Company Quick10K Filing
Cree
Price49.04 EPS-4
Shares108 P/E-13
MCap5,281 P/FCF94
Net Debt-994 EBIT-391
TEV4,288 TEV/EBIT-11
TTM 2019-09-29, in MM, except price, ratios
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 2020-10-28 Earnings, Exhibits
8-K 2020-10-18 Enter Agreement, Regulation FD, Exhibits
8-K 2020-09-01 Officers, Exhibits
8-K 2020-08-24 Officers, Exhibits
8-K 2020-08-18 Earnings, Exhibits
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

CREE 10Q Quarterly Report

Part I - Financial Information
Item 1. Financial Statements (Unaudited)
Note 1 - Basis of Presentation and New Accounting Standards
Note 3 - Revenue Recognition
Note 4 - Leases
Note 5 - Financial Statement Details
Note 6 - Investments
Note 7 - Fair Value of Financial Instruments
Note 8 - Goodwill and Intangible Assets
Note 9 - Long - Term Debt
Note 10 - Loss per Share
Note 11 - Stock - Based Compensation
Note 12 - Income Taxes
Note 13 - Commitments and Contingencies
Note 14 - Reportable Segments
Note 15 - Restructuring
Note 16 - Subsequent Events
Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations
Item 3. Quantitative and Qualitative Disclosures About Market Risk
Item 4. Controls and Procedures
Part II - Other Information
Item 1. Legal Proceedings
Item 1A. Risk Factors
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
Item 3. Defaults Upon Senior Securities
Item 4. Mine Safety Disclosures
Item 5. Other Information
Item 6. Exhibits
EX-2.1 ex21-apaforleddivest.htm
EX-31.1 cree9272020ex311.htm
EX-31.2 cree9272020ex312.htm
EX-32.1 cree9272020ex321.htm
EX-32.2 cree9272020ex322.htm

Cree Earnings 2020-09-27

Balance SheetIncome StatementCash Flow
3.42.72.01.40.70.02012201420172020
Assets, Equity
0.50.30.20.0-0.1-0.32012201420172020
Rev, G Profit, Net Income
0.30.20.1-0.1-0.2-0.32012201420172020
Ops, Inv, Fin

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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 September 27, 2020
or
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 
DurhamNorth Carolina27703
(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 classTrading Symbol(s)Name of each exchange on which registered
Common Stock, $0.00125 par value CREEThe 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 filerAccelerated filer
Non-accelerated filerSmaller 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 October 23, 2020, was 110,340,000.


Table of Contents
CREE, INC.
FORM 10-Q
For the Quarterly Period Ended September 27, 2020
Table of Contents

2

Table of Contents
PART I - FINANCIAL INFORMATION
Item 1.    Financial Statements (Unaudited)

3

Table of Contents
CREE, INC.
UNAUDITED CONSOLIDATED BALANCE SHEETS
in millions of U.S. Dollars, except share data in thousandsSeptember 27, 2020June 28, 2020
Assets
Current assets:
Cash and cash equivalents$436.4 $448.8 
Short-term investments702.1 802.9 
Total cash, cash equivalents and short-term investments1,138.5 1,251.7 
Accounts receivable, net108.5 114.0 
Inventories187.3 179.1 
Income taxes receivable6.7 6.6 
Prepaid expenses28.4 26.3 
Other current assets14.6 13.8 
Current assets held for sale1.3 1.3 
Total current assets1,485.3 1,592.8 
Property and equipment, net940.9 831.1 
Goodwill424.3 530.0 
Intangible assets, net175.4 179.6 
Other long-term investments53.0 55.9 
Deferred tax assets7.3 6.3 
Other assets37.1 35.3 
Total assets$3,123.3 $3,231.0 
Liabilities and Shareholders' Equity
Current liabilities:
Accounts payable and accrued expenses$273.9 $220.8 
Accrued contract liabilities36.2 38.3 
Income taxes payable2.9 3.2 
Finance lease liabilities0.4 3.6 
Other current liabilities30.0 25.3 
Total current liabilities343.4 291.2 
Long-term liabilities:
Convertible notes, net793.6 783.8 
Deferred tax liabilities3.1 1.8 
Finance lease liabilities - long-term10.3 11.4 
Other long-term liabilities57.8 53.6 
Total long-term liabilities864.8 850.6 
Commitments and contingencies
Shareholders’ equity:
Preferred stock, par value $0.01; 3,000 shares authorized at September 27, 2020 and June 28, 2020; none issued and outstanding
  
Common stock, par value $0.00125; 200,000 shares authorized at September 27, 2020 and June 28, 2020; 110,296 and 109,230 shares issued and outstanding at September 27, 2020 and June 28, 2020, respectively
0.1 0.1 
Additional paid-in-capital3,116.2 3,106.2 
Accumulated other comprehensive income16.0 16.0 
Accumulated deficit(1,223.6)(1,039.2)
Total shareholders’ equity1,908.7 2,083.1 
Non-controlling interest6.4 6.1 
Total equity1,915.1 2,089.2 
Total liabilities and shareholders’ equity$3,123.3 $3,231.0 
The accompanying notes are an integral part of the consolidated financial statements
4

Table of Contents
CREE, INC.
UNAUDITED CONSOLIDATED STATEMENTS OF OPERATIONS
 
 Three months ended
 September 27, 2020September 29, 2019
in millions of U.S. Dollars, except share data
Revenue, net$216.6 $242.8 
Cost of revenue, net162.6 168.6 
Gross profit54.0 74.2 
Operating expenses:
Research and development49.6 43.7 
Sales, general and administrative51.9 57.6 
Amortization or impairment of acquisition-related intangibles3.6 3.6 
(Gain) loss on disposal or impairment of other assets(0.2)1.0 
Goodwill impairment105.7  
Other operating expense13.4 7.2 
Operating loss(170.0)(38.9)
Non-operating expense (income), net14.0 (1.6)
Loss before income taxes(184.0)(37.3)
Income tax expense0.1 0.5 
Net loss(184.1)(37.8)
Net income attributable to noncontrolling interest0.3  
Net loss attributable to controlling interest($184.4)($37.8)
Basic and diluted loss per share
Net loss attributable to controlling interest($1.68)($0.35)
Weighted average shares - basic and diluted (in thousands)109,705 107,113 
The accompanying notes are an integral part of the consolidated financial statements
5

Table of Contents
CREE, INC.
UNAUDITED CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS

 Three months ended
(in millions of U.S. Dollars)September 27, 2020September 29, 2019
Net loss($184.1)($37.8)
Other comprehensive loss:
Net unrealized gain on available-for-sale securities 0.5 
Comprehensive loss (184.1)(37.3)
Net income attributable to non-controlling interest0.3  
Comprehensive loss attributable to controlling interest($184.4)($37.3)
The accompanying notes are an integral part of the consolidated financial statements
6

Table of Contents
CREE, INC.
UNAUDITED CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
Common StockAdditional Paid-in CapitalAccumulated DeficitAccumulated Other Comprehensive IncomeTotal Equity - Controlled InterestNon-controlling InterestTotal Equity
(in millions of U.S Dollars, except share data)Number of SharesPar Value
Balance at June 28, 2020109,230 $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 shares1,066 — 16.5 — — 16.5 — 16.5 
Balance at September 27, 2020110,296 $0.1 $3,116.2 ($1,223.6)$16.0 $1,908.7 $6.4 $1,915.1 
The accompanying notes are an integral part of the consolidated financial statements
7

Table of Contents
CREE, INC.
UNAUDITED CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY

Common StockAdditional Paid-in CapitalAccumulated DeficitAccumulated Other Comprehensive IncomeTotal Equity - Controlled InterestNon-controlling InterestTotal Equity
(in millions of U.S. Dollars, except share data)Number of SharesPar Value
Balance at June 30, 2019106,570 $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 shares1,127 — 18.6 — — 18.6 — 18.6 
Balance at September 29, 2019107,697 $0.1 $2,895.8 ($885.3)$10.0 $2,020.6 $5.0 $2,025.6 
The accompanying notes are an integral part of the consolidated financial statements
8

Table of Contents

CREE, INC.
UNAUDITED CONSOLIDATED STATEMENTS OF CASH FLOWS
 Three months ended
(in millions of U.S. Dollars)September 27, 2020September 29, 2019
Operating activities:
Net loss($184.1)($37.8)
Adjustments to reconcile net loss to net cash provided by (used in) operating activities:
Depreciation and amortization33.9 28.6 
Amortization of debt issuance costs and discount, net of capitalized interest9.4 5.6 
Stock-based compensation15.7 16.9 
Goodwill impairment105.7  
Loss on disposal or impairment of long-lived assets0.2 1.0 
Amortization of premium/discount on investments1.5  
Loss (gain) on equity investment3.4 (3.5)
Foreign exchange (gain) loss on equity investment(0.5)0.1 
Deferred income taxes0.3  
Changes in operating assets and liabilities:
Accounts receivable, net5.5 (8.8)
Inventories(7.7)5.0 
Prepaid expenses and other assets3.5 7.9 
Accounts payable, trade(3.7)(21.7)
Accrued salaries and wages and other liabilities19.4 (20.5)
Accrued contract liabilities(2.1)7.2 
Cash provided by (used in) operating activities0.4 (20.0)
Investing activities:
Purchases of property and equipment(114.0)(42.0)
Purchases of patent and licensing rights(1.9)(1.1)
Proceeds from sale of property and equipment0.6  
Purchases of short-term investments(65.7)(134.0)
Proceeds from maturities of short-term investments157.8 93.0 
Proceeds from sale of short-term investments7.2 31.8 
Cash used in investing activities(16.0)(52.3)
Financing activities:
Payments on long-term debt borrowings, including finance lease obligations(0.1) 
Proceeds from issuance of common stock16.5 18.6 
Tax withholding on vested equity awards(12.8)(13.2)
Commitment fee on long-term incentive agreement(0.5) 
Cash provided by financing activities3.1 5.4 
Effects of foreign exchange changes on cash and cash equivalents0.1 (0.3)
Net change in cash and cash equivalents(12.4)(67.2)
Cash and cash equivalents, beginning of period448.8 500.5 
Cash and cash equivalents, end of period$436.4 $433.3 
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 materials, devices for power and radio-frequency (RF) applications and specialty lighting-class light emitting diode (LED) products. The Company's silicon carbide and gallium nitride (GaN) materials and devices are targeted for applications such as transportation, power supplies, inverters and wireless systems. The Company's LEDs are targeted for use in indoor and outdoor lighting, electronic signs and signals and video displays.
The Company operates in two reportable segments:
Wolfspeed, which consists of 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.
LED Products, which consists of LED chips and LED components. The Company's LED products enable its customers to develop and market LED-based products for lighting, video screens, automotive and specialty lighting 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.
As discussed more fully below in Note 16, “Subsequent Events,” on October 18, 2020, the Company entered into a definitive agreement to sell certain assets and subsidiaries comprising its LED Products segment (the LED Business) to SMART Global Holdings, Inc. (SGH) and its wholly owned subsidiary Chili Acquisition, Inc. (collectively with SGH, SMART) for up to $300 million, including fixed upfront and deferred payments and contingent consideration (the LED Business Divestiture). Following the completion of the LED Business Divestiture, the Company will operate solely in the Wolfspeed segment.
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 September 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 months ended September 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.
Certain accounting matters that generally require consideration of forecasted financial information were assessed regarding impacts from the COVID-19 outbreak as of September 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
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ended September 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 our consolidated financial statements.
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 the Company's 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.

Note 2 – Discontinued Operations
The Company did not have any discontinued operations activity for the three months ended September 27, 2020 and September 29, 2019.

Note 3 – Revenue Recognition
In accordance with FASB Accounting Standards Codification 606 "Revenue from Contracts with Customers" (ASC 606), the Company follows a five-step approach defined by the new standard 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 deferred revenue, price protection guarantees and the Company's liability under the LED Supply Agreement. Contract liabilities were $78.3 million as of September 27, 2020 and $80.3 million as of June 28, 2020. The decrease was primarily due to lower reserve liabilities and continued fulfillment on the LED Supply Agreement. Contract liabilities are recorded within accrued contract liabilities and other long-term liabilities on the balance sheet. Before the adoption of ASC 606, liabilities relating to various rights of return were recorded as a deduction to accounts receivable.
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Disaggregated revenue by geography is presented in Note 14, "Reportable Segments". For the three months ended September 27, 2020, the Company recognized revenue of $1.0 million that was included in contract liabilities as of June 28, 2020. The amount recognized primarily related to the recognition of contingent liabilities related to the LED Supply Agreement and deferred revenue. Revenue recognized related to performance obligations that were satisfied or partially satisfied in previous periods was not material for the three months ended September 27, 2020.

Note 4 – Leases
The Company primarily leases manufacturing, office and warehousing space. 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 Wolfspeed manufacturing space in Malaysia and a 49-year ground lease on a future silicon carbide 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:September 27, 2020June 28, 2020
Right-of-use asset (1)
$14.4 $14.0 
Current lease liability (2)
5.7 5.2 
Non-current lease liability (3)
8.9 8.7 
Total operating lease liabilities14.6 13.9 
Finance Leases:
Finance lease assets (4)
11.4 15.4 
Current portion of finance lease liabilities0.4 3.6 
Finance lease liabilities, less current portion10.3 11.4 
Total finance lease liabilities10.7 15.0 
(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 $1.6 million and $1.4 million for the three months ended September 27, 2020 and September 29, 2019, respectively.
Short-term lease expense, variable lease expense and lease income were immaterial for the three months ended September 27, 2020 and September 29, 2019.
Finance lease amortization was $0.2 million and interest expense was $0.1 million for the three months ended September 27, 2020. Finance lease amortization and interest expense were not recorded for the three months ended September 29, 2019.
Cash Flows
Cash flow information consisted of the following:
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Three months ended
(in millions of U.S. Dollars)September 27, 2020September 29, 2019
Cash used in operating activities:
Cash paid for operating leases$1.3 $1.5 
Cash paid for interest portion of financing leases0.1  
Cash used in financing activities:
Cash paid for principal portion of finance leases0.1  
Non-cash operating activities:
Operating lease additions due to adoption of ASC 842 12.2 
Operating lease additions and modifications, net1.8 0.5 
Finance lease additions  
Non-cash investing activities (1):
Transfer of finance lease liability to accounts payable and accrued expenses4.2  
(1) In the first quarter of fiscal 2021, the Company executed the available bargain purchase option for certain finance leases relating to property and equipment, net, in order to purchase the assets.
Lease Liability Maturities
Maturities of operating and finance lease liabilities as of September 27, 2020 were as follows (in millions of U.S. Dollars):
Fiscal Year EndingOperating LeasesFinance LeasesTotal
June 27, 2021 (remainder of fiscal 2021)$4.9 $0.5 $5.4 
June 26, 20224.9 0.6 5.5 
June 25, 20233.0 0.7 3.7 
June 30, 20241.2 0.7 1.9 
June 29, 20251.0 0.7 1.7 
Thereafter0.4 15.3 15.7 
Total lease payments15.4 18.5 33.9 
Imputed lease interest(0.8)(7.8)(8.6)
Total lease liabilities$14.6 $10.7 $25.3 
Supplemental Disclosures
Operating LeasesFinance Leases
Weighted average remaining lease term (in months) (1)
39470
Weighted average discount rate (2)
3.32 %2.77 %
(1) Weighted average remaining lease term of finance leases without the 49-year ground lease is 77 months.
(2) Weighted average discount rate of finance leases without the 49-year ground lease is 3.40%.

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Note 5 – Financial Statement Details
Accounts Receivable, net
Accounts receivable, net consisted of the following:
(in millions of U.S. Dollars)September 27, 2020June 28, 2020
Billed trade receivables$106.7 $111.3 
Unbilled contract receivables0.8 1.2 
Royalties2.2 2.8 
109.7 115.3 
Allowance for bad debts(1.2)(1.3)
Accounts receivable, net$108.5 $114.0 
Changes in the Company’s allowance for bad debts were as follows:
(in millions of U.S. Dollars)September 27, 2020
Balance at beginning of period$1.3 
Current period provision change 
Write-offs, net of recoveries(0.1)
Balance at end of period$1.2 
Inventories
Inventories consisted of the following:
(in millions of U.S. Dollars)September 27, 2020June 28, 2020
Raw material$47.5 $47.0 
Work-in-progress101.1 95.4 
Finished goods38.7 36.7 
Inventories$187.3 $179.1 
Accounts Payable and Accrued Expenses
Accounts payable and accrued expenses consisted of the following:
(in millions of U.S. Dollars)September 27, 2020June 28, 2020
Accounts payable, trade$123.7 $106.9 
Accrued salaries and wages72.3 47.4 
Accrued expenses70.3 60.5 
Other7.6 6.0 
Accounts payable and accrued expenses$273.9 $220.8 
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Other Operating Expense
Other operating expense consisted of the following:
Three months ended
(in millions of U.S. Dollars)September 27, 2020September 29, 2019
Factory optimization restructuring$1.6 $1.2 
Severance and other restructuring3.2 0.8 
Total restructuring costs4.8 2.0 
Project, transformation and transaction costs5.6 2.6 
Factory optimization start-up costs3.0 1.4 
Non-restructuring related executive severance 1.2 
Other operating expense$13.4 $7.2 
Accumulated Other Comprehensive Income, net of taxes
Accumulated other comprehensive income, net of taxes, consisted of the following:
(in millions of U.S. Dollars)September 27, 2020June 28, 2020
Currency translation gain$9.5 $9.5 
Net unrealized gain on available-for-sale securities (1)
6.5 6.5 
Accumulated other comprehensive income, net of taxes$16.0 $16.0 
(1) Amounts as of September 27, 2020 and June 28, 2020 include a $2.4 million loss related to tax on unrealized gain (loss) on available-for-sale securities.
Reclassifications Out of Accumulated Other Comprehensive Income
Less than $0.1 million was reclassified for each of the three month periods ended September 27, 2020 and September 29, 2019. Amounts were reclassified to non-operating expense, net on the consolidated statements of operations.
Non-Operating Expense, net
The following table summarizes the components of non-operating expense, net:
Three months ended
(in millions of U.S. Dollars)September 27, 2020September 29, 2019
Foreign currency loss, net$ $0.1 
Loss (gain) on equity investment, net3.4 (3.5)
Interest income(2.7)(5.5)
Interest expense, net of capitalized interest13.1 7.4 
Other, net0.2 (0.1)
Non-operating expense, net$14.0 ($1.6)
The change in loss (gain) on equity investment, net is due to the decrease in the Lextar Electronics Corporation (Lextar) stock price.
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Statements of Cash Flows - non-cash activities
Three months ended
Non-cash operating activitiesSeptember 27, 2020September 29, 2019
Lease asset and liability additions (1)
$ $12.2 
Lease asset and liability modifications, net1.8 0.5 
Non-cash investing and financing activities
Transfer of finance lease liability to accounts payable and accrued expenses (2)
4.2  
(1) The total amount of lease asset and liability additions for the three months ended September 29, 2019 relates to the increase of right-of-use assets and matching lease liabilities as a result of adopting ASC 842. See Note 4, "Leases", for further information.
(2) In the first quarter of fiscal 2021, the Company executed the available bargain purchase option for certain finance leases relating to property and equipment, net, in order to purchase the assets.
Accrued property and equipment as of September 27, 2020 and September 29, 2019 was $108.2 million and $8.8 million, respectively.

Note 6 – Investments
Investments consist of municipal bonds, corporate bonds, U.S. agency securities, U.S. treasury securities, variable rate demand notes, commercial paper and certificates of deposit. All short-term investments are classified as available-for-sale. Other long-term investments consist of the Company's ownership interest in Lextar.
Short-term investments as of September 27, 2020 and June 28, 2020 consisted of the following:
 September 27, 2020
 Amortized CostGross Unrealized GainsGross Unrealized Losses
Credit Loss Allowance (1)
Estimated Fair Value
Municipal bonds$119.6 $2.3 $ $ $121.9 
Corporate bonds456.3 6.2   462.5 
U.S. agency securities18.2  (0.1) 18.1 
U.S. treasury securities58.9 0.5   59.4 
Certificates of deposit33.7    33.7 
Commercial paper6.5    6.5 
Total short-term investments$