falsedesktopCREE2020-09-27000089541920000131{"tbl_sim": "https://q10k.com/tbl-sim", "search": "https://q10k.com/search"}{"q10k_tbl_0": "Large accelerated filer\t☒\tAccelerated filer\t☐\nNon-accelerated filer\t☐\tSmaller reporting company\t☐\n\t\tEmerging growth company\t☐\n", "q10k_tbl_1": "Part I. Financial Information\t\t\n\tItem 1. Financial Statements (Unaudited)\t3\n\tItem 2. Management's Discussion and Analysis of Financial Condition and Results of Operations\t31\n\tItem 3. Quantitative and Qualitative Disclosures About Market Risk\t42\n\tItem 4. Controls and Procedures\t42\nPart II. Other Information\t\t\n\tItem 1. Legal Proceedings\t43\n\tItem 1A. Risk Factors\t44\n\tItem 2. Unregistered Sales of Equity Securities and Use of Proceeds\t58\n\tItem 3. Defaults Upon Senior Securities\t58\n\tItem 4. Mine Safety Disclosures\t59\n\tItem 5. Other Information\t59\n\tItem 6. Exhibits\t60\n", "q10k_tbl_2": "Consolidated Balance Sheets as of September 27 2020 and June 28 2020\t4\nConsolidated Statements of Operations for the three months ended September 27 2020 and September 29 2019\t5\nConsolidated Statements of Comprehensive Loss for the three months ended September 27 2020 and September 29 2019\t6\nConsolidated Statements of Shareholders' Equity for the three months ended September 27 2020 and September 29 2019\t7\nConsolidated Statements of Cash Flows for the three months ended September 27 2020 and September 29 2019\t9\nNotes to Unaudited Consolidated Financial Statements\t10\n", "q10k_tbl_3": "in millions of U.S. Dollars except share data in thousands\tSeptember 27 2020\tJune 28 2020\nAssets\t\t\nCurrent assets:\t\t\nCash and cash equivalents\t436.4\t448.8\nShort-term investments\t702.1\t802.9\nTotal cash cash equivalents and short-term investments\t1138.5\t1251.7\nAccounts receivable net\t108.5\t114.0\nInventories\t187.3\t179.1\nIncome taxes receivable\t6.7\t6.6\nPrepaid expenses\t28.4\t26.3\nOther current assets\t14.6\t13.8\nCurrent assets held for sale\t1.3\t1.3\nTotal current assets\t1485.3\t1592.8\nProperty and equipment net\t940.9\t831.1\nGoodwill\t424.3\t530.0\nIntangible assets net\t175.4\t179.6\nOther long-term investments\t53.0\t55.9\nDeferred tax assets\t7.3\t6.3\nOther assets\t37.1\t35.3\nTotal assets\t3123.3\t3231.0\nLiabilities and Shareholders' Equity\t\t\nCurrent liabilities:\t\t\nAccounts payable and accrued expenses\t273.9\t220.8\nAccrued contract liabilities\t36.2\t38.3\nIncome taxes payable\t2.9\t3.2\nFinance lease liabilities\t0.4\t3.6\nOther current liabilities\t30.0\t25.3\nTotal current liabilities\t343.4\t291.2\nLong-term liabilities:\t\t\nConvertible notes net\t793.6\t783.8\nDeferred tax liabilities\t3.1\t1.8\nFinance lease liabilities - long-term\t10.3\t11.4\nOther long-term liabilities\t57.8\t53.6\nTotal long-term liabilities\t864.8\t850.6\nCommitments and contingencies\t\t\nShareholders' equity:\t\t\nPreferred stock par value $0.01; 3000 shares authorized at September 27 2020 and June 28 2020; none issued and outstanding\t0\t0\nCommon stock par value $0.00125; 200000 shares authorized at September 27 2020 and June 28 2020; 110296 and 109230 shares issued and outstanding at September 27 2020 and June 28 2020 respectively\t0.1\t0.1\nAdditional paid-in-capital\t3116.2\t3106.2\nAccumulated other comprehensive income\t16.0\t16.0\nAccumulated deficit\t(1223.6)\t(1039.2)\nTotal shareholders' equity\t1908.7\t2083.1\nNon-controlling interest\t6.4\t6.1\nTotal equity\t1915.1\t2089.2\nTotal liabilities and shareholders' equity\t3123.3\t3231.0\n", "q10k_tbl_4": "\tThree months ended\t\n\t\tSeptember 27 2020\t\t\t\tSeptember 29 2019\t\t\nin millions of U.S. Dollars except share data\t\t\t\t\t\t\t\t\nRevenue net\t\t216.6\t\t\t\t242.8\t\t\nCost of revenue net\t\t162.6\t\t\t\t168.6\t\t\nGross profit\t\t54.0\t\t\t\t74.2\t\t\nOperating expenses:\t\t\t\t\t\t\t\t\nResearch and development\t\t49.6\t\t\t\t43.7\t\t\nSales general and administrative\t\t51.9\t\t\t\t57.6\t\t\nAmortization or impairment of acquisition-related intangibles\t\t3.6\t\t\t\t3.6\t\t\n(Gain) loss on disposal or impairment of other assets\t\t(0.2)\t\t\t\t1.0\t\t\nGoodwill impairment\t\t105.7\t\t\t\t0\t\t\nOther operating expense\t\t13.4\t\t\t\t7.2\t\t\nOperating loss\t\t(170.0)\t\t\t\t(38.9)\t\t\nNon-operating expense (income) net\t\t14.0\t\t\t\t(1.6)\t\t\nLoss before income taxes\t\t(184.0)\t\t\t\t(37.3)\t\t\nIncome tax expense\t\t0.1\t\t\t\t0.5\t\t\nNet loss\t\t(184.1)\t\t\t\t(37.8)\t\t\nNet income attributable to noncontrolling interest\t\t0.3\t\t\t\t0\t\t\nNet loss attributable to controlling interest\t\t($184.4)\t\t\t\t($37.8)\t\t\nBasic and diluted loss per share\t\t\t\t\t\t\t\t\nNet loss attributable to controlling interest\t\t($1.68)\t\t\t\t($0.35)\t\t\nWeighted average shares - basic and diluted (in thousands)\t\t109705\t\t\t\t107113\t\t\n", "q10k_tbl_5": "\tThree months ended\t\n(in millions of U.S. Dollars)\t\tSeptember 27 2020\t\t\t\tSeptember 29 2019\t\t\nNet loss\t\t($184.1)\t\t\t\t($37.8)\t\t\nOther comprehensive loss:\t\t\t\t\t\t\t\t\nNet unrealized gain on available-for-sale securities\t\t0\t\t\t\t0.5\t\t\nComprehensive loss\t\t(184.1)\t\t\t\t(37.3)\t\t\nNet income attributable to non-controlling interest\t\t0.3\t\t\t\t0\t\t\nComprehensive loss attributable to controlling interest\t\t($184.4)\t\t\t\t($37.3)\t\t\n", "q10k_tbl_6": "\tCommon Stock\t\tAdditional Paid-in Capital\tAccumulated Deficit\tAccumulated Other Comprehensive Income\tTotal Equity - Controlled Interest\tNon-controlling Interest\tTotal Equity\n(in millions of U.S Dollars except share data)\tNumber of Shares\tPar Value\nBalance at June 28 2020\t109230\t0.1\t3106.2\t($1039.2)\t16.0\t2083.1\t6.1\t2089.2\nNet loss\t0\t0\t0\t(184.4)\t0\t(184.4)\t0.3\t(184.1)\nUnrealized gain on available-for-sale securities\t0\t0\t0\t0\t0\t0\t0\t0\nComprehensive loss\t\t\t\t\t\t(184.4)\t0.3\t(184.1)\nTax withholding on vested equity awards\t0\t0\t(22.7)\t0\t0\t(22.7)\t0\t(22.7)\nStock-based compensation\t0\t0\t16.2\t0\t0\t16.2\t0\t16.2\nExercise of stock options and issuance of shares\t1066\t0\t16.5\t0\t0\t16.5\t0\t16.5\nBalance at September 27 2020\t110296\t0.1\t3116.2\t($1223.6)\t16.0\t1908.7\t6.4\t1915.1\n", "q10k_tbl_7": "\tCommon Stock\t\tAdditional Paid-in Capital\tAccumulated Deficit\tAccumulated Other Comprehensive Income\tTotal Equity - Controlled Interest\tNon-controlling Interest\tTotal Equity\n(in millions of U.S. Dollars except share data)\tNumber of Shares\tPar Value\nBalance at June 30 2019\t106570\t0.1\t2874.1\t($847.5)\t9.5\t2036.2\t5.0\t2041.2\nNet loss\t0\t0\t0\t(37.8)\t0\t(37.8)\t0\t(37.8)\nUnrealized gain on available-for-sale securities\t0\t0\t0\t0\t0.5\t0.5\t0\t0.5\nComprehensive loss\t\t\t\t\t\t(37.3)\t0\t(37.3)\nTax withholding on vested equity awards\t0\t0\t(14.3)\t0\t0\t(14.3)\t0\t(14.3)\nStock-based compensation\t0\t0\t17.4\t0\t0\t17.4\t0\t17.4\nExercise of stock options and issuance of shares\t1127\t0\t18.6\t0\t0\t18.6\t0\t18.6\nBalance at September 29 2019\t107697\t0.1\t2895.8\t($885.3)\t10.0\t2020.6\t5.0\t2025.6\n", "q10k_tbl_8": "\tThree months ended\t\n(in millions of U.S. Dollars)\tSeptember 27 2020\tSeptember 29 2019\nOperating activities:\t\t\nNet loss\t($184.1)\t($37.8)\nAdjustments to reconcile net loss to net cash provided by (used in) operating activities:\t\t\nDepreciation and amortization\t33.9\t28.6\nAmortization of debt issuance costs and discount net of capitalized interest\t9.4\t5.6\nStock-based compensation\t15.7\t16.9\nGoodwill impairment\t105.7\t0\nLoss on disposal or impairment of long-lived assets\t0.2\t1.0\nAmortization of premium/discount on investments\t1.5\t0\nLoss (gain) on equity investment\t3.4\t(3.5)\nForeign exchange (gain) loss on equity investment\t(0.5)\t0.1\nDeferred income taxes\t0.3\t0\nChanges in operating assets and liabilities:\t\t\nAccounts receivable net\t5.5\t(8.8)\nInventories\t(7.7)\t5.0\nPrepaid expenses and other assets\t3.5\t7.9\nAccounts payable trade\t(3.7)\t(21.7)\nAccrued salaries and wages and other liabilities\t19.4\t(20.5)\nAccrued contract liabilities\t(2.1)\t7.2\nCash provided by (used in) operating activities\t0.4\t(20.0)\nInvesting activities:\t\t\nPurchases of property and equipment\t(114.0)\t(42.0)\nPurchases of patent and licensing rights\t(1.9)\t(1.1)\nProceeds from sale of property and equipment\t0.6\t0\nPurchases of short-term investments\t(65.7)\t(134.0)\nProceeds from maturities of short-term investments\t157.8\t93.0\nProceeds from sale of short-term investments\t7.2\t31.8\nCash used in investing activities\t(16.0)\t(52.3)\nFinancing activities:\t\t\nPayments on long-term debt borrowings including finance lease obligations\t(0.1)\t0\nProceeds from issuance of common stock\t16.5\t18.6\nTax withholding on vested equity awards\t(12.8)\t(13.2)\nCommitment fee on long-term incentive agreement\t(0.5)\t0\nCash provided by financing activities\t3.1\t5.4\nEffects of foreign exchange changes on cash and cash equivalents\t0.1\t(0.3)\nNet change in cash and cash equivalents\t(12.4)\t(67.2)\nCash and cash equivalents beginning of period\t448.8\t500.5\nCash and cash equivalents end of period\t436.4\t433.3\n", "q10k_tbl_9": "Note 1\tBasis of Presentation and New Accounting Standards\t11\nNote 2\tDiscontinued Operations\t12\nNote 3\tRevenue Recognition\t12\nNote 4\tLeases\t13\nNote 5\tFinancial Statement Details\t15\nNote 6\tInvestments\t17\nNote 7\tFair Value of Financial Instruments\t19\nNote 8\tGoodwill and Intangible Assets\t20\nNote 9\tLong-term Debt\t21\nNote 10\tLoss Per Share\t24\nNote 11\tStock-Based Compensation\t24\nNote 12\tIncome Taxes\t26\nNote 13\tCommitments and Contingencies\t26\nNote 14\tReportable Segments\t27\nNote 15\tRestructuring\t29\nNote 16\tSubsequent Events\t29\n", "q10k_tbl_10": "Operating Leases:\tSeptember 27 2020\tJune 28 2020\nRight-of-use asset (1)\t14.4\t14.0\nCurrent lease liability (2)\t5.7\t5.2\nNon-current lease liability (3)\t8.9\t8.7\nTotal operating lease liabilities\t14.6\t13.9\nFinance Leases:\t\t\nFinance lease assets (4)\t11.4\t15.4\nCurrent portion of finance lease liabilities\t0.4\t3.6\nFinance lease liabilities less current portion\t10.3\t11.4\nTotal finance lease liabilities\t10.7\t15.0\n", "q10k_tbl_11": "\tThree months ended\t\n(in millions of U.S. Dollars)\tSeptember 27 2020\tSeptember 29 2019\nCash used in operating activities:\t\t\nCash paid for operating leases\t1.3\t1.5\nCash paid for interest portion of financing leases\t0.1\t0\nCash used in financing activities:\t\t\nCash paid for principal portion of finance leases\t0.1\t0\nNon-cash operating activities:\t\t\nOperating lease additions due to adoption of ASC 842\t0\t12.2\nOperating lease additions and modifications net\t1.8\t0.5\nFinance lease additions\t0\t0\nNon-cash investing activities (1):\t\t\nTransfer of finance lease liability to accounts payable and accrued expenses\t4.2\t0\n", "q10k_tbl_12": "Fiscal Year Ending\tOperating Leases\tFinance Leases\tTotal\nJune 27 2021 (remainder of fiscal 2021)\t4.9\t0.5\t5.4\nJune 26 2022\t4.9\t0.6\t5.5\nJune 25 2023\t3.0\t0.7\t3.7\nJune 30 2024\t1.2\t0.7\t1.9\nJune 29 2025\t1.0\t0.7\t1.7\nThereafter\t0.4\t15.3\t15.7\nTotal lease payments\t15.4\t18.5\t33.9\nImputed lease interest\t(0.8)\t(7.8)\t(8.6)\nTotal lease liabilities\t14.6\t10.7\t25.3\n", "q10k_tbl_13": "(in millions of U.S. Dollars)\tSeptember 27 2020\tJune 28 2020\nBilled trade receivables\t106.7\t111.3\nUnbilled contract receivables\t0.8\t1.2\nRoyalties\t2.2\t2.8\n\t109.7\t115.3\nAllowance for bad debts\t(1.2)\t(1.3)\nAccounts receivable net\t108.5\t114.0\n", "q10k_tbl_14": "(in millions of U.S. Dollars)\tSeptember 27 2020\tJune 28 2020\nRaw material\t47.5\t47.0\nWork-in-progress\t101.1\t95.4\nFinished goods\t38.7\t36.7\nInventories\t187.3\t179.1\n", "q10k_tbl_15": "(in millions of U.S. Dollars)\tSeptember 27 2020\tJune 28 2020\nAccounts payable trade\t123.7\t106.9\nAccrued salaries and wages\t72.3\t47.4\nAccrued expenses\t70.3\t60.5\nOther\t7.6\t6.0\nAccounts payable and accrued expenses\t273.9\t220.8\n", "q10k_tbl_16": "\tThree months ended\t\n(in millions of U.S. Dollars)\t\tSeptember 27 2020\t\t\t\tSeptember 29 2019\t\t\nFactory optimization restructuring\t\t1.6\t\t\t\t1.2\t\t\nSeverance and other restructuring\t\t3.2\t\t\t\t0.8\t\t\nTotal restructuring costs\t\t4.8\t\t\t\t2.0\t\t\nProject transformation and transaction costs\t\t5.6\t\t\t\t2.6\t\t\nFactory optimization start-up costs\t\t3.0\t\t\t\t1.4\t\t\nNon-restructuring related executive severance\t\t0\t\t\t\t1.2\t\t\nOther operating expense\t\t13.4\t\t\t\t7.2\t\t\n", "q10k_tbl_17": "(in millions of U.S. Dollars)\tSeptember 27 2020\tJune 28 2020\nCurrency translation gain\t9.5\t9.5\nNet unrealized gain on available-for-sale securities (1)\t6.5\t6.5\nAccumulated other comprehensive income net of taxes\t16.0\t16.0\n", "q10k_tbl_18": "\tThree months ended\t\n(in millions of U.S. Dollars)\t\tSeptember 27 2020\t\t\t\tSeptember 29 2019\t\t\nForeign currency loss net\t\t0\t\t\t\t0.1\t\t\nLoss (gain) on equity investment net\t\t3.4\t\t\t\t(3.5)\t\t\nInterest income\t\t(2.7)\t\t\t\t(5.5)\t\t\nInterest expense net of capitalized interest\t\t13.1\t\t\t\t7.4\t\t\nOther net\t\t0.2\t\t\t\t(0.1)\t\t\nNon-operating expense net\t\t14.0\t\t\t\t($1.6)\t\t\n", "q10k_tbl_19": "\tThree months ended\t\nNon-cash operating activities\tSeptember 27 2020\tSeptember 29 2019\nLease asset and liability additions (1)\t0\t12.2\nLease asset and liability modifications net\t1.8\t0.5\nNon-cash investing and financing activities\t\t\nTransfer of finance lease liability to accounts payable and accrued expenses (2)\t4.2\t0\n", "q10k_tbl_20": "\tSeptember 27 2020\t\t\t\t\n\tAmortized Cost\tGross Unrealized Gains\tGross Unrealized Losses\tCredit Loss Allowance (1)\tEstimated Fair Value\nMunicipal bonds\t119.6\t2.3\t0\t0\t121.9\nCorporate bonds\t456.3\t6.2\t0\t0\t462.5\nU.S. agency securities\t18.2\t0\t(0.1)\t0\t18.1\nU.S. treasury securities\t58.9\t0.5\t0\t0\t59.4\nCertificates of deposit\t33.7\t0\t0\t0\t33.7\nCommercial paper\t6.5\t0\t0\t0\t6.5\nTotal short-term investments\t693.2\t9.0\t($0.1)\t0\t702.1\n\t\tJune 28 2020\t\t\t\n\t\tAmortized Cost\tGross Unrealized Gains\tGross Unrealized Losses (2)\tEstimated Fair Value\nMunicipal bonds\t\t130.0\t2.0\t0\t132.0\nCorporate bonds\t\t473.8\t6.3\t0\t480.1\nU.S. agency securities\t\t29.1\t0\t0\t29.1\nU.S. treasury securities\t\t52.3\t0.6\t0\t52.9\nCertificates of deposit\t\t95.3\t0\t0\t95.3\nVariable rate demand note\t\t2.5\t0\t0\t2.5\nCommercial paper\t\t11.0\t0\t0\t11.0\nTotal short-term investments\t\t794.0\t8.9\t0\t802.9\n", "q10k_tbl_21": "\tSeptember 27 2020\t\t\t\t\t\n\tLess than 12 Months\t\tGreater than 12 Months\t\tTotal\t\n\tFair Value\tUnrealized Loss\tFair Value\tUnrealized Loss\tFair Value\tUnrealized Loss\nMunicipal bonds\t4.0\t0\t0\t0\t4.0\t0\nCorporate bonds\t7.8\t0\t0\t0\t7.8\t0\nU.S. agency securities\t16.0\t(0.1)\t0\t0\t16.0\t(0.1)\nU.S. treasury securities\t23.8\t0\t0\t0\t23.8\t0\nTotal\t51.6\t($0.1)\t0\t0\t51.6\t($0.1)\nNumber of securities with an unrealized loss\t\t16\t\t0\t\t16\n\tJune 28 2020\t\t\t\t\t\n\tLess than 12 Months\t\tGreater than 12 Months\t\tTotal\t\n\tFair Value\tUnrealized Loss (1)\tFair Value\tUnrealized Loss\tFair Value\tUnrealized Loss\nMunicipal bonds\t14.3\t0\t0\t0\t14.3\t0\nCorporate bonds\t29.1\t0\t0\t0\t29.1\t0\nU.S. agency securities\t8.6\t0\t0\t0\t8.6\t0\nU.S. treasury securities\t13.8\t0\t0\t0\t13.8\t0\nTotal\t65.8\t0\t0\t0\t65.8\t0\nNumber of securities with an unrealized loss\t\t46\t\t0\t\t46\n", "q10k_tbl_22": "\tWithin One Year\tAfter One Within Five Years\tAfter Five Within Ten Years\tAfter Ten Years\tTotal\nMunicipal bonds\t24.1\t97.8\t0\t0\t121.9\nCorporate bonds\t197.1\t265.4\t0\t0\t462.5\nU.S. agency securities\t8.5\t9.6\t0\t0\t18.1\nU.S. treasury securities\t44.7\t14.7\t0\t0\t59.4\nCertificates of deposit\t33.7\t0\t0\t0\t33.7\nCommercial paper\t6.5\t0\t0\t0\t6.5\nTotal short-term investments\t314.6\t387.5\t0\t0\t702.1\n", "q10k_tbl_23": "\tSeptember 27 2020\t\t\t\tJune 28 2020\t\t\t\n(in millions of U.S. Dollars)\tLevel 1\tLevel 2\tLevel 3\tTotal\tLevel 1\tLevel 2\tLevel 3\tTotal\nAssets:\t\t\t\t\t\t\t\t\nCash equivalents:\t\t\t\t\t\t\t\t\nMoney market funds\t176.6\t0\t0\t176.6\t199.9\t0\t0\t199.9\nU.S. agency securities\t0\t13.0\t0\t13.0\t0\t19.6\t0\t19.6\nU.S. treasury securities\t35.7\t0\t0\t35.7\t19.0\t0\t0\t19.0\nCertificates of deposit\t0\t0\t0\t0\t0\t54.3\t0\t54.3\nCommercial paper\t0\t33.3\t0\t33.3\t0\t11.1\t0\t11.1\nTotal cash equivalents\t212.3\t46.3\t0\t258.6\t218.9\t85.0\t0\t303.9\nShort-term investments:\t\t\t\t\t\t\t\t\nMunicipal bonds\t0\t121.9\t0\t121.9\t0\t132.0\t0\t132.0\nCorporate bonds\t0\t462.5\t0\t462.5\t0\t480.1\t0\t480.1\nU.S. agency securities\t0\t18.1\t0\t18.1\t0\t29.1\t0\t29.1\nU.S. treasury securities\t59.4\t0\t0\t59.4\t52.9\t0\t0\t52.9\nCertificates of deposit\t0\t33.7\t0\t33.7\t0\t95.3\t0\t95.3\nCommercial paper\t0\t6.5\t0\t6.5\t0\t11.0\t0\t11.0\nVariable rate demand note\t0\t0\t0\t0\t0\t2.5\t0\t2.5\nTotal short-term investments\t59.4\t642.7\t0\t702.1\t52.9\t750.0\t0\t802.9\nOther long-term investments:\t\t\t\t\t\t\t\t\nCommon stock of non-U.S. corporations\t0\t53.0\t0\t53.0\t0\t55.9\t0\t55.9\nTotal assets\t271.7\t742.0\t0\t1013.7\t271.8\t890.9\t0\t1162.7\n", "q10k_tbl_24": "(in millions of U.S. Dollars)\tWolfspeed\tLED Products\tTotal\nBalance at June 28 2020\t349.7\t180.3\t530.0\nImpairment\t0\t(105.7)\t(105.7)\nBalance at September 27 2020\t349.7\t74.6\t424.3\n", "q10k_tbl_25": "\tSeptember 27 2020\t\t\tJune 28 2020\t\t\n(in millions of U.S. Dollars)\tGross\tAccumulated Amortization\tNet\tGross\tAccumulated Amortization\tNet\nCustomer relationships\t147.8\t($71.5)\t76.3\t147.8\t($70.0)\t77.8\nDeveloped technology\t74.9\t(31.1)\t43.8\t74.9\t(29.7)\t45.2\nNon-compete agreements\t12.2\t(7.8)\t4.4\t12.2\t(7.1)\t5.1\nTrade names\t0.5\t(0.5)\t0\t0.5\t(0.5)\t0\nAcquisition related intangible assets\t235.4\t(110.9)\t124.5\t235.4\t(107.3)\t128.1\nPatent and licensing rights\t114.8\t(63.9)\t50.9\t114.6\t(63.1)\t51.5\nTotal intangible assets\t350.2\t($174.8)\t175.4\t350.0\t($170.4)\t179.6\n", "q10k_tbl_26": "(in millions of U.S. Dollars) Fiscal Year Ending\tAcquisition Related Intangibles\tPatents\tTotal\nJune 27 2021\t10.9\t6.6\t17.5\nJune 26 2022\t13.5\t7.9\t21.4\nJune 25 2023\t11.0\t6.9\t17.9\nJune 30 2024\t10.4\t6.0\t16.4\nJune 29 2025\t10.4\t4.8\t15.2\nThereafter\t68.3\t18.7\t87.0\nTotal future amortization expense\t124.5\t50.9\t175.4\n", "q10k_tbl_27": "(in millions of U.S. Dollars)\tSeptember 27 2020\tJune 28 2020\nPrincipal\t999.8\t999.8\nUnamortized discount and issuance costs\t(206.2)\t(216.0)\nNet carrying amount\t793.6\t783.8\n", "q10k_tbl_28": "(in millions of U.S. Dollars)\tSeptember 27 2020\tJune 28 2020\nDiscount related to value of conversion option\t262.3\t262.3\nPartial extinguishment of 2023 Notes\t(27.7)\t(27.7)\nDebt issuance costs\t(6.3)\t(6.3)\nNet carrying amount\t228.3\t228.3\n", "q10k_tbl_29": "\tThree months ended\t\n(in millions of U.S. Dollars)\t\tSeptember 27 2020\t\t\t\tSeptember 29 2019\t\t\nInterest expense net of capitalized interest\t\t3.2\t\t\t\t1.3\t\t\nAmortization of discount and issuance costs net of capitalized interest\t\t9.4\t\t\t\t5.6\t\t\nTotal interest expense net\t\t12.6\t\t\t\t6.9\t\t\n", "q10k_tbl_30": "\tThree months ended\t\n(in millions of U.S. Dollars except share data)\t\tSeptember 27 2020\t\t\t\tSeptember 29 2019\t\t\nNet loss attributable to controlling interest\t\t($184.4)\t\t\t\t($37.8)\t\t\nWeighted average shares - basic and diluted (in thousands)\t\t109705\t\t\t\t107113\t\t\nLoss per share - basic and diluted:\t\t\t\t\t\t\t\t\nNet loss attributable to controlling interest\t\t($1.68)\t\t\t\t($0.35)\t\t\n", "q10k_tbl_31": "(shares in thousands)\tNumber of Shares\tWeighted Average Exercise Price\nOutstanding at June 28 2020\t983\t37.88\nGranted\t0\t0\nExercised\t(374)\t44.27\nForfeited or expired\t(9)\t63.67\nOutstanding at September 27 2020\t600\t33.49\n", "q10k_tbl_32": "(awards and units in thousands)\tNumber of RSAs/RSUs\tWeighted Average Grant-Date Fair Value\nNonvested at June 28 2020\t2932\t43.89\nGranted\t998\t67.10\nVested\t(1053)\t37.44\nForfeited\t(103)\t37.75\nNonvested at September 27 2020\t2774\t55.10\n", "q10k_tbl_33": "\tThree months ended\t\n(in millions of U.S. Dollars)\t\tSeptember 27 2020\t\t\t\tSeptember 29 2019\t\t\nCost of revenue net\t\t3.6\t\t\t\t2.2\t\t\nResearch and development\t\t3.0\t\t\t\t2.4\t\t\nSales general and administrative\t\t9.1\t\t\t\t12.3\t\t\nTotal stock-based compensation expense\t\t15.7\t\t\t\t16.9\t\t\n", "q10k_tbl_34": "\tThree months ended\t\n\t\tSeptember 27 2020\t\t\t\tSeptember 29 2019\t\t\nRevenue:\t\t\t\t\t\t\t\t\nWolfspeed revenue\t\t115.5\t\t\t\t127.7\t\t\nLED Products revenue\t\t101.1\t\t\t\t115.1\t\t\nTotal revenue\t\t216.6\t\t\t\t242.8\t\t\nGross Profit and Gross Margin:\t\t\t\t\t\t\t\t\nWolfspeed gross profit\t\t42.3\t\t\t\t59.0\t\t\nWolfspeed gross margin\t\t36.6%\t\t\t\t46.2%\t\t\nLED Products gross profit\t\t22.4\t\t\t\t22.1\t\t\nLED Products gross margin\t\t22.2%\t\t\t\t19.2%\t\t\nTotal segment gross profit\t\t64.7\t\t\t\t81.1\t\t\nUnallocated costs (1)\t\t(10.7)\t\t\t\t(6.9)\t\t\nConsolidated gross profit\t\t54.0\t\t\t\t74.2\t\t\nConsolidated gross margin\t\t24.9%\t\t\t\t30.6%\t\t\n", "q10k_tbl_35": "\tThree months ended\t\t\n\t\tSeptember 27 2020\tSeptember 29 2019\t\t\t\t\t\t\n(in millions of U.S. Dollars)\t\t\tRevenue\t\t\t\t% of Revenue\t\t\t\t\t\tRevenue\t\t\t\t\t\t% of Revenue\t\t\nUnited States\t\t\t56.7\t\t\t\t26.2%\t\t\t\t\t\t55.4\t\t\t\t\t\t22.8%\t\t\nChina\t\t\t64.4\t\t\t\t29.7%\t\t\t\t\t\t73.2\t\t\t\t\t\t30.1%\t\t\nEurope\t\t\t51.0\t\t\t\t23.5%\t\t\t\t\t\t63.0\t\t\t\t\t\t25.9%\t\t\nOther\t\t\t44.5\t\t\t\t20.6%\t\t\t\t\t\t51.2\t\t\t\t\t\t21.2%\t\t\nTotal\t\t\t216.6\t\t\t\t\t\t\t\t\t\t242.8\t\t\t\t\t\t\t\t\n", "q10k_tbl_36": "\tSeptember 27 2020\tJune 28 2020\nWolfspeed\t106.7\t97.3\nLED Products\t71.7\t76.2\nTotal segment inventories\t178.4\t173.5\nUnallocated inventories\t8.9\t5.6\nConsolidated inventories\t187.3\t179.1\n", "q10k_tbl_37": "\tThree months ended\t\t\n\t\tSeptember 27 2020\tSeptember 29 2019\t\t\t\t\t\t\n(in millions of U.S. Dollars except share data)\t\t\tAmount\t\t\t\t% of Revenue\t\t\t\t\t\tAmount\t\t\t\t\t\t% of Revenue\t\t\nRevenue net\t\t\t216.6\t\t\t\t100.0%\t\t\t\t\t\t242.8\t\t\t\t\t\t100.0%\t\t\nCost of revenue net\t\t\t162.6\t\t\t\t75.1\t\t\t\t\t\t168.6\t\t\t\t\t\t69.4\t\t\nGross profit\t\t\t54.0\t\t\t\t24.9\t\t\t\t\t\t74.2\t\t\t\t\t\t30.6\t\t\nResearch and development\t\t\t49.6\t\t\t\t22.9\t\t\t\t\t\t43.7\t\t\t\t\t\t18.0\t\t\nSales general and administrative\t\t\t51.9\t\t\t\t24.0\t\t\t\t\t\t57.6\t\t\t\t\t\t23.7\t\t\nAmortization or impairment of acquisition-related intangibles\t\t\t3.6\t\t\t\t1.7\t\t\t\t\t\t3.6\t\t\t\t\t\t1.5\t\t\n(Gain) loss on disposal or impairment of other assets\t\t\t(0.2)\t\t\t\t(0.1)\t\t\t\t\t\t1.0\t\t\t\t\t\t0.4\t\t\nGoodwill impairment\t\t\t105.7\t\t\t\t48.8\t\t\t\t\t\t0\t\t\t\t\t\t0\t\t\nOther operating expense\t\t\t13.4\t\t\t\t6.2\t\t\t\t\t\t7.2\t\t\t\t\t\t3.0\t\t\nOperating (loss) income\t\t\t(170.0)\t\t\t\t(78.5)\t\t\t\t\t\t(38.9)\t\t\t\t\t\t(16.0)\t\t\nNon-operating expense (income) net\t\t\t14.0\t\t\t\t6.5\t\t\t\t\t\t(1.6)\t\t\t\t\t\t(0.7)\t\t\nLoss before income taxes\t\t\t(184.0)\t\t\t\t(84.9)\t\t\t\t\t\t(37.3)\t\t\t\t\t\t(15.4)\t\t\nIncome tax expense\t\t\t0.1\t\t\t\t0\t\t\t\t\t\t0.5\t\t\t\t\t\t0.2\t\t\nNet loss\t\t\t(184.1)\t\t\t\t(85.0)\t\t\t\t\t\t(37.8)\t\t\t\t\t\t(15.6)\t\t\nNet income attributable to non-controlling interest\t\t\t0.3\t\t\t\t0.1\t\t\t\t\t\t0\t\t\t\t\t\t0\t\t\nNet loss attributable to controlling interest\t\t\t($184.4)\t\t\t\t(85.1)\t\t\t\t\t\t($37.8)\t\t\t\t\t\t(15.6)\t\t\nBasic and diluted loss per share\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t\nNet loss attributable to controlling interest\t\t\t($1.68)\t\t\t\t\t\t\t\t\t\t($0.35)\t\t\t\t\t\t\t\t\n", "q10k_tbl_38": "\tThree months ended\t\t\t\n(in millions of U.S. Dollars)\tSeptember 27 2020\tSeptember 29 2019\tChange\t\nWolfspeed revenue\t\t115.5\t127.7\t($12.2)\t\t\t\t(10)%\t\t\nPercent of revenue\t\t53%\t53%\t\t\t\t\t\t\t\nLED Products revenue\t\t101.1\t115.1\t(14.0)\t\t\t\t(12)%\t\t\nPercent of revenue\t\t47%\t47%\t\t\t\t\t\t\t\nTotal revenue\t\t216.6\t242.8\t($26.2)\t\t\t\t(11)%\t\t\n", "q10k_tbl_39": "\tThree months ended\t\t\t\n(in millions of U.S. Dollars)\tSeptember 27 2020\tSeptember 29 2019\tChange\t\nWolfspeed gross profit\t\t42.3\t59.0\t($16.7)\t\t\t\t(28)%\t\t\nWolfspeed gross margin\t\t36.6%\t46.2%\t\t\t\t\t\t\t\nLED Products gross profit\t\t22.4\t22.1\t0.3\t\t\t\t1%\t\t\nLED Products gross margin\t\t22.2%\t19.2%\t\t\t\t\t\t\t\nUnallocated costs (1)\t\t(10.7)\t(6.9)\t(3.8)\t\t\t\t(55)%\t\t\nConsolidated gross profit\t\t54.0\t74.2\t($20.2)\t\t\t\t(27)%\t\t\nConsolidated gross margin\t\t24.9%\t30.6%\t\t\t\t\t\t\t\n", "q10k_tbl_40": "\tThree months ended\t\t\t\n(in millions of U.S. Dollars)\tSeptember 27 2020\tSeptember 29 2019\tChange\t\nResearch and development\t\t49.6\t43.7\t5.9\t\t\t\t14%\t\t\nPercent of revenue\t\t23%\t18%\t\t\t\t\t\t\t\n", "q10k_tbl_41": "\tThree months ended\t\t\t\n(in millions of U.S. Dollars)\tSeptember 27 2020\tSeptember 29 2019\tChange\t\nSales general and administrative\t\t51.9\t57.6\t($5.7)\t\t\t\t(10)%\t\t\nPercent of revenue\t\t24%\t24%\t\t\t\t\t\t\t\n", "q10k_tbl_42": "\tThree months ended\t\t\t\n(in millions of U.S. Dollars)\tSeptember 27 2020\tSeptember 29 2019\tChange\t\nCustomer relationships\t\t1.5\t1.5\t0\t\t\t\t-%\t\t\nDeveloped technology\t\t1.4\t1.4\t0\t\t\t\t-%\t\t\nNon-compete agreements\t\t0.7\t0.7\t0\t\t\t\t-%\t\t\nTotal amortization\t\t3.6\t3.6\t0\t\t\t\t-%\t\t\n", "q10k_tbl_43": "\tThree months ended\t\t\t\n(in millions of U.S. Dollars)\tSeptember 27 2020\tSeptember 29 2019\tChange\t\n(Gain) loss on disposal or impairment of other assets\t\t($0.2)\t1.0\t($1.2)\t\t\t\t(120)%\t\t\n", "q10k_tbl_44": "\tThree months ended\t\t\t\n(in millions of U.S. Dollars)\tSeptember 27 2020\tSeptember 29 2019\tChange\t\nFactory optimization restructuring\t\t1.6\t1.2\t0.4\t\t\t\t33%\t\t\nSeverance and other restructuring\t\t3.2\t0.8\t2.4\t\t\t\t300%\t\t\nTotal restructuring costs\t\t4.8\t2.0\t2.8\t\t\t\t140%\t\t\nProject transformation and transaction costs\t\t5.6\t2.6\t3.0\t\t\t\t115%\t\t\nFactory optimization start-up costs\t\t3.0\t1.4\t1.6\t\t\t\t114%\t\t\nNon-restructuring related executive severance\t\t0\t1.2\t(1.2)\t\t\t\t(100)%\t\t\nOther operating expense\t\t13.4\t7.2\t6.2\t\t\t\t86%\t\t\n", "q10k_tbl_45": "\tThree months ended\t\t\t\n(in millions of U.S. Dollars)\tSeptember 27 2020\tSeptember 29 2019\tChange\t\nLoss (gain) on equity investment net\t\t3.4\t($3.5)\t6.9\t\t\t\t(197)%\t\t\nForeign currency loss net\t\t0\t0.1\t(0.1)\t\t\t\t(100)%\t\t\nInterest income\t\t(2.7)\t(5.5)\t2.8\t\t\t\t(51)%\t\t\nInterest expense net of capitalized interest\t\t13.1\t7.4\t5.7\t\t\t\t(77)%\t\t\nOther net\t\t0.2\t(0.1)\t0.3\t\t\t\t(300)%\t\t\nNon-operating expense (income) net\t\t14.0\t($1.6)\t15.6\t\t\t\t(975)%\t\t\n", "q10k_tbl_46": "\tThree months ended\t\t\t\n(in millions of U.S. Dollars)\tSeptember 27 2020\tSeptember 29 2019\tChange\t\nIncome tax expense\t\t0.1\t0.5\t($0.4)\t\t\t\t(80)%\t\t\nEffective tax rate\t\t-%\t(1)%\t\t\t\t\t\t\t\n", "q10k_tbl_47": "\tThree months ended\t\t\n\tSeptember 27 2020\tJune 28 2020\tChange\nDays of sales outstanding (a)\t33\t37\t(4)\nDays of supply in inventory (b)\t104\t104\t0\nDays in accounts payable (c)\t(112)\t(103)\t(9)\nCash conversion cycle\t25\t38\t(13)\n", "q10k_tbl_48": "\tThree months ended\t\t\t\n\tSeptember 27 2020\tSeptember 29 2019\tChange\t\nCash provided by (used in) operating activities\t0.4\t($20.0)\t20.4\t(102)%\nCash used in investing activities\t(16.0)\t(52.3)\t36.3\t69%\nCash provided by financing activities\t3.1\t5.4\t(2.3)\t(43)%\nEffect of foreign exchange changes\t0.1\t(0.3)\t0.4\t(133)%\nNet change in cash and cash equivalents\t($12.4)\t($67.2)\t54.8\t(82)%\n", "q10k_tbl_49": "\t\t\tIncorporated by Reference\t\t\nExhibit No.\tDescription\tFiled Herewith\tForm\tExhibit\tFiling Date\n2.1^\tAsset Purchase Agreement dated October 18 2020 between Cree Inc. SMART Global Holdings Inc. and Chili Acquisition Inc.\tX\t\t\t\n10.1\tNotice of Grant to Gregg A. Lowe dated August 24 2020\t\t8-K\t10.1\t8/28/2020\n10.2\tNotice of Grant to Neill P. Reynolds dated August 24 2020\t\t8-K\t10.2\t8/28/2020\n10.3\tForm of Performance Share Award Agreement for Gregg A. Lowe\t\t8-K\t10.1\t9/8/2020\n31.1\tCertification by Chief Executive Officer pursuant to Rule 13a-14(a) under the Securities Exchange Act of 1934 as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002\tX\t\t\t\n31.2\tCertification by Chief Financial Officer pursuant to Rule 13a-14(a) under the Securities Exchange Act of 1934 as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002\tX\t\t\t\n32.1\tCertification by Chief Executive Officer pursuant to 18 U.S.C. Section 1350 as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002\tX\t\t\t\n32.2\tCertification by Chief Financial Officer pursuant to 18 U.S.C. Section 1350 as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002\tX\t\t\t\n101\tThe following materials from Cree Inc.'s Quarterly Report on Form 10-Q for the fiscal quarter ended September 27 2020 formatted in Inline XBRL (eXtensible Business Reporting Language): (i) Consolidated Balance Sheets; (ii) Consolidated Statements of Operations; (iii) Consolidated Statements of Comprehensive Loss; (iv) Consolidated Statement of Shareholders' Equity; (v) Consolidated Statements of Cash Flows; and (vi) Notes to Consolidated Financial Statements\tX\t\t\t\n104\tThe cover page from Cree Inc.'s Quarterly Report on Form 10-Q for the quarter ended September 27 2020 formatted in Inline XBRL (included in Exhibit 101)\tX\t\t\t\n"}{"bs": "q10k_tbl_3", "is": "q10k_tbl_4", "cf": "q10k_tbl_8"}None
☒ 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
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 October 23, 2020, was 110,340,000.
in millions of U.S. Dollars, except share data in thousands
September 27, 2020
June 28, 2020
Assets
Current assets:
Cash and cash equivalents
$436.4
$448.8
Short-term investments
702.1
802.9
Total cash, cash equivalents and short-term investments
1,138.5
1,251.7
Accounts receivable, net
108.5
114.0
Inventories
187.3
179.1
Income taxes receivable
6.7
6.6
Prepaid expenses
28.4
26.3
Other current assets
14.6
13.8
Current assets held for sale
1.3
1.3
Total current assets
1,485.3
1,592.8
Property and equipment, net
940.9
831.1
Goodwill
424.3
530.0
Intangible assets, net
175.4
179.6
Other long-term investments
53.0
55.9
Deferred tax assets
7.3
6.3
Other assets
37.1
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 liabilities
36.2
38.3
Income taxes payable
2.9
3.2
Finance lease liabilities
0.4
3.6
Other current liabilities
30.0
25.3
Total current liabilities
343.4
291.2
Long-term liabilities:
Convertible notes, net
793.6
783.8
Deferred tax liabilities
3.1
1.8
Finance lease liabilities - long-term
10.3
11.4
Other long-term liabilities
57.8
53.6
Total long-term liabilities
864.8
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-capital
3,116.2
3,106.2
Accumulated other comprehensive income
16.0
16.0
Accumulated deficit
(1,223.6)
(1,039.2)
Total shareholders’ equity
1,908.7
2,083.1
Non-controlling interest
6.4
6.1
Total equity
1,915.1
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
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
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.
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, 2020
June 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 liabilities
14.6
13.9
Finance Leases:
Finance lease assets (4)
11.4
15.4
Current portion of finance lease liabilities
0.4
3.6
Finance lease liabilities, less current portion
10.3
11.4
Total finance lease liabilities
10.7
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 paid for interest portion of financing leases
0.1
—
Cash used in financing activities:
Cash paid for principal portion of finance leases
0.1
—
Non-cash operating activities:
Operating lease additions due to adoption of ASC 842
—
12.2
Operating lease additions and modifications, net
1.8
0.5
Finance lease additions
—
—
Non-cash investing activities (1):
Transfer of finance lease liability to accounts payable and accrued expenses
4.2
—
(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 Ending
Operating Leases
Finance Leases
Total
June 27, 2021 (remainder of fiscal 2021)
$4.9
$0.5
$5.4
June 26, 2022
4.9
0.6
5.5
June 25, 2023
3.0
0.7
3.7
June 30, 2024
1.2
0.7
1.9
June 29, 2025
1.0
0.7
1.7
Thereafter
0.4
15.3
15.7
Total lease payments
15.4
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 Leases
Finance Leases
Weighted average remaining lease term (in months) (1)
39
470
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%.
Other operating expense consisted of the following:
Three months ended
(in millions of U.S. Dollars)
September 27, 2020
September 29, 2019
Factory optimization restructuring
$1.6
$1.2
Severance and other restructuring
3.2
0.8
Total restructuring costs
4.8
2.0
Project, transformation and transaction costs
5.6
2.6
Factory optimization start-up costs
3.0
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, 2020
June 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, 2020
September 29, 2019
Foreign currency loss, net
$—
$0.1
Loss (gain) on equity investment, net
3.4
(3.5)
Interest income
(2.7)
(5.5)
Interest expense, net of capitalized interest
13.1
7.4
Other, net
0.2
(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.
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: