Discontinued Operations

12 Months Ended

Jun. 30, 2024

Discontinued Operations and Disposal Groups [Abstract]

RF Business Divestiture

On December 2, 2023, the Company completed the sale of its RF product line (the RF Business) to MACOM Technology Solutions Holdings, Inc. (MACOM) pursuant to the terms of the Asset Purchase Agreement (the RF Purchase Agreement) dated August 22, 2023. Pursuant to the RF Purchase Agreement, the Company received approximately $75 million in cash and 711,528 shares of MACOM common stock (the MACOM Shares), which had a market value of approximately $60.8 million based on the closing price for MACOM’s common stock on December 1, 2023, the last trading day prior to the closing of the transaction (the RF Closing), as reported on the Nasdaq Global Select Market (the RF Business Divestiture).

In connection with the RF Business Divestiture, MACOM will assume control of Wolfspeed’s 100mm gallium nitride wafer fabrication facility in Research Triangle Park, North Carolina (the RTP Fab) approximately two years following the RF Closing (the RTP Fab Transfer). The RTP Fab Transfer will occur in the future to accommodate the Company’s relocation of certain production equipment currently located in the RTP Fab to its fabrication facility in Durham, North Carolina. Prior to the RTP Fab Transfer, the MACOM Shares are subject to restrictions on transfer. The Company will forfeit one-quarter of the MACOM Shares if the RTP Fab Transfer has not occurred by the fourth anniversary of the RF Closing.

The Company and MACOM also entered into certain ancillary and related agreements, including (i) an Intellectual Property Assignment and License Agreement, which assigned to MACOM certain intellectual property owned by the Company and its affiliates and licensed to MACOM certain additional intellectual property owned by the Company, (ii) a Transition Services Agreement, pursuant to which the Company provides MACOM certain limited transition services following the RF Closing, (iii) a Master Supply Agreement, pursuant to which the Company will continue to operate the RTP Fab and supply MACOM with Epi wafers and fabrication services (the RF Master Supply Agreement) through the date the RTP Fab Transfer is completed (the RTP Fab Transfer Date), (iv) a Long-Term Epi Supply Agreement (the Long-Term Epi Supply Agreement), pursuant to which MACOM will purchase Epi wafers from the Company from the RTP Fab Transfer Date until the fifth anniversary of the RTP Fab Transfer Date, (v) an Epi Research and Development Agreement, pursuant to which the Company will provide MACOM certain research and development activities and other technical manufacturing support services related to the RF Business during the period between the RF Closing and expiration of the Long-Term Epi Supply Agreement, and (vi) a Real Estate License Agreement, which allows MACOM to use certain portions of the RTP Fab to conduct the RF Business through the RTP Fab Transfer Date. In connection with the RTP Fab Transfer, the Company and MACOM will enter into a Lease Agreement, which allows MACOM to lease the premises of the RTP Fab for a period of 15 years after the RTP Fab Transfer Date.

Because the RF Business Divestiture represented a strategic shift that had and will continue to have a major effect on the Company’s operations and financial results, the Company has classified the results of the RF 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 that conveyed in the RF Purchase Agreement upon classification as discontinued operations in August 2023. Additionally, the related assets and liabilities associated with the RF Business Divestiture, with the exception of current and long-term assets associated with the RTP Fab, are classified as held for sale from discontinued operations in the consolidated balance sheet as of June 25, 2023.

The RTP Fab is not considered within the RF Business Divestiture disposal group and the current and long-term assets associated with the RTP Fab are not classified as held for sale from discontinued operations in the consolidated balance sheets.

The following table presents the financial results of the RF Business as loss from discontinued operations, net of income taxes in the Company's consolidated statements of operations:


	Fiscal Year Ended
(in millions of U.S. Dollars)		June 30, 2024	June 25, 2023	June 26, 2022
Revenue, net		$59.6	$163.4	$174.1
Cost of revenue, net		68.7	126.8	132.9
Gross (loss) profit		(9.1)	36.6	41.2
Operating expenses:
Research and development		30.5	59.7	53.8
Sales, general and administrative		13.9	21.0	20.5
Amortization of intangibles		1.5	9.2	11.4
Loss on disposal of assets		0.3	—	—

Other operating expense		24.3	15.5	0.2
Operating loss		(79.6)	(68.8)	(44.7)
Non-operating expense		—	(0.1)	(0.5)
Loss before income taxes and loss on sale		(79.6)	(68.7)	(44.2)
Loss on sale		204.0	—	—
Loss before income taxes		(283.6)	(68.7)	(44.2)
Income tax expense		7.0	0.7	0.8
Net loss		($290.6)	($69.4)	($45.0)

During fiscal 2024, the Company recorded a total loss on sale of $204.0 million, which was net against the impairments and excess loss liability on assets held for sale. The total cost of selling the RF Business was $25.4 million, of which $12.2 million was recognized in fiscal 2024.

At the inception of the RF Master Supply Agreement, the Company recorded a supply agreement liability of $95.0 million, of which $67.0 million was outstanding as of June 30, 2024. The supply agreement liability is recognized in other current liabilities and other long-term liabilities on the consolidated balance sheets. A receivable of $4.6 million in connection with the RF Master Supply Agreement is included in other current assets in the consolidated balance sheet as of June 30, 2024.

Additionally, the Company recorded a supply agreement liability of $58.0 million for the Long-Term Epi Supply Agreement and a liability of $38.0 million for the future transfer of assets in connection with the RTP Fab Transfer. These liabilities are recognized in other long-term liabilities in the consolidated balance sheet as of June 30, 2024.

The following table presents the assets and liabilities of the RF Business classified as discontinued operations as of June 25, 2023:


(in millions of U.S. Dollars)									June 25, 2023
Assets (current and long-term)



Inventories									$42.6


Other current assets									0.2


Property and equipment, net									25.9

Intangible assets, net									92.0

Other assets									6.6

Assets held for sale from discontinued operations									167.3

Liabilities (current and long-term)
Accounts payable and accrued expenses									2.4
Contract liabilities and distributor-related reserves									4.0

Other current liabilities									2.2


Other long-term liabilities									5.3

Liabilities held for sale of discontinued operations									$13.9

LED Business Divestiture

On March 1, 2021, the Company completed the sale of certain assets and subsidiaries comprising its former LED Products segment to SMART Global Holdings, Inc. (SGH) and its wholly owned subsidiary CreeLED, Inc. (CreeLED, and collectively with SGH, SMART) (the LED Business Divestiture) pursuant to the terms of the Asset Purchase Agreement (the LED Purchase Agreement), dated October 18, 2020, as amended.

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 and Fabrication Services Agreement (the 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.

In the third quarter of fiscal 2022, the Company received an early payment for the unsecured promissory note issued to the Company by SGH at the closing of the LED Business Divestiture. The principal amount of $125.0 million was paid in full, along with outstanding accrued interest as of the payment date.

In the fourth quarter of fiscal 2022, the Company received an unsecured promissory note from CreeLED as additional consideration to satisfy the earnout obligations pursuant to the LED Purchase Agreement (the Earnout Note) with a principal amount of $101.8 million. As a result, the Company recorded a net gain of $94.2 million within discontinued operations, net in the consolidated statements of operations for fiscal year ended June 26, 2022. The gain recorded is net of $3.9 million in taxes and $1.2 million in transaction fees. Additionally, the amount is less a previously recorded gain of $2.5 million, which was recorded in fiscal 2021 as part of the total loss on sale to account for the minimum amount of the Earnout Note. In the first quarter of fiscal 2023, the Company received an early payment for the Earnout Note for the full principal amount of $101.8 million and the Company agreed to forgo payment by CreeLED of the outstanding accrued interest as of the payment date.

For the fiscal year ended June 26, 2022, the Company recognized $3.9 million of income tax expense related to discontinued operations, which primarily related to the foreign operations of the LED Business, inclusive of $2.4 million of income tax expense related to the sale of the issued and outstanding equity interests of Cree Huizhou Solid State Lighting Company Limited in the third quarter of fiscal 2021.

The income tax impact of the United States 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 years ended June 25, 2023 and June 26, 2022, the Company recognized $2.4 million and $3.6 million, respectively, in administrative fees related to the LED RELA. Fees related to the LED RELA were recorded as lease income. See Note 5, "Leases" below for additional information.

For the fiscal years ended June 25, 2023 and June 26, 2022, the Company recognized $6.0 million and $9.2 million, respectively, in administrative fees related to the LED TSA. 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, none of which was outstanding as of June 30, 2024.

The Company recognized a net loss of $25.3 million, $13.6 million and $0.8 million in non-operating expense, net for the fiscal years ended June 30, 2024, June 25, 2023 and June 26, 2022, respectively, related to the Wafer Supply Agreement. A receivable of $0.6 million was included in other assets in the consolidated balance sheets as of June 30, 2024. In the fourth quarter of fiscal 2024, the Company entered into an amendment to the Wafer Supply Agreement to terminate the agreement as of September 30, 2024.