Reportable Segments

The Company's operating and reportable segments are:


•	Wolfspeed


•	LED Products


•	Lighting Products

Reportable Segments Description

The Company's Wolfspeed segment includes power devices, RF devices, and SiC materials. The Company's LED Products segment includes LED chips and LED components. The Company's Lighting Products segment primarily consists of LED lighting systems and lamps.

Financial Results by Reportable Segment

The table below reflects the results of the Company's reportable segments as reviewed by the Chief Operating Decision Maker (CODM) for the three and nine months ended March 25, 2018. The Company's CODM is the Chief Executive Officer. 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 loss must be included to reconcile the consolidated gross profit presented in the table below to the Company's consolidated loss 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, quarterly or annual incentive plans, matching contributions under the Company’s 401(k) plan, and acquisition related costs. 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.

For the three and nine months ended March 26, 2017, the Wolfspeed segment was presented as discontinued operations. The depreciation and amortization adjustment in the table below represents the depreciation and amortization that would have been recognized had the Wolfspeed assets been continuously classified as held and used. These costs were allocated to the Wolfspeed segment's gross profit for the three and nine months ended March 26, 2017 because they represent an adjustment which provides comparability to the current period.

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



	Three Months Ended						Nine Months Ended
	March 25, 2018			March 26, 2017			March 25, 2018			March 26, 2017
Revenue:
Wolfspeed revenue		$81,902			$56,133			$218,628			$160,401
LED Products revenue	143,298			131,327			440,500			406,858
Lighting Products revenue	130,758			154,045			425,098			546,805
Total revenue		$355,958			$341,505			$1,084,226			$1,114,064

Gross Profit and Gross Margin:
Wolfspeed gross profit		$39,285			$26,396			$105,816			$74,737
Wolfspeed gross margin	48.0		%	47.0		%	48.4		%	46.6		%
LED Products gross profit	37,764			32,385			115,180			115,499
LED Products gross margin	26.4		%	24.7		%	26.1		%	28.4		%
Lighting Products gross profit	24,956			35,355			79,803			159,415
Lighting Products gross margin	19.1		%	23.0		%	18.8		%	29.2		%
Total segment gross profit	102,005			94,136			300,799			349,651
Unallocated costs	(2,949		)	(3,459		)	(8,808		)	(13,077		)
Depreciation and amortization adjustment	—			(4,601		)	—			—
Consolidated gross profit		$99,056			$86,076			$291,991			$336,574
Consolidated gross margin	27.8		%	25.2		%	26.9		%	30.2		%

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 CODM reviews all of the Company's assets other than inventories on a consolidated basis.

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, quarterly or annual incentive compensation, matching contributions under the Company’s 401(k) plan, and acquisition related costs.

Inventories for each of the Company's segments were as follows (in thousands):



	March 25, 2018		June 25, 2017
Wolfspeed		$56,261		$26,453
LED Products	102,078		108,297
Lighting Products	147,131		145,710
Total segment inventories	305,470		280,460
Unallocated inventories	4,388		3,925
Consolidated inventories		$309,858		$284,385