Acquisition

Infineon Radio Frequency Power Business

On March 6, 2018, the Company acquired certain assets of the Infineon Radio Frequency Power Business (RF Power), pursuant to an asset purchase agreement with Infineon in exchange for a base purchase price of $429 million, subject to certain adjustments. As part of the agreement, the Company paid $427 million of cash on the purchase date and agreed to purchase certain additional non-U.S. property and equipment related to the RF Power business from Infineon for approximately $2 million, which was completed during the fourth quarter of fiscal 2018. The acquisition allows the Company to expand its product portfolio into the wireless market.

The acquisition of the RF Power business from Infineon was accounted for as a business combination. The purchase price for this acquisition is preliminary and subject to change. The areas of the purchase price that are not yet finalized are primarily related to intangible assets, property and equipment, other long-term liabilities, amortization and depreciation lives. The purchase price has been preliminarily allocated to the assets acquired and liabilities assumed based on their estimated fair values as follows (in thousands):



Assets:
Inventories		$22,500
Property and equipment	11,722
Other receivables	433
Intangible assets	149,000
Goodwill	248,957
Total Assets	432,612
Liabilities assumed:
Accounts payable	(39		)
Accrued expenses and liabilities	(3,411		)
Total liabilities assumed	(3,450		)
Net assets acquired		$429,162

As noted above, the valuation of acquired intangible assets is preliminary as of June 24, 2018. Similarly, the amortization periods are preliminary until the valuation is finalized. The preliminary amortization periods for intangible assets acquired are as follows (in thousands, except for years):



	Asset Amount		Estimated Life in Years
Lease agreement		$1,000	10
Customer relationships	92,000		15
Developed technology	44,000		14
Non-compete agreements	12,000		4
Total identifiable intangible assets		$149,000

Goodwill largely consists of the manufacturing and other synergies of the combined companies, and the value of the assembled workforce. The weighted average amortization periods for intangibles was 13.8 years For tax purposes, in accordance with Section 197 of the Internal Revenue Code of 1986, as amended (the IRC), $245.0 million of goodwill will be amortized over 15 years.

The assets, liabilities, and operating results of the RF Power business have been included in the Company's consolidated financial statements from the date of acquisition. Additionally, the RF Power business's results from operations are reported as part of the Company's Wolfspeed segment. The results of the RF Power business reflected in the Company's Consolidated Statements of Loss for the Fiscal Year ended June 24, 2018 from the date of acquisition (March 6, 2018) are as follows (in thousands):



	Amount
Revenue		$28,953
Net loss		($11,735	)

The Company incurred total transaction costs related to the acquisition of approximately $3.7 million. Substantially all of these costs were included in Operating Expenses in the Consolidated Statements of Loss in fiscal 2018 in accordance with U.S. GAAP.

Pro Forma Financial Information

The following supplemental pro forma information (in thousands, except per share data) presents the consolidated financial results as if the RF Power transaction had occurred at the beginning of fiscal 2017:



	Twelve Months Ended
	June 24, 2018			June 25, 2017
Revenue	$1,559,099			$1,580,605
Net loss	(284,929		)	(108,750		)
Loss per share, basic	$	(2.86	)	$	(1.10	)
Loss per share, diluted	$	(2.86	)	$	(1.10	)

These amounts have been calculated after applying the Company's accounting policies and adjusting the results of the RF Power business to give effect to events and transactions that are directly attributable to the RF Power business transactions, including the elimination of sales by the Company to the RF Power business prior to acquisition, additional depreciation and amortization that would have been charged assuming the fair value adjustments primarily to property and equipment and intangible assets had been applied at the beginning of the 2017 fiscal year, together with the consequential tax effects. Excluded from the pro forma net loss and the loss per share amounts for the twelve months ended June 24, 2018, but included in the pro forma net loss and the the loss per share amounts for the twelve months ended June 25, 2017, are one-time acquisition costs attributable to the RF Power business of $3.7 million. This supplemental pro forma information has been prepared for comparative purposes and does not purport to be indicative of what would have occurred had the acquisition been made at the beginning of the 2017 fiscal year, nor is it indicative of any future results.

Arkansas Power Electronics International, Inc.

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 were 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 $1.9 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 weighted average amortization period for intangibles was 7.9 years.

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.