North Carolina
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56-1572719
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(State or other jurisdiction of incorporation or
organization)
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(I.R.S. Employer Identification No.)
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4600 Silicon Drive
Durham, North Carolina
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27703
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(Address of principal executive offices)
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(Zip Code)
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Large accelerated filer [X]
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Accelerated filer [ ]
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Non-accelerated filer [ ] (Do not check if a smaller reporting company)
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Smaller reporting company [ ]
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Emerging growth company [ ]
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Description
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Page No.
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Item 1.
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Item 2.
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Item 3.
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Item 4.
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Item 1.
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Item 1A.
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Item 2.
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Item 3.
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Item 4.
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Item 5.
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Item 6.
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December 24,
2017 |
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June 25,
2017 |
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(In thousands, except par value)
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ASSETS
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Current assets:
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Cash and cash equivalents
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$169,688
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$132,597
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Short-term investments
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480,221
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478,341
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Total cash, cash equivalents and short-term investments
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649,909
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610,938
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Accounts receivable, net
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153,014
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148,392
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Income tax receivable
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2,809
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8,040
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Inventories, net
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273,211
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284,385
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Prepaid expenses
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22,933
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23,305
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Other current assets
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19,450
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23,390
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Current assets held for sale
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6,913
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2,180
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Total current assets
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1,128,239
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1,100,630
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Property and equipment, net
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612,131
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581,263
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Goodwill
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618,828
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618,828
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Intangible assets, net
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259,607
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274,315
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Other long-term investments
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72,517
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50,366
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Deferred income taxes
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10,399
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11,763
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Other assets
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12,564
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12,702
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Total assets
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$2,714,285
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$2,649,867
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LIABILITIES AND SHAREHOLDERS’ EQUITY
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Current liabilities:
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Accounts payable, trade
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$158,291
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$133,185
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Accrued salaries and wages
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46,906
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41,860
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Other current liabilities
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40,525
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36,978
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Total current liabilities
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245,722
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212,023
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Long-term liabilities:
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Long-term debt
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124,000
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145,000
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Deferred income taxes
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37,404
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49,860
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Other long-term liabilities
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24,147
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20,179
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Total long-term liabilities
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185,551
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215,039
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Commitments and contingencies (Note 13)
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Shareholders’ equity:
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Preferred stock, par value $0.01; 3,000 shares authorized at December 24, 2017 and June 25, 2017; none issued and outstanding
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—
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—
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Common stock, par value $0.00125; 200,000 shares authorized at December 24, 2017 and June 25, 2017; 99,888 issued and outstanding at December 24, 2017 and 97,674 shares issued and outstanding at June 25, 2017
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123
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121
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Additional paid-in-capital
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2,483,424
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2,419,517
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Accumulated other comprehensive income, net of taxes
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3,427
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5,909
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Accumulated deficit
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(208,878
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)
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(202,742
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)
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Total shareholders’ equity
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2,278,096
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2,222,805
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Noncontrolling interest
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4,916
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—
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Total liabilities and equity
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$2,714,285
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$2,649,867
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Three Months Ended
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Six Months Ended
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December 24,
2017 |
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December 25,
2016 |
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December 24,
2017 |
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December 25,
2016 |
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(In thousands, except per share amounts)
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Revenue, net
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$367,870
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$401,326
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$728,268
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$772,559
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Cost of revenue, net
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275,267
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260,759
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535,333
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522,061
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Gross profit
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92,603
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140,567
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192,935
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250,498
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Operating expenses:
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Research and development
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39,776
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37,893
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81,635
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77,841
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Sales, general and administrative
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68,076
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76,513
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131,040
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144,971
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Amortization or impairment of acquisition-related intangibles
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6,792
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5,937
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13,584
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12,345
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Loss on disposal or impairment of long-lived assets
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4,262
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717
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7,087
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1,041
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Total operating expenses
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118,906
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121,060
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233,346
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236,198
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Operating (loss) income
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(26,303
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)
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19,507
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(40,411
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)
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14,300
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Non-operating income (expense), net
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26,729
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(4,760
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)
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25,662
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(4,919
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)
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Income (loss) before income taxes
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426
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14,747
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(14,749
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)
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9,381
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Income tax (benefit) expense
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(13,326
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)
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8,531
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(8,629
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)
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2,598
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Net income (loss)
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$13,752
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$6,216
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($6,120
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)
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$6,783
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Net income attributable to noncontrolling interest
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31
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—
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16
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—
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Net income (loss) attributable to controlling interest
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$13,721
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$6,216
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($6,136
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)
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$6,783
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Earnings (loss) per share:
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Basic
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$0.14
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$0.06
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($0.06
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)
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$0.07
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Diluted
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$0.14
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$0.06
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($0.06
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)
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$0.07
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Weighted average shares used in per share calculation:
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Basic
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99,184
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98,467
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98,499
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99,513
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Diluted
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100,763
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98,730
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98,499
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99,994
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Three Months Ended
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Six Months Ended
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December 24,
2017 |
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December 25,
2016 |
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December 24,
2017 |
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December 25,
2016 |
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(In thousands)
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Net income (loss)
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$13,721
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$6,216
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($6,136
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)
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$6,783
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Other comprehensive loss:
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Currency translation (loss) gain
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(424
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)
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(1,343
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1,218
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(1,314
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)
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Net unrealized loss on available-for-sale securities, net of tax benefit of $0 and $2,357 and $0 and $2,556 respectively
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(3,660
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)
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(3,795
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)
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(3,700
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)
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(4,115
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)
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Other comprehensive loss:
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(4,084
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)
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(5,138
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)
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(2,482
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)
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(5,429
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)
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Comprehensive income (loss)
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$9,637
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$1,078
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($8,618
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)
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$1,354
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Six Months Ended
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December 24,
2017 |
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December 25,
2016 |
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(In thousands)
|
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Cash flows from operating activities:
|
|
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|
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Net income (loss)
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($6,120
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)
|
|
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$6,783
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Adjustments to reconcile net income to net cash provided by operating activities:
|
|
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|
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Depreciation and amortization
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74,634
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62,574
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Stock-based compensation
|
22,162
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|
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26,856
|
|
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Excess tax benefit from stock-based payment arrangements
|
—
|
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(1
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)
|
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Loss on disposal or impairment of long-lived assets
|
7,087
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|
845
|
|
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Amortization of premium/discount on investments
|
2,631
|
|
|
2,749
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|
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(Gain) loss on equity investment
|
(21,479
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)
|
|
6,298
|
|
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Foreign exchange gain on equity investment
|
(672
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)
|
|
(434
|
)
|
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Deferred income taxes
|
(11,801
|
)
|
|
44
|
|
||
Changes in operating assets and liabilities:
|
|
|
|
||||
Accounts receivable, net
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(4,203
|
)
|
|
13,647
|
|
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Inventories
|
11,339
|
|
|
1,290
|
|
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Prepaid expenses and other assets
|
5,014
|
|
|
2,735
|
|
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Accounts payable, trade
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17,925
|
|
|
(13,834
|
)
|
||
Accrued salaries and wages and other liabilities
|
9,295
|
|
|
10,164
|
|
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Net cash provided by operating activities
|
105,812
|
|
|
119,716
|
|
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Cash flows from investing activities:
|
|
|
|
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Purchases of property and equipment
|
(85,222
|
)
|
|
(35,211
|
)
|
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Purchases of patent and licensing rights
|
(4,932
|
)
|
|
(5,836
|
)
|
||
Proceeds from sale of property and equipment
|
380
|
|
|
236
|
|
||
Purchases of short-term investments
|
(158,327
|
)
|
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(125,022
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)
|
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Proceeds from maturities of short-term investments
|
138,435
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|
|
93,312
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|
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Proceeds from sale of short-term investments
|
11,938
|
|
|
7,619
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Net cash used in investing activities
|
(97,728
|
)
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(64,902
|
)
|
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Cash flows from financing activities:
|
|
|
|
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Proceeds from issuing shares to noncontrolling interest
|
4,900
|
|
|
—
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|
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Payment of acquisition-related contingent consideration
|
(1,850
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)
|
|
(2,775
|
)
|
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Proceeds from long-term debt borrowings
|
160,000
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|
|
245,000
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|
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Payments on long-term debt borrowings
|
(181,000
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)
|
|
(235,000
|
)
|
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Net proceeds from issuance of common stock
|
46,550
|
|
|
8,021
|
|
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Excess tax benefit from stock-based payment arrangements
|
—
|
|
|
1
|
|
||
Repurchases of common stock
|
—
|
|
|
(98,431
|
)
|
||
Net cash provided by (used in) financing activities
|
28,600
|
|
|
(83,184
|
)
|
||
Effects of foreign exchange changes on cash and cash equivalents
|
407
|
|
|
(691
|
)
|
||
Net increase (decrease) in cash and cash equivalents
|
37,091
|
|
|
(29,061
|
)
|
||
Cash and cash equivalents:
|
|
|
|
||||
Beginning of period
|
132,597
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|
|
166,154
|
|
||
End of period
|
|
$169,688
|
|
|
|
$137,093
|
|
Supplemental disclosure of cash flow information:
|
|
|
|
||||
Significant non-cash transactions:
|
|
|
|
||||
Accrued property and equipment
|
|
$19,039
|
|
|
|
$8,240
|
|
•
|
Lighting Products
|
•
|
LED Products
|
•
|
Wolfspeed
|
|
December 24, 2017
|
|
June 25, 2017
|
||||
Billed trade receivables
|
|
$214,266
|
|
|
|
$205,516
|
|
Unbilled contract receivables
|
987
|
|
|
912
|
|
||
|
215,253
|
|
|
206,428
|
|
||
Allowance for sales returns, discounts and other incentives
|
(53,528
|
)
|
|
(49,425
|
)
|
||
Allowance for bad debts
|
(8,711
|
)
|
|
(8,611
|
)
|
||
Accounts receivable, net
|
|
$153,014
|
|
|
|
$148,392
|
|
|
December 24, 2017
|
|
June 25, 2017
|
||||
Raw material
|
|
$84,429
|
|
|
|
$73,410
|
|
Work-in-progress
|
89,501
|
|
|
100,402
|
|
||
Finished goods
|
99,281
|
|
|
110,573
|
|
||
Inventories, net
|
|
$273,211
|
|
|
|
$284,385
|
|
|
December 24, 2017
|
|
June 25, 2017
|
||||
Accrued taxes
|
|
$13,181
|
|
|
|
$11,148
|
|
Accrued professional fees
|
4,713
|
|
|
5,545
|
|
||
Accrued warranty
|
15,151
|
|
|
13,631
|
|
||
Accrued other
|
7,480
|
|
|
6,654
|
|
||
Other current liabilities
|
|
$40,525
|
|
|
|
$36,978
|
|
|
December 24, 2017
|
|
June 25, 2017
|
||||
Currency translation gain
|
|
$5,689
|
|
|
|
$4,471
|
|
Net unrealized (loss) gain on available-for-sale securities
|
(2,262
|
)
|
|
1,438
|
|
||
Accumulated other comprehensive income, net of taxes
|
|
$3,427
|
|
|
|
$5,909
|
|
|
Three Months Ended
|
|
Six Months Ended
|
||||||||||||
|
December 24, 2017
|
|
December 25, 2016
|
|
December 24, 2017
|
|
December 25, 2016
|
||||||||
Foreign currency gain (loss), net
|
|
$462
|
|
|
|
($1,856
|
)
|
|
|
$1,228
|
|
|
|
($495
|
)
|
Gain on sale of investments, net
|
1
|
|
|
—
|
|
|
47
|
|
|
12
|
|
||||
Gain (loss) on equity investment, net
|
24,746
|
|
|
(3,796
|
)
|
|
21,479
|
|
|
(6,283
|
)
|
||||
Interest income, net
|
1,467
|
|
|
900
|
|
|
2,617
|
|
|
1,787
|
|
||||
Other, net
|
53
|
|
|
(8
|
)
|
|
291
|
|
|
60
|
|
||||
Non-operating income (expense), net
|
|
$26,729
|
|
|
|
($4,760
|
)
|
|
|
$25,662
|
|
|
|
($4,919
|
)
|
Accumulated Other Comprehensive Income Component
|
|
Amount Reclassified Out of Accumulated Other Comprehensive Income
|
|
Affected Line Item in the Consolidated Statements of Income (Loss)
|
||||||||||||||
|
|
Three Months Ended
|
|
Six Months Ended
|
|
|
||||||||||||
|
|
December 24, 2017
|
|
December 25, 2016
|
|
December 24, 2017
|
|
December 25, 2016
|
|
|
||||||||
Net unrealized gain on available-for-sale securities, net of taxes
|
|
|
$1
|
|
|
|
$—
|
|
|
|
$47
|
|
|
|
$12
|
|
|
Non-operating income (expense), net
|
|
|
1
|
|
|
—
|
|
|
47
|
|
|
12
|
|
|
Income (loss) before income taxes
|
||||
|
|
—
|
|
|
—
|
|
|
—
|
|
|
5
|
|
|
Income tax (benefit) expense
|
||||
|
|
|
$1
|
|
|
|
$—
|
|
|
|
$47
|
|
|
|
$7
|
|
|
|
|
|
December 24, 2017
|
||||||||||||||
|
|
Amortized Cost
|
|
Gross Unrealized Gains
|
|
Gross Unrealized Losses
|
|
Estimated Fair Value
|
||||||||
Municipal bonds
|
|
|
$178,985
|
|
|
|
$815
|
|
|
|
($1,025
|
)
|
|
|
$178,775
|
|
Corporate bonds
|
|
172,410
|
|
|
1,161
|
|
|
(761
|
)
|
|
172,810
|
|
||||
U.S. agency securities
|
|
3,921
|
|
|
—
|
|
|
(7
|
)
|
|
3,914
|
|
||||
Non-U.S. certificates of deposit
|
|
122,634
|
|
|
—
|
|
|
—
|
|
|
122,634
|
|
||||
Commercial paper
|
|
2,088
|
|
|
—
|
|
|
—
|
|
|
2,088
|
|
||||
Total short-term investments
|
|
|
$480,038
|
|
|
|
$1,976
|
|
|
|
($1,793
|
)
|
|
|
$480,221
|
|
|
|
|
|
|
|
|
|
|
||||||||
|
|
June 25, 2017
|
||||||||||||||
|
|
Amortized Cost
|
|
Gross Unrealized Gains
|
|
Gross Unrealized Losses
|
|
Estimated Fair Value
|
||||||||
Municipal bonds
|
|
|
$177,890
|
|
|
|
$2,219
|
|
|
|
($68
|
)
|
|
|
$180,041
|
|
Corporate bonds
|
|
175,991
|
|
|
1,925
|
|
|
(195
|
)
|
|
177,721
|
|
||||
U.S. agency securities
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
||||
Non-U.S. certificates of deposit
|
|
120,379
|
|
|
—
|
|
|
—
|
|
|
120,379
|
|
||||
Commercial paper
|
|
200
|
|
|
—
|
|
|
—
|
|
|
200
|
|
||||
Total short-term investments
|
|
|
$474,460
|
|
|
|
$4,144
|
|
|
|
($263
|
)
|
|
|
$478,341
|
|
|
|
December 24, 2017
|
||||||||||||||||||||||
|
|
Less than 12 Months
|
|
Greater than 12 Months
|
|
Total
|
||||||||||||||||||
|
|
Fair Value
|
|
Unrealized Loss
|
|
Fair Value
|
|
Unrealized Loss
|
|
Fair Value
|
|
Unrealized Loss
|
||||||||||||
Municipal bonds
|
|
|
$115,005
|
|
|
|
($897
|
)
|
|
|
$7,821
|
|
|
|
($90
|
)
|
|
|
$122,826
|
|
|
|
($987
|
)
|
Corporate bonds
|
|
100,236
|
|
|
(563
|
)
|
|
12,808
|
|
|
(237
|
)
|
|
113,044
|
|
|
(800
|
)
|
||||||
U.S. agency securities
|
|
3,914
|
|
|
(7
|
)
|
|
—
|
|
|
—
|
|
|
3,914
|
|
|
(7
|
)
|
||||||
Total
|
|
|
$219,155
|
|
|
|
($1,467
|
)
|
|
|
$20,629
|
|
|
|
($327
|
)
|
|
|
$239,784
|
|
|
|
($1,794
|
)
|
Number of securities with an unrealized loss
|
|
|
|
148
|
|
|
|
|
23
|
|
|
|
171
|
|
||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
|
|
June 25, 2017
|
||||||||||||||||||||||
|
|
Less than 12 Months
|
|
Greater than 12 Months
|
|
Total
|
||||||||||||||||||
|
|
Fair Value
|
|
Unrealized Loss
|
|
Fair Value
|
|
Unrealized Loss
|
|
Fair Value
|
|
Unrealized Loss
|
||||||||||||
Municipal bonds
|
|
|
$26,816
|
|
|
|
($68
|
)
|
|
|
$—
|
|
|
|
$—
|
|
|
|
$26,816
|
|
|
|
($68
|
)
|
Corporate bonds
|
|
57,404
|
|
|
(195
|
)
|
|
—
|
|
|
—
|
|
|
57,404
|
|
|
(195
|
)
|
||||||
U.S. agency securities
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
||||||
Total
|
|
|
$84,220
|
|
|
|
($263
|
)
|
|
|
$—
|
|
|
|
$—
|
|
|
|
$84,220
|
|
|
|
($263
|
)
|
Number of securities with an unrealized loss
|
|
|
|
67
|
|
|
|
|
—
|
|
|
|
|
67
|
|
|
Within One Year
|
|
After One, Within Five Years
|
|
After Five, Within Ten Years
|
|
After Ten
Years
|
|
Total
|
||||||||||
Municipal bonds
|
|
$1,526
|
|
|
|
$130,557
|
|
|
|
$35,186
|
|
|
|
$11,506
|
|
|
|
$178,775
|
|
Corporate bonds
|
4,759
|
|
|
97,126
|
|
|
62,274
|
|
|
8,651
|
|
|
172,810
|
|
|||||
U.S. agency securities
|
—
|
|
|
3,914
|
|
|
—
|
|
|
—
|
|
|
3,914
|
|
|||||
Non-U.S. certificates of deposit
|
114,911
|
|
|
7,723
|
|
|
—
|
|
|
—
|
|
|
122,634
|
|
|||||
Commercial paper
|
2,088
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
2,088
|
|
|||||
Total short-term investments
|
|
$123,284
|
|
|
|
$239,320
|
|
|
|
$97,460
|
|
|
|
$20,157
|
|
|
|
$480,221
|
|
•
|
Level 1 - Valuations based on quoted prices in active markets for identical instruments that the Company is able to access. Since valuations are based on quoted prices that are readily and regularly available in an active market, valuation of these products does not entail a significant degree of judgment.
|
•
|
Level 2 - Valuations based on quoted prices in active markets for instruments that are similar, or quoted prices in markets that are not active for identical or similar instruments, and model-derived valuations in which all significant inputs and significant value drivers are observable in active markets.
|
•
|
Level 3 - Valuations based on inputs that are unobservable and significant to the overall fair value measurement.
|
|
December 24, 2017
|
|
June 25, 2017
|
||||||||||||||||||||||||||||
|
Level 1
|
|
Level 2
|
|
Level 3
|
|
Total
|
|
Level 1
|
|
Level 2
|
|
Level 3
|
|
Total
|
||||||||||||||||
Assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||||
Cash equivalents:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||||
Municipal bonds
|
|
$—
|
|
|
|
$—
|
|
|
|
$—
|
|
|
|
$—
|
|
|
|
$—
|
|
|
|
$1,802
|
|
|
|
$—
|
|
|
|
$1,802
|
|
Non-U.S. certificates of deposit
|
—
|
|
|
85,259
|
|
|
—
|
|
|
85,259
|
|
|
—
|
|
|
736
|
|
|
—
|
|
|
736
|
|
||||||||
Money market funds
|
1,191
|
|
|
—
|
|
|
—
|
|
|
1,191
|
|
|
1,184
|
|
|
—
|
|
|
—
|
|
|
1,184
|
|
||||||||
Total cash equivalents
|
1,191
|
|
|
85,259
|
|
|
—
|
|
|
86,450
|
|
|
1,184
|
|
|
2,538
|
|
|
—
|
|
|
3,722
|
|
||||||||
Short-term investments:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||||
Municipal bonds
|
—
|
|
|
178,775
|
|
|
—
|
|
|
178,775
|
|
|
—
|
|
|
180,041
|
|
|
—
|
|
|
180,041
|
|
||||||||
Corporate bonds
|
—
|
|
|
172,810
|
|
|
—
|
|
|
172,810
|
|
|
—
|
|
|
177,721
|
|
|
—
|
|
|
177,721
|
|
||||||||
U.S. agency securities
|
3,914
|
|
|
—
|
|
|
—
|
|
|
3,914
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
||||||||
Commercial paper
|
—
|
|
|
2,088
|
|
|
—
|
|
|
2,088
|
|
|
—
|
|
|
200
|
|
|
—
|
|
|
200
|
|
||||||||
Non-U.S. certificates of deposit
|
—
|
|
|
122,634
|
|
|
—
|
|
|
122,634
|
|
|
—
|
|
|
120,379
|
|
|
—
|
|
|
120,379
|
|
||||||||
Total short-term investments
|
3,914
|
|
|
476,307
|
|
|
—
|
|
|
480,221
|
|
|
—
|
|
|
478,341
|
|
|
—
|
|
|
478,341
|
|
||||||||
Other long-term investments:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||||
Common stock of non-U.S. corporations
|
—
|
|
|
72,517
|
|
|
—
|
|
|
72,517
|
|
|
—
|
|
|
50,366
|
|
|
—
|
|
|
50,366
|
|
||||||||
Total other long-term investments
|
—
|
|
|
72,517
|
|
|
—
|
|
|
72,517
|
|
|
—
|
|
|
50,366
|
|
|
—
|
|
|
50,366
|
|
||||||||
Total assets
|
|
$5,105
|
|
|
|
$634,083
|
|
|
|
$—
|
|
|
|
$639,188
|
|
|
|
$1,184
|
|
|
|
$531,245
|
|
|
|
$—
|
|
|
|
$532,429
|
|
|
December 24, 2017
|
|
June 25, 2017
|
||||||||||||||||||||
|
Gross
|
|
Accumulated Amortization
|
|
Net
|
|
Gross
|
|
Accumulated Amortization
|
|
Net
|
||||||||||||
Intangible assets with finite lives:
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Customer relationships
|
|
$141,420
|
|
|
|
($87,790
|
)
|
|
|
$53,630
|
|
|
|
$141,420
|
|
|
|
($84,673
|
)
|
|
|
$56,747
|
|
Developed technology
|
181,728
|
|
|
(143,179
|
)
|
|
38,549
|
|
|
181,728
|
|
|
(132,747
|
)
|
|
48,981
|
|
||||||
Non-compete agreements
|
10,475
|
|
|
(10,436
|
)
|
|
39
|
|
|
10,475
|
|
|
(10,398
|
)
|
|
77
|
|
||||||
Trade names, finite-lived
|
520
|
|
|
(520
|
)
|
|
—
|
|
|
520
|
|
|
(520
|
)
|
|
—
|
|
||||||
Patent and licensing rights
|
155,523
|
|
|
(67,814
|
)
|
|
87,709
|
|
|
151,985
|
|
|
(63,155
|
)
|
|
88,830
|
|
||||||
Total intangible assets with finite lives
|
489,666
|
|
|
(309,739
|
)
|
|
179,927
|
|
|
486,128
|
|
|
(291,493
|
)
|
|
194,635
|
|
||||||
Trade names, indefinite-lived
|
79,680
|
|
|
—
|
|
|
79,680
|
|
|
79,680
|
|
|
—
|
|
|
79,680
|
|
||||||
Total intangible assets
|
|
$569,346
|
|
|
|
($309,739
|
)
|
|
|
$259,607
|
|
|
|
$565,808
|
|
|
|
($291,493
|
)
|
|
|
$274,315
|
|
Fiscal Year Ending
|
|
||
June 24, 2018 (remainder of fiscal 2018)
|
|
$13,925
|
|
June 30, 2019
|
25,459
|
|
|
June 28, 2020
|
20,042
|
|
|
June 27, 2021
|
18,631
|
|
|
June 26, 2022
|
16,307
|
|
|
Thereafter
|
85,563
|
|
|
Total future amortization expense
|
|
$179,927
|
|
|
Three Months Ended
|
|
Six Months Ended
|
||||||||||||
|
December 24,
2017 |
|
December 25,
2016 |
|
December 24,
2017 |
|
December 25,
2016 |
||||||||
Net income (loss)
|
|
$13,721
|
|
|
|
$6,216
|
|
|
|
($6,136
|
)
|
|
|
$6,783
|
|
Weighted average common shares
|
99,184
|
|
|
98,467
|
|
|
98,499
|
|
|
99,513
|
|
||||
Basic earnings (loss) per share
|
|
$0.14
|
|
|
|
$0.06
|
|
|
|
($0.06
|
)
|
|
|
$0.07
|
|
|
Three Months Ended
|
|
Six Months Ended
|
||||||||||||
|
December 24,
2017 |
|
December 25,
2016 |
|
December 24,
2017 |
|
December 25,
2016 |
||||||||
Net income (loss)
|
|
$13,721
|
|
|
|
$6,216
|
|
|
|
($6,136
|
)
|
|
|
$6,783
|
|
Weighted average common shares - basic
|
99,184
|
|
|
98,467
|
|
|
98,499
|
|
|
99,513
|
|
||||
Dilutive effect of stock options, nonvested shares and Employee Stock Purchase Plan purchase rights
|
1,579
|
|
|
263
|
|
|
—
|
|
|
481
|
|
||||
Weighted average common shares - diluted
|
100,763
|
|
|
98,730
|
|
|
98,499
|
|
|
99,994
|
|
||||
Diluted earnings (loss) per share
|
|
$0.14
|
|
|
|
$0.06
|
|
|
|
($0.06
|
)
|
|
|
$0.07
|
|
|
Number of Shares
|
|
Weighted Average Exercise Price
|
|||
Outstanding at June 25, 2017
|
10,604
|
|
|
|
$38.27
|
|
Granted
|
53
|
|
|
|
$24.66
|
|
Exercised
|
(1,448
|
)
|
|
|
$27.56
|
|
Forfeited or expired
|
(1,371
|
)
|
|
|
$49.48
|
|
Outstanding at December 24, 2017
|
7,838
|
|
|
|
$38.20
|
|
|
Number of
RSAs/RSUs
|
|
Weighted Average
Grant-Date Fair Value
|
|||
Nonvested at June 25, 2017
|
2,412
|
|
|
|
$26.74
|
|
Granted
|
2,211
|
|
|
|
$25.91
|
|
Vested
|
(584
|
)
|
|
|
$29.44
|
|
Forfeited
|
(478
|
)
|
|
|
$24.52
|
|
Nonvested at December 24, 2017
|
3,561
|
|
|
|
$26.08
|
|
|
Three Months Ended
|
|
Six Months Ended
|
||||||||||||
|
December 24,
2017 |
|
December 25,
2016 |
|
December 24,
2017 |
|
December 25,
2016 |
||||||||
Income Statement Classification:
|
|
|
|
|
|
|
|
||||||||
Cost of revenue, net
|
|
$1,898
|
|
|
|
$2,978
|
|
|
|
$3,673
|
|
|
|
$5,783
|
|
Research and development
|
1,999
|
|
|
2,486
|
|
|
4,456
|
|
|
5,925
|
|
||||
Sales, general and administrative
|
8,129
|
|
|
6,742
|
|
|
14,031
|
|
|
15,148
|
|
||||
Total stock-based compensation expense
|
|
$12,026
|
|
|
|
$12,206
|
|
|
|
$22,160
|
|
|
|
$26,856
|
|
Balance at June 25, 2017
|
|
$27,919
|
|
Warranties accrued in current period
|
15,853
|
|
|
Expenditures
|
(9,171
|
)
|
|
Balance at December 24, 2017
|
|
$34,601
|
|
•
|
Lighting Products
|
•
|
LED Products
|
•
|
Wolfspeed
|
|
Three Months Ended
|
|
Six Months Ended
|
||||||||||||
|
December 24,
2017 |
|
December 25,
2016 |
|
December 24,
2017 |
|
December 25,
2016 |
||||||||
Revenue:
|
|
|
|
|
|
|
|
||||||||
Lighting Products revenue
|
|
$144,616
|
|
|
|
$208,924
|
|
|
|
$294,340
|
|
|
|
$392,760
|
|
LED Products revenue
|
152,682
|
|
|
138,038
|
|
|
297,202
|
|
|
275,531
|
|
||||
Wolfspeed revenue
|
70,572
|
|
|
54,364
|
|
|
136,726
|
|
|
104,268
|
|
||||
Total revenue
|
|
$367,870
|
|
|
|
$401,326
|
|
|
|
$728,268
|
|
|
|
$772,559
|
|
|
|
|
|
|
|
|
|
||||||||
Gross Profit and Gross Margin:
|
|
|
|
|
|
|
|
||||||||
Lighting Products gross profit
|
|
$22,964
|
|
|
|
$74,770
|
|
|
|
$54,847
|
|
|
|
$124,060
|
|
Lighting Products gross margin
|
15.9
|
%
|
|
35.8
|
%
|
|
18.6
|
%
|
|
31.6
|
%
|
||||
LED Products gross profit
|
38,606
|
|
|
40,314
|
|
|
77,416
|
|
|
82,084
|
|
||||
LED Products gross margin
|
25.3
|
%
|
|
29.2
|
%
|
|
26.0
|
%
|
|
29.8
|
%
|
||||
Wolfspeed gross profit
|
34,133
|
|
|
25,911
|
|
|
66,531
|
|
|
49,371
|
|
||||
Wolfspeed gross margin
|
48.4
|
%
|
|
47.7
|
%
|
|
48.7
|
%
|
|
47.4
|
%
|
||||
Total segment gross profit
|
95,703
|
|
|
140,995
|
|
|
198,794
|
|
|
255,515
|
|
||||
Unallocated costs
|
(3,100
|
)
|
|
(4,859
|
)
|
|
(5,859
|
)
|
|
(9,618
|
)
|
||||
Depreciation and amortization adjustment
|
—
|
|
|
4,431
|
|
|
—
|
|
|
4,601
|
|
||||
Consolidated gross profit
|
|
$92,603
|
|
|
|
$140,567
|
|
|
|
$192,935
|
|
|
|
$250,498
|
|
Consolidated gross margin
|
25.2
|
%
|
|
35.0
|
%
|
|
26.5
|
%
|
|
32.4
|
%
|
|
December 24,
2017 |
|
June 25,
2017 |
||||
Lighting Products
|
|
$140,657
|
|
|
|
$145,710
|
|
LED Products
|
100,411
|
|
|
108,297
|
|
||
Wolfspeed
|
28,047
|
|
|
26,453
|
|
||
Total segment inventories, net
|
269,115
|
|
|
280,460
|
|
||
Unallocated inventories
|
4,096
|
|
|
3,925
|
|
||
Consolidated inventories, net
|
|
$273,211
|
|
|
|
$284,385
|
|
•
|
Lighting Products
|
•
|
LED Products
|
•
|
Wolfspeed
|
•
|
Overall Demand for Products and Applications using LEDs, SiC power devices and GaN RF devices
. Our potential for growth depends significantly on the continued adoption of LEDs, the adoption of SiC and GaN materials and device products in the power and RF markets, and our ability to win new designs for these applications. Demand also fluctuates based on various market cycles, continuously evolving industry supply chains, and evolving competitive dynamics in each of the respective markets. These uncertainties make demand difficult to forecast for us and our customers.
|
•
|
Intense and Constantly Evolving Competitive Environment.
Competition in the industries we serve is intense. Many companies have made significant investments in product development and production equipment. Product pricing pressures exist as market participants often undertake pricing strategies to gain or protect market share, increase the utilization of their production capacity and open new applications to the LED, lighting, power and RF markets we serve. To remain competitive, market participants must continuously increase product performance, reduce costs and develop improved ways to serve their customers. To address these competitive pressures, we have invested in research and development activities to support new product development, lower product costs and deliver higher levels of performance to differentiate our products in the market. In addition, we invest in systems, people and new processes to improve our ability to deliver a better overall experience for our customers.
|
•
|
Lighting Sales Channel Development.
Commercial lighting is usually sold through lighting agents and distributors in the North American lighting market. The lighting agents typically have exclusive sales rights for a defined territory and are typically aligned with one large lighting company for a large percentage of their product sales. The size, quality and capability of the lighting agent has a significant effect on winning new projects and sales in a given geographic market. While these agents sell other lighting products, the large traditional lighting companies have taken steps to prevent their channel partners from selling competing product lines. We are constantly working to improve the capabilities of our existing channel partners and increase our share of their sales as well as develop new partners to improve our sales effectiveness in each geographic market.
|
•
|
Technological Innovation and Advancement.
Innovations and advancements in LEDs, lighting and power and RF technologies continue to expand the potential commercial application for our products. However, new technologies or standards could emerge or improvements could be made in existing technologies that could reduce or limit the demand for our products in certain markets.
|
•
|
Intellectual Property Issues.
Market participants rely on patented and non-patented proprietary information relating to product development, manufacturing capabilities and other core competencies of their business. Protection of intellectual property is critical. Therefore, steps such as additional patent applications, confidentiality and non-disclosure agreements, as well as other security measures are generally taken. To enforce or protect intellectual property rights, litigation or threatened litigation is common.
|
•
|
Revenue
decreased
to
$728 million
for the
six
months ended
December 24, 2017
from
$773 million
for the
six
months ended
December 25, 2016
.
|
•
|
Gross profit
decreased
to
$193 million
for the
six
months ended
December 24, 2017
from
$250 million
for the
six
months ended
December 25, 2016
. Gross margin was
26%
for the
six
months ended
December 24, 2017
and
32%
for the
six
months ended
December 25, 2016
.
|
•
|
Operating loss was
$40 million
for the
six
months ended
December 24, 2017
compared to operating income of
$14 million
for the
six
months ended
December 25, 2016
. Net loss per diluted share was
$(0.06)
for the
six
months ended
December 24, 2017
compared to net earnings per diluted share of
$0.07
for the
six
months ended
December 25, 2016
.
|
•
|
Cash, cash equivalents and short-term investments were
$650 million
at
December 24, 2017
and
$611 million
at
June 25, 2017
. Cash provided by operating activities was
$106 million
for the
six
months ended
December 24, 2017
compared to
$120 million
for the
six
months ended
December 25, 2016
.
|
•
|
Inventories decreased to
$273 million
at
December 24, 2017
compared to
$284 million
at
June 25, 2017
.
|
•
|
Purchases of property and equipment were
$85 million
for the
six
months ended
December 24, 2017
compared to
$35 million
for the
six
months ended
December 25, 2016
.
|
•
|
Invest in the Wolfspeed business to increase capacity and further develop the technology to support longer term growth opportunities in SiC materials, SiC power devices and modules, and GaN RF devices.
|
•
|
Grow Lighting Products revenue and improve margins by investing in our channel relationships, improving execution, and continuing to deliver innovative lighting solutions.
|
•
|
Grow the LED Products business by expanding our product offering with new products that leverage our market leadership to serve a larger share of existing customers’ LED demand, while also opening new applications for our technology.
|
•
|
Improve the customer experience and service levels in all of our businesses.
|
|
Three Months Ended
|
|
Six Months Ended
|
||||||||||||||||||||||||
|
December 24,
2017 |
|
December 25,
2016 |
|
December 24,
2017 |
|
December 25,
2016 |
||||||||||||||||||||
|
Dollars
|
|
% of Revenue
|
|
Dollars
|
|
% of Revenue
|
|
Dollars
|
|
% of Revenue
|
|
Dollars
|
|
% of Revenue
|
||||||||||||
Revenue, net
|
|
$367,870
|
|
|
100
|
%
|
|
|
$401,326
|
|
|
100
|
%
|
|
|
$728,268
|
|
|
100
|
%
|
|
|
$772,559
|
|
|
100
|
%
|
Cost of revenue, net
|
275,267
|
|
|
75
|
%
|
|
260,759
|
|
|
65
|
%
|
|
535,333
|
|
|
74
|
%
|
|
522,061
|
|
|
68
|
%
|
||||
Gross profit
|
92,603
|
|
|
25
|
%
|
|
140,567
|
|
|
35
|
%
|
|
192,935
|
|
|
26
|
%
|
|
250,498
|
|
|
32
|
%
|
||||
Research and development
|
39,776
|
|
|
11
|
%
|
|
37,893
|
|
|
9
|
%
|
|
81,635
|
|
|
11
|
%
|
|
77,841
|
|
|
10
|
%
|
||||
Sales, general and administrative
|
68,076
|
|
|
19
|
%
|
|
76,513
|
|
|
19
|
%
|
|
131,040
|
|
|
18
|
%
|
|
144,971
|
|
|
19
|
%
|
||||
Amortization or impairment of acquisition-related intangibles
|
6,792
|
|
|
2
|
%
|
|
5,937
|
|
|
1
|
%
|
|
13,584
|
|
|
2
|
%
|
|
12,345
|
|
|
2
|
%
|
||||
Loss on disposal or impairment of long-lived assets
|
4,262
|
|
|
1
|
%
|
|
717
|
|
|
—
|
%
|
|
7,087
|
|
|
1
|
%
|
|
1,041
|
|
|
—
|
%
|
||||
Operating (loss) income
|
(26,303
|
)
|
|
(7
|
)%
|
|
19,507
|
|
|
5
|
%
|
|
(40,411
|
)
|
|
(6
|
)%
|
|
14,300
|
|
|
2
|
%
|
||||
Non-operating income (expense), net
|
26,729
|
|
|
7
|
%
|
|
(4,760
|
)
|
|
(1
|
)%
|
|
25,662
|
|
|
4
|
%
|
|
(4,919
|
)
|
|
(1
|
)%
|
||||
Income (loss) before income taxes
|
426
|
|
|
—
|
%
|
|
14,747
|
|
|
4
|
%
|
|
(14,749
|
)
|
|
(2
|
)%
|
|
9,381
|
|
|
1
|
%
|
||||
Income tax (benefit) expense
|
(13,326
|
)
|
|
(4
|
)%
|
|
8,531
|
|
|
2
|
%
|
|
(8,629
|
)
|
|
(1
|
)%
|
|
2,598
|
|
|
—
|
%
|
||||
Net income (loss)
|
13,752
|
|
|
4
|
%
|
|
|
$6,216
|
|
|
2
|
%
|
|
|
($6,120
|
)
|
|
(1
|
)%
|
|
|
$6,783
|
|
|
1
|
%
|
|
Net income attributable to noncontrolling interest
|
31
|
|
|
—
|
%
|
|
—
|
|
|
—
|
%
|
|
16
|
|
|
—
|
%
|
|
—
|
|
|
—
|
%
|
||||
Net income (loss) attributable to controlling interest
|
|
$13,721
|
|
|
4
|
%
|
|
|
$6,216
|
|
|
2
|
%
|
|
|
($6,136
|
)
|
|
(1
|
)%
|
|
|
$6,783
|
|
|
1
|
%
|
Basic earnings (loss) per share
|
|
$0.14
|
|
|
|
|
|
$0.06
|
|
|
|
|
|
($0.06
|
)
|
|
|
|
|
$0.07
|
|
|
|
||||
Diluted earnings (loss) per share
|
|
$0.14
|
|
|
|
|
|
$0.06
|
|
|
|
|
|
|
($0.06
|
)
|
|
|
|
|
$0.07
|
|
|
|
|
Three Months Ended
|
|
|
|
|
|
Six Months Ended
|
|
|
|
|
||||||||||||||||||
|
December 24,
2017 |
|
December 25,
2016 |
|
Change
|
|
December 24,
2017 |
|
December 25,
2016 |
|
Change
|
||||||||||||||||||
Lighting Products revenue
|
|
$144,616
|
|
|
|
$208,924
|
|
|
|
($64,308
|
)
|
|
(31
|
)%
|
|
|
$294,340
|
|
|
|
$392,760
|
|
|
|
($98,420
|
)
|
|
(25
|
)%
|
Percent of revenue
|
39
|
%
|
|
52
|
%
|
|
|
|
|
|
40
|
%
|
|
51
|
%
|
|
|
|
|
||||||||||
LED Products revenue
|
152,682
|
|
|
138,038
|
|
|
14,644
|
|
|
11
|
%
|
|
297,202
|
|
|
275,531
|
|
|
21,671
|
|
|
8
|
%
|
||||||
Percent of revenue
|
42
|
%
|
|
34
|
%
|
|
|
|
|
|
41
|
%
|
|
36
|
%
|
|
|
|
|
||||||||||
Wolfspeed revenue
|
70,572
|
|
|
54,364
|
|
|
16,208
|
|
|
30
|
%
|
|
136,726
|
|
|
104,268
|
|
|
32,458
|
|
|
31
|
%
|
||||||
Percent of revenue
|
19
|
%
|
|
14
|
%
|
|
|
|
|
|
19
|
%
|
|
13
|
%
|
|
|
|
|
||||||||||
Total revenue
|
|
$367,870
|
|
|
|
$401,326
|
|
|
|
($33,456
|
)
|
|
(8
|
)%
|
|
|
$728,268
|
|
|
|
$772,559
|
|
|
|
($44,291
|
)
|
|
(6
|
)%
|
|
Three Months Ended
|
|
|
|
|
|
Six Months Ended
|
|
|
|
|
||||||||||||||||||
|
December 24,
2017 |
|
December 25,
2016 |
|
Change
|
|
December 24,
2017 |
|
December 25,
2016 |
|
Change
|
||||||||||||||||||
Lighting Products gross profit
|
|
$22,964
|
|
|
|
$74,770
|
|
|
|
($51,806
|
)
|
|
(69
|
)%
|
|
|
$54,847
|
|
|
|
$124,060
|
|
|
|
($69,213
|
)
|
|
(56
|
)%
|
Lighting Products gross margin
|
15.9
|
%
|
|
35.8
|
%
|
|
|
|
|
|
18.6
|
%
|
|
31.6
|
%
|
|
|
|
|
||||||||||
LED Products gross profit
|
38,606
|
|
|
40,314
|
|
|
(1,708
|
)
|
|
(4
|
)%
|
|
77,416
|
|
|
82,084
|
|
|
(4,668
|
)
|
|
(6
|
)%
|
||||||
LED Products gross margin
|
25.3
|
%
|
|
29.2
|
%
|
|
|
|
|
|
26.0
|
%
|
|
29.8
|
%
|
|
|
|
|
||||||||||
Wolfspeed gross profit
|
34,133
|
|
|
25,911
|
|
|
8,222
|
|
|
32
|
%
|
|
66,531
|
|
|
49,371
|
|
|
17,160
|
|
|
35
|
%
|
||||||
Wolfspeed gross margin
|
48.4
|
%
|
|
47.7
|
%
|
|
|
|
|
|
48.7
|
%
|
|
47.4
|
%
|
|
|
|
|
||||||||||
Unallocated costs
|
(3,100
|
)
|
|
(4,859
|
)
|
|
1,759
|
|
|
(36
|
)%
|
|
(5,859
|
)
|
|
(9,618
|
)
|
|
3,759
|
|
|
(39
|
)%
|
||||||
Depreciation and amortization adjustment
|
—
|
|
|
4,431
|
|
|
(4,431
|
)
|
|
(100
|
)%
|
|
—
|
|
|
4,601
|
|
|
(4,601
|
)
|
|
(100
|
)%
|
||||||
Consolidated gross profit
|
|
$92,603
|
|
|
|
$140,567
|
|
|
|
($47,964
|
)
|
|
(34
|
)%
|
|
|
$192,935
|
|
|
|
$250,498
|
|
|
|
($57,563
|
)
|
|
(23
|
)%
|
Consolidated gross margin
|
25.2
|
%
|
|
35.0
|
%
|
|
|
|
|
|
26.5
|
%
|
|
32.4
|
%
|
|
|
|
|
|
Three Months Ended
|
|
|
|
|
|
Six Months Ended
|
|
|
|
|
||||||||||||||||||
|
December 24,
2017 |
|
December 25,
2016 |
|
Change
|
|
December 24,
2017 |
|
December 25,
2016 |
|
Change
|
||||||||||||||||||
Research and development
|
|
$39,776
|
|
|
|
$37,893
|
|
|
|
$1,883
|
|
|
5
|
%
|
|
|
$81,635
|
|
|
|
$77,841
|
|
|
|
$3,794
|
|
|
5
|
%
|
Percent of revenue
|
11
|
%
|
|
9
|
%
|
|
|
|
|
|
11
|
%
|
|
10
|
%
|
|
|
|
|
|
Three Months Ended
|
|
|
|
|
|
Six Months Ended
|
|
|
|
|
||||||||||||||||||
|
December 24,
2017 |
|
December 25,
2016 |
|
Change
|
|
December 24,
2017 |
|
December 25,
2016 |
|
Change
|
||||||||||||||||||
Sales, general and administrative
|
|
$68,076
|
|
|
|
$76,513
|
|
|
|
($8,437
|
)
|
|
(11
|
)%
|
|
|
$131,040
|
|
|
|
$144,971
|
|
|
|
($13,931
|
)
|
|
(10
|
)%
|
Percent of revenue
|
19
|
%
|
|
19
|
%
|
|
|
|
|
|
18
|
%
|
|
19
|
%
|
|
|
|
|
|
Three Months Ended
|
|
|
|
|
|
Six Months Ended
|
|
|
|
|
||||||||||||||||||
|
December 24,
2017 |
|
December 25,
2016 |
|
Change
|
|
December 24,
2017 |
|
December 25,
2016 |
|
Change
|
||||||||||||||||||
Customer relationships
|
|
$1,558
|
|
|
|
$1,277
|
|
|
|
$281
|
|
|
22
|
%
|
|
|
$3,116
|
|
|
|
$2,602
|
|
|
|
$514
|
|
|
20
|
%
|
Developed technology
|
5,214
|
|
|
4,660
|
|
|
554
|
|
|
12
|
%
|
|
10,429
|
|
|
9,505
|
|
|
924
|
|
|
10
|
%
|
||||||
Non-compete agreements
|
20
|
|
|
—
|
|
|
20
|
|
|
100
|
%
|
|
39
|
|
|
(282
|
)
|
|
321
|
|
|
(114
|
)%
|
||||||
Trade names, finite-lived
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
%
|
|
—
|
|
|
520
|
|
|
(520
|
)
|
|
—
|
%
|
||||||
Total amortization
|
|
$6,792
|
|
|
|
$5,937
|
|
|
|
$855
|
|
|
14
|
%
|
|
|
$13,584
|
|
|
|
$12,345
|
|
|
|
$1,239
|
|
|
10
|
%
|
|
Three Months Ended
|
|
|
|
|
|
Six Months Ended
|
|
|
|
|
||||||||||||||||||
|
December 24,
2017 |
|
December 25,
2016 |
|
Change
|
|
December 24,
2017 |
|
December 25,
2016 |
|
Change
|
||||||||||||||||||
Loss on disposal or impairment of long-lived assets
|
|
$4,262
|
|
|
|
$717
|
|
|
|
$3,545
|
|
|
494
|
%
|
|
|
$7,087
|
|
|
|
$1,041
|
|
|
|
$6,046
|
|
|
581
|
%
|
|
Three Months Ended
|
|
|
|
|
|
Six Months Ended
|
|
|
|
|
||||||||||||||||||
|
December 24, 2017
|
|
December 25, 2016
|
|
Change
|
|
December 24, 2017
|
|
December 25, 2016
|
|
Change
|
||||||||||||||||||
Gain on sale of investments, net
|
|
$1
|
|
|
|
$—
|
|
|
|
$1
|
|
|
100
|
%
|
|
|
$47
|
|
|
|
$12
|
|
|
|
$35
|
|
|
292
|
%
|
Gain (loss) on equity investment, net
|
24,746
|
|
|
(3,796
|
)
|
|
28,542
|
|
|
752
|
%
|
|
21,479
|
|
|
(6,283
|
)
|
|
27,762
|
|
|
442
|
%
|
||||||
Foreign currency gain (loss), net
|
462
|
|
|
(1,856
|
)
|
|
2,318
|
|
|
125
|
%
|
|
1,228
|
|
|
(495
|
)
|
|
1,723
|
|
|
348
|
%
|
||||||
Interest income, net
|
1,467
|
|
|
900
|
|
|
567
|
|
|
63
|
%
|
|
2,617
|
|
|
1,787
|
|
|
830
|
|
|
46
|
%
|
||||||
Other, net
|
53
|
|
|
(8
|
)
|
|
61
|
|
|
763
|
%
|
|
291
|
|
|
60
|
|
|
231
|
|
|
385
|
%
|
||||||
Non-operating income (expense), net
|
|
$26,729
|
|
|
|
($4,760
|
)
|
|
|
$31,489
|
|
|
662
|
%
|
|
|
$25,662
|
|
|
|
($4,919
|
)
|
|
|
$30,581
|
|
|
622
|
%
|
|
Three Months Ended
|
|
|
|
|
|
Six Months Ended
|
|
|
|
|
||||||||||||||||||
|
December 24, 2017
|
|
December 25, 2016
|
|
Change
|
|
December 24, 2017
|
|
December 25, 2016
|
|
Change
|
||||||||||||||||||
Income tax (benefit) expense
|
|
($13,326
|
)
|
|
|
$8,531
|
|
|
|
($21,857
|
)
|
|
(256
|
)%
|
|
|
($8,629
|
)
|
|
|
$2,598
|
|
|
|
($11,227
|
)
|
|
(432
|
)%
|
Effective tax rate
|
(3,128.2
|
)%
|
|
57.8
|
%
|
|
|
|
|
|
58.5
|
%
|
|
27.7
|
%
|
|
|
|
|
|
Three Months Ended
|
|
|
|||
|
December 24,
2017 |
|
June 25,
2017 |
|
Change
|
|
Days of sales outstanding
(a)
|
37
|
|
37
|
|
—
|
|
Days of supply in inventory
(b)
|
89
|
|
98
|
|
(9
|
)
|
Days in accounts payable
(c)
|
(52)
|
|
(46)
|
|
(6
|
)
|
Cash conversion cycle
|
74
|
|
89
|
|
(15
|
)
|
a)
|
Days of sales outstanding (DSO) measures the average collection period of our receivables. DSO is based on the ending net trade receivables and the revenue, net for the quarter then ended. DSO is calculated by dividing ending accounts receivable, net of applicable allowances and reserves, by the average net revenue per day for the respective 90 day period.
|
b)
|
Days of supply in inventory (DSI) measures the average number of days from procurement to sale of our product. DSI is based on ending inventory and cost of revenue, net for the quarter then ended. DSI is calculated by dividing ending inventory by average cost of revenue, net per day for the respective 90 day period.
|
c)
|
Days in accounts payable (DPO) measures the average number of days our payables remain outstanding before payment. DPO is based on ending accounts payable and cost of revenue, net for the quarter then ended. DPO is calculated by dividing ending accounts payable by the average cost of revenue, net per day for the respective 90 day period.
|
|
Six Months Ended
|
|
|
|
|
|||||||||
|
December 24, 2017
|
|
December 25, 2016
|
|
Change
|
|||||||||
Net cash provided by operating activities
|
|
$105,812
|
|
|
|
$119,716
|
|
|
|
($13,904
|
)
|
|
(12
|
)%
|
Net cash used in investing activities
|
(97,728
|
)
|
|
(64,902
|
)
|
|
(32,826
|
)
|
|
51
|
%
|
|||
Net cash provided by (used in) financing activities
|
28,600
|
|
|
(83,184
|
)
|
|
111,784
|
|
|
134
|
%
|
|||
Effects of foreign exchange changes on cash and cash equivalents
|
407
|
|
|
(691
|
)
|
|
1,098
|
|
|
159
|
%
|
|||
Net increase (decrease) in cash and cash equivalents
|
|
$37,091
|
|
|
|
($29,061
|
)
|
|
|
$66,152
|
|
|
228
|
%
|
•
|
achievement of technology breakthroughs required to make commercially viable products;
|
•
|
the accuracy of our predictions for market requirements;
|
•
|
our ability to predict, influence and/or react to evolving standards;
|
•
|
acceptance of our new product and systems designs;
|
•
|
acceptance of new technology in certain markets;
|
•
|
the availability of qualified research and development personnel;
|
•
|
our timely completion of product designs and development;
|
•
|
our ability to develop repeatable processes to manufacture new products in sufficient quantities, with the desired specifications and at competitive costs;
|
•
|
our ability to effectively transfer increasingly complex products and technology from development to manufacturing;
|
•
|
our customers’ ability to develop competitive products incorporating our products; and
|
•
|
market acceptance of our products and our customers’ products.
|
•
|
maintain, expand, construct and purchase adequate manufacturing facilities and equipment, as well as secure sufficient third-party manufacturing resources, to meet customer demand;
|
•
|
manage an increasingly complex supply chain that has the ability to supply an increasing number of raw materials, subsystems and finished products with the required specifications and quality, and deliver on time to our manufacturing facilities, our third party manufacturing facilities, or our logistics operations;
|
•
|
expand the capability of information systems to support a more complex business;
|
•
|
expand research and development, sales and marketing, technical support, distribution capabilities, manufacturing planning and administrative functions;
|
•
|
manage organizational complexity and communication;
|
•
|
expand the skills and capabilities of our current management team;
|
•
|
add experienced senior level managers and executives;
|
•
|
attract and retain qualified employees; and
|
•
|
adequately maintain and adjust the operational and financial controls that support our business.
|
•
|
costs associated with the removal, collection and destruction of the product;
|
•
|
payments made to replace product;
|
•
|
costs associated with repairing the product;
|
•
|
the write-down or destruction of existing inventory;
|
•
|
insurance recoveries that fail to cover the full costs associated with product recalls;
|
•
|
lost sales due to the unavailability of product for a period of time;
|
•
|
delays, cancellations or rescheduling of orders for our products; or
|
•
|
increased product returns.
|
•
|
variability in our process repeatability and control;
|
•
|
contamination of the manufacturing environment;
|
•
|
equipment failure, power outages, fires, flooding, information or other system failures or variations in the manufacturing process;
|
•
|
lack of consistency and adequate quality and quantity of piece parts, other raw materials and other bill of materials items;
|
•
|
inventory shrinkage or human errors;
|
•
|
defects in production processes (including system assembly) either within our facilities or at our suppliers; and
|
•
|
any transitions or changes in our production process, planned or unplanned.
|
•
|
the failure of an acquired business, investee or joint venture to meet our performance and financial expectations;
|
•
|
identification of additional liabilities relating to an acquired business;
|
•
|
loss of existing customers of our current and acquired businesses due to concerns that new product lines may be in competition with the customers’ existing product lines;
|
•
|
difficulty integrating an acquired business's operations, personnel and financial and operating systems into our current business;
|
•
|
diversion of management attention;
|
•
|
difficulty separating the operations, personnel and financial and operating systems of a spin-off or divestiture from our current business;
|
•
|
the possibility we are unable to complete the transaction and expend substantial resources without achieving the desired benefit;
|
•
|
the inability to obtain required regulatory agency approvals;
|
•
|
uncertainty of the financial markets or circumstances that cause conditions that are less favorable and/or different than expected; and
|
•
|
expenses incurred to complete a transaction may be significantly higher than anticipated.
|
•
|
protection of intellectual property and trade secrets;
|
•
|
tariffs, customs, trade sanctions, trade embargoes and other barriers to importing/exporting materials and products in a cost-effective and timely manner, or changes in applicable tariffs or custom rules;
|
•
|
the burden of complying with and changes in U.S. or international taxation policies;
|
•
|
timing and availability of export licenses;
|
•
|
rising labor costs;
|
•
|
disruptions in or inadequate infrastructure of the countries where we operate;
|
•
|
difficulties in collecting accounts receivable;
|
•
|
difficulties in staffing and managing international operations; and
|
•
|
the burden of complying with foreign and international laws and treaties.
|
•
|
pay substantial damages;
|
•
|
indemnify our customers;
|
•
|
stop the manufacture, use and sale of products found to be infringing;
|
•
|
incur asset impairment charges;
|
•
|
discontinue the use of processes found to be infringing;
|
•
|
expend significant resources to develop non-infringing products or processes; or
|
•
|
obtain a license to use third party technology.
|
•
|
the jurisdiction in which profits are determined to be earned and taxed;
|
•
|
changes in tax laws or interpretation of such tax laws and changes in generally accepted accounting principles, for example interpretations and U.S. regulations issued as a result of the significant changes to the U.S. tax law included within the Tax Cuts and Jobs Act of 2017 (Tax Legislation);
|
•
|
the resolution of issues arising from tax audits with various authorities;
|
•
|
changes in the valuation of our deferred tax assets and liabilities, for example, in the third quarter of fiscal 2017 we recognized a full valuation allowance against our U.S. deferred tax assets and other deferred charges primarily due to our three-year cumulative pre-tax loss position in the U.S. and the termination of the Wolfspeed sale transaction, which was anticipated to generate U.S. taxable income;
|
•
|
adjustments to estimated taxes upon finalization of various tax returns;
|
•
|
increases in expenses not deductible for tax purposes, including impairment of goodwill in connection with acquisitions;
|
•
|
changes in available tax credits;
|
•
|
the recognition and measurement of uncertain tax positions;
|
•
|
variations in realized tax deductions for certain stock-based compensation awards (such as non-qualified stock options and restricted stock) from those originally anticipated; and
|
•
|
the repatriation of non-U.S. earnings for which we have not previously provided for taxes or any changes in legislation that may result in these earnings being taxed, regardless of our decision regarding repatriation of funds, for example, the Tax Legislation, enacted in the second quarter of fiscal 2018, included a one-time tax on deemed repatriated earnings of non-U.S. subsidiaries.
|
•
|
regulatory penalties, fines, legal liabilities and the forfeiture of certain tax benefits;
|
•
|
suspension of production;
|
•
|
alteration of our fabrication, assembly and test processes; and
|
•
|
curtailment of our operations or sales.
|
•
|
increasing our vulnerability to downturns in our business, to competitive pressures and to adverse general economic and industry conditions;
|
•
|
requiring the dedication of an increased portion of our expected cash flows from operations to service our indebtedness, thereby reducing the amount of expected cash flow available for other purposes, including capital expenditures, research and development and stock repurchases;
|
•
|
limiting our flexibility in planning for, or reacting to, changes in our business and the industry in which we operate;
|
•
|
placing us at a competitive disadvantage compared to our peers that may have less indebtedness than we have by limiting our ability to borrow additional funds needed to operate and grow our business; and
|
•
|
increasing our interest expense if interest rates increase.
|
Exhibit No.
|
|
Description
|
|
|
|
Specimen Common Stock Certificate
|
|
|
|
Notice of Grant to Gregg A. Lowe, dated September 27, 2017 (incorporated by reference to Exhibit 10.2 of the Company’s Current Report on Form 8-K, dated September 27, 2017, filed with the Securities and Exchange Commission on September 28, 2017)
|
|
|
|
Form of Stock Unit Award Agreement (Performance-Based) for Gregg A. Lowe (incorporated by reference in Exhibit 10.3 of the Company's Current Report on Form 8-K, dated September 27, 2017, filed with the Securities and Exchange Commission on September 28, 2017)
|
|
|
|
2005 Employee Stock Purchase Plan, as amended (incorporated by reference to Exhibit 10.1 of the Company's Current Report on Form 8-K, dated October 24, 2017, filed with the Securities and Exchange Commission on October 24, 2017)
|
|
|
|
First Amendment to the Credit Agreement, dated September 10, 2015, by and among Cree, Inc., Wells Fargo Bank, National Association, as administrative agent, E-conolight LLC, a domestic subsidiary of the Cree, Inc., as guarantor, and the other lenders party thereto
|
|
|
|
Second Amendment to Credit Agreement, dated November 13, 2017, by and among Cree, Inc., Wells Fargo Bank, National Association, as administrative agent, E-conolight LLC, a domestic subsidiary of the Cree, Inc., as guarantor, and the other lenders party thereto (incorporated by reference to Exhibit 10.1 of the Company’s Current Report on Form 8-K, dated November 13, 2017, filed with the Securities and Exchange Commission on November 16, 2017)
|
|
|
|
Separation and General Release Agreement with Daniel J. Castillo, dated December 21, 2017
|
|
|
|
Certification by Chief Executive Officer pursuant to Rule 13a-14(a) under the Securities Exchange Act of 1934, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
|
|
|
|
Certification by Chief Financial Officer pursuant to Rule 13a-14(a) under the Securities Exchange Act of 1934, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
|
|
|
|
Certification by Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
|
|
|
|
Certification by Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
|
|
101
|
|
|
The following materials from Cree, Inc.’s Quarterly Report on Form 10-Q for the fiscal quarter ended September 24, 2017 formatted in XBRL (eXtensible Business Reporting Language): (i) Consolidated Balance Sheets; (ii) Consolidated Statements of Income (Loss); (iii) Consolidated Statements of Comprehensive Income (Loss); (iv) Consolidated Statements of Cash Flows; and (v) Notes to Consolidated Financial Statements
|
|
CREE, INC.
|
|
|
January 24, 2018
|
|
|
|
|
/s/ MICHAEL E. MCDEVITT
|
|
Michael E. McDevitt
|
|
Executive Vice President and Chief Financial Officer
|
|
(Authorized Officer and Principal Financial and Chief Accounting Officer)
|
ADMINISTRATIVE AGENT
:
|
WELLS FARGO BANK, NATIONAL ASSOCIATION
, as a Lender and as Administrative Agent
|
LENDERS
:
|
[___Citibank, N.A.____________]
,
|
LENDERS
:
|
[___GOLDMAN SACHS BANK USA,___],
|
LENDERS
:
|
[___HSBC Bank USA, National Association_____],
|
LENDERS
:
|
[___PNC Bank, National Association_____],
|
LENDERS
:
|
[___
SunTrust Bank____________],
|
LENDERS
:
|
[
___U.S BANK NATIONAL ASSOCIATION__],
|
LENDERS
:
|
[
___JPMORGAN CHASE BANK, N.A.____],
|
LENDERS
:
|
[
___Bank of America N.A.____],
|
1.
|
I have reviewed this quarterly report on Form 10-Q of Cree, Inc.;
|
2.
|
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
|
3.
|
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
|
4.
|
The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
|
a.
|
Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
|
b.
|
Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
|
c.
|
Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
|
d.
|
Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and
|
5.
|
The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):
|
a.
|
All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and
|
b.
|
Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.
|
/s/ GREGG A. LOWE
|
Gregg A. Lowe
|
President and Chief Executive Officer
|
1.
|
I have reviewed this quarterly report on Form 10-Q of Cree, Inc.;
|
2.
|
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
|
3.
|
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
|
4.
|
The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
|
a.
|
Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
|
b.
|
Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
|
c.
|
Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
|
d.
|
Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and
|
5.
|
The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):
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a.
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All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and
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b.
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Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.
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/s/ MICHAEL E. MCDEVITT
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Michael E. McDevitt
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Executive Vice President and Chief Financial Officer
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1
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The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended; and
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|
2
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The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.
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/s/ GREGG A. LOWE
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Gregg A. Lowe
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President and Chief Executive Officer
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January 24, 2018
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|
1
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The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended; and
|
|
2
|
The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.
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/s/ MICHAEL E. MCDEVITT
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Michael E. McDevitt
|
Executive Vice President and Chief Financial Officer
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|
January 24, 2018
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