Leases

3 Months Ended

Sep. 26, 2021

Leases [Abstract]

Leases

Leases

The Company primarily leases manufacturing and office space. The Company also has a number of bulk gas leases. Lease agreements frequently include renewal provisions and require the Company to pay real estate taxes, insurance and maintenance costs. Variable costs include lease payments that were volume or usage-driven in accordance with the use of the underlying asset, as well as non-lease components incurred with respect to actual terms rather than contractually fixed amounts.

The Company's finance lease obligations include manufacturing equipment, manufacturing space in Malaysia, and a 49-year ground lease on a future Silicon Carbide device fabrication facility in New York.

Balance Sheet

Lease assets and liabilities and the corresponding balance sheet classifications are as follows (in millions of U.S. Dollars):

Operating Leases:	September 26, 2021	June 27, 2021
Right-of-use asset (1)	$13.3	$12.1
Current lease liability (2)	6.6	4.5
Non-current lease liability (3)	6.4	7.5
Total operating lease liabilities	13.0	12.0
Finance Leases:
Finance lease assets (4)	$18.6	$15.5
Current portion of finance lease liabilities	8.7	5.2
Finance lease liabilities, less current portion	9.9	10.0
Total finance lease liabilities	18.6	15.2

(1) Within other assets on the consolidated balance sheets.

(2) Within other current liabilities on the consolidated balance sheets.

(3) Within other long-term liabilities on the consolidated balance sheets.

(4) Within property and equipment, net on the consolidated balance sheets.

Statement of Operations

Operating lease expense was $1.5 million for the three months ended September 26, 2021 and $1.4 million for the three months ended September 27, 2020.

Short-term lease expense, variable lease expense and sublease income were immaterial for the three months ended September 26, 2021 and September 27, 2020.

Finance lease amortization was $0.4 million and interest expense was $0.1 million for the three months ended September 26, 2021. Finance lease amortization was $0.2 million and interest expense was $0.1 million for the three months ended September 27, 2020.

Cash Flows

Cash flow information consisted of the following:

	Three months ended
(in millions of U.S. Dollars)	September 26, 2021	September 27, 2020
Cash used in operating activities:
Cash paid for operating leases	$1.6	$1.3
Cash paid for interest portion of financing leases	0.1	0.1
Cash used in financing activities:
Cash paid for principal portion of finance leases	0.1	0.1
Non-cash activities:
Operating lease additions and modifications, net	2.6	1.2
Finance lease additions	3.5	—
Transfer of finance lease liability to accounts payable and accrued expenses (1)	—	4.2

(1) In the first quarter of fiscal 2021, the Company executed the available bargain purchase option for certain finance leases relating to property and equipment, net, in order to purchase the assets.

Lease Liability Maturities

Maturities of operating and finance lease liabilities as of September 26, 2021 were as follows (in millions of U.S. Dollars):

Fiscal Year Ending	Operating Leases	Finance Leases	Total
June 26, 2022 (remainder of fiscal 2022)	$5.7	$8.8	$14.5
June 25, 2023	3.6	0.7	4.3
June 30, 2024	2.2	0.7	2.9
June 29, 2025	1.2	0.7	1.9
June 28, 2026	0.7	0.7	1.4
Thereafter	0.1	14.5	14.6
Total lease payments	13.5	26.1	39.6
Imputed lease interest	(0.5)	(7.5)	(8.0)
Total lease liabilities	$13.0	$18.6	$31.6

Supplemental Disclosures

	Operating Leases		Finance Leases
Weighted average remaining lease term (in months) (1)	27		353
Weighted average discount rate (2)	2.54	%	2.26	%

(1) Weighted average remaining lease term of finance leases without the 49-year ground lease is 24 months.

(2) Weighted average discount rate of finance leases without the 49-year ground lease is 1.78%.

Lease Income

As mentioned in Note 2, "Discontinued Operations", on March 1, 2021 and in connection with the sale of its LED Business, the Company entered into the LED RELA pursuant to which the Company leases to CreeLED approximately 58,000 square feet of the Company’s property and certain facilities in Durham, North Carolina for a total of $3.6 million per year. The lease term is 24 months and expires on February 28, 2023. Subject to certain provisions in the LED RELA, CreeLED may terminate its rights or a portion of its rights under the agreement at any time with sixty days written notice. A notice of thirty days is permitted under certain circumstances as defined in the agreement. The agreement does not contain any renewal provisions.

The Company recognized lease income of $0.9 million for the three months ended September 26, 2021. The Company did not recognize lease income for the three months ended September 27, 2020.

The Company did not recognize any variable lease income for the three months ended September 26, 2021 and September 27, 2020.

Future minimum rental income relating to the LED RELA is as follows (in millions of U.S. Dollars):

June 26, 2022 (remainder of fiscal 2022)	2.7
June 25, 2023	2.4
Total future minimum rental income	5.1

Leases

Leases

The Company primarily leases manufacturing and office space. The Company also has a number of bulk gas leases. Lease agreements frequently include renewal provisions and require the Company to pay real estate taxes, insurance and maintenance costs. Variable costs include lease payments that were volume or usage-driven in accordance with the use of the underlying asset, as well as non-lease components incurred with respect to actual terms rather than contractually fixed amounts.

The Company's finance lease obligations include manufacturing equipment, manufacturing space in Malaysia, and a 49-year ground lease on a future Silicon Carbide device fabrication facility in New York.

Balance Sheet

Lease assets and liabilities and the corresponding balance sheet classifications are as follows (in millions of U.S. Dollars):

Operating Leases:	September 26, 2021	June 27, 2021
Right-of-use asset (1)	$13.3	$12.1
Current lease liability (2)	6.6	4.5
Non-current lease liability (3)	6.4	7.5
Total operating lease liabilities	13.0	12.0
Finance Leases:
Finance lease assets (4)	$18.6	$15.5
Current portion of finance lease liabilities	8.7	5.2
Finance lease liabilities, less current portion	9.9	10.0
Total finance lease liabilities	18.6	15.2

(1) Within other assets on the consolidated balance sheets.

(2) Within other current liabilities on the consolidated balance sheets.

(3) Within other long-term liabilities on the consolidated balance sheets.

(4) Within property and equipment, net on the consolidated balance sheets.

Statement of Operations

Operating lease expense was $1.5 million for the three months ended September 26, 2021 and $1.4 million for the three months ended September 27, 2020.

Short-term lease expense, variable lease expense and sublease income were immaterial for the three months ended September 26, 2021 and September 27, 2020.

Finance lease amortization was $0.4 million and interest expense was $0.1 million for the three months ended September 26, 2021. Finance lease amortization was $0.2 million and interest expense was $0.1 million for the three months ended September 27, 2020.

Cash Flows

Cash flow information consisted of the following:

	Three months ended
(in millions of U.S. Dollars)	September 26, 2021	September 27, 2020
Cash used in operating activities:
Cash paid for operating leases	$1.6	$1.3
Cash paid for interest portion of financing leases	0.1	0.1
Cash used in financing activities:
Cash paid for principal portion of finance leases	0.1	0.1
Non-cash activities:
Operating lease additions and modifications, net	2.6	1.2
Finance lease additions	3.5	—
Transfer of finance lease liability to accounts payable and accrued expenses (1)	—	4.2

(1) In the first quarter of fiscal 2021, the Company executed the available bargain purchase option for certain finance leases relating to property and equipment, net, in order to purchase the assets.

Lease Liability Maturities

Maturities of operating and finance lease liabilities as of September 26, 2021 were as follows (in millions of U.S. Dollars):

Fiscal Year Ending	Operating Leases	Finance Leases	Total
June 26, 2022 (remainder of fiscal 2022)	$5.7	$8.8	$14.5
June 25, 2023	3.6	0.7	4.3
June 30, 2024	2.2	0.7	2.9
June 29, 2025	1.2	0.7	1.9
June 28, 2026	0.7	0.7	1.4
Thereafter	0.1	14.5	14.6
Total lease payments	13.5	26.1	39.6
Imputed lease interest	(0.5)	(7.5)	(8.0)
Total lease liabilities	$13.0	$18.6	$31.6

Supplemental Disclosures

	Operating Leases		Finance Leases
Weighted average remaining lease term (in months) (1)	27		353
Weighted average discount rate (2)	2.54	%	2.26	%

(1) Weighted average remaining lease term of finance leases without the 49-year ground lease is 24 months.

(2) Weighted average discount rate of finance leases without the 49-year ground lease is 1.78%.

Lease Income

As mentioned in Note 2, "Discontinued Operations", on March 1, 2021 and in connection with the sale of its LED Business, the Company entered into the LED RELA pursuant to which the Company leases to CreeLED approximately 58,000 square feet of the Company’s property and certain facilities in Durham, North Carolina for a total of $3.6 million per year. The lease term is 24 months and expires on February 28, 2023. Subject to certain provisions in the LED RELA, CreeLED may terminate its rights or a portion of its rights under the agreement at any time with sixty days written notice. A notice of thirty days is permitted under certain circumstances as defined in the agreement. The agreement does not contain any renewal provisions.

The Company recognized lease income of $0.9 million for the three months ended September 26, 2021. The Company did not recognize lease income for the three months ended September 27, 2020.

The Company did not recognize any variable lease income for the three months ended September 26, 2021 and September 27, 2020.

Future minimum rental income relating to the LED RELA is as follows (in millions of U.S. Dollars):

June 26, 2022 (remainder of fiscal 2022)	2.7
June 25, 2023	2.4
Total future minimum rental income	5.1

Leases

Leases

The Company primarily leases manufacturing and office space. The Company also has a number of bulk gas leases. Lease agreements frequently include renewal provisions and require the Company to pay real estate taxes, insurance and maintenance costs. Variable costs include lease payments that were volume or usage-driven in accordance with the use of the underlying asset, as well as non-lease components incurred with respect to actual terms rather than contractually fixed amounts.

The Company's finance lease obligations include manufacturing equipment, manufacturing space in Malaysia, and a 49-year ground lease on a future Silicon Carbide device fabrication facility in New York.

Balance Sheet

Lease assets and liabilities and the corresponding balance sheet classifications are as follows (in millions of U.S. Dollars):

Operating Leases:	September 26, 2021	June 27, 2021
Right-of-use asset (1)	$13.3	$12.1
Current lease liability (2)	6.6	4.5
Non-current lease liability (3)	6.4	7.5
Total operating lease liabilities	13.0	12.0
Finance Leases:
Finance lease assets (4)	$18.6	$15.5
Current portion of finance lease liabilities	8.7	5.2
Finance lease liabilities, less current portion	9.9	10.0
Total finance lease liabilities	18.6	15.2

(1) Within other assets on the consolidated balance sheets.

(2) Within other current liabilities on the consolidated balance sheets.

(3) Within other long-term liabilities on the consolidated balance sheets.

(4) Within property and equipment, net on the consolidated balance sheets.

Statement of Operations

Operating lease expense was $1.5 million for the three months ended September 26, 2021 and $1.4 million for the three months ended September 27, 2020.

Short-term lease expense, variable lease expense and sublease income were immaterial for the three months ended September 26, 2021 and September 27, 2020.

Finance lease amortization was $0.4 million and interest expense was $0.1 million for the three months ended September 26, 2021. Finance lease amortization was $0.2 million and interest expense was $0.1 million for the three months ended September 27, 2020.

Cash Flows

Cash flow information consisted of the following:

	Three months ended
(in millions of U.S. Dollars)	September 26, 2021	September 27, 2020
Cash used in operating activities:
Cash paid for operating leases	$1.6	$1.3
Cash paid for interest portion of financing leases	0.1	0.1
Cash used in financing activities:
Cash paid for principal portion of finance leases	0.1	0.1
Non-cash activities:
Operating lease additions and modifications, net	2.6	1.2
Finance lease additions	3.5	—
Transfer of finance lease liability to accounts payable and accrued expenses (1)	—	4.2

(1) In the first quarter of fiscal 2021, the Company executed the available bargain purchase option for certain finance leases relating to property and equipment, net, in order to purchase the assets.

Lease Liability Maturities

Maturities of operating and finance lease liabilities as of September 26, 2021 were as follows (in millions of U.S. Dollars):

Fiscal Year Ending	Operating Leases	Finance Leases	Total
June 26, 2022 (remainder of fiscal 2022)	$5.7	$8.8	$14.5
June 25, 2023	3.6	0.7	4.3
June 30, 2024	2.2	0.7	2.9
June 29, 2025	1.2	0.7	1.9
June 28, 2026	0.7	0.7	1.4
Thereafter	0.1	14.5	14.6
Total lease payments	13.5	26.1	39.6
Imputed lease interest	(0.5)	(7.5)	(8.0)
Total lease liabilities	$13.0	$18.6	$31.6

Supplemental Disclosures

	Operating Leases		Finance Leases
Weighted average remaining lease term (in months) (1)	27		353
Weighted average discount rate (2)	2.54	%	2.26	%

(1) Weighted average remaining lease term of finance leases without the 49-year ground lease is 24 months.

(2) Weighted average discount rate of finance leases without the 49-year ground lease is 1.78%.

Lease Income

As mentioned in Note 2, "Discontinued Operations", on March 1, 2021 and in connection with the sale of its LED Business, the Company entered into the LED RELA pursuant to which the Company leases to CreeLED approximately 58,000 square feet of the Company’s property and certain facilities in Durham, North Carolina for a total of $3.6 million per year. The lease term is 24 months and expires on February 28, 2023. Subject to certain provisions in the LED RELA, CreeLED may terminate its rights or a portion of its rights under the agreement at any time with sixty days written notice. A notice of thirty days is permitted under certain circumstances as defined in the agreement. The agreement does not contain any renewal provisions.

The Company recognized lease income of $0.9 million for the three months ended September 26, 2021. The Company did not recognize lease income for the three months ended September 27, 2020.

The Company did not recognize any variable lease income for the three months ended September 26, 2021 and September 27, 2020.

Future minimum rental income relating to the LED RELA is as follows (in millions of U.S. Dollars):

June 26, 2022 (remainder of fiscal 2022)	2.7
June 25, 2023	2.4
Total future minimum rental income	5.1