EX-99.2 4 ex99251719.htm EXHIBIT 99.2 Exhibit


Unaudited Pro Forma Consolidated Financial Information
On May 13, 2019, Cree, Inc. (“Cree” or the “Company”) completed the previously announced sale (the “Sale”) of Cree Lighting (as defined below) to IDEAL Industries, Inc. (“IDEAL”). Cree Lighting’s historical financial results were reflected as discontinued operations in Cree’s unaudited consolidated financial statements as previously reported in the Company’s Quarterly Report on Form 10-Q for the nine months ended March 31, 2019.
Pursuant to the March 14, 2019 Purchase Agreement between Cree and IDEAL (“Purchase Agreement”) and related ancillary agreements entered into at the closing of the Sale, the Company sold to IDEAL (i) certain manufacturing facilities and equipment, inventory, intellectual property rights, contracts and real estate of the Company comprising the Company’s Lighting Products business unit, which includes the LED lighting fixtures, lamps and corporate lighting solutions business for commercial, industrial and consumer applications, and (ii) all of the issued and outstanding equity interests of E-conolight LLC (“E-conolight”), Cree Canada Corp. and Cree Europe S.r.l., each a wholly owned subsidiary of the Company (collectively “Cree Lighting”). IDEAL also assumed certain liabilities related to Cree Lighting.
The aggregate consideration received consisted of $225 million in cash, subject to certain adjustments, and the potential to receive an earn-out payment based on an adjusted EBITDA metric for Cree Lighting over a 12-month period beginning two years subsequent to the closing of the Sale.
Unaudited Pro Forma Consolidated Financial Information
The unaudited pro forma consolidated statements of (loss) income for the fiscal years ended June 24, 2018, June 25, 2017, and June 26, 2016, were based on and derived from the Company’s historical consolidated financial statements. These unaudited pro forma consolidated statements of (loss) income give effect to the Sale as if it had been consummated on June 29, 2015, the first day of Cree’s fiscal year ended June 26, 2016, adjusted to reflect amounts that were determined to be directly attributable to the Sale, factually supportable and expected to have a continuing impact on the Company’s consolidated results. Actual adjustments, however, may differ significantly from the information presented.

The unaudited pro forma consolidated financial information is intended for informational purposes only, and does not purport to represent what Cree’s financial position or results of operations actually would have been had the Sale been consummated on June 29, 2015, or to project Cree’s financial position or results of operations for any future date or period. This information should be read in conjunction with (i) the audited consolidated financial statements, accompanying notes and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” included in the Company’s Annual Report on Form 10-K for the fiscal year ended June 24, 2018, and (ii) the unaudited consolidated financial statements, accompanying notes and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” included in the Company’s Quarterly Report on Form 10-Q for the nine months ended March 31, 2019.
Historical Cree
This column represents Cree’s historical consolidated financial statements for each of the periods presented and does not reflect any adjustments related to the Sale.
Cree Lighting
This column was derived from Cree’s audited consolidated financial statements and the related accounting records for the fiscal years ended June 24, 2018, June 25, 2017, and June 26, 2016, and reflects the financial results of Cree Lighting, adjusted to include certain costs directly attributable to Cree Lighting and to exclude general corporate overhead costs.






Additional Pro Forma Adjustments

There are no pro forma adjustments to the Company’s unaudited consolidated statement of loss for the nine months ended March 31, 2019 previously included in the Company’s Quarterly Report on Form 10-Q for such period,
as the expected loss on the sale is excluded from the unaudited pro forma consolidated statement of loss because it is non-recurring. The Company believes that the adjustments related to the Sale contained in the unaudited pro forma consolidated statements of (loss) income for the fiscal years ended June 24, 2018, June 25, 2017, and June 26, 2016 contained herein are consistent with the guidance for discontinued operations under U.S. GAAP.

A limited number of pro forma adjustments are required to illustrate the effects of the Sale on the Company’s unaudited consolidated balance sheet as of March 31, 2019. Had the Sale occurred on March 31, 2019, the unaudited pro forma consolidated balance sheet as of March 31, 2019 would have reflected the following additional pro forma adjustments: (a) an increase in the cash balance by $221 million to $677 million from the net cash proceeds, received at the closing of the Sale, which include certain working capital adjustments; (b) an increase in the accrued contract liabilities balance by $14 million to $61 million related to a supply agreement between Cree and IDEAL; and (c) an increase in accumulated deficit by $64 million to $778 million due to the estimated loss on sale, which includes the estimated carrying value of assets sold on that date less proceeds, impact of the cumulative translation adjustment, acceleration of stock-based compensation expense and the supply agreement.
The Company has incurred approximately $8 million in transaction expenses relating to the Sale. These transaction expenses were reflected in the Company’s continuing operations within the unaudited consolidated statement of loss in Cree’s Quarterly Report on Form 10-Q for the nine months ended March 31, 2019.
Estimates used in preparing these additional pro forma adjustments may change as the Company finalizes the accounting for the Sale to be reported in Cree’s Annual Report on Form 10-K for the fiscal year ending June 30, 2019.







Cree, Inc.
Unaudited Pro Forma Consolidated Statement of Loss
Fiscal Year Ended June 24, 2018
(In thousands, except per share data)

 
 
Historical
Cree
 
Cree Lighting
 
Pro Forma Cree
 
 
 
 
 
 
 
Revenue, net
 

$1,493,680

 

$568,758

 

$924,922

Cost of revenue, net
 
1,086,038

 
463,166

 
622,872

Gross profit
 
407,642

 
105,592

 
302,050

Operating expenses:
 
 
 
 
 
 
Research and development
 
164,321

 
35,905

 
128,416

Sales, general and administrative
 
283,489

 
97,635

 
185,854

Amortization or impairment of acquisition-related intangibles
 
30,772

 
23,622

 
7,150

Goodwill impairment charges
 
247,455

 
247,455

 

Loss on disposal or impairment of long-lived assets
 
10,692

 
2,075

 
8,617

       Total operating expenses
 
736,729

 
406,692

 
330,037

Operating loss
 
(329,087
)
 
(301,100
)
 
(27,987
)
Non-operating income, net
 
11,642

 
1,246

 
10,396

Loss before income taxes
 
(317,445
)
 
(299,854
)
 
(17,591
)
Income tax (benefit) expense
 
(37,522
)
 
(35,965
)
 
(1,557
)
Net loss
 
(279,923
)
 
(263,889
)
 
(16,034
)
Net income attributable to noncontrolling interest
 
45

 

 
45

Net loss attributable to controlling interest
 

($279,968
)
 

($263,889
)
 

($16,079
)
 
 
 
 
 
 
 
Loss per share:
 
 
 
 
 
 
Basic
 

($2.81
)
 
 
 

($0.16
)
Diluted
 

($2.81
)
 
 
 

($0.16
)
Weighted average shares used in per share calculation:
 
 
 
 
 
 
Basic
 
99,530

 
 
 
99,530

Diluted
 
99,530

 
 
 
99,530

 
 
 
 
 
 
 






Cree, Inc.
Unaudited Pro Forma Consolidated Statement of Loss
Fiscal Year Ended June 25, 2017
(In thousands, except per share data)

 
 
Historical Cree
 
Cree Lighting
 
Pro Forma Cree
 
 
 
 
 
 
 
Revenue, net
 

$1,473,000

 

$701,467

 

$771,533

Cost of revenue, net
 
1,038,428

 
510,918

 
527,510

Gross profit
 
434,572

 
190,549

 
244,023

Operating expenses:
 
 
 
 
 
 
Research and development
 
158,549

 
44,751

 
113,798

Sales, general and administrative
 
277,175

 
119,568

 
157,607

Amortization or impairment of acquisition-related intangibles
 
27,499

 
24,079

 
3,420

Loss on disposal or impairment of long-lived assets
 
2,521

 
768

 
1,753

Wolfspeed transaction termination fee
 
(12,500
)
 

 
(12,500
)
       Total operating expenses
 
453,244

 
189,166

 
264,078

Operating (loss) income
 
(18,672
)
 
1,383

 
(20,055
)
Non-operating income, net
 
14,008

 
1,022

 
12,986

(Loss) income before income taxes
 
(4,664
)
 
2,405

 
(7,069
)
Income tax expense
 
93,454

 
14,647

 
78,807

Net loss
 

($98,118
)
 

($12,242
)
 

($85,876
)
 
 
 
 
 
 
 
Loss per share:
 
 
 
 
 
 
Basic
 

($1.00
)
 
 
 

($0.87
)
Diluted
 

($1.00
)
 
 
 

($0.87
)
Weighted average shares used in per share calculation:
 
 
 
 
 
 
Basic
 
98,487

 
 
 
98,487

Diluted
 
98,487

 
 
 
98,487

 
 
 
 
 
 
 





Cree, Inc.
Unaudited Pro Forma Consolidated Statement of (Loss) Income
Fiscal Year Ended June 26, 2016
(In thousands, except per share data)

 
 
Historical
Cree
 
Cree Lighting
 
Pro Forma Cree
 
 
 
 
 
 
 
Revenue, net
 

$1,616,627

 

$889,133

 

$727,494

Cost of revenue, net
 
1,129,553

 
656,712

 
472,841

Gross profit
 
487,074

 
232,421

 
254,653

Operating expenses:
 
 
 
 
 
 
Research and development
 
168,848

 
46,388

 
122,460

Sales, general and administrative
 
283,052

 
131,936

 
151,116

Amortization or impairment of acquisition-related intangibles
 
28,732

 
25,818

 
2,914

Loss on disposal or impairment of long-lived assets
 
16,913

 
2,426

 
14,487

       Total operating expenses
 
497,545

 
206,568

 
290,977

Operating (loss) income
 
(10,471
)
 
25,853

 
(36,324
)
Non-operating (expense) income, net
 
(13,035
)
 
573

 
(13,608
)
(Loss) income before income taxes
 
(23,506
)
 
26,426

 
(49,932
)
Income tax (benefit) expense
 
(1,970
)
 
8,578

 
(10,548
)
Net (loss) income
 

($21,536
)
 

$17,848

 

($39,384
)
 
 
 
 
 
 
 
Loss per share:
 
 
 
 
 
 
Basic
 

($0.21
)
 
 
 

($0.39
)
Diluted
 

($0.21
)
 
 
 

($0.39
)
Weighted average shares used in per share calculation:
 
 
 
 
 
 
Basic
 
101,783

 
 
 
101,783

Diluted
 
101,783

 
 
 
101,783