Reportable Segments

The Company’s operating and reportable segments are:


•	LED Products


•	Lighting Products


•	Power and RF Products

The Company’s CODM reviews segment performance and allocates resources based upon segment revenue and segment gross profit.

Reportable Segments Description

LED Products Segment

The Company’s LED Products segment includes LED chips, LED components, and SiC materials.

LED Chips

LED chip products include blue and green LED chips based on GaN and related materials. LED chips or die are solid-state electronic components used in a number of applications and are currently available in a variety of brightness levels, wavelengths (color) and sizes. The Company uses LED chips internally in the manufacturing of its LED components. Customers use the blue and green LED chips in a variety of applications including video screens, gaming displays, function indicator lights, and automotive backlights, headlamps and directional indicators. Customers may also combine blue LED chips with phosphors to create white LEDs, which are used in various applications for indoor and outdoor illumination and backlighting, full-color display screens, liquid crystal displays (LCD) backlighting, white keypads and the camera flash function.

LED Components

LED component products include a range of packaged LED products from the Company’s XLamp^® LED components and LED modules for lighting applications to the Company’s high-brightness LED components.

The Company’s XLamp LED components and LED modules are lighting class packaged LED products designed to meet a broad range of market needs for lighting applications including general illumination (both indoor and outdoor applications), portable, architectural, signal and transportation lighting. The Company uses XLamp LED components in its own lighting products. The Company also sells XLamp LED components externally to customers and distributors for use in a variety of products, primarily for lighting applications.

The Company’s high-brightness LED components consist of surface mount (SMD) and through-hole packaged LED products. The SMD LED component products are available in a full range of colors designed to meet a broad range of market needs, including video, signage, general illumination, transportation, gaming and specialty lighting markets. The Company's through-hole packaged LED component products are available in a full range of colors, primarily designed for the signage market, and provide users with color and brightness consistency across a wide viewing area.

SiC Materials

The Company’s SiC materials are targeted for customers who use them to manufacture products for RF, power switching, gemstones and other applications. Corporate, government and university customers also buy SiC materials for research and development directed at RF and high power devices. The Company sells its SiC materials in bulk form, as a bare wafer or with SiC and GaN epitaxial films.

Lighting Products Segment

The Company’s Lighting Products segment primarily consists of LED lighting systems and bulbs. The Company designs, manufactures and sells lighting systems for indoor and outdoor applications, with its primary focus on LED lighting systems for the commercial, industrial and consumer markets. Lighting products are sold to distributors, retailers and direct to customers. Our portfolio of lighting products is designed for use in settings such as office and retail space, restaurants and hospitality, schools and universities, manufacturing, healthcare, airports, municipal, residential, street lighting and parking structures, among other applications.

Power and RF Products Segment

The Company’s Power and RF Products segment includes power devices and RF devices.

Power Devices

The Company’s SiC-based power products include Schottky diodes, SiC metal semiconductor field-effect transistors (MOSFETs), and SiC power modules at various voltages. The Company's power products provide increased efficiency, faster switching speeds and reduced system size and weight over comparable silicon-based power devices. Power products are sold primarily to customers and distributors for use in power supplies used in computer servers, solar inverters, uninterruptible power supplies, industrial power supplies and other applications.

RF Devices

The Company’s RF devices include a variety of GaN high electron mobility transistors (HEMTs) and monolithic microwave integrated circuits (MMICs), which are optimized for military, telecom and other commercial applications. The Company's RF devices are made from SiC and GaN and provide improved efficiency, bandwidths and frequency of operation as compared to silicon or GaAs. The Company also provides foundry services for GaN HEMTs and MMICs. The Company's foundry service allows a customer to design its own custom RF circuits to be fabricated in the Company's foundry, or have the Company design and fabricate custom products that meet the customer's specific requirements.

Financial Results by Reportable Segment

The table below reflects the results of the Company’s reportable segments as reviewed by the Company’s CODM for fiscal 2014, 2013 and 2012. The Company used the same accounting policies to derive the segment results reported below as those used in the Company’s consolidated financial statements.

The Company’s 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 the segment revenue presented in the table below. As such, total segment revenue in the table below is equal to the Company’s consolidated revenue.

The Company’s 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 Income must be included to reconcile the consolidated gross profit presented in the table below to the Company’s consolidated income before income taxes.

In order to determine gross profit for each reportable segment, the Company allocates direct costs and indirect costs to each segment’s cost of revenue. The Company allocates indirect costs, such as employee benefits for manufacturing employees, shared facilities services, information technology, purchasing, and customer service, when the costs are identifiable and beneficial to the reportable segment. The Company allocates these indirect costs based on a reasonable measure of utilization that considers the specific facts and circumstances of the costs being allocated.

Unallocated costs in the table below consisted primarily of manufacturing employees’ stock-based compensation, expenses for profit sharing and quarterly or annual incentive plans and matching contributions under the Company’s 401(k) plan. These costs were not allocated to the reportable segments' gross profit because the Company’s CODM does not review them regularly when evaluating segment performance and allocating resources.

Revenue, gross profit and gross margin for each of the Company's segments were as follows (in thousands, except percentages):



	Revenue						Gross Profit and Gross Margin
	Year Ended						Year Ended
	June 29, 2014		June 30, 2013		June 24, 2012		June 29, 2014			June 30, 2013			June 24, 2012
LED Products		$833,684		$801,483		$756,924		$381,003			$344,649			$290,642
LED Products gross margin							46		%	43		%	38		%
Lighting Products	706,425		495,089		334,704		197,304			148,947			103,396
Lighting Products gross margin							28		%	30		%	31		%
Power and RF Products	107,532		89,410		73,030		60,723			48,127			32,051
Power and RF Products gross margin							56		%	54		%	44		%
Total segment reporting		$1,647,641		$1,385,982		$1,164,658	639,030			541,723			426,089
Unallocated costs							(20,235		)	(18,463		)	(16,627		)
Consolidated gross profit								$618,795			$523,260			$409,462
Consolidated gross margin							38		%	38		%	35		%

Assets by Reportable Segment

Inventories are the only assets reviewed by the Company’s CODM when evaluating segment performance and allocating resources to the segments. The following table sets forth the Company’s inventories by reportable segment for the fiscal years ended June 29, 2014 and June 30, 2013.

Unallocated inventories in the table below were not allocated to the reportable segments because the Company’s CODM does not review them when evaluating performance and allocating resources to each segment. Unallocated inventories consisted primarily of manufacturing employees’ stock-based compensation, profit sharing and quarterly or annual incentive compensation and matching contributions under the Company’s 401(k) plan.

The Company does not allocate assets other than inventories to the reportable segments because the Company’s CODM does not review them when assessing segment performance and allocating resources. The CODM reviews all of the Company’s assets other than inventories on a consolidated basis. Inventories for each of the Company's segments were as follows (in thousands):



	June 29, 2014		June 30, 2013
LED Products		$123,249		$99,835
Lighting Products	148,757		87,546
Power and RF Products	8,019		6,593
Total segment inventories	280,025		193,974
Unallocated inventories	4,755		3,027
Consolidated inventories		$284,780		$197,001

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. The following table sets forth the percentage of revenue from external customers by geographic area:



	For the Years Ended
	June 29, 2014		June 30, 2013		June 24, 2012
United States	49	%	44	%	38	%
China	27	%	28	%	32	%
Europe	9	%	12	%	14	%
South Korea	2	%	2	%	2	%
Japan	6	%	7	%	8	%
Malaysia	1	%	1	%	2	%
Taiwan	1	%	2	%	1	%
Other	5	%	4	%	3	%
Total percentage of revenue	100	%	100	%	100	%

The following table sets forth the Company’s tangible long-lived assets by country (in thousands):



	June 29, 2014		June 30, 2013
United States		$449,359		$419,267
China	154,881		122,477
Other	1,473		1,089
Total tangible long-lived assets		$605,713		$542,833