Discontinued Operations

12 Months Ended

Jun. 30, 2019

Discontinued Operations and Disposal Groups [Abstract]

On May 13, 2019, the Company completed the sale of (a) certain manufacturing facilities and equipment, inventory, intellectual property rights, contracts, and real estate of the Company used by the Company's Lighting Products business unit, which includes LED lighting fixtures, lamps and corporate lighting solutions for commercial, industrial and consumer applications, and (b) all of the issued and outstanding equity interests of E-conolight LLC (E-conolight), Cree Canada Corp. and Cree Europe S.r.l., each a wholly owned subsidiary of the Company (collectively, the Lighting Products business unit) to IDEAL, pursuant to the Purchase Agreement, dated March 14, 2019, as amended between Cree and IDEAL (the Purchase Agreement). The Company retained certain liabilities associated with the Lighting Products business unit arising prior to the closing of the sale. The Lighting Products business unit represented the Lighting Products segment disclosed in the Company's historical financial statements.

The aggregate net proceeds from the sale of the Lighting Products business unit was $219.0 million in cash, which is subject to certain adjustments. Additionally, the Company is entitled to an earnout payment subject to the future performance of the Lighting Products business unit. In connection with the transaction, the Company and IDEAL entered into certain ancillary and related agreements, including (i) an Intellectual Property Assignment and License Agreement, which assigned to IDEAL certain intellectual property owned by the Company and licensed to IDEAL certain additional intellectual property owned by the Company; (ii) a Transition Services Agreement (the TSA), which is designed to ensure a smooth transition of the Lighting Products business unit to IDEAL; (iii) an LED Supply Agreement (the LED Supply Agreement), pursuant to which the Company will supply IDEAL with certain LED chip and component products for three years; and (iv) a Real Estate License Agreement, which will allow IDEAL to use certain premises owned by the Company to conduct the Lighting Products business unit after closing. The Company recognized a loss on the sale of $66.2 million.

The Company has classified the results of the Lighting Products business unit as discontinued operations, the results of which for the fiscal years ended June 30, 2019, June 24, 2018, and June 25, 2017 are as follows:



	Fiscal Years Ended
	June 30, 2019			June 24, 2018			June 25, 2017
(in millions of U.S. Dollars)
Revenue, net		$419.8			$568.8			$701.5
Cost of revenue, net	324.3			463.2			510.9
Gross profit	95.5			105.6			190.6
Research and development	37.1			35.9			44.7
Sales, general and administrative	100.6			97.6			119.6
Amortization or impairment of acquisition-related intangibles	116.4			23.6			24.1
Goodwill impairment charges	90.3			247.5			—
Loss on disposal or impairment of long-lived assets	2.0			2.1			0.8
Operating (loss) income	(250.9		)	(301.1		)	1.4
Non-operating income	—			(1.3		)	(1.0		)
(Loss) income before income taxes and loss on sale	(250.9		)	(299.8		)	2.4
Loss on sale	66.2			—			—
(Loss) income before income taxes	(317.1		)	(299.8		)	2.4
Income tax expense (benefit)	0.1			(36.3		)	12.4
Net loss		($317.2	)		($263.5	)		($10.0	)

Assets and liabilities held for sale relating to the sale of the Lighting Products business unit as of June 24, 2018 are as follows:



(in millions of U.S. Dollars)	June 24, 2018
Assets
Accounts receivable, net	$	67.5
Income tax receivable	0.4
Inventories	144.4
Prepaid expenses	3.8
Other current assets	7.3
Total current assets	223.4
Property and equipment, net	72.2
Goodwill	90.3
Intangible assets, net	174.3
Deferred income taxes	0.7
Other assets	0.2
Total assets	$	561.1

Liabilities
Accounts payable, trade	$	44.7
Accrued salaries and wages	11.6
Income tax payable	0.3
Other current liabilities	24.2
Total current liabilities	80.8
Other long term liabilities	21.5
Total liabilities	$	102.3

The cash flow impacts of the Lighting Products business unit are as follows:



	Fiscal Years Ended
(in millions of U.S. Dollars)	June 30, 2019			June 24, 2018			June 25, 2017
Cash (used in) provided by operating activities of discontinued operations	$	(17.9	)	$	61.0		$	85.2
Cash used in investing activities of discontinued operations	(15.4		)	(17.9		)	(16.9		)

The Company recognized $1.6 million in administrative fees in fiscal 2019 relating to the TSA, all of which are accrued in accounts receivable, net in the consolidated balance sheets as of June 30, 2019. These fees were recorded as a reduction of sales, general and administrative expense in the consolidated statements of operations.

The Company recognized $2.1 million in revenue in fiscal 2019 related to the LED Supply Agreement. No amounts were accrued in accounts receivable, net in the consolidated balance sheets as of June 30, 2019 relating to the LED Supply Agreement. Additionally, the Company recorded a contract liability of $13.4 million relating to the LED Supply Agreement as of June 30, 2019. The contract liability is recognized in contract liabilities and other long term liabilities on the consolidated balance sheets.