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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 26, 2021
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
__________________________________________ 
WOLFSPEED, 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 valueWOLFNew York Stock Exchange
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 22, 2021, was 116,217,170.


Table of Contents
WOLFSPEED, INC.
FORM 10-Q
For the Quarterly Period Ended September 26, 2021
Table of Contents

2

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

3

Table of Contents
WOLFSPEED, INC.
UNAUDITED CONSOLIDATED BALANCE SHEETS
in millions of U.S. Dollars, except share data in thousandsSeptember 26, 2021June 27, 2021
Assets
Current assets:
Cash and cash equivalents$261.5 $379.0 
Short-term investments596.3 775.6 
Total cash, cash equivalents and short-term investments857.8 1,154.6 
Accounts receivable, net106.4 95.9 
Inventories183.0 166.6 
Income taxes receivable6.5 6.4 
Prepaid expenses33.3 25.7 
Other current assets43.2 27.9 
Current assets held for sale1.7 1.6 
Total current assets1,231.9 1,478.7 
Property and equipment, net1,343.3 1,292.3 
Goodwill359.2 359.2 
Intangible assets, net136.5 140.5 
Long-term receivables140.0 138.4 
Deferred tax assets1.0 1.0 
Other assets36.9 35.5 
Long-term assets of discontinued operations 1.2 
Total assets$3,248.8 $3,446.8 
Liabilities and Shareholders' Equity
Current liabilities:
Accounts payable and accrued expenses$247.7 $381.1 
Accrued contract liabilities25.6 22.9 
Income taxes payable0.4 0.4 
Finance lease liabilities8.7 5.2 
Other current liabilities36.6 38.6 
Current liabilities of discontinued operations 0.6 
Total current liabilities319.0 448.8 
Long-term liabilities:
Convertible notes, net834.4 823.9 
Deferred tax liabilities2.7 2.5 
Finance lease liabilities - long-term9.9 10.0 
Other long-term liabilities43.4 44.5 
Long-term liabilities of discontinued operations 0.6 
Total long-term liabilities890.4 881.5 
Commitments and contingencies
Shareholders’ equity:
Preferred stock, par value $0.01; 3,000 shares authorized at September 26, 2021 and June 27, 2021; none issued and outstanding
  
Common stock, par value $0.00125; 200,000 shares authorized at September 26, 2021 and June 27, 2021; 116,186 and 115,691 shares issued and outstanding at September 26, 2021 and June 27, 2021, respectively
0.1 0.1 
Additional paid-in-capital3,670.6 3,676.8 
Accumulated other comprehensive income1.9 2.7 
Accumulated deficit(1,633.2)(1,563.1)
Total shareholders’ equity2,039.4 2,116.5 
Total liabilities and shareholders’ equity$3,248.8 $3,446.8 
The accompanying notes are an integral part of the consolidated financial statements
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WOLFSPEED, INC.
UNAUDITED CONSOLIDATED STATEMENTS OF OPERATIONS
 
 Three months ended
 September 26, 2021September 27, 2020
in millions of U.S. Dollars, except share data
Revenue, net$156.6 $115.5 
Cost of revenue, net107.2 80.0 
Gross profit49.4 35.5 
Operating expenses:
Research and development49.9 41.2 
Sales, general and administrative49.0 44.0 
Amortization or impairment of acquisition-related intangibles3.6 3.6 
(Gain) loss on disposal or impairment of other assets(0.2)0.3 
Other operating expense12.8 8.6 
Operating loss(65.7)(62.2)
Non-operating expense, net4.1 13.9 
Loss before income taxes(69.8)(76.1)
Income tax expense (benefit)0.3 (0.8)
Net loss from continuing operations(70.1)(75.3)
Net loss from discontinued operations (108.8)
Net loss(70.1)(184.1)
Net income from discontinued operations attributable to noncontrolling interest 0.3 
Net loss attributable to controlling interest($70.1)($184.4)
Basic and diluted loss per share
Continuing operations($0.60)($0.69)
Net loss attributable to controlling interest($0.60)($1.68)
Weighted average shares - basic and diluted (in thousands)115,919 109,705 
The accompanying notes are an integral part of the consolidated financial statements
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WOLFSPEED, INC.
UNAUDITED CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS
 Three months ended
(in millions of U.S. Dollars)September 26, 2021September 27, 2020
Net loss($70.1)($184.1)
Other comprehensive loss:
Net unrealized loss on available-for-sale securities(0.8) 
Comprehensive loss (70.9)(184.1)
Net income from discontinued operations attributable to noncontrolling interest 0.3 
Comprehensive loss attributable to controlling interest($70.9)($184.4)
The accompanying notes are an integral part of the consolidated financial statements
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WOLFSPEED, INC.
UNAUDITED CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
Common StockAdditional Paid-in CapitalAccumulated DeficitAccumulated Other Comprehensive IncomeTotal Shareholders' Equity
(in millions of U.S Dollars, except share data)Number of SharesPar Value
Balance at June 27, 2021115,691 $0.1 $3,676.8 ($1,563.1)$2.7 $2,116.5 
Net loss— — — (70.1)— (70.1)
Unrealized loss on available-for-sale securities— — — — (0.8)(0.8)
Comprehensive loss(70.9)
Tax withholding on vested equity awards— — (22.5)— — (22.5)
Stock-based compensation— — 15.6 — — 15.6 
Exercise of stock options and issuance of shares495 — 0.7 — — 0.7 
Balance at September 26, 2021116,186 $0.1 $3,670.6 ($1,633.2)$1.9 $2,039.4 
The accompanying notes are an integral part of the consolidated financial statements
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WOLFSPEED, INC.
UNAUDITED CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
Common StockAdditional Paid-in CapitalAccumulated DeficitAccumulated Other Comprehensive IncomeTotal Equity - Controlled InterestNon-controlling Interest from Discontinued OperationsTotal Shareholders' 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) income— — — (184.4)— (184.4)0.3 (184.1)
Unrealized gain on available-for-sale securities— — — —   —  
Comprehensive (loss) income(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
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WOLFSPEED, INC.
UNAUDITED CONSOLIDATED STATEMENTS OF CASH FLOWS
 Three months ended
(in millions of U.S. Dollars)September 26, 2021September 27, 2020
Operating activities:
Net loss($70.1)($184.1)
Net loss from discontinued operations (108.8)
Net loss from continuing operations(70.1)(75.3)
Adjustments to reconcile net loss from continuing operations to cash (used in) provided by operating activities:
Depreciation and amortization34.6 27.4 
Amortization of debt issuance costs and discount, net of non-cash capitalized interest5.1 9.4 
Stock-based compensation14.6 13.7 
Loss on disposal or impairment of long-lived assets0.8 0.2 
Amortization of premium/discount on investments1.7 1.5 
Realized gain on sale of investments(0.2) 
Loss on equity investment 3.4 
Foreign exchange gain on equity investment (0.5)
Deferred income taxes0.2 0.3 
Changes in operating assets and liabilities:
Accounts receivable, net(10.5)11.4 
Inventories(22.5)(11.0)
Prepaid expenses and other assets1.2 5.3 
Accounts payable, trade(5.2)(2.7)
Accrued salaries and wages and other liabilities(14.9)17.4 
Accrued contract liabilities2.7 0.2 
Net cash (used in) provided by operating activities of continuing operations(62.5)0.7 
Net cash used in operating activities of discontinued operations (0.3)
Cash (used in) provided by operating activities(62.5)0.4 
Investing activities:
Purchases of property and equipment(259.3)(113.5)
Purchases of patent and licensing rights(1.0)(1.2)
Proceeds from sale of property and equipment0.5 0.6 
Purchases of short-term investments(8.7)(61.7)
Proceeds from maturities of short-term investments77.2 157.8 
Proceeds from sale of short-term investments108.5 3.2 
Reimbursement of property and equipment purchases from long-term incentive agreement50.8  
Net cash used in investing activities of continuing operations(32.0)(14.8)
Net cash used in investing activities of discontinued operations (1.2)
Cash used in investing activities(32.0)(16.0)
Financing activities:
Proceeds from long-term debt borrowings20.0  
Payments on long-term debt borrowings, including finance lease obligations(20.1)(0.1)
Proceeds from issuance of common stock0.7 16.5 
Tax withholding on vested equity awards(22.5)(12.8)
Commitment fee on long-term incentive agreement(1.0)(0.5)
Cash (used in) provided by financing activities(22.9)3.1 
Effects of foreign exchange changes on cash and cash equivalents(0.1)0.1 
Net change in cash and cash equivalents(117.5)(12.4)
Cash and cash equivalents, beginning of period379.0 448.8 
Cash and cash equivalents, end of period$261.5 $436.4 
The accompanying notes are an integral part of the consolidated financial statements
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WOLFSPEED, INC.
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS


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Note 1 – Basis of Presentation and New Accounting Standards
Overview
Wolfspeed, Inc. (the Company), formally known as Cree, Inc., is an innovator of wide bandgap semiconductors, focused on Silicon Carbide and gallium nitride (GaN) materials and devices for power and radio-frequency (RF) applications. The Company's Silicon Carbide and GaN materials and devices are targeted for applications such as transportation, power supplies, inverters and wireless systems.
Previously, the Company designed, manufactured and sold specialty lighting-class light emitting diode (LED) products targeted for use in indoor and outdoor lighting, electronic signs and signals and video displays. As discussed more fully below in Note 2, “Discontinued Operations,” on March 1, 2021, the Company completed the sale of certain assets and subsidiaries comprising its former LED Products segment (the LED Business Divestiture) to SMART Global Holdings, Inc. (SGH) and its wholly owned newly-created acquisition subsidiary CreeLED, Inc. (CreeLED and collectively with SGH, SMART).
Unless otherwise noted, discussion within these notes to the consolidated financial statements relates to the Company's continuing operations.
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.
In January 2021, the Company announced plans to change its corporate name from Cree, Inc. to Wolfspeed, Inc., which was completed on October 4, 2021. In addition, the Company transferred the listing of its common stock to the New York Stock Exchange (NYSE) from The Nasdaq Global Select Market (Nasdaq). The Company ceased trading as a Nasdaq-listed company at the end of the day on October 1, 2021 and commenced trading as a NYSE-listed company at market open on October 4, 2021 under the new ticker symbol ‘WOLF’.
The majority of the Company's products are manufactured at its production facilities located in North Carolina, California and Arkansas. The Company also uses contract manufacturers for certain products and aspects of product fabrication, assembly and packaging. Additionally, the Company is in the process of building a Silicon Carbide device fabrication facility in New York. The Company operates research and development facilities in North Carolina, California, Arkansas, Arizona and New York.
Wolfspeed, Inc. is a North Carolina corporation established in 1987, and its headquarters are in Durham, North Carolina.
Basis of Presentation
The consolidated financial statements presented herein have been prepared by the Company and have not been audited. In the opinion of management, all normal and recurring adjustments necessary to fairly state the consolidated financial position, results of operations, comprehensive loss, shareholders' equity and cash flows at September 26, 2021, and for all periods presented, have been made. All material intercompany accounts and transactions have been eliminated. The consolidated balance sheet at June 27, 2021 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 27, 2021 (fiscal 2021) (the 2021 Form 10-K). The results of operations for the three months ended September 26, 2021 are not necessarily indicative of the operating results that may be attained for the entire fiscal year ending June 26, 2022 (fiscal 2022). Additionally, the impact of the COVID-19 pandemic to the results of operations remains uncertain.
Certain accounting matters that generally require consideration of forecasted financial information were assessed regarding impacts from the COVID-19 pandemic as of September 26, 2021 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 26, 2021, the Company believes the full impact of the COVID-19 pandemic remains uncertain and will continue to assess if ongoing developments related to the COVID-19 pandemic may cause future material impacts to its consolidated financial statements.
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Change in Estimate
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.
As a result of the LED Business Divestiture and the Company's continued investment in 200mm technology, the Company evaluated the useful lives applied to certain machinery and equipment assets by considering industry standards and reviewing the assets' historical and estimated future use. In the first quarter of fiscal 2022, the Company increased the expected useful lives of these assets by two to five years to more closely reflect the estimated economic lives of those assets. This change in estimate was applied prospectively effective for the first quarter of fiscal 2022 and resulted in a decrease in depreciation expense of $8.4 million for the first quarter of fiscal 2022. Approximately $7.1 million of the decrease in depreciation expense resulted in a reduction of inventory as of September 26, 2021 and will impact cost of revenue, net in future periods as the inventory is relieved. The remaining $1.3 million of reduced depreciation expense resulted in the following: (1) an improvement in gross profit of $0.5 million; (2) an improvement in both loss before income taxes and net loss of $1.3 million; and (3) an improvement in basic and diluted loss per share of $0.01 per share.
Recently Adopted Accounting Pronouncements
None.
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 will adopt this standard on June 27, 2022, as required, and is currently evaluating the impact on its consolidated financial statements.

Note 2 – Discontinued Operations
On March 1, 2021, the Company completed the LED Business Divestiture pursuant to the terms of the Asset Purchase Agreement (the LED Purchase Agreement), dated October 18, 2020, as amended. Pursuant to the LED Purchase Agreement, (i) the Company completed the sale to SMART of (a) certain equipment, inventory, intellectual property rights, contracts, and real estate comprising the Company’s former LED Products segment, (b) all of the issued and outstanding equity interests of Cree Huizhou Solid State Lighting Company Limited (Cree Huizhou), a limited liability company organized under the laws of the People’s Republic of China and an indirect wholly owned subsidiary of the Company, and (c) the Company’s ownership interest in Cree Venture LED Company Limited., the Company’s joint venture with San’an Optoelectronics Co., Ltd. (collectively, the LED Business); and (ii) SMART assumed certain liabilities related to the LED Business. The Company retained certain assets used in and pre-closing liabilities associated with the former LED Products segment.
The purchase price for the LED Business consisted of (i) a payment of $50 million in cash, subject to customary adjustments, (ii) an unsecured promissory note issued to the Company by SGH in the amount of $125 million (the Purchase Price Note), (iii) the potential to receive an earn-out payment between $2.5 million and $125 million based on the revenue and gross profit performance of the LED Business in the first four full fiscal quarters following the closing (the Earnout Period), also payable in the form of a unsecured promissory note of SGH (the Earnout Note), and (iv) the assumption of certain liabilities. The Purchase Price Note and the Earnout Note will accrue interest at a rate of three-month LIBOR plus 3.0% with interest paid every three months and one bullet payment of principal and all accrued and unpaid interest will be payable on the maturity date of the Purchase Price Note and Earnout Note. The Purchase Price Note will mature on August 15, 2023, and the Earnout Note will mature on March 27, 2025. In fiscal 2021, the Company recognized a loss on sale of the LED Business of $29.1 million. The cost of selling the LED Business was $27.4 million, which was recognized throughout fiscal 2020 and 2021.
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In connection with the closing of the LED Business Divestiture, the Company and CreeLED also entered into certain ancillary and related agreements, including (i) an Intellectual Property Assignment and License Agreement, which assigned to CreeLED certain intellectual property owned by the Company and its affiliates and licensed to CreeLED certain additional intellectual property owned by the Company, (ii) a Transition Services Agreement (LED TSA), (iii) a Wafer Supply and Fabrication Services Agreement (the Wafer Supply Agreement), pursuant to which the Company will supply CreeLED with certain Silicon Carbide materials and fabrication services for up to four years, and (iv) a Real Estate License Agreement (LED RELA), which will allow CreeLED to use certain premises owned by the Company to conduct the LED Business for a period of up to 24 months after closing.
The following table presents the financial results of the LED Business as loss from discontinued operations, net of income taxes in the Company's consolidated statements of operations:
Three months ended
(in millions of U.S. Dollars)September 27, 2020
Revenue, net$101.1 
Cost of revenue, net82.6 
Gross profit18.5 
Operating expenses:
Research and development8.4 
Sales, general and administrative7.9 
Goodwill impairment105.7 
Gain on disposal or impairment of long-lived assets(0.5)
Other operating expense4.8 
Operating loss(107.8)
Non-operating expense, net0.1 
Loss before income taxes(107.9)
Income tax expense0.9 
Net loss(108.8)
Net income attributable to noncontrolling interest0.3 
Net loss attributable to controlling interest($109.1)
As of September 27, 2020, the Company determined it would more likely than not sell all or a portion of the assets comprising its former LED Products segment below carrying value. As a result, the Company recorded an impairment to goodwill of $105.7 million.
For the three months ended September 26, 2021, the Company recognized $0.9 million and $2.9 million in administrative fees related to the LED RELA and the LED TSA, respectively, of which $0.3 million and $0.9 million are included in accounts receivable, net in the consolidated balance sheets as of September 26, 2021. Fees related to the LED RELA were recorded as lease income, see Note 4, "Leases." Fees related to the LED TSA were recorded as a reduction in expense within the line item in the consolidated statements of operations in which costs were incurred.
At the inception of the Wafer Supply Agreement, the Company recorded a supply agreement liability of $31.0 million, of which $17.5 million was outstanding as of September 26, 2021. The Wafer Supply Agreement liability is recognized in other current liabilities and other long-term liabilities on the consolidated balance sheets.
The Company recognized a net loss of $0.8 million in non-operating expense, net for the three months ended September 26, 2021 related to the Wafer Supply Agreement. A receivable of $3.1 million was included in other assets in the consolidated balance sheets as of September 26, 2021.

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Note 3 – Revenue Recognition
In accordance with ASC 606, the Company follows a five-step approach for recognizing revenue, consisting of the following: (1) identify the contract with a customer; (2) identify the performance obligations in the contract; (3) determine the transaction price; (4) allocate the transaction price to the performance obligations in the contract; and (5) recognize revenue when, or as, the entity satisfies a performance obligation.
Contract liabilities primarily include various rights of return and customer deposits, as well as a reserve on the Company's "ship and debit" program. Contract liabilities were $47.8 million as of September 26, 2021 and $45.2 million as of June 27, 2021. The increase was primarily due to increased reserves on the Company's "ship and debit" program. Contract liabilities are recorded within accrued contract liabilities and other long-term liabilities on the consolidated balance sheets.
For the three months ended September 26, 2021, the Company did not recognize any revenue that was included in contract liabilities as of June 27, 2021.
Revenue recognized related to performance obligations that were satisfied or partially satisfied in previous periods was not material for the three months ended September 26, 2021.
The Company conducts business in several geographic areas. Revenue is attributed to a particular geographic region based on the shipping address for the products. Disaggregated revenue from external customers by geographic area is as follows:
 Three months ended
 September 26, 2021September 27, 2020
(in millions of U.S. Dollars)Revenue% of RevenueRevenue% of Revenue
Europe$58.1 37.1 %$35.8 31.0 %
United States26.0 16.6 %28.9 25.0 %
China42.9 27.4 %22.4 19.4 %
Japan10.3 6.6 %11.3 9.8 %
South Korea7.5 4.8 %7.4 6.4 %
Other11.8 7.5 %9.7 8.4 %
Total$156.6 $115.5 

Note 4 – Leases
The Company primarily leases manufacturing and office space. The Company also has a number of bulk gas leases. Lease agreements frequently include renewal provisions and require the Company to pay real estate taxes, insurance and maintenance costs. Variable costs include lease payments that were volume or usage-driven in accordance with the use of the underlying asset, as well as non-lease components incurred with respect to actual terms rather than contractually fixed amounts.
The Company's finance lease obligations include manufacturing equipment, manufacturing space in Malaysia, and a 49-year ground lease on a future Silicon Carbide device fabrication facility in New York.
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Balance Sheet
Lease assets and liabilities and the corresponding balance sheet classifications are as follows (in millions of U.S. Dollars):
Operating Leases:September 26, 2021June 27, 2021
Right-of-use asset (1)
$13.3 $12.1 
Current lease liability (2)
6.6 4.5 
Non-current lease liability (3)
6.4 7.5 
Total operating lease liabilities13.0 12.0 
Finance Leases:
Finance lease assets (4)
$18.6 $15.5 
Current portion of finance lease liabilities8.7 5.2 
Finance lease liabilities, less current portion9.9 10.0 
Total finance lease liabilities18.6 15.2 
(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 $1.5 million for the three months ended September 26, 2021 and $1.4 million for the three months ended September 27, 2020.
Short-term lease expense, variable lease expense and sublease income were immaterial for the three months ended September 26, 2021 and September 27, 2020.
Finance lease amortization was $0.4 million and interest expense was $0.1 million for the three months ended September 26, 2021. Finance lease amortization was $0.2 million and interest expense was $0.1 million for the three months ended September 27, 2020.
Cash Flows
Cash flow information consisted of the following:
Three months ended
(in millions of U.S. Dollars)September 26, 2021September 27, 2020
Cash used in operating activities:
Cash paid for operating leases$1.6 $1.3 
Cash paid for interest portion of financing leases0.1 0.1 
Cash used in financing activities:
Cash paid for principal portion of finance leases0.1 0.1 
Non-cash activities:
Operating lease additions and modifications, net2.6 1.2 
Finance lease additions3.5  
Transfer of finance lease liability to accounts payable and accrued expenses (1)
 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 26, 2021 were as follows (in millions of U.S. Dollars):
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Fiscal Year EndingOperating LeasesFinance LeasesTotal
June 26, 2022 (remainder of fiscal 2022)$5.7 $8.8 $14.5 
June 25, 20233.6 0.7 4.3 
June 30, 20242.2 0.7 2.9 
June 29, 20251.2 0.7 1.9 
June 28, 20260.7 0.7 1.4 
Thereafter0.1 14.5 14.6 
Total lease payments13.5 26.1 39.6 
Imputed lease interest(0.5)(7.5)(8.0)
Total lease liabilities$13.0 $18.6 $31.6 
Supplemental Disclosures
Operating LeasesFinance Leases
Weighted average remaining lease term (in months) (1)
27353
Weighted average discount rate (2)
2.54 %2.26 %
(1) Weighted average remaining lease term of finance leases without the 49-year ground lease is 24 months.
(2) Weighted average discount rate of finance leases without the 49-year ground lease is 1.78%.
Lease Income
As mentioned in Note 2, "Discontinued Operations", on March 1, 2021 and in connection with the sale of its LED Business, the Company entered into the LED RELA pursuant to which the Company leases to CreeLED approximately 58,000 square feet of the Company’s property and certain facilities in Durham, North Carolina for a total of $3.6 million per year. The lease term is 24 months and expires on February 28, 2023. Subject to certain provisions in the LED RELA, CreeLED may terminate its rights or a portion of its rights under the agreement at any time with sixty days written notice. A notice of thirty days is permitted under certain circumstances as defined in the agreement. The agreement does not contain any renewal provisions.
The Company recognized lease income of $0.9 million for the three months ended September 26, 2021. The Company did not recognize lease income for the three months ended September 27, 2020.
The Company did not recognize any variable lease income for the three months ended September 26, 2021 and September 27, 2020.
Future minimum rental income relating to the LED RELA is as follows (in millions of U.S. Dollars):
June 26, 2022 (remainder of fiscal 2022)2.7 
June 25, 20232.4 
Total future minimum rental income5.1 

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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 26, 2021June 27, 2021
Billed trade receivables$106.0 $95.6 
Unbilled contract receivables0.9 0.6 
Royalties0.4 0.5 
107.3 96.7 
Allowance for bad debts(0.9)(0.8)
Accounts receivable, net$106.4 $95.9 
    
Changes in the Company’s allowance for bad debts were as follows:
(in millions of U.S. Dollars)September 26, 2021
Balance at beginning of period$0.8 
Current period provision change0.1 
Write-offs, net of recoveries 
Balance at end of period$0.9 
Inventories
Inventories consisted of the following:
(in millions of U.S. Dollars)September 26, 2021June 27, 2021
Raw material$46.8 $43.3 
Work-in-progress121.6 109.5 
Finished goods14.6 13.8 
Inventories$183.0 $166.6 
In addition, the Company holds inventory related to the Wafer Supply Agreement entered into in connection with the LED Business Divestiture, which is recorded within other current assets on the consolidated balance sheets.
Accounts Payable and Accrued Expenses
Accounts payable and accrued expenses consisted of the following:
(in millions of U.S. Dollars)September 26, 2021June 27, 2021
Accounts payable, trade$38.2 $44.2 
Accrued salaries and wages60.2 69.5 
Accrued property and equipment128.9 248.3 
Accrued expenses19.5 17.4 
Other0.9 1.7 
Accounts payable and accrued expenses$247.7 $381.1 

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Other Operating Expense
Other operating expense consisted of the following:
Three months ended
(in millions of U.S. Dollars)September 26, 2021September 27, 2020
Factory optimization restructuring$2.6 $1.6 
Severance and other restructuring 2.8 
Total restructuring costs2.6 4.4 
Project, transformation and transaction costs1.6 1.2 
Factory optimization start-up costs8.6 3.0 
Other operating expense$12.8 $8.6 
Accumulated Other Comprehensive Income, net of taxes
Accumulated other comprehensive income, net of taxes, consisted of $1.9 million and $2.7 million of net unrealized gains on available-for-sale securities as of September 26, 2021 and June 27, 2021, respectively. Amounts for both periods 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
Reclassifications out of accumulated other comprehensive income were $0.2 million for the three months ended September 26, 2021 and less than $0.1 million for the three months ended September 27, 2020. 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 26, 2021September 27, 2020
Foreign currency gain, net($0.1)($0.2)
Gain on sale of investments, net(0.2) 
Loss on equity investment, net 3.4 
Interest income(2.6)(2.7)
Interest expense, net of capitalized interest6.7 13.1 
Loss on Wafer Supply Agreement0.8  
Other, net(0.5)0.3 
Non-operating expense, net$4.1 $13.9 
Statements of Cash Flows - non-cash activities
Three months ended
September 26, 2021September 27, 2020
Lease asset and liability additions$3.5 $1.1 
Lease asset and liability modifications, net2.6 0.1 
Transfer of finance lease liability to accounts payable and accrued expenses (1)
 4.2 
Decrease in property, plant and equipment from long-term incentive related receivables23.2  
(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.
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Accrued property and equipment as of September 26, 2021 and September 27, 2020 was $128.9 million and $108.2 million, respectively.
Note 6 – Investments
Investments consist of municipal bonds, corporate bonds, U.S. agency securities, U.S. treasury securities, certificates of deposit, commercial paper and variable rate demand notes. All short-term investments are classified as available-for-sale.
Short-term investments as of September 26, 2021 and June 27, 2021 consisted of the following:
 September 26, 2021
 Amortized CostGross Unrealized GainsGross Unrealized LossesCredit Loss AllowanceEstimated Fair Value
Municipal bonds$135.7 $1.7 $ $ $137.4 
Corporate bonds366.9 2.6 (0.2) 369.3 
U.S. agency securities13.8    13.8 
U.S. treasury securities46.1 0.2   46.3 
Certificates of deposit9.5    9.5 
Variable rate demand notes20.0    20.0 
Total short-term investments$592.0 $4.5 ($0.2)$ $596.3 
 June 27, 2021
 Amortized CostGross Unrealized GainsGross Unrealized LossesCredit Loss AllowanceEstimated Fair Value
Municipal bonds$139.4 $1.9 $ $ $141.3 
Corporate bonds456.5 3.3 (0.3) 459.5 
U.S. agency securities15.8    15.8 
U.S. treasury securities72.3 0.3 (0.1) 72.5 
Certificates of deposit16.5    16.5 
Commercial paper50.0    50.0 
Variable rate demand notes20.0    20.0 
Total short-term investments$770.5 $5.5 ($0.4)$ $775.6 
The Company does not include accrued interest in estimated fair values of short-term investments and does not record an allowance for credit losses on receivables related to accrued interest. Accrued interest receivable was $4.1 million and $5.5 million as of September 26, 2021 and June 27, 2021, respectively, and is recorded in other current assets on the consolidated balance sheets. When necessary, write offs of noncollectable interest income are recorded as a reversal to interest income. There were no write offs of noncollectable interest income during the three months ended September 26, 2021 and September 27, 2020.
The following tables present the gross unrealized losses and estimated fair value of the Company’s short-term investments, aggregated by investment type and the length of time that individual securities have been in a continuous unrealized loss position:
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