Table of ~~this Annual Report and our other reports is available without charge upon written request to Investor Relations, Cree, Inc., 4600 Silicon Drive, Durham, North Carolina 27703.~~Contents

Item 1A. Risk Factors

Described below are various risks and uncertainties that may affect our business. If any of the risks described below actually occurs, our business, financial condition or results of operations could be materially and adversely affected.

Risk categories and certain principal risks under each category (each described more fully below):

–Risks related to our global operations, including global macroeconomic and market risks

•Our business may be adversely affected by the state of the global economy, uncertainties in global financial markets, our ability, or our customers' or vendors' ability, to access funding, and possible trade tariffs and trade restrictions.

•We are subject to risks related to international sales and purchases.

–Risks related to sales, product development and manufacturing

•We face significant challenges managing our growth strategy.

•Variations in our production could impact our ability to reduce costs and could cause our margins to decline and our operating results to suffer.

•Our results of operations, financial condition and business could be harmed if we are ~~substantially dependent on~~unable to balance customer demand and capacity.

–Risks associated with our strategic transactions

•If we fail to evaluate and execute strategic opportunities successfully, our business may suffer.

•We are subject to a number of risks associated with the ~~acceptance~~sale of ~~new products.~~the RF Business, and these risks could adversely impact our operations, financial condition and business.

~~Our future success~~–Risks associated with cybersecurity, intellectual property and litigation

•We may ~~depend~~be subject to confidential information theft or misuse, which could harm our business and results of operations.

•There are limitations on our ability to ~~deliver new, higher performing~~protect our intellectual property.

–Risks related to legal, regulatory, accounting, tax and ~~lower cost solutions for existing and new markets and for customers to accept those solutions.~~ compliance matters

•We must introduce new products in a timely and cost-effective manner, and we must secure production orders for those products from our customers. The development of new products is a highly complex process, and we have in some instances experienced delays in completing the development and introduction of new products which has impacted our results in the past, such as in our fiscal 2016 third quarter and beyond. Our research and development efforts are aimed at solving increasingly complex problems, and we do not expect that all of our projects willmay be ~~successful. The successful development, introduction and acceptance of new products depend on a number of factors, including the following:~~

~~achievement of technology breakthroughs~~ required to ~~make commercially viable products;~~recognize a significant charge to earnings if our goodwill or other assets become impaired.

~~the accuracy~~•The adoption of ~~our predictions for market requirements;~~

~~our ability to predict, influence~~or changes in government and/or ~~react~~industry policies, standards or regulations relating to ~~evolving standards;~~

~~acceptance of our new product and systems designs;~~

~~acceptance of new technology in certain markets;~~

the ~~availability of qualified research and development personnel;~~

~~our timely completion of product designs and development;~~

~~our ability to develop repeatable processes to manufacture new products in sufficient quantities, with the desired specifications and at competitive costs;~~

~~our ability to effectively transfer increasingly complex products and technology from development to manufacturing;~~

~~our customers’ ability to develop competitive products incorporating our products; and~~

~~market acceptance~~efficiency, performance, vehicle range or other aspects of our products and the products in which they are utilized could impact the demand for our ~~customers’~~ products.

~~If any of these~~–General risk factors

–We may be required to recognize a significant charge to earnings if our goodwill or other ~~similar~~assets become impaired.

Risks related to our global operations, including global macroeconomic and market risks

Our business may be adversely affected by the state of the global economy, uncertainties in global financial markets, our ability, or our customers' or vendors' ability, to access funding, and possible trade tariffs and trade restrictions.

Our operations and performance depend significantly on worldwide economic and geopolitical conditions. Uncertainty about global economic conditions could result in customers postponing purchases of our products and services in response to tighter credit, unemployment, negative financial news and/or declines in income or asset values and other macroeconomic factors, ~~becomes problematic,~~which could have a material negative effect on demand for our products and services and, accordingly, on our business, results of operations or financial condition. For example, current global financial markets continue to reflect uncertainty, including recent bank failures in the United States, the ongoing military conflict between Russia and Ukraine and the COVID-19 pandemic. Given these uncertainties, there could be further disruptions to the global economy, financial markets and consumer confidence. If economic conditions deteriorate unexpectedly, our business and results of operations could be materially and adversely affected. For example, our customers, including our distributors and their customers, may experience difficulty obtaining the working capital and other financing necessary to support historical or projected purchasing patterns, which could negatively affect our results of operations.

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Recent global economic slowdowns could continue and potentially result in certain economies dipping into economic recessions, including in the United States. Additionally, increased inflation around the world, including in the United States, applies pressure to our costs. Continued economic slowdowns or recessions and inflationary pressures could have a negative impact on our business, including decreased demand, increased costs, and other challenges. Government actions to address economic slowdowns and increased inflation, including increased interest rates, also could result in negative impacts to our growth.

General trade tensions between the United States and China continue, and any economic and political uncertainty caused by the United States tariffs imposed on goods from China, among other potential countries, and any corresponding tariffs or currency devaluations from China or such other countries in response, has negatively impacted, and may in the future negatively impact, demand and/or increase the cost for our products. Additionally, Russia’s invasion of Ukraine in early 2022 triggered significant sanctions from the U.S. and European countries. Resulting changes in U.S. trade policy could trigger retaliatory actions by Russia, its allies and other affected countries, including China, resulting in a potential trade war. Furthermore, if the conflict between Russia and Ukraine continues for a prolonged period of time, or if other countries, including the U.S., become involved in the conflict, we could face significant adverse effects to our business and financial condition. For example, if our supply or customer arrangements are disrupted due to expanded sanctions or involvement of countries where we have operations or relationships, our business could be materially disrupted. Further, the use of cyberattacks could expand as part of the conflict, which could adversely affect our ability to maintain or enhance our cyber-security and data protection measures.

Although we believe we have adequate liquidity and capital resources to fund our operations for at least the next 12 months, we expect to need additional funding to fully complete all of our intended expansion initiatives, which we may seek to obtain through, among other avenues, government funding in both the United States or Europe, public or private equity offerings, and debt financings (which may involve retiring some of our existing debt). If unfavorable capital market conditions exist, we may not be able to ~~deliver~~raise sufficient capital on favorable terms and ~~introduce~~on a timely basis, if at all. If we issue equity or convertible debt securities to raise additional funds, our existing shareholders may experience dilution and the new equity or debt securities may have rights, preferences and privileges senior to those of our then-existing shareholders. If we incur additional debt, it may impose financial and operating covenants that could restrict the operations of our business. In a rising interest rate environment, debt financing will become more expensive and may have higher transactional and servicing costs. In addition, our existing indebtedness may limit our ability to obtain additional financing in the future. The potential inability to obtain adequate funding from debt or capital sources in the future could force us to self-fund strategic initiatives or even forego certain opportunities, which in turn could potentially harm our performance.

We are subject to risks related to international sales and purchases.

In fiscal 2023, 80% of our revenue was from outside the United States and we expect that revenue from international sales will continue to represent a significant portion of our total revenue. As such, a significant slowdown or instability in relevant foreign economies or lower investments in new infrastructure could have a negative impact on our sales. We also purchase a portion of the materials included in our products from overseas sources.

Our international sales and purchases are subject to numerous United States and foreign laws and regulations, including, without limitation, tariffs, trade sanctions, trade barriers, trade embargoes, regulations relating to import-export control, technology transfer restrictions, the International Traffic in Arms Regulation promulgated under the Arms Export Control Act, the Foreign Corrupt Practices Act and the anti-boycott provisions of the U.S. Export Administration Act. The U.S. Government has imposed, and in the future may impose, restrictions on shipments to some of our current customers. Government restrictions on sales to certain foreign customers will reduce company revenue and profit related to those customers in the short term and could have a potential long-term impact.

Our international sales are subject to variability as our selling prices become less competitive in countries with currencies that are declining in value against the U.S. Dollar and more competitive in countries with currencies that are increasing in value against the U.S. Dollar. In addition, our international purchases can become more expensive if the U.S. Dollar weakens against the foreign currencies in which we are billed. We may in the future enter into foreign currency derivative financial instruments in an effort to manage or hedge some of our foreign exchange rate risk. We may not be able to engage in hedging transactions in the future, and, even if we do, foreign currency fluctuations may still have a material adverse effect on our results of operations.

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Our operations in foreign countries expose us to certain risks inherent in doing business internationally, which may adversely affect our business, results of operations or financial condition.

We have revenue, operations and contract manufacturing arrangements in foreign countries that expose us to certain risks. For example, fluctuations in exchange rates may affect our revenue, expenses and results of operations as well as the value of our assets and liabilities as reflected in our financial statements. We are also subject to other types of risks of doing business internationally, including the following:

•protection of intellectual property and trade secrets;

•tariffs, customs, trade sanctions, trade embargoes and other barriers to importing/exporting materials and products in a cost-effective and timely manner, or ~~cost-effective manner.~~changes in applicable tariffs or custom rules;

•the burden of complying with and changes in United States or international taxation policies;

•timing and availability of export licenses;

•rising labor costs;

•disruptions in or inadequate infrastructure of the countries where we operate;

•the impact of public health epidemics on employees and the global economy, such as COVID-19;

•difficulties in collecting accounts receivable;

•difficulties in staffing and managing international operations; and

•the burden of complying with foreign and international laws and treaties.

For example, the United States has imposed significant tariffs on Chinese-made goods, which the Biden administration has largely left in place. The tariffs imposed on Chinese goods, among other potential countries and any corresponding tariffs from China or such other countries in response has, and may in the future, negatively impact demand and/or increase the costs for our products. In some instances, we have received and may continue to receive incentives from foreign governments to encourage our investment in certain countries, regions or areas outside of the United States. Government incentives may include tax rebates, reduced tax rates, favorable lending policies and other measures, some or all of which may be available to us due to our foreign operations. Any of these incentives could be reduced or eliminated by governmental authorities at any time or as a result of our inability to maintain minimum operations necessary to earn the incentives. Any reduction or elimination of incentives currently provided for our operations could adversely affect our business and results of operations. These same governments also may provide increased incentives to or require production processes that favor local companies, which could further negatively impact our business and results of operations.

Changes in regulatory, geopolitical, social, economic, or monetary policies and other factors may have a material adverse effect on our business in the future, or may require us to exit a particular market or significantly modify our current business practices. Abrupt political change, terrorist activity and armed conflict pose a risk of general economic disruption in affected countries, which could also result in an adverse effect on our business and results of operations.

Risks related to sales, product development and manufacturing

We face significant challenges managing our growth strategy.

Our potential for growth depends significantly on the adoption of our products within the markets we serve and for other applications, and our ability to affect this rate of adoption. In order to manage our growth and business strategy effectively relative to the uncertain pace of adoption, we must continue to:

~~expand the capability of information systems to support a more complex business;~~

•maintain, expand, construct and purchase adequate manufacturing facilities and equipment, as well as secure sufficient third-party manufacturing resources, to meet customer ~~demand;~~demand, including specifically the expansion of our silicon carbide capacity with the opening and ramping of a state-of-the-art, automated 200mm capable silicon carbide device fabrication facility in New York, an expansion of our materials factory in Durham, North Carolina, the construction of a new materials manufacturing facility in Siler City, North Carolina, and the planned construction of a new 200mm capable silicon carbide device fabrication facility in Saarland, Germany;

•meet our production capacity and delivery commitments to our customers, including those customers who provide us with capacity reservation deposits or similar payments;

•manage an increasingly complex supply chain (including managing the impacts of ongoing supply constraints in the semiconductor industry and meeting purchase commitments under take-or-pay arrangements with certain suppliers) that has the ability to supply an increasing number of raw materials, subsystems and finished products with the required specifications and quality, and deliver on time to our manufacturing facilities, our ~~third party~~third-party manufacturing facilities, our logistics operations, or our ~~logistics operations;~~customers;

•expand the skills and capabilities of our current management team;

•add experienced senior level managers and executives;

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•attract and retain qualified employees;

•expand the capability of our information systems to support a more complex business, such as our current implementation of a new company-wide enterprise resource planning (ERP) system;

•be successful in securing design-ins across our end markets, including automotive applications;

•realize our expected local, state and federal government incentives, including capital investment reimbursements, property tax reimbursements and sales tax exemptions from state, county and local governments;

•confirm our eligibility for and receive the expected benefits from refundable income tax credits and capital grants through the U.S. CHIPS and Science Act of 2022 (the CHIPS Act), and receive and potentially sell any tax credits for which we may apply under the Inflation Reduction Act;

•access capital markets to fund our growth initiatives, including our ongoing and planned capacity expansions;

•expand research and development, sales and marketing, technical support, distribution capabilities, manufacturing planning and administrative functions;

•safeguard confidential information and protect our intellectual property;

•manage organizational complexity and communication; and

~~expand the skills and capabilities of our current management team;~~

~~add experienced senior level managers and executives;~~

~~attract and retain qualified employees; and~~

~~adequately~~•execute, maintain and adjust the operational and financial controls that support our business.

We are also increasingly dependent on information technology to enable us to improve the effectiveness of our operations and to maintain financial accuracy and efficiency. For example, the implementation of a new information technology platform at our Racine operations in our 2016 fiscal third quarter led to service interruptions that resulted in lower commercial lighting orders and revenues during that quarter and beyond. Allocation and effective management of the resources necessary to successfully implement, integrate, train personnel and sustain this new platform will remain critical to ensure that we are not subject to transaction errors, processing inefficiencies, loss of customers, business disruptions or loss of or damage to intellectual property through a security breach in the near term. Additionally, we face these same risks if we fail to allocate and effectively manage the resources necessary to build, implement, upgrade, integrate and sustain appropriate technology infrastructure over the longer term.

While we intend to continue to focus on managing our costs and expenses, ~~over the long term~~ we expect to invest to support our growth and may have additional unexpected costs. Such investments take time to become fully operational, and we may not be able to expand quickly enough to exploit targeted market opportunities. In connection with our efforts to cost-effectively manage our growth, we have increasingly relied on contractors for production capacity, logistics support and certain administrative functions including hosting of certain information technology software applications. If our contract manufacturers ~~original design manufacturers (ODMs)~~(including those at which we maintain captive lines) or other service providers do not perform effectively, we may not be able to achieve the expected cost savings and may incur additional costs to correct errors or fulfill customer demand. Depending on the function involved, such errors may also lead to business disruption, processing inefficiencies, the loss of or damage to intellectual property through security breach, or an impact on employee morale. Our operations may also be negatively impacted if any of these contract manufacturers ~~ODMs~~ or other service providers do not have the financial capability to meet our growing needs.

There are also inherent execution risks in starting up a new factory or expanding production capacity, whether one of our own factories or that of our contract manufacturers, ~~or ODMs, or~~as well as risks to moving production to different contract manufacturers, ~~or ODMs,~~ that could increase costs and reduce our operating ~~results,~~results. In the fourth quarter of fiscal 2022, we opened a new silicon carbide device fabrication facility in Marcy, New York to complement the materials factory expansion underway at our United States campus headquarters in Durham, North Carolina. We also commenced work on our new materials manufacturing facility in Siler City, North Carolina in the first quarter of fiscal 2023. The establishment and operation of a new manufacturing facility or expansion of an existing facility involves significant risks and challenges, some of which we have experienced and may experience in the future, including, but not limited to, the following:

•design and construction delays and cost ~~overruns,~~ overruns;

•issues in installing and qualifying new equipment and ramping production;

•poor production process yields and reduced quality ~~control.~~control; and

•insufficient personnel with requisite expertise and experience to operate an automated silicon carbide device fabrication facility and a materials manufacturing facility.

We ~~operate in industries~~are also increasingly dependent on information technology to enable us to improve the effectiveness of our operations and to maintain financial accuracy and efficiency. Allocation and effective management of the resources necessary to successfully implement, integrate, train personnel and sustain our information technology platforms will remain critical to ensure that we are not subject to ~~significant fluctuation in supply and demand and ultimately pricing that affects our revenue and profitability.~~

~~The industries we serve are in different stages~~transaction errors, processing inefficiencies, loss of ~~adoption and are characterized by constant and rapid technological change, rapid product obsolescence and price erosion, evolving standards, short product life-cycles~~customers or suppliers, business disruptions or loss of or damage to intellectual property through a security breach in the ~~case of~~near term. Additionally, we face these same risks if we fail to allocate and effectively manage the ~~LED industry~~resources necessary to build, implement, upgrade, integrate and ~~fluctuations~~sustain appropriate technology infrastructure over the longer term.

Variations in ~~product supply~~our production could impact our ability to reduce costs and ~~demand. The LED, power~~could cause our margins to decline and RF industries have experienced significant fluctuations, often in connection with, or in anticipation of, product cycles and changes in general economic conditions. The semiconductor industry is characterized by rapid technological change, high capital expenditures, short product life cycles and continuous advancements in process technologies and manufacturing facilities. As the markets for our products mature, additional fluctuations may result from variability and consolidations within the industry’s customer base. These fluctuations have been characterized by lower product demand, production overcapacity, higher inventory levels and increased pricing pressure. These fluctuations have also been characterized by higher demand for key components and equipment used in, or in the manufactureoperating results to suffer.

All of our products ~~resulting~~are manufactured using technologies that are highly complex. The number of usable items, or yield, from our production processes may fluctuate as a result of many factors, including but not limited to the following:

•variability in ~~longer lead times, supply delays~~our process repeatability and control;

•contamination of the manufacturing environment;

•equipment failure, power outages, fires, flooding, information or other system failures or variations in the

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manufacturing process;

•lack of consistency and adequate quality and quantity of piece parts, other raw materials and other bill of materials items;

•inventory shrinkage or human errors;

•defects in production ~~disruptions.~~processes (including system assembly) either within our facilities or at our suppliers; and

We•any transitions or changes in our production process, planned or unplanned.

In the past, we have experienced ~~these conditions~~difficulties in achieving acceptable yields on certain products, which has adversely affected our ~~business and~~operating results. We may experience ~~such conditions~~similar problems in the future, ~~which~~and we cannot predict when they may occur or their severity.

In some instances, we may offer products for future delivery at prices based on planned yield improvements or increased cost efficiencies from other production advances. Failure to achieve these planned improvements or advances could have a ~~material negative~~significant impact on our ~~business, results of operations or financial condition. For example, in the fourth quarter of fiscal 2015, we commenced a restructuring plan for our LED business that reduced excess capacity~~margins and ~~overhead as well as increased reserves as the result of a more aggressive pricing environment. The restructuring activity ended in the second quarter of fiscal 2016.~~operating results.

In addition, ~~as we diversify~~ our ~~product offerings~~ability to convert volume manufacturing to larger diameter substrates can be an important factor in providing a more cost-effective manufacturing process. We continue to prepare for production using 200mm substrates and as pricing differences in the average selling prices among our product lines widen, a change in the mix of sales among our product lines may increase volatility in our revenue and gross margin from period to period.

Ifif we are unable to ~~effectively develop, manage and expand our sales channels for our products, our operating results may suffer.~~

We have expanded into business channels that are different from those in which we have historically operated as we grow our business and sell more lighting, LED, power and RF products. Our sales agents have in the past and may in the future choose to drop our product lines from their portfolio to avoid losing access to our competitors’ products, resultingmake this transition in a ~~disruption in the project pipeline and lower than targeted sales for~~timely or cost-effective manner, our products. Our sales agents have the ability to shift business to different suppliers within their product portfolio based on a number of factors, including customer service and new product availability. We sell a portion of our lighting products through retailers who may alter their promotional pricing or inventory strategies, which could impact our targeted sales of these products. If we are unable to effectively penetrate these channels or develop alternate channels to ensure our products are reaching the intended customer base, our financial results may be adversely impacted. In addition, if we successfully penetrate or develop these channels, we cannot guarantee that customers will accept our products or that we will be able to manufacture and deliver them in the timeline established by our customers.

We sell a substantial portion of our products to distributors. We rely on distributors to develop and expand their customer base as well as anticipate demand from their customers. If they are not successful, our growth and profitability may be adversely impacted. Distributors must balance the need to have enough products in stock in order to meet their customers’ needs against their internal target inventory levels and the risk of potential inventory obsolescence. The risks of inventory obsolescence are especially relevant to technological products. The distributors’ internal target inventory levels vary depending on market cycles and a number of factors within each distributor over which we have very little, if any, control. Distributors also have the ability to shift business to different manufacturers within their product portfolio based on a number of factors, including new product availability and performance.

We typically recognize revenue on products sold to distributors when the item is shipped and title passes to the distributor (sell-in method). Certain distributors have limited rights to return inventory under stock rotation programs and have limited price protection rights for which we make estimates. We evaluate inventory levels in the distribution channel, current economic trends and other related factors in order to account for these factors in our judgments and estimates. As inventory levels and product return trends change, we may have to revise our estimates and incur additional costs, and our gross margins and operating results could be ~~adversely~~negatively impacted.

~~The markets in which we operate are highly competitive and have evolving technical requirements.~~

The markets for our products are highly competitive. In the LED market, we compete with companies that manufacture and sell LED chips and LED components. In the lighting market, we compete with companies that manufacture and sell traditional and LED lighting products, many of which have larger and more established sales channels. In the semiconductor market, we compete with companies that have greater market share, name recognition and technical resources than we do. Competitors continue to offer new products with aggressive pricing, additional features and improved performance. Competitive pricing pressures remain a challenge and continue to accelerate the rate of decline in our sales prices, particularly in our LED Products and Wolfspeed segments. Aggressive pricing actions by our competitors in our businesses could reduce margins if we are not able to reduce costs at an equal or greater rate than the sales price decline.

With the growth potential for LEDs, we will continue to face increased competition in the future across our businesses. If the investment in capacity exceeds the growth in demand, such as exists in the current LED market, the LED market is likely to become more competitive with additional pricing pressures. Additionally, new technologies could emerge or improvements could be made in existing technologies that may also reduce the demand for lighting and LEDs in certain markets. There are also new technologies, such as organic LEDs (OLEDs), which could potentially reduce LED demand for backlighting, potentially impacting the overall LED market.

As competition increases, we need to continue to develop new products that meet or exceed the needs of our customers. Therefore, our ability to continually produce more efficient and lower cost LEDs, lighting products and power and RF products that meet the evolving needs of our customers will be critical to our success. Competitors may also try to align with some of our strategic customers. This could lead to lower prices for our products, reduced demand for our products and a corresponding reduction in our ability to recover development, engineering and manufacturing costs. Any of these developments could have an adverse effect on our business, results of operations or financial condition.

Our results of operations, financial condition and business could be harmed if we are unable to balance customer demand and capacity.

As customer demand for our products changes, we must be able to adjust our production capacity to meet demand. We are continually taking steps to address our manufacturing capacity needs for our products. Currently, we are focusing on increasing production capacity. If we are not able to increase ~~or decrease~~ our production capacity at our targeted rate, or if there are unforeseen costs associated with ~~adjusting~~increasing our capacity levels, or if we are unable to obtain advanced semiconductor manufacturing equipment in a timely manner, we may not be able to achieve our financial targets. For example, our Wolfspeed business is currently experiencing demand in excess of our production capacity, which is resulting in longer manufacturing lead times to customers as we manage our constrained capacity. While we began in fiscal 2016 making significant investments to expand our materials, power and RF device capacity and continue to do so, these investments take time to bring in, install and get fully qualified. As a result, weWe may be unable to build or qualify ~~such~~ new capacity on a timely basis to meet customer demand and customers may fulfill their orders with one of our competitors instead. In addition, as we introduce new products and change product generations, we must balance the production and inventory of prior generation products with the production and inventory of new generation products, whether manufactured by us or our contract manufacturers, to maintain a product mix that will satisfy customer demand and mitigate the risk of incurring cost write-downs on the previous generation products, related raw materials and tooling. Significant or prolonged shortages or delivery delays of our products to our customers could delay their manufacturing and negatively impact our relationships with these customers.

Due to the proportionately high fixed cost nature of our business (such as facility costs), if demand does not materialize at the rate forecasted, we may not be able to scale back our manufacturing expenses or overhead costs quickly enough to correspond to the lower than expected demand. This could result in lower margins and adversely impact our business and results of operations. Additionally, if product demand decreases or we fail to forecast demand accurately, our results may be adversely impacted due to higher costs resulting from lower factory utilization, causing higher fixed costs per unit produced. ~~For example,~~Changes in ~~the third quarter of fiscal 2017, we had lower overall lighting~~product demand ~~which led to higher costs per unit produced~~ from our ~~Racine factory, thereby reducing gross margins for~~customers' forecasts may also cause variability in our ~~Lighting Products segment.~~supply costs if significant adjustments are needed to our forecasted or committed procurement and supply plans. Further, we may be required to recognize impairments on our long-lived assets or recognize excess inventory write-off charges, ~~as we did in the fourth quarter of fiscal 2015. We may in the future be required to recognize~~or excess capacity charges, which would have a negative impact on our results of operations.

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With the opening of our new silicon carbide device fabrication facility in Marcy, New York, we will experience increased pressure on margins during the period when production begins but before the facility is at full utilization, and in the initial periods we expect these underutilization costs to be substantial as we ramp up the facility. Additionally, our large upfront investment in the facility, or any other new facility, to increase capacity does not guarantee we will need the capacity and we may experience lower than expected capacity once the facility is in production, which could result in further margin pressures.

In addition, our efforts to improve quoted delivery lead-time performance may result in corresponding reductions in order backlog. A decline in backlog levels could result in more variability and less predictability in our quarter-to-quarter ~~net~~ revenue and operating results.

Our operating results are substantially dependent on the acceptance of new products.

IfOur future success may depend on our ability to deliver new, higher performing and/or lower cost solutions for existing and new markets and for customers to accept those solutions. The development of new products ~~fail~~is a highly complex process, and we have in some instances experienced delays in completing the development, introduction and qualification of new products which has impacted our results in the past. Our research and development efforts are aimed at solving increasingly complex problems, and we do not expect that all our projects will be successful. The successful development, introduction and acceptance of new products depend on a number of factors, including the following:

•qualification and acceptance of our new product and systems designs, specifically entering into automotive applications which require even more stringent levels of qualification and standards;

•our ability to ~~perform~~ effectively transfer increasingly complex products and technology from development to manufacturing, including the transition to 200mm substrates;

•our ability to introduce new products in a timely and cost-effective manner;

•achievement of technology breakthroughs required to make commercially viable products;

•our ability to convert customer design-ins to sales of significant volume, and, if customer design-in activity does result in such sales, when such sales will ultimately occur and what the amount of such sales will be;

•the accuracy of our predictions for market requirements;

•our ability to predict, influence and/or ~~fail~~react to ~~meet customer requirements or expectations, we could incur significant additional costs, including costs associated~~evolving standards;

•acceptance of new technology in certain markets;

•our ability to protect intellectual property developed in new products;

•the availability of qualified research and development personnel;

•our timely completion of product designs and development;

•our ability to develop repeatable processes to manufacture new products in sufficient quantities, with the ~~recall of those items.~~desired specifications and at competitive costs;

~~The manufacture~~•our ability to secure volume purchase orders related to new products;

•our customers’ ability to develop competitive products incorporating our products; and

•market acceptance of our products ~~involves highly complex processes. Our customers specify quality, performance~~ and ~~reliability standards~~our customers’ products.

If any of these or other similar factors becomes problematic, we may not be able to deliver and introduce new products in a timely or cost-effective manner.

We face risks relating to our suppliers, including that we must meet. If our products do not meet these standards, we may be required to replace or rework the products. In some cases, our products may contain undetected defects or flaws that only become evident after shipment and installation. For example, during the second and third quarters of fiscal 2017, we determined that the quality of several of our commercial lighting products were possibly impacted by third party supplied drivers that did not meet specifications. Therefore, we increased our product warranty reserves for potential future warranty claims. Even if our products meet standard specifications, our customers may attempt to use our products in applications for which they were not designed or in products that were not designed or manufactured properly, resulting in product failures and creating customer satisfaction issues.

~~costs associated with the removal, collection and destruction of the product;~~

~~payments made to replace product;~~

~~costs associated with repairing the product;~~

~~the write-down or destruction of existing inventory;~~

~~insurance recoveries that fail to cover the full costs associated with product recalls;~~

~~lost sales due to the unavailability of product for a period of time;~~

~~delays, cancellations or rescheduling of orders for our products; or~~

~~increased product returns.~~

A significant product recall could also result in adverse publicity, damage to our reputation and a loss of customer or consumer confidence in our products. We also may be the target of product liability lawsuits or regulatory proceedings by the Consumer Product Safety Commission (CPSC) and could suffer losses from a significant product liability judgment or adverse CPSC finding against us if the use of our products at issue is determined to have caused injury or contained a substantial product hazard.

We provide warranty periods ranging from 90 days to 10 years on our products. The standard warranty on nearly all of our new LED lighting products, which now represent the majority of our revenue, is 10 years. Although we believe our reserves are appropriate, we are making projections about the future reliability of new products and technologies, and we may experience increased variability in warranty claims. Increased warranty claims could result in significant losses due to a rise in warranty expense and costs associated with customer support.

We rely on a number of key sole source and limited source suppliers, ~~and~~ are subject to high price volatility on certain commodity inputs, variations in parts quality, and raw material consistency and ~~availability.~~availability, and rely on independent shipping companies for delivery of our products.

We depend on a number of sole source and limited source suppliers for certain raw materials, components, services and equipment used in manufacturing our products, including key materials and equipment used in critical stages of our manufacturing processes. Although alternative sources generally exist for these items, qualification of many of these alternative sources could take up to six months or longer. Where possible, we attempt to identify and qualify alternative sources for our sole and limited source suppliers.

We generally purchase these sole or limited source items with purchase orders, and we have limited guaranteed supply arrangements with such ~~suppliers.~~suppliers, including take-or-pay arrangements and capacity reserve deposit agreements. Some of our sources can have variations in attributes and availability which can affect our ability to produce products in sufficient volume or quality. We do not control the time and resources that these suppliers devote to our business, and we cannot be sure that these suppliers will perform their obligations to us. Additionally, general shortages in the marketplace of certain raw materials or key components may adversely impact our business. In the past, we have experienced decreases in our production yields when

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suppliers have varied from previously agreed upon specifications or made other modifications we do not specify, which impacted our cost of revenue.

Additionally, the inability of our suppliers to access capital efficiently could cause disruptions in their businesses, thereby negatively impacting ours. This risk may increase ~~if an~~from unpredictable and unstable changes in economic ~~downturn~~conditions, including recession, inflation, or other changes, which may negatively ~~affects~~affect key suppliers or a significant number of our other suppliers. Any delay in product delivery or other interruption or variation in supply from these suppliers could prevent us from meeting commercial demand for our products. If we were to lose key suppliers, if our key suppliers were unable to support our demand for any reason or if we were unable to identify and qualify alternative suppliers, our manufacturing operations could be interrupted or hampered significantly.

We rely on arrangements with independent shipping companies for the delivery of our products from vendors and to customers both in the United States and abroad. The failure or inability of these shipping companies to deliver products or the unavailability of shipping or port services, even temporarily, could have a material adverse effect on our business. We may also be adversely affected by an increase in freight surcharges due to rising fuel costs, oil costs and added security.

In our fabrication process, we consume a number of precious metals and other commodities, which are subject to high price ~~volatility.~~volatility and the potential impacts of increased inflation. Our operating margins could be significantly affected if we are not able to pass along price increases to our customers. In addition, production could be disrupted by the unavailability of the resources used in production such as water, silicon, electricity and gases. Future environmental regulations could restrict supply or increase the cost of certain of those materials.

We operate in industries that are subject to significant fluctuation in supply and demand and ultimately pricing, which affects our revenue and profitability.

The industries we serve are in different stages of adoption and are characterized by constant and rapid technological change, rapid product obsolescence and price erosion, evolving standards and fluctuations in product supply and demand. The semiconductor industry is characterized by rapid technological change, high capital expenditures, short product life cycles and continuous advancements in process technologies and manufacturing facilities. As the markets for our products mature, additional fluctuations may result from variability and consolidations within the industry’s customer base. These fluctuations have been characterized by lower product demand, production overcapacity, higher inventory levels and aggressive pricing actions by our competitors. These fluctuations have also been characterized by higher demand for key components and equipment used in, or in the manufacture of, our products resulting in longer lead times, supply delays and production disruptions. We have experienced these conditions in our business and may experience such conditions in the future, which could have a material negative impact on our business, results of operations or financial condition.

In addition, as we diversify our product offerings and as pricing differences in the average selling prices among our product lines widen, a change in the mix of sales among our product lines may increase volatility in our revenue and gross margin from period to period.

The markets in which we operate are highly competitive and have evolving technical requirements.

The markets for our products are highly competitive. In the semiconductor market, we compete with companies that have greater market share, name recognition, distribution and sales channels, and/or technical resources than we do. Competitors continue to offer new products with aggressive pricing, additional features and improved performance. Aggressive pricing actions by our competitors in our businesses could reduce margins if we are not able to reduce costs at an equal or greater rate than the sales price decline.

As competition increases, we need to continue to develop new products that meet or exceed the needs of our customers. Therefore, our ability to continually produce more efficient and lower cost power and RF products that meet the evolving needs of our customers will be critical to our success. Competitors may also try to align with some of our strategic customers. This could lead to lower prices for our products, reduced demand for our products and a corresponding reduction in our ability to recover development, engineering and manufacturing costs. Any of these developments could have an adverse effect on our business, results of operations or financial condition.

We depend on a limited number of customers, including distributors, ~~and retailers,~~ for a substantial portion of our revenue, and the loss of, or a significant reduction in purchases by, one or more of these customers could adversely affect our operating results.

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We receive a significant amount of our revenue from a limited number of customers ~~including~~and distributors, ~~and retailers, one~~two of which individually represented ~~12%~~more than 10% of our consolidated revenue in fiscal ~~2017. Most~~2023. Many of our customer orders are made on a purchase order basis, which does not generally require any long-term customer commitments. Therefore, these customers may alter their purchasing behavior with little or no notice to us for various reasons, including developing, or, in the case of our distributors, their customers developing, their own product solutions; choosing to purchase or distribute product from our competitors; incorrectly forecasting end market demand for their products; or experiencing a reduction in their market share in the markets for which they purchase our products. In the case of retailers, these customers may alter their promotional pricing; increase promotion of competitors' products over our products; or reduce their inventory levels; all of which could negatively impact our financial condition and results of operations. If our customers alter their purchasing behavior, if our customers’ purchasing behavior does not match our expectations or if we encounter any problems collecting amounts due from them, our financial condition and results of operations could be negatively impacted.

Our revenue is highly dependent on our customers’ ability to produce, market and sell more integrated products.

Our revenue depends on getting our products designed into a larger number of our customers’ products and in turn, our customers’ ability to produce, market and sell their products. For example, we have current and prospective customers that create, or plan to create, power and RF products or systems using our substrates, die, components or modules. Even if our customers are able to develop and produce products or systems that incorporate our substrates, die, components or modules, there can be no assurance that our customers will be successful in marketing and selling these products or systems in the marketplace.

Our results may be negatively impacted if customers do not maintain their favorable perception of our ~~brand~~brands and products.

~~We have a developing brand with increasing value.~~ Maintaining and continually enhancing the value of ~~this brand~~our brands is critical to the success of our business. Brand value is based in large part on customer perceptions. Success in promoting and enhancing brand value depends in large part on our ability to provide high-quality products. Brand value could diminish significantly due to a number of factors, including adverse publicity about our products (whether valid or not), a failure to maintain the quality of our products (whether perceived or real), the failure of our products ~~or Cree~~ to deliver consistently positive consumer experiences, the products becoming unavailable to consumers or consumer perception that we have acted in an irresponsible manner. Damage to our brand, reputation or loss of customer confidence in our brand or products could result in decreased demand for our products and have a negative impact on our business, results of operations or financial condition.

~~Variations in~~If our ~~production~~products fail to perform or fail to meet customer requirements or expectations, we could ~~impact our ability to reduce~~incur significant additional costs, ~~and could cause our margins to decline and our operating results to suffer.~~including costs associated with the recall of those items.

~~All~~The manufacture of our products ~~are~~involves highly complex processes. Our customers specify quality, performance and reliability standards that we must meet. If our products do not meet these standards, we may be required to replace or rework the products. In some cases, our products may contain undetected defects or flaws that only become evident after shipment and installation. Even if our products meet standard specifications, our customers may attempt to use our products in applications for which they were not designed or in products that were not designed or manufactured ~~using technologies that are highly complex. The~~properly, resulting in product failures and creating customer satisfaction issues.

We have experienced product quality, performance or reliability problems from time to time and defects or failures may occur in the future. If failures or defects occur, they could result in significant losses or product recalls. A significant product recall could also result in adverse publicity, damage to our reputation and a loss of customer confidence in our products. We also may be the target of product liability lawsuits against us if the use of our products at issue is determined to have caused injury or contained a substantial product hazard.

We provide standard warranty periods of 90 days on our products, with longer periods under a limited number of ~~usable items, or yield, from~~customer contracts. Although we believe our ~~production processes~~reserves are appropriate, we are making projections about the future reliability of new products and technologies, and we may ~~fluctuate as a result of many factors, including but not limited to the following:~~

experience increased variability in ~~our process repeatability~~warranty claims. Increased warranty claims could result in significant losses due to a rise in warranty expense and ~~control;~~costs associated with customer support.

~~contamination of the manufacturing environment;~~

~~equipment failure, power outages, fires, flooding, information or other system failures or variations in the manufacturing process;~~

~~lack of consistency and adequate quality and quantity of piece parts, other raw materials and other bill of materials items;~~

~~inventory shrinkage or human errors;~~

~~defects in production processes (including system assembly) either within our facilities or at our suppliers; and~~

~~any transitions or changes in our production process, planned or unplanned.~~

In the past, we have experienced difficulties in achieving acceptable yields on certain products, which has adversely affected our operating results. We may experience similar problems in the future, and we cannot predict when they may occur or their severity.

~~In addition, our ability to convert volume manufacturing to larger diameter substrates can be an important factor in providing a more cost effective manufacturing process.~~ If we are unable to effectively develop, manage and expand our sales channels for our products, our operating results may suffer.

We sell a portion of our products to distributors, including a distributor that represented more than 10% of our revenue in fiscal 2023. We rely on distributors to develop and expand their customer base as well as to anticipate demand from their customers. If they are not successful, our growth and profitability may be adversely impacted. Distributors must balance the need to have enough products in stock in order to meet their customers’ needs against their internal target inventory levels and the risk of potential inventory obsolescence. The risks of inventory obsolescence are especially relevant to technological products. The distributors’ internal target inventory levels vary depending on market cycles and a number of factors within each distributor over which we have very little, if any, control. Distributors also have the ability to shift business to different manufacturers

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within their product portfolio based on a number of factors, including new product availability and performance. Similarly, we have the ability to add, consolidate, or remove distributors.

We typically recognize revenue on products sold to distributors when the item is shipped and title passes to the distributor (sell-in method). Certain distributors have limited rights to return inventory under stock rotation programs and have limited price adjustment rights for which we make ~~this transition~~estimates. We evaluate inventory levels in ~~a timely~~the distribution channel, current economic trends and other related factors in order to account for these factors in our judgments and estimates. As inventory levels and product return trends change or ~~cost effective manner,~~we make changes to our distributor roster, we may have to revise our estimates and incur additional costs, and our gross margins and operating results could be ~~negatively~~adversely impacted.

~~Global economic conditions could materially adversely impact demand~~As a result of our continued expansion into new markets, we may compete with existing customers who may reduce their orders.

We continue to expand into new markets and new market segments. Many of our existing customers who purchase our silicon carbide substrate materials develop and manufacture devices, die and components using those wafers that are offered in the same power and RF markets. As a result, some of our current customers perceive us as a competitor in these market segments. In response, our customers may reduce or discontinue their orders for our ~~products and services.~~

~~Our operations and performance depend significantly on worldwide economic conditions. Uncertainty about global economic conditions~~substrate materials. This reduction in or discontinuation of orders could ~~result~~occur faster than our sales growth in customers postponing purchases of our products and services in response to tighter credit, unemployment, negative financial news and/or declines in income or asset values and other macroeconomic factors,these new markets, which could ~~have a material negative effect on demand for our products and services and, accordingly, on~~adversely affect our business, results of operations or financial condition. ~~For example, any economic and political uncertainty caused by the United Kingdom's impending exit from the European Union may negatively impact demand for~~

Risks associated with our ~~products.~~

Additionally, our international sales are subject to variability as our selling prices become less competitive in countries with currencies that are declining in value against the U.S. Dollar and more competitive in countries with currencies that are increasing in value against the U.S. Dollar. In addition, our international purchases can become more expensive if the U.S. Dollar weakens against the foreign currencies in which we are billed.strategic transactions

If we fail to evaluate and execute strategic opportunities successfully, our business may suffer.

From time to time, including the present, we evaluate strategic opportunities available to us for product, technology or business transactions, such as business acquisitions, investments or capacity expansions, joint ventures, divestitures, or spin-offs. If we choose to enter into such strategic transactions, we face certain risks including:

•the inability to realize the expected benefits, both from a timing and amount perspective, from our ongoing and planned capacity expansions, including the construction of a new materials manufacturing facility in Siler City, North Carolina and the planned construction of a new 200mm capable silicon carbide device fabrication facility in Saarland, Germany;

•the failure of an acquired business, investee or joint venture to meet our performance and financial expectations;

•identification of additional liabilities relating to an acquired business;

•loss of ~~existing~~ customers ~~of our current and acquired businesses~~ due to ~~concerns that new product lines may be in~~perceived conflicts or competition with such customers or due to regulatory actions taken by governmental agencies;

•that we are not able to enter into acceptable contractual arrangements in connection with the ~~customers’ existing product lines;~~transaction;

•difficulty integrating an acquired business's operations, personnel and financial and operating systems into our current business;

•that we are not able to develop and expand customer bases and accurately anticipate demand from end customers, which can result in increased inventory and reduced orders if we experience wide fluctuations in supply and demand;

•diversion of management attention;

•difficulty separating the operations, personnel and financial and operating systems of a spin-off or divestiture from our current business;

•the possibility we are unable to complete the transaction and expend substantial resources without achieving the desired benefit;

•the inability to obtain required regulatory agency approvals;

•reliance on a transaction counterparty for transition services for an extended period of time, which may result in additional expenses and delay the integration of the acquired business and realization of the desired benefit of the transaction;

•uncertainty of the financial markets or circumstances that cause conditions that are less favorable and/or different than expected; and

•expenses incurred to complete a transaction may be significantly higher than anticipated.

We may not be able to adequately address these risks or any other problems that arise from our prior or future acquisitions, investments, joint ventures, divestitures or spin-offs. Any failure to successfully evaluate strategic opportunities and address risks or other problems that arise related to any such business transaction could adversely affect our business, results of operations or financial condition.

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We are subject to a ~~result~~number of risks associated with the sale of the RF Business, and these risks could adversely impact our operations, financial condition and business.

On August 22, 2023, we executed the RF Purchase Agreement with MACOM with respect to the RF Business Divestiture. We are subject to a number of risks associated with this transaction, including risks associated with:

•the failure to satisfy, on a timely basis or at all, the closing conditions set forth in the RF Purchase Agreement, including the expiration of the waiting period under the Hart-Scott-Rodino Antitrust Improvements Act of 1976 and other customary closing conditions;

•the separation of the RF Business, and related information technology, from the businesses we are retaining and the operation of our ~~continued expansion into new markets, we may compete~~retained business without the RF Business;

•issues, delays or complications in completing required transition activities to allow the RF Business to operate under MACOM after the closing, including incurring unanticipated costs to complete such activities;

•unfavorable reaction to the sale by customers, competitors, suppliers and employees;

•the disruption to and uncertainty in our business and our relationships with ~~existing customers who may reduce their orders.~~

Through acquisitions and organic growth, we continue to expand into new markets and new market segments. Many of our existing customers who purchase our LED products or Wolfspeed substrate materials develop and manufacture products using those wafers, chips and components that are offered into the same lighting, power and RF markets. As a result, some of our current customers perceive us as a competitor in these market segments. In response, our customers, may reduce or discontinue their orders for our LED or Wolfspeed substrate materials products. This reduction in or discontinuation of orders could occur faster than our sales growth in these new markets, which could adversely affect our business, results of operations or financial condition.

~~Our revenue is highly dependent on our customers’ ability to produce, market and sell more integrated products.~~

Our revenue in our LED Products and Wolfspeed segments depends on getting our products designed into a larger number of our customers’ products and in turn, our customers’ ability to produce, market and sell their products. For example, we have current and prospective customers that create, or plan to create, lighting systems using our LED components. Even ifincluding attempts by our customers ~~are able~~ to ~~develop and produce LED lighting products~~terminate or ~~products that incorporate our power and RF products, there can be no assurance that~~renegotiate their relationships with us or decisions by our customers ~~will be successful in marketing and selling these products in the marketplace.~~to defer or delay purchases from us;

~~Our operations in foreign countries expose us to certain risks inherent in doing business internationally, which may adversely affect our business, results of operations or financial condition.~~

We have revenue, operations, manufacturing facilities and contract manufacturing arrangements in foreign countries that expose us to certain risks. For example, fluctuations in exchange rates may affect our revenue, expenses and results of operations as well as the value of our assets and liabilities as reflected in our financial statements. We are also subject to other types of risks, including the following:

~~protection of intellectual property and trade secrets;~~

tariffs, customs, trade sanctions, trade embargoes and other barriers to importing/exporting materials and products in a cost effective and timely manner, or changes in applicable tariffs or custom rules;

~~the burden of complying with and changes in U.S. or international taxation policies;~~

~~timing and availability of export licenses;~~

~~rising labor costs;~~

~~disruptions in or inadequate infrastructure of the countries where we operate;~~

•difficulties in ~~collecting accounts receivable;~~

~~difficulties in staffing~~hiring, retaining and ~~managing international operations; and~~

~~the burden of complying with foreign and international laws and treaties.~~

In some instances, we have received and may continue to receive incentives from foreign governments to encourage our investment in certain countries, regions or areas outside of the United States. In particular, we have received and may continue to receive such incentives in connection with our operations in Asia, as Asian national and local governments seek to encourage the development of the technology industry. Government incentives may include tax rebates, reduced tax rates, favorable lending policies and other measures, some or all of which may be available to us due to our foreign operations. Any of these incentives could be reduced or eliminated by governmental authorities at any timemotivating key personnel during this process or as a result of uncertainties generated by this process or any developments or actions relating to it;

•the diversion of our ~~inability~~management’s attention away from the operation of the business we are retaining;

•the need to ~~maintain minimum operations necessary~~incur significant transaction costs in connection with the transaction, regardless of whether it is completed;

•the restrictions on and obligations with respect to ~~earn the incentives. Any reduction or elimination of incentives currently provided for our operations could adversely affect~~ our business set forth in the RF Purchase Agreement and, ~~results of operations. These same governments also may~~following closing, the RF MSA and the transition services agreement, in each case between us and MACOM;

•the need to provide ~~increased incentives to or require production processes that favor local companies, which could further negatively impact our business and results of operations.~~

~~Changes~~transition services in ~~regulatory, geopolitical, social, economic, or monetary policies and other factors, including those~~connection with the transaction, which may result ~~from the new U.S. presidential administration and the U.S. Congress, if any, may have a material adverse effect on our business~~ in the ~~future, or may require us to exit a particular market or significantly modify our current business practices. Abrupt political change, terrorist activity~~diversion of resources and ~~armed conflict pose a risk of general economic disruption in affected countries, which could also result in an adverse effect on our business~~focus; and results of operations. For example, the results of the United Kingdom’s referendum on whether to remain a part of the European Union have created political and economic uncertainty not only in the United Kingdom, but in many European countries in which we do business. There could be further uncertainty as the United Kingdom negotiates the future terms of its relationship with the European Union following its withdrawal.

~~In order to compete, we must attract, motivate and retain key employees, and~~ •our failure to ~~do so~~realize the full purchase price anticipated under the RF Purchase Agreement, including due to fluctuations in the market price of MACOM’s common stock before we are able to sell the Shares following the RTP Fab Transfer and the forfeiture of one-quarter of the Shares in the event that the RTP Fab Transfer is not completed within four years following the closing of the transaction.

As a result of these risks, we may be unable to realize the anticipated benefits of the transaction, including the total amount of cash we expect to realize. Our failure to realize the anticipated benefits of the transaction would adversely impact our operations, financial condition and business and could ~~harm~~limit our ~~results~~ability to pursue additional strategic transactions.

We are subject to a number of ~~operations.~~risks associated with the sale of our former LED Products segment, and these risks could adversely impact our operations, financial condition and business.

~~Hiring~~On March 1, 2021, we completed the sale of our former LED Products segment to SMART Global Holdings, Inc. (SGH) pursuant to the Asset Purchase Agreement dated October 18, 2020 (the LED Purchase Agreement). We are subject to a number of risks associated with this transaction, including risks associated with:

•the restrictions on and ~~retaining qualified executives, scientists, engineers, technical staff and sales personnel is critical~~obligations with respect to our business set forth in the Wafer Supply Agreement between us and ~~competition~~CreeLED; and

•any required payments of indemnification obligations under the LED Purchase Agreement for ~~experienced employees in our industry can be intense.~~ retained liabilities and breaches of representations, warranties or covenants.

As a global company, this issue is not limited to the United States, but includes our other locations such as Europe and China. For example, there is substantial competition in China for qualified and capable personnel, particularly experienced engineers and technical personnel, whichresult of these risks, we may make it difficult for us to recruit and retain qualified employees. Also, within Huizhou, China, there are other large companies building manufacturing plants that will likely compete for qualified employees. If we arebe unable to ~~staff sufficient and adequate personnel at our China facilities, we may experience lower revenue or increased manufacturing costs, which~~realize the anticipated benefits of the transaction. Our failure to realize the anticipated benefits of the transaction would adversely ~~affect~~impact our ~~results of operations.~~

~~To help attract, motivate~~operations, financial condition and retain key employees, we use benefits such as stock-based compensation awards. If the value of such awards does not appreciate, as measured by the performance of the price of our common stock or if our stock-based compensation otherwise ceases to be viewed as a valuable benefit,business and could limit our ability to ~~attract, retain~~pursue additional strategic transactions.

We are subject to risks associated with the sale of our former Lighting Products business unit, and ~~motivate employees~~these risks could adversely impact our financial condition.

On May 13, 2019, we closed the sale of our former Lighting Products business unit to IDEAL Industries, Inc. (IDEAL). We are subject to risks associated with this transaction, including risks associated with any required payments of indemnification obligations under the Purchase Agreement with IDEAL for retained liabilities and breaches of representations, warranties or covenants.

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As a result, we may be ~~weakened,~~unable to realize the anticipated benefits of the transaction. Our failure to realize the anticipated benefits of the transaction would adversely impact our financial condition and could limit our ability to pursue additional strategic transactions.

Risks associated with cybersecurity, intellectual property and litigation

We may be subject to confidential information theft or misuse, which could harm our business and results of operations.

~~On May 19, 2017,~~We face attempts by others to gain unauthorized access to our information technology systems on which we ~~announced that we were accelerating~~maintain proprietary and other confidential information and such attempts may increase in terms of frequency and severity in light of the ~~succession planning process for our chief executive officer and that Charles M. Swoboda will step down from his executive positions~~sanctions imposed on Russia in response to its invasion of Ukraine. Our security measures may be breached as the result of industrial or other espionage actions of outside parties, employees, employee error, malfeasance or otherwise, and as a ~~member~~result, an unauthorized party may obtain access to our systems. The risk of a security breach or disruption, particularly through cyber-attacks, ransomware, or cyber intrusion, including by computer hackers, foreign governments, and cyber terrorists, has generally increased as cyber-attacks have become more prevalent and harder to detect and fight against. Additionally, outside parties may attempt to access our confidential information through other means, for example by fraudulently inducing our employees to disclose confidential information. We actively seek to prevent, detect and investigate any unauthorized access, which sometimes occurs and is usually not recognized until after it has occurred. To date, we do not believe that such unauthorized access has caused us any material damage. We might be unaware of any such access or unable to determine its magnitude and effects. We are also at risk of security breaches and disruptions occurring at third parties that we work with, including our customers and suppliers. In addition, these threats are constantly evolving, thereby increasing the ~~Board~~difficulty of Directors following a transition period. Our CEO search process, which is being led by a search committee of the Board, to identify a candidate for a permanent Chief Executive Officer and President continues, and we are working with an executive search firm to assist with the process of identifying and evaluating both internal and external candidates. There are no assurances concerning the timingsuccessfully defending against them or ~~outcome~~implementing adequate preventative measures. The theft and/or unauthorized use or publication of our ~~search for~~trade secrets and other confidential business information as a new Chief Executive Officer. Our ability to execute our business strategies and attract and retain key executives may be adversely affected by the uncertainty associated with the transition to a successor Chief Executive Officer.

~~The adoption~~result of ~~or changes in government and/or industry policies, standards or regulations relating to the efficiency, performance, use or other aspects of our products could impact the demand for our products.~~

The adoption of or changes in government and/or industry policies, standards or regulations relating to the efficiency, performance or other aspects of our products may impact the demand for our products. Demand for our products may also be impacted by changes in government and/or industry policies, standards or regulations that discourage the use of certain traditional lighting technologies. These constraints may be eliminated or delayed by legislative action, which could have a negative impact on demand for our products. Our ability and the ability of our competitors to meet these new requirements could impact competitive dynamics in the market.

~~If governments, their agencies or utilities reduce their demand for our products or discontinue or curtail their funding, our business may suffer.~~

~~Changes in governmental budget priorities~~such an incident could adversely affect our ~~business and results~~competitive position, result in a loss of ~~operations. U.S. and foreign government agencies have purchased products directly from us and products from our customers, and U.S. government agencies have historically funded a portion~~confidence in the adequacy of our ~~research~~threat mitigation and ~~development activities. When~~detection processes and procedures, cause us to incur significant costs to remedy the ~~government changes budget priorities, such as in times of war or financial crisis, or reallocates its research~~damage caused by the incident, divert management's attention and ~~development spending to areas unrelated to our business, our research~~other resources, and development funding and our product sales to government entities and government-funded customers are at risk. For example, demand and payment for our products and our customers’ products may be affected by public sector budgetary cycles, funding authorizations or utility rebates. Funding reductions or delays could negatively impact demand for our products. If government or utility funding is discontinued or significantly reduced, our business and results of operations could be adversely affected.

~~We are exposed to fluctuations in~~reduce the ~~market~~ value of our investment ~~portfolio~~in research and ~~in interest rates, and therefore, impairment~~development. In addition, the increased prevalence of ~~our investments or lower investment income~~employees working from home may exacerbate the aforementioned cybersecurity risks. Our business could ~~harm our earnings.~~

We are exposed to market value and inherent interest rate risk related to our investment portfolio. We have historically invested portions of our available cash in fixed interest rate securities such as high-grade corporate debt, commercial paper, municipal bonds, certificates of deposit, government securities and other fixed interest rate investments. The primary objective of our cash investment policy is preservation of principal. However, these investments are generally not Federal Deposit Insurance Corporation insured and may lose value and/or become illiquid regardless of their credit rating.

From time to time, we have also made investments in public and private companies that engage in complementary businesses. For example, during fiscal 2015 we made an investment in Lextar Electronics Corporation (Lextar), a public company in Taiwan. An investment in another company isbe subject to ~~the risks inherent in the business~~significant disruption and we could suffer monetary or other losses.

Our disclosure controls and procedures address cybersecurity and include elements intended to ensure that there is an analysis of ~~that company and to trends affecting the equity markets as a whole. Investments in publicly held companies~~potential disclosure obligations arising from security breaches. In addition, we are subject to ~~market risks~~data privacy, protection and ~~like~~security laws and regulations, including the European General Data Protection Act (GDPR) that governs personal information of European persons. We also maintain compliance programs to address the potential applicability of restrictions against trading while in possession of material, nonpublic information generally and in connection with a cyber-security breach. However, a breakdown in existing controls and procedures around our ~~investment~~cyber-security environment may prevent us from detecting, reporting or responding to cyber incidents in ~~Lextar, may not be liquidated easily. As~~ a result, we may not be able to reduce the size of our position or liquidate our investments when we deem appropriate to limit our downside risk. Should the value of any such investments we hold decline, the related write-down in valuetimely manner and could have a material adverse effect on our financial ~~condition~~position and ~~results of operations. For example, the~~ value of our ~~Lextar investment declined~~stock.

There are limitations on our ability to protect our intellectual property.

Our intellectual property position is based in part on patents owned by us and patents licensed to us. We intend to continue to file patent applications in the future, where appropriate, and to pursue such applications with U.S. and certain foreign patent authorities.

Our existing patents are subject to expiration and re-examination and we cannot be sure that additional patents will be issued on any new applications around the covered technology or that our existing or future patents will not be successfully contested by third parties. Also, because issuance of a valid patent does not prevent other companies from ~~the date~~using alternative, non-infringing technology, we cannot be sure that any of our ~~investment in December 2014 through~~patents, or patents issued to others and licensed to us, will provide significant commercial protection, especially as new competitors enter the ~~end~~market.

We periodically discover products that are counterfeit reproductions of ~~fiscal 2017 with variability between quarters,~~our products or that otherwise infringe on our intellectual property rights. The actions we take to establish and protect trademarks, patents and other intellectual property rights may ~~continue~~not be adequate to ~~decline~~prevent imitation of our products by others, and therefore, may adversely affect our sales and our brand and result in the ~~future. As required~~shift of customer preference away from our products. Further, the actions we take to establish and protect trademarks, patents and other intellectual property rights could result in significant legal expense and divert the efforts of our technical personnel and management, even if the litigation or other action results in a determination favorable to us.

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or that the confidentiality agreements will not be breached. We also cannot be sure that we would have adequate remedies for any breach of such agreements or other misappropriation of our trade secrets, or that our trade secrets and proprietary know-how will not otherwise become known or be independently discovered by Rule 3-09 of Regulation S-X, we filed Lextar’s financial statements, prepared by Lextar and audited by its independent public accounting firm, as of and for the years ended December 31, 2015 and 2014 as an exhibit to this Annual Report.others.

Litigation could adversely affect our operating results and financial condition.

We are often involved in litigation, primarily patent ~~litigation.~~litigation, such as our patent dispute with The Trustees of Purdue University, as discussed further in Note 15, “Commitments and Contingencies,” in our consolidated financial statements included in Item 8 of this Annual Report. Defending against existing and potential litigation will likely require significant attention and resources and, regardless of the outcome, result in significant legal expenses, which could adversely affect our results unless covered by insurance or recovered from third parties. If our defenses are ultimately unsuccessful or if we are unable to achieve a favorable resolution, we could be liable for damage awards that could materially affect our results of operations and financial condition.

Where necessary, we may initiate litigation to enforce our patent or other intellectual property rights, which could adversely impact our relationship with certain customers. Any such litigation may require us to spend a substantial amount of time and money and could distract management from our day-to-day operations. Moreover, there is no assurance that we will be successful in any such litigation.

Our business may be impaired by claims that we, or our customers, infringe the intellectual property rights of others.

Vigorous protection and pursuit of intellectual property rights characterize our industry. These traits have resulted in significant and often protracted and expensive litigation. Litigation to determine the validity of patents or claims by third parties of infringement of patents or other intellectual property rights could result in significant legal expense and divert the efforts of our technical personnel and management, even if the litigation results in a determination favorable to us. In the event of an adverse result in such litigation, we could be required ~~to:~~

to pay substantial damages;

indemnify our customers;

stop the manufacture, use and sale of products found to be infringing;

incur asset impairment charges;

discontinue the use of processes found to be infringing;

expend significant resources to develop non-infringing products or processes; or

obtain a license to use third party technology.

There can be no assurance that third parties will not attempt to assert infringement claims against us, or our customers, with respect to our products. In addition, our customers may face infringement claims directed to the customer’s products that incorporate our products, and an adverse result could impair the customer’s demand for our products. We have also promised certain of our customers that we will indemnify them in the event they are sued by our competitors for infringement claims directed to the products we supply. Under these indemnification obligations, we may be responsible for future payments to resolve infringement claims against them.

From time to time, we receive correspondence asserting that our products or processes are or may be infringing patents or other intellectual property rights of others. If we believe the assertions may have merit or in other appropriate circumstances, we may take steps to seek to obtain a license or to avoid the infringement. We cannot predict, however, whether a license will be available; that we would find the terms of any license offered acceptable; or that we would be able to develop an alternative solution. Failure to obtain a necessary license or develop an alternative solution could cause us to incur substantial liabilities and costs and to suspend the manufacture of affected products.

~~There are limitations on our ability~~Risks related to ~~protect our intellectual property.~~

~~Our intellectual property position is based in part on patents owned by us~~legal, regulatory, accounting, tax and ~~patents licensed to us. We intend to continue to file patent applications in the future, where appropriate, and to pursue such applications with U.S. and certain foreign patent authorities.~~

Our existing patents are subject to expiration and re-examination and we cannot be sure that additional patents will be issued on any new applications around the covered technology or that our existing or future patents will not be successfully contested by third parties. Also, since issuance of a valid patent does not prevent other companies from using alternative, non-infringing technology, we cannot be sure that any of our patents, or patents issued to others and licensed to us, will provide significant commercial protection, especially as new competitors enter the market.

We periodically discover products that are counterfeit reproductions of our products or that otherwise infringe on our intellectual property rights. The actions we take to establish and protect trademarks, patents and other intellectual property rights may not be adequate to prevent imitation of our products by others, and therefore, may adversely affect our sales and our brand and result in the shift of customer preference away from our products. Further, the actions we take to establish and protect trademarks, patents and other intellectual property rights could result in significant legal expense and divert the efforts of our technical personnel and management, even if the litigation or other action results in a determination favorable to us.

We also rely on trade secrets and other non-patented proprietary information relating to our product development and manufacturing activities. We try to protect this information through appropriate efforts to maintain its secrecy, including requiring employees and third parties to sign confidentiality agreements. We cannot be sure that these efforts will be successful or that the confidentiality agreements will not be breached. We also cannot be sure that we would have adequate remedies for any breach of such agreements or other misappropriation of our trade secrets, or that our trade secrets and proprietary know-how will not otherwise become known or be independently discovered by others.compliance matters

We may be required to recognize a significant charge to earnings if our goodwill or other ~~intangible~~ assets become impaired.

Goodwill and ~~purchased intangible~~other assets ~~with indefinite lives are not amortized, but~~ are reviewed for impairment annually and ~~more frequently~~ when events or changes in circumstances indicate that the carrying value of an asset may not be recoverable. ~~We assess the recoverability of the unamortized balance of our finite-lived intangible assets when indicators of potential impairment are present.~~ Factors that may indicate that the carrying value of our goodwill ~~or other intangible assets~~ may not be recoverable include a significant decline in our stock price and market capitalization and slower growth rates in our industry. For other assets such as finite-lived intangible assets and fixed assets, we assess the recoverability of the asset balance when indicators of potential impairment are present. The recognition of a significant charge to earnings in our consolidated financial statements resulting from any impairment of our goodwill or other ~~intangible~~ assets could adversely impact our results of operations.

WeThe adoption of or changes in government and/or industry policies, standards or regulations relating to the efficiency, performance, vehicle range or other aspects of our products and the products in which they are utilized could impact the demand for our products.

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The adoption of or changes in government and/or industry policies, standards or regulations relating to the efficiency, performance, vehicle range or other aspects of our products and the products in which they are utilized or integrated may impact the demand for our products. For example, efforts to change, eliminate or reduce industry or regulatorystandards could negatively impact our business. These constraints may be ~~subject to confidential information theft~~eliminated or ~~misuse,~~delayed by legislative action, which ~~could harm our business and results of operations.~~

We face attempts by others to gain unauthorized access to our information technology systems on which we maintain proprietary and other confidential information. Our security measures may be breached as the result of industrial or other espionage actions of outside parties, employee error, malfeasance or otherwise, and as a result, an unauthorized party may obtain access to our systems. Additionally, outside parties may attempt to access our confidential information through other means, for example by fraudulently inducing our employees to disclose confidential information. We actively seek to prevent, detect and investigate any unauthorized access, which sometimes occurs. We might be unaware of any such access or unable to determine its magnitude and effects. The theft and/or unauthorized use or publication of our trade secrets and other confidential business information as a result of such an incident could adversely affect our competitive position and the value of our investment in research and development could be reduced. Our business could be subject to significant disruption and we could suffer monetary or other losses.

~~We are subject to risks related to international sales and purchases.~~

We expect that revenue from international sales will continue to represent a significant portion of our total revenue. As such, a significant slowdown or instability in relevant foreign economies, including economic instability in Europe, or lower investments in new infrastructure could have a negative impact on demand for our ~~sales. We also purchase a portion of the materials included in our products from overseas sources.~~

products. Our international sales and purchases are subject to numerous U.S. and foreign laws and regulations, including, without limitation, tariffs, trade sanctions, trade barriers, trade embargoes, regulations relating to import-export control, technology transfer restrictions, the International Traffic in Arms Regulation promulgated under the Arms Export Control Act, the Foreign Corrupt Practices Actability and the ~~anti-boycott provisions~~ability of ~~the U.S. Export Administration Act. If we fail~~our competitors to ~~comply with these laws and regulations, we~~meet evolving government and/or industry requirements could ~~be liable for administrative, civil or criminal liabilities, and,~~impact competitive dynamics in the ~~extreme case, we could be suspended or debarred from government contracts or have our export privileges suspended, which could have a material adverse effect on our business.~~

International sales and purchases are also subject to a variety of other risks, including risks arising from currency fluctuations, collection issues and taxes. We have entered and may in the future enter into foreign currency derivative financial instruments in an effort to manage or hedge some of our foreign exchange rate risk. We may not be able to engage in hedging transactions in the future, and, even if we do, foreign currency fluctuations may still have a material adverse effect on our results of operations.

~~Our business may be adversely affected by uncertainties in the global financial markets and our or our customers’ or suppliers’ ability to access the capital markets.~~

Global financial markets continue to reflect uncertainty. Given these uncertainties, there could be future disruptions in the global economy, financial markets and consumer confidence. If economic conditions deteriorate unexpectedly, our business and results of operations could be materially and adversely affected. For example, our customers, including our distributors and their customers, may experience difficulty obtaining the working capital and other financing necessary to support historical or projected purchasing patterns, which could negatively affect our results of operations.

Although we believe we have adequate liquidity and capital resources to fund our operations internally and under our existing line of credit, our inability to access the capital markets on favorable terms in the future, or at all, may adversely affect our financial performance. The inability to obtain adequate financing from debt or capital sources in the future could force us to self-fund strategic initiatives or even forego certain opportunities, which in turn could potentially harm our performance.market.

Changes in our effective tax rate or the ability to obtain future tax credits may affect our ~~results.~~results and financial condition.

Our future effective tax rates and our ability to obtain future tax credits may ~~be affected by~~affect our results and financial condition due to a number of factors, including:

•the jurisdiction in which profits are determined to be earned and taxed;

~~changes in government administrations, such as the new U.S. presidential administration and U.S. Congress, as well as in the states and countries in which we operate;~~

•potential changes in tax laws or alterations in the interpretation of such tax laws and changes in generally accepted accounting ~~principles;~~principles, for example interpretations and U.S. regulations issued as a result of the significant changes to the U.S. tax law included within the Tax Cuts and Jobs Act of 2017 (the TCJA), the Coronavirus Aid, Relief and Economic Security Act of 2020 and the Inflation Reduction Act (the IRA);

•changes in available tax credits, including the eligibility for or the receipt of the expected benefits from refundable investment tax credits obtained through the CHIPS Act;

•the implementation of international tax and profit shifting rules in countries in which we operate, as recommended by the Organization for Economic Co-operation and Development’s Base Erosion, including the establishment of a minimum tax of 15% on global income;

•the resolution of issues arising from tax audits with various authorities;

•changes in the valuation of our deferred tax assets and ~~liabilities. For example, in~~ liabilities;

•the ~~third quarter~~ongoing restructuring of ~~fiscal 2017 we recognized a full valuation allowance against~~ our ~~U.S. deferred tax assets and other deferred charges primarily due to~~existing legal entities, including the restructuring of our ~~three-year cumulative pre-tax loss position in the U.S. and the termination of the Wolfspeed sale transaction, which was anticipated to generate U.S. taxable income;~~Luxembourg holding company;

•adjustments to estimated taxes upon finalization of various tax returns;

•increases in expenses not deductible for tax purposes, including impairment of goodwill in connection with acquisitions;

~~changes in available tax credits;~~

•the recognition and measurement of uncertain tax positions;

•variations in realized tax deductions for certain stock-based compensation awards (such as non-qualified stock options and restricted stock) from those originally anticipated; and

•the repatriation of non-U.S. earnings for which we have not previously provided for ~~U.S.~~ taxes or any changes in legislation that may result in these earnings being taxed, ~~within the U.S.,~~ regardless of our decision regarding repatriation of funds. For example, the TCJA included a one-time tax on deemed repatriated earnings of non-U.S. subsidiaries.

Any significant increase or decrease in our future effective tax rates could impact net ~~loss~~(loss) income for future periods. In addition, the determination of our income tax provision requires complex estimations, significant judgments and significant knowledge and experience concerning the applicable tax laws. To the extent our income tax liability materially differs from our income tax provisions due to factors, including the above, which were not anticipated at the time we estimated our tax provision, our net (loss) income ~~(loss)~~ or cash flows could be affected.

Failure to comply with applicable environmental laws and regulations worldwide could harm our business and results of operations.

The manufacturing, assembling and testing of our products require the use of hazardous materials that are subject to a broad array of environmental, health and safety laws and regulations. Our failure to comply with any of these applicable laws or regulations could result ~~in:~~

in regulatory penalties, fines, legal liabilities and the forfeiture of certain tax benefits;

suspension of production;

alteration of our fabrication, assembly and test processes; and

curtailment of our operations or sales.

In addition, our failure to manage the use, transportation, emission, discharge, storage, recycling or disposal of hazardous materials could subject us to ~~increased~~significant costs or future liabilities. Existing and future environmental laws and regulations could also require us to acquire pollution abatement or remediation equipment, modify our product designs or incur other expenses, such as permit costs, associated with such laws and regulations. Many new materials that we are evaluating for use in our operations may be subject to regulation under existing or future environmental laws and regulations that may restrict our use of one or more of such materials in our manufacturing, assembly and test processes or products. Any of these restrictions could harm our business and results of operations by increasing our expenses or requiring us to alter our manufacturing processes.

New climate change laws and regulations could require us to change our manufacturing processes or procure substitute raw materials that may cost more or be more difficult to procure. Various jurisdictions in which we do business have implemented,

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or in the future could implement or amend, restrictions on emissions of carbon dioxide or other greenhouse gases, limitations or restrictions on water use, regulations on energy management and waste management, and other climate change-based rules and regulations, which may increase our expenses and adversely affect our operating results. We expect increased worldwide regulatory activity relating to climate change in the future. Future compliance with these laws and regulations may adversely affect our business and results of operations.

Our results could vary as a result of the methods, estimates and judgments that we use in applying our accounting policies, including changes in the accounting standards to be applied.

The methods, estimates and judgments that we use in applying our accounting policies have a significant impact on our results (see “Critical Accounting ~~Policies and~~ Estimates” in ~~Management’s~~Item 7, "Management’s Discussion and Analysis of Financial Condition and Results of ~~Operations included in Part II, Item 7~~Operations" of this Annual Report). Such methods, estimates and judgments are, by their nature, subject to substantial risks, uncertainties and assumptions, and factors may arise over time that lead us to change our methods, estimates and judgments. Changes in those methods, estimates and judgments could significantly affect our results of operations or financial ~~condition.~~condition, such as the change in estimated useful lives of certain assets applied in the first quarter of fiscal 2022.

Likewise, our results may be impacted due to changes in the accounting standards to be applied, such as the ~~increased use of fair value measurement standards and~~ changes in ~~revenue~~convertible debt recognition requirements.

Regulations related to conflict-free minerals may force us to incur additional expenses.

Rules adopted by the SEC under the Dodd-Frank Wall Street Reform and Consumer Protection Act impose annual disclosure and reporting requirements for those companies who may use “conflict” minerals mined from the Democratic Republic of Congo and adjoining countries in their products. We may face challenges with government regulators, our customers and our suppliers if we are unable to sufficiently verify that the metals used in our products are conflict free. Our most recent disclosure regarding our due diligence was filed on May 31, 2023 for calendar year 2022.

General risk factors

We have outstanding debt which could materially restrict our business and adversely affect our financial condition, liquidity and results of operations.

As of June 25, 2023, our indebtedness consisted of $575.0 million aggregate principal amount of our 1.75% convertible senior notes due May 1, 2026 (the 2026 Notes), $750.0 million aggregate principal amount of our 0.25% convertible senior notes due February 15, 2028 (the 2028 Notes), $1,750.0 million aggregate principal amount of our 1.875% convertible senior notes due December 1, 2029 (the 2029 Notes) (collectively, the Outstanding Convertible Notes) and $1,250.0 million aggregate principal amount of senior secured notes due 2030 (the 2030 Senior Notes). In addition, on July 5, 2023, we entered into an Unsecured Customer Refundable Deposit Agreement (the “CRD Agreement”) with Renesas Electronics America Inc. (“Renesas America”) pursuant to which Renesas America provided the Company an initial deposit in an aggregate principal amount of $1 billion with a commitment to provide additional deposits in an aggregate principal amount of up to an additional $1 billion at our discretion in calendar year 2024, in connection with our entry into a wafer supply agreement with Renesas Electronics Corporation, an affiliate of Renesas America. Our ability to pay interest and repay the principal for any outstanding indebtedness under the Outstanding Convertible Notes, the 2030 Senior Notes and the CRD Agreement (if applicable) is dependent upon our ability to manage our business operations and generate sufficient cash flows to service such debt. There can be no assurance that we will be able to manage any of these risks successfully.

The level of our outstanding debt may adversely affect our operating results and financial condition by, among other things:

•increasing our vulnerability to downturns in our business, to competitive pressures and to adverse general economic and industry conditions;

•requiring the dedication of an increased portion of our expected cash flows from operations to service our indebtedness, thereby reducing the amount of expected cash flow available for other purposes, including capital expenditures, research and development and stock repurchases;

•limiting our flexibility in planning for, or reacting to, changes in our business and the industry in which we operate;

•placing us at a competitive disadvantage compared to our peers that may have less indebtedness than we have by limiting our ability to borrow additional funds needed to operate and grow our business; and

•increasing our interest expense if interest rates increase.

The Indenture governing the 2030 Senior Notes (the 2030 Senior Notes Indenture) includes a liquidity maintenance financial covenant requiring us to have an aggregate amount of unrestricted cash and cash equivalents maintained in accounts over which the trustee and collateral agent for the 2030 Senior Notes has been granted a perfected first lien security interest of at least

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$500,000,000 as of the last day of any calendar month, which amount will be reduced over time upon the fulfillment of certain conditions. In addition, the 2030 Senior Notes Indenture contains certain restrictions that could limit our ability to, among other things: incur additional indebtedness, dispose of assets, create liens on assets, make acquisitions or engage in mergers or consolidations, and engage in certain transactions with our subsidiaries and affiliates. The 2030 Senior Notes Indenture also requires us to make an offer to repurchase the 2030 Senior Notes with 100% of the net cash proceeds of certain non-ordinary course asset sales and casualty events, subject to the ability to reinvest the proceeds of such casualty events and asset sales (subject to certain limitations), or upon a change of control. The Indentures governing the Outstanding Convertible Notes (the Convertible Notes Indentures) require us to repurchase the Outstanding Convertible Notes upon certain fundamental changes relating to our common stock, and also prohibit our consolidation, merger, or sale of all or substantially all of our assets except with or to a successor entity assuming our obligations under the Indentures. The CRD Agreement contains certain restrictions on our ability to incur debt and liens, consummate non-arm’s-length transactions with affiliates, mergers and consolidations whereby obligations under the CRD Agreement are not assumed, and change the nature of our business. The restrictions imposed by the 2030 Senior Notes Indenture, the Convertible Notes Indentures, and the CRD Agreement could limit our ability to plan for or react to changing business conditions, or could otherwise restrict our business activities and plans.

Our ability to comply with the provisions of the 2030 Senior Notes Indenture, the Convertible Notes Indentures, and the CRD Agreement may also be affected by events beyond our control and if any of these restrictions or terms is breached, it could lead to an event of default under the 2030 Senior Notes, the Outstanding Convertible Notes, and the CRD Agreement. A default, if not cured or waived, may permit acceleration of our indebtedness. In addition, our lenders could terminate their commitments to make further loans under the 2030 Senior Notes Indenture or the CRD Agreement. If our indebtedness is accelerated, we cannot be certain that we will have sufficient funds to pay the accelerated indebtedness or that we will have the ability to refinance accelerated indebtedness on terms favorable to us or at all.

The capped call transactions may not prevent dilution of our common stock upon conversion of the 2028 Notes or the 2029 Notes.

In connection with the pricing of the 2028 Notes and the 2029 Notes, we entered into privately negotiated capped call transactions with the option counterparties. The capped call transactions are expected generally to reduce the potential dilution to our common stock upon any conversion of the 2028 Notes and 2029 Notes and/or offset any potential cash payments we are required to make in excess of the principal amount of the converted 2028 Notes and 2029 Notes, as the case may be, upon conversion of the 2028 Notes and 2029 Notes. If, however, the market price per share of our common stock, as measured under the terms of the capped call transactions, exceeds the cap price of the capped call transactions (currently $212.04 for the 2028 Notes and $202.538 for the 2029 Notes), there would nevertheless be dilution and/or there would not be an offset of such potential cash payments, in each case, to the extent that such market price exceeds the cap price of the capped call transactions.

Catastrophic events and disaster recovery may disrupt ~~our business.~~business continuity.

A disruption or failure of our systems or operations in the event of a natural disaster or severe weather event, including, but not limited to, earthquakes, wildfires, droughts, flooding, tornadoes, hurricanes or tsunamis, health pandemic, such as an influenza outbreak within our workforce, or man-made catastrophic event could cause delays in completing sales, continuing production or performing other critical functions of our business, particularly if a catastrophic event ~~occurred~~were to occur at our primary manufacturing locations or our subcontractors' locations. Global climate change could result in certain natural disasters occurring more frequently or with greater intensity. Any of these events could severely affect our ability to conduct normal business operations and, as a result, our operating results could be adversely affected. There may also be secondary impacts that are unforeseeable as well, such as impacts to our customers, which could cause delays in new orders, delays in completing sales or even order cancellations.

In order to compete, we must attract, motivate and retain key employees, and our failure to do so could harm our results of operations.

Hiring and retaining qualified executives, scientists, engineers, technical staff, sales personnel and production personnel is critical to our business, and competition for experienced employees in our industry can be intense. As a global company, this issue is not limited to the United States, but includes our other locations such as Europe and Asia. For example, there is substantial competition for qualified and capable personnel, particularly experienced engineers and technical personnel, which may make it difficult for us to recruit and retain qualified employees. If we are unable to staff sufficient and adequate personnel at our facilities, we may experience lower revenue or increased manufacturing costs, which would adversely affect our results of operations.

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To help attract, motivate and retain key employees, we use benefits such as stock-based compensation awards. If the value of such awards does not appreciate, as measured by the performance of the price of our common stock or if our stock-based compensation otherwise ceases to be viewed as a valuable benefit, our ability to attract, retain and motivate employees could be weakened, which could harm our business and results of operations.

Our stock price may be volatile.

Historically, our common stock has experienced substantial price volatility, particularly as a result of significant fluctuations in our revenue, earnings and margins over the past few years, and variations between our actual financial results and the published expectations of analysts. For example, the closing price per share of our common stock on the ~~NASDAQ Global Select Market~~New York Stock Exchange ranged from a low of ~~$21.12~~$39.48 to a high of ~~$28.98~~$122.07 during the 12twelve months ended June 25, ~~2017.~~2023. If our future operating results or margins are below the expectations of stock market analysts or our investors, our stock price will likely decline.

Speculation and opinions in the press or investment community about our strategic position, financial condition, results of operations or significant transactions can also cause changes in our stock price. In particular, ~~speculation around~~competition in some of the markets we address such as electric vehicles and 5G, the ramp up of our ~~market opportunities for energy efficient lighting~~business, and the effect of tariffs or COVID-19 on our business, may have a dramatic effect on our stock price.

Additionally, actions taken by the option counterparties in the capped call transactions entered into in connection with the 2028 Notes and the 2029 Notes may affect our stock price, ~~especially~~including the potential modifications of their hedge positions by entering into or unwinding various derivatives with respect to our common stock.

We are exposed to fluctuations in the market value of our investment portfolio and in interest rates, and therefore, impairment of our investments or lower investment income could harm our earnings.

We are exposed to market value and inherent interest rate risk related to our investment portfolio. We have historically invested portions of our available cash in fixed interest rate securities such as ~~various~~high-grade corporate debt, commercial paper, municipal bonds, certificates of deposit, government ~~agencies announce~~securities and other fixed interest rate investments. The primary objective of our cash investment policy is preservation of principal. However, these investments are generally not Federal Deposit Insurance Corporation insured and may lose value and/or become illiquid regardless of their ~~planned~~credit rating.

From time to time, we have also made investments in ~~energy efficient technology, including lighting.~~public and private companies that engage in complementary businesses.

We may be subject to volatility and uncertainty in customer demand, supply chains, worldwide economies and financial markets resulting from the COVID-19 pandemic or other outbreak of infectious disease or similar public health threat.

We have ~~outstanding debt~~significant manufacturing operations in the United States and contract manufacturing agreements in Asia, which were affected by the COVID-19 pandemic and the measures to try to contain it. We initially experienced some limited disruptions in supply from some of our suppliers, although the disruptions to date have not been significant. At some of our contract manufacturers in Asia, which include captive lines and contract packaging facilities, we have experienced, and may experience in the future, some disruptions in supply from containment measures.

Restrictions on access to our manufacturing facilities or on our support operations or workforce, or similar limitations for our vendors and suppliers, and restrictions or disruptions of transportation, such as reduced availability of air transport, port closures, and increased border controls or closures in connection with the COVID-19 pandemic or future outbreaks of infectious diseases or similar public health events could ~~materially restrict~~limit our ~~business~~ability to meet customer demand, lead to increased costs and ~~adversely affect~~have a material adverse effect on our financial condition ~~liquidity~~and results of operations.

The COVID-19 pandemic has significantly increased economic and demand uncertainty. These uncertainties also make it more difficult for us to assess the quality of our product order backlog and to estimate future financial results. The COVID-19 pandemic initially caused an economic slowdown, and the continued spread of COVID-19 and its variants or future outbreaks of infectious diseases or similar public health events could contribute to or exacerbate a global economic slowdown or recession, which could have a material adverse effect on demand for our products and on our financial condition and results of operations.

Our ~~indebtedness consists~~amended and restated bylaws provide that, unless we consent in writing to the selection of ~~borrowings from our revolving line~~an alternative forum, the state courts of credit. Our ability to pay interest and repay the principal for our indebtedness is dependent upon our ability to manage our business operations and generate sufficient cash flows to service such debt. There can be no assurance that weNorth Carolina will be ~~able to manage any of these risks successfully.~~

~~The level of outstanding debt under this line of credit may adversely affect~~the sole and exclusive forum for substantially all disputes between us and our ~~operating results and financial condition by, among other things:~~

~~increasing our vulnerability to downturns in our business, to competitive pressures and to adverse general economic and industry conditions;~~

requiring the dedication of an increased portion of our expected cash flows from operations to service our indebtedness, thereby reducing the amount of expected cash flow available for other purposes, including capital expenditures, research and development and stock repurchases;

~~limiting our flexibility in planning for, or reacting to, changes in our business and the industry in~~shareholders, which ~~we operate;~~

placing us at a competitive disadvantage compared to our peers that may have less indebtedness than we have by limiting our ability to borrow additional funds needed to operate and grow our business; and

~~increasing our interest expense if interest rates increase.~~

~~Our line of credit requires us to maintain compliance with certain financial ratios. In addition, our line of credit contains certain restrictions that~~ could limit our shareholders’ ability to ~~among other things: incur additional indebtedness, dispose of assets, create liens on assets, make acquisitions~~obtain a favorable judicial forum for disputes with us or ~~engage in mergers~~our directors, officers, or ~~consolidations, and engage in certain transactions with our subsidiaries and affiliates. These restrictions could limit our ability to plan for~~employees or ~~react to changing business conditions, or could otherwise restrict our business activities and plans.~~agents.

Our ~~ability~~amended and restated bylaws provide that, unless we consent in writing to ~~comply with~~the selection of an alternative forum, the sole and exclusive forum for all litigation relating to our ~~loan covenants may also be affected~~internal affairs, including without limitation (i) any derivative action or

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proceeding brought on behalf of Wolfspeed, (ii) any action asserting a claim of breach of a fiduciary duty owed by ~~events beyond~~any director, officer or other employee of Wolfspeed to Wolfspeed or our ~~control~~shareholders, (iii) any action asserting a claim arising pursuant to any provision of the North Carolina Business Corporation Act (the NCBCA), our restated articles of incorporation, as amended, or our amended and ifrestated bylaws, (iv) any ~~of these restrictions~~action to interpret, apply, enforce, or ~~terms is breached, it could lead to an event of default under our line of credit. A default, if not cured or waived, may permit acceleration~~determine the validity of our ~~indebtedness. In addition,~~restated articles of incorporation, as amended, or our ~~lenders could terminate their commitments~~amended and restated bylaws, or (v) any action asserting a claim governed by the internal affairs doctrine, shall be the state courts of North Carolina, or if such courts lack jurisdiction, a federal court located within the State of North Carolina, in all cases subject to ~~make further extensions of credit under our line of credit. If our indebtedness is accelerated, we cannot be certain that we will have sufficient funds to pay~~ the ~~accelerated indebtedness or that we will have~~court’s having personal jurisdiction over the ~~ability to refinance accelerated indebtedness on terms favorable to us or at all.~~

~~Regulations related to conflict-free minerals may force us to incur additional expenses.~~

The Dodd-Frank Wall Street Reform and Consumer Protection Act contains provisions to improve transparency and accountability concerning the supply of minerals originating from the conflict zones of the Democratic Republic of Congo (DRC) and adjoining countries. As a result, in August 2012 the SEC established new annual disclosure and reporting requirements for those companies who may use “conflict” minerals mined from the DRC and adjoining countries in their products. Our most recent disclosure regarding our due diligence wasindispensable parties named as defendants. Any such action filed in ~~May 2017 for calendar year 2016. These requirements could affect the sourcing and availability of certain minerals used in the manufacture of our products. As~~ a ~~result, we may not~~North Carolina state court shall be ~~able to obtain the relevant minerals at competitive prices and there will likely be additional costs associated with complying with the due diligence procedures as required~~designated by the ~~SEC.~~party filing the action as a mandatory complex business case. In ~~addition, because our supply chain is complex,~~any such action where the NCBCA specifies the division or county wherein the action must be brought, the action shall be brought in such division or county. Our amended and restated bylaws also provide that, notwithstanding the foregoing, (x) the provisions described above will not apply to suits brought to enforce any liability or duty created by the Exchange Act or any other claim for which the federal courts have exclusive jurisdiction, and (y) unless we ~~may face reputational challenges with our customers~~consent in writing to the selection of an alternative forum, the federal district courts shall, to the fullest extent permitted by law, be the exclusive forum for the resolution of any complaint asserting a cause of action against Wolfspeed or any director, officer, employee, or agent of Wolfspeed and ~~other stakeholders if we are unable~~arising under the Securities Act.

If a court were to ~~sufficiently verify~~find the ~~origins~~choice of ~~all minerals used~~forum provision contained in our ~~products through the due diligence procedures,~~amended and restated bylaws to be inapplicable or unenforceable in an action, we may incur additional costs asassociated with resolving such action in other jurisdictions, which could harm our business, results of operations, and financial condition. Even if we are successful in defending against these claims, litigation could result in substantial costs and be a ~~result of changes~~distraction to ~~product, processes or sources of supply as a consequence of these requirements.~~management and other employees.

Item 1B.Unresolved Staff Comments

Not applicable.

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Item 2.Properties

~~The table below sets forth information with respect to~~Our corporate headquarters, primary research and development operations, and primary manufacturing operations are located within our Durham, North Carolina facilities that we own, which sits on 141 acres of owned land.

Our products are also produced at owned manufacturing facilities located in Research Triangle Park (RTP), North Carolina and Marcy, New York and at leased facilities in Morgan Hill, California and Fayetteville, Arkansas. Our RTP facility sits on 55 acres of owned land and our Marcy, New York facility sits on 55 acres of leased land.

In addition, we recently purchased an existing facility in Farmers Branch, Texas, which will be used for materials production, and are in the process of constructing two new materials manufacturing facilities in North Carolina, including our materials manufacturing facility in Siler City, North Carolina which sits on 446 acres of owned land.

Some of our products are also produced at contract manufacturing facilities throughout Asia. We maintain captive lines at some of our contract manufacturers.

We also maintain sales and support offices in leased office premises in North America, Asia, and Europe.

Details on our significant owned and leased facilities as of June 25, ~~2017. The sizes of the locations represent the approximate gross square footage of each site’s buildings.~~

Size (approximate gross square footage)
Location
Segment Utilization¹
Total Production
Facility
Services and
Warehousing

Administrative
Function

Housing /
Other
Owned Facilities
Durham, NC All 966,844
536,169
83,860
346,815
—
Research Triangle Park, NC 3 203,995
90,613
62,855
50,527
—
Racine, WI 1 802,845
160,000
418,000
224,845
—
Huizhou, China 2 823,951
332,271
116,568
41,764
333,348
Total owned 2,797,635
1,119,053
681,283
663,951
333,348

Leased Facilities
Durham, NC 1 189,430
15,200
167,584
6,646
—
Laredo, TX 1 100,545
—
97,545
3,000
—
Goleta, CA 1,2 25,623
—
1,882
23,741
—
Yorkville, WI 1 79,016
—
77,316
1,700
—
Pleasant Prairie, WI 1
147,877

—

145,477

2,400

—
Fayetteville, AR 3 26,265
10,956
—
15,309

Sesto Fiorentino, Italy 1,2 63,670
20,672
24,998
18,000
—
Hong Kong All 38,913
—
8,958
29,955
—
Misc. sales and support offices All 66,189
—
15,477
50,712
—
Total leased 737,528
46,828
539,237
151,463
—

Total gross square footage 3,535,163
1,165,881
1,220,520
815,414
333,348

¹ ~~Segments listed in the “Segment Utilization” column above~~2023 are ~~identified~~ as follows: ~~1) Lighting Products; 2) LED Products and 3) Wolfspeed.~~

In the United States, our corporate headquarters as well as our primary research and development and manufacturing operations are located at the Durham, North Carolina facilities that we own. These Durham facilities sit on 149 acres of land that we own. Our power and RF products are primarily produced at our owned manufacturing facility located in Research Triangle Park, North Carolina. This facility sits on 55 acres of land that we own. Domestically, our lighting products are primarily produced at our owned facility in Racine, Wisconsin, which sits on 33 acres of land that we own, and a leased facility in Durham, North Carolina.

Location

Principal Use

Approximate square footage

Owned Facilities

Durham, North Carolina - Silicon Drive Site

Administrative, Production and R&D

1,054,000

Marcy, New York

Production

560,000

Research Triangle Park, North Carolina

Production

189,000

Leased Facilities

Morgan Hill, California

Production

84,000

Fayetteville, Arkansas

R&D/Production

40,000

LED products are produced at our owned manufacturing facilities located in Huizhou, Guangdong Province, China. We also own dormitories for housing our Chinese employees near and adjacent to the owned manufacturing facilities. The owned manufacturing facilities, dormitories, and support buildings are located on land that is leased from the Chinese government through two leases. The first land lease is for twelve acres that expires in June 2057 and supports the manufacturing facilities. The second land lease is for five acres that expires in December 2082 and is used for dormitory buildings.

We also maintain sales and support offices, through our subsidiaries, in leased office premises in North America, Asia, and Europe. In addition, we lease a facility in Goleta, California that is used for research and development and administrative functions.

Item 3.Legal Proceedings

The information required by this item is set forth under Note ~~13,~~15, “Commitments and Contingencies,” in our consolidated financial statements included in Item 8 of this Annual Report and is incorporated herein by reference.

Item 4. Mine Safety Disclosures

Not applicable.

Table of Contents

PART II

Item 5.Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities

Common Stock Market Information

Our common stock is traded on the ~~NASDAQ Global Select Market and is quoted~~New York Stock Exchange under the trading symbol ~~CREE.~~WOLF. There were ~~324~~231 holders of record of our common stock as of August ~~18, 2017. The following table sets forth, for the quarters indicated, the high and low closing sales prices~~17, 2023. Holders of record are defined as ~~reported by NASDAQ.~~

Fiscal 2017 Fiscal 2016
High Low High Low
First Quarter
$28.98

$23.19

$27.56

$23.95
Second Quarter 27.58
21.12
28.16
22.12
Third Quarter 28.83
25.56
32.44
24.07
Fourth Quarter 27.24
21.70
30.14
22.43

~~We have never paid cash dividends on~~those shareholders whose shares are registered in their names in our ~~common~~ stock records and do not ~~anticipate that we will do so~~include beneficial owners of common stock whose shares are held in the foreseeable future. Our credit agreement with Wells Fargo Bank, National Association and other lenders party thereto, contains certain dividend distribution restrictions. Applicable state laws may also limit the paymentnames of ~~dividends. Our present policy is to retain earnings, if any, to provide funds to invest in our business.~~

brokers, dealers or clearing agencies.

Stock Performance Graph

The following information in this Item 5 of this Annual Report ~~on Form 10-K~~ is not deemed to be “soliciting material” or to be “filed” with the SEC or subject to Regulation 14A or 14C under the Exchange Act or to the liabilities of Section 18 of the Exchange Act, and will not be deemed to be incorporated by reference into any filing under the Securities Act or the Exchange Act, except to the extent we specifically incorporate it by reference into such filing.

The following graph ~~compares~~and related table compare the cumulative total return on our common stock with the cumulative total returns of the ~~NASDAQ~~Nasdaq Composite Index and the ~~NASDAQ Electronic Components~~Philadelphia Semiconductor Index, ~~for the five-year period commencing June 24, 2012. The stock price performance shown on the graph below is not necessarily indicative~~assuming an investment of ~~future price performance.~~

Comparison of Five-Year Cumulative Total Return*

~~Among Cree, Inc., the NASDAQ Composite Index and the NASDAQ Electronic Components Index~~

* Assumes (1) $100 invested$100.00 on June 24, ~~2012 in Cree, Inc. Common Stock, the NASDAQ Composite Index~~2018 and the ~~NASDAQ Electronic Components Index and (2) the immediate~~ reinvestment of ~~all~~ dividends.

6/24/2012 6/30/2013 6/29/2014 6/28/2015 6/26/2016 6/25/2017
Cree, Inc.
$100.00

$261.06

$198.28

$110.43

$94.85

$100.60
NASDAQ Composite Index 100.00
119.38
156.20
182.53
167.12
225.01
NASDAQ Electronic Components Index 100.00
118.23
150.86
166.70
163.71
232.96


	6/24/2018	6/30/2019	6/28/2020	6/27/2021	6/26/2022	6/25/2023
Wolfspeed, Inc.	$100.00	$117.88	$121.15	$206.86	$149.81	$103.74
Nasdaq Composite Index	100.00	105.24	129.57	192.09	156.35	183.37
Philadelphia Semiconductor Index	100.00	108.74	145.86	249.32	211.77	277.14

Sale of Unregistered Securities

~~There~~Other than as previously reported in our Current Reports on Form 8-K, there were no unregistered securities sold during fiscal ~~2017~~.2023.

~~Stock Repurchase Program~~

Table of Contents

On August 24, 2016, our Board of Directors approved our fiscal 2017 stock repurchase program authorizing us to repurchase shares of common stock having an aggregate purchase price not exceeding $300 million for all purchases from August 24, 2016 throughDividends

In the ~~expiration of the program on June 25, 2017. There were no shares repurchased under the stock repurchase program in the~~ ~~fourth~~ ~~quarter of fiscal~~ ~~2017~~.

~~Since the inception of our stock repurchase program in January 2001 through June 25, 2017,~~past, we have ~~repurchased 38.7 million shares of~~not declared or paid cash dividends on our common stock. We do not expect to pay dividends on our common stock ~~at an average price~~for the foreseeable future. Instead, we anticipate that all of ~~$28.66 per share with an aggregate value~~our earnings, if any, will be used for the operation and growth of ~~$1.1 billion. The repurchase program could~~our business. Any future determinations to declare cash dividends would be ~~implemented through open market or privately negotiated transactions at~~subject to the discretion of our ~~management.~~ board of directors and would depend upon various factors, including our results of operations, financial condition and capital requirements, restrictions that may be imposed by applicable law and our indebtedness, and other factors deemed relevant by our board of directors.

On June 14, 2017, our Board of Directors approved our fiscal 2018 stock repurchase program authorizing us to repurchase shares of common stock having an aggregate purchase price not exceeding $200 million for all purchases from June 26, 2017 through the expiration of the program on June 24, 2018.

Item 6.~~Selected Financial Data~~

~~The consolidated statement of (loss) income data set forth below with respect to the fiscal years ended~~ ~~June 25, 2017~~, ~~June 26, 2016, and~~ ~~June 28, 2015~~ ~~and the consolidated balance sheet data at~~ ~~June 25, 2017~~ ~~and~~ ~~June 26, 2016~~ are derived from, and are qualified by reference to, the audited consolidated financial statements included in Item 8 of this Annual Report and should be read in conjunction with those financial statements and notes thereto. The consolidated statement of income data for the fiscal years ended ~~June 29, 2014~~ ~~and~~ ~~June 30, 2013~~ ~~and the consolidated balance sheet data at~~ ~~June 28, 2015~~, ~~June 29, 2014, and~~ ~~June 30, 2013~~ ~~are derived from audited consolidated financial statements not included herein.~~

~~Selected Consolidated Financial Data~~

~~(In thousands, except per share data)~~Reserved

Fiscal Years Ended
June 25,
2017 June 26,
2016 June 28,
2015 June 29,
2014 June 30,
2013
Consolidated Statement of (Loss) Income
Revenue, net
$1,473,000

$1,616,627

$1,632,505

$1,647,641

$1,385,982
Operating (loss) income (18,672 ) (10,471 ) (73,550 ) 133,236
95,454
Net (loss) income (98,118 ) (21,536 ) (64,692 ) 123,490
86,227
(Loss) earnings per share
Basic
($1.00 )
($0.21 )
($0.57 )
$1.02

$0.74
Diluted
($1.00 )
($0.21 )
($0.57 )
$1.00

$0.73
Weighted average shares used in per share calculation:
Basic 98,487
101,783
113,022
120,623
116,621
Diluted 98,487
101,783
113,022
122,914
117,979

June 25,
2017 June 26,
2016 June 28,
2015 June 29,
2014 June 30,
2013
Consolidated Balance Sheet Data
Total cash, cash equivalents and short-term investments
$610,938

$605,305

$713,191

$1,162,466

$1,023,915
Working capital 888,607
933,708
1,053,464
1,467,236
1,308,355
Total assets 2,649,867
2,766,060
2,948,033
3,338,981
3,048,062
Total long-term liabilities 215,039
175,237
231,295
45,943
37,061
Total shareholders’ equity 2,222,805
2,367,824
2,461,952
2,986,383
2,803,590

Table of Contents

Item 7.Management’s Discussion and Analysis of Financial Condition and Results of Operations

Executive Summary

The following discussion is designed to provide a better understanding of our audited consolidated financial statements and notes thereto, including a brief discussion of our business and products, key factors that impacted our performance and a summary of our operating results. The following discussion should be read in conjunction with our consolidated financial statements included in Item 8 of this Annual Report. Historical results and percentage relationships among any amounts in the financial statements are not necessarily indicative of trends in operating results for any future periods.

~~Overview~~

~~Cree, Inc. (Cree, we, our, or us) is a leading innovator of lighting-class light emitting diode (LED) products, lighting products~~ Unless otherwise noted, the following information and wide bandgap semiconductor products for power and radio-frequency (RF) applications. Our products are targeted for applications such as indoor and outdoor lighting, video displays, transportation, electronic signs and signals, power supplies, inverters and wireless systems. As discussed more fully below, we operate in three reportable segments: Lighting Products, LED Products and Wolfspeed.

~~Our lighting products primarily consist of LED lighting systems and lamps. We design, manufacture and sell lighting fixtures and lamps for the commercial, industrial and consumer markets.~~

Our LED products consist of LED chips and LED components. Our LED products enable our customers to develop and market LED-based products for lighting, video screens, automotive and other industrial applications.

Our Wolfspeed business consists of silicon carbide (SiC) materials, power devices and RF devices based on wide bandgap semiconductor materials such as SiC and gallium nitride (GaN). Our materials products and power devices are used in solar, electric vehicles, motor drives, power supplies and transportation applications. Our RF devices are used in military communications, radar, satellite and telecommunication applications.

As discussed more fully in Note 1, “Business,” in our consolidated financial statements included in Item 8 of this Annual Report, on July 13, 2016, we executed a definitive agreement to sell the Wolfspeed business to Infineon Technologies AG (Infineon). Beginning in July 2016, the Company classified the results of the Wolfspeed business as discontinued operations in the Company’s consolidated statements of loss for all periods presented and classified the related assets and liabilities associated with the discontinued operations as held for sale in the consolidated balance sheets. On March 6, 2017, the definitive agreement with Infineon was terminated. As a result of the termination of the agreement, we have reclassified the results of the Wolfspeed business as continuing operations in our consolidated statements of loss, and presented it as a separate reportable segment, for all periods presented. Additionally, the related assets and liabilities associated with the discontinued operations were reclassified as held and used in the consolidated balance sheets for all periods presented.

The majority of our products are manufactured at our production facilities located in North Carolina, Wisconsin and China. We also use contract manufacturers for certain products and aspects of product fabrication, assembly and packaging. We operate research and development facilities in North Carolina, Arkansas, California, Wisconsin, India, Italy and China (including Hong Kong).

Cree, Inc. is a North Carolina corporation established in 1987, and our headquarters are in Durham, North Carolina. For further information about our consolidated revenue and earnings, please see our consolidated financial statements included in Item 8 of this Annual Report.

~~Reportable Segments~~

~~Our three reportable segments are:~~

~~Lighting Products~~

~~LED Products~~

~~Wolfspeed~~

Reportable segments are components of an entity that have separate financial data that the entity’s Chief Operating Decision Maker (CODM) regularly reviews when allocating resources and assessing performance. Our CODM is the Chief Executive Officer.

Our CODM does not review inter-segment transactions when evaluating segment performance and allocating resources to each segment, and inter-segment transactions are not included in our segment revenue disclosure. As such, total segment revenue is equaldiscussion relates to our ~~consolidated revenue.~~continuing operations.

Our CODM reviews gross profit as the lowest and only level of segment profit. As such, all items below gross profit in the Consolidated Statements of Loss must be included to reconcile the consolidated gross profit to our consolidated loss before income taxes.

~~For financial results by reportable segment, please refer to Note 14, “Reportable Segments,” in our consolidated financial statements included in Item 8 of this Annual Report.~~

Industry Dynamics and Trends

There are a number of industry factors that affect our business which include, among others:

•Supply Constraints. The semiconductor industry has experienced supply constraints for certain items. While we have successfully managed through challenges relating to obtaining certain necessary raw materials and production and processing equipment thus far, and have continued to see supply availabilities and lead times stabilize across many direct materials, we expect the supply situation for certain items to remain tight for at least the next few quarters. In addition, the ongoing military conflict between Russia and Ukraine may further exacerbate supply constraints. The current high demand for our products has also led to supply constraints for our customers. We are working closely with our customer base to best match our supply to their demand. We have taken steps to provide continuity to our customers to the extent possible, including entering into purchase agreements and providing customer reserve deposits with our suppliers to secure future supply to us, although we expect that our production capacity constraints as we continue to bring additional capacity online may continue to limit our shipments to our customers in the near term.

•Overall Demand for Products and Applications ~~using LEDs, SiC power devices~~Using Our Wolfspeed Materials and ~~GaN RF devices.~~Devices. Our potential for growth depends significantly on the continued adoption of ~~LEDs, the adoption of SiC~~silicon carbide and GaN ~~substrate~~materials and device products in the power and RF markets, the continued use of silicon devices in the RF telecommunications market and our ability to win new designs for these applications. Demand also fluctuates based on various domestic and global economic and market cycles, continuously evolving industry supply chains, trade and tariff terms, and inflationary impacts, as well as evolving competitive dynamics in each of the respective markets. These uncertainties make demand difficult to forecast for us and our customers.

For example, decreasing consumer or industrial demand as a result of an economic slowdown or recession may lead our customers to delay designing in our products. Over the past six months, we have been seeing softening demand for our RF products but significantly higher demand for our power products. We believe the increased demand for our power products reflects the value that the industry places on a transition to silicon carbide materials and devices while also evidencing the growing global focus on adopting higher efficiency energy solutions, including electric vehicle and related technologies. We believe these trends could have a significant positive impact on revenues in future periods as we increase capacity to meet this increased demand, but in the short and near term we expect to face production capacity constraints while we continue to work to bring additional capacity online.

•Technological Innovation and Advancement. Innovations and advancements in ~~LEDs, lighting and~~materials, power, and RF technologies continue to expand the potential commercial application for our products. However, new technologies or standards could emerge or improvements could be made in existing technologies that could reduce or limit the demand for our products in certain markets.

•Intellectual Property Issues.Market participants rely on patented and non-patented proprietary information relating to product development, manufacturing capabilities and other core competencies of their business. Protection of intellectual property is critical. Therefore, steps such as additional patent applications, confidentiality and non-disclosure agreements, as well as other security measures are generally taken. To enforce or protect intellectual property rights, litigation or threatened litigation is common.

Fiscal ~~2017~~2023 Overview

The following is a summary of our financial results for the year ended June 25, ~~2017:~~2023:

•Our year-over-year revenue ~~decreased~~increased by ~~$144~~$175.7 million to ~~$1.5 billion.~~$921.9 million.

•Gross margin ~~remained flat at 30%~~decreased to 30.3% from 33.4%. Gross profit ~~decreased by $53~~increased to $279.5 million ~~to $435~~from $249.3 million.

•Operating loss from continuing operations was ~~$19~~$380.6 million in fiscal ~~2017~~2023 compared to ~~operating loss of $10~~$247.8 million in fiscal ~~2016. Net~~2022.

•Diluted loss per ~~diluted~~ share from continuing operations was ~~$1.00~~$2.65 in fiscal ~~2017~~2023 compared to ~~net loss per diluted share of $0.21~~$2.46 in fiscal ~~2016.~~2022.

•Combined cash, cash equivalents and short-term investments ~~remained flat at $0.6 billion~~increased to $2,954.9 million at June 25, ~~2017 and~~2023 from $1,198.8 million at June 26, ~~2016. Cash provided by~~2022.

•Long-term debt, net, including convertible notes, was $4,175.1 million at June 25, 2023 and $1,021.6 million at June 26, 2022. As discussed further below and in Note 10, "Long-term Debt," in our consolidated financial statements in Item 8 of this Annual Report, we sold $1,750.0 million aggregate principal amount of 2029 Notes in the second quarter of fiscal 2023 and $1,250.0 million aggregate principal amount of 2030 Senior Notes in the fourth quarter of fiscal 2023.

•Net cash used in operating activities of continuing operations was ~~$216~~$142.6 million in fiscal ~~2017,~~2023 compared to ~~$203~~$154.2 million in fiscal ~~2016.~~2022.

~~We spent $104 million to repurchase 4.4 million shares of our common stock during fiscal 2017.~~

~~We spent $87 million on purchases~~•Purchases of property and equipment, net were $800.3 million (net of $155.5 million in reimbursements) in fiscal ~~2017~~2023 compared to ~~$120~~$505.9 million (net of $139.0 million in reimbursements) in fiscal ~~2016.~~2022.

•Design-ins were $8.3 billion in fiscal 2023 compared to $6.4 billion in fiscal 2022.

Business Outlook

~~While we believe that the markets for our products will remain highly competitive during fiscal 2018, we~~We believe we are uniquely positioned as ~~a market leading~~an innovator in the global semiconductor industry. The strength of our balance sheet provides us the ability to invest in our business, as indicated by our new state-of-the-art, automated 200mm silicon carbide device fabrication facility in Marcy, New York, where we recently started revenue generating production. In addition, an expansion of our materials factory at our U.S. campus headquarters in Durham, North Carolina, the construction of a new materials manufacturing facility in Siler City, North Carolina, and the recently announced plan to construct a new silicon carbide device fabrication facility in Saarland, Germany are all three business segments and target growth in all three businesses over the next several years. These businesses are in different phases of their growth plans and generally operate on different market cycles. This is targetedexpected to ~~provide better business diversity and less cyclical results over time.~~increase our production capacity.

We are primarily focused on investing in our business to expand the ~~following priorities to~~scale, further develop the technologies, and accelerate the growth opportunities of silicon carbide materials, silicon carbide power devices and modules. We believe these efforts will support our goals of delivering higher revenue and ~~profits~~shareholder returns over ~~time:~~time.

~~Invest~~In addition, we are focused on improving the number of usable items in a production cycle (yield) as our manufacturing technologies become more complex. Despite increased complexities in our manufacturing processes, we believe we are in a position to improve yield levels to support our future growth, particularly as we transition more production to our new silicon carbide device fabrication facility in Marcy, New York.

We believe we have the ability to navigate the current environment while maintaining our capital expenditure plans to support future growth to meet long-term demand, which demand in the ~~Wolfspeed business~~short-term and mid-term appears to be ahead of the industry's supply capabilities. Our expansion plans to increase supply include the continued build out of our new facility in New York, the construction of additional production capacity in North Carolina and the planned construction of a new silicon carbide device fabrication facility in Saarland, Germany. For fiscal 2024, we target approximately $2.0 billion of net capital investment.

Design-ins

Design-ins are customer commitments to purchase our products and are one of the factors we use to forecast long-term demand and future revenue. To meet the qualification of a design-in, the customer provides us with documentation (e.g., a letter of intent, statement of work or developmental contract) that can include details such as the expected delivery timeline, estimated price, necessary capacity and ~~further develop the technology~~required support. A design-in, even with a formal commitment, does not always convert to ~~support longer term growth opportunities in SiC materials, SiC power devices and modules, and GaN RF devices.~~

~~Grow Lighting Products~~future revenue ~~and improve margins by investing in our channel relationships, improving execution, continuing~~for a variety of reasons, including, but not limited to, ~~deliver innovative lighting solutions and by potentially acquiring complimentary businesses that are accretive to our earnings.~~

Grow the LED Products business by expanding our product offering with new products that leverage our market leadership to serve a larger share of existing customers’ LED demand, while also opening new applications for our technology.

~~Improve~~ the customer ~~experience and service levels in all~~delaying or abandoning the project, capacity constraints, timeline challenges, and/or technology changes. Therefore, management uses the design-in amount as a guide to forecast future demand but it should not be taken as an absolute indicator of ~~our businesses.~~future revenue.

Results of Operations

~~The following table sets forth certain~~Selected consolidated statement of ~~loss~~operations data for the ~~periods indicated (in thousands, except per share amounts~~years ended June 25, 2023, June 26, 2022 and ~~percentages):~~June 27, 2021 is as follows:


	Fiscal Years Ended
	June 25, 2023			June 26, 2022			June 27, 2021
(in millions of U.S. Dollars, except share data)	Amount	% of Revenue		Amount	% of Revenue		Amount	% of Revenue
Revenue, net	$921.9	100.0	%	$746.2	100.0	%	$525.6	100.0	%
Cost of revenue, net	642.4	69.7	%	496.9	66.6	%	361.0	68.7	%
Gross profit	279.5	30.3	%	249.3	33.4	%	164.6	31.3	%
Research and development	225.4	24.4	%	196.4	26.3	%	177.8	33.8	%
Sales, general and administrative	235.3	25.5	%	203.5	27.3	%	181.6	34.6	%
Factory start-up costs	160.2	17.4	%	70.0	9.4	%	8.0	1.5	%
Amortization or impairment of acquisition-related intangibles	10.9	1.2	%	13.6	1.8	%	14.5	2.8	%
Abandonment of long-lived assets	—	—	%	—	—	%	73.9	14.1	%
Loss (gain) on disposal or impairment of other assets	2.0	0.2	%	(0.3)	—	%	1.6	0.3	%

Other operating expense	26.3	2.9	%	13.9	1.9	%	21.1	4.0	%
Operating loss	(380.6)	(41.3)	%	(247.8)	(33.2)	%	(313.9)	(59.7)	%
Non-operating (income) expense, net	(52.1)	(5.7)	%	38.3	5.1	%	26.3	5.0	%
Loss before income taxes	(328.5)	(35.6)	%	(286.1)	(38.3)	%	(340.2)	(64.7)	%
Income tax expense	1.4	0.2	%	9.0	1.2	%	1.1	0.2	%
Net loss from continuing operations	(329.9)	(35.8)	%	(295.1)	(39.5)	%	(341.3)	(64.9)	%
Net income (loss) from discontinued operations	—	—	%	94.2	12.6	%	(181.2)	(34.5)	%
Net loss	(329.9)	(35.8)	%	(200.9)	(26.9)	%	(522.5)	(99.4)	%
Net income attributable to noncontrolling interest	—	—	%	—	—	%	1.4	0.3	%
Net loss attributable to controlling interest	($329.9)	(35.8)	%	($200.9)	(26.9)	%	($523.9)	(99.7)	%

Basic and diluted loss per share
Continuing operations	($2.65)			($2.46)			($3.04)

Net loss attributable to controlling interest	($2.65)			($1.67)			($4.66)

Fiscal Years Ended
June 25, 2017 June 26, 2016 June 28, 2015
Dollars % of
Revenue Dollars % of
Revenue Dollars % of
Revenue
Revenue, net
$1,473,000
100 %
$1,616,627
100 %
$1,632,505
100 %
Cost of revenue, net 1,038,428
70 % 1,129,553
70 % 1,158,586
71 %
Gross profit 434,572
30 % 487,074
30 % 473,919
29 %
Research and development 158,549
11 % 168,848
10 % 182,797
11 %
Sales, general and administrative 277,175
19 % 283,052
18 % 290,730
18 %
Amortization or impairment of acquisition-related intangibles 27,499
2 % 28,732
2 % 26,220
2 %
Loss on disposal or impairment of long-lived assets 2,521
0 % 16,913
1 % 47,722
3 %
Wolfspeed transaction termination fee (12,500 ) (1 )% —
— % —
— %
Operating loss (18,672 ) (1 )% (10,471 ) (1 )% (73,550 ) (5 )%
Non-operating income (expense), net 14,008
1 % (13,035 ) (1 )% (10,389 ) (1 )%
Loss before income taxes (4,664 ) — % (23,506 ) (1 )% (83,939 ) (5 )%
Income tax (benefit) expense 93,454
6 % (1,970 ) — % (19,247 ) (1 )%
Net loss
($98,118 ) (7 )%
($21,536 ) (1 )%
($64,692 ) (4 )%
Basic loss per share
($1.00 )
($0.21 )
($0.57 )
Diluted loss per share
($1.00 )
($0.21 )
($0.57 )

~~LED Business Restructuring~~

~~In June 2015, our Board~~Table of Directors approved a plan to restructure the LED Products business. The restructuring reduced excess capacity and overhead in order to improve the cost structure moving forward. The primary components of the restructuring include the planned sale or abandonment of certain manufacturing equipment, facility consolidation and the elimination of certain positions. The restructuring activity ended in the second quarter of fiscal 2016. During fiscal 2016, we realized $18.8 million in LED restructuring charges, which were partially offset by a $1.1 million gain on the sale of long-lived assets related to the restructuring which were sold for a value in excess of their estimated net realizable value during fiscal 2016.Contents

~~The following table summarizes the actual charges incurred (in thousands):~~

Capacity and overhead cost reductions Amounts incurred during fiscal year 2015 Amounts incurred during fiscal year 2016 Cumulative amounts incurred through fiscal year 2016 Affected Line Item in the Consolidated Statements of Loss
Loss on disposal or impairment of long-lived assets
$42,716

$15,506

$58,222
Loss on disposal or impairment of long-lived assets
Severance expense 2,019
264
2,283
Sales, general and administrative expenses
Lease termination and facility consolidation costs 1,246
3,079
4,325
Sales, general and administrative expenses
Increase in channel inventory reserves 26,479
—
26,479
Revenue, net
Increase in inventory reserves 11,091
—
11,091
Cost of revenue, net
Total restructuring charges
$83,551

$18,849

$102,400

Revenue

Revenue was comprised of the ~~following (in thousands, except percentages):~~following:


	Fiscal Years Ended			Year-Over-Year Change
(in millions of U.S. Dollars)	June 25, 2023	June 26, 2022	June 27, 2021	2022 to 2023			2021 to 2022
Power Products	$408.9	$276.4	$132.8	$132.5	48	%	$143.6	108	%
Materials Products	$349.3	$295.5	$241.6	$53.8	18	%	$53.9	22	%
RF Products	$163.7	$174.3	$151.2	($10.6)	(6)	%	$23.1	15	%
Revenue	$921.9	$746.2	$525.6	$175.7	24	%	$220.6	42	%

Fiscal Years Ended Year-Over-Year Change
June 25,
2017 June 26,
2016 June 28,
2015 2016 to 2017 2015 to 2016
Lighting Products
$701,467

$889,133

$906,502

($187,666 ) (21 )%
($17,369 ) (2 )%
Percent of revenue 48 % 55 % 56 %
LED Products 550,302
551,156
554,987
(854 ) — % (3,831 ) (1 )%
Percent of revenue 37 %
34 %
34 %
Wolfspeed 221,231
176,338
171,016
44,893
25 % 5,322
3 %
Percent of revenue 15 % 11 % 10 %
Total revenue
$1,473,000

$1,616,627

$1,632,505

($143,627 ) (9 )%
($15,878 ) (1 )%

~~Our consolidated~~The increase in revenue ~~decreased 9% to $1.5 billion in~~for fiscal 2017 compared to $1.6 billion in fiscal 2016. Lighting Products revenue decreased by 21% and LED Products revenue decreased slightly, while Wolfspeed revenue increased by 25%. For the fiscal year ended 2016, our consolidated revenue remained flat at $1.6 billion2023 compared to fiscal ~~2015. Lighting Products revenue and LED Products revenue decreased by 2% and 1%, respectively, while Wolfspeed revenue increased by 3%.~~

~~Lighting Products Segment Revenue~~

Lighting Products revenue represented approximately 48%, 55%, and 56% of our total revenue for fiscal 2017, 2016 and 2015 respectively. Lighting Products revenue was $701.5 million, $889.1 million, and $906.5 million for fiscal 2017, 2016 and 2015 respectively.

Lighting Products revenue decreased 21% to $701.5 million in fiscal 2017 from $889.1 million in fiscal 2016. This decrease was the result of a 15% decrease in units sold and an 11% decrease in average selling prices (ASP), partially offset by the incremental revenue associated with a patent license issuance fee in connection with a new patent license agreement. The decrease in units sold in fiscal 2017 compared to fiscal 2016 was due to lower sales in both our commercial and consumer channels. The decrease in ASP in fiscal 2017 compared to fiscal 20162022 was primarily due to ~~lower consumer bulb prices year over year.~~

~~Lighting Products revenue~~growth in our power product line, where we increased production capacity to meet strong demand. Increased production capacity for our materials product line also contributed to increased revenues, partially offset by decreased ~~2% to $889.1 million in fiscal 2016 from $906.5 million in fiscal 2015. This decrease was the~~revenues for our RF product line as a result of ~~lower consumer lighting sales which offset higher commercial lighting sales.~~ softening demand.

The ~~number of units sold decreased 22%~~increase in revenue for fiscal ~~2016~~2022 compared to fiscal 2015 due to lower consumer bulb sales and a change in mix, which was partially offset by an increase in ASP. The ASP increased 26% in fiscal 2016 compared to fiscal 2015 primarily due to a higher mix of commercial lighting fixtures, which have a higher ASP than our other lighting products.

~~LED Products Segment Revenue~~

LED Products revenue represented 37%, 34%, and 34% of our total revenue for fiscal 2017, 2016 and 2015, respectively. LED Products revenue was $550.3 million, $551.2 million, and $555.0 million for fiscal 2017, 2016 and 2015, respectively.

LED Products revenue decreased slightly to $550.3 million in fiscal 2017 from $551.2 million in fiscal 2016. This decrease was primarily the result of a decrease in licensing revenue mostly offset by increased product sales. The number of units sold increased 7% which was partially offset by 5% decrease in ASPs. The decrease in ASP in fiscal 2017 compared to fiscal 2016 was due to competitive pricing pressures.

LED Products revenue decreased 1% to $551.2 million in fiscal 2016 from $555.0 million in fiscal 2015. This decrease was primarily a result of a reduction in ASP due to increased global competition for LED products which impacted both our LED chip and LED component product lines, partially offset by an increase in the overall number of units sold and an increase in license revenue associated with new patent license agreements. The ASP decreased 11% in fiscal 2016 compared to fiscal 2015 and the overall number of units sold increased 12% in fiscal 2016 compared to fiscal 2015.

~~Wolfspeed Segment Revenue~~

Wolfspeed revenue represented approximately 15%, 11%, and 10% of our total revenue for fiscal 2017, 2016 and 2015, respectively. Wolfspeed revenue was $221.2 million, $176.3 million, and $171.0 million for fiscal 2017, 2016 and 2015, respectively.

Wolfspeed revenue increased 25% to $221.2 million in fiscal 2017 from $176.3 million in fiscal 2016. This increase was primarily the result of a 29% increase in the number of units sold and a 2% increase in ASP, which were partially offset by a decrease in contract revenue. The increase in units sold in fiscal 2017 compared to fiscal 2016 was the result of increases across all products. The increase in ASP in fiscal 2017 compared to fiscal 20162021 was primarily due to ~~a greater mix~~increased demand across all of ~~higher priced material substrate and RF device products.~~

~~Wolfspeed revenue~~our product lines, as well as increased 3% to $176.3 million in fiscal 2016 from $171.0 million in fiscal 2015. This increase was primarily the result of higher substrate and contract revenue, partially offset by lower device sales. ASPs increased 17% in fiscal 2016 compared to fiscal 2015, partially offset by a 17% decrease in the number of units sold. The increase in ASP was due to a higher substrate sale mix and a greater mix of higher pricedproduction capacity for our power and ~~RF products. The decrease in units sold was primarily~~materials product lines to meet the ~~result of lower RF units sold.~~strong demand during the period.

Gross Profit and Gross Margin

Gross profit and gross margin were as ~~follows (in thousands, except percentages):~~follows:


	Fiscal Years Ended						Year-Over-Year Change
(in millions of U.S. Dollars)	June 25, 2023		June 26, 2022		June 27, 2021		2022 to 2023			2021 to 2022
Gross profit	$279.5		$249.3		$164.6		$30.2	12	%	$84.7	51	%
Gross margin	30	%	33	%	31	%

Fiscal Years Ended Year-Over-Year Change
June 25, 2017 June 26, 2016 June 28, 2015 2016 to 2017 2015 to 2016
Lighting Products gross profit
$196,218

$238,242

$235,542

($42,024 ) (18 )%
$2,700
1 %
Lighting Products gross margin 28 % 27 % 26 %
LED Products 151,675
173,814
158,955
(22,139 ) (13 )% 14,859
9 %
LED Products Gross Margin 28 % 32 % 29 %
Wolfspeed gross profit 103,465
94,622
99,721
8,843
9 % (5,099 ) (5 )%
Wolfspeed gross margin 47 % 54 % 58 %
Unallocated costs (16,786 ) (19,604 ) (20,299 )
2,818
(14 )% 695
(3 )%
Consolidated gross profit
$434,572

$487,074

$473,919

($52,502 ) (11 )%
$13,155
3 %
Consolidated gross margin 30 % 30 % 29 %

~~Our consolidated~~The increase in gross profit ~~decreased 11%~~for fiscal 2023 compared to ~~$434.6 million in~~ fiscal 2017 from $487.1 million in fiscal 2016. Our consolidated gross margin remained flat at 30% in fiscal 2017 and in fiscal 2016. Our consolidated gross profit increased 3% to $487.1 million in fiscal 2016 from $473.9 million in fiscal 2015. Our consolidated gross margin increased to 30% in fiscal 2016 from 29% in fiscal 2015.

~~Lighting Products Segment Gross Profit and Gross Margin~~

~~Lighting Products gross profit~~2022 was ~~$196.2 million, $238.2 million, and $235.5 million in fiscal 2017, 2016 and 2015, respectively. Lighting Products gross margin was 28%, 27%, and 26% in fiscal 2017, 2016 and 2015, respectively.~~

Lighting Products gross profit decreased 18% to $196.2 million in fiscal 2017 from $238.2 million in fiscal 2016. Lighting Products gross margin increased to 28% in fiscal 2017 from 27% in fiscal 2016. Lighting Products gross profit decreased primarily due to ~~lower lighting~~increased revenues in our power and materials product ~~sales,~~lines, partially offset by decreased revenue in our RF product line, increased production costs, unfavorable product mix and higher ~~commercial lighting~~stock-based compensation costs.

The decrease in gross margin for fiscal 2023 compared to fiscal 2022 was primarily due to increased production costs and unfavorable product ~~warranty reserves, and lower factory utilization, which~~mix. These impacts were partially offset by a ~~patent license issuance fee. Lighting Products~~ gross margin ~~increased due~~improvement in the current period resulting from realizing the full impact of our early fiscal 2022 change in estimate to increase our expected useful lives of certain machinery and equipment assets to more closely reflect the ~~patent license issuance fee revenue, partially offset by~~estimated economic lives of those assets.*

* The change in our expected useful lives was applied in the ~~higher commercial lighting product warranty reserves and lower factory utilization from lower lighting product sales.~~

~~Lighting Products gross profit increased 1% to $238.2 million in~~first quarter of fiscal ~~2016 from $235.5 million in fiscal 2015. Lighting Products gross margin increased to 27% in fiscal 2016 from 26% in fiscal 2015. Lighting Products~~2022 but had limited impact on that period's gross profit and gross margin ~~increased~~because the majority of the impact in the first quarter of fiscal 2022 resulted in a reduction of inventory.

The increase in gross profit for fiscal 2022 compared to fiscal 2021 was primarily due to aincreased revenues in the current period and lower production costs, including the impact of increasing the expected useful lives of certain machinery and equipment assets to more ~~favorable mix~~closely reflect the estimated economic lives of ~~commercial lighting fixtures and~~those assets. The increase in gross margin for fiscal 2022 compared to fiscal 2021 was primarily due to the ~~benefit of factory cost reductions.~~

~~LED Products Segment Gross Profit and Gross Margin~~

~~Our LED Products~~same factors as the increase to gross profit, ~~was $151.7 million, $173.8 million,~~partly offset by product mix.

As explained further below, the operating costs of each of our new facilities will largely be reflected in cost of revenue, net once such facility reaches revenue generating production. During the period when production begins, but before the facility is at its expected utilization level, we expect some of the costs to operate the facility will not be absorbed into the cost of inventory. We expect that these costs will be substantial as we ramp up the facility to the expected or normal utilization level. The costs incurred to operate the facility in excess of the costs absorbed into inventory are referred to as underutilization costs and ~~$159.0 million in fiscal 2017, 2016 and 2015, respectively. LED Products gross margin was 28%, 32%, and 29% in fiscal 2017, 2016 and 2015, respectively.~~

~~LED Products gross profit decreased 13%~~are expensed as incurred to ~~$151.7 million in fiscal 2017 from $173.8 million in fiscal 2016, and LED Products gross margin decreased to 28% in fiscal 2017 from 32% in fiscal 2016. LED Products~~cost of revenue, net. We expect gross profit and gross margin ~~decreased due~~ to ~~lower license revenue, lower pricing resulting~~be significantly impacted in future periods from these underutilization costs in connection with our new facility construction and expansion projects, the ~~increased global competition for LED products and a less favorable mix~~costs of ~~LED products sold.~~which to date have solely been expensed as factory start-up costs.

LED Products gross profit increased 9% to $173.8 million in fiscal 2016 from $159.0 million in fiscal 2015, and LED Products gross margin increased to 32% in fiscal 2016 from 29% in fiscal 2015. LED Products gross profit and gross margin increased due to higher license revenue and higher units sold, partially offset by lower pricing. In fiscal 2015, LED Products gross profit and gross margin were negatively impacted by increases in channel inventory reserves and inventory reserves pursuant to our restructuring plan, as well as lower factory utilization resulting from lower demand and our targeted actions in the latter half of fiscal 2015 to reduce inventory balances for our LED Products segment.

~~Wolfspeed Segment Gross Profit and Gross Margin~~

Wolfspeed gross profit was $103.5 million, $94.6 million, and $99.7 million in fiscal 2017, 2016 and 2015, respectively. Wolfspeed gross margin was 47%, 54%, and 58% in fiscal 2017, 2016 and 2015, respectively.

Wolfspeed gross profit increased 9% to $103.5 million in fiscal 2017 from $94.6 million in fiscal 2016. Wolfspeed gross margin decreased to 47% in fiscal 2017 from 54% in fiscal 2016. Wolfspeed gross profit increased primarily due to higher revenue. Wolfspeed gross margin decreased primarily due to costs associated with new product ramp ups and changes in product mix.

Wolfspeed gross profit decreased 5% to $94.6 million in fiscal 2016 from $99.7 million in fiscal 2015. Wolfspeed gross margin decreased to 54% in fiscal 2016 from 58% in fiscal 2015. Wolfspeed gross profit and gross margin decreased primarily due to costs associated with new product ramp ups and changes in product mix.

~~Unallocated Costs~~

Unallocated costs were $16.8 million, $19.6 million, and $20.3 million for fiscal 2017, 2016 and 2015, respectively. These costs consisted primarily of manufacturing employees’ stock-based compensation, expenses for profit sharing and quarterly or annual incentive plans and matching contributions under our 401(k) plan. These costs were not allocated to the reportable segments’ gross profit because our CODM does not review them regularly when evaluating segment performance and allocating resources.

~~Unallocated costs decreased by $2.8 million in fiscal 2017 compared to fiscal 2016, primarily due to lower stock-based compensation incurred as a result of our lower average share price.~~

~~Unallocated costs decreased by $0.7 million in fiscal 2016 compared to fiscal 2015, primarily due to lower stock-based compensation incurred as a result of our lower average share price.~~

For further information on the allocation of costs to segment gross profit, refer to Note 14, “Reportable Segments,” in our consolidated financial statements included in Item 8 of this Annual Report.

Research and Development

Research and development expenses include costs associated with the development of new products, enhancements of existing products and general technology research. These costs consisted primarily of employee salaries and related compensation costs, occupancy costs, consulting costs and the cost of development equipment and supplies.

~~The following sets forth our research~~ Research and development ~~expenses~~costs also include developing supporting technologies for expansion of our new silicon carbide device fabrication facility in ~~dollars and as a percentage of revenue (in thousands, except percentages):~~

Fiscal Years Ended Year-Over-Year Change
June 25, 2017 June 26, 2016 June 28, 2015 2016 to 2017 2015 to 2016
Research and development
$158,549

$168,848

$182,797

($10,299 ) (6 )%
($13,949 ) (8 )%
Percent of revenue 11 % 10 % 11 %
Marcy, New York.

Research and development expenses ~~decreased~~were as follows:


	Fiscal Years Ended						Year-Over-Year Change
(in millions of U.S. Dollars)	June 25, 2023		June 26, 2022		June 27, 2021		2022 to 2023			2021 to 2022
Research and development	$225.4		$196.4		$177.8		$29.0	15	%	$18.6	10	%
Percent of revenue	24	%	26	%	34	%

The increases in ~~fiscal 2017 to $158.5 million compared to $168.8 million in fiscal 2016, which decreased from $182.8 million in fiscal 2015. The decrease in fiscal 2017 compared to fiscal 2016 was~~research and development expenses were primarily due to ~~cost management~~our continued investment in our silicon carbide and GaN technologies, including the ~~nature~~development of ~~current research~~existing silicon carbide materials and ~~development projects. The decrease in fiscal 2016 compared to fiscal 2015 was primarily due to a shift in emphasis to lighting-related research~~fabrication technology for next generation platforms and ~~development, which is inherently less expensive than LED research~~expansion of our power and ~~development.~~

RF product portfolio.

Our research and development expenses vary significantly from year to year based on a number of factors, including the timing of new product introductions and the number and nature of our ongoing research and development activities.

Sales, General and Administrative

Sales, general and administrative (SG&A) expenses ~~were~~are comprised primarily of costs associated with our sales and marketing personnel and our executive and administrative personnel (for example, finance, human resources, information technology and legal) and ~~consisted~~consist of salaries and related compensation costs; consulting and other professional services (such as litigation and other outside legal counsel fees, audit and other compliance costs); marketing and advertising expenses; facilities and insurance costs; and travel and other costs.

SG&A expenses were as follows:


	Fiscal Years Ended						Year-Over-Year Change
(in millions of U.S. Dollars)	June 25, 2023		June 26, 2022		June 27, 2021		2022 to 2023			2021 to 2022
Sales, general and administrative	$235.3		$203.5		$181.6		$31.8	16	%	$21.9	12	%
Percent of revenue	26	%	27	%	35	%

The ~~following table sets forth our sales, general and administrative expenses~~increase in ~~dollars and as a percentage of revenue (in thousands, except percentages):~~

Fiscal Years Ended Year-Over-Year Change
June 25, 2017 June 26, 2016 June 28, 2015 2016 to 2017 2015 to 2016
Sales, general and administrative
$277,175

$283,052

$290,730

($5,877 ) (2 )%
($7,678 ) (3 )%
Percent of revenue 19 % 18 % 18 %

~~Sales, general and administrative~~SG&A expenses in fiscal ~~2017 decreased 2% to $277.2 million from $283.1 million in fiscal 2016, which was a 3% decrease from $290.7 million in fiscal 2015. The decrease in fiscal 2017~~2023 compared to fiscal ~~2016~~2022 was primarily due to ~~lower spending on corporate sales~~increased salaries and ~~marketing~~benefits from increased headcount, including incentive based stock-based compensation, as well as increases in professional services, sponsorship, and travel costs.

The increase in SG&A expenses ~~related to lower sales and a decrease in litigation spending partially offset by higher Wolfspeed transaction expenses. The decrease~~ in fiscal ~~2016~~2022 compared to fiscal ~~2015~~2021 was primarily due to ~~lower spending on corporate sales~~increased salaries and ~~marketing expenses related to lower sales,~~benefits from increased headcount, including incentive based stock-based compensation, as well as increased consulting, legal and travel costs, partially offset by ~~an increase~~a decrease in ~~legal fees associated~~costs related to transition services incurred in the first half of fiscal 2021 in connection with ~~intellectual property protection~~the sale of our former Lighting Products business unit.

Factory Start-up Costs


	Fiscal Years Ended			Year-Over-Year Change
(in millions of U.S. Dollars)	June 25, 2023	June 26, 2022	June 27, 2021	2022 to 2023			2021 to 2022
Factory start-up costs	$160.2	$70.0	$8.0	$90.2	129	%	$62.0	775	%

Factory start-up costs relate to expanding our production footprint to support expected growth. Increases in all periods presented are primarily due to the progression of construction and ~~enforcement.~~start-up of our new silicon carbide device fabrication facility in Marcy, New York, the start of construction on our new materials manufacturing facility in Siler City, North Carolina and the materials expansion activities at our Durham, North Carolina location.

Factory start-up costs relate to facilities that have not yet started revenue generating production. When a new facility begins revenue generating production, the operating costs of that facility previously expensed as start-up costs will instead be primarily expensed as part of the cost of the production within the cost of revenue, net line item in our statement of operations. For example, our new silicon carbide device fabrication facility in Marcy, New York began revenue generating production at the end of fiscal 2023 and the costs of this facility will be primarily reflected in cost of revenue, net in future periods.

Amortization or Impairment of Acquisition-Related Intangibles

As a result of our acquisitions, we have recognized various amortizable intangible assets, including customer relationships, developed technology and non-compete ~~agreements and trade names.~~agreements.

Amortization of intangible assets related to our acquisitions was as ~~follows (in thousands, except percentages):~~follows:


																		Fiscal Years Ended			Year-Over-Year Change
	Fiscal Years Ended						Year-Over-Year Change
	June 25, 2017		June 26, 2016		June 28, 2015		2016 to 2017					2015 to 2016
(in millions of U.S. Dollars)																	(in millions of U.S. Dollars)	June 25, 2023	June 26, 2022	June 27, 2021	2022 to 2023			2021 to 2022
Customer relationships		$6,235		$6,374		$5,614		($139	)	(2	)%		$760		14	%	Customer relationships	$6.1	$6.1	$6.1	$—	—	%	$—	—	%
Developed technology	20,860		20,321		18,642		539			3	%	1,679			9	%	Developed technology	4.8	5.4	5.4	(0.6)	(11)	%	—	—	%
Non-compete agreements	404		2,037		1,960		(1,633		)	(80	)%	77			4	%	Non-compete agreements	—	2.1	3.0	(2.1)	(100)	%	(0.9)	(30)	%
Trade names, finite-lived	—		—		4		—			—	%	(4		)	(100	)%

Total		$27,499		$28,732		$26,220		($1,233	)	(4	)%		$2,512		10	%	Total	$10.9	$13.6	$14.5	($2.7)	(20)	%	($0.9)	(6)	%

Amortization of acquisition-related ~~intangibles~~intangible assets decreased in ~~fiscal 2017 compared to fiscal 2016 primarily~~all periods presented due to ~~less amortization expense for customer relationships and non-compete agreements in fiscal 2017. This decrease was partially offset by an increase in~~certain intangible assets reaching the ~~amortization~~end of ~~developed technology related to~~their useful lives. No other significant acquisition-related intangible activity or impairments occurred between the ~~acquisition~~periods.

Abandonment of ~~Arkansas Power Electronics International, Inc. (APEI) that was placed in service in~~Long-Lived Assets

In the fourth quarter of fiscal ~~2016. Amortization~~2021, we modified our long-range plan regarding a portion of ~~acquisition-related intangibles increased~~our Durham, North Carolina campus originally intended for expanding our LED production capacity that we had considered using to expand the manufacturing footprint for our silicon carbide materials product line. After we complete our current ongoing silicon carbide materials production capacity expansion in ~~fiscal 2016 compared to fiscal 2015 primarily due to~~Durham, we plan on further expansion of our silicon carbide materials production capacity outside of the ~~amortization~~Durham campus. As a result, we decided we will no longer complete the construction of ~~intangibles related to~~certain buildings on the ~~APEI acquisition as discussed~~Durham campus. Accordingly, an expense of $73.9 million was recorded based upon an updated valuation of the property in ~~Note 3, “Acquisition,” in~~connection with the preparation of our ~~consolidated~~ financial statements ~~in Part II, Item 8 of this Annual Report.~~

for the fiscal year ended June 27, 2021.

Loss (gain) on Disposal or Impairment of ~~Long-Lived~~Other Assets

We operate a ~~capital intensive~~capital-intensive business. As such, we dispose of a certain level of our equipment in the normal course of business as our production processes change due to production improvement initiatives or product mix changes. Due to the risk of technological obsolescence or changes in our production process, we regularly review our ~~equipment~~long-lived assets and capitalized patent costs for possible impairment. ~~The following table sets forth our loss~~

Loss (gain) on disposal or impairment of ~~long-lived~~other assets ~~(in thousands, except percentages):~~were as follows:


	Fiscal Years Ended			Year-Over-Year Change
(in millions of U.S. Dollars)	June 25, 2023	June 26, 2022	June 27, 2021	2022 to 2023			2021 to 2022
Loss (gain) on disposal or impairment of other assets	$2.0	($0.3)	$1.6	$2.3	(767)	%	($1.9)	(119)	%

Fiscal Years Ended Year-Over-Year Change
June 25, 2017 June 26, 2016 June 28, 2015 2016 to 2017 2015 to 2016
Loss on disposal or impairment of long-lived assets
$2,521

$16,913

$47,722

($14,392 ) (85 )%
($30,809 ) (65 )%

~~We recognized~~Loss (gain) on disposal or impairment of other assets primarily relate to proceeds from asset sales offset by write-offs of fixed asset projects, as well as the write-offs of impaired or abandoned patents. Additionally, the gain on disposal or impairment of other assets for the fiscal year ended June 26, 2022 includes a $0.7 million net ~~loss~~gain related to consideration received from the early payment of ~~$2.5 million, $16.9 million, and $47.7 million on~~ the ~~disposal~~unsecured promissory note (the Purchase Price Note) issued by SGH at the closing of ~~long-lived assets in fiscal years 2017, 2016, and 2015, respectively. The decrease in net loss in fiscal 2017 compared to fiscal 2016 was primarily due to~~ the ~~planned sale or abandonment of certain long-lived assets in fiscal 2016 to reduce excess manufacturing capacity pursuant to our restructuring plan~~LED Business Divestiture (as defined below), as discussed above. The net losses in fiscal 2016 and fiscal 2015 were primarily due to the planned sale or abandonment of certain long-lived assets to reduce excess manufacturing capacity pursuant to our restructuring plan discussed above.

~~Wolfspeed Transaction Termination Fee~~

~~As discussed more fully~~ in Note ~~1, “Business,”~~3, "Discontinued Operations," in our consolidated financial statements included in Item 8 of this Annual ~~Report, as a result~~Report.

Other Operating Expense

Other operating expense was comprised of the ~~termination~~following:


	Fiscal Years Ended			Year-Over-Year Change
(in millions of U.S. Dollars)	June 25, 2023	June 26, 2022	June 27, 2021	2022 to 2023			2021 to 2022
Project, transformation and transaction costs	22.9	6.6	7.3	16.3	247	%	(0.7)	(10)	%
Factory optimization restructuring costs	—	6.1	7.6	(6.1)	(100)	%	(1.5)	(20)	%
Severance costs	3.4	1.2	6.2	2.2	183	%	(5.0)	(81)	%

Other operating expense	$26.3	$13.9	$21.1	$12.4	89	%	($7.2)	(34)	%

Project, transformation and transaction costs primarily relate to professional services fees associated with completed and potential acquisitions and divestitures, as well as internal transformation programs focused on optimizing our administrative processes.

Factory optimization restructuring costs relate to our multi-year factory optimization restructuring plan, which was implemented in connection with our expansion activities between fiscal 2019 and fiscal 2022. As part of the ~~agreement~~factory optimization restructuring plan, we incurred restructuring charges associated with the movement of equipment as well as disposals on certain long-lived assets. The factory optimization restructuring plan concluded in fiscal 2022.

The increase in other operating expense in all periods is primarily due to ~~sell the Wolfspeed business to Infineon, Infineon paid us a termination fee of $12.5 million in cash on March 10, 2017.~~increased professional service fees associated with completed and potential acquisitions and divestitures.

Non-Operating ~~Income (Expense),~~(Income) Expense, net

Non-operating (income) expense, net was comprised of the following:


	Fiscal Years Ended			Year-Over-Year Change
(in millions of U.S. Dollars)	June 25, 2023	June 26, 2022	June 27, 2021	2022 to 2023			2021 to 2022
Interest income	($58.2)	($11.8)	($10.1)	($46.4)	393	%	($1.7)	(17)	%
Interest expense, net of capitalized interest	42.6	25.1	45.4	17.5	70	%	(20.3)	(45)	%
Gain on arbitration proceedings	(50.3)	—	—	(50.3)	(100)	%	—	—	%
Loss on debt extinguishment	—	24.8	—	(24.8)	(100)	%	24.8	100	%
Gain on equity investment	—	—	(8.3)	—	—	%	8.3	100	%
Loss on Wafer Supply Agreement	13.6	0.8	0.8	12.8	1,600	%	—	—	%
Gain on sale of investments, net	—	(0.3)	(0.4)	0.3	100	%	0.1	25	%



Other, net	0.2	(0.3)	(1.1)	0.5	167	%	0.8	73	%
Non-operating (income) expense, net	($52.1)	$38.3	$26.3	($90.4)	(236)	%	$12.0	46	%

Interest income. The ~~following table sets forth~~increase in interest income in both periods was primarily driven by increased short-term investment balances, as well as increased returns on our ~~non-operating~~short-term investments. Our short-term investment balances increased significantly in the second quarter of fiscal 2023 resulting from the net proceeds we received from the sale of the 2029 Notes.

The increase in interest income ~~(expense)~~in fiscal 2022 compared to fiscal 2021 was primarily due to interest income received on our previously held note receivable from SGH in connection with the LED Business Divestiture, partially offset by decreased investment returns from our short-term investment securities.

Interest expense, net of capitalized interest. The increase in interest expense in fiscal 2023 compared to fiscal 2022 was primarily due to interest from our 2029 Notes and 2030 Senior Notes, which were not outstanding as of June 26, 2022. This increase was partially offset by a decrease in interest expense from our 2028 Notes, primarily due to the adoption of ASU 2020-06, which eliminated interest expense relating to the accretion on discount in the current period. In addition, an increase in interest expense from our 1.75% convertible senior notes due May 1, 2026 (the 2026 Notes), the interest of which was fully capitalized in fiscal 2022 but was almost fully expensed in fiscal 2023, was offset by a decrease in interest expense from our 0.875% convertible senior notes due September 1, 2023 (the 2023 Notes), which were extinguished in the second quarter of fiscal 2022.

The decrease in interest expense in fiscal 2022 compared to fiscal 2021 was primarily due to capitalizing interest on the 2026 Notes in connection with the building of our new silicon carbide device fabrication facility in New York, which we began capitalizing in the fourth quarter of fiscal 2021. The decrease in interest expense resulting from the extinguishment of the 2023 Notes in the second quarter of fiscal 2022 was mostly offset by an increase in interest expense from the sale of the 2028 Notes in the third quarter of fiscal 2022.

Gain on arbitration proceedings. In the first quarter of fiscal 2023, we received an arbitration award in relation to a former customer failing to fulfill contractual obligations to purchase a certain amount of product over a period of time. In the second quarter of fiscal 2023, a final payment was received. The gain recognized is net ~~(in thousands, except percentages):~~of legal fees incurred.

Fiscal Years Ended Year-Over-Year Change
June 25, 2017 June 26, 2016 June 28, 2015 2016 to 2017 2015 to 2016
Gain on sale of investments, net
$93

$238

$925

($145 ) (61 )%
($687 ) (74 )%
Gain (loss) on equity investment 7,543
(15,357 ) (22,624 ) 22,900
(149 )% 7,267
(32 )%
Dividends from equity investment 16
1,655
2,581
(1,639 ) (99 )% (926 ) (36 )%
Interest income, net 3,696
4,472
9,086
(776 ) (17 )% (4,614 ) (51 )%
Foreign currency gain (loss), net 2,460
(4,500 ) (929 ) 6,960
(155 )% (3,571 ) 384 %
Other, net 200
457
572
(257 ) (56 )% (115 ) (20 )%
Non-operating income (expense), net
$14,008

($13,035 )
($10,389 )
$27,043
(207 )%
($2,646 ) 25 %

~~During~~Loss on debt extinguishment. In the second quarter of fiscal ~~2017, 2016 and 2015, we~~2022, all of our then-outstanding 2023 Notes were converted into shares of our common stock, which resulted in a ~~net interest income position. Our short-term investments consisted primarily~~loss on extinguishment of ~~municipal bonds, corporate bonds, U.S. agency securities, non-U.S. certificates~~$24.8 million. See Note 10, "Long-term Debt," to our consolidated financial statements in Item 8 of ~~deposit and non-U.S. government securities.~~this Annual Report for additional information.

Gain on equity investment. The ~~primary objective~~gain on equity investment for fiscal 2021 relates to changes in fair value of our ~~investment policy is preservation~~previously held ENNOSTAR Inc. (ENNOSTAR) investment. In the fourth quarter of ~~principal. Other long-term investments consisted of~~fiscal 2021, we liquidated our ~~approximately 15%~~ common stock ownership interest in ~~Lextar Electronics Corporation (Lextar), which was~~ENNOSTAR. We no longer hold any equity interest in ENNOSTAR.

Loss on Wafer Supply Agreement. In connection with the completed in December 2014. This investment was accounted for under the equity method from the date of investment until June 2016 when we chose for our representative not to stand for re-election as a member of the Lextar board of directors. We utilize the fair value option in accounting for our investment in Lextar.

~~Gain on~~ sale of ~~investments, net.~~ ~~Gain on sale of investments, net was $93 thousand, $238 thousand~~our former LED Products business unit to SGH and ~~$925 thousand~~its wholly owned subsidiary CreeLED, Inc. (CreeLED and collectively with SGH, SMART) in fiscal ~~2017, fiscal 2016~~2021, we entered into a Wafer Supply and ~~fiscal 2015, respectively. Gain on sale of investments, net decreased~~Fabrication Services Agreement (the Wafer Supply Agreement), pursuant to which we supply CreeLED with certain silicon carbide materials and fabrication services for up to four years. We recognized a supply agreement liability in ~~fiscal 2017 primarily due to lower sales of investments. Gain on sale of investments, net decreased in fiscal 2016 primarily due to lower sales of investments.~~

~~Gain (loss) on equity investment.~~ Gain on equity investment was $7.5 million in fiscal 2017 and loss on equity investment was $15.4 million and $22.6 million in fiscal 2016 and fiscal 2015, respectively. We had a gain on equity investment in fiscal 2017 due to the increaseconnection with this agreement, which reached full amortization in the ~~fair value~~second quarter of ~~our Lextar investment.~~fiscal 2023. We ~~had a loss on equity investment in fiscal 2016 and fiscal 2015 due~~expect losses from this agreement to decreases in the fair value of our Lextar investment. Lextar’s stock is publicly traded on the Taiwan Stock Exchange and its share price increased from 15.70 New Taiwanese Dollars (TWD) at June 26, 2016 to 18.40 TWD at June 25, 2017. Lextar's share price declined from 30 TWD at the date of our investment incontinue through December 2014 to 21.55 TWD at June 28, 2015 and to 15.70 TWD at June 26, 2016. This volatile stock price trend may continue in the future given the risks inherent in Lextar’s business and trends affecting the Taiwan and global equity markets. Any future stock price changes will be recorded as further gains or losses on equity investment based on the increase or decrease, respectively, in the fair value of the investment during the applicable fiscal period. Further losses could have a material adverse effect on our results of operations.

~~Dividends from equity investment.~~ ~~Dividends from equity investment were $0.0 million, $1.7 million and $2.6 million in fiscal 2017, fiscal 2016 and fiscal 2015, respectively, due to our Lextar investment.~~

~~Interest income, net.~~ Interest income, net was $3.7 million, $4.5 million and $9.1 million in fiscal 2017, fiscal 2016 and fiscal 2015, respectively. The decrease in interest income, net in fiscal 2017 compared to fiscal 2016 was primarily due to lower invested balances and higher interest expense due to overall higher borrowings associated with our line of credit, partially offset by higher investment yields. The decrease in interest income, net in fiscal 2016 compared to fiscal 2015 was primarily due to lower invested balances and higher interest expense due to overall higher borrowings associated with our line of credit, partially offset by higher investment yields.

~~Foreign currency gain (loss), net.~~ Foreign currency gain (loss), net consisted primarily of remeasurement adjustments resulting from our Lextar investment and consolidating our international subsidiaries. The foreign currency gain, net in fiscal 2017 was primarily due to favorable fluctuations in the exchange rate between both the Chinese Yuan and the Euro and the United States Dollar which was partially offset by an unfavorable fluctuation in the exchange rate between the TWD and the United States Dollar related to our Lextar investment. The foreign currency loss, net in fiscal 2016 was primarily due to unfavorable fluctuation in the exchange rate between the TWD and the United States Dollar related to our Lextar investment and unfavorable fluctuation in the exchange rate between the Chinese Yuan and the United States Dollar. The foreign currency gain, net for fiscal 2015 was primarily due to unfavorable fluctuation in the exchange rate between the TWD and the United States Dollar related to our Lextar investment and unfavorable fluctuation in the exchange rate between the Euro and the United States Dollar.

~~Other, net.~~ ~~Other, net was $200 thousand, $457 thousand and $572 thousand in fiscal 2017, fiscal 2016 and fiscal 2015, respectively.~~2025.

Income Tax Expense ~~(Benefit)~~

~~The following table sets forth our income~~Income tax expense ~~(benefit) in dollars~~ and our effective tax rate ~~(in thousands, except percentages):~~was as follows:


	Fiscal Years Ended						Year-Over-Year Change
(in millions of U.S. Dollars)	June 25, 2023		June 26, 2022		June 27, 2021		2022 to 2023			2021 to 2022
Income tax expense	$1.4		$9.0		$1.1		(7.6)	(84)	%	7.9	718	%
Effective tax rate	—	%	(3)	%	—	%

Fiscal Years Ended Year-Over-Year Change
June 25,
2017 June 26,
2016 June 28,
2015 2016 to 2017 2015 to 2016
Income tax expense (benefit)
$93,454

($1,970 )
($19,247 ) 95,424
(4,844 )% 17,277
(90 )%
Effective tax rate (2,004 )% 8 % 23 %

~~We recognized income tax expense of $93.5 million in fiscal 2017 as compared to income tax benefit of $2.0 million in fiscal 2016.~~ The ~~decrease~~change in the effective tax rate from ~~8% in fiscal 2016 to (2,004)~~(3)% in fiscal ~~2017 was due~~2022 as compared to the establishment of a valuation allowance against our U.S. deferred tax assets and other deferred charges in a period of a pre-tax loss, as discussed more fully in Note 12 “Income Taxes” to our audited financial statements in Part II, Item 8 of this Annual Report. The decrease in the effective tax rate from 23%0% in fiscal ~~2015 to 8% in~~2023 and fiscal ~~2016~~2021 was primarily due to $7.3 million of income tax expense recognized in the ~~establishment~~second quarter of ~~a valuation allowance on foreign net operating loss carryovers during~~ fiscal ~~2016.~~2022 related to the restructuring of our Luxembourg holding company.

~~The~~In general, the variation between our effective income tax rate and the current U.S. statutory rate of ~~35 percent~~21.0% is primarily due to: (i) changes in our valuation allowances against deferred tax assets, ~~in the U.S. and Luxembourg,~~ (ii) income derived from international locations with ~~lower~~differing tax rates than the U.S., and (iii) tax credits generated.

Net Loss from Discontinued Operations

We have classified the results of our former LED Products segment (the LED Business) as discontinued operations in our consolidated statements of operations for all periods presented. We ceased recording depreciation and amortization of long-lived assets of the LED Business upon classification as discontinued operations in October 2020.

We recorded net income from discontinued operations of $94.2 million and net loss from discontinued operations of $181.2 million in fiscal 2022 and 2021, respectively.

Net income from discontinued operations in fiscal 2022 related to the receipt of an unsecured promissory note from CreeLED as additional consideration to satisfy the earnout obligations pursuant to the Asset Purchase Agreement (the LED Purchase Agreement), dated October 18, 2020, as amended. The additional consideration was based upon the revenue and gross profit performance of the LED Products Business in the first four full fiscal quarters following the closing.

Net loss from discontinued operations in fiscal 2021 included a $112.6 million goodwill impairment, a $19.5 million impairment to assets held for sale associated with the LED Business Divestiture and a $29.1 million loss on sale.

Liquidity and Capital Resources

Overview

We require cash to fund our operating expenses and working capital requirements, including the purchase of goods and services in the ordinary course of business such as raw materials, supplies and capital equipment, as well as outlays for research and development, ~~capital expenditures,~~ strategic acquisitions and investments. Our principal sources of liquidity are cash on hand, marketable securities ~~cash generated from operations~~ and ~~availability under~~ our ~~line of credit. Our~~ ability to generate cash from operations has been one of our fundamental strengths and has provided us with substantial flexibility in meeting our operating, financing and investing needs. We have a $500 million line of creditissue additional 2030 Senior Notes, subject to certain conditions precedent, as discussed in Note ~~8, “Long-term~~10, "Long-term Debt,~~” in~~" to our consolidated financial statements ~~included~~ in ~~Part II,~~ Item 8 of this Annual Report. The purpose of this facility is to provide short term flexibility to optimize returns on our cash and investment portfolio while funding share repurchases, capital expenditures and other general business needs.

Based on past performance and current expectations, we believe our current working capital ~~availability under our line of credit~~ and anticipated cash flows from operations will be adequate to meet our cash needs for our daily operations and capital expenditures for at least the next 12 months. ~~We may use a portion~~With the strength of our available cash and cash equivalents, line of credit or funds underlying our marketable securities to repurchase shares of our common stock pursuant to repurchase programs authorized by our Board of Directors. With our strong working capital position, we believe that we have the ability to continue to invest in ~~further development~~the near-term expansion of our ~~products~~production capacity, further develop our product portfolio and, when necessary or appropriate, make selective acquisitions or other strategic investments to strengthen our product portfolio or secure key intellectual ~~properties or expand~~properties. However, even with our ~~production capacity.~~

~~From time~~strong working capital position, we expect to ~~time, we evaluate strategic opportunities, including potential acquisitions, joint ventures, divestitures, spin-offs or investments in complementary businesses, and we anticipate continuing~~need additional funding to ~~make such evaluations. We may also access capital markets through the issuance~~fully complete all of ~~debt or additional shares of common stock in connection with the acquisition of complementary businesses or other significant assets or for other strategic opportunities.~~

~~Contractual Obligations~~

~~At June 25, 2017, payments to be made pursuant to significant contractual obligations are as follows (in thousands):~~our intended capacity expansions.

Table of Contents

Payments Due by Period
Total Less than
One Year One to
Three Years Three to
Five Years More Than
Five Years
Operating lease obligations
$14,462

$4,905

$6,256

$2,042

$1,259
Purchase obligations 124,733
111,576
4,374
4,058
4,725
Long-term debt 145,000
—
145,000
—
—
Interest payments on long-term debt¹
11,012
3,031
6,062
1,919
—
Other long-term liabilities²
—
—
—
—
—
Total contractual obligations
$295,207

$119,512

$161,692

$8,019

$5,984
Sources of Liquidity

¹~~Interest payments on long-term debt are based on the interest rate at June 25, 2017.~~

²Other long-term liabilities as of June 25, 2017 included long-term tax contingencies and other tax liabilities of $49.9 million, deferred liabilities of $0.4 million and other long-term contingent liabilities (for example, warranties) of $19.8 million. These liabilities were not included in the table above as they will either not be settled in cash and/or the timing of any payments is uncertain.

Operating lease obligations include rental amounts due on leases of certain office and manufacturing space under the terms of non-cancelable operating leases. These leases expire at various times through April 2024. Most of the lease agreements provide for rental adjustments for increases in base rent, property taxes and general property maintenance that would be recognized as rent expense, if applicable.

Purchase obligations represent purchase commitments, including open purchase orders and contracts, and are generally related to the purchase of goods and services in the ordinary course of business such as raw materials, supplies and capital equipment.

~~Financial Condition~~

The following table sets forth our cash, cash equivalents and short-term ~~investments (in thousands):~~investments:


(in millions of U.S. Dollars)	June 25, 2023	June 26, 2022	Change
Cash and cash equivalents	$1,757.0	$449.5	$1,307.5
Short-term investments	1,197.9	749.3	448.6
Total cash, cash equivalents and short-term investments	$2,954.9	$1,198.8	$1,756.1

June 25,
2017 June 26,
2016 Change
Cash and cash equivalents
$132,597

$166,154

($33,557 )
Short-term investments 478,341
439,151
39,190
Total cash, cash equivalents and short-term investments
$610,938

$605,305

$5,633

~~Our liquidity and capital resources primarily depend on our cash flows from operations and our working capital.~~ The significant components of our working capital are liquid assets such as cash and cash equivalents, short-term investments, accounts receivable and inventories reduced by ~~trade accounts payable.~~

~~The following table presents the components of our cash conversion cycle:~~

Three Months Ended
June 25,
2017 June 26,
2016 Change
Days of sales outstanding (a) 37
38
(1 )
Days of supply in inventory (b) 98
99
(1 )
Days in accounts payable (c) (46 ) (43 ) (3 )
Cash conversion cycle 89
94
(5 )


a)	Days of sales outstanding (DSO) measures the average collection period of our receivables. DSO is based on the ending net trade receivables and the revenue, net for the quarter then ended. DSO is calculated by dividing ending accounts receivable, net of applicable allowances and reserves, by the average net revenue per day for the respective 90 day period.


b)	Days of supply in inventory (DSI) measures the average number of days from procurement to sale of our product. DSI is based on ending inventory and cost of revenue, net for the quarter then ended. DSI is calculated by dividing ending inventory by average cost of revenue, net per day for the respective 90 day period.


c)	Days in accounts payable (DPO) measures the average number of days our payables remain outstanding before payment. DPO is based on ending accounts payable and cost of revenue, net for the quarter then ended. DPO is calculated by dividing ending accounts payable by the average cost of revenue, net per day for the respective 90 day period.

~~The decrease in the cash conversion cycle was primarily driven by an increase in days in~~ accounts payable and ~~decreases~~accrued expenses.

In the second quarter of fiscal 2022, all outstanding 2023 Notes were surrendered for conversion following our issuance on December 8, 2021 of a notice to holders of the 2023 Notes calling for the redemption of all outstanding 2023 Notes, resulting in ~~days~~the settlement of ~~sales~~the previously outstanding $424.8 million aggregate principal amount of 2023 Notes in approximately 7.1 million shares of our common stock.

In the third quarter of fiscal 2022, we issued and sold a total of $750.0 million aggregate principal amount of 2028 Notes, as discussed in ~~days~~Note 10, "Long-term Debt," to our consolidated financial statements in Item 8 of ~~supply~~this Annual Report. The total net proceeds of the 2028 Notes was $732.3 million, of which we used $108.2 million to fund the cost of entering into capped call transactions.

In the second quarter of fiscal 2023, we issued and sold a total of $1,750.0 million aggregate principal amount of 2029 Notes, as discussed in ~~inventory.~~Note 10, "Long-term Debt," to our consolidated financial statements in Item 8 of this Annual Report. The total net proceeds of the 2029 Notes was $1,718.6 million, of which we used $273.9 million to fund the cost of entering into capped call transactions.

In the fourth quarter of fiscal 2023, we sold $1,250 million aggregate principal amount of 2030 Senior Notes, as discussed in Note 10, "Long-term Debt," to our consolidated financial statements in Item 8 of this Annual Report. The total net proceeds of the 2030 Senior Notes was approximately $1,149.3 million. We expect to use the net proceeds for general corporate purposes.

In connection with the sale of our 2030 Senior Notes, we terminated the $125.0 million secured revolving line of credit under which we were able to borrow, repay and reborrow loans from time to time prior to its scheduled maturity date of January 9, 2026.

In addition, we received early payments on two unsecured promissory notes issued to us in connection with the sale of certain assets and subsidiaries comprising the LED Business to SMART on March 1, 2021 (the LED Business Divestiture). In the third quarter of fiscal 2022, we received an early payment in the amount of $125.0 million, along with outstanding accrued and unpaid interest as of the payment date, relating to the unsecured promissory note issued with the completion of the transaction. In the first quarter of fiscal 2023, we received an early payment in the amount of $101.8 million in connection with the unsecured promissory note issued in the fourth quarter of fiscal 2022 as an earn-out payment.

As of June 25, ~~2017~~,2023, we had unrealized losses on our short-term investments of ~~$0.3~~$22.7 million. All of our short-term investments had investment grade ratings, and any such investments that were in an unrealized loss position at June 25, ~~2017~~2023 were in such position due to interest rate changes, sector credit rating changes or company-specific rating changes. AsWe evaluate our short-term investments for expected credit losses. We believe we are able to and we intend to hold each of the investments held with an unrealized loss as of June 25, 2023 until the investments fully recover in market value. No allowance for credit losses was recorded as of June 25, 2023.

From time to time, we evaluate strategic opportunities, including potential acquisitions, joint ventures, divestitures, spin-offs or investments in complementary businesses, and ~~believe that~~ we have continued to make such evaluations. We may also access capital markets through the ~~ability~~issuance of debt or equity, which we may use in connection with the acquisition of complementary businesses or other significant assets or for other strategic opportunities or general corporate purposes.

Table of Contents

Expected Uses of Liquidity

We recently opened our new silicon carbide device fabrication facility in Marcy, New York, to ~~hold such investments~~expand capacity for production of our silicon carbide devices. We now expect to invest approximately $2.0 billion in construction, equipment and other related costs for the new facility, of which approximately $500 million is expected to be reimbursed over time by the State of New York Urban Development Corporation (doing business as Empire State Development) under a ~~period~~Grant Disbursement Agreement (the GDA). As of ~~time that will be sufficient~~June 25, 2023, we have spent approximately $900 million and received $305.2 million in reimbursements.

Additionally, we recently started construction on a new materials manufacturing facility in Siler City, North Carolina. Through fiscal 2024, we expect to invest approximately $1.3 billion in construction, equipment and other related costs for ~~anticipated recovery in market value,~~the new facility, net of estimated refundable federal investment tax credits and capital grants we ~~currently~~ expect to receive through the ~~full principal or recover~~CHIPS Act. The timing and amount of these estimated CHIPS Act incentives is uncertain and could happen after fiscal 2024. In addition, the facility is also further supported by an approximately $1.0 billion long-term incentive package from state, county and local governments, primarily in the form of property tax reimbursements and sales tax exemptions.

We also recently announced the intention to build a highly automated, cutting-edge wafer fabrication facility in Saarland, Germany. We expect to invest approximately $3.5 billion in construction, equipment and other related costs for the new facility, with the vast majority of such investment occurring after fiscal 2024.

For fiscal 2024, we target approximately $2.0 billion of net capital investment, which is primarily related to capacity and infrastructure projects to support longer-term growth and strategic priorities. This target is highly dependent on the timing and overall progress on our ~~cost basis~~new silicon carbide fabrication facility in ~~these securities. The declines~~New York and the construction of our new materials manufacturing facility in ~~value~~Siler City, North Carolina. Our target net capital investment figure is net of approximately $150 million of expected reimbursements from the GDA during the fiscal year.

For more details on the GDA, see Note 15, "Commitments and Contingencies," in our consolidated financial statements included in Item 8 of this Annual Report.

In addition, we may also apply for and potentially sell tax credits as part of the ~~securities~~Inflation Reduction Act to further fund our expansion initiatives.

We have a take-or-pay supplier agreement that requires a minimum of $200 million of purchases over the next five years, as outlined further in Note 15, "Commitments and Contingencies," to our consolidated financial statements in Item 8 of this Annual Report.

Given our current cash position, we believe we will be able to fund daily operations for at least the next 12 months but we expect to need additional funding to fully complete all of our previously announced planned expansion initiatives described above. We may seek to obtain funding through, among other avenues, government funding in both the United States or Europe, public or private equity offerings and debt financings (which may involve retiring some of our existing debt).

In addition to ordinary operating expenses, our estimated future obligations consist of leases, debt, and interest on long-term debt. For a description of contractual obligations, including lease and debt obligations, see Note 5, "Leases," Note 10, "Long-term Debt," and Note 15, "Commitments and Contingencies," in our ~~portfolio are considered to be temporary~~consolidated financial statements included in ~~nature and, accordingly, we do not believe these securities are impaired as~~Item 8 of ~~June 25, 2017~~.

this Annual Report.

Cash Flows

In summary, our cash flows were as follows (in ~~thousands)~~millions of U.S. Dollars):


	Fiscal Years Ended			Year-Over-Year Change
	June 25, 2023	June 26, 2022	June 27, 2021	2022 to 2023	2021 to 2022
Cash used in operating activities	($142.6)	($154.2)	($125.5)	$11.6	($28.7)
Cash used in investing activities	(1,147.0)	(391.0)	(448.6)	(756.0)	57.6
Cash provided by financing activities	2,597.1	615.9	504.1	1,981.2	111.8
Effect of foreign exchange changes	—	(0.2)	0.2	0.2	(0.4)
Net increase (decrease) in cash and cash equivalents	$1,307.5	$70.5	($69.8)	$1,237.0	$140.3

Fiscal Years Ended Year-Over-Year Change
June 25, 2017 June 26, 2016 June 28, 2015 2016 to 2017 2015 to 2016
Cash provided by operating activities
$215,900

$203,316

$181,254

$12,584

$22,062
Cash used in investing activities (145,250 ) (7,903 ) (16,137 ) (137,347 ) 8,234
Cash (used in) provided by financing activities (104,078 ) (167,859 ) (311,353 ) 63,781
143,494
Effect of foreign exchange changes (129 ) (1,110 ) (878 ) 981
(232 )
Net (decrease) increase in cash and cash equivalents
($33,557 )
$26,444

($147,114 )
($60,001 )
$173,558

~~The following is a discussion~~Table of ~~our primary sources and uses of cash in our operating, investing and financing activities.~~Contents

~~The accompanying notes are an integral part~~

Table of ~~the consolidated financial statements.~~

~~CREE, INC.~~

~~CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS~~

Contents

Fiscal Years Ended
June 25,
2017 June 26,
2016 June 28,
2015
(In thousands)
Net loss
($98,118 )
($21,536 )
($64,692 )
Other comprehensive (loss) income:
Currency translation loss, net of tax benefit of $0, $0 and $0, respectively (153 ) (362 ) (3,563 )
Net unrealized (loss) gain on available-for-sale securities, net of tax (expense) benefit of $0, ($1,936), and $1,284, respectively (2,666 ) 3,292
(2,044 )
Other comprehensive (loss) income (2,819 ) 2,930
(5,607 )
Comprehensive loss
($100,937 )
($18,606 )
($70,299 )

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

~~CREE, INC.~~

~~CONSOLIDATED STATEMENTS OF CASH FLOWS~~

Fiscal Years Ended

June 25,
2017 June 26,
2016 June 28,
2015
(In thousands)
Cash flows from operating activities:
Net loss
($98,118 )
($21,536 )
($64,692 )
Adjustments to reconcile net loss to net cash provided by operating activities:
Depreciation and amortization 150,508
159,145
173,323
Stock-based compensation 47,725
58,728
64,299
Excess tax benefit from share-based payment arrangements 2
(12 ) (1,395 )
Impairment of acquisition-related intangibles —
—
254
Loss on disposal or impairment of long-lived assets 2,521
16,913
47,722
Amortization of premium/discount on investments 5,427
5,314
6,152
(Gain)/loss on equity method investment (7,543 ) 15,357
22,624
Foreign exchange (gain)/loss on equity method investment (2,644 ) 2,057
347
Deferred income taxes 74,918
(15,839 ) (21,346 )
Changes in operating assets and liabilities, net of effect of acquisition:
Accounts receivable, net 16,955
21,800
37,853
Inventories 17,918
(23,269 ) 3,528
Prepaid expenses and other assets 17,438
8,103
(11,112 )
Accounts payable, trade (4,818 ) (12,090 ) (44,796 )
Accrued salaries and wages and other liabilities (4,389 ) (11,355 ) (31,507 )
Net cash provided by operating activities 215,900
203,316
181,254
Cash flows from investing activities:
Purchases of property and equipment (86,928 ) (120,018 ) (206,160 )
Purchases of patent and licensing rights (12,405 ) (14,443 ) (19,491 )
Proceeds from sale of property and equipment 1,392
5,296
285
Purchases of short-term investments (200,405 ) (220,823 ) (349,802 )
Proceeds from maturities of short-term investments 125,922
312,524
419,802
Proceeds from sale of short-term investments 27,174
42,074
219,795
Purchase of other long-term investments —
—
(80,566 )
Purchase of acquired business, net of cash acquired —
(12,513 ) —
Net cash used in investing activities (145,250 ) (7,903 ) (16,137 )
Cash flows from financing activities:
Payment of acquisition-related contingent consideration (2,775 ) —
—
Proceeds from long-term debt borrowings 468,000
653,000
695,000
Payments on long-term debt borrowings (483,000 ) (693,000 ) (495,000 )
Net proceeds from issuance of common stock 17,716
21,682
36,929
Excess tax benefit from share-based payment arrangements (2 ) 12
1,395
Repurchases of common stock (104,017 ) (149,553 ) (549,677 )
Net cash used in financing activities (104,078 ) (167,859 ) (311,353 )
Effects of foreign exchange changes on cash and cash equivalents (129 ) (1,110 ) (878 )
Net (decrease) increase in cash and cash equivalents (33,557 ) 26,444
(147,114 )
Cash and cash equivalents:
Beginning of period 166,154
139,710
286,824
End of period
$132,597

$166,154

$139,710
Supplemental disclosure of cash flow information:
Cash paid for interest
$3,588

$3,110

$1,002
Cash paid for income taxes
$8,494

$14,722

$28,834
Significant non-cash transactions:
Accrued property and equipment
$10,173

$3,721

$24,243

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

~~CREE, INC.~~

~~CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY~~

Common Stock
Additional
Paid-in
Capital

(Accumulated deficit)/Retained
Earnings

Accumulated
Other
Comprehensive
Income

Total
Shareholders’
Equity

Number
of Shares
Par Value
(In thousands)
Balance at June 29, 2014 120,114

$149

$2,190,011

$784,818

$11,405

$2,986,383
Net loss —
—
—
(64,692 ) —
(64,692 )
Currency translation loss, net of tax benefit of $0 —
—
—
—
(3,563 ) (3,563 )
Unrealized loss on available-for-sale securities, net of tax benefit of $1,284 —
—
—
—
(2,044 ) (2,044 )
Comprehensive income (70,299 )
Income tax expense from stock option exercises —
—
(1,010 ) —
—
(1,010 )
Repurchased shares (16,034 ) (20 ) —
(549,657 )

(549,677 )
Stock-based compensation —
—
64,720
—
—
64,720
Exercise of stock options and issuance of shares 1,427
2
31,833
—
—
31,835
Balance at June 28, 2015 105,507

$131

$2,285,554

$170,469

$5,798

$2,461,952
Net loss —
—
—
(21,536 ) —
(21,536 )
Currency translation loss, net of tax benefit of $0 —
—
—
—
(362 ) (362 )
Unrealized gain on available-for-sale securities, net of tax expense of $1,936 —
—
—
—
3,292
3,292
Comprehensive income (18,606 )
Income tax expense from stock option exercises —
—
(3,525 ) —
—
(3,525 )
Repurchased shares (5,842 ) (7 ) —
(149,546 ) —
(149,553 )
Stock-based compensation —
—
58,425
—
—
58,425
Exercise of stock options and issuance of shares 1,164
1
19,130
—
—
19,131
Balance at June 26, 2016 100,829

$125

$2,359,584

($613 )
$8,728

$2,367,824
Net loss —
—
—
(98,118 ) —
(98,118 )
Currency translation loss, net of tax benefit of $0 —
—
—
—
(153 ) (153 )
Unrealized loss on available-for-sale securities, net of tax expense of $0 —
—
—
—
(2,666 ) (2,666 )
Comprehensive loss (100,937 )
Income tax expense from stock option exercises —
—
(253 ) —
—
(253 )
Repurchased shares (4,460 ) (6 ) —
(104,011 )

(104,017 )
Stock-based compensation —
—
46,813
—
—
46,813
Exercise of stock options and issuance of shares 1,305
2
13,373
—
—
13,375
Balance at June 25, 2017 97,674

$121

$2,419,517

($202,742 )
$5,909

$2,222,805

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

~~CREE,~~WOLFSPEED, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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Note 1 – Business

Overview

~~Cree,~~Wolfspeed, Inc. (the Company) is ~~a leading~~an innovator of ~~lighting-class light emitting diode (LED) products, lighting products and~~ wide bandgap ~~semiconductor products~~semiconductors, focused on silicon carbide and gallium nitride (GaN) materials and devices for power and radio-frequency (RF) applications. The ~~Company's products are targeted for applications such as indoor and outdoor lighting, video displays, transportation, electronic signs and signals, power supplies, inverters and wireless systems.~~

The Company's lighting products primarily consist of LED lighting systems and lamps. The Company designs, manufactures and sells lighting fixtures and lamps for the commercial, industrial and consumer markets.

The Company's LED products consist 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 other industrial applications.

~~The~~ Company’s ~~Wolfspeed business consists of~~product families include silicon carbide ~~(SiC)~~and GaN materials, power devices and RF devices ~~based on wide bandgap semiconductor materials~~targeted for various applications such as ~~SiC~~electric vehicles, fast charging, 5G, renewable energy and ~~gallium nitride (GaN).~~ storage, and aerospace and defense. As discussed more fully below in Note 17, “Subsequent Events,” on August 22, 2023, the Company entered into a definitive agreement to sell certain assets and subsidiaries comprising its RF products lines.

The Company’s materials products and power devices are used in ~~solar,~~ electric vehicles, motor drives, power supplies, solar and transportation applications. The Company’s materials products and RF devices are used in military communications, radar, satellite and telecommunication applications.

The majority of the Company's products are manufactured at its production facilities located in North Carolina, ~~Wisconsin~~California and ~~China.~~Arkansas. The Company also uses contract manufacturers for certain products and aspects of product fabrication, assembly and packaging. Additionally, the Company recently opened its silicon carbide device fabrication facility in New York. The Company operates research and development facilities in North Carolina, California, Arkansas, ~~California, Wisconsin, India, Italy~~Arizona and ~~China (including Hong Kong).~~New York.

~~Cree,~~Wolfspeed, Inc. is a North Carolina corporation established in 1987, and ~~is headquartered~~its headquarters are in Durham, North Carolina.

~~The Company's three reportable segments are:~~

~~Lighting Products~~

~~LED Products~~

~~Wolfspeed~~

~~For financial results by reportable segment, please refer to Note 14, “Reportable Segments.”~~

~~Termination of Wolfspeed Sale Transaction~~

On July 13, 2016, the Company executed an Asset Purchase Agreement (the APA) with Infineon, which was approved by both the Company’s Board of Directors and Infineon’s Supervisory Board. Pursuant to the APA, the Company agreed to sell to Infineon, and Infineon agreed to (i) purchase from the Company (a) the assets comprising the Company’s power and RF product lines (formerly the Company's Power and RF Products segment), including manufacturing facilities and equipment, inventory, intellectual property rights, contracts, real estate, and the outstanding equity interests of Cree Fayetteville, Inc, one of the Company’s wholly-owned subsidiaries, and (b) certain related portions of the Company’s SiC materials and gemstones business previously included within the LED Products segment and (ii) assume certain liabilities related to the Wolfspeed business.

Beginning in July 2016, the Company classified the results of the Wolfspeed business as discontinued operations in the Company’s consolidated statements of loss for all periods presented. The Company also ceased recording depreciation and amortization of long-lived assets of the Wolfspeed business upon classification as discontinued operations in July 2016. Additionally, the related assets and liabilities associated with the discontinued operations were classified as held for sale in the consolidated balance sheets.

On February 16, 2017, the Company announced that the APA would be terminated as the Company and Infineon were unable to identify alternatives to modify the transaction to address the national security concerns of, and obtain approval from, the Committee on Foreign Investment in the United States, one of the closing conditions under the APA. On March 6, 2017, the Company and Infineon entered into a Termination Agreement pursuant to which the APA was terminated. Pursuant to the APA and the Termination Agreement, Infineon paid the Company a termination fee of $12.5 million in cash on March 10, 2017, which is included in Wolfspeed transaction termination fee in the Company’s consolidated statements of loss and in net cash provided by operating activities in the Company’s consolidated statements of cash flows.

As a result of the announcement of the termination of the APA and the Company’s decision to continue operating the Wolfspeed business, as of February 16, 2017, the Company reclassified the results of the Wolfspeed business as continuing operations in the Company’s consolidated statements of loss, and presented it as a separate reportable segment for all periods presented. Additionally, the related assets and liabilities of the Wolfspeed business were reclassified as held and used in the consolidated balance sheets for all periods presented. The long-lived assets were measured at the lower of their carrying amount before being classified as held for sale, adjusted for any depreciation and amortization expense that would have been recognized had the assets been continuously classified as held and used, or their fair value at the date of the subsequent decision not to sell.

Note 2 – Basis of Presentation and Summary of Significant Accounting Policies

Principles of Consolidation

The consolidated financial statements include the accounts of the Company and its wholly owned subsidiaries. All material intercompany accounts and transactions have been ~~eliminated in consolidation.~~eliminated.

Fiscal Year

The Company’s fiscal year is a 52 or 53~~-week~~53-week period ending on the last Sunday in the month of June. The Company’s ~~2017, 2016~~2023, 2022 and ~~2015~~2021 fiscal years were 52-week fiscal years. The ~~Company’s~~ ~~2018~~Company's 2024 fiscal year will be a ~~52-week~~53-week fiscal year. The next 53-week fiscal year will be for the Company's 2030 fiscal year.

Reclassifications

Certain prior period amounts in the accompanying consolidated financial statements have been reclassified to conform to the current year presentation. These reclassifications had no effect on previously reported net loss or shareholders’ equity.

Use of Estimates

The preparation of consolidated financial statements in conformity with accounting principles generally accepted in the United States of America (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. The Company evaluates its estimates on an ongoing basis, including those related to revenue recognition, ~~product warranty obligations,~~ valuation of inventories, tax related contingencies, valuation of stock-based compensation, valuation of long-lived and intangible assets, other contingencies and litigation, among others. The Company generally bases its estimates on historical experience and on various other assumptions that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results could differ materially from those estimates.

Segment Information

~~U.S. GAAP requires segmentation based on an entity’s internal organization and~~The Company operates as a single reporting ~~of revenue and operating income based upon internal accounting methods commonly referred to as~~segment. Accordingly, the ~~“management approach.”~~Chief Operating ~~segments are defined as components of an enterprise about which separate financial information is available that is evaluated regularly by the chief operating decision maker~~Decision Maker (CODM)~~, or decision making group, in deciding how to allocate~~ allocates resources and ~~in assessing performance.~~assesses performance on a consolidated basis. The ~~Company’s~~Company's identified CODM is ~~its~~the Chief Executive Officer. ~~The Company has determined that it currently has~~ ~~three~~ ~~operating and reportable segments.~~

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Cash and Cash Equivalents

Cash and cash equivalents consist of unrestricted cash accounts and highly liquid investments with an original maturity of three months or less when purchased. Cash and cash equivalents are stated at cost, which approximates fair value. The Company holds cash and cash equivalents at several major financial institutions, which often exceed insurance limits set by the Federal Deposit Insurance Corporation (FDIC). The Company has not historically experienced any losses due to such concentration of credit risk.

Accounts Receivable

For product revenue, the Company typically invoices its customers at the time of shipment for the sales order value of products shipped. Accounts receivable are recognized at the invoiced amount and are not subject to any interest or finance charges. The Company does not have any off-balance sheet credit exposure related to any of its customers.

Allowance for Doubtful Accounts

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.

Investments

Investments in certain securities may be classified into three categories:

•Held-to-Maturity – Debt securities that the entity has the positive intent and ability to hold to maturity, which are reported at amortized cost.

•Trading – Debt ~~and equity~~ securities that are bought and held principally for the purpose of selling in the near term, which are reported at fair value, with unrealized gains and losses included in earnings.

•Available-for-Sale – Debt ~~and equity~~ securities not classified as either held-to-maturity or trading securities, which are reported at fair value with unrealized gains or losses excluded from earnings and reported as a separate component of shareholders’ equity. However, as explained further below, the Company evaluates each individual security in an unrealized loss position for expected credit losses and if it is evaluated as having an expected credit loss, unrealized losses of that security are included in earnings.

The Company reassesses the appropriateness of the classification (i.e., held-to-maturity, trading or available-for-sale) of its investments at the end of each reporting period.

~~When~~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 ~~fair value of~~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 ~~declines below its original cost, the~~in an unrealized loss position is determined to have lost value from a decreased credit rating. The Company ~~considers all available evidence~~does not record an allowance for credit losses on receivables related to ~~evaluate whether the decline is other-than-temporary. Among other things, the Company considers the duration and extent of the decline and economic factors influencing the capital markets.~~accrued interest. For the fiscal years ended June 25, ~~2017~~, 2023, June 26, ~~2016~~,2022 and June ~~28, 2015, the Company had~~27, 2021, no ~~other-than-temporary declines below the cost basis of its investments.~~ allowance for credit losses was recorded.

The Company utilizes specific identification in computing realized gains and losses on the sale of investments. Realized gains and losses on the sale of investments are reported in ~~other income~~non-operating (income) expense, net in the consolidated statements of operations. Unrealized gains and ~~expense.~~losses are included as a separate component of equity, net of tax, unless the Company determines there is an expected credit loss.

Investments in marketable securities with maturities beyond one year may be classified as short-term based on their highly liquid nature and because such marketable securities represent the investment of cash that is available for current operations.

~~Other long-term investments consist~~Fair Value of ~~the Company's approximately 15% common stock ownership interest in Lextar Electronics Corporation (Lextar), which the~~Financial Instruments

The Company ~~acquired in December 2014. This investment was accounted for under the equity method from the date of investment until June 2016 when the Company chose~~performs recurring fair value measurements for its ~~representative not to stand for re-election~~cash equivalents and short-term investments, as ~~a member~~discussed further in Note 8, "Fair Value of ~~the Lextar board of directors. The Company utilizes the~~Financial Instruments." In addition, cash, accounts and interest receivable, accounts payable and other liabilities approximate their fair ~~value option in accounting for its investment in Lextar. The Company has determined that for its fiscal years ended~~values at June 25, 2023 and June 26, 2016 and June 28, 2015, Lextar has met the conditions of a significant subsidiary under Rule 1-02(w) of Regulation S-X for which the Company is required, pursuant to Rule 3-09 of Regulation S-X, to file separate financial statements as an exhibit to its Annual Report on Form 10-K. As such, separate financial statements for Lextar~~, prepared by Lextar and audited by its independent public accounting firm,~~ ~~are filed as Exhibit 99.1~~2022 due to the ~~Company's Annual Report.~~short-term nature of these instruments.

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Inventories

Inventories are stated at the lower of cost or ~~market,~~net realizable value, with cost determined on a first-in, first-out (FIFO) method or an average cost ~~method; and with market not to exceed net realizable value.~~method. The Company writes down its inventory balances for estimates of excess and obsolete amounts. These write-downs are recognized as a component of cost of revenue. At the point of the write-down, a new lower-cost basis for that inventory is established, and any subsequent improvements in facts and circumstances do not result in the restoration or increase in that newly established lower-cost basis. The Company recognized charges for write-downs in inventories of $7.3 million, ~~$3.6 million~~ ~~and~~ ~~$15.2 million, for fiscal~~ ~~2017~~, ~~2016~~ ~~and~~ ~~2015, respectively.~~

Property and Equipment

Property and equipment are stated at cost and depreciated on a straight-line basis over the assets’ estimated useful lives. Leasehold improvements are amortized over the lesser of the asset life or the ~~life~~term of the related lease. In general, the Company’s policy for useful lives is as follows:



Furniture and fixtures	5 years
Buildings and building improvements	5 to 40 years
Machinery and equipment		3 to 15 years
~~Buildings and building improvements~~	Vehicles	5 ~~to 40~~ years
~~Furniture and fixtures~~	Computer hardware/software	3 to 5 years
~~Aircraft and vehicles~~		~~5 to 20 years~~
Leasehold improvements		Shorter of estimated useful life or lease term

Expenditures for repairs and maintenance are charged to expense as incurred. The costs for major renewals and improvements are capitalized and depreciated over their estimated useful lives. The cost and related accumulated depreciation of the assets are removed from the accounts upon disposition and any resulting gain or loss is reflected in operating income.

The Company considers a long-lived asset to be abandoned after the Company has ceased use of such asset and there is no longer intent to use or repurpose the asset in the future. Abandoned long-lived assets are recorded at their salvage value, if any.

Government Assistance Programs and Incentives

The Company receives, or expects to receive in the future, various types of government assistance, primarily in the form of grants, refundable tax credits, property tax reimbursements and sales tax exemptions. Government assistance is recognized when there is reasonable assurance that: (1) the Company will comply with the relevant conditions and (2) the assistance will be received. Government assistance related to reimbursing fixed asset purchases, such as reimbursement grants and refundable federal investment tax credits, are recorded as a reduction to the related asset(s), which then reduces depreciation expense over the expected useful life of the asset on a straight-line basis.

Silicon Carbide Device Facility in Marcy, New York

The Company receives government grants from the State of New York Urban Development Corporation to partially or fully reimburse the Company for certain property, plant and equipment purchases in connection with its construction of a new silicon carbide device fabrication facility in Marcy, New York. To receive these grants, the Company must comply with a number of objectives outlined in the related grant disbursement agreement, as outlined in Note 15, "Commitments and Contingencies". Grant amounts already received are subject to clawback provisions if the Company does not satisfy the agreement's outlined objectives.

As of June 25, 2023, the Company has reduced property and equipment, net by $399.1 million as a result of expected and received reimbursements from the State of New York Urban Development Corporation, of which $305.2 million has been received in cash and an additional $93.9 million in receivables are recorded in other current assets and in other assets in the consolidated balance sheet. The Company started receiving cash reimbursements in the fourth quarter of fiscal 2021.

Manufacturing Facility in Siler City, North Carolina

In connection with the construction of a planned materials manufacturing facility in Siler City, North Carolina, the Company expects to receive a long-term incentive package from state, county and local governments, primarily in the form of property tax reimbursements and sales tax exemptions on purchased machinery and equipment. In order to receive property tax reimbursements, the Company is required to comply with investment and job targets. The facility is under construction and the Company anticipates beginning to recognize incentives starting in fiscal 2024.

U.S. CHIPS and Science Act of 2022 (the CHIPS Act)

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The Company expects to receive refundable federal investment tax credits and capital grants through the CHIPS Act in connection with ongoing expansion projects. As of June 25, 2023, the Company has reduced property and equipment, net by $167.4 million as a result of expected refundable tax credits in connection with the CHIPS Act.

Shipping and Handling Costs

Shipping and handling costs are included in ~~Cost~~cost of revenue, net in the ~~Consolidated Statements~~consolidated statements of ~~Loss~~operations and are recognized as a period expense during the period in which they are incurred.

Goodwill and Intangible Assets

The Company recognizes the assets acquired and liabilities assumed in business combinations at their respective fair values at the date of acquisition, with any excess purchase price recognized as goodwill. Valuation of intangible assets entails significant estimates and assumptions including, but not limited to, estimating future cash flows from product revenue, developing appropriate discount rates, continuation of customer relationships and renewal of customer contracts, and approximating the useful lives of the intangible assets acquired.

Goodwill

The Company recognizes goodwill as an asset representing the future economic benefits arising from other assets acquired in a business combination that are not individually identified and separately recognized. The Company tests goodwill for impairment at least annually as of the first day of ~~the~~ its fiscal fourth quarter, or when indications of potential impairment exist. The Company monitors for the existence of potential impairment indicators throughout the fiscal year.

The Company conducts impairment testing for goodwill at the reporting unit level. Reporting units may be operating segments as a whole, or an operation one level below an operating segment, referred to as a component. The Company has determined that ~~its~~it has one reporting ~~units are its~~ ~~three~~ ~~operating and reportable segments.~~unit, Wolfspeed.

The Company may initiate goodwill impairment testing by considering qualitative factors to determine whether it is more likely than not that a reporting unit’s carrying value is greater than its fair value. Such factors may include the following, among others: a significant decline in the reporting unit’s expected future cash flows; a sustained, significant decline in the Company’s stock price and market capitalization; a significant adverse change in legal factors or in the business climate; unanticipated competition; and slower growth rates; as well as changes in management, key personnel, strategy and customers. If the ~~Company’s~~Company's qualitative assessment indicates ~~that goodwill impairment~~it is more likely than not that the Company performs the two-step goodwill impairment test. Alternatively, the Company may bypass the qualitative test and initiate goodwill impairment testing with the first step of the two-step goodwill impairment test.

~~During the first step of the goodwill impairment test, the Company compares the fair value of the reporting unit to its carrying value, including goodwill. The Company derives a reporting unit~~’s fair value through a combination of the market approach (a guideline transaction method) and the income approach (a discounted cash flow analysis). The income approach utilizes a discount rate from the capital asset pricing model. If all reporting units are analyzed during the first step of the goodwill impairment test, their respective fair values are reconciled back to the Company’~~s consolidated market capitalization.~~

~~If the~~estimated fair value of a reporting unit exceeds its carrying value, ~~then~~no further analysis is required and goodwill is not impaired. Otherwise, the Company ~~concludes that no~~performs a quantitative goodwill impairment ~~has occurred.~~test to determine if goodwill is impaired. The quantitative test compares the fair value of a reporting unit with its carrying amount, including goodwill.

If the fair value of the reporting unit exceeds the carrying value of the net assets associated with the reporting unit, goodwill is not considered impaired. If the carrying value of the net assets associated with the reporting unit exceeds ~~its fair value,~~ the ~~Company performs the second step of the goodwill impairment test to measure possible goodwill impairment loss. During the second step, the Company hypothetically values the reporting unit~~’~~s tangible and intangible assets and liabilities as if the reporting unit had been acquired in a business combination. Then, the implied~~ fair value of the reporting unit,’~~s goodwill is compared to the carrying value of its goodwill. If the carrying value of the reporting unit~~’~~s goodwill exceeds the implied fair value of the goodwill,~~ the Company recognizes an impairment loss in an amount equal to the excess, not to exceed the carrying value of the reporting ~~unit~~’sunit's goodwill. Once an impairment loss is recognized, the adjusted carrying value of the goodwill becomes the new accounting basis of the goodwill for the reporting unit.

~~Indefinite-Lived Intangible Assets~~

~~The Company~~’~~s indefinite-lived intangible assets are tested for impairment at least annually in the fiscal fourth quarter or when indications of potential impairment exist.~~ The Company ~~monitors for~~derives a reporting unit’s fair value through a combination of the ~~existence of potential impairment indicators throughout~~market approach (guideline transaction method and guideline public company method) and the ~~fiscal year.~~

income approach (a discounted cash flow analysis). The ~~Company~~’~~s impairment test may begin with~~income approach utilizes a ~~qualitative test to determine whether it is more likely than not that an~~ ~~indefinite-lived intangible~~discount rate from a capital asset’~~s carrying~~ pricing model. The fair value is ~~greater than its fair value.~~ ~~In performing this test,~~reconciled back to the Company ~~may consider the following qualitative factors, among others: a significant decline in expected future cash flows; changes in industry and~~’s consolidated market conditions such as the deterioration in the environment in which the Company operates or an increased competitive environment; changes in management, key personnel, strategy, or customers; as well as other economic factors. If the Company’s qualitative assessment indicates that asset impairment is more likely than not, the Company performs a quantitative impairment test by ~~comparing the fair value of the~~ ~~indefinite-lived intangible asset~~ ~~to its carrying value. Alternatively, the Company may bypass the qualitative test and initiate impairment testing with the quantitative impairment test. Determining the fair value~~ of indefinite-lived intangible assets entails significant estimates and assumptions including, but not limited to, determining the timing and expected costs to complete development projects, estimating future cash flows from product revenue, developing appropriate discount rates, estimating probability rates for the successful completion of development projects, continuation of customer relationships and renewal of customer contracts, and approximating the useful lives of the intangible assets acquired.

If the fair value of the indefinite-lived intangible asset exceeds its carrying value, then the Company concludes that no impairment has occurred. If the carrying value of the indefinite-lived intangible asset exceeds its fair value, the Company recognizes an impairment loss in an amount equal to the excess, not to exceed the carrying value. Once an impairment loss is recognized, the adjusted carrying value becomes the new accounting basis of the indefinite-lived intangible asset.capitalization.

Finite-Lived Intangible Assets

U.S. GAAP requires that intangible assets, other than goodwill and indefinite-lived intangibles, must be amortized over their useful lives. The Company is currently amortizing its acquired intangible assets with finite lives over periods ranging from ~~one~~10 to 2015 years.

Patent rights reflect costs incurred by the Company in applying for and maintaining patents owned by the Company and costs incurred in purchasing patents and related rights from third parties. Licensing rights reflect costs incurred by the Company in acquiring licenses under patents owned by others. The Company amortizes both on a straight-line basis over the expected useful life of the associated patent rights, which is generally the lesser of 20 years from the date of the patent application or the license period. Royalties payable under licenses for patents owned by others are generally expensed as incurred. The Company reviews its capitalized patent portfolio and recognizes impairment charges when circumstances warrant, such as when patents have been abandoned or are no longer being pursued.

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Long-Lived Assets

The Company reviews long-lived assets such as property and equipment for impairment based on changes in circumstances that indicate their carrying amounts may not be recoverable. In making these determinations, the Company uses certain assumptions, including but not limited to: (1) estimations of the fair market value of the assets and (2) estimations of future cash flows expected to be generated by these assets, which are based on additional assumptions such as asset utilization, length of service the asset will be used in the Company’s operations and estimated salvage values.

Contingent Liabilities

The Company recognizes contingent liabilities when it is probable that an asset has been impaired or a liability has been incurred at the date of the financial statements and the amount of the loss can be reasonably estimated. Disclosure in the notes to the financial statements is required for loss contingencies that do not meet both these conditions if there is a reasonable possibility that a loss may have been incurred. See Note ~~13,~~15, “Commitments and Contingencies,” for a discussion of loss contingencies in connection with pending and threatened litigation. The ~~Company expenses as incurred the~~ costs of defending legal claims against the ~~Company.~~Company are expensed as incurred.

Revenue Recognition

~~The Company recognizes~~Revenue is recognized when control of a good or service promised in a contract (i.e., performance obligation) is transferred to a customer. Control is obtained when a customer has the ability to direct the use of and obtain substantially all of the remaining benefits from that good or service. Substantially all of the Company's revenue is derived from product ~~revenue~~sales. Revenue is recognized at a point in time based on the Company’s evaluation of when the ~~earnings process is complete, as evidenced by persuasive evidence~~customer obtains control of ~~an arrangement (typically in~~ the ~~form~~products, and all performance obligations under the terms of ~~a purchase order), when~~ the ~~sales price is fixed or determinable, collection of~~contract are satisfied. If customer acceptance clauses are present and it cannot be objectively determined that control has been transferred based on the contract and shipping terms, revenue is ~~reasonably assured,~~only recorded when customer acceptance is received and ~~title and risk~~all performance obligations have been satisfied. Sales of ~~loss have passed to the customer.~~

The Company provides its customers with limited rights of return for non-conforming shipments and product warranty claims. The Company estimates an allowance for anticipated sales returns based upon an analysis of historical sales returns and other relevant data. The Company recognizes an allowance for non-conforming returns at the time of sale as a reduction of product revenue and as a reduction to the related accounts receivable balance. The Company recognizes a liability for product warranty claims at the time of sale as an increase to cost of revenue.products typically do not include more than one performance obligation.

A ~~substantial~~ portion of the Company’s products are sold through distributors. Distributors stock inventory and sell the Company’s products to their own customer base, which may include: value added resellers; manufacturers who incorporate the Company’s products into their own manufactured goods; or ultimate end users of the Company’s products. The Company recognizes revenue upon shipment of its products to its distributors. This arrangement is often referred to as a “sell-in” or “point-of-purchase” model as opposed to a “sell-through” or “point-of-sale” model, where revenue is deferred and not recognized until the distributor sells the product through to their customer.

~~Certain~~Master supply or distributor agreements are in place with some of the Company's customers and contain terms and conditions including, but not limited to, payment, delivery, incentives and warranty. These agreements sometimes require minimum purchase commitments and/or involve potential penalties to the Company if a defined supply schedule is not met. If a master supply, distributor or other similar agreement is not in place with a customer, the Company considers a purchase order, which is governed by the Company’s standard terms and conditions, to be the contract governing the relationship with that customer.

Pricing terms are negotiated independently on a stand-alone basis. Revenue is measured based on the amount of net consideration to which the Company expects to be entitled to receive in exchange for products or services. Variable consideration is recognized as a reduction of net revenue with a corresponding reserve at the time of revenue recognition, and consists primarily of sales incentives, volume discounts, price concessions and return allowances. Variable consideration is estimated based on contractual terms, historical analysis of customer purchase volumes, or historical analysis using specific data for the type of consideration being assessed.

Some of the Company’s distributors are provided limited rights that allow them to return a portion of inventory (product exchange rights or stock rotation rights) and receive credits for changes in selling prices (price protection rights) or customer pricing arrangements under the Company’s “ship and debit” program or other targeted sales incentives. These estimates are calculated based upon historical experience, product shipment analysis, current economic conditions, on-hand inventory at the distributor, and customer contractual arrangements. The Company believes that it can reasonably and reliably estimate the allowance for distributor credits at the time of sale. Accordingly, estimates for these rights are recognized at the time of sale as a contract liability and a reduction of product ~~revenue and as a reduction to the related accounts receivable balance.~~revenue.

From time to time, the Company will issue a new price book for its products, and provide a credit to certain distributors for inventory quantities on hand if required by the Company’s agreement with the distributor. This practice is known as price protection. These credits are applied against the reserve that the Company establishes upon initial shipment

Table of ~~product to the distributor.~~Contents

Under the ship and debit program, products are sold to distributors at negotiated prices and the distributors are required to pay for the products purchased within the Company’s standard commercial terms. Subsequent to the initial product purchase, a distributor may request a price allowance for a particular part number(s) for certain target customers, prior to the distributor reselling the particular part to that customer. If the Company approves an allowance and the distributor resells the product to the target customer, the Company credits the distributor according to the allowance the Company approved. These credits are applied against the reserve that the Company establishes upon initial shipment of product to the distributor.

~~In addition,~~The Company also has inventory consignment agreements in which revenue is recognized at a point in time, when the customer or distributor pulls product from consignment inventory that the Company ~~runs sales incentive programs with certain distributors~~stores at designated locations. Delivery and ~~retailers, such as product rebates~~transfer of control occur at that point, when title and ~~cooperative advertising campaigns. The~~risk of loss transfers and the customer or distributor becomes obligated to pay for the products pulled from inventory. Until the products are pulled for use or sale by the customer or distributor, the Company ~~recognizes these incentives at~~retains control over the ~~time they are offered~~products’ disposition, including the right to ~~customers and records a credit to their account with an offsetting expense as either a reduction to revenue, increase to cost of revenue,~~pull back or ~~marketing expense depending on~~relocate the ~~type of sales incentive.~~products.

From time to time, the Company may enter into licensing arrangements related to its intellectual property. Revenue from licensing arrangements is recognized when earned and estimable. The timing of revenue recognition is dependent on the terms of each license agreement. Generally, the Company will recognize non-refundable upfront licensing fees related to patent licenses immediately upon receipt of the funds if the Company has no significant future obligations to perform under the arrangement. However, the Company will defer recognition for licensing fees ~~where~~when the Company has significant future performance requirements, the fee is not fixed (such as royalties earned as a percentage of future revenue), or the fees are otherwise contingent.

Leases

~~Accounts Receivable~~

~~For product revenue,~~At lease inception, the Company ~~typically invoices its customers at~~determines an arrangement is a lease if the ~~time~~contract involves the use of ~~shipment for~~a distinct identified asset, the ~~sales order value~~lessor does not have substantive substitution rights and the lessee obtains control of ~~products shipped. Accounts receivable~~the asset throughout the period by obtaining substantially all of the economic benefit of the asset and the right to direct the use of the asset. Depending on the terms, leases are ~~recognized at the invoiced amount and are not subject to any interest~~classified as either operating or finance ~~charges.~~leases, if the Company is the lessee, or as operating, sales-type or direct financing leases, if the Company is the lessor. The Company does not have any ~~off-balance sheet credit exposure related to any of its customers.~~

~~Allowance for Doubtful Accounts~~

sales-type or direct financing leases. Lease agreements frequently include other services such as maintenance, electricity, security, janitorial and reception services. The Company ~~evaluates~~accounts for the ~~collectability of accounts receivable~~lease and non-lease components in its arrangements as a single lease component.

Accounting for Leases as a Lessee

Right-of-use assets represent the Company's right to use an underlying asset during the lease term and lease liabilities represent the Company's obligation to make lease payments arising from the lease. Assets and liabilities are recognized based on ~~a combination~~the present value of ~~factors. In cases where~~lease payments over the lease term. Most leases include one or more options to renew, with renewal terms that can extend the lease term from one to five years or more. The exercise of the renewal option is at the Company's sole discretion and the Company ~~becomes aware of circumstances that may impair a specific customer’s ability~~considers these options in determining the lease term used to ~~meet~~establish its ~~financial obligations subsequent to the original sale, the~~right-of-use assets and lease liabilities. The Company will ~~recognize~~remeasure its lease liability and adjust the related right-of-use asset upon the occurrence of the following: lease modifications not accounted for as a separate contract; a triggering event that changes the certainty of the lessee exercising an ~~allowance against amounts due, and thereby reduce~~option to renew or terminate the ~~net recognized receivable~~lease, or purchase the underlying asset; a change to the amount probable of being owed by the Company ~~reasonably believes will be collected. For all other customers,~~under a residual value guarantee; or the resolution of a contingency upon which the variable lease payments are based such that those payments become fixed.

Because most of the Company's leases do not provide an implicit rate, the Company ~~recognizes an allowance for doubtful accounts~~uses its incremental borrowing rate based on the ~~length~~information available at the lease commencement date in determining the present value of ~~time~~lease payments. The Company would use the ~~receivables~~implicit rate when readily determinable. Operating lease expense is generally recognized on a straight-line basis over the lease term. Finance lease assets are ~~past due~~generally amortized over the term of the lease. If the finance lease transfers ownership of the underlying asset to the Company or the Company is reasonably certain it will exercise an option to purchase the underlying asset, the finance lease assets are amortized on a straight-line basis over the useful life of the asset. Interest expense on the finance lease liability is recognized using the effective interest rate method and ~~consideration~~is presented within interest expense on the Company’s consolidated statements of ~~other factors~~operations.

Operating leases with a lease term of 12 months or less are not recorded on the balance sheet. The Company recognizes lease expense for these leases on a straight-line basis over the lease term. Variable lease payment amounts that cannot be determined at the commencement of the lease, such as ~~industry conditions,~~increases in lease payments based on changes in index rates, are not included in the ~~current business environment~~right-of-use assets or liabilities. These variable lease payments are expensed as incurred.

Accounting for Leases as a Lessor

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Lease income is recognized on a straight-line basis over the lease term. Variable lease payments, if any, are recognized as income in the period received. The underlying asset in an operating lease is carried at depreciated cost and ~~the Company’s historical experience.~~is included in property and equipment.

Advertising

The Company expenses the costs of producing advertisements at the time production occurs and expenses the cost of communicating the advertising in the period in which the advertising is used. Advertising costs are included in ~~Sales,~~sales, general and administrative expenses in the ~~Consolidated Statements~~consolidated statements of ~~Loss~~operations and amounted to approximately ~~$13.0~~$11.5 million, ~~$12.6~~$7.5 million,, and ~~$25.6~~$5.1 million for the years ended June 25, ~~2017~~, 2023, June 26, ~~2016~~2022 and June ~~28, 2015~~,27, 2021, respectively.

Retirement Savings Plan

The Company sponsors one employee benefit plan (the 401(k) Plan) pursuant to Section 401(k) of the Internal Revenue Code. All U.S. employees are eligible to participate under the 401(k) Plan on the first day of a new fiscal month after the date of hire. Under the 401(k) Plan, there is no fixed dollar amount of retirement benefits; rather, the Company matches a defined percentage of employee deferrals, and employees vest in these matching funds over time. Employees choose their investment elections from a list of available investment options. During the fiscal years ended June 25, 2023, June 26, 2022 and June 27, 2021, the Company contributed approximately $12.3 million, $10.3 million and $8.0 million to the 401(k) Plan, respectively. The Pension Benefit Guaranty Corporation does not insure the 401(k) Plan.

Research and Development

Research and development expenses consist primarily of employee salaries and related compensation costs, occupancy costs, consulting costs and the cost of development equipment and supplies. Research and development activities are expensed when incurred.

Earnings/Loss Per Share

Basic earnings/loss per share is computed by dividing net income/loss by the weighted average number of shares of common stock outstanding for the applicable period. Diluted ~~loss~~earnings per share is determined in the same manner as basic earnings/loss per share except that the impacts from interest expense and dividends on net income/loss are removed and the number of shares is increased to assume exercise of potentially dilutive stock options, nonvested restricted stock, ~~and~~ contingently issuable shares using the treasury stock method and the potential issuance of shares in connection with the Company's convertible notes, unless the effect of such increases would be anti-dilutive. Under the treasury stock method, the amount the employee must pay for exercising stock options, the amount of compensation cost for future service that the Company has not yet recognized, and the amount of tax benefits that would be recognized in additional paid-in capital when the award becomes deductible are assumed to be used to repurchase shares.

Stock-Based Compensation

The Company ~~recognizes~~accounts for its employee stock-based compensation plans using the fair value method. The fair value method requires the Company to estimate the grant-date fair value of its stock-based awards and amortize this fair value to compensation expense over the requisite service period or vesting term.

The Company’s stock-based awards can be either service-based or performance-based. Performance-based conditions may be tied to future financial and/or operating performance of the Company, external based market metrics or internal performance metrics.

For service-based restricted stock units (RSUs) and performance-based RSUs (commonly referred to as PSUs) with internal metrics, the grant-date fair value is based upon the market price of the Company’s common stock on the date of the grant. For performance-based RSUs, the Company reassesses the probability of the achievement of the performance condition at each reporting period and adjusts the compensation expense for ~~all share-based payments granted based on~~subsequent changes in the estimate or actual outcome. This fair value is then amortized to compensation expense over the requisite service period or vesting term.

For performance-based awards with market conditions, the Company estimates the grant date fair value using the Monte Carlo valuation model and expenses the awards over the vesting period regardless of whether the market condition is ultimately satisfied.

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The Company uses the Black-Scholes option-pricing model to estimate the fair value of the ~~shares~~Company’s Employee Stock Purchase Plan (ESPP) awards. The determination of the fair value of stock-based payment awards on the date of ~~grant. Compensation~~grant using an option-pricing model is affected by the Company’s stock price as well as assumptions regarding a number of complex and subjective variables. These variables include the expected stock price volatility over the term of the awards, the risk-free interest rate and expected dividends. Due to the inherent limitations of option-valuation models, future events that are unpredictable and the estimation process utilized in determining the valuation of the stock-based awards, the ultimate value realized by award holders may vary significantly from the amounts expensed in the Company’s financial statements.

Stock-based compensation expense is ~~then~~ recognized ~~over~~net of estimated forfeitures such that expense is recognized only for those stock-based awards that are expected to vest. A forfeiture rate is estimated at the ~~award’s vesting period.~~time of grant and revised, if necessary, in subsequent periods if actual forfeitures differ from initial estimates.

~~Fair Value of Financial Instruments~~

~~Cash and cash equivalents, short-term investments, accounts and interest receivable, accounts payable and other liabilities approximate their fair values at~~ ~~June 25, 2017~~ ~~and~~ ~~June 26, 2016~~ ~~due to~~See Note 13, "Stock-based Compensation," for more information about the ~~short-term nature of these instruments.~~Company's stock-based compensation plans.

Taxes

Deferred tax assets and liabilities are recognized for the estimated future tax consequences attributable to differences between the carrying amounts of existing assets and liabilities and their respective tax bases. Deferred tax assets are recognized for deductible temporary differences, along with net operating loss carryforwards and credit carryforwards, if it is more likely than not that the tax benefits will be realized. To the extent a deferred tax asset cannot be recognized under the preceding criteria, valuation allowances are established. Deferred tax assets and liabilities are measured using enacted tax rates in effect for the year in which those temporary differences are expected to be recovered or settled.

Taxes payable which are not based on income are accrued ratably over the period to which they apply. For example, payroll taxes are accrued each period end based upon the amount of payroll taxes that are owed as of that date; whereas taxes such as property taxes and franchise taxes are accrued over the fiscal year to which they apply if paid at the end of a period, or they are amortized ratably over the fiscal year if they are paid in advance.

~~Sales Taxes~~

~~The Company presents sales taxes collected from customers and remitted to governmental authorities on a net basis (i.e. excluded from revenue and expenses).~~

Foreign Currency Translation

~~Foreign~~All of the Company's operations have a U.S. Dollar functional currency and therefore no foreign currency translation adjustments are recognized in ~~Other~~other comprehensive ~~(loss) income~~loss in the ~~Consolidated Statements~~consolidated statements of Comprehensive Loss for changes between the foreign subsidiaries’ functional currency and the United States (U.S.) dollar. Foreign currency translation gains and losses are included in the Company’s equity account balance of Accumulated other comprehensive ~~income, net of taxes in the Consolidated Balance Sheets until such time that the subsidiaries are either sold or substantially liquidated.~~

~~Because the~~loss. The Company and its subsidiaries transact business in currencies other than the U.S. Dollar and as such, the Company ~~will continue to experience~~experiences varying amounts of foreign currency exchange gains and ~~losses~~losses.

Joint Venture

Effective July 17, 2017, the Company entered into a Shareholders Agreement with San’an Optoelectronics Co., Ltd. (San’an) and Cree Venture LED Company Limited (Cree Venture LED) pursuant to which the Company and San’an funded their contributions to Cree Venture LED and agreed upon the management and operation of Cree Venture LED. The Company contributed $5.1 million of cash for ~~subsidiaries with U.S. dollar functional currency.~~a 51% ownership interest and San’an contributed $4.9 million of cash for a 49% ownership interest.

The Company's interest in Cree Venture LED was included in the LED Business Divestiture and its related activity is classified as discontinued operations.

Supplemental Cash Flow Information

Cash paid for interest was $29.5 million, $13.1 million, and $14.1 million for the fiscal years ended June 25, 2023, June 26, 2022 and June 27, 2021, respectively.

Cash paid (received) for taxes, net of refunds received, was $2.9 million, $(4.4) million and $11.0 million for the fiscal years ended June 25, 2023, June 26, 2022 and June 27, 2021, respectively.

Recently ~~Issued~~Adopted Accounting Pronouncements

~~Revenue from Contracts with Customers~~Convertible Debt Instruments

In ~~May 2014,~~August 2020, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) ~~No. 2014-09: Revenue from~~2020-06, Debt – Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging – Contracts ~~with Customers (Topic 606)~~in Entity’s Own Equity

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(Subtopic 815-40). ~~The FASB has subsequently issued multiple ASUs which amend~~This standard simplifies the accounting for convertible instruments by eliminating the cash conversion and ~~clarify~~the beneficial conversion accounting models. This update also amends the guidance for the derivatives scope exception for contracts in ~~Topic 606.~~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.

The Company adopted this standard on June 27, 2022, the first day of its 2023 fiscal year, under the modified retrospective approach. The adoption resulted in (i) a reduction of additional paid in capital by $333.0 million for the recombination of the equity conversion component of the convertible notes outstanding, which was initially separated and recorded in equity, (ii) an increase in the cumulative convertible note carrying value of $277.9 million as a result of removing previously recorded debt discounts, (iii) a decrease in property, plant and equipment for previously capitalized non-cash interest of $25.4 million and (iv) a decrease to beginning accumulated deficit as of June 27, 2022 of $29.7 million to recognize the cumulative gain on adoption. The Company did not recognize a discrete tax impact related to the opening deferred tax balances as of June 27, 2022 due to a full U.S. valuation allowance.

Government Assistance

In November 2021, the FASB issued ASU ~~establishes~~2021-10, Government Assistance (Topic 832) - Disclosures by Business Entities about Government Assistance. This standard requires entities to provide annual disclosures regarding government assistance. More specifically, the amendments in the standard improve financial reporting by requiring disclosures that increase the transparency of transactions with a ~~principles-based approach~~government accounted for by applying a grant or contribution accounting model by analogy, including (1) the types of transactions; (2) the accounting for those transactions; and (3) the effect of those transactions on an entity's financial statements. The Company adopted this standard on June 27, 2022 under the prospective approach.

Recently Issued Accounting Pronouncements Pending Adoption

None.

Note 3 – Discontinued Operations

On March 1, 2021, the Company completed the sale of certain assets and subsidiaries comprising its former LED Products segment to SMART Global Holdings, Inc. (SGH) and its wholly owned subsidiary CreeLED, Inc. (CreeLED and collectively with SGH, SMART) (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, 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 ~~arising~~and gross profit performance of the LED Business in the first four full fiscal quarters following the closing, 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 had a maturity date of August 15, 2023, and as explained further below, was prepaid by SGH in full pursuant to its terms, along with outstanding accrued and unpaid interest as of the payment date, in the third quarter of fiscal 2022. The Earnout Note was issued by CreeLED in the fourth quarter of 2022, had a maturity date of March 27, 2025 and as explained further below, was prepaid by CreeLED in full pursuant to its terms, in connection with the forgiveness by the Company of outstanding accrued and unpaid interest as of the payment date, in the first quarter of fiscal 2023. 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.

In the third quarter of fiscal 2022, the Company received an early payment for the Purchase Price Note. The principal amount of $125.0 million was paid in full, along with outstanding accrued interest as of the payment date.

In the fourth quarter of fiscal 2022, the Company received the Earnout Note with a principal amount of $101.8 million. As a result, the Company recorded a net gain of $94.2 million within discontinued operations, net in the consolidated statements of operations for fiscal year ended June 26, 2022. The gain recorded is net of $3.9 million in taxes and $1.2 million in transaction fees. Additionally, the amount is less a previously recorded gain of $2.5 million, which was recorded in fiscal 2021 as part of the total loss on sale to account for the minimum amount of the Earnout Note. In the first quarter of fiscal 2023, the Company received an early payment for the Earnout Note for the full principal amount of $101.8 million and the Company agreed to forgo payment by CreeLED of the outstanding accrued interest as of the payment date.

In addition to the $94.2 million net gain from ~~contracts~~discontinued operations recognized in fiscal year ended June 26, 2022 as a result of receiving the Earnout Note, 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 for the fiscal year ended June 27, 2021:


															Fiscal Year Ended
(in millions of U.S. Dollars)															June 27, 2021
Revenue, net															$272.8
Cost of revenue, net															213.3
Gross profit															59.5
Operating expenses:
Research and development															22.3
Sales, general and administrative															29.4
Goodwill impairment															112.6
Impairment on assets held for sale															19.5
Gain on disposal or impairment of long-lived assets															(1.6)
Other operating expense															18.7
Operating loss															(141.4)
Non-operating income															(0.3)
Loss before income taxes and loss on sale															(141.1)
Loss on sale															29.1
Loss before income taxes															(170.2)
Income tax expense															11.0
Net loss															(181.2)
Net income attributable to noncontrolling interest															1.4
Net loss attributable to controlling interest															($182.6)

As of September 27, 2020, the Company determined it would more likely than not sell all or a portion of the assets comprising the LED Products segment below carrying value. As a result, the Company recorded an impairment to goodwill of $105.7 million.

As of December 27, 2020, the Company recorded an additional impairment to goodwill of $6.9 million and an impairment to assets held for sale associated with ~~customers~~the LED Business Divestiture of $19.5 million.

For the fiscal years ended June 26, 2022 and ~~supersedes existing revenue recognition guidance.~~ June 27, 2021, the Company recognized $3.9 million and $11.0 million, respectively, of income tax expense related to discontinued operations, which primarily related to the foreign operations of the

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LED Business. Income tax expense related to discontinued operations for the fiscal year ended June 26, 2022 and June 27, 2021 includes $2.4 million and $4.1 million, respectively, of income tax expense related to the sale of the issued and outstanding equity interests of Cree Huizhou in the third quarter of fiscal 2021.

The ~~ASU provides that an entity should apply~~income tax impact of the U.S. operations of the LED Business for all periods presented were offset with a valuation allowance as described in Note 14, "Income Taxes."

For the fiscal years ended June 25, 2023, June 26, 2022 and June 27, 2021, the Company recognized $2.4 million, $3.6 million and $1.2 million in administrative fees related to the LED RELA, respectively, none of which is included in accounts receivable, net in the consolidated balance sheets as of June 25, 2023. Fees related to the LED RELA were recorded as lease income. See Note 5, "Leases" below for additional information.

For the fiscal years ended June 25, 2023, June 26, 2022 and June 27, 2021, the Company recognized $6.0 million, $9.2 million and $4.0 million in administrative fees related to the LED TSA, respectively, of which $0.2 million are included in accounts receivable, net in the consolidated balance sheets as of June 25, 2023. 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, none of which was outstanding as of June 25, 2023.

The Company recognized a net loss of $13.6 million, $0.8 million and $0.8 million in non-operating expense, net for the fiscal years ended June 25, 2023, June 26, 2022 and June 27, 2021, respectively, related to the Wafer Supply Agreement. A receivable of $1.3 million was included in other assets in the consolidated balance sheets as of June 25, 2023.

Note 4 – Revenue Recognition

The Company follows a five-step approach for recognizing revenue, ~~including~~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. ~~Also,~~

Contract liabilities primarily include various rights of return and customer deposits, as well as a reserve on the ~~entity must provide various disclosures concerning~~Company's "ship and debit" program. Contract liabilities were $73.8 million and $47.8 million as of June 25, 2023 and June 26, 2022, respectively. The increase was primarily due to increased customer reserve deposits and ship and debit reserves. Contract liabilities are recorded within accrued contract liabilities and other long-term liabilities on the ~~nature, amount~~consolidated balance sheets.

Practical Expedients and ~~timing~~Exemptions

The Company does not disclose the value of unsatisfied performance obligations for contracts with an original expected length of one year or less.

Incidental contract costs that are not material in context of the delivery of products are expensed as incurred. Sales commissions are expensed when the amortization period is less than one year. Contract assets, such as costs to obtain or fulfill contracts, are an insignificant component of the Company’s revenue recognition process. The majority of the Company’s fulfillment costs as a manufacturer consist of inventory, fixed assets, and intangible assets, all of which are accounted for under the respective guidance for those asset types.

The Company’s accounts receivable balance represents the Company’s unconditional right to receive consideration from its customers with contracts. Payments are typically due within 30 days of the completion of the performance obligation and invoicing, and therefore do not contain significant financing components.

Sales tax, value-added tax, and other taxes the Company collects concurrent with revenue-producing activities are excluded from revenue, and shipping and handling costs are treated as fulfillment activities and are included in cost of revenue in the Company’s consolidated statements of operations.

For the fiscal years ended June 25, 2023 and ~~cash flows arising from contracts with customers. The Company’s evaluation of ASU 2014-09 is ongoing and not complete; however,~~June 26, 2022, the Company ~~anticipates~~did not recognize any material revenue that was included in contract liabilities at the ~~primary changes~~start of each respective fiscal year.

Product Line Revenue

The Company sells products from within three product lines: Power Products, silicon carbide and GaN materials (Materials Products) and RF Products. Revenue from these three product lines is as follows:

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	Fiscal Years Ended
(in millions of U.S. Dollars)	June 25, 2023	June 26, 2022	June 27, 2021
Power Products	$408.9	$276.4	$132.8
Materials Products	349.3	295.5	241.6
RF Products	163.7	174.3	151.2
Total	$921.9	$746.2	$525.6

Geographic Information

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 ~~recognition to be related to certain patent license arrangements.~~ from external customers by geographic area is as follows:


	For the Years Ended
	June 25, 2023				June 26, 2022				June 27, 2021
(in millions of U.S. Dollars)	Revenue		%		Revenue		%		Revenue		%
Europe	$	291.5	31.6	%	$	260.4	34.9	%	$	188.9	35.9	%
Hong Kong	214.1		23.2	%	162.6		21.8	%	80.7		15.4	%
Asia Pacific (excluding China and Hong Kong)	194.3		21.1	%	128.9		17.3	%	114.7		21.8	%
United States	188.6		20.5	%	142.7		19.1	%	117.3		22.3	%
China	29.6		3.2	%	48.6		6.5	%	19.4		3.7	%
Other	3.8		0.4	%	3.0		0.4	%	4.6		0.9	%
Total	$	921.9			$	746.2			$	525.6

Note 5 – Leases

The ~~FASB~~Company primarily leases manufacturing and office spaces. The Company also has ~~issued~~a number of bulk gas leases. Lease agreements frequently include renewal provisions and ~~may issue in the future, interpretive guidance, which may cause our evaluation to change. The effective date will be the first quarter of the Company's fiscal year ending June 30, 2019 and~~require the Company ~~currently expects~~ to ~~use the modified retrospective method.~~

~~Leases~~

~~In February 2016, the FASB issued ASU No. 2016-02: Leases (Topic 842). The ASU requires that a lessee recognize in its statement of financial position a liability to make~~pay real estate taxes, insurance and maintenance costs. Variable costs include lease payments ~~(the lease liability) and a right-of-use asset representing its right to~~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. For details on the Company's lease policies, see the significant accounting policy disclosures in Note 2, “Basis of Presentation and Summary of Significant Accounting Policies."

The Company's finance lease obligations primarily relate to contract manufacturing space in Malaysia and a 49-year ground lease on the Company's 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:	June 25, 2023	June 26, 2022
Right-of-use asset (1)	$104.6	$48.5

Current lease liability (2)	7.9	4.6
Non-current lease liability (3)	117.2	43.6
Total operating lease liabilities	125.1	48.2

Finance Leases:
Finance lease assets (4)	$9.6	$10.3

Current portion of finance lease liabilities	0.5	0.5
Finance lease liabilities, less current portion	9.2	9.6
Total finance lease liabilities	9.7	10.1

(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 $11.0 million, $8.1 million and $5.5 million in fiscal 2023, 2022 and 2021, respectively.

Short-term lease expense was immaterial in fiscal 2023, 2022 and 2021.

Finance lease amortization was $0.8 million, $1.2 million and $1.0 million, and interest expense was $0.3 million, $0.3 million and $0.3 million, in fiscal 2023, 2022 and 2021, respectively.

Cash Flows

Cash flow information consisted of the following (1):


	Fiscal Years Ended
(in millions of U.S. Dollars)	June 25, 2023	June 26, 2022	June 27, 2021
Cash (used in) provided by operating activities:
Cash paid for operating leases	($6.7)	($8.1)	($5.7)
Cash received for tenant allowance on operating leases	17.8	—	—
Cash paid for interest portion of financing leases	(0.3)	(0.3)	(0.3)
Cash used in financing activities:
Cash paid for principal portion of finance leases	(0.5)	(0.5)	(0.4)

(1) See Note 6, "Financial Statement Details," for non-cash activities related to leases.

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Lease Liability Maturities

Maturities of operating and finance lease liabilities as of June 25, 2023 were as follows (in millions of U.S. Dollars):


Fiscal Year Ending	Operating Leases	Finance Leases	Total
June 30, 2024	$12.0	$0.7	$12.7
June 29, 2025	12.1	0.7	12.8
June 28, 2026	17.1	0.7	17.8
June 27, 2027	13.1	0.4	13.5
June 26, 2028	12.2	0.2	12.4
Thereafter	104.3	14.0	118.3
Total lease payments	170.8	16.7	187.5
Future tenant improvement allowances	(3.7)	—	(3.7)
Imputed lease interest	(42.0)	(7.0)	(49.0)
Total lease liabilities	$125.1	$9.7	$134.8

Supplemental Disclosures


	Operating Leases		Finance Leases
Weighted average remaining lease term (in months) (1)	153		473
Weighted average discount rate (2)	4.33	%	2.67	%

(1) Weighted average remaining lease term of finance leases without the 49-year ground lease is 40 months.

(2) Weighted average discount rate of finance leases without the 49-year ground lease is 3.50%.

Lease Income

As mentioned in Note 3, "Discontinued Operations," on March 1, 2021 and in connection with the LED Business Divestiture, the Company entered into the LED RELA pursuant to which the Company leased 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 was 24 months and expired on February 26, 2023.

In addition, the Company leases space to a third party at one of its owned facilities.

The Company recognized lease income of $2.5 million, $3.6 million and $1.2 million for the lease term. The asset will be based on the liability, subject to adjustment, such as for initial direct costs. For leases with a term of 12 months or less, a lessee is permitted to make an accounting policy election by class of underlying asset not to recognize lease assetsfiscal years ended June 25, 2023, June 26, 2022 and lease liabilities. For income statement purposes, leases are still required to be classified as either operating or finance. Operating leases will result in straight-line expense while finance leases will result in a front-loaded expense pattern. The effective date will be the first quarter of the Company's fiscal year ending June ~~28, 2020, using a modified retrospective approach.~~ 27, 2021, respectively.

The Company ~~is currently analyzing~~did not recognize any variable lease income for the ~~impact of this new pronouncement.~~

~~Stock Compensation~~

In March 2016, the FASB issued ASU No. 2016-09: Compensation-Stock Compensation (Topic 718): Improvements to Employee Share-Based Payment Accounting. The ASU simplifies the current stock compensation guidance for tax consequences. The ASU requires an entity to recognize all excess tax benefitsfiscal years ended June 25, 2023, June 26, 2022 and tax deficiencies as income tax expense or benefit in its income statement. The ASU also eliminates the requirement to defer recognition of an excess tax benefit until the benefit is realized through a reduction to taxes payable. For cash flows statement purposes, excess tax benefits should be classified as an operating activity and cash payments made to taxing authorities on the employee’s behalf for withheld shares should be classified as financing activity. The effective date will be the first quarter of the Company's fiscal year ending June 24, 2018. The Company's adoption of this ASU is not expected to impact its consolidated financial statements.

~~Goodwill Impairment Testing~~

In January 2017, the FASB issued ASU No. 2017-04: Intangibles-Goodwill and Other (Topic 350): Simplifying the Test for Goodwill Impairment. The ASU simplifies the manner in which an entity is required to test for goodwill impairment by eliminating Step 2 from the goodwill impairment test. Additionally, the ASU removes the requirement for any reporting unit with a zero or negative carrying amount to perform a qualitative assessment and, if it fails such qualitative test, to perform Step 2 of the goodwill impairment test. The effective date will be the first quarter of the Company's fiscal year ending June 27, 2021. ~~The Company’s adoption of this guidance is not expected to have a significant impact on its consolidated financial statements.~~

~~Note 3 – Acquisition~~

On July 8, 2015, the Company closed on the acquisition of Arkansas Power Electronics International, Inc. (APEI), a global leader in power modules and power electronics applications, pursuant to a merger agreement with APEI and certain shareholders of APEI, whereby the Company acquired all of the outstanding share capital of APEI in exchange for a base purchase price of $13.8 million, subject to certain adjustments. In addition, if certain goals are achieved over the subsequent two years, additional cash payments totaling up to $4.6 million may be made to the former APEI shareholders. Payments totaling $2.8 million were made to the former APEI shareholders in July 2016 based on achievement of the first year goals. Payments totaling $1.8 million were made to the former APEI shareholders in July 2017 based on achievement of the second year goals. In connection with this acquisition, APEI became a wholly owned subsidiary of the Company, renamed Cree Fayetteville, Inc. (Cree Fayetteville). Cree Fayetteville is not considered a significant subsidiary of the Company and its results from operations are reported as part of the Company's Wolfspeed segment.

~~The total purchase price for this acquisition was as follows (in thousands):~~



~~Cash consideration paid to shareholders~~		~~$13,797~~
~~Post closing adjustments~~	~~181~~
~~Contingent consideration~~	~~4,625~~
~~Total purchase price~~		~~$18,603~~

~~The purchase price for this acquisition has been allocated to the assets acquired and liabilities assumed based on their estimated fair values as follows (in thousands):~~



~~Tangible assets:~~
~~Cash and cash equivalents~~		~~$1,284~~
~~Accounts receivable~~	~~1,006~~
~~Inventories~~	~~143~~
~~Property and equipment~~	~~935~~
~~Other assets~~	~~270~~
~~Total tangible assets~~	~~3,638~~
~~Intangible assets:~~
~~Patents~~	40
~~Customer relationships~~	~~4,500~~
~~Developed technology~~	~~11,403~~
~~In-process research & development~~	~~7,565~~
~~Non-compete agreements~~	~~231~~
~~Goodwill~~	~~2,483~~
~~Total intangible assets~~	~~26,222~~
~~Liabilities assumed:~~
~~Accounts payable~~	55
~~Accrued expenses and liabilities~~	~~1,911~~
~~Other long-term liabilities~~	~~9,291~~
~~Total liabilities assumed~~	~~11,257~~
~~Net assets acquired~~		~~$18,603~~

~~The identifiable intangible assets acquired as a result of the acquisition will be amortized over their respective estimated useful lives as follows (in thousands, except for years):~~

Asset Amount Estimated Life in Years
Patents
$40
20
Customer relationships 4,500
4
Developed technology
11,403
10
In-process research and development¹
7,565
7
Non-compete agreements 231
3
Total identifiable intangible assets
$23,739

⁽¹⁾In-process research and development (IPR&D) is initially classified as indefinite-lived assets and tested for impairment at least annually or when indications of potential impairment exist. The IPR&D was completed in January 2016.

Goodwill largely consists of expansion of product offerings of power modules and power electronics applications, manufacturing and other synergies of the combined companies, and the value of the assembled workforce.

The assets, liabilities and operating results of APEI have been included in the Company's consolidated financial statements from the date of acquisition and are not significant to the Company as a whole.

Note 46 – Financial Statement Details

Accounts Receivable, net

~~The following table summarizes the components of accounts~~Accounts receivable, net ~~(in thousands):~~ consisted of the following:


(in millions of U.S. Dollars)	June 25, 2023	June 26, 2022
Billed trade receivables	$152.1	$148.0
Unbilled contract receivables	2.3	2.7
Royalties	1.1	0.7
	155.5	151.4

Allowance for bad debts	(0.7)	(1.2)
Accounts receivable, net	$154.8	$150.2

Table of Contents

June 25,
2017 June 26,
2016
Billed trade receivables
$205,516

$217,691
Unbilled contract receivables 912
2,135
206,428
219,826
Allowance for sales returns, discounts and other incentives (49,425 ) (48,710 )
Allowance for bad debts (8,611 ) (5,505 )
Accounts receivable, net
$148,392

$165,611

~~The following table summarizes the changes in the Company’s allowance for sales returns, discounts and other incentives (in thousands):~~

Fiscal Years Ended
June 25,
2017 June 26,
2016 June 28,
2015
Balance at beginning of period
$48,710

$58,094

$29,010
Current period claims (191,325 ) (163,523 ) (148,715 )
Provision for sales returns, discounts and other incentives 192,040
154,139
177,799
Balance at end of period
$49,425

$48,710

$58,094

~~The following table summarizes the changes~~Changes in the Company’s allowance for bad debts ~~(in thousands):~~were as follows:


										Fiscal Years Ended
	Fiscal Years Ended
	June 25, 2017			June 26, 2016		June 28, 2015
(in millions of U.S. Dollars)									(in millions of U.S. Dollars)	June 25, 2023	June 26, 2022	June 27, 2021
Balance at beginning of period		$5,505			$4,941		$2,761		Balance at beginning of period	$1.2	$0.8	$0.7
Current period provision	3,541			564		2,184
Current period provision change									Current period provision change	(0.5)	0.4	0.1
Write-offs, net of recoveries	(435		)	—		(4		)	Write-offs, net of recoveries	—	—	—
Balance at end of period		$8,611			$5,505		$4,941		Balance at end of period	$0.7	$1.2	$0.8

Table of certain positions. The restructuring activity ended in the second quarter of fiscal 2016. During fiscal 2016, the company realized $18.8 million in LED restructuring charges which were partially offset by a $1.1 million gain on the sale of long-lived assets related to the restructuring which were sold for a value in excess of their estimated net realizable value during fiscal 2016.

~~The following table summarizes the actual charges incurred (in thousands):~~

Contents

In the table above, the lease termination costs relate to the relocation of certain manufacturing operations from a leased facility in Huizhou, China to a company-owned facility which is also in Huizhou, China. In June 2015, the Company ceased using the leased facility and recognized a $0.5 million charge for the lease contract termination cost.

In the table above, the severance expense relates to a reduction in manufacturing and support positions. There is not a significant retention period for impacted employees and all severance was paid in fiscal 2016.

Note 1917 - Subsequent ~~Event~~Events

2033 CRD Notes

In July 2023, the Company entered into an Unsecured Customer Refundable Deposit Agreement (the CRD Agreement) with a customer, pursuant to which the customer will provide the Company up to $2 billion in unsecured deposits. Under the CRD Agreement, the Company received an initial deposit of $1 billion with additional deposits of up to an additional $1 billion at the Company's request, subject to certain conditions during the 2024 calendar year. Unless previously terminated in accordance with its terms, the CRD Agreement will mature on July 5, 2033, and the amount of the deposits, together with accrued and unpaid interest, will be required to be repaid to the customer at such time.

The deposits under the CRD Agreement will bear interest, payable on a semi-annual basis, at a base rate of 6% per annum, with the potential for an increased variable rate of either 10% or 15% in connection with any inability of the Company to satisfy supply targets under a ten-year wafer supply agreement with the same customer. The Company may voluntarily prepay the deposits, in whole or in part, at any time at a price equal to 106% of the principal amount of the deposits prepaid. Upon the occurrence of a change of control, the customer may require the Company to prepay the deposits in whole at a variable prepayment price depending on the day of prepayment.

RF Business Divestiture

On April 25, 2017, the Company announced that it intended to form a joint venture, to be called Cree Venture LED Company, Ltd. (Cree Venture LED), with San’an Optoelectronics Co., Ltd. (San’an) to produce and deliver to market high performing, mid-power lighting class LEDs in an exclusive arrangement to serve the expanding markets of North and South America, Europe and Japan, and serve China and the rest of the world on a non-exclusive basis.

~~Effective July 17, 2017,~~August 22, 2023, the Company entered into a ~~Shareholders Agreement~~definitive agreement (the RF Purchase Agreement) to sell its radio frequency product line (RF Products) to MACOM Technology Solutions Holdings, Inc. (MACOM) for approximately $75 million in cash, subject to a customary purchase price adjustment, and 711,528 shares of MACOM common stock (the Shares), valued at $50 million based on the 30 trading day trailing average closing price for MACOM’s common stock through August 21, 2023 (the RF Business Divestiture). The Company expects to close the transaction by the end of calendar 2023.

In connection with ~~San’an and Cree Venture LED pursuant~~the RF Business Divestiture, MACOM will assume control of Wolfspeed’s 100mm gallium nitride wafer fabrication facility in Research Triangle Park, North Carolina (the RTP Fab) approximately two years following the closing of the transaction (the Closing) to ~~which~~accommodate the Company’s relocation of certain production equipment (the RTP Fab Transfer). Prior to the RTP Fab Transfer, the Shares will be subject to restrictions on transfer. The Company will forfeit one-quarter of the Shares if the RTP Fab Transfer has not occurred by the fourth anniversary of the Closing.

The Company and ~~San’an funded their contributions to Cree Venture LED~~MACOM will also enter into certain ancillary and ~~agreed upon the management~~related agreements, including (i) an Intellectual Property Assignment and operation of Cree Venture LED. The Company contributed $5.1 million for a 51% ownership interest and San’an contributed $4.9 million for a 49% ownership interest. Cree Venture LED will have a five-member board of directors, three ofLicense Agreement, which will ~~be designated~~assign to MACOM certain intellectual property owned by the Company and ~~two of which will be designated~~its affiliates and license to MACOM certain additional intellectual property owned by ~~San’an.~~

In connection with forming Cree Venture LED and entering into the Shareholders Agreement, Cree Venture LED and San’an also entered into a manufacturing agreement pursuant to which San’an will supply Cree Venture LED with mid-power LED products, and Cree Venture LED and the Company, ~~entered into~~(ii) a ~~sales agency agreement~~Transition Services Agreement (RF TSA), pursuant to which the Company will beprovide MACOM certain limited transition services following the ~~independent sales representative~~Closing, (iii) a Master Supply Agreement, pursuant to which Wolfspeed will continue to operate the RTP Fab and supply MACOM with Epi-wafers and fabrication services between the date of ~~Cree Venture LED in~~ the ~~exclusive markets, among~~Closing and the date on which the RTP Fab Transfer is complete (RTP Fab Transfer Date), (iv) a Long-Term Epi Supply Agreement (LTA), pursuant to which MACOM will purchase from the Company Epi-wafers from the Closing until the fifth anniversary of the RTP Fab Transfer Date, (v) an Epi Research and Development Agreement, pursuant to which the Company will provide MACOM certain research and development activities and other ~~ancillary agreements~~technical manufacturing support services related to the ~~transaction.~~

~~The Company targets that Cree Venture LED will finish becoming fully established~~RF Business during the period between the Closing and ~~begin first product qualifications with customers by the end of calendar 2017.~~

~~Note 20 – Quarterly Results of Operations - Unaudited~~

~~The following is a summary~~expiration of the ~~Company’s consolidated quarterly results of operations for each~~LTA, (vi) a Real Estate License Agreement, which will allow MACOM to use certain portions of the ~~fiscal~~RTP Fab to conduct the RF Business between the Closing and the RTP Fab Transfer Date, and (vii) a Lease Agreement, which will allow MACOM to lease the premises of the RTP Fab for a period of 15 years ~~ended~~ ~~June 25, 2017~~ ~~and~~ ~~June 26, 2016~~ ~~(in thousands, except per share data):~~after the RTP Fab Transfer Date.

September 25,
2016 December 25, 2016 March 26, 2017 June 25,
2017 Fiscal Year 2017
Revenue, net
$371,231

$401,325

$341,505

$358,939

$1,473,000
Cost of revenue, net 261,302
260,759
255,429
260,938
1,038,428
Gross profit 109,929
140,566
86,076
98,001
434,572
Net loss 566
6,219
(99,013 ) (5,890 ) (98,118 )
Earnings (loss) per share:
Basic
$—

$0.06

($1.02 )
($0.06 )
($1.00 )
Diluted
$—

$0.06

($1.02 )
($0.06 )
($1.00 )

September 27,
2015 December 27,
2015 March 27,
2016 June 26,
2016 Fiscal Year 2016
Revenue, net
$425,489

$435,806

$366,919

$388,413

$1,616,627
Cost of revenue, net 294,916
301,361
257,886
275,390
1,129,553
Gross profit 130,573
134,445
109,033
113,023
487,074
Net (loss) income (24,489 ) 13,442
152
(10,641 ) (21,536 )
(Loss) earnings per share:
Basic
($0.24 )
$0.13

$—

($0.11 )
($0.21 )
Diluted
($0.24 )
$0.13

$—

($0.11 )
($0.21 )

Table of Contents

Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure

None.

Item 9A. Controls and Procedures

Disclosure Controls and Procedures

Our management, with the participation of our Chief Executive Officer and Chief Financial Officer, has evaluated the effectiveness of our disclosure controls and procedures (as such term is defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act) as of the end of the period covered by this Annual Report. Based on such evaluation, our Chief Executive Officer and Chief Financial Officer concluded that, as of the end of the period covered by this Annual Report, our disclosure controls and procedures are effective in that they provide reasonable assurances that the information we are required to disclose in the reports we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods required by the SEC’s rules and forms and that such information is accumulated and communicated to management, including our Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure.

Changes to Internal Control Over Financial Reporting

In the second quarter of fiscal 2023, we completed the initial phase of our new enterprise resource planning (ERP) system implementation and migrated our general ledger and consolidation process onto the new system. In connection with this implementation, we modified certain internal control processes and procedures. Following the implementation, these changes to our control environment were validated according to our established processes.

There have been no changes to our internal control over financial reporting, as such term is defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act, during the fourth quarter of fiscal ~~2017~~2023 that materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

In the course of our ongoing preparations for making management’s report on internal control over financial reporting as required by Section 404 of the Sarbanes-Oxley Act of 2002, from time to time we have identified areas in need of improvement and have taken remedial actions to strengthen the affected controls as appropriate. We make these and other changes to enhance the effectiveness of our internal controls over financial reporting, which do not have a material effect on our overall internal control.

We will continue to evaluate the effectiveness of our disclosure controls and procedures and internal control over financial reporting on an ongoing basis and will take action as appropriate.

Management’s Report on Internal Control Over Financial Reporting

Our management is responsible for establishing and maintaining adequate internal control over financial reporting, as such term is defined in Exchange Act Rules 13a-15(f) and 15d-15(f). Our internal control system was designed to provide reasonable assurance to our management and Board of Directors regarding the preparation and fair presentation of published financial statements.

Our internal control over financial reporting includes those policies and procedures that:


~~(i)~~	~~pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of our assets;~~


~~(ii)~~	provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that our receipts and expenditures are being made only in accordance with authorizations of our management and directors; and


~~(iii)~~	~~provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of our assets that could have a material effect on the financial statements.~~

(i)pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of our assets;

(ii)provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that our receipts and expenditures are being made only in accordance with authorizations of our management and directors; and

(iii)provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of our assets that could have a material effect on the financial statements.

All internal control systems, no matter how well designed, have inherent limitations. Therefore, even those systems determined to be effective can provide only reasonable assurance with respect to financial statement preparation and presentation.

Table of Contents

In making the assessment of internal control over financial reporting, our management used the criteria issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO) in Internal Control-Integrated Framework (2013 framework). Based on that assessment and those criteria, management has concluded that our internal control over financial reporting was effective as of June 25, ~~2017~~.2023.

The effectiveness of our internal control over financial reporting as of June 25, ~~2017~~2023 has been audited by PricewaterhouseCoopers LLP, an independent registered public accounting firm, as stated in their report in Item 8 of this Annual Report.

Item 9B.Other Information

Not applicable.

Item 9C.Disclosure Regarding Foreign Jurisdictions that Prevent Inspections

Not applicable.

Table of Contents

PART III

Certain information called for in Items 10, 11, 12, 13 and 14 is incorporated by reference from our definitive proxy statement relating to our annual meeting of shareholders, which will be filed with the SEC within 120 days after the end of fiscal ~~2017~~.2023.

Item 10.Directors, Executive Officers and Corporate Governance

Item 11.Executive Compensation

Item 12.Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters

Item 13.Certain Relationships and Related Transactions, and Director Independence

Item 14.Principal Accountant Fees and Services

Table of Contents

PART IV

Item 15.Exhibits and Financial Statement Schedules

(a)(1) and (2) The financial statements and reports of independent registered public accounting firm are filed as part of this Annual Report (see “Index to Consolidated Financial Statements” at Item 8). The financial statement schedules are not included in this item as they are either not applicable or are included as part of the consolidated financial statements.

(a)(3) The following exhibits have been or are being filed herewith and are numbered in accordance with Item 601 of Regulation S-K:

Incorporated by Reference

Exhibit No.

Description

Filed Herewith

Form

Exhibit

Filing Date

2.1^

Purchase Agreement, dated March 14, 2019, by and between Cree, Inc. and IDEAL Industries, Inc., as amended

8-K

2.1

5/16/2019

2.2^

Asset Purchase Agreement, dated October 18, 2020, between Cree, Inc., SMART Global Holdings, Inc. and Chili Acquisition, Inc., as amended

8-K

2.1

3/2/2021

3.1

Restated Articles of Incorporation, as amended

10-Q

3.1

10/28/2021

3.2

Amended and Restated Bylaws, dated January 23, 2023

10-Q

3.1

1/26/2023

4.1

Description of the Registered Securities

10-Q

4.1

10/28/2021

4.2

Indenture, dated as of April 21, 2020, between Cree, Inc. and U.S. Bank National Association

8-K

4.1

4/21/2020

4.3

Form of 1.75% Convertible Senior Note due 2026 (included in Exhibit 4.2)

8-K

4.2

4/21/2020

4.4

Indenture, dated as of February 3, 2022, between Wolfspeed, Inc. and U.S. Bank National Association

8-K

4.1

2/3/2022

4.5

Form of 0.25% Convertible Senior Note due 2028 (included in Exhibit 4.4)

8-K

4.2

2/3/2022

4.6

Indenture, dated as of November 21, 2022, between Wolfspeed, Inc. and U.S. Bank Trust Company, National Association

8-K

4.1

11/21/2022

4.7

Form of 1.875% Convertible Senior Note due 2029 (included in Exhibit 4.6)

8-K

4.2

11/21/2022

4.8

Form of certificate representing the Senior Secured Notes due 2030 (included as Exhibit A to Exhibit 10.27)

8-K

4.1

6/26/2023

4.9

Unsecured Customer Refundable Deposit Agreement, dated as of July 5, 2023, between Wolfspeed, Inc. and Renesas Electronics America Inc.

8-K

4.1

7/5/2023

10.1*

2013 Long-Term Incentive Compensation Plan, as amended ("2013 LTIP")

10-Q

10.3

10/28/2021

10.2*

Form of Restricted Stock Unit Award Agreement under the 2013 LTIP

10-Q

10.5

1/22/2014

10.3*

Form of Master Performance Unit Award Agreement under the 2013 LTIP

8-K

10.4

8/29/2014

10.4*

Form of Performance Share Award Agreement - Section 16 Officer under the 2013 LTIP

10-Q

10.6

10/21/2015

10.5*

Form of Stock Unit Award Agreement (Performance-Based) under the 2013 LTIP

10-K

10.41

8/20/2018

10.6*

Form of Stock Unit Award Agreement (Time-Based) under the 2013 LTIP

10-K

10.42

8/20/2018

10.7*

Form of Performance Share Award Agreement for Gregg A. Lowe

8-K

10.1

9/8/2020

10.8*

Form of Restricted Stock Unit Award Agreement under the 2013 LTIP for Gregg Lowe

10-Q

10.4

10/28/2021

10.9*

Form of Restricted Stock Unit Award Agreement under the 2013 LTIP for Executive Officers other than Gregg Lowe

10-Q

10.5

10/28/2021

10.10*

Form of Restricted Stock Unit Award Agreement under the 2013 LTIP for Non-Employee Directors

10-Q

10.6

10/28/2021

Table of Contents

10.11*

Form of Performance Share Award Agreement under the 2013 LTIP for Gregg Lowe

10-Q

10.7

10/28/2021

10.12*

Form of Performance Share Award Agreement under the 2013 LTIP for Executive Officers other than Gregg Lowe

10-Q

10.8

10/28/2021

10.13*

Form of Performance Share Award Agreement under the 2013 LTIP for Gregg Lowe (fiscal 2024 award)

10.14*

Form of Performance Share Award Agreement under the 2013 LTIP for Executive Officers other than Gregg Lowe (fiscal 2024 award)

10.15*

Notice of Grant to Gregg A. Lowe, dated August 29, 2022

8-K

10.1

8/31/2022

10.16*

Notice of Grant to Neill P. Reynolds, dated August 29, 2022

8-K

10.2

8/31/2022

10.17*

2020 Employee Stock Purchase Plan

10-Q

10.9

10/28/2021

10.18*

Change in Control Agreement for Chief Executive Officer between Cree, Inc. and Gregg A. Lowe, dated September 22, 2017

8-K

10.1

9/28/2017

10.19*

First Amendment to Change in Control Agreement (for Chief Executive Officer), dated May 4, 2018

8-K

10.3

5/4/2018

10.20*

Cree Severance Plan - Senior Leadership Team, Plan Document and Summary Plan Description, effective as of April 30, 2018

8-K

10.1

5/4/2018

10.21*

Form of Participation Agreement Under Cree Severance Plan - Senior Leadership Team

8-K

10.2

5/4/2018

10.22*

Schedule of Compensation of Non-Employee Directors

8-K

10.1

1/25/2023

10.23*

Non-Employee Director Stock Compensation and Deferral Program, as amended and restated

10-Q

10.10

10/28/2021

10.24*

Form of Cree, Inc. Indemnification Agreement for Directors and Officers

8-K

10.1

10/29/2010

10.25

Form of Confirmation of Call Option Transactions related to 0.25% Convertible Senior Notes due 2028

8-K

10.1

2/3/2022

10.26

Form of Confirmation of Call Option Transactions related to 1.875% Convertible Senior Notes due 2029

8-K

10.1

11/21/2022

10.27^

Indenture, dated as of June 23, 2023, by and between Wolfspeed, Inc. and U.S. Bank Trust Company, National Association, as trustee and collateral agent.

8-K

10.1

6/26/2023

21.1

Subsidiaries of the Company

23.1

Consent of PricewaterhouseCoopers LLP

31.1

Certification 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

31.2

Certification 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

32.1

Certification 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

32.2

Certification 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

101

The following materials from Wolfspeed, Inc.’s Annual Report on Form 10-K for the fiscal year ended June 25, 2023 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 Statements of Cash Flows; (v) Consolidated Statements of Shareholders' Equity; and (vi) Notes to Consolidated Financial Statements

Table of Contents

~~EXHIBIT NO.~~104

~~DESCRIPTION~~

~~2.1~~

~~Asset Purchase Agreement, dated as of July 13, 2016, by and among Infineon Technologies AG, Cree,~~The cover page from the Wolfspeed, Inc.~~, and Cree Sweden AB (incorporated by reference to Exhibit 2.1 of the Company's Current Report on Form 8-K/A, dated July 13, 2016, filed with the Securities and Exchange Commission on July 18, 2016)~~

~~3.1~~

Articles of Incorporation, as amended (incorporated herein by reference to Exhibit 3.1 to the Company’s Annual Report on Form 10-K for the fiscal year ended June 30, 2002, as filed with the Securities and Exchange Commission on August 19, 2002)

~~3.2~~

Bylaws, as amended and restated (incorporated herein by reference to Exhibit 3.1 to the Company’s Current Report on Form 8-K, dated January 27, 2015, filed with the Securities and Exchange Commission on January 28, 2015)

~~4.1~~

~~Specimen Common Stock Certificate~~

10.1*

2004 Long-Term Incentive Compensation Plan, as amended (incorporated herein by reference to Exhibit 10.1 to the Company's Current Report on Form 8-K, dated October 23, 2012, as filed with the Securities and Exchange Commission on October 25, 2012)

10.2*

Addendum to Form of Master Stock Option Award Agreement Terms and Conditions for Grants of Nonqualified Stock Options to Non-Employee Directors (incorporated herein by reference to Exhibit 10.5 to the Company’s Quarterly Report on Form 10-Q for the quarterly period ended September 27, 2009, as filed with the Securities and Exchange Commission on October 21, 2009)

10.3*

Form of Nonqualified Stock Option Award Agreement for Non-Employee Directors (incorporated herein by reference to Exhibit 10.3 to the Company's Quarterly Report on Form 10-Q for the quarterly period ended September 23, 2012, as filed with the Securities and Exchange Commission on October 17, 2012)

10.4*

Form of Master Stock Option Award Agreement for Grants of Nonqualified Stock Options (incorporated herein by reference to Exhibit 10.4 to the Company’s Quarterly Report on Form 10-Q for the quarterly period ended September 24, 2006, as filed with the Securities and Exchange Commission on November 2, 2006)

10.5*

Form of Master Stock Option Award Agreement for Grants of Nonqualified Stock Options (incorporated herein by reference to Exhibit 10.4 to the Company’s Quarterly Report on Form 10-Q for the quarterly period ended December 26, 2010, as filed with the Securities and Exchange Commission on January 19, 2011)

10.6*

Form of Nonqualified Stock Option Agreement (incorporated herein by reference to Exhibit 10.4 to the Company's Quarterly Report on Form 10-Q for the quarterly period ended September 23, 2012, as filed with the Securities and Exchange Commission on October 17, 2012)

10.7*

Form of Master Restricted Stock Award Agreement (incorporated herein by reference to Exhibit 10.5 to the Company’s Quarterly Report on Form 10-Q for the quarterly period ended September 24, 2006, as filed with the Securities and Exchange Commission on November 2, 2006)

10.8*

Form of Restricted Stock Award Agreement (incorporated herein by reference to Exhibit 10.5 to the Company's Quarterly Report on Form 10-Q for the quarterly period ended September 23, 2012, as filed with the Securities and Exchange Commission on October 17, 2012)

10.9*

Non-Employee Director Stock Compensation and Deferral Program (incorporated herein by reference to Exhibit 10.3 to the Company’s Quarterly Report on Form 10-Q for the quarterly period ended September 27, 2009, as filed with the Securities and Exchange Commission on October 21, 2009)



10.10*		Amendment One to Non-Employee Director Stock Compensation and Deferral Program (incorporated herein by reference to Exhibit 10.3 to the Company’s Quarterly Report on Form 10-Q for the quarterly period ended December 26, 2010, as filed with the Securities and Exchange Commission on January 19, 2011)

10.11*		Cree, Inc. Severance Plan for Section 16 Officers, as amended (incorporated herein by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K, dated October 28, 2013, as filed with the Securities and Exchange Commission on October 31, 2013)

10.12*		Change in Control Agreement for Chief Executive Officer, effective December 17, 2012, between Cree, Inc. and Charles M. Swoboda (incorporated herein by reference to Exhibit 10.1 to the Company's Current Report on Form 8-K, dated December 17, 2012, as filed with the Securities and Exchange Commission on December 20, 2012)

10.13*		Form of Cree, Inc. Change in Control Agreement for Section 16 Officers other than the Chief Executive Officer (incorporated herein by reference to Exhibit 10.2 to the Company's Current Report on Form 8-K, dated December 17, 2012, as filed with the Securities and Exchange Commission on December 20, 2012)

10.14*		Form of Cree, Inc. Indemnification Agreement for Directors and Officers (incorporated herein by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K, dated October 25, 2010, as filed with the Securities and Exchange Commission on October 29, 2010)

10.15*		Form of Master Performance Unit Award Agreement (incorporated herein by reference to Exhibit 10.6 to the Company's Current Report on Form 8-K, dated August 30, 2013, as filed with the Securities and Exchange Commission on September 5, 2013)

10.16*		Form of Stock Unit Award Agreement (Time-Based) (incorporated herein by reference to Exhibit 10.7 to the Company's Quarterly Report on Form 10-Q for the quarterly period ended September 29, 2013, as filed with the Securities and Exchange Commission on October 23, 2013)

10.17*		Form of Stock Unit Award Agreement (Performance-Based) (incorporated herein by reference to Exhibit 10.8 to the Company's Quarterly Report on Form 10-Q for the quarterly period ended September 29, 2013, as filed with the Securities and Exchange Commission on October 23, 2013)

10.18*		2005 Employee Stock Purchase Plan, as amended (incorporated herein by reference to Exhibit 10.2 to the Company's Current Report on Form 8-K, dated October 29, 2013, as filed with the Securities and Exchange Commission on October 29, 2013)

10.19*		Form of Nonqualified Stock Option Award Agreement (incorporated herein by reference to Exhibit 10.4 to the Company's Quarterly Report on Form 10-Q for the quarterly period ended December 29, 2013, as filed with the Securities and Exchange Commission on January 22, 2014)

10.20*		Form of Restricted Stock Unit Award Agreement (incorporated herein by reference to Exhibit 10.5 to the Company's Quarterly Report on Form 10-Q for the quarterly period ended December 29, 2013, as filed with the Securities and Exchange Commission on January 22, 2014)

10.21*		Form of Master Performance Unit Award Agreement (incorporated herein by reference to Exhibit 10.4 of the Company’s Current Report on Form 8-K, dated August 25, 2014, filed with the Securities and Exchange Commission on August 29, 2014)

10.22*		2013 Long-Term Incentive Compensation Plan, as amended (incorporated herein by reference to Exhibit 10.1 of the Company's Current Report on Form 8-K, dated October 25, 2016, filed with the Securities and Exchange Commission on October 28, 2016)

~~10.23~~		Credit Agreement, dated January 9, 2015, by and between Cree, Inc., Wells Fargo Bank, National Association, as administrative agent and lender, E-conolight LLC, a domestic subsidiary of the Company, as guarantor, and the other lenders party thereto (incorporated herein by reference to Exhibit 10.1 of the Company's Current Report on Form 8-K, dated January 9, 2015, filed with the Securities and Exchange Commission on January 12, 2015)

~~10.24~~		Credit Agreement Consent, dated as of July 13, 2016, by and between Cree, Inc., Wells Fargo Bank, National Association, as administrative agent and lender, E-conolight LLC, a domestic subsidiary of the Company, as guarantor, and the other lenders party to the Credit Agreement (incorporated herein by reference to Exhibit 10.2 to the Company’s Quarterly Report on Form 10-Q for the quarterly period ended September 25, 2016, as filed with the Securities and Exchange Commission on October 19, 2016)

10.25*		Notice of Grant to Charles M. Swoboda (incorporated herein by reference to Exhibit 10.1 of the Company’s Current Report on Form 8-K, dated August 23, 2016, filed with the Securities and Exchange Commission on August 25, 2016)

10.26*

Notice of Grant to Michael E. McDevitt (incorporated herein by reference to Exhibit 10.2 of the Company’s Current Report on Form 8-K, dated August 23, 2016, filed with the Securities and Exchange Commission on August 25, 2016)

10.27*

Management Incentive Compensation Plan, as amended and restated (incorporated herein by reference to Exhibit 10.4 to the Company's Current Report on Form 8-K, dated August 23, 2016, as filed with the Securities and Exchange Commission on August 25, 2016)

10.28*

Schedule of Compensation for Non-Employee Directors (incorporated herein by reference to Exhibit 10.5 to the Company's Quarterly Report on Form 10-Q for the quarterly period ended September 27, 2015, as filed with the Securities and Exchange Commission on October 21, 2015)

10.29*

Form of Performance Share Award Agreement - Section 16 Officer (incorporated herein by reference to Exhibit 10.6 to the Company’s Quarterly Report on Form 10-Q for the quarterly period ended September 27, 2015, as filed with the Securities and Exchange Commission on October 21, 2015)

10.30*

Change in Control Agreement for Section 16 Officers other than the Chief Executive Officer, dated July 13, 2016, by and between Cree, Inc. and Franco Plastina (incorporated by reference to Exhibit 10.1 of the Company’s Current Report on Form 8-K, dated July 13, 2016, filed with the Securities and Exchange Commission on July 18, 2016)

~~10.31~~

Termination Agreement, dated as of March 6, 2017, by and between Cree, Inc. and Infineon Technologies AG (incorporated by reference to Exhibit 10.1 of the Company’s Current Report on Form 8-K, March 6, 2017, filed with the Securities and Exchange Commission on March 7, 2017)

10.32*

Separation, General Release and Consulting Agreement, dated May 18, 2017, between Cree, Inc. and Charles M. Swoboda (incorporated herein by reference to Exhibit 10.1 to the Company's Current Report on Form 8-K, dated May 18, 2017, as filed with the Securities and Exchange Commission on May 24, 2017)

~~21.1~~

~~Subsidiaries of the Company~~

~~23.1~~

~~Consent of PricewaterhouseCoopers LLP~~

~~23.2~~

~~Consent of KPMG~~

~~31.1~~

~~Certification 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~~

~~31.2~~

~~Certification 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~~

~~32.1~~

~~Certification 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~~

~~32.2~~

~~Certification 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~~

99.1**

~~Audited financial statements of Lextar Electronics Corporation as of and for the years ended December 31, 2015 and 2014.~~

~~101~~

~~The following materials from Cree, Inc.’s~~'s Annual Report on Form 10-K for the fiscal year ended June 25, ~~2017~~2023 formatted in Inline XBRL (eXtensible Business Reporting Language): (i) Consolidated Balance Sheets; (ii) Consolidated Statements of Loss; (iii) Consolidated Statements of Comprehensive Loss; (iv) Consolidated Statements of Cash Flows; (v) Consolidated Statements of Shareholders' Equity; and (vi) Notes to Consolidated Financial Statements(included in Exhibit 101)



*		Management contract or compensatory plan or arrangement
^
**	~~The financial statements as~~Portions of ~~and for the years ended December 31, 2015 and 2014 of Lextar Electronics Corporation, prepared by Lextar and audited by its independent public accounting firm,~~ ~~are included in~~ this ~~Annual Report~~exhibit have been omitted pursuant to Rule ~~3-09~~601(b)(2) of Regulation ~~S-X.~~ S-K. The omitted information is not material and is the type of information that the Company customarily and actually treats as private and confidential.

Item 16.Form 10-K Summary

None.

Table of Contents

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.


WOLFSPEED, INC.
Date:		August 23, 2023

~~CREE, INC.~~
~~Date:~~	~~August 23, 2017~~

By:	/s/ C~~HARLES~~ ~~M. SWOBODA~~ Gregg A. Lowe
		~~Charles M. Swoboda~~Gregg A. Lowe
		~~Chairman,~~ Chief Executive Officer and President
		(Principal Executive Officer)

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.

Signature

Title

Date

/s/ GREGG A. LOWE

Chief Executive Officer and President

August 23, 2023

Gregg A. Lowe

(Principal Executive Officer)

~~Signature~~

~~Title~~

~~Date~~

/s/ C~~HARLES~~ ~~M. SWOBODA~~ NEILL P.REYNOLDS

~~Chairman, Chief Executive Officer and President~~

~~August 23, 2017~~

~~Charles M. Swoboda~~

~~/s/ MICHAEL~~ ~~E. M~~CD~~EVITT~~

Executive Vice President and Chief Financial Officer

August 23, ~~2017~~2023

~~Michael E. McDevitt~~Neill P. Reynolds

(Principal Financial and ~~Chief~~Principal Accounting Officer)

/s/ C~~LYDE~~DARREN R. H~~OSEIN~~ JACKSON

Chairman and Director

August 23, ~~2017~~2023

~~Clyde R. Hosein~~

~~/s/ ROBERT~~ ~~A. INGRAM~~

~~Director~~

~~August 23, 2017~~

~~Robert A. Ingram~~

~~/s/ DARREN~~ ~~R. JACKSON~~

~~Director~~

~~August 23, 2017~~

Darren R. Jackson

~~/s/ C. HOWARD~~ NYE

~~Director~~

~~August 23, 2017~~

~~C. Howard Nye~~

~~/s/ JOHN~~ ~~B. REPLOGLE~~

~~Director~~

~~August 23, 2017~~

~~John B. Replogle~~

~~/s/ THOMAS~~ ~~H. WERNER~~

~~Director~~

~~August 23, 2017~~

~~Thomas H. Werner~~

~~/s/ ANNE~~ ~~C. WHITAKER~~

~~Director~~

~~August 23, 2017~~

~~Anne C. Whitaker~~

~~EXHIBIT INDEX~~

~~EXHIBIT NO.~~

~~DESCRIPTION~~

/s/ GLENDA DORCHAK

Director

August 23, 2023

~~2.1~~Glenda Dorchak

Asset Purchase Agreement, dated as of July 13, 2016, by and among Infineon Technologies AG, Cree, Inc., and Cree Sweden AB (incorporated by reference to Exhibit 2.1 of the Company's Current Report on Form 8-K/A, dated July 13, 2016, filed with the Securities and Exchange Commission on July 18, 2016)

~~3.1~~

~~3.2~~

~~4.1~~

~~Specimen Common Stock Certificate~~

10.1*

10.2*

10.3*

10.4*

10.5*

Form of Master Stock Option Award Agreement for Grants of Nonqualified Stock Options (incorporated herein by reference to Exhibit 10.4 to the Company’s Quarterly Report on Form 10-Q for the quarterly period ended December 26, 2010, as filed with the Securities and Exchange Commission on January 19, 2011)

10.6*

10.7*

10.8*

10.9*

10.10*

Amendment One to Non-Employee Director Stock Compensation and Deferral Program (incorporated herein by reference to Exhibit 10.3 to the Company’s Quarterly Report on Form 10-Q for the quarterly period ended December 26, 2010, as filed with the Securities and Exchange Commission on January 19, 2011)

10.11*

Cree, Inc. Severance Plan for Section 16 Officers, as amended (incorporated herein by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K, dated October 28, 2013, as filed with the Securities and Exchange Commission on October 31, 2013)

10.12*

Change in Control Agreement for Chief Executive Officer, effective December 17, 2012, between Cree, Inc. and Charles M. Swoboda (incorporated herein by reference to Exhibit 10.1 to the Company's Current Report on Form 8-K, dated December 17, 2012, as filed with the Securities and Exchange Commission on December 20, 2012)

10.13*

Form of Cree, Inc. Change in Control Agreement for Section 16 Officers other than the Chief Executive Officer (incorporated herein by reference to Exhibit 10.2 to the Company's Current Report on Form 8-K, dated December 17, 2012, as filed with the Securities and Exchange Commission on December 20, 2012)

10.14*

Form of Cree, Inc. Indemnification Agreement for Directors and Officers (incorporated herein by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K, dated October 25, 2010, as filed with the Securities and Exchange Commission on October 29, 2010)

/s/ JOHN C. HODGE

Director

August 23, 2023

10.15*John C. Hodge

Form of Master Performance Unit Award Agreement (incorporated herein by reference to Exhibit 10.6 to the Company's Current Report on Form 8-K, dated August 30, 2013, as filed with the Securities and Exchange Commission on September 5, 2013)

10.16*

Form of Stock Unit Award Agreement (Time-Based) (incorporated herein by reference to Exhibit 10.7 to the Company's Quarterly Report on Form 10-Q for the quarterly period ended September 29, 2013, as filed with the Securities and Exchange Commission on October 23, 2013)

10.17*

Form of Stock Unit Award Agreement (Performance-Based) (incorporated herein by reference to Exhibit 10.8 to the Company's Quarterly Report on Form 10-Q for the quarterly period ended September 29, 2013, as filed with the Securities and Exchange Commission on October 23, 2013)

10.18*

2005 Employee Stock Purchase Plan, as amended (incorporated herein by reference to Exhibit 10.2 to the Company's Current Report on Form 8-K, dated October 29, 2013, as filed with the Securities and Exchange Commission on October 29, 2013)

10.19*

Form of Nonqualified Stock Option Award Agreement (incorporated herein by reference to Exhibit 10.4 to the Company's Quarterly Report on Form 10-Q for the quarterly period ended December 29, 2013, as filed with the Securities and Exchange Commission on January 22, 2014)

10.20*

Form of Restricted Stock Unit Award Agreement (incorporated herein by reference to Exhibit 10.5 to the Company's Quarterly Report on Form 10-Q for the quarterly period ended December 29, 2013, as filed with the Securities and Exchange Commission on January 22, 2014)

10.21*

Form of Master Performance Unit Award Agreement (incorporated herein by reference to Exhibit 10.4 of the Company’s Current Report on Form 8-K, dated August 25, 2014, filed with the Securities and Exchange Commission on August 29, 2014)

10.22*

2013 Long-Term Incentive Compensation Plan, as amended (incorporated herein by reference to Exhibit 10.1 of the Company's Current Report on Form 8-K, dated October 25, 2016, filed with the Securities and Exchange Commission on October 28, 2016)

~~10.23~~

Credit Agreement, dated January 9, 2015, by and between Cree, Inc., Wells Fargo Bank, National Association, as administrative agent and lender, E-conolight LLC, a domestic subsidiary of the Company, as guarantor, and the other lenders party thereto (incorporated herein by reference to Exhibit 10.1 of the Company's Current Report on Form 8-K, dated January 9, 2015, filed with the Securities and Exchange Commission on January 12, 2015)

~~10.24~~

Credit Agreement Consent, dated as of July 13, 2016, by and between Cree, Inc., Wells Fargo Bank, National Association, as administrative agent and lender, E-conolight LLC, a domestic subsidiary of the Company, as guarantor, and the other lenders party to the Credit Agreement (incorporated herein by reference to Exhibit 10.2 to the Company’s Quarterly Report on Form 10-Q for the quarterly period ended September 25, 2016, as filed with the Securities and Exchange Commission on October 19, 2016)

10.25*

Notice of Grant to Charles M. Swoboda (incorporated herein by reference to Exhibit 10.1 of the Company’s Current Report on Form 8-K, dated August 23, 2016, filed with the Securities and Exchange Commission on August 25, 2016)

10.26*

10.27*

10.28*

10.29*

10.30*

~~10.31~~

/s/ CLYDE R. HOSEIN

August 23, 2023

Clyde R. Hosein

10.32*

~~21.1~~

~~Subsidiaries of the Company~~

~~23.1~~

~~Consent of PricewaterhouseCoopers LLP~~

~~23.2~~

~~Consent of KPMG~~

~~31.1~~

~~Certification 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~~

~~31.2~~

~~Certification 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~~

~~32.1~~

~~Certification 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~~

~~32.2~~

~~Certification 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~~

99.1**

~~Audited financial statements of Lextar Electronics Corporation as of and for the years ended December 31, 2015 and 2014.~~

~~101~~

The following materials from Cree, Inc.’s Annual Report on Form 10-K for the fiscal year ended June 25, 2017 formatted in XBRL (eXtensible Business Reporting Language): (i) Consolidated Balance Sheets; (ii) Consolidated Statements of Loss; (iii) Consolidated Statements of Comprehensive Loss; (iv) Consolidated Statements of Cash Flows; (v) Consolidated Statements of Shareholders' Equity; and (vi) Notes to Consolidated Financial Statements

~~Management contract or compensatory plan~~

/s/ DUY-LOAN T. LE

Director

August 23, 2023

Duy-Loan T. Le

~~The financial statements as of and for the years ended December 31, 2015 and 2014 of Lextar Electronics Corporation, prepared by Lextar and audited by its independent public accounting firm,~~ ~~are included in this Annual Report pursuant to Rule 3-09 of Regulation S-X.~~/s/ JOHN B. REPLOGLE

Director

August 23, 2023

John B. Replogle

/s/ MARVIN A. RILEY

Director

August 23, 2023

Marvin A. Riley

/s/ STACY J. SMITH

Director

August 23, 2023

Stacy J. Smith

/s/ THOMAS H. WERNER

Director

August 23, 2023

Thomas H. Werner



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
Durham	North Carolina
(Address of principal executive offices)		(Zip Code)



Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common Stock, $0.00125 par value	WOLF	~~The NASDAQ~~New York Stock ~~Market LLC~~Exchange



Large accelerated filer			ý☒		Accelerated filer		¨☐

Non-accelerated filer	¨ ~~(Do not check if a smaller reporting company)~~ ☐			Smaller reporting company		¨☐

		Emerging growth company	¨ ☐



		~~Page~~

Report of Independent Registered Public Accounting Firm (PCAOB ID 238)		5147

Consolidated Balance Sheets as of June 25, ~~2017~~2023 and June 26, ~~2016~~2022	5249

Consolidated Statements of ~~Loss~~Operations for the years ended June 25, ~~2017,~~2023, June 26, ~~2016~~2022 and June ~~28, 2015~~27, 2021	5350

Consolidated Statements of Comprehensive Loss for the years ended June 25, ~~2017,~~2023, June 26, ~~2016~~2022 and June ~~28, 2015~~27, 2021	5451

Consolidated Statements of Cash Flows for the years ended June 25, ~~2017,~~2023, June 26, ~~2016~~2022 and June ~~28, 2015~~27, 2021	5552

Consolidated Statements of Shareholders’ Equity for the years ended June 25, ~~2017,~~2023, June 26, ~~2016~~2022 and June ~~28, 2015~~27, 2021	5653

Notes to Consolidated Financial Statements	5754


	June 25, 2023	June 26, 2022
in millions of U.S. Dollars, except share data in thousands
Assets
Current assets:
Cash and cash equivalents	$1,757.0	$449.5
Short-term investments	1,197.9	749.3
Total cash, cash equivalents and short-term investments	2,954.9	1,198.8
Accounts receivable, net	154.8	150.2
Inventories	327.5	227.0
Income taxes receivable	0.8	1.3

Prepaid expenses	36.8	32.1
Other current assets	131.7	151.4
Current assets held for sale	—	1.6

Total current assets	3,606.5	1,762.4
Property and equipment, net	2,191.4	1,481.1
Goodwill	359.2	359.2
Intangible assets, net	115.9	125.4
Long-term receivables	2.6	104.7

Deferred tax assets	1.2	1.0
Other assets	309.9	83.7

Total assets	$6,586.7	$3,917.5

Liabilities and Shareholders' Equity
Current liabilities:
Accounts payable and accrued expenses	$536.9	$307.7
Accrued contract liabilities	43.0	37.0
Income taxes payable	9.6	11.6
Finance lease liabilities	0.5	0.5
Other current liabilities	37.9	31.7

Total current liabilities	627.9	388.5
Long-term liabilities:
Long-term debt	1,149.5	—
Convertible notes, net	3,025.6	1,021.6
Deferred tax liabilities	3.9	3.2
Finance lease liabilities - long-term	9.2	9.6
Other long-term liabilities	148.7	55.3

Total long-term liabilities	4,336.9	1,089.7
Commitments and contingencies
Shareholders’ equity:
Preferred stock, par value $0.01; 3,000 shares authorized at June 25, 2023 and June 26, 2022; none issued and outstanding	—	—
Common stock, par value $0.00125; 200,000 shares authorized at June 25, 2023 and June 26, 2022; 124,794 and 123,795 shares issued and outstanding at June 25, 2023 and June 26, 2022, respectively	0.2	0.2
Additional paid-in-capital	3,711.0	4,228.4
Accumulated other comprehensive loss	(25.1)	(25.3)
Accumulated deficit	(2,064.2)	(1,764.0)
Total shareholders’ equity	1,621.9	2,439.3


Total liabilities and shareholders’ equity	$6,586.7	$3,917.5



ý☒	ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
	For the fiscal year ended	June 25, ~~2017~~2023



¨☐			TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
			For the transition period from to



Part I
Item 1.			Business			4
Item 1A.			Risk Factors			10
Item 1B.			Unresolved Staff Comments			26
Item 2.			Properties			27
Item 3.			Legal Proceedings			27
Item 4.			Mine Safety Disclosures			27

Part II						~~Page~~
~~Part I~~
Item 1.	~~Business~~5.	5

~~Item 1A.~~	~~Risk Factors~~	11

~~Item 1B.~~	~~Unresolved Staff Comments~~	25

~~Item 2.~~	~~Properties~~	26

~~Item 3.~~	~~Legal Proceedings~~	26

~~Item 4.~~	~~Mine Safety Disclosures~~	26

~~Part II~~
~~Item 5.~~	Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities	2728

Item 6.	~~Selected Financial Data~~	Reserved			29

Item 7.	Management’s Discussion and Analysis of Financial Condition and Results of Operations			30

Item 7A.	Quantitative and Qualitative Disclosures About Market Risk			4945

Item 8.	Financial Statements and Supplementary Data			5046

Item 9.	Changes in and Disagreements with Accountants on Accounting and Financial Disclosure			9093

Item 9A.	Controls and Procedures			9093

Item 9B.	Other Information			9194
Item 9C.			Disclosure Regarding Foreign Jurisdictions that Prevent Inspections			94
~~Part III~~
Part III
Item 10.			Directors, Executive Officers and Corporate Governance			9295

Item 11.	Executive Compensation			9295

Item 12.	Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters			9295

Item 13.	Certain Relationships and Related Transactions, and Director Independence			9295

Item 14.	Principal Accountant Fees and Services			9295

PART IV
Item 15.			Exhibits and Financial Statement Schedules			9396
Item 16.			Form 10-K Summary			98
~~SIGNATURES~~			96



		Size (approximate gross square footage)
Location	Segment Utilization¹	Total	Production	Facility Services and Warehousing	Administrative Function	Housing / Other
Owned Facilities
Durham, NC	All	966,844	536,169	83,860	346,815	—
Research Triangle Park, NC	3	203,995	90,613	62,855	50,527	—
Racine, WI	1	802,845	160,000	418,000	224,845	—
Huizhou, China	2	823,951	332,271	116,568	41,764	333,348
Total owned		2,797,635	1,119,053	681,283	663,951	333,348

Leased Facilities
Durham, NC	1	189,430	15,200	167,584	6,646	—
Laredo, TX	1	100,545	—	97,545	3,000	—
Goleta, CA	1,2	25,623	—	1,882	23,741	—
Yorkville, WI	1	79,016	—	77,316	1,700	—
Pleasant Prairie, WI	1	147,877	—	145,477	2,400	—
Fayetteville, AR	3	26,265	10,956	—	15,309
Sesto Fiorentino, Italy	1,2	63,670	20,672	24,998	18,000	—
Hong Kong	All	38,913	—	8,958	29,955	—
Misc. sales and support offices	All	66,189	—	15,477	50,712	—
Total leased		737,528	46,828	539,237	151,463	—

Total gross square footage		3,535,163	1,165,881	1,220,520	815,414	333,348



	Fiscal 2017				Fiscal 2016
	High		Low		High		Low
First Quarter		$28.98		$23.19		$27.56		$23.95
Second Quarter	27.58		21.12		28.16		22.12
Third Quarter	28.83		25.56		32.44		24.07
Fourth Quarter	27.24		21.70		30.14		22.43



	6/24/2012		6/30/2013		6/29/2014		6/28/2015		6/26/2016		6/25/2017
Cree, Inc.		$100.00		$261.06		$198.28		$110.43		$94.85		$100.60
NASDAQ Composite Index	100.00		119.38		156.20		182.53		167.12		225.01
NASDAQ Electronic Components Index	100.00		118.23		150.86		166.70		163.71		232.96



	Fiscal Years Ended
	June 25, 2017					June 26, 2016					June 28, 2015
	Dollars			% of Revenue		Dollars			% of Revenue		Dollars			% of Revenue
Revenue, net		$1,473,000		100	%		$1,616,627		100	%		$1,632,505		100	%
Cost of revenue, net	1,038,428			70	%	1,129,553			70	%	1,158,586			71	%
Gross profit	434,572			30	%	487,074			30	%	473,919			29	%
Research and development	158,549			11	%	168,848			10	%	182,797			11	%
Sales, general and administrative	277,175			19	%	283,052			18	%	290,730			18	%
Amortization or impairment of acquisition-related intangibles	27,499			2	%	28,732			2	%	26,220			2	%
Loss on disposal or impairment of long-lived assets	2,521			0	%	16,913			1	%	47,722			3	%
Wolfspeed transaction termination fee	(12,500		)	(1	)%	—			—	%	—			—	%
Operating loss	(18,672		)	(1	)%	(10,471		)	(1	)%	(73,550		)	(5	)%
Non-operating income (expense), net	14,008			1	%	(13,035		)	(1	)%	(10,389		)	(1	)%
Loss before income taxes	(4,664		)	—	%	(23,506		)	(1	)%	(83,939		)	(5	)%
Income tax (benefit) expense	93,454			6	%	(1,970		)	—	%	(19,247		)	(1	)%
Net loss		($98,118	)	(7	)%		($21,536	)	(1	)%		($64,692	)	(4	)%
Basic loss per share		($1.00	)				($0.21	)				($0.57	)
Diluted loss per share		($1.00	)				($0.21	)				($0.57	)



Capacity and overhead cost reductions	Amounts incurred during fiscal year 2015		Amounts incurred during fiscal year 2016		Cumulative amounts incurred through fiscal year 2016		Affected Line Item in the Consolidated Statements of Loss
Loss on disposal or impairment of long-lived assets		$42,716		$15,506		$58,222	Loss on disposal or impairment of long-lived assets
Severance expense	2,019		264		2,283		Sales, general and administrative expenses
Lease termination and facility consolidation costs	1,246		3,079		4,325		Sales, general and administrative expenses
Increase in channel inventory reserves	26,479		—		26,479		Revenue, net
Increase in inventory reserves	11,091		—		11,091		Cost of revenue, net
Total restructuring charges		$83,551		$18,849		$102,400



			Payments Due by Period
	Total		Less than One Year		One to Three Years		Three to Five Years		More Than Five Years
Operating lease obligations		$14,462		$4,905		$6,256		$2,042		$1,259
Purchase obligations	124,733		111,576		4,374		4,058		4,725
Long-term debt	145,000		—		145,000		—		—
Interest payments on long-term debt¹	11,012		3,031		6,062		1,919		—
Other long-term liabilities²	—		—		—		—		—
Total contractual obligations		$295,207		$119,512		$161,692		$8,019		$5,984



	Three Months Ended
	June 25, 2017		June 26, 2016		Change
Days of sales outstanding (a)	37		38		(1	)
Days of supply in inventory (b)	98		99		(1	)
Days in accounts payable (c)	(46	)	(43	)	(3	)
Cash conversion cycle	89		94		(5	)



/s/PricewaterhouseCoopers LLP
Raleigh, North Carolina
August 23, ~~2017~~2023



	June 25, 2017			June 26, 2016
	(In thousands, except par value)
ASSETS
Current assets:
Cash and cash equivalents		$132,597			$166,154
Short-term investments	478,341			439,151
Total cash, cash equivalents and short-term investments	610,938			605,305
Accounts receivable, net	148,392			165,611
Income tax receivable	8,040			6,304
Inventories	284,385			303,542
Prepaid expenses	23,305			26,810
Other current assets	23,390			44,788
Current assets held for sale	2,180			4,347
Total current assets	1,100,630			1,156,707
Property and equipment, net	581,263			599,723
Goodwill	618,828			618,828
Intangible assets, net	274,315			302,810
Other long-term investments	50,366			40,179
Deferred income taxes	11,763			38,564
Other assets	12,702			9,249
Total assets		$2,649,867			$2,766,060
LIABILITIES AND SHAREHOLDERS’ EQUITY
Current liabilities:
Accounts payable, trade		$133,185			$132,286
Accrued salaries and wages	41,860			44,642
Other current liabilities	36,978			46,071
Total current liabilities	212,023			222,999
Long-term liabilities:
Long-term debt	145,000			160,000
Deferred income taxes	49,860			943
Other long-term liabilities	20,179			14,294
Total long-term liabilities	215,039			175,237
Commitments and contingencies (Note 13)
Shareholders’ equity:
Preferred stock, par value $0.01; 3,000 shares authorized at June 25, 2017 and June 26, 2016; none issued and outstanding	—			—
Common stock, par value $0.00125; 200,000 shares authorized at June 25, 2017 and June 26, 2016; 97,674 and 100,829 shares issued and outstanding at June 25, 2017 and June 26, 2016, respectively	121			125
Additional paid-in-capital	2,419,517			2,359,584
Accumulated other comprehensive income, net of taxes	5,909			8,728
Accumulated deficit	(202,742		)	(613		)
Total shareholders’ equity	2,222,805			2,367,824
Total liabilities and shareholders’ equity		$2,649,867			$2,766,060


	Fiscal Years Ended
in millions of U.S. Dollars	June 25, 2023	June 26, 2022	June 27, 2021
Operating activities:
Net loss	($329.9)	($200.9)	($522.5)
Net income (loss) from discontinued operations	—	94.2	(181.2)
Net loss from continuing operations	(329.9)	(295.1)	(341.3)
Adjustments to reconcile net loss to cash used in operating activities:
Depreciation and amortization	164.0	129.8	120.9
Amortization of debt issuance costs and discount, net of non-cash capitalized interest	7.5	20.1	32.8
Loss on extinguishment of debt	—	24.8	—
Stock-based compensation	81.9	60.9	53.2

Abandonment of long-lived assets	—	—	73.9

Loss on disposal or impairment of long-lived assets, including loss on disposal portion of factory optimization and start-up costs	3.8	1.0	5.0
Amortization of (premium) discount on investments, net	(4.7)	6.1	6.9
Realized gain on sale of investments	—	(0.3)	(0.4)
Gain on equity investment	—	—	(8.3)
Foreign exchange gain on equity investment	—	—	(2.2)
Deferred income taxes	0.5	0.7	0.9
Changes in operating assets and liabilities:
Accounts receivable, net	(4.6)	(54.3)	(23.5)
Inventories	(97.5)	(68.8)	(44.6)
Prepaid expenses and other assets	(18.5)	(0.4)	(20.0)
Accounts payable, trade	30.0	29.2	21.7
Accrued salaries and wages and other liabilities	(1.1)	(10.5)	15.3
Accrued contract liabilities	26.0	2.6	(2.8)
Net cash used in operating activities of continuing operations	(142.6)	(154.2)	(112.5)
Net cash used in operating activities of discontinued operations	—	—	(13.0)
Cash used in operating activities	(142.6)	(154.2)	(125.5)
Investing activities:
Purchases of property and equipment	(955.8)	(644.9)	(570.5)
Purchases of patent and licensing rights	(6.5)	(5.7)	(5.9)
Proceeds from sale of property and equipment, including insurance proceeds	1.7	3.1	2.3
Purchases of short-term investments	(1,191.0)	(475.0)	(475.0)
Proceeds from maturities of short-term investments	637.2	242.3	428.3
Proceeds from sale of short-term investments	110.1	225.2	51.7
Reimbursement of property and equipment purchases from long-term incentive agreement	155.5	139.0	10.7
Proceeds from sale of business resulting from the receipt of transaction related note receivable	101.8	125.0	43.7
Proceeds from sale of long-term investment	—	—	66.4
Net cash used in investing activities of continuing operations	(1,147.0)	(391.0)	(448.3)
Net cash used in investing activities of discontinued operations	—	—	(0.3)
Cash used in investing activities	(1,147.0)	(391.0)	(448.6)
Financing activities:
Proceeds from long-term debt borrowings	1,200.0	20.0	30.0
Proceeds from convertible notes	1,750.0	750.0	—
Payments of debt issuance costs	(82.1)	(17.7)	—
Cash paid for capped call transactions	(273.9)	(108.2)	—
Proceeds from issuance of common stock	23.8	22.4	539.7
Tax withholding on vested equity awards	(19.2)	(29.1)	(36.2)
Payments on long-term debt borrowings, including finance lease obligations	(0.5)	(20.5)	(30.4)


Incentive-related escrow refunds	—	—	1.5

Commitment fees on long-term incentive agreement	(1.0)	(1.0)	(0.5)


Cash provided by financing activities	2,597.1	615.9	504.1
Effects of foreign exchange changes on cash and cash equivalents	—	(0.2)	0.2
Net change in cash and cash equivalents	1,307.5	70.5	(69.8)

Cash and cash equivalents, beginning of period	449.5	379.0	448.8
Cash and cash equivalents, end of period	$1,757.0	$449.5	$379.0


	Common Stock		Additional Paid-in Capital	Accumulated Deficit	Accumulated Other Comprehensive Income	Total Equity - Controlled Interest	Non-controlling Interest from Discontinued Operations	Total Equity
	Number of Shares	Par Value
Share data in thousands, U.S. Dollar information in millions
Balance at June 28, 2020	109,230	$0.1	$3,106.2	($1,039.2)	$16.0	$2,083.1	$6.1	$2,089.2
Net (loss) income	—	—	—	(523.9)	—	(523.9)	1.4	(522.5)
Reclassification of currency translation gain to loss on sale of discontinued operations	—	—	—	—	(9.5)	(9.5)	—	(9.5)
Unrealized loss on available-for-sale securities	—	—	—	—	(3.8)	(3.8)	—	(3.8)

Tax withholding on vested equity awards	—	—	(36.2)	—	—	(36.2)	—	(36.2)
Stock-based compensation	—	—	67.1	—	—	67.1	—	67.1
Exercise of stock options and issuance of shares	2,238	—	50.6	—	—	50.6	—	50.6
Issuance of shares under the at-the-market offering program, net of issuance costs	4,223	—	489.1	—	—	489.1	—	489.1
Reclassification of noncontrolling interest to loss on sale of discontinued operations	—	—	—	—	—	—	(7.5)	(7.5)
Balance at June 27, 2021	115,691	$0.1	$3,676.8	($1,563.1)	$2.7	$2,116.5	$—	$2,116.5
Net loss	—	—	—	(200.9)	—	(200.9)	—	(200.9)

Unrealized loss on available-for-sale securities	—	—	—	—	(28.0)	(28.0)	—	(28.0)

Tax withholding on vested equity awards	—	—	(29.1)	—	—	(29.1)	—	(29.1)
Stock-based compensation	—	—	62.8	—	—	62.8	—	62.8
Exercise of stock options and issuance of shares	978	—	22.4	—	—	22.4	—	22.4
Issuance of shares related to the extinguishment of convertible notes due September 1, 2023	7,126	0.1	416.1	—	—	416.2	—	416.2
Issuance of convertible notes due February 15, 2028	—	—	187.6	—	—	187.6	—	187.6
Capped call transactions related to the issuance of convertible notes due February 15, 2028	—	—	(108.2)	—	—	(108.2)	—	(108.2)
Balance at June 26, 2022	123,795	$0.2	$4,228.4	($1,764.0)	($25.3)	$2,439.3	$—	$2,439.3
Net loss	—	—	—	(329.9)	—	(329.9)	—	(329.9)


Unrealized gain on available-for-sale securities	—	—	—	—	0.2	0.2	—	0.2

Tax withholding on vested equity awards	—	—	(19.2)	—	—	(19.2)	—	(19.2)
Stock-based compensation	—	—	84.9	—		84.9	—	84.9
Exercise of stock options and issuance of shares	999	—	23.8	—	—	23.8	—	23.8
Adoption of ASU 2020-06	—	—	(333.0)	29.7	—	(303.3)	—	(303.3)
Capped call transactions related to the issuance of convertible notes due December 1, 2029	—	—	(273.9)	—	—	(273.9)	—	(273.9)

Balance at June 25, 2023	124,794	$0.2	$3,711.0	($2,064.2)	($25.1)	$1,621.9	$—	$1,621.9



	Common Stock					Additional Paid-in Capital			(Accumulated deficit)/Retained Earnings			Accumulated Other Comprehensive Income			Total Shareholders’ Equity
	Number of Shares		Par Value			Additional Paid-in Capital			(Accumulated deficit)/Retained Earnings			Accumulated Other Comprehensive Income			Total Shareholders’ Equity
	(In thousands)
Balance at June 29, 2014	120,114			$149			$2,190,011			$784,818			$11,405			$2,986,383
Net loss	—		—			—			(64,692		)	—			(64,692		)
Currency translation loss, net of tax benefit of $0	—		—			—			—			(3,563		)	(3,563		)
Unrealized loss on available-for-sale securities, net of tax benefit of $1,284	—		—			—			—			(2,044		)	(2,044		)
Comprehensive income															(70,299		)
Income tax expense from stock option exercises	—		—			(1,010		)	—			—			(1,010		)
Repurchased shares	(16,034	)	(20		)	—			(549,657		)				(549,677		)
Stock-based compensation	—		—			64,720			—			—			64,720
Exercise of stock options and issuance of shares	1,427		2			31,833			—			—			31,835
Balance at June 28, 2015	105,507			$131			$2,285,554			$170,469			$5,798			$2,461,952
Net loss	—		—			—			(21,536		)	—			(21,536		)
Currency translation loss, net of tax benefit of $0	—		—			—			—			(362		)	(362		)
Unrealized gain on available-for-sale securities, net of tax expense of $1,936	—		—			—			—			3,292			3,292
Comprehensive income															(18,606		)
Income tax expense from stock option exercises	—		—			(3,525		)	—			—			(3,525		)
Repurchased shares	(5,842	)	(7		)	—			(149,546		)	—			(149,553		)
Stock-based compensation	—		—			58,425			—			—			58,425
Exercise of stock options and issuance of shares	1,164		1			19,130			—			—			19,131
Balance at June 26, 2016	100,829			$125			$2,359,584			($613	)		$8,728			$2,367,824
Net loss	—		—			—			(98,118		)	—			(98,118		)
Currency translation loss, net of tax benefit of $0	—		—			—			—			(153		)	(153		)
Unrealized loss on available-for-sale securities, net of tax expense of $0	—		—			—			—			(2,666		)	(2,666		)
Comprehensive loss															(100,937		)
Income tax expense from stock option exercises	—		—			(253		)	—			—			(253		)
Repurchased shares	(4,460	)	(6		)	—			(104,011		)				(104,017		)
Stock-based compensation	—		—			46,813			—			—			46,813
Exercise of stock options and issuance of shares	1,305		2			13,373			—			—			13,375
Balance at June 25, 2017	97,674			$121			$2,419,517			($202,742	)		$5,909			$2,222,805



Note 1	Business	55
Note 2	Basis of Presentation and Summary of Significant Accounting Policies	55
Note 3	Discontinued Operations	63
Note 4	Revenue Recognition	65
Note 5	Leases	66
Note 6	Financial Statement Details	68
Note 7	Investments	72
Note 8	Fair Value of Financial Instruments	74
Note 9	Goodwill and Intangible Assets	75
Note 10	Long-term Debt	76
Note 11	Shareholders' Equity	82
Note 12	Loss Per Share	83
Note 13	Stock-Based Compensation	83
Note 14	Income Taxes	86
Note 15	Commitments and Contingencies	90
Note 16	Concentrations of Credit Risk	91


Note 17	Subsequent Events	92



	Asset Amount		Estimated Life in Years
Patents		$40	20
Customer relationships	4,500		4
Developed technology	11,403		10
In-process research and development¹	7,565		7
Non-compete agreements	231		3
Total identifiable intangible assets		$23,739



	June 25, 2017		June 26, 2016
Raw material		$73,410		$83,299
Work-in-progress	100,402		96,779
Finished goods	110,573		123,464
Inventories		$284,385		$303,542



	June 25, 2017		June 26, 2016
Accrued taxes		$11,148		$12,720
Accrued professional fees	5,545		7,980
Accrued warranty	13,631		20,207
Accrued other	6,654		5,164
Other current liabilities		$36,978		$46,071



	June 25, 2017		June 26, 2016
Currency translation gain		$4,471		$4,624
Net unrealized (loss) gain on available-for-sale securities	1,438		4,104
Accumulated other comprehensive income, net of taxes		$5,909		$8,728



Accumulated Other Comprehensive Income Component	Amount Reclassified from Accumulated Other Comprehensive Income						Affected Line Item in the Consolidated Statements of Loss
	Fiscal Years Ended
	June 25, 2017		June 26, 2016		June 28, 2015
Net unrealized gain on available-for-sale securities, net of taxes		$93		$238		$925	Non-operating income (expense), net
	93		238		925		Loss before income taxes
	—		20		210		Income tax expense (benefit)
		$93		$218		$715	Net loss


	June 25, 2023
(in millions of U.S. Dollars)	Amortized Cost	Gross Unrealized Gains	Gross Unrealized Losses	Credit Loss Allowance	Estimated Fair Value
Corporate bonds	$512.3	$—	($16.7)	$—	$495.6
U.S. treasury securities	261.8	—	(1.4)	—	260.4
Municipal bonds	179.7	—	(4.4)	—	175.3
Certificates of deposit	112.3	—	—	—	112.3
U.S. agency securities	77.0	—	(0.2)	—	76.8

Commercial paper	50.2	—	—	—	50.2
Variable rate demand notes	27.3	—	—	—	27.3

Total short-term investments	$1,220.6	$—	($22.7)	$—	$1,197.9



	June 25, 2017
	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Estimated Fair Value
Municipal bonds		$177,890		$2,219		($68	)		$180,041
Corporate bonds	175,991		1,925		(195		)	177,721
Non-U.S. certificates of deposit	120,379		—		—			120,379
U.S. certificates of deposit	—		—		—			—
Commercial paper	200		—		—			200
Total short-term investments		$474,460		$4,144		($263	)		$478,341



	June 25, 2017
	Less than 12 Months					Greater than 12 Months				Total
	Fair Value		Unrealized Loss			Fair Value		Unrealized Loss		Fair Value		Unrealized Loss
Municipal bonds		$26,816		($68	)		$—		$—		$26,816		($68	)
Corporate bonds	57,404		(195		)	—		—		57,404		(195		)
Total		$84,220		($263	)		$—		$—		$84,220		($263	)
Number of securities with an unrealized loss			67					—				67


(in millions of U.S. Dollars)	Within One Year	After One, Within Five Years	After Five, Within Ten Years	After Ten Years	Total
Corporate bonds	$303.7	$191.9	$—	$—	$495.6
U.S. treasury securities	220.9	39.5	—	—	260.4
Municipal bonds	91.5	81.4	—	2.4	175.3
Certificates of deposit	112.3	—	—	—	112.3
U.S. agency securities	66.8	10.0	—	—	76.8

Commercial paper	50.2	—	—	—	50.2
Variable rate demand notes	—	—	9.7	17.6	27.3

Total short-term investments	$845.4	$322.8	$9.7	$20.0	$1,197.9



	Within One Year		After One, Within Five Years		After Five, Within Ten Years		After Ten Years		Total
Municipal bonds		$45,519		$107,947		$26,575		$—		$180,041
Corporate bonds	48,515		94,637		34,569		—		177,721
Non-U.S. certificates of deposit	5,755		114,624		—		—		120,379
U.S. certificates of deposit	—		—		—		—		—
Commercial paper	200		—		—		—		200
Total short-term investments		$99,989		$317,208		$61,144		$—		$478,341



	June 25, 2017								June 26, 2016
	Level 1		Level 2		Level 3		Total		Level 1		Level 2		Level 3		Total
Assets:
Cash equivalents
Municipal bonds	$	—	$	1,802	$	—	$	1,802	$	—	$	—	$	—	$	—
Non-U.S. certificates of deposit	—		736		—		736		—		137		—		137
Money market funds	1,184		—		—		1,184		576		—		—		576
Total cash equivalents	1,184		2,538		—		3,722		576		137		—		713
Short-term investments:
Municipal bonds	—		180,041		—		180,041		—		190,440		—		190,440
Corporate bonds	—		177,721		—		177,721		—		168,767		—		168,767
U.S. certificates of deposit	—		—		—		—		—		3,500		—		3,500
Commercial paper	—		200		—		200		—		3,317		—		3,317
Non-U.S. certificates of deposit	—		120,379		—		120,379		—		73,127		—		73,127
Total short-term investments	—		478,341		—		478,341		—		439,151		—		439,151
Other long-term investments
Common stock of non-U.S. corporations	—		50,366		—		50,366		—		40,179		—		40,179
Total other long-term investments	—		50,366		—		50,366		—		40,179		—		40,179
Total assets		$1,184		$531,245		$—		$532,429		$576		$479,467		$—		$480,043



LED Products		Lighting Products		Wolfspeed		Consolidated Total
	$180,278		$337,781		$100,769		$618,828



	June 25, 2017							June 26, 2016
	Gross		Accumulated Amortization			Net		Gross		Accumulated Amortization			Net
Intangible assets with finite lives:
Customer relationships		$141,420		($84,673	)		$56,747		$141,420		($78,438	)		$62,982
Developed technology	181,728		(132,747		)	48,981		181,728		(111,884		)	69,844
Non-compete agreements	10,475		(10,398		)	77		10,475		(9,994		)	481
Trade names, finite-lived	520		(520		)	—		520		(520		)	—
Patent and licensing rights	151,985		(63,155		)	88,830		145,780		(55,957		)	89,823
Total intangible assets with finite lives	486,128		(291,493		)	194,635		479,923		(256,793		)	223,130
Trade names, indefinite-lived	79,680					79,680		79,680					79,680
Total intangible assets		$565,808		($291,493	)		$274,315		$559,603		($256,793	)		$302,810


(in millions of U.S. Dollars) Fiscal Year Ending	Acquisition Related Intangibles	Patents	Total
June 30, 2024	$10.4	$4.4	$14.8
June 29, 2025	10.4	3.4	13.8
June 28, 2026	9.3	2.6	11.9
June 27, 2027	9.3	2.1	11.4
June 26, 2028	9.3	1.8	11.1
Thereafter	40.4	12.5	52.9
Total future amortization expense	$89.1	$26.8	$115.9