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Discontinued Operations | 12 Months Ended
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Jun. 27, 2021
Discontinued Operations and Disposal Groups [Abstract] |
Discontinued Operations | Discontinued Operations Lighting Business 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 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 was 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 year ended June 30, 2019 are as follows:
(in millions of U.S. Dollars) | June 30, 2019
Revenue, net | $419.8 |
Cost of revenue, net | 324.3 |
Gross profit | 95.5 |
Research and development | 37.1 |
Sales, general and administrative | 100.6 |
Amortization or impairment of acquisition-related intangibles | 116.4 |
Goodwill impairment charges | 90.3 |
Loss on disposal or impairment of long-lived assets | 2.0 |
Loss before income taxes and loss on sale | (250.9) |
Loss on sale | 66.2 |
Loss before income taxes | (317.1) |
Income tax expense | 0.1 |
Net loss | ($317.2) |
The Company recognized $4.2 million, $10.5 million and $1.6 million in administrative fees for the fiscal years ended June 27, 2021, June 28, 2020 and June 30, 2019, respectively, relating to the TSA, of which $1.6 million was accrued in accounts receivable, net in the consolidated balance sheets as of June 28, 2020. Less than $0.1 million was accrued in accounts receivable, net in the consolidated balance sheets as of June 27, 2021. These fees were recorded as a reduction of sales, general and administrative expense in the consolidated statements of operations. The LED Supply Agreement was transferred in connection with the LED Business Divestiture. The Company recognized $4.2 million, $12.0 million and $2.1 million of revenue related to the LED Supply Agreement for the fiscal years ended June 27, 2021, June 28, 2020 and June 30, 2019, respectively, which is included in revenue from discontinued operations. As of June 28, 2020, $0.7 million of revenue related to the LED Supply Agreement was accrued in accounts receivable, net and is included in current assets of discontinued operations on the consolidated balance sheets. Additionally, the Company recorded a contract liability of $9.9 million relating to the LED Supply Agreement as of June 28, 2020. The contract liability is recorded in current and long-term liabilities of discontinued operations on the consolidated balance sheets. LED Business On March 1, 2021, the Company completed the LED Business Divestiture pursuant to the terms of the Asset Purchase Agreement (the LED Purchase Agreement), dated October 18, 2020, as amended. Pursuant to the LED Purchase Agreement, (i) the Company completed the sale to SMART of (a) certain equipment, inventory, intellectual property rights, contracts, and real estate comprising the Company’s LED Products segment, (b) all of the issued and outstanding equity interests of Cree Huizhou Solid State Lighting Company Limited (Cree Huizhou), a limited liability company organized under the laws of the People’s Republic of China and an indirect wholly owned subsidiary of the Company, and (c) the Company’s ownership interest in Cree Venture LED, the Company’s joint venture with San’an Optoelectronics Co., Ltd. (collectively, the LED Business); and (ii) SMART assumed certain liabilities related to the LED Business. The Company retained certain assets used in and pre-closing liabilities associated with the LED Products segment. The purchase price for the LED Business consisted of (i) a payment of $50 million in cash, subject to customary adjustments, (ii) an unsecured promissory note issued to the Company by SGH in the amount of $125 million (the Purchase Price Note), (iii) the potential to receive an earn-out payment between $2.5 million and $125 million based on the revenue and gross profit performance of the LED Business in the first four full fiscal quarters following the closing (the Earnout Period), also payable in the form of a unsecured promissory note of SGH (the Earnout Note), and (iv) the assumption of certain liabilities. The Purchase Price Note and the Earnout Note will accrue interest at a rate of three-month LIBOR plus 3.0% with interest paid every three months and one bullet payment of principal and all accrued and unpaid interest will be payable on the maturity date of the Purchase Price Note and Earnout Note. The Purchase Price Note will mature on August 15, 2023, and the Earnout Note will mature on March 27, 2025. The Company recognized a loss on sale of the LED Business of $29.1 million. The cost of selling the LED Business was $27.4 million, which was recognized throughout fiscal 2020 and 2021. In connection with the closing of the LED Business Divestiture, the Company and CreeLED also entered into certain ancillary and related agreements, including (i) an Intellectual Property Assignment and License Agreement, which assigned to CreeLED certain intellectual property owned by the Company and its affiliates and licensed to CreeLED certain additional intellectual property owned by the Company, (ii) a Transition Services Agreement (LED TSA), (iii) a Wafer Supply Agreement, pursuant to which the Company will supply CreeLED with certain silicon carbide materials and fabrication services for up to four years, and (iv) a Real Estate License Agreement (LED RELA), which will allow CreeLED to use certain premises owned by the Company to conduct the LED Business for a period of up to 24 months after closing. Because the LED Business Divestiture represented a strategic shift that will have a major effect on the Company’s operations and financial results, the Company has classified the results of the LED Business as discontinued operations in the Company’s consolidated statements of operations for all periods presented. The Company ceased recording depreciation and amortization of long-lived assets conveying in the LED Purchase Agreement upon classification as discontinued operations in October 2020. Additionally, the related assets and liabilities associated with discontinued operations are classified as held for sale in the consolidated balance sheets as of June 28, 2020. The following table presents the financial results of the LED Business as (loss) income from discontinued operations, net of income taxes in the Company's consolidated statements of operations:
| Fiscal Years Ended
(in millions of U.S. Dollars) | June 27, 2021 |  | June 28, 2020 |  | June 30, 2019
Revenue, net | $272.8 |  |  | $433.2 |  |  | $541.8 |
Cost of revenue, net | 213.3 |  |  | 343.4 |  |  | 394.5 |
Gross profit | 59.5 |  |  | 89.8 |  |  | 147.3 |
Operating expenses: |  |  |  |  |
Research and development | 22.3 |  |  | 32.2 |  |  | 36.8 |
Sales, general and administrative | 29.4 |  |  | 29.7 |  |  | 31.8 |
Goodwill impairment | 112.6 |  |  | — |  |  | — |
Impairment on assets held for sale | 19.5 |  |  | — |  |  | — |
Gain on disposal or impairment of long-lived assets | (1.6) |  |  | (0.1) |  |  | (0.3) |
Other operating expense | 18.7 |  |  | 13.3 |  |  | 1.4 |
Operating (loss) income | (141.4) |  |  | 14.7 |  |  | 77.6 |
Non-operating income | (0.3) |  |  | (0.5) |  |  | (0.1) |
(Loss) income before income taxes and loss on sale | (141.1) |  |  | 15.2 |  |  | 77.7 |
Loss on sale | 29.1 |  |  | — |  |  | — |
(Loss) income before income taxes | (170.2) |  |  | 15.2 |  |  | 77.7 |
Income tax expense | 11.0 |  |  | 8.2 |  |  | 17.1 |
Net (loss) income | (181.2) |  |  | 7.0 |  |  | 60.6 |
Net income attributable to noncontrolling interest | 1.4 |  |  | 1.1 |  |  | — |
Net (loss) income attributable to controlling interest | ($182.6) |  |  | $5.9 |  |  | $60.6 |
As of September 27, 2020, the Company determined it would more likely than not sell all or a portion of the assets comprising the LED Products segment below carrying value. As a result, the Company recorded an impairment to goodwill of $105.7 million. As of December 27, 2020, the Company recorded an additional impairment to goodwill of $6.9 million and an impairment to assets held for sale associated with the LED Business Divestiture of $19.5 million. For the fiscal years ended June 27, 2021, June 28, 2020 and June 30, 2019, the Company recognized $11.0 million, $8.2 million and $17.1 million, respectively, of income tax expense related to discontinued operations, which primarily related to the foreign operations of the LED Business. Income tax expense related to discontinued operations for the fiscal year ended June 27, 2021 includes $4.1 million of income tax expense related to the sale of the issued and outstanding equity interests of Cree Huizhou in the third quarter of fiscal 2021. The income tax impact of the U.S. operations of the LED Business for all periods presented were offset with a valuation allowance as described in Note 14, "Income Taxes." For the fiscal year ended June 27, 2021, the Company recognized $1.2 million and $4.0 million in administrative fees related to the LED RELA and the LED TSA, respectively, of which $0.3 million and $0.7 million are included in accounts receivable, net in the consolidated balance sheets as of June 27, 2021. Fees related to the LED RELA were recorded as lease income, see Note 5, "Leases." Fees related to the LED TSA were recorded as a reduction in expense within the line item in the consolidated statements of operations in which costs were incurred. At the inception of the Wafer Supply Agreement, the Company recorded a supply agreement liability of $31.0 million, of which $22.7 million was outstanding as of June 27, 2021. The supply agreement liability is recognized in other current liabilities and other long-term liabilities on the consolidated balance sheets. The Company recognized a net loss of $0.8 million in non-operating expense, net for the fiscal year ended June 27, 2021 related to the Wafer Supply Agreement. A receivable of $7.0 million was included in other assets in the consolidated balance sheets as of June 27, 2021. The following table presents the assets and liabilities of the LED Business classified as discontinued operations as of June 28, 2020:
(in millions of U.S. Dollars) |  |  | June 28, 2020
Assets |  |  |
Short-term investments |  |  | $12.0 |
Accounts receivable, net |  |  | 41.6 |
Inventories |  |  | 57.2 |
Prepaid expenses |  |  | 0.1 |
Other current assets |  |  | 5.1 |
Current assets of discontinued operations |  |  | 116.0 |
Property and equipment, net |  |  | 60.3 |
Goodwill |  |  | 180.3 |
Intangible assets, net |  |  | 22.7 |
Deferred tax assets |  |  | 5.1 |
Other assets |  |  | 1.7 |
Long-term assets of discontinued operations |  |  | 270.1 |
Liabilities |  |  |
Accounts payable and accrued expenses |  |  | 31.0 |
Accrued contract liabilities |  |  | 24.1 |
Income taxes payable |  |  | 2.0 |
Other current liabilities |  |  | 3.1 |
Current liabilities of discontinued operations |  |  | 60.2 |
Other long-term liabilities |  |  | 9.8 |
Long-term liabilities of discontinued operations |  |  | 9.8 |
As of June 27, 2021, certain leases conveying to SMART as part of the LED Purchase Agreement, including an office lease in Hong Kong, were still legally held by the Company. As of June 27, 2021, the assets and liabilities related to these leases are classified as held for sale in the consolidated balance sheets.

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- Definition The entire disclosure related to a disposal group. Includes, but is not limited to, a discontinued operation, disposal classified as held-for-sale or disposed of by means other than sale or disposal of an individually significant component. + References Reference 1: http://fasb.org/us-gaap/role/ref/legacyRef -Publisher FASB -Name Accounting Standards Codification -Topic 360 -URI http://asc.fasb.org/topic&trid=2155823 Reference 2: http://fasb.org/us-gaap/role/ref/legacyRef -Publisher FASB -Name Accounting Standards Codification -Topic 205 -SubTopic 20 -URI http://asc.fasb.org/subtopic&trid=2122178 + Details
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