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Leases

6 Months Ended

Dec. 25, 2022

Leases [Abstract]

Leases

Leases

The Company primarily leases manufacturing and office spaces. The Company also has a number of bulk gas leases. Lease agreements frequently include renewal provisions and require the Company to pay real estate taxes, insurance and maintenance costs. Variable costs include lease payments that were volume or usage-driven in accordance with the use of the underlying asset, as well as non-lease components incurred with respect to actual terms rather than contractually fixed amounts.

The Company's finance lease obligations primarily relate to contract manufacturing space in Malaysia and a 49-year ground lease on the Company's Silicon Carbide device fabrication facility in New York.

Balance Sheet

Lease assets and liabilities and the corresponding balance sheet classifications are as follows (in millions of U.S. Dollars):

Operating Leases:			December 25, 2022						June 26, 2022
Right-of-use asset (1)			$58.1						$48.5
Current lease liability (2)			5.3						4.6
Non-current lease liability (3)			57.3						43.6
Total operating lease liabilities			$62.6						$48.2
Finance Leases:
Finance lease assets (4)			$10.0						$10.3
Current portion of finance lease liabilities			0.5						0.5
Finance lease liabilities, less current portion			9.4						9.6
Total finance lease liabilities			$9.9						$10.1

(1) Within other assets on the consolidated balance sheets.

(2) Within other current liabilities on the consolidated balance sheets.

(3) Within other long-term liabilities on the consolidated balance sheets.

(4) Within property and equipment, net on the consolidated balance sheets.

Statement of Operations

Operating lease expense was $2.5 million and $4.7 million for the three and six months ended December 25, 2022, respectively, and $3.3 million and $4.8 million for the three and six months ended December 26, 2021, respectively.

Short-term lease expense, variable lease expense and sublease income were immaterial for the three and six months ended December 25, 2022 and December 26, 2021.

Finance lease amortization was $0.2 million and $0.4 million and interest expense was less than $0.1 million and $0.1 million for the three and six months ended December 25, 2022, respectively. Finance lease amortization was $0.3 million and $0.7 million and interest expense was $0.1 million and $0.2 million for the three and six months ended December 26, 2021, respectively.

Cash Flows

Cash flow information consisted of the following (1):

			Six months ended
(in millions of U.S. Dollars)			December 25, 2022						December 26, 2021
Cash (used in) provided by operating activities:
Cash paid for operating leases			($2.7)						($4.2)
Cash received from tenant improvement allowance on operating lease			3.1						—
Cash paid for interest portion of financing leases			(0.1)						(0.1)
Cash used in financing activities:
Cash paid for principal portion of finance leases			(0.3)						(0.2)

(1) See Note 5, "Financial Statement Details," for non-cash activities related to leases.

Lease Liability Maturities

Maturities of operating and finance lease liabilities as of December 25, 2022 were as follows (in millions of U.S. Dollars):

Fiscal Year Ending			Operating Leases			Finance Leases			Total
June 25, 2023 (remainder of fiscal 2023)			$3.4			$0.4			$3.8
June 30, 2024			9.2			0.7			9.9
June 29, 2025			9.9			0.7			10.6
June 28, 2026			9.7			0.7			10.4
June 27, 2027			8.4			0.4			8.8
Thereafter			67.1			14.2			81.3
Total lease payments			107.7			17.1			124.8
Future tenant improvement allowances			(18.5)			—			(18.5)
Imputed lease interest			(26.6)			(7.2)			(33.8)
Total lease liabilities			$62.6			$9.9			$72.5

Supplemental Disclosures

			Operating Leases			Finance Leases
Weighted average remaining lease term (in months) (1)			134			556
Weighted average discount rate (2)			4.46		%	2.68		%

(1) Weighted average remaining lease term of finance leases excluding the 49-year ground lease is 47 months.

(2) Weighted average discount rate of finance leases excluding the 49-year ground lease is 3.49%.

Lease Income

As mentioned in Note 2, "Discontinued Operations", on March 1, 2021 and in connection with the sale of its LED Business, the Company entered into the LED RELA pursuant to which the Company leases to CreeLED approximately 58,000 square feet of the Company’s property and certain facilities in Durham, North Carolina for a total of $3.6 million per year. The lease term is 24 months and expires on February 26, 2023. Subject to certain provisions in the LED RELA, CreeLED may terminate its rights or a portion of its rights under the agreement at any time with sixty days written notice. A notice of thirty days is permitted under certain circumstances as defined in the agreement. The agreement does not contain any renewal provisions.

The Company recognized lease income of $0.9 million and $1.8 million for the three and six months ended December 25, 2022, respectively. The Company recognized lease income of $0.9 million and $1.8 million for the three and six months ended December 26, 2021, respectively.

The Company did not recognize any variable lease income for the three and six months ended December 25, 2022 and December 26, 2021.

Future minimum rental income relating to the LED RELA is $0.6 million for the remainder of fiscal 2023.

Leases

Leases

The Company primarily leases manufacturing and office spaces. The Company also has a number of bulk gas leases. Lease agreements frequently include renewal provisions and require the Company to pay real estate taxes, insurance and maintenance costs. Variable costs include lease payments that were volume or usage-driven in accordance with the use of the underlying asset, as well as non-lease components incurred with respect to actual terms rather than contractually fixed amounts.

The Company's finance lease obligations primarily relate to contract manufacturing space in Malaysia and a 49-year ground lease on the Company's Silicon Carbide device fabrication facility in New York.

Balance Sheet

Lease assets and liabilities and the corresponding balance sheet classifications are as follows (in millions of U.S. Dollars):

Operating Leases:			December 25, 2022						June 26, 2022
Right-of-use asset (1)			$58.1						$48.5
Current lease liability (2)			5.3						4.6
Non-current lease liability (3)			57.3						43.6
Total operating lease liabilities			$62.6						$48.2
Finance Leases:
Finance lease assets (4)			$10.0						$10.3
Current portion of finance lease liabilities			0.5						0.5
Finance lease liabilities, less current portion			9.4						9.6
Total finance lease liabilities			$9.9						$10.1

(1) Within other assets on the consolidated balance sheets.

(2) Within other current liabilities on the consolidated balance sheets.

(3) Within other long-term liabilities on the consolidated balance sheets.

(4) Within property and equipment, net on the consolidated balance sheets.

Statement of Operations

Operating lease expense was $2.5 million and $4.7 million for the three and six months ended December 25, 2022, respectively, and $3.3 million and $4.8 million for the three and six months ended December 26, 2021, respectively.

Short-term lease expense, variable lease expense and sublease income were immaterial for the three and six months ended December 25, 2022 and December 26, 2021.

Finance lease amortization was $0.2 million and $0.4 million and interest expense was less than $0.1 million and $0.1 million for the three and six months ended December 25, 2022, respectively. Finance lease amortization was $0.3 million and $0.7 million and interest expense was $0.1 million and $0.2 million for the three and six months ended December 26, 2021, respectively.

Cash Flows

Cash flow information consisted of the following (1):

			Six months ended
(in millions of U.S. Dollars)			December 25, 2022						December 26, 2021
Cash (used in) provided by operating activities:
Cash paid for operating leases			($2.7)						($4.2)
Cash received from tenant improvement allowance on operating lease			3.1						—
Cash paid for interest portion of financing leases			(0.1)						(0.1)
Cash used in financing activities:
Cash paid for principal portion of finance leases			(0.3)						(0.2)

(1) See Note 5, "Financial Statement Details," for non-cash activities related to leases.

Lease Liability Maturities

Maturities of operating and finance lease liabilities as of December 25, 2022 were as follows (in millions of U.S. Dollars):

Fiscal Year Ending			Operating Leases			Finance Leases			Total
June 25, 2023 (remainder of fiscal 2023)			$3.4			$0.4			$3.8
June 30, 2024			9.2			0.7			9.9
June 29, 2025			9.9			0.7			10.6
June 28, 2026			9.7			0.7			10.4
June 27, 2027			8.4			0.4			8.8
Thereafter			67.1			14.2			81.3
Total lease payments			107.7			17.1			124.8
Future tenant improvement allowances			(18.5)			—			(18.5)
Imputed lease interest			(26.6)			(7.2)			(33.8)
Total lease liabilities			$62.6			$9.9			$72.5

Supplemental Disclosures

			Operating Leases			Finance Leases
Weighted average remaining lease term (in months) (1)			134			556
Weighted average discount rate (2)			4.46		%	2.68		%

(1) Weighted average remaining lease term of finance leases excluding the 49-year ground lease is 47 months.

(2) Weighted average discount rate of finance leases excluding the 49-year ground lease is 3.49%.

Lease Income

As mentioned in Note 2, "Discontinued Operations", on March 1, 2021 and in connection with the sale of its LED Business, the Company entered into the LED RELA pursuant to which the Company leases to CreeLED approximately 58,000 square feet of the Company’s property and certain facilities in Durham, North Carolina for a total of $3.6 million per year. The lease term is 24 months and expires on February 26, 2023. Subject to certain provisions in the LED RELA, CreeLED may terminate its rights or a portion of its rights under the agreement at any time with sixty days written notice. A notice of thirty days is permitted under certain circumstances as defined in the agreement. The agreement does not contain any renewal provisions.

The Company recognized lease income of $0.9 million and $1.8 million for the three and six months ended December 25, 2022, respectively. The Company recognized lease income of $0.9 million and $1.8 million for the three and six months ended December 26, 2021, respectively.

The Company did not recognize any variable lease income for the three and six months ended December 25, 2022 and December 26, 2021.

Future minimum rental income relating to the LED RELA is $0.6 million for the remainder of fiscal 2023.

Leases

Leases

The Company primarily leases manufacturing and office spaces. The Company also has a number of bulk gas leases. Lease agreements frequently include renewal provisions and require the Company to pay real estate taxes, insurance and maintenance costs. Variable costs include lease payments that were volume or usage-driven in accordance with the use of the underlying asset, as well as non-lease components incurred with respect to actual terms rather than contractually fixed amounts.

The Company's finance lease obligations primarily relate to contract manufacturing space in Malaysia and a 49-year ground lease on the Company's Silicon Carbide device fabrication facility in New York.

Balance Sheet

Lease assets and liabilities and the corresponding balance sheet classifications are as follows (in millions of U.S. Dollars):

Operating Leases:			December 25, 2022						June 26, 2022
Right-of-use asset (1)			$58.1						$48.5
Current lease liability (2)			5.3						4.6
Non-current lease liability (3)			57.3						43.6
Total operating lease liabilities			$62.6						$48.2
Finance Leases:
Finance lease assets (4)			$10.0						$10.3
Current portion of finance lease liabilities			0.5						0.5
Finance lease liabilities, less current portion			9.4						9.6
Total finance lease liabilities			$9.9						$10.1

(1) Within other assets on the consolidated balance sheets.

(2) Within other current liabilities on the consolidated balance sheets.

(3) Within other long-term liabilities on the consolidated balance sheets.

(4) Within property and equipment, net on the consolidated balance sheets.

Statement of Operations

Operating lease expense was $2.5 million and $4.7 million for the three and six months ended December 25, 2022, respectively, and $3.3 million and $4.8 million for the three and six months ended December 26, 2021, respectively.

Short-term lease expense, variable lease expense and sublease income were immaterial for the three and six months ended December 25, 2022 and December 26, 2021.

Finance lease amortization was $0.2 million and $0.4 million and interest expense was less than $0.1 million and $0.1 million for the three and six months ended December 25, 2022, respectively. Finance lease amortization was $0.3 million and $0.7 million and interest expense was $0.1 million and $0.2 million for the three and six months ended December 26, 2021, respectively.

Cash Flows

Cash flow information consisted of the following (1):

			Six months ended
(in millions of U.S. Dollars)			December 25, 2022						December 26, 2021
Cash (used in) provided by operating activities:
Cash paid for operating leases			($2.7)						($4.2)
Cash received from tenant improvement allowance on operating lease			3.1						—
Cash paid for interest portion of financing leases			(0.1)						(0.1)
Cash used in financing activities:
Cash paid for principal portion of finance leases			(0.3)						(0.2)

(1) See Note 5, "Financial Statement Details," for non-cash activities related to leases.

Lease Liability Maturities

Maturities of operating and finance lease liabilities as of December 25, 2022 were as follows (in millions of U.S. Dollars):

Fiscal Year Ending			Operating Leases			Finance Leases			Total
June 25, 2023 (remainder of fiscal 2023)			$3.4			$0.4			$3.8
June 30, 2024			9.2			0.7			9.9
June 29, 2025			9.9			0.7			10.6
June 28, 2026			9.7			0.7			10.4
June 27, 2027			8.4			0.4			8.8
Thereafter			67.1			14.2			81.3
Total lease payments			107.7			17.1			124.8
Future tenant improvement allowances			(18.5)			—			(18.5)
Imputed lease interest			(26.6)			(7.2)			(33.8)
Total lease liabilities			$62.6			$9.9			$72.5

Supplemental Disclosures

			Operating Leases			Finance Leases
Weighted average remaining lease term (in months) (1)			134			556
Weighted average discount rate (2)			4.46		%	2.68		%

(1) Weighted average remaining lease term of finance leases excluding the 49-year ground lease is 47 months.

(2) Weighted average discount rate of finance leases excluding the 49-year ground lease is 3.49%.

Lease Income

As mentioned in Note 2, "Discontinued Operations", on March 1, 2021 and in connection with the sale of its LED Business, the Company entered into the LED RELA pursuant to which the Company leases to CreeLED approximately 58,000 square feet of the Company’s property and certain facilities in Durham, North Carolina for a total of $3.6 million per year. The lease term is 24 months and expires on February 26, 2023. Subject to certain provisions in the LED RELA, CreeLED may terminate its rights or a portion of its rights under the agreement at any time with sixty days written notice. A notice of thirty days is permitted under certain circumstances as defined in the agreement. The agreement does not contain any renewal provisions.

The Company recognized lease income of $0.9 million and $1.8 million for the three and six months ended December 25, 2022, respectively. The Company recognized lease income of $0.9 million and $1.8 million for the three and six months ended December 26, 2021, respectively.

The Company did not recognize any variable lease income for the three and six months ended December 25, 2022 and December 26, 2021.

Future minimum rental income relating to the LED RELA is $0.6 million for the remainder of fiscal 2023.

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The entire disclosure for finance leases of lessee. Includes, but is not limited to, description of lessee's finance lease and maturity analysis of finance lease liability.

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-Publisher FASB
-Name Accounting Standards Codification
-Topic 842
-SubTopic 20
-URI https://asc.fasb.org/subtopic&trid=77888251

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-Name Accounting Standards Codification
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-URI https://asc.fasb.org/subtopic&trid=77888251

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-Name Accounting Standards Codification
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-SubTopic 30
-URI https://asc.fasb.org/subtopic&trid=77888252

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