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Acquisitions | 12 Months Ended
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Jun. 26, 2011
Acquisitions |
Acquisitions | Note 3 - Acquisitions Acquisition of LED Lighting Fixtures, Inc. In February 2008, the Company acquired LED Lighting Fixtures, Inc. (LLF) through a wholly owned subsidiary that merged into Cree, Inc. June 27, 2010. Through this acquisition the Company acquired a research and development center, a commercialized LED lighting portfolio, sales channels and manufacturing subcontractor relationships to accelerate the adoption of energy-efficient LED lighting for the general illumination market. The Company acquired all of the outstanding share capital of LLF in exchange for total upfront consideration of $80.8 million, consisting of (1) $16.5 million in cash, (2) approximately 1.9 million shares of the Company's common stock valued at $58.8 million, (3) the assumption of fully vested LLF employee stock options valued at $4.5 million, and (4) transaction costs of $1.0 million consisting primarily of professional fees incurred relating to attorneys, accountants and valuation advisors. Under the acquisition terms, additional consideration of up to $26.4 million would become payable to the former shareholders of LLF if defined product development targets and key employee retention measures were achieved over the three calendar years following the acquisition. The initial purchase price for this acquisition was as follows (in thousands):
Cash consideration paid to LLF stockholders |  | $ | 16,450 |
Fair value of common stock issued by the Company |  |  | 58,830 |
Fair value of vested LLF stock options assumed by the Company |  |  | 4,486 |
Direct transaction fees and expenses |  |  | 1,042 |
Total purchase price |  | $ | 80,808 |
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 |  | $ | 10,312 |
Accounts receivable |  |  | 982 |
Inventories |  |  | 1,603 |
Deferred tax assets |  |  | 2,573 |
Property and equipment |  |  | 596 |
Other assets |  |  | 1,093 |
Total tangible assets |  | $ | 17,159 |
Intangible assets: |  |  |  |
Customer relationships |  | $ | 1,300 |
Non-compete agreements |  |  | 440 |
Developed technology |  |  | 39,500 |
Goodwill |  |  | 39,450 |
Total intangible assets |  | $ | 80,690 |
Liabilities assumed: |  |  |  |
Accounts payable |  | $ | 1,525 |
Accrued expenses |  |  | 770 |
Deferred tax liability |  |  | 14,746 |
Total liabilities assumed |  | $ | 17,041 |
Net assets acquired |  | $ | 80,808 |
The identifiable assets acquired as a result of the acquisition are being amortized over their respective estimated useful lives as follows (in thousands, except for years):
|  | Asset Amount |  |  | Estimated Life in Years |
Customer relationships |  | $ | 1,300 |  |  |  | 8 |
Non-compete agreements |  |  | 440 |  |  |  | 3 |
Developed technology |  |  | 39,500 |  |  |  | 14 |
Total identifiable assets |  | $ | 41,240 |  |  |  |  |
The goodwill associated with the acquisition of LLF is not deductible for tax purposes. The assets, liabilities, and operating results of LLF have been included in the Company's consolidated financial statements from the date of acquisition. Pro forma information giving effect to this acquisition has not been presented because the pro forma information would not differ materially from the Company's historical results. LLF met the conditions necessary for the earn-out payment for the calendar years ended December 31, 2008, 2009 and 2010 and as a result, the Company made a cash payment in the amount of $4.4 million to the former shareholders of LLF in the third quarter of fiscal 2009, a cash payment in the amount of $8.8 million to the former shareholders of LLF in the third quarter of fiscal 2010 and a cash payment in the amount of $13.2 million to the former shareholders of LLF in the third quarter of fiscal 2011, thus increasing goodwill in the Company's consolidated financial statements. Acquisition of COTCO Luminant Device Limited In March 2007, the Company acquired COTCO Luminant Device Limited, a Hong Kong company (now "Cree Hong Kong Limited") (COTCO), from COTCO Holdings Limited, a Hong Kong company (now United Luminous International (Holdings) Limited) ("Holdings"). Cree Hong Kong Limited is headquartered in Hong Kong and has production facilities in China. This acquisition provided us expanded packaging, research and development capabilities, a broader LED component portfolio, a lower cost manufacturing facility and expanded our sales channels in China. The Company acquired all of the outstanding share capital of COTCO in exchange for consideration consisting of approximately 7.6 million shares of the Company's common stock and $77.3 million cash. Under the acquisition terms, additional consideration of up to $125.0 million would become payable to Holdings or its designees in the event COTCO achieved specific EBITDA targets over the Company's two full fiscal years following the acquisition. Any such additional consideration would be treated as an incremental purchase price of COTCO, and thus result in an increase to goodwill in the Company's consolidated financial statements in the period earned. The initial purchase price for this acquisition was as follows (in thousands):
Cash consideration paid to COTCO shareholder |  | $ | 77,334 |
Fair value of common stock issued by the Company |  |  | 126,943 |
Direct transaction fees and expenses |  |  | 3,065 |
Total purchase price |  | $ | 207,342 |
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 |  | $ | 1,110 |
Accounts receivable |  |  | 20,376 |
Inventories |  |  | 22,916 |
Other current assets |  |  | 54 |
Property and equipment |  |  | 24,066 |
Total tangible assets |  | $ | 68,522 |
Intangible assets: |  |  |  |
Customer relationships |  | $ | 51,000 |
Trade names and license agreements |  |  | 150 |
Developed technology |  |  | 7,220 |
In-process research and development charge |  |  | 950 |
Goodwill |  |  | 108,249 |
Total intangible assets |  | $ | 167,569 |
Liabilities assumed: |  |  |  |
Accounts payable |  | $ | 10,870 |
Accrued expenses |  |  | 5,576 |
Deferred tax liability |  |  | 12,303 |
Total liabilities assumed |  | $ | 28,749 |
Net assets acquired |  | $ | 207,342 |
The identifiable assets acquired as a result of the acquisition are being amortized over their respective estimated useful lives as follows (in thousands, except for years):
|  | Asset Amount |  |  | Estimated Life in Years |
Customer relationships |  | $ | 51,000 |  |  |  | 8 |
Trade names and license agreements |  |  | 150 |  |  |  | 1 |
Developed technology |  |  | 7,220 |  |  |  | 7 |
Total identifiable assets |  | $ | 58,370 |  |  |  |  |
The estimated fair value of in-process research and development was recorded immediately as an expense in fiscal 2007 and was reflected in research and development expenses in the Consolidated Statement of Income. This represented the estimated fair value of certain acquired technologies under development that had not yet reached technological feasibility and had no alternative future use. The goodwill associated with the acquisition of COTCO is not deductible for tax purposes. Under the acquisition terms, additional consideration would become payable to Holdings or its designees in the event COTCO achieved specific EBITDA targets over the Company's two full fiscal years following the acquisition. For fiscal 2008 results, the Company made a cash payment in the amount of $60.0 million in fiscal 2009. For fiscal 2009 results, the Company made a cash payment in the amount of $57.1 million in fiscal 2010. These incremental payments were treated as additional purchase price and resulted in an increase to goodwill in the Company's consolidated financial statements.

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- Definition The entire disclosure for a business combination (or series of individually immaterial business combinations) completed during the period, including background, timing, and recognized assets and liabilities. The disclosure may include leverage buyout transactions (as applicable). + References Reference 1: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Statement of Financial Accounting Standard (FAS) -Number 141 -Paragraph 51, 52 -LegacyDoc This reference is SUPERSEDED by the Accounting Standards Codification effective for interim and annual periods ending after September 15, 2009. This reference is included to help users transition from the previous accounting hierarchy and will be removed from future versions of this taxonomy. 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