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Table of Contents
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 29, 2020
or
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from              to             
Commission file number 0-21154
__________________________________________ 
CREE, INC.
(Exact name of registrant as specified in its charter)
North Carolina 56-1572719
(State or other jurisdiction of incorporation or organization) (I.R.S. Employer Identification No.)
4600 Silicon Drive 
DurhamNorth Carolina27703
(Address of principal executive offices) (Zip Code)
(919) 407-5300
(Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:
Title of each classTrading Symbol(s)Name of each exchange on which registered
Common Stock, $0.00125 par value CREEThe Nasdaq Stock Market LLC
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
Yes No

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).
Yes No
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer”, “accelerated filer,” “smaller reporting company,” and "emerging growth company" in Rule 12b-2 of the Exchange Act.
Large accelerated filerAccelerated filer
Non-accelerated filerSmaller reporting company
Emerging growth company

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Securities Act.

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
Yes No
The number of shares outstanding of the registrant’s common stock, par value $0.00125 per share, as of April 24, 2020, was 108,160,061.


Table of Contents
CREE, INC.
FORM 10-Q
For the Quarterly Period Ended March 29, 2020
Table of Contents

2

Table of Contents
PART I - FINANCIAL INFORMATION
Item 1.    Financial Statements (Unaudited)

3

Table of Contents
CREE, INC.
UNAUDITED CONSOLIDATED BALANCE SHEETS
(in millions of U.S. Dollars, except share data) March 29, 2020June 30, 2019
Assets
Current assets:
Cash and cash equivalents$323.0  $500.5  
Short-term investments529.9  550.9  
Total cash, cash equivalents and short-term investments852.9  1,051.4  
Accounts receivable, net161.0  128.9  
Inventories170.1  187.4  
Income taxes receivable6.1  0.2  
Prepaid expenses27.7  23.3  
Other current assets12.2  19.7  
Current assets held for sale0.2  1.9  
Total current assets1,230.2  1,412.8  
Property and equipment, net737.6  625.2  
Goodwill530.0  530.0  
Intangible assets, net183.6  197.9  
Other long-term investments31.5  39.5  
Deferred tax assets6.7  5.6  
Other assets18.3  5.9  
Total assets$2,737.9  $2,816.9  
Liabilities and Shareholders' Equity
Current liabilities:
Accounts payable and accrued expenses$184.8  $200.9  
Accrued contract liabilities45.1  45.8  
Income taxes payable1.2  3.0  
Finance lease liabilities0.6    
Other current liabilities19.7  18.5  
Total current liabilities251.4  268.2  
Long-term liabilities:
Convertible notes, net486.3  469.1  
Deferred tax liabilities2.3  2.0  
Finance lease liabilities - long-term2.2    
Other long-term liabilities50.7  36.4  
Total long-term liabilities541.5  507.5  
Commitments and contingencies
Shareholders’ equity:
Preferred stock, par value $0.01; 3,000 shares authorized at March 29, 2020 and June 30, 2019; none issued and outstanding
    
Common stock, par value $0.00125; 200,000 shares authorized at March 29, 2020 and June 30, 2019; 108,153 and 106,570 shares issued and outstanding at March 29, 2020 and June 30, 2019, respectively
0.1  0.1  
Additional paid-in-capital2,931.3  2,874.1  
Accumulated other comprehensive income7.8  9.5  
Accumulated deficit(999.7) (847.5) 
Total shareholders’ equity1,939.5  2,036.2  
Non-controlling interest5.5  5.0  
Total equity1,945.0  2,041.2  
Total liabilities and shareholders’ equity$2,737.9  $2,816.9  
The accompanying notes are an integral part of the consolidated financial statements
4

Table of Contents
CREE, INC.
UNAUDITED CONSOLIDATED STATEMENTS OF OPERATIONS
 
 Three months endedNine months ended
 March 29, 2020March 31, 2019March 29, 2020March 31, 2019
(in millions of U.S. Dollars, except share data)
Revenue, net$215.5  $274.0  $698.2  $828.7  
Cost of revenue, net154.1  173.5  500.7  526.4  
Gross profit61.4  100.5  197.5  302.3  
Operating expenses:
Research and development46.7  40.7  137.7  117.2  
Sales, general and administrative49.7  50.6  160.1  143.7  
Amortization or impairment of acquisition-related intangibles3.7  3.9  10.9  11.7  
Loss on disposal or impairment of other assets0.3  5.3  2.1  5.7  
Other operating expense10.8  11.1  31.8  14.3  
Operating (loss) income(49.8) (11.1) (145.1) 9.7  
Non-operating expense, net14.5  8.4  7.8  23.7  
Loss before income taxes(64.3) (19.5) (152.9) (14.0) 
Income tax (benefit) expense(2.9) 2.8  (1.2) 9.3  
Net loss from continuing operations(61.4) (22.3) (151.7) (23.3) 
Net loss from discontinued operations  (205.4)   (218.0) 
Net loss(61.4) (227.7) (151.7) (241.3) 
Net income attributable to noncontrolling interest0.2  0.1  0.5  0.1  
Net loss attributable to controlling interest($61.6) ($227.8) ($152.2) ($241.4) 
Basic and diluted loss per share
Continuing operations attributable to controlling interest($0.57) ($0.22) ($1.41) ($0.23) 
Net loss attributable to controlling interest($0.57) ($2.20) ($1.41) ($2.35) 
Weighted average shares - basic and diluted (in thousands)108,115  103,659  107,718  102,807  
The accompanying notes are an integral part of the consolidated financial statements
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CREE, INC.
UNAUDITED CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS

 Three months endedNine months ended
(in millions of U.S. Dollars)March 29, 2020March 31, 2019March 29, 2020March 31, 2019
Net loss($61.4) ($227.7) ($151.7) ($241.3) 
Other comprehensive loss:
Currency translation loss  (0.3)   (0.8) 
Net unrealized (loss) gain on available-for-sale securities(1.9) 2.0  (1.7) 2.8  
Comprehensive loss (63.3) (226.0) (153.4) (239.3) 
Net income attributable to non-controlling interest0.2  0.1  0.5  0.1  
Comprehensive loss attributable to controlling interest($63.5) ($226.1) ($153.9) ($239.4) 
The accompanying notes are an integral part of the consolidated financial statements
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CREE, INC.
UNAUDITED CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
Common StockAdditional Paid-in CapitalAccumulated DeficitAccumulated Other Comprehensive IncomeTotal Equity - Controlled InterestNon-controlling InterestTotal Equity
(in millions of U.S Dollars, except share data)Number of SharesPar Value
Balance at June 30, 2019106,570  $0.1  $2,874.1  ($847.5) $9.5  $2,036.2  $5.0  $2,041.2  
Net loss—  —  —  (37.8) —  (37.8) —  (37.8) 
Unrealized gain on available-for-sale securities—  —  —  —  0.5  0.5  —  0.5  
Comprehensive loss(37.3) —  (37.3) 
Tax withholding on vested equity awards—  —  (14.3) —  —  (14.3) —  (14.3) 
Stock-based compensation—  —  17.4  —  —  17.4  —  17.4  
Exercise of stock options and issuance of shares1,127  —  18.6  —  —  18.6  —  18.6  
Balance at September 29, 2019107,697  $0.1  $2,895.8  ($885.3) $10.0  $2,020.6  $5.0  $2,025.6  
Net (loss) income—  —  —  (52.8) —  (52.8) 0.3  (52.5) 
Unrealized loss on available-for-sale securities—  —  —  —  (0.3) (0.3) —  (0.3) 
Comprehensive (loss) income(53.1) 0.3  (52.8) 
Tax withholding on vested equity awards—  —  (0.4) —  —  (0.4) —  (0.4) 
Stock-based compensation—  —  13.4  —  —  13.4  —  13.4  
Exercise of stock options and issuance of shares334  —  10.7  —  —  10.7  —  10.7  
Balance at December 29, 2019108,031  $0.1  $2,919.5  ($938.1) $9.7  $1,991.2  $5.3  $1,996.5  
Net (loss) income—  —  —  (61.6) —  (61.6) 0.2  (61.4) 
Unrealized loss on available-for-sale securities—  —  —  —  (1.9) (1.9) —  (1.9) 
Comprehensive (loss) income(63.5) 0.2  (63.3) 
Tax withholding on vested equity awards—  —  (1.5) —  —  (1.5) —  (1.5) 
Stock-based compensation—  —  11.6  —  —  11.6  —  11.6  
Exercise of stock options and issuance of shares122  —  1.7  —  —  1.7  —  1.7  
Balance at March 29, 2020108,153  $0.1  $2,931.3  ($999.7) $7.8  $1,939.5  $5.5  $1,945.0  
The accompanying notes are an integral part of the consolidated financial statements
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CREE, INC.
UNAUDITED CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY

Common StockAdditional Paid-in CapitalAccumulated DeficitAccumulated Other Comprehensive IncomeTotal Equity - Controlled InterestNon-controlling InterestTotal Equity
(in millions of U.S. Dollars, except share data)Number of SharesPar Value
Balance at June 24, 2018101,488  $0.1  $2,549.1  ($482.7) $0.6  $2,067.1  $5.0  $2,072.1  
Net loss—  —  —  (11.1) —  (11.1) —  (11.1) 
Currency translation gain—  —  —  —  0.3  0.3  —  0.3  
Unrealized loss on available-for-sale securities—  —  —  —  (0.3) (0.3) —  (0.3) 
Comprehensive loss(11.1) —  (11.1) 
Tax withholding on vested equity awards—  —  (10.8) —  —  (10.8) —  (10.8) 
Stock-based compensation—  —  12.1  —  —  12.1  —  12.1  
Exercise of stock options and issuance of shares1,032  —  15.5  —  —  15.5  —  15.5  
Convertible note issuance—  —  110.6  —  —  110.6  —  110.6  
Adoption of ASC 606—  —  —  10.3  —  10.3  —  10.3  
Balance at September 23, 2018102,520  $0.1  $2,676.5  ($483.5) $0.6  $2,193.7  $5.0  $2,198.7  
Net loss—  —  —  (2.5) —  (2.5) —  (2.5) 
Currency translation loss—  —  —  —  (0.9) (0.9) —  (0.9) 
Unrealized gain on available-for-sale securities—  —  —  —  1.1  1.1  —  1.1  
Comprehensive loss(2.3) —  (2.3) 
Tax withholding on vested equity awards—  —  (1.1) —  —  (1.1) —  (1.1) 
Repurchased shares—  —  —  —  —  —  —  —  
Stock-based compensation—  —  13.6  —  —  13.6  —  13.6  
Exercise of stock options and issuance of shares553  —  14.6  —  —  14.6  —  14.6  
Balance at December 30, 2018103,073  $0.1  $2,703.6  ($486.0) $0.8  $2,218.5  $5.0  $2,223.5  
Net (loss) income—  —  —  (227.8) —  (227.8) 0.1  (227.7) 
Currency translation loss—  —  —  —  (0.3) (0.3) —  (0.3) 
Unrealized gain on available-for-sale securities—  —  —  —  2.0  2.0  —  2.0  
Comprehensive loss(226.1) 0.1  (226.0) 
Tax withholding on vested equity awards—  —  (0.5) —  —  (0.5) —  (0.5) 
Stock-based compensation—  —  15.6  —  —  15.6  —  15.6  
Exercise of stock options and issuance of shares1,442  —  53.3  —  —  53.3  —  53.3  
Balance at March 31, 2019104,515  $0.1  $2,772.0  ($713.8) $2.5  $2,060.8  $5.1  $2,065.9  
The accompanying notes are an integral part of the consolidated financial statements
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CREE, INC.
UNAUDITED CONSOLIDATED STATEMENTS OF CASH FLOWS
 Nine months ended
(in millions of U.S. Dollars)March 29, 2020March 31, 2019
Operating activities:
Net loss from continuing operations($151.7) ($23.3) 
Adjustments to reconcile net loss to net cash (used in) provided by operating activities:
Depreciation and amortization90.9  93.1  
Amortization of debt issuance costs and discount17.2  12.7  
Stock-based compensation41.3  34.5  
Loss on disposal or impairment of long-lived assets2.1  5.7  
Amortization of premium/discount on investments0.5  2.0  
Realized (gain) loss on sale of investments(1.3) 0.1  
Loss on equity investment9.2  12.4  
Foreign exchange (gain) loss on equity investment(1.2) 0.9  
Deferred income taxes(0.8) (1.7) 
Changes in operating assets and liabilities:
Accounts receivable, net(31.9) (63.6) 
Inventories18.4  (20.2) 
Prepaid expenses and other assets1.9  (4.6) 
Accounts payable, trade(19.2) 18.4  
Accrued salaries and wages and other liabilities(