DURHAM, N.C., April 22, 2008 (PRIME NEWSWIRE) -- Cree, Inc. (Nasdaq:CREE), a market-leading innovator of lighting-class LEDs, LED lighting retrofit solutions, and semiconductor solutions for backlighting, wireless and power applications, today announced revenue of $125.0 million for its fiscal third quarter ended March 30, 2008. This represents a 5% increase compared to the fiscal second quarter of 2008 and a 38% increase compared to revenue of $90.3 million reported for the third fiscal quarter last year. GAAP net income for the third quarter was $5.7 million, or $0.06 per diluted share, compared to net income of $21.1 million or $0.27 per diluted share for the third quarter of fiscal 2007. The acquisition of LED Lighting Fixtures, Inc., which closed during the quarter, increased revenue by $0.7 million and reduced earnings by $0.01 per diluted share.
The remainder of this press release highlights the company's financial results on both a GAAP and a non-GAAP basis. The GAAP results include certain costs, charges, gains and losses which are excluded from non-GAAP results. By publishing the non-GAAP measures, management intends to provide investors with additional information to further analyze the company's performance, core results and underlying trends. Cree's management evaluates results and makes operating decisions using both GAAP and non-GAAP measures included in this press release. Non-GAAP results are not prepared in accordance with GAAP, and non-GAAP information should be considered a supplement to, and not a substitute for, financial statements prepared in accordance with GAAP. Investors and potential investors are encouraged to review the reconciliation of non-GAAP financial measures to their most directly comparable GAAP measures attached to this press release.
GAAP earnings of $0.06 per diluted share includes expenses totaling $6.4 million, net of tax, or $0.07 per diluted share due to certain items. These items consist of amortization of acquired intangibles of $0.04 per diluted share and stock-based compensation expense of $0.03 per diluted share. On a non-GAAP basis, adjusted to exclude these items, net income for the third quarter of fiscal 2008 was $12.0 million, or $0.14 per diluted share. On a non-GAAP basis, adjusted to exclude similar items as in fiscal 2008 and a non-recurring tax benefit of $0.22 per diluted share, net income for the third quarter of fiscal 2007 was $4.7 million, or $0.06 per diluted share.
"Cree's strategy to drive revenue growth by focusing on LED lighting continued to pay dividends in Q3, as we delivered financial performance that was in line with our previously announced guidance," stated Chuck Swoboda, Cree Chairman and CEO. "Revenue growth was led by higher sales of LED components, which exceeded sales of LED chips for the first time. In addition, we took another bold step in leading the LED lighting revolution with our acquisition of LED Lighting Fixtures, which positions us even better to drive the adoption of LED lighting going forward. For Q4, we target growth from XLamp(r) LEDs, high-brightness LED components and our new LED lighting solutions, all of which are benefitting from the rising demand for energy-efficient LED lighting."
Recent Business Highlights:
-- Acquired LED Lighting Fixtures, which is recognized in the
lighting industry as the first company to develop a viable,
energy-efficient, "no-compromise" retrofit LED down light for
general illumination. The acquisition:
- Expands Cree's market opportunity by providing direct access
to the lighting market
- Enables Cree to drive retrofit solutions to convert existing
lighting infrastructure to energy-efficient lighting and to
accelerate the adoption of LED lighting
- Sets the stage for Cree to help obsolete the light bulb
-- Announced that Austin, TX, and the Tianjin Economic Development
Area (TEDA) in China will join the growing LED City(tm) initiative.
Austin plans to evaluate and deploy state-of-the-art LED lighting
technology across its municipal infrastructure and is offering
rebates that cover approximately 30 percent of the upfront cost
of LEDs to help businesses explore the benefits of this new
technology. The TEDA is the first city area in China to join the
program and has partnered with Tianjin Polytechnic University to
develop the expertise necessary to accelerate the adoption of LED
lighting in China.
Q3 2008 Financial Metrics:
-- Gross margin was 35% of revenue.
-- Cash flow from operations was $5.5 million.
-- Cash and investments increased $36.4 million to $398.3 million
from Q2.
Business Outlook:
For its fourth quarter of fiscal 2008 ending June 29, 2008, Cree targets revenue in a range of $129 million to $133 million with GAAP earnings of $0.04 to $0.06 per diluted share and non-GAAP earnings of $0.12 to $0.14 per diluted share, based on an estimated 91 million diluted weighted average shares. Targeted non-GAAP earnings exclude expenses related to the amortization of acquired intangibles of $3.6 million, net of tax, and stock-based compensation expense of $3.6 million, net of tax. Our GAAP and Non-GAAP earnings targets reflect approximately $0.04 and $0.03 per diluted share, respectively, representing expected lower interest income, higher patent litigation expense and the dilution resulting from our acquisition of LED Lighting Fixtures, Inc.
Cree will host a conference call at 5:00 p.m. Eastern time today to review the highlights of the fiscal third quarter 2008 results and the fiscal fourth quarter 2008 business outlook, including significant factors and assumptions underlying the targets noted above. The conference call will be available to the public through a live audio web broadcast via the Internet. Log on to Cree's website at www.cree.com and go to "Investor Relations - Overview" for webcast details. The call will be archived and available on the website through May 6, 2008.
Supplemental financial information, including the non-GAAP reconciliation discussed below, is available in the "Investor Relations" section of Cree's website, under "Financial Metrics," "Quarter ending March 30, 2008," at http://www.cree.com/investor/metrics.asp.
About Cree, Inc.
Cree is leading the LED lighting revolution and setting the stage to obsolete the incandescent light bulb through the use of energy-efficient, environmentally friendly LED lighting. Cree is a market-leading innovator of lighting-class LEDs, LED lighting retrofit solutions, and semiconductor solutions for backlighting, wireless and power applications.
Cree's product families include blue and green LED chips, high brightness LEDs, lighting-class power LEDs, power-switching devices and radio-frequency/wireless devices. Cree solutions are driving improvements in applications such as general illumination, backlighting, electronic signs and signals, variable-speed motors, and wireless communications. For additional product specifications please refer to www.cree.com.
The Cree, Inc. logo is available at http://www.primenewswire.com/newsroom/prs/?pkgid=3529
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. Actual results, including with respect to our targets and prospects, could differ materially due to a number of factors, including our ability to complete development and commercialization of products under development, such as our pipeline of brighter LED chips, LED components and LED lighting retrofit solutions; our ability to lower costs; potential changes in demand; increasing price competition in key markets; the risk that, due to the complexity of our manufacturing processes and transition of production to larger wafers, we may experience production delays that preclude us from shipping sufficient quantities to meet customer orders or that result in higher production costs and lower margins; risks associated with the ramp-up of our production for our new products, as well as production at our Huizhou facility and subcontractors; 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; 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 our recent acquisition; risks associated with ongoing litigation; and other factors discussed in our filings with the Securities and Exchange Commission, including our report on Form 10-K for the fiscal year ended June 24, 2007, and subsequent reports filed with the SEC. Except as required under the U.S. federal securities laws and the rules and regulations of the SEC, Cree disclaims any 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.
Cree, the Cree logo and XLamp are registered trademarks, and LED City is a trademark, of Cree, Inc.
CREE, INC.
CONSOLIDATED STATEMENTS OF INCOME
(in thousands, except per share data)
Three Months Ended Nine Months Ended
--------------------- ---------------------
3/30/2008 3/25/2007 3/30/2008 3/25/2007
(Unaudited) (Unaudited) (Unaudited) (Unaudited)
--------- --------- --------- ---------
Product revenue $ 118,160 $ 82,318 $ 335,464 $ 261,258
Contract revenue 6,826 7,935 21,907 21,695
--------- --------- --------- ---------
Total revenue 124,986 90,253 357,371 282,953
Cost of product
revenue 75,935 55,279 219,766 163,778
Cost of contract
revenue 5,502 6,002 17,520 16,934
--------- --------- --------- ---------
Total cost of revenue 81,437 61,281 237,286 180,712
Gross margin 43,549 28,972 120,085 102,241
Operating expenses:
Research and development 15,405 15,619 43,083 44,272
Sales, general and
administrative 21,076 13,115 57,449 37,636
Amortization of
acquisition-related
intangibles 4,225 186 12,321 528
(Gain) loss on disposal
and impairment of
long-lived assets (722) (154) 487 28
--------- --------- --------- ---------
Total operating expenses 39,984 28,766 113,340 82,464
Operating income 3,565 206 6,745 19,777
Non-operating income:
Gain on sale of
investments, net -- -- 14,117 11,411
Interest and other
non-operating income,
net 3,884 3,993 12,193 11,838
--------- --------- --------- ---------
Income from continuing
operations before
income taxes 7,449 4,199 33,055 43,026
Income tax expense
(benefit) 1,787 (9,846) 7,885 (649)
--------- --------- --------- ---------
Net income from
continuing operations 5,662 14,045 25,170 43,675
(Loss) income from
discontinued operations,
net of related tax effect (2) 7,085 (176) 7,224
--------- --------- --------- ---------
Net income $ 5,660 $ 21,130 $ 24,994 $ 50,899
========= ========= ========= =========
Diluted earnings per
share:
Income from continuing
operations $ 0.06 $ 0.18 $ 0.29 $ 0.56
(Loss) income from
discontinued
operations $ (0.00) $ 0.09 $ (0.00) $ 0.09
--------- --------- --------- ---------
Net income $ 0.06 $ 0.27 $ 0.29 $ 0.65
========= ========= ========= =========
Weighted average shares
of common stock out-
standing, basic 87,211 76,417 85,695 76,809
Weighted average shares
of common stock out-
standing, diluted 88,905 77,134 87,506 77,729
CREE, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands)
3/30/2008 12/30/2007
(Unaudited) (Unaudited) 6/24/2007
----------------------- ----------
Assets:
Current assets:
Cash, cash equivalents and
short term investments $ 336,965 $ 295,121 $ 242,655
Accounts receivable, net 111,604 90,520 79,668
Inventory, net 83,328 75,063 71,068
Income taxes receivable and
prepaid income taxes 2,000 3,246 7,947
Deferred income taxes 20,886 19,939 23,573
Prepaid expenses and other
current assets 11,918 10,389 8,920
Assets of discontinued
operations 133 150 301
----------------------- ----------
Total current assets 566,834 494,428 434,132
Property and equipment, net 351,222 354,252 372,345
Long-term investments 61,369 66,828 68,363
Intangible assets, net 129,643 89,573 96,138
Goodwill 187,874 144,334 141,777
Other assets 9,349 3,526 3,475
----------------------- ----------
Total assets $1,306,291 $1,152,941 $1,116,230
======================= ==========
Liabilities and
Shareholders' Equity:
Current liabilities:
Accounts payable, trade $ 44,797 $ 36,612 $ 32,940
Accrued salaries and wages 14,337 10,197 10,241
Income taxes payable -- 6,856 4,504
Other current liabilities 8,101 6,212 6,259
Liabilities of discontinued
operations 541 572 505
----------------------- ----------
Total current liabilities 67,776 60,449 54,449
Long-term liabilities:
Deferred income taxes 55,937 36,499 38,758
Contingent tax reserves 4,852 5,792 5,792
Other long-term liabilities 162 173 129
Long-term liabilities of
discontinued operations 835 924 1,103
----------------------- ----------
Total long-term liabilities 61,786 43,388 45,782
Shareholders' Equity:
Common stock 112 107 106
Additional paid-in-capital 851,362 736,242 713,778
Accumulated other
comprehensive income 8,008 1,168 9,826
Retained earnings 317,247 311,587 292,289
----------------------- ----------
Total shareholders' equity 1,176,729 1,049,104 1,015,999
----------------------- ----------
Total liabilities and
shareholders' equity $1,306,291 $1,152,941 $1,116,230
======================= ==========
The following is a reconciliation showing how Cree, Inc.'s third
quarter income statements for fiscal 2008 and 2007 would appear if
they were adjusted for the items noted below.
CREE, INC.
Reconciling Items to Q3 2008 & 2007 Financial Statements
- GAAP to Non-GAAP
(in thousands, except per share amounts)
(Unaudited)
Three Months Ended
March 30, 2008
---------------------------------
GAAP Adjustments Non-GAAP
--------------------- --------
Product revenue $118,160 $ -- $118,160
Contract revenue 6,826 -- 6,826
--------------------- --------
Total revenue 124,986 -- 124,986
Cost of product revenue 75,935 (569)(a) 75,366
Cost of contract revenue 5,502 -- 5,502
--------------------- --------
Total cost of sales 81,437 (569) 80,868
Gross margin 43,549 569 44,118
Gross margin percentage 35% 35%
Operating expenses:
Research and development 15,405 (1,095)(a) 14,310
Sales, general and administrative 21,076 (2,466)(a) 18,610
Amortization of acquisition-
related intangibles 4,225 (4,225)(b) --
Gain on disposal of assets (722) -- (722)
--------------------- --------
Total operating expenses 39,984 (7,786) 32,198
Operating income 3,565 8,355 11,920
Non-operating income:
Gain (loss) on investments in
securities -- -- --
Interest and other non-operating
income, net 3,884 -- 3,884
--------------------- --------
Income from continuing
operations before
income taxes 7,449 8,355 15,804
Income tax expense (benefit) 1,787 2,005(c) 3,792
--------------------- --------
Net income from continuing
operations 5,662 6,350 12,012
(Loss) gain from discontinued
operations, net of related
tax (2) -- (2)
--------------------- --------
Net income $ 5,660 $ 6,350 $ 12,010
===================== ========
Earnings per diluted share:
From continuing operations $ 0.06 $ 0.07 $ 0.14
From discontinued operations $ (0.00) $ -- $ (0.00)
--------------------- --------
From net income $ 0.06 $ 0.07 $ 0.14
===================== ========
Weighted average shares of common
stock outstanding, basic 87,211 -- 87,211
Weighted average shares of common
stock outstanding, diluted 88,905 -- 88,905
Three Months Ended
March 25, 2007
---------------------------------
GAAP Adjustments Non-GAAP
--------------------- --------
Product revenue $ 82,318 $ -- $ 82,318
Contract revenue 7,935 -- 7,935
--------------------- --------
Total revenue 90,253 -- 90,253
Cost of product revenue 55,279 (580)(a) 54,699
Cost of contract revenue 6,002 -- 6,002
--------------------- --------
Total cost of sales 61,281 (580) 60,701
Gross margin 28,972 580 29,552
Gross margin percentage 32% 33%
Operating expenses:
Research and development 15,619 (831)(a) 14,788
Sales, general and administrative 13,115 (1,331)(a) 11,784
Amortization of acquisition-
related intangibles 186 (186)(b) --
Gain on disposal of assets (154) -- (154)
--------------------- --------
Total operating expenses 28,766 (2,348) 26,418
Operating income 206 2,928 3,134
Non-operating income:
Gain (loss) on investments in
securities -- -- --
Interest and other non-operating
income, net 3,993 -- 3,993
--------------------- --------
Income from continuing
operations before
income taxes 4,199 2,928 7,127
Income tax expense (benefit) (9,846) 12,036(d) 2,190
--------------------- --------
Net income from continuing
operations 14,045 (9,108) 4,937
(Loss) gain from discontinued
operations, net of related
tax 7,085 (7,286)(e) (201)
--------------------- --------
Net income $ 21,130 $(16,394) $ 4,736
===================== ========
Earnings per diluted share:
From continuing operations $ 0.18 $ (0.12) $ 0.06
From discontinued operations $ 0.09 $ (0.09) $ (0.00)
--------------------- ---------
From net income $ 0.27 $ (0.22) $ 0.06
===================== =========
Weighted average shares of common
stock outstanding, basic 76,417 -- 76,417
Weighted average shares of common
stock outstanding, diluted 77,134 -- 77,134
(a) Non-cash stock-based compensation expense of $569 in costs of
product revenue, $1,095 in research and development and $2,466 in
sales, general and administrative for the three months ended
March 30, 2008, and $580 in costs of product revenue, $831 in
research and development and $1,331 in sales, general and
administrative for the three months ended March 25, 2007.
(b) Amortization expense of $4,225 for the three months ended
March 30, 2008, and $186 for the three months ended March 25, 2007,
recognized on intangible assets resulting from acquisitions.
(c) Tax effects of non-cash stock-based compensation expense and
amortization related to acquisition-related intangible assets.
(d) Tax effects for non-cash stock-based compensation, tax benefit
related to the change in estimate of contingent tax reserves
associated with our research and experimentation tax credit
benefit related to the completion of Internal Revenue Service
audits of fiscal 2003, 2004 and 2005 Federal tax returns, tax
benefit related to the release of valuation allowances on
deferred tax assets related to Federal capital loss carry-
forwards and income tax return to provision adjustments
associated with the filing of our fiscal 2006 federal tax
returns.
(e) Tax benefit related to the the release of contingent tax
reserves associated with the completion of Internal Revenue
Service audits of fiscal 2003, 2004 and 2005 Federal tax returns.
The following is a reconciliation showing how Cree, Inc.'s year-to-
date income statements for fiscal 2008 and 2007 would appear if they
were adjusted for the items noted below.
CREE, INC.
Reconciling Items to Nine Months Financial Statements
- GAAP to Non-GAAP
(in thousands, except per share amounts)
(Unaudited)
Nine Months Ended
March 30, 2008
---------------------------------
As
GAAP Adjustments Adjusted
---------------------- --------
Product revenue $335,464 $ -- $335,464
Contract revenue 21,907 -- 21,907
---------------------- --------
Total revenue 357,371 -- 357,371
Cost of product revenue 219,766 (2,209)(a) 217,557
Cost of contract revenue 17,520 -- 17,520
---------------------- --------
Total cost of sales 237,286 (2,209) 235,077
Gross margin 120,085 2,209 122,294
Gross margin percentage 34% 34%
Operating expenses:
Research and development 43,083 (3,031)(a) 40,052
Sales, general and administrative 57,449 (7,122)(a)(b) 50,327
Amortization of acquisition-
related intangibles 12,321 (12,321)(c) --
Loss on disposal and impairment
of long-lived assets 487 -- 487
---------------------- --------
Total operating expenses 113,340 (22,474) 90,866
Operating income 6,745 24,683 31,428
Non-operating income:
Gain (loss) on investments
in securities 14,117 (14,117)(d) --
Interest and other non-operating
income, net 12,193 -- 12,193
---------------------- --------
Income from continuing operations
before income taxes 33,055 10,566 43,621
Income tax expense 7,885 2,552(e) 10,437
---------------------- --------
Net income from continuing
operations 25,170 8,014 33,184
(Loss) gain from discontinued
operations, net of related tax (176) -- (176)
---------------------- --------
Net income $ 24,994 $ 8,014 $ 33,008
====================== ========
Earnings per diluted share:
From continuing operations $ 0.29 $ 0.09 $ 0.38
From discontinued operations $ (0.00) $ -- $ (0.00)
---------------------- --------
From net income $ 0.29 $ 0.09 $ 0.38
====================== ========
Weighted average shares of common
stock outstanding, basic 85,695 -- 85,695
Weighted average shares of common
stock outstanding, diluted 87,506 -- 87,506
Nine Months Ended
March 25, 2007
---------------------------------
As
GAAP Adjustments Adjusted
---------------------- --------
Product revenue $261,258 $ -- $261,258
Contract revenue 21,695 -- 21,695
---------------------- --------
Total revenue 282,953 -- 282,953
Cost of product revenue 163,778 (2,787)(a) 160,991
Cost of contract revenue 16,934 -- 16,934
---------------------- --------
Total cost of sales 180,712 (2,787) 177,925
Gross margin 102,241 2,787 105,028
Gross margin percentage 36% 37%
Operating expenses:
Research and development 44,272 (2,606)(a) 41,666
Sales, general and administrative 37,636 (3,774)(a) 33,862
Amortization of acquisition-
related intangibles 528 (528)(c) --
Loss on disposal and impairment
of long-lived assets 28 -- 28
---------------------- --------
Total operating expenses 82,464 (6,908) 75,556
Operating income 19,777 9,695 29,472
Non-operating income:
Gain (loss) on investments
in securities 11,411 (11,351)(d) 60
Interest and other non-operating
income, net 11,838 -- 11,838
---------------------- --------
Income from continuing operations
before income taxes 43,026 (1,656) 41,370
Income tax expense (649) 13,706(f) 13,057
---------------------- --------
Net income from continuing
operations 43,675 (15,362) 28,313
(Loss) gain from discontinued
operations, net of related tax 7,224 (7,566)(g) (342)
---------------------- --------
Net income $ 50,899 $(22,928) $ 27,971
====================== ========
Earnings per diluted share:
From continuing operations $ 0.56 $ (0.20) $ 0.36
From discontinued operations $ 0.09 $ (0.10) $ (0.01)
---------------------- --------
From net income $ 0.65 $ (0.29) $ 0.36
====================== ========
Weighted average shares of common
stock outstanding, basic 76,809 -- 76,809
Weighted average shares of common
stock outstanding, diluted 77,729 -- 77,729
(a) Non-cash stock-based compensation expense of $2,209 in costs
of product revenue, $3,031 in research and development and $6,074
in sale, general and administrative for the nine months ended
March 30, 2008, and $2,787 in costs of product revenue, $2,606 in
research and development and $3,774 in sale, general and
administrative for the nine months ended March 25, 2007.
(b) Personal property assessment of $1,048 related to finalizing
the audits of our 2002 through 2007 property tax returns.
(c) Amortization expense of $12,321 for the nine months ended
March 30, 2007, and $528 for the nine months ended March 25, 2007,
recognized on intangible assets resulting from prior year
acquisitions.
(d) Gain on the sale of 500,000 shares of Color Kinetics
Incorporated common stock during the nine months ended March 30,
2008, and on the sale of 931,000 shares of Color Kinetics
Incorporated common stock during the nine months ended March 25,
2007.
(e) Tax effects for non-cash stock-based compensation expense,
personal property tax assessment, the amortization of acquisition-
related intangible assets and on the sale of Color Kinetics
Incorporated common stock.
(f) Tax effects for non-cash stock-based compensation, tax benefit
related to the change in estimate of contingent tax reserves
associated with our research and experimentation tax credit
benefit related to the completion of Internal Revenue Service
audits of fiscal 2003, 2004 and 2005 Federal tax returns, tax
benefit of the release of valuation allowances on deferred tax
assets related to Federal capital loss carry forwards and income
tax return to provision adjustments associated with the filing of
our fiscal 2006 federal tax returns.
(g) Tax benefit related to the the release of contingent tax
reserves associated with the completion of Internal Revenue
Service audits of fiscal 2003, 2004 and 2005 Federal tax returns,
and Gain realized as a result of entering into a sublease
agreement at Cree Microwave.