Acquisition

Infineon Technologies AG Radio Frequency Power Business

On March 6, 2018, the Company acquired certain assets of the Infineon Technologies AG (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 has agreed to purchase certain additional non-U.S. property and equipment related to the RF Power business from Infineon for approximately $2.2 million, with this additional purchase expected to close 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		$24,931
Property and equipment	10,504
Intangible assets	149,000
Goodwill	246,278
Total Assets	430,713
Liabilities assumed:
Accounts payable	(39		)
Accrued expenses and liabilities	(3,264		)
Other long-term liabilities	(290		)
Total liabilities assumed	(3,593		)
Net assets acquired	$	427,120

As noted above, the valuation of acquired intangible assets is preliminary as of March 25, 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. For tax purposes, in accordance with IRC Section 197, $246 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 three months ended March 25, 2018 from the date of acquisition (March 6, 2018) are as follows (in thousands):



	Amount
Revenue		$4,191
Net loss	(2,325		)

The Company incurred total transaction costs related to the acquisition of approximately $3.1 million which were expensed in the third quarter of 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 the 2017 fiscal year:



	Three Months Ended						Nine Months Ended
	March 25, 2018			March 26, 2017			March 25, 2018			March 26, 2017
Revenue	$370,939			$365,771			$1,149,645			$1,202,199
Net loss	(237,189		)	(101,142		)	(247,614		)	(97,542		)
Earnings per share, basic	$	(2.37	)	$	(1.04	)	$	(2.50	)	$	(0.99	)
Earnings per share, diluted	$	(2.37	)	$	(1.04	)	$	(2.50	)	$	(0.99	)

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 income and the earnings per share amounts for the three and nine months ended March 25, 2018 are one-time acquisition costs and foreign currency gains attributable to the RF Power business of $3.1 million and $1.9 million, respectively. 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 were to 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. The final payment of $1.9 million was made 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.