8-K

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 8-K

CURRENT REPORT

Pursuant to Section 13 OR 15(d) of The Securities Exchange Act of 1934

Date of Report (Date of Earliest Event Reported): July 13, 2016

CREE, INC.

(Exact name of registrant as specified in its charter)

North Carolina	0-21154	56-1572719
(State or other jurisdiction of incorporation)	(Commission File Number)	(I.R.S. Employer Identification Number)

4600 Silicon Drive
Durham, North Carolina	27703
(Address of principal executive offices)	(Zip Code)

(919) 407-5300

Registrant’s telephone number, including area code

N/A

(Former name or former address, if changed since last report)

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:

[ ]    Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

[ ]    Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

[ ]    Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

[ ]    Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

Item 1.01 Entry into a Material Definitive Agreement

On July 13, 2016, Cree, Inc. (“Cree” or the “Company”) and Cree Sweden AB, a wholly-owned subsidiary of the Company (together with the Company, the “Sellers”), entered into an Asset Purchase Agreement (the “Purchase Agreement”) with Infineon Technologies AG, a stock corporation (Aktiengesellschaft) organized under the laws of the Federal Republic of Germany (“Infineon” or the “Buyer”). The transaction, which was approved by both Cree’s Board of Directors and Infineon’s Supervisory Board, is expected to close by the end of calendar year 2016, subject to customary closing conditions and governmental approvals.

Pursuant to the Purchase Agreement, the Sellers and certain affiliates of the Sellers will sell to Buyer, and Buyer will (i) purchase from the Sellers, (a) certain manufacturing facilities and equipment, inventory, intellectual property rights, contracts, and real estate of the Sellers and certain affiliates of the Sellers comprising the Sellers’ power and radio-frequency (“RF”) business and certain related portions of its silicon carbide (“SiC”) materials and gemstones business and (b) all of the issued and outstanding equity interests of Cree Fayetteville, Inc, a wholly-owned subsidiary of the Company (collectively, the “Power and RF Business”); and (ii) assume certain liabilities related to the Power and RF Business (collectively (i) and (ii), the “Transaction”). The Company will retain certain liabilities associated with the Power and RF Business arising prior to the closing of the Transaction. Infineon is expected to hire most of Cree’s approximately 600 Wolfspeed employees either at the closing of the transaction or following a transition period.

The purchase price for the Power and RF Business will be $850 million in cash, which is subject to certain adjustments. In connection with the Transaction, the Company and Buyer will also enter into certain ancillary and related agreements, including (i) an Intellectual Property Assignment and License Agreement, which will assign to Buyer certain intellectual property owned by the Company and license to Buyer certain additional intellectual property owned by the Company, (ii) a Transition Services Agreement, which is designed to ensure a smooth transition of the Power and RF Business to Buyer, and (iii) a Wafer Supply Agreement, pursuant to which the Company will supply Buyer with silicon carbide wafers and silicon carbide boules for a transitional period of time.

The Purchase Agreement contains customary representations, warranties and covenants, including covenants to cooperate in seeking regulatory approvals, as well as the Company’s agreement to not compete with the Power and RF Business for five (5) years following the closing of the Transaction and to indemnify the Buyer for certain damages that the Buyer may suffer following the closing of the Transaction.

The obligation of the Buyer to purchase the Power and RF Business is subject to the satisfaction or waiver of a number of conditions set forth in the Purchase Agreement, including regulatory approval under the Hart-Scott-Rodino Antitrust Improvements Act of 1976 and certain similar non-US regulations, the approval of the Committee on Foreign Investment in the United States and other customary closing conditions. The Purchase Agreement provides for customary termination rights of the parties and also provides that in the event the Purchase Agreement is terminated for certain specified regulatory-related circumstances, the Buyer may be required to pay the Company a termination fee ranging from $12.5 million to $42.5 million.

Item 2.02 Results of Operations and Financial Condition

On July 14, 2016, the Company issued a press release announcing preliminary estimated financial results for the Company’s fourth fiscal quarter ended June 26, 2016. The press release is attached as Exhibit 99.1 and incorporated into this report by reference.

The information in this Item 2.02, including Exhibit 99.1, shall not be deemed “filed” for the purposes of Section 18 of the Securities Exchange Act of 1934, as amended, or otherwise subject to the liability of that Section. Furthermore, the information in Item 2.02 of this report shall not be deemed incorporated by reference into the filings of the Company under the Securities Act of 1933, as amended.

Item 7.01 Regulation FD Disclosure

On July 14, 2016, the Company issued a press release announcing the execution of the Purchase Agreement. The press release is furnished as Exhibit 99.1 and incorporated by reference into Item 7.01 of this report.

The information in this Item 7.01, including Exhibit 99.1, shall not be deemed “filed” for the purposes of Section 18 of the Securities Exchange Act of 1934, as amended, or otherwise subject to the liability of that Section. Furthermore, the information in Item 7.01 of this report shall not be deemed incorporated by reference into the filings of the Company under the Securities Act of 1933, as amended.

Item 9.01 Financial Statements and Exhibits

(d)    Exhibits

Exhibit No.	Description of Exhibit
99.1	Press Release dated July 14, 2016

Cautionary Statements Regarding Forward Looking Statements

This report contains forward-looking statements involving risks and uncertainties, both known and unknown, that may cause actual results to differ materially from those indicated. In this context, forward-looking statements often address expected future business and financial performance and financial condition, and often contain words such as “believe,” “project,” “may,” “will,” “anticipate,” “target,” “plan,” “estimate,” “expect” and “intend” and other similar expressions, and variations or negatives of these words. Forward-looking statements by their nature address matters that are, to different degrees, uncertain, such as statements about the potential timing or consummation of the proposed transaction or the anticipated benefits thereof, including future financial and operating

results. Actual results may differ materially due to a number of factors, such as the possibility that the closing of the Transaction may be delayed or may not occur; the ability to obtain regulatory approval or the possibility that such regulatory approval may result in the imposition of conditions that could require the parties to abandon the Transaction; the risk that one or more conditions to closing may not be satisfied; the possibility that anticipated benefits of the Transaction will not be realized; potential business uncertainty, including changes to existing business relationships, during the pendency before closing that could affect the Company’s financial performance; and other factors discussed in the Company’s filings with the Commission, including its Annual Report on Form 10-K for the year ended June 28, 2015 and subsequent filings. Any forward-looking statements included in this report are as of the date made and the Company does not intend to update them if its views later change. These forward-looking statements should not be relied upon as representing the Company’s views as of any date subsequent to the date of this report.

SIGNATURE

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

CREE, INC.
By:	/s/ Michael E. McDevitt
	Michael E. McDevitt
	Executive Vice President and Chief Financial Officer

Date: July 14, 2016

EXHIBIT INDEX

Exhibit No.	Description of Exhibit
99.1	Press Release dated July 14, 2016

EX-99.1

Exhibit 99.1

Press Release

FOR IMMEDIATE RELEASE

Contact:

Raiford Garrabrant

Cree, Inc.

Director, Investor Relations

Phone: 919-407-7895

Fax: 919-407-5615

investorrelations@cree.com

Cree to Sell Wolfspeed to Infineon for $850 Million Cash

Transaction Sharpens Cree’s Strategic Focus on LED Lighting

DURHAM, N.C., July 14, 2016 - Cree, Inc. (Nasdaq: CREE), a market leader in LED lighting, today announced execution of a definitive agreement to sell its Wolfspeed Power and RF division (“Wolfspeed”), which includes the silicon carbide substrate business for power, RF and gemstone applications, to Infineon Technologies AG (FSE: IFX / OTCQX: IFNNY) for $850 million in cash.

In 2015, the Company announced its strategy to become a more focused LED lighting company. As part of that strategy, the Company also announced the proposed IPO of Wolfspeed to create a more focused Power and RF management team, raise capital to fuel Wolfspeed’s growth and unlock value for Cree shareholders.

Subsequent to that announcement, the Company was approached by several parties interested in acquiring the business directly. After evaluating the strategic options, the Company concluded that selling Wolfspeed to Infineon is the best decision for our shareholders, employees and customers.

“Selling Wolfspeed to Infineon speeds our transition to a more focused LED lighting company while providing significant resources to accelerate our growth,” stated Chuck Swoboda, Cree chairman and CEO. “Divesting Wolfspeed is targeted to reduce short-term profits, but increase free cash flow. We believe this is the right decision for the company, as it unlocks value, increases management focus on the core business and supports our mission to build a more valuable LED lighting technology company. We target using the capital raised, combined with improved free cash flow, to fund select M&A, as well as to support additional stock buybacks.”

The business to be acquired by Infineon generated pro-forma revenue of $173 million in the last twelve months ending March 27, 2016*. Both Cree’s Board of Directors and Infineon’s Supervisory Board have approved the transaction. J.P. Morgan Securities LLC served as the company’s financial adviser on the transaction. The closing of the transaction is expected by the end of calendar year 2016, and is subject to

customary closing conditions and regulatory approvals, including HSR and CFIUS clearance. The Company targets approximately $585 million of net proceeds after tax and other deal related costs.

*Attached as an exhibit to this press release is a reconciliation schedule comparing Cree’s historical segment information presentation to the pro-forma segment information for revenue, gross profit and gross margin for the segments reclassified to reflect the assets to be sold as part of the Wolfspeed business. These assets include certain assets formerly part of the LED Product segment relating to the silicon carbide substrate business for power, RF and gemstone applications described above.

FY16 Q4 Business Update

Commercial lighting gained momentum in Q4, as orders increased, customer service improved significantly and nine new products or significant upgrades were released. LED Products also executed well, delivering solid quarter over quarter revenue growth.

Preliminary revenue results for Q4 were at the upper end of the Company’s target range at approximately $388 million.

◦ Lighting Products revenue was in line with the expectations for this segment in the Company’s previously announced revenue targets at approximately $197 million.

◦ LED Products revenue was higher than the expectations for this segment in the Company’s previously announced revenue targets at approximately $160 million due in part to the benefit of licensing revenue.

◦ Wolfspeed revenue was in line with the expectations for this segment in the Company’s previously announced revenue targets at approximately $31 million.

The Company will provide a complete review of Q4 results and FY17 Q1 outlook on its regularly scheduled financial results call on August 16^th at 5:00 p.m. EDT.

Conference Call:

The Company plans to hold a conference call today at 8:00 a.m. EDT to discuss the transaction and these preliminary results. The conference call will be available to the public through a live audio web broadcast via the internet. For webcast details, visit Cree’s website at investor.cree.com/events.cfm.

About Cree, Inc.

Cree is leading the LED lighting revolution and making energy-wasting traditional lighting technologies obsolete through the use of energy-efficient, mercury-free LED lighting. Cree is a market-leading innovator of lighting-class LEDs, lighting products and semiconductor products for power and radio frequency (RF) applications.

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Cree’s product families include LED lighting systems and bulbs, blue and green LED chips, high-brightness LEDs, lighting-class power LEDs, power-switching devices and RF devices. Cree's products are driving improvements in applications such as general illumination, electronic signs and signals, power supplies and inverters.

For additional product and Company information, please refer to www.cree.com.

Forward Looking Statements:

The schedules attached to this release are an integral part of the release. This press release contains forward-looking statements involving risks and uncertainties, both known and unknown, that may cause actual results to differ materially from those indicated in the forward-looking statements. Forward-looking statements by their nature address matters that are, to different degrees, uncertain, such as statements about the potential timing or consummation of the proposed transaction or the anticipated benefits thereof, including future financial and operating results. Actual results, including with respect to our targets and prospects, could differ materially due to a number of factors, including the risk that the transaction may be delayed or may not occur; the ability to obtain regulatory approval or the possibility that such regulatory approval may result in the imposition of conditions that could cause the parties to abandon the transaction; the risk that one or more of the conditions to closing of the transaction may not be satisfied; the possibility that anticipated benefits of the proposed transaction will not be realized, including the amount of cash to be realized by Cree from the transaction or its resulting ability to pursue select strategic transactions and stock repurchases; potential business uncertainty, including changes to existing business relationships during the pendency before closing that could affect Cree’s financial performance; that we may not obtain sufficient orders to achieve our targeted revenues; price competition in key markets; the risk that we or our channel partners are not able to develop and expand customer bases and accurately anticipate demand from end customers, which can result in increased inventory and reduced orders as we experience wide fluctuations in supply and demand; the risk that our commercial lighting results will continue to suffer if new issues arise regarding the new ERP system we implemented in the third quarter of fiscal 2016; the risk that we may experience production difficulties that preclude us from shipping sufficient quantities to meet customer orders or that result in higher production costs and lower margins; our ability to lower costs; the risk that our results will suffer if we are unable to balance fluctuations in customer demand and capacity; product mix; risks associated with the ramp-up of production of our new products, and our entry into new business channels different from those in which we have historically operated; the risk that customers do not maintain their favorable perception of our brand and products, resulting in lower demand for our products; the risk that our products fail to perform or fail to meet customer requirements or expectations, resulting in significant additional costs, including costs associated with the potential recall of our products; the risk that retail customers may alter promotional pricing, increase promotion of a competitor's products over our products or reduce their inventory levels, all of which could negatively affect product demand; the risk that our equity method investments may experience periods of significant stock price volatility causing us to recognize fair value losses on our investment; the risk that we have an increasingly complex supply chain and its ability to

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scale to enable maintaining a sufficient supply of raw materials; ongoing uncertainty in global economic conditions, infrastructure development or customer demand that could negatively affect product demand, collectability of receivables and other related matters as consumers and businesses may defer purchases or payments, or default on payments; the risk we may be required to record a significant charge to earnings if our goodwill or amortizable assets become impaired; our ability to complete development and commercialization of products under development, such as our pipeline of improved LED chips, LED components and LED lighting products; risks resulting from the concentration of our business among few customers, including the risk that customers may reduce or cancel orders or fail to honor purchase commitments; risks related to our multi-year warranty periods for LED lighting products; risks associated with acquisitions, divestitures or investments; the rapid development of new technology and competing products that may impair demand or render our products obsolete; the potential lack of customer acceptance for our products; risks associated with ongoing litigation; and other factors discussed in our filings with the Securities and Exchange Commission (SEC), including our report on Form 10-K for the fiscal year ended June 28, 2015, and subsequent reports filed with the SEC. These forward-looking statements represent Cree's judgment as of the date of this release. Except as required under the U.S. federal securities laws and the rules and regulations of the SEC, Cree disclaims any intent or obligation to update any forward-looking statements after the date of this release, whether as a result of new information, future events, developments, changes in assumptions or otherwise.

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CREE, INC.

PRO FORMA SEGMENT RECLASSIFICATION

TWELVE TRAILING MONTHS ENDED MARCH 2016

(unaudited)

(in thousands, except percentages)

		Three Months Ended June 28, 2015									Three Months Ended September 27, 2015									Three Months Ended December 27, 2015									Three Months Ended March 27, 2016									Twelve Months Ended March 27, 2016
		Reported			Change			Pro Forma			Reported			Change			Pro Forma			Reported			Change			Pro Forma			Reported			Change			Pro Forma			Reported			Change			Pro Forma
Revenue
	Lighting Products	$	229,139		$	—		$	229,139		$	248,031		$	—		$	248,031		$	254,970		$	—		$	254,970		$	187,714		$	—		$	187,714		$	919,854		$	—		$	919,854
	Percent of Revenue	60		%				60		%	58		%				58		%	59		%				59		%	51		%				51		%	57		%				57		%
	LED Products	122,231			(12,871		)	109,360			148,208			(14,684		)	133,524			153,362			(14,566		)	138,796			150,189			(14,636		)	135,553			573,990			(56,757		)	517,233
	Percent of Revenue	32		%				29		%	35		%				31		%	35		%				32		%	41		%				37		%	36		%				32		%
	Wolfspeed	30,787			12,871			43,658			29,250			14,684			43,934			27,474			14,566			42,040			29,016			14,636			43,652			116,527			56,757			173,284
	Percent of Revenue	8		%				11		%	7		%				10		%	6		%				10		%	8		%				12		%	7		%				11		%
	Total	$	382,157		$	—		$	382,157		$	425,489		$	—		$	425,489		$	435,806		$	—		$	435,806		$	366,919		$	—		$	366,919		$	1,610,371		$	—		$	1,610,371
Gross Profit/ Gross Margin
	Lighting Products	$	56,934		$	—		$	56,934		$	69,081		$	—		$	69,081		$	72,642		$	—		$	72,642		$	48,808		$	—		$	48,808		$	247,465		$	—		$	247,465
	Gross Margin	24.8		%				24.8		%	27.9		%				27.9		%	28.5		%				28.5		%	26.0		%				26.0		%	26.9		%				26.9		%
	LED Products	8,506			(8,492		)	14			51,668			(9,793		)	41,875			52,719			(9,780		)	42,939			52,102			(9,272		)	42,830			164,995			(37,337		)	127,658
	Gross Margin	7.0		%	66.0		%	—		%	34.9		%	66.7		%	31.4		%	34.4		%	67.1		%	30.9		%	34.7		%	63.4		%	31.6		%	28.7		%	65.8		%	24.7		%
	Wolfspeed	16,163			7,956			24,119			14,323			9,446			23,769			14,346			9,372			23,718			13,477			8,794			22,271			58,309			35,568			93,877
	Gross Margin	52.5		%	61.8		%	55.2		%	49.0		%	64.3		%	54.1		%	52.2		%	64.3		%	56.4		%	46.4		%	60.1		%	51.0		%	50.0		%	62.7		%	54.2		%
	Unallocated costs	(4,913		)	536			(4,377		)	(4,499		)	347			(4,152		)	(5,262		)	408			(4,854		)	(5,354		)	478			(4,876		)	(20,028		)	1,769			(18,259		)
	Total	$	76,690		$	—		$	76,690		$	130,573		$	—		$	130,573		$	134,445		$	—		$	134,445		$	109,033		$	—		$	109,033		$	450,741		$	—		$	450,741
	Gross Margin	20.1		%				20.1		%	30.7		%				30.7		%	30.8		%				30.8		%	29.7		%				29.7		%	28.0		%				28.0		%

The abovereconciliation schedule compares Cree’s historical segment information presentation to the pro-forma segment information for revenue, gross profit and gross margin for the segments reclassified to reflect the assets to be sold as part of the Wolfspeed business. These assets include certain assets formerly part of the LED Product segment relating to the silicon carbide substrate business for power, RF and gemstone applications.

Source: Cree, Inc.

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