Discontinued Operations

3 Months Ended

Sep. 29, 2024

Discontinued Operations and Disposal Groups [Abstract]

RF Business Divestiture

On December 2, 2023 (the RF Closing), 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 and 711,528 shares of MACOM common stock (the MACOM Shares).

In connection with the divestiture of the RF Business (the RF Business Divestiture), MACOM will assume control of the Company’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 (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 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 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 had and will continue to have a major effect on the Company’s operations and financial results, the Company classified the results of the RF Business as discontinued operations in the Company’s consolidated statements of operations for fiscal 2024. 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. 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
(in millions of U.S. Dollars)						September 24, 2023
Revenue, net						$32.8
Cost of revenue, net						37.9
Gross profit (loss)						(5.1)
Operating expenses:
Research and development						20.3
Sales, general and administrative						7.7
Amortization of intangibles						1.5
Impairment on assets held for sale						144.6
Excess loss liability on assets held for sale						75.4
Other operating expense						17.1




Loss before income taxes						(271.7)
Income tax expense						0.4
Net loss						($272.1)

At the inception of the RF Master Supply Agreement, the Company recorded a supply agreement liability of $95.0 million, of which $57.5 million was outstanding as of September 29, 2024. The supply agreement liability is recognized in other current liabilities and other long-term liabilities on the consolidated balance sheets. A receivable of $5.2 million in connection with the RF Master Supply Agreement is included in other current assets in the consolidated balance sheet as of September 29, 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 on the consolidated balance sheets.

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 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. In fiscal 2024, the Company entered into an amendment to the Wafer Supply Agreement to terminate the agreement as of September 30, 2024.

For the three months ended September 29, 2024, the Company recognized a net loss of $9.2 million in non-operating expense (income), net related to the Wafer Supply Agreement. For the three months ended September 24, 2023, the Company recognized a net loss of $6.9 million in non-operating expense (income), net related to the Wafer Supply Agreement.