771.

Table of Contents

CREE, INC.

FORM 10-Q

For the Quarterly Period Ended March 28, 2021

Table of Contents

PART I - FINANCIAL INFORMATION

Item 1. Financial Statements (Unaudited)


Consolidated Balance Sheets as of March 28, 2021 and June 28, 2020			4
Consolidated Statements of Operations for the three and nine months ended March 28, 2021 and March 29, 2020			5
Consolidated Statements of Comprehensive Loss for the three and nine months ended March 28, 2021 and March 29, 2020			6
Consolidated Statements of Shareholders' Equity for the nine months ended March 28, 2021 and March 29, 2020			7
Consolidated Statements of Cash Flows for the nine months ended March 28, 2021 and March 29, 2020			9
Notes to Unaudited Consolidated Financial Statements			10

Table of Contents

CREE, INC.

UNAUDITED CONSOLIDATED BALANCE SHEETS


in millions of U.S. Dollars, except share data in thousands	March 28, 2021	June 28, 2020
Assets
Current assets:
Cash and cash equivalents	$531.6	$448.8
Short-term investments	761.7	790.9
Total cash, cash equivalents and short-term investments	1,293.3	1,239.7
Accounts receivable, net	84.1	72.4
Inventories	147.5	121.9
Income taxes receivable	9.1	6.6

Prepaid expenses	23.8	26.2
Other current assets	38.5	8.7
Current assets held for sale	2.0	1.3
Current assets of discontinued operations	—	116.0
Total current assets	1,598.3	1,592.8
Property and equipment, net	1,165.1	770.8
Goodwill	359.2	349.7
Intangible assets, net	144.6	156.9
Long-term receivables	137.8	—
Other long-term investments	67.2	55.9
Deferred tax assets	1.2	1.2
Other assets	33.0	33.6
Long-term assets of discontinued operations	1.3	270.1
Total assets	$3,507.7	$3,231.0

Liabilities and Shareholders' Equity
Current liabilities:
Accounts payable and accrued expenses	$319.5	$189.8
Accrued contract liabilities	24.5	14.2
Income taxes payable	—	1.2
Finance lease liabilities	0.4	3.6
Other current liabilities	37.8	22.2
Current liabilities of discontinued operations	0.6	60.2
Total current liabilities	382.8	291.2
Long-term liabilities:

Convertible notes, net	813.7	783.8
Deferred tax liabilities	2.3	1.8
Finance lease liabilities - long-term	10.1	11.4
Other long-term liabilities	51.1	43.8
Long-term liabilities of discontinued operations	0.7	9.8
Total long-term liabilities	877.9	850.6
Commitments and contingencies
Shareholders’ equity:
Preferred stock, par value $0.01; 3,000 shares authorized at March 28, 2021 and June 28, 2020; none issued and outstanding	—	—
Common stock, par value $0.00125; 200,000 shares authorized at March 28, 2021 and June 28, 2020; 115,425 and 109,230 shares issued and outstanding at March 28, 2021 and June 28, 2020, respectively	0.1	0.1
Additional paid-in-capital	3,658.9	3,106.2
Accumulated other comprehensive income	3.5	16.0
Accumulated deficit	(1,415.5)	(1,039.2)
Total shareholders’ equity	2,247.0	2,083.1
Noncontrolling interest from discontinued operations	—	6.1
Total equity	2,247.0	2,089.2
Total liabilities and shareholders’ equity	$3,507.7	$3,231.0

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

Table of Contents

CREE, INC.

UNAUDITED CONSOLIDATED STATEMENTS OF OPERATIONS


	Three months ended		Nine months ended
	March 28, 2021	March 29, 2020	March 28, 2021	March 29, 2020
in millions of U.S. Dollars, except share data
Revenue, net	$137.3	$113.9	$379.8	$362.3
Cost of revenue, net	93.3	72.6	259.0	232.9
Gross profit	44.0	41.3	120.8	129.4
Operating expenses:
Research and development	46.0	38.6	132.7	112.5
Sales, general and administrative	44.2	41.7	135.0	135.7
Amortization or impairment of acquisition-related intangibles	3.7	3.7	10.9	10.9
Loss on disposal or impairment of other assets	0.1	0.1	0.8	1.7


Other operating expense	11.4	5.2	22.6	22.2

Operating loss	(61.4)	(48.0)	(181.2)	(153.6)
Non-operating expense, net	8.1	14.7	18.9	8.1
Loss before income taxes	(69.5)	(62.7)	(200.1)	(161.7)
Income tax benefit	(3.0)	(6.5)	(4.0)	(8.3)
Net loss from continuing operations	(66.5)	(56.2)	(196.1)	(153.4)
Net (loss) income from discontinued operations	(41.6)	(3.7)	(178.8)	1.7
Net loss	(108.1)	(59.9)	(374.9)	(151.7)
Net income from discontinued operations attributable to noncontrolling interest	0.8	0.2	1.4	0.5
Net loss attributable to controlling interest	($108.9)	($60.1)	($376.3)	($152.2)

Basic and diluted loss per share
Continuing operations	($0.59)	($0.52)	($1.75)	($1.42)

Net loss attributable to controlling interest	($0.96)	($0.56)	($3.35)	($1.41)






Weighted average shares - basic and diluted (in thousands)	112,891	108,115	112,330	107,718

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

Table of Contents

CREE, INC.

UNAUDITED CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS


	Three months ended		Nine months ended
(in millions of U.S. Dollars)	March 28, 2021	March 29, 2020	March 28, 2021	March 29, 2020
Net loss	($108.1)	($59.9)	($374.9)	($151.7)
Other comprehensive loss:
Reclassification of currency translation gain to loss on sale of discontinued operations	(9.5)	—	(9.5)	—
Net unrealized loss on available-for-sale securities	(2.5)	(1.9)	(3.0)	(1.7)

Comprehensive loss	(120.1)	(61.8)	(387.4)	(153.4)
Net income from discontinued operations attributable to noncontrolling interest	0.8	0.2	1.4	0.5
Comprehensive loss attributable to controlling interest	($120.9)	($62.0)	($388.8)	($153.9)

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

Table of Contents

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
Net (loss) income	—	—	—	(108.9)	—	(108.9)	0.8	(108.1)
Reclassification of currency translation gain to loss on sale of discontinued operations	—	—	—	—	(9.5)	(9.5)	—	(9.5)
Unrealized loss on available-for-sale securities	—	—	—	—	(2.5)	(2.5)	—	(2.5)
Comprehensive (loss) income						(120.9)	0.8	(120.1)
Tax withholding on vested equity awards	—	—	(7.4)	—	—	(7.4)	—	(7.4)

Stock-based compensation	—	—	19.5	—	—	19.5	—	19.5
Exercise of stock options and issuance of shares	225	—	1.8	—	—	1.8	—	1.8

Issuance of shares under the at-the-market offering program, net of issuance costs	4,223	—	489.1	—	—	489.1	—	489.1
Reclassification of noncontrolling interest to loss on sale of discontinued operations	—	—	—	—	—	—	(7.5)	(7.5)
Balance at March 28, 2021	115,425	$0.1	$3,658.9	($1,415.5)	$3.5	$2,247.0	$—	$2,247.0

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

Table of Contents

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
Net (loss) income	—	—	—	(60.1)	—	(60.1)	0.2	(59.9)

Unrealized loss on available-for-sale securities	—	—	—	—	(1.9)	(1.9)	—	(1.9)
Comprehensive (loss) income						(62.0)	0.2	(61.8)
Tax withholding on vested equity awards	—	—	(1.5)	—	—	(1.5)	—	(1.5)

Stock-based compensation	—	—	11.6	—	—	11.6	—	11.6
Exercise of stock options and issuance of shares	122	—	1.7	—	—	1.7	—	1.7



Balance at March 29, 2020	108,153	$0.1	$2,931.3	($999.7)	$7.8	$1,939.5	$5.5	$1,945.0

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

Table of Contents

CREE, INC.

UNAUDITED CONSOLIDATED STATEMENTS OF CASH FLOWS


	Nine months ended
(in millions of U.S. Dollars)	March 28, 2021	March 29, 2020
Operating activities:
Net loss	($374.9)	($151.7)
Net (loss) income from discontinued operations	(178.8)	1.7
Net loss from continuing operations	(196.1)	(153.4)
Adjustments to reconcile net loss from continuing operations to net cash used in operating activities:
Depreciation and amortization	88.6	73.7
Amortization of debt issuance costs and discount, net of capitalized interest	26.1	17.2

Stock-based compensation	40.3	36.9



Loss on disposal or impairment of long-lived assets	3.7	1.7
Amortization of premium/discount on investments	4.9	0.5
Realized gain on sale of investments	(0.3)	(1.0)
(Gain) loss on equity investment	(7.9)	9.2
Foreign exchange gain on equity investment	(3.4)	(1.2)
Deferred income taxes	0.5	(0.8)
Changes in operating assets and liabilities:
Accounts receivable, net	(11.7)	(31.7)
Inventories	(25.4)	2.2
Prepaid expenses and other assets	(28.2)	0.9
Accounts payable, trade	27.2	(6.3)
Accrued salaries and wages and other liabilities	12.5	(18.7)
Accrued contract liabilities	10.3	5.9
Net cash used in operating activities of continuing operations	(58.9)	(64.9)
Net cash (used in) provided by operating activities of discontinued operations	(16.6)	25.4
Cash used in operating activities	(75.5)	(39.5)
Investing activities:
Purchases of property and equipment	(394.0)	(166.9)
Purchases of patent and licensing rights	(3.6)	(2.8)
Proceeds from sale of property and equipment	0.2	1.8
Purchases of short-term investments	(342.1)	(421.2)
Proceeds from maturities of short-term investments	335.6	342.5
Proceeds from sale of short-term investments	28.1	96.4

Proceeds from sale of business, net	36.6	—

Net cash used in investing activities of continuing operations	(339.2)	(150.2)
Net cash used in investing activities of discontinued operations	(0.3)	(2.0)
Cash used in investing activities	(339.5)	(152.2)
Financing activities:


Proceeds from long-term debt borrowings

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	2021-03-28	Filed 2021-04-29
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
8-K	2021-02-11
8-K	2021-02-11
8-K	2021-01-27
8-K	2021-01-25
8-K	2020-10-28
8-K	2020-10-26
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-10.2	ex102purchasepricenote.htm
EX-31.1	cree3282021ex311.htm
EX-31.2	cree3282021ex312.htm
EX-32.1	cree3282021ex321.htm
EX-32.2	cree3282021ex322.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	61
	Item 4. Mine Safety Disclosures	61
	Item 5. Other Information	61
	Item 6. Exhibits	62

CREE 10Q Quarterly Report

Cree Earnings 2021-03-28