Discontinued Operations

9 Months Ended

Mar. 29, 2020

Discontinued Operations and Disposal Groups [Abstract]

On May 13, 2019, the Company completed the sale of (a) certain manufacturing facilities and equipment, inventory, intellectual property rights, contracts, and real estate of the Company used by the Company's Lighting Products business unit, which includes LED lighting fixtures, lamps and corporate lighting solutions for commercial, industrial and consumer applications, and (b) 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, the Lighting Products business unit) to IDEAL, pursuant to the Purchase Agreement, dated March 14, 2019, as amended, between the Company and IDEAL (the Purchase Agreement). The Company retained certain liabilities associated with the Lighting Products business unit arising prior to the closing of the sale. The Lighting Products business unit represented the Lighting Products segment disclosed in the Company's historical financial statements.

The aggregate net proceeds from the sale of the Lighting Products business unit was $219.0 million in cash, which is subject to certain adjustments. Additionally, the Company is entitled to an earnout payment subject to the future performance of the Lighting Products business unit. In connection with the transaction, the Company and IDEAL entered into certain ancillary and related agreements, including (i) an Intellectual Property Assignment and License Agreement, which assigned to IDEAL certain intellectual property owned by the Company and licensed to IDEAL certain additional intellectual property owned by the Company; (ii) a Transition Services Agreement (the TSA), which is designed to ensure a smooth transition of the Lighting Products business unit to IDEAL; (iii) an LED Supply Agreement (the LED Supply Agreement), pursuant to which the Company will supply IDEAL with certain LED chip and component products for three years; and (iv) a Real Estate License Agreement, which will allow IDEAL to use certain premises owned by the Company to conduct certain operations of the Lighting Products business unit after closing. The Company recognized a loss on the sale of $66.2 million.

The Company has classified the results of the Lighting Products business unit as discontinued operations, the results of which for the three and nine months ended March 31, 2019 are as follows:


	Three months ended	Nine months ended
(in millions of U.S. Dollars)	March 31, 2019	March 31, 2019
Revenue, net	$109.4	$376.0
Cost of revenue, net	82.5	287.5
Gross profit	26.9	88.5
Operating expenses:
Research and development	8.8	27.4
Sales, general and administrative	21.2	68.2
Amortization or impairment of acquisition-related intangibles	2.0	9.1
Goodwill impairment charges	197.6	197.6
Loss on disposal or impairment of long-lived assets	1.8	2.1
Other operating expense	0.5	1.9
Operating loss	(205.0)	(217.8)
Non-operating income	(0.2)	(0.5)


Loss before income taxes	(204.8)	(217.3)
Income tax expense	0.6	0.7
Net loss	($205.4)	($218.0)

The Company did not have any discontinued operations activity for the three and nine months ended March 29, 2020.

The Company recognized $2.5 million and $8.1 million in administrative fees for the three and nine months ended March 29, 2020 relating to the TSA, of which $1.7 million are included in accounts receivable, net in the consolidated balance sheets as of

March 29, 2020. These fees were recorded as a reduction of sales, general and administrative expense in the consolidated statements of operations.

The Company recognized $3.2 million and $9.7 million in revenue for the three and nine months ended March 29, 2020 related to the LED Supply Agreement, of which $0.8 million was included in accounts receivable, net in the consolidated balance sheets as of March 29, 2020. Additionally, the Company recorded a contract liability of $10.5 million relating to the LED Supply Agreement as of March 29, 2020. The contract liability is recognized in contract liabilities and other long-term liabilities on the consolidated balance sheets.