XML 30 R9.htm IDEA: XBRL DOCUMENT
v3.24.0.1

Discontinued Operations | 6 Months Ended
--- | ---
Dec. 31, 2023
Discontinued Operations and Disposal Groups [Abstract] |
Discontinued Operations | Discontinued Operations 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 previously reported Asset Purchase Agreement (the RF Purchase Agreement). Pursuant to the RF Purchase Agreement, the Company received approximately $75 million in cash, subject to a customary purchase price adjustment, and 711,528 shares of MACOM common stock (the MACOM Shares), which shares 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 license to MACOM certain additional intellectual property owned by the Company, (ii) a Transition Services Agreement (the RF TSA), pursuant to which the Company provides MACOM certain limited transition services following the RF Closing, (iii) a Master Supply Agreement, pursuant to which Wolfspeed will continue to operate the RTP Fab and supply MACOM with Epi-wafers and fabrication services (the RF Master Supply Agreement) through the date on which the RTP Fab Transfer is complete (the RTP Fab Transfer Date), (iv) a Long-Term Epi Supply Agreement (the Long-Term Epi Supply Agreement), pursuant to which MACOM will purchase from the Company Epi-wafers 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 (the RF RELA), 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 (the RTP Fab 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 will 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 sheets 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:
| Three months ended |  | Six months ended
(in millions of U.S. Dollars) | December 31, 2023 |  | December 25, 2022 |  | December 31, 2023 |  | December 25, 2022
Revenue, net | $26.8 |  |  | $42.3 |  |  | $59.6 |  |  | $94.2 |
Cost of revenue, net | 30.8 |  |  | 32.1 |  |  | 68.7 |  |  | 71.8 |
Gross (loss) profit | (4.0) |  |  | 10.2 |  |  | (9.1) |  |  | 22.4 |
Operating expenses: |  |  |  |  |  |  |
Research and development | 10.2 |  |  | 17.6 |  |  | 30.5 |  |  | 32.5 |
Sales, general and administrative | 6.2 |  |  | 5.3 |  |  | 13.9 |  |  | 10.3 |
Amortization of intangibles | — |  |  | 2.2 |  |  | 1.5 |  |  | 4.6 |
Loss on disposal of assets | 0.3 |  |  | — |  |  | 0.3 |  |  | — |
Other operating expense | 7.2 |  |  | 3.4 |  |  | 24.3 |  |  | 5.5 |
Operating loss | (27.9) |  |  | (18.3) |  |  | (79.6) |  |  | (30.5) |
Non-operating expense | — |  |  | 0.2 |  |  | — |  |  | — |
Loss before income taxes and loss on sale | (27.9) |  |  | (18.5) |  |  | (79.6) |  |  | (30.5) |
(Gain) loss on sale | (16.0) |  |  | — |  |  | 204.0 |  |  | — |
Loss before income taxes | (11.9) |  |  | (18.5) |  |  | (283.6) |  |  | (30.5) |
Income tax expense | 6.6 |  |  | 0.3 |  |  | 7.0 |  |  | 0.4 |
Net loss | ($18.5) |  |  | ($18.8) |  |  | ($290.6) |  |  | ($30.9) |
In the first quarter of fiscal 2024, the Company recorded an impairment to assets held for sale associated with the pending RF Business Divestiture of $144.6 million and an excess loss liability on assets held for sale of $75.4 million. During the first six months of 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 in the first quarter of fiscal 2024 and resulted in a gain on sale for the three months ended December 31, 2023. This gain primarily consisted of an increase in fair value of the MACOM Shares between the date of the RF Purchase Agreement and the RF Closing. Total cost of selling the RF Business was $25.4 million, which was recognized throughout fiscal 2023 and 2024. At the inception of the RF Master Supply Agreement, the Company recorded a supply agreement liability of $95.0 million, of which $92.9 million was outstanding as of December 31, 2023. The supply agreement liability is recognized in other current liabilities and other long-term liabilities on the consolidated balance sheets. A receivable of $1.0 million in connection with the RF Master Supply Agreement is included in other current assets in the consolidated balance sheet as of December 31, 2023. 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 on the consolidated balance sheets. 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 |  |  | 91.9 |
Other assets |  |  | 6.7 |
Assets held for sale from discontinued operations |  |  | 167.3 |
Liabilities (current and long-term) |  |  |
Accounts payable and accrued expenses |  |  | 2.4 |
Accrued contract liabilities |  |  | 4.0 |
Finance lease liabilities |  |  | 0.1 |
Other current liabilities |  |  | 2.1 |
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 (the LED Business) 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 (the 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 (the LED RELA), which allowed CreeLED to use certain premises owned by the Company to conduct the LED Business for a period of up to 24 months after closing. For the three and six months ended December 25, 2022, the Company recognized $0.9 million and $1.8 million in administrative fees related to the LED RELA. Fees related to the LED RELA were recorded as lease income, see Note 4, "Leases." The LED RELA concluded in the third quarter of fiscal 2023. For the three and six months ended December 25, 2022, the Company recognized $1.8 million and $3.7 million 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. The LED TSA concluded in the fourth quarter of fiscal 2023. 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 December 31, 2023. For the three and six months ended December 31, 2023, the Company recognized a net loss of $6.6 million and $13.5 million, respectively in non-operating expense (income), net related to the Wafer Supply Agreement, of which a receivable of $0.9 million is included in other current assets in the consolidated balance sheet as of December 31, 2023. For the three and six months ended December 25, 2022, the Company recognized a net loss of $2.6 million and $2.5 million, respectively, in non-operating income, net related to the Wafer Supply Agreement.

X
- References No definition available. + Details
Name: | us-gaap_DiscontinuedOperationsAndDisposalGroupsAbstract
Namespace Prefix: | us-gaap_
Data Type: | xbrli:stringItemType
Balance Type: | na
Period Type: | duration

X
- 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 -Topic 205 -SubTopic 20 -Name Accounting Standards Codification -Publisher FASB -URI https://asc.fasb.org//205-20/tableOfContent Reference 2: http://fasb.org/us-gaap/role/ref/legacyRef -Topic 360 -Name Accounting Standards Codification -Publisher FASB -URI https://asc.fasb.org//360/tableOfContent + Details
Name: | us-gaap_DisposalGroupsIncludingDiscontinuedOperationsDisclosureTextBlock
Namespace Prefix: | us-gaap_
Data Type: | dtr-types:textBlockItemType
Balance Type: | na
Period Type: | duration