Cree Reports Record Quarterly Revenue for the First Quarter of Fiscal Year 2009

Q1 2009 Revenue Increased 24 Percent Year-Over-Year to $140 Million


DURHAM, N.C., Oct. 21, 2008 (GLOBE NEWSWIRE) -- Cree, Inc. (Nasdaq:CREE), a market leader in LED lighting, today announced revenue of $140.4 million for its first quarter of fiscal 2009, ended September 28, 2008. This represents a 24% increase compared to revenue of $113.4 million reported for the first fiscal quarter last year and a 3% increase compared to the fiscal fourth quarter of 2008. GAAP net income for the first quarter was $5.9 million, or $0.07 per diluted share, compared to net income of $12.7 million or $0.15 per diluted share for the first quarter of fiscal 2008. Net income for the first quarter of fiscal 2008 benefited from a realized gain on investment of $10.8 million or $0.13 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 that 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 EPS of $0.07 per diluted share for the first quarter of fiscal 2009 includes expenses totaling $7.3 million, net of tax, or $0.08 per diluted share related to amortization of acquired intangibles and stock-based compensation expense. On a non-GAAP basis, adjusted to exclude these items, net income for the first quarter of fiscal 2009 was $13.2 million, or $0.15 per diluted share. On a non-GAAP basis, adjusted to exclude similar items as well as a realized gain on investment and property tax expense adjustments, net income for the first quarter of fiscal 2008 was $8.8 million, or $0.10 per diluted share.

"Financial results were at the high end of our targeted range in Q1 due to strong LED revenue growth and better margins," stated Chuck Swoboda, Cree chairman and CEO. "Additionally, the recently announced strategic agreement with Zumtobel signals an important step for Cree and is targeted to accelerate the LED lighting revolution across Europe. While the current economic uncertainty has made forecasting the business more challenging, we continue to target growth driven by increased demand for our XLamp(r) LED and LED lighting solution products."

Recent Business Highlights:



 * Announced commercial availability of the XLamp MC-E LED. The
   multi-chip XLamp MC-E retains the same 7mm x 9mm footprint as
   Cree's existing XLamp XR family LEDs while providing four times
   the light output of the existing XR-E, the highest lumen output
   commercially available for a package of this size.

 * Entered into a long-term strategic agreement with Zumtobel Group,
   a global market leader in the professional lighting industry, to
   supply LED downlights to the European market. This agreement
   accelerates the business relationship, which is anticipated to
   expand into other high-volume lighting categories in 2009.

 * Welcomed Welland, Ontario, Canada, into the LED City(R) program.
   The city has converted many of its lighting applications to LEDs,
   including streetlights and traffic signals, and has additional
   projects underway.

 * The Cree LR4 recessed architectural LED downlight won the top
   prize for recessed downlights in the 2008 Lighting for Tomorrow
   solid-state lighting (SSL) competition, and was praised for
   "superior energy efficiency and color quality." The Cree LR24, a
   24-inch square recessed LED light, was honored for superior
   efficacy in the "Other Applications" category.

 * Named Steve Kelley as executive vice president and chief
   operating officer. Kelley comes to Cree after five years at Texas
   Instruments where he served as vice president and general manager
   of the Standard Linear and Logic Group.

Q1 2009 Financial Metrics:



 * GAAP gross margin improved to 35% of revenue compared to 31% in
   Q1 of FY08, and non-GAAP gross margin was 36%.

 * Accounts receivable decreased $6.9 million from Q4 to $103.4
   million, resulting in days sales outstanding of 66, a decrease of
   7 days from Q4.

 * Inventory decreased $0.9 million from Q4 to $79.2 million and
   represents 78 days of inventory, a decrease of 2 days from Q4.

 * Cash and investments were $339.1 million with cash flow from
   operations of $42.1 million and free cash flow (cash flow from
   operations less capital expenditures) of $30.3 million.

Business Outlook:

Current uncertainty in global economic conditions makes it particularly difficult to predict demand and makes it more likely that Cree's actual results could differ materially from expectations. For its second quarter of fiscal 2009 ending December 28, 2008, Cree targets revenue in a range of $142 million to $146 million with GAAP earnings of $0.07 to $0.08 per diluted share and non-GAAP earnings of $0.15 to $0.16 per diluted share, based on an estimated 89 million diluted weighted average shares. Targeted non-GAAP earnings exclude expenses related to the amortization of acquired intangibles of $0.04 per diluted share and stock-based compensation expense of $0.04 per diluted share.

Cree will host a conference call at 5:00 p.m. Eastern time today to review the highlights of the fiscal first quarter 2009 results and the fiscal second quarter 2009 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 November 4, 2008.

Supplemental financial information, including the non-GAAP reconciliation attached to this press release, is available in the "Investor Relations" section of Cree's website, under "Financial Metrics," "Quarter ending September 28, 2008," at www.cree.com.

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 solutions, and semiconductor solutions for wireless and power applications.

Cree's product families include recessed LED down lights, lighting-class power LEDs, high-brightness LEDs, blue and green LED chips, 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 and company information, please refer to www.cree.com.

The Cree, Inc. logo is available at http://www.globenewswire.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 current uncertainty in global economic conditions that could negatively affect product demand and other related matters as consumers and businesses may defer purchases in response to tighter credit and negative financial news; 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 acquisitions; 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 29, 2008, 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, XLamp and LED City are registered trademarks of Cree, Inc.



                              CREE, INC.
                   CONSOLIDATED STATEMENTS OF INCOME
                 (in thousands, except per share data)

                                              Three Months Ended
                                          ---------------------------
                                         September 28,   September 23,
                                             2008             2007
                                          -----------     -----------
                                                  (Unaudited)

 Product revenue                          $   134,693     $   105,963
 Contract revenue                               5,685           7,423
                                          -----------     -----------
 Total revenue                                140,378         113,386

 Cost of product revenue                       86,644          72,580
 Cost of contract revenue                       4,371           6,066
                                          -----------     -----------
 Total cost of revenue                         91,015          78,646

 Gross margin                                  49,363          34,740
 Gross margin percentage                         35.2%           30.6%

 Operating expenses:
 Research and development                      17,275          12,777
 Sales, general and administrative             22,918          18,164
 Amortization of
  acquisition-related intangibles               4,062           4,048
 Loss on disposal and impairment of
  long-lived assets                               405             734
                                          -----------     -----------
 Total operating expenses                      44,660          35,723

 Operating income (loss)                        4,703            (983)
 Operating income percentage                      3.4%          -0.9%

 Non-operating income:
 Gain on sale of investments, net                  12          14,117
 Interest and other non-operating
  income, net                                   2,977           3,727
                                          -----------     -----------
 Income from continuing operations before
  income taxes                                  7,692          16,861

 Income tax expense                             1,754           3,994
                                          -----------     -----------
 Net income from continuing operations          5,938          12,867

 Loss from discontinued operations, net
  of related tax effect                           (19)           (154)
                                          -----------     -----------
 Net income                               $     5,919     $    12,713
                                          ===========     ===========

 Diluted earnings per share:
 Income from continuing operations        $      0.07     $      0.15
 Loss from discontinued operations        $     (0.00)    $     (0.00)
                                          -----------     -----------
 Net income                               $      0.07     $      0.15
                                          ===========     ===========

 Weighted average shares of common
   stock outstanding, basic                    87,851          84,683

 Weighted average shares of common
   stock outstanding, diluted                  88,732          86,566



                              CREE, INC.
                 CONDENSED CONSOLIDATED BALANCE SHEETS
                            (in thousands)

                                         September 28,      June 29,
                                             2008             2008
                                          -----------     -----------
                                          (Unaudited)
 Assets:
 Current assets:
 Cash, cash equivalents and
  short-term investments                  $   286,498     $   312,428
 Accounts receivable, net                     103,430         110,376

 Inventory, net                                79,216          80,161

 Income taxes receivable                        9,938           9,825

 Deferred income taxes                          5,032           4,578
 Prepaid expenses and other
  current assets                               13,167          13,000

 Assets of discontinued operations              2,658           2,600
                                          -----------     -----------
 Total current assets                         499,939         532,968

 Property and equipment, net                  342,059         348,013
 Long-term investments                         52,566          58,604
 Intangible assets, net                       121,975         125,037
 Goodwill                                     244,003         244,003

 Other assets                                   6,344           4,782
                                          -----------     -----------
 Total assets                             $ 1,266,886     $ 1,313,407
                                          ===========     ===========

 Liabilities and Shareholders' Equity:
 Current liabilities:
 Accounts payable, trade                  $    40,765     $    37,402

 Accrued salaries and wages                    16,191          13,471

 Income taxes payable                           7,290           5,314

 Other current liabilities                      3,462           7,938
 Contingent payment due related to
  COTCO acquisition                                --          60,000
 Liabilities of discontinued operations           480             550
                                          -----------     -----------
 Total current liabilities                     68,188         124,675

 Long-term liabilities:

 Deferred income taxes                         37,035          38,048

 Other long-term liabilities                    4,199           4,199
 Long-term liabilities of
  discontinued operations                         745             745
                                          -----------     -----------
 Total long-term liabilities                   41,979          42,992

 Shareholders' Equity:

 Common stock                                     110             110
 Additional paid-in-capital                   816,392         811,015
 Accumulated other comprehensive income         8,606           8,923
 Retained earnings                            331,611         325,692
                                          -----------     -----------
 Total shareholders' equity                 1,156,719       1,145,740
                                          -----------     -----------
 Total liabilities and
  shareholders' equity                    $ 1,266,886     $ 1,313,407
                                          ===========     ===========

The following is a reconciliation showing how Cree, Inc.'s first quarter income statements for fiscal 2009 and 2008 would appear if they were adjusted for the items noted below.



                              CREE, INC.
      Reconciling Items to Q1 2009 & 2008 Financial Statements -
                           GAAP to Non-GAAP
               (in thousands, except per share amounts)
                              (Unaudited)

                                         Three Months Ended        
                                         September 28, 2008      
                                   --------------------------------- 
                                    GAAP     Adjustments    Non-GAAP 
                                   ---------------------     -------- 

 Product revenue                   $134,693     $     --     $134,693
 Contract revenue                     5,685           --        5,685
                                   ---------------------     -------- 
 Total revenue                      140,378           --      140,378

 Cost of product revenue             86,644       (1,302)(a)   85,342
 Cost of contract revenue             4,371           --        4,371
                                   ---------------------     -------- 
 Total cost of sales                 91,015       (1,302)      89,713

 Gross margin                        49,363        1,302       50,665
 Gross margin percentage               35.2%                     36.1%

 Operating expenses:
 Research and development            17,275       (1,446)(a)   15,829
 Sales, general and administrative   22,918       (2,685)(a)   20,233
 Amortization of
  acquisition-related intangibles     4,062       (4,062)(b)       --
 Gain on disposal of assets             405           --          405
                                   ---------------------     -------- 
 Total operating expenses            44,660       (8,193)      36,467

 Operating income                     4,703        9,495       14,198
 Operating income percentage            3.4%                     10.1%

 Non-operating income:
 Gain (loss) on investments 
  in securities                          12           --           12
 Interest and other non-operating
  income, net                         2,977           --        2,977
                                   ---------------------     -------- 
 Income from continuing operations 
  before income taxes                 7,692        9,495       17,187

 Income tax expense (benefit)         1,754        2,165(c)     3,919
                                   ---------------------     -------- 
 Net income from 
  continuing operations               5,938        7,330       13,268

 Gain (loss) from discontinued
  operations, net of related tax        (19)          --          (19)
                                   ---------------------     -------- 
 Net income                        $  5,919     $  7,330     $ 13,249
                                   =====================     ========

 Earnings per diluted share:
 From continuing operations        $   0.07     $   0.08     $   0.15
 From discontinued operations      $  (0.00)    $     --     $  (0.00)
                                   ---------------------     -------- 
 From net income                   $   0.07     $   0.08     $   0.15
                                   =====================     ========

 Weighted average shares of 
  common stock outstanding, basic    87,851           --       87,851

 Weighted average shares of 
  common stock outstanding, 
  diluted                            88,732           --       88,732


                                          Three Months Ended
                                          September 23, 2007
                                    ---------------------------------
                                     GAAP     Adjustments    Non-GAAP
                                    ---------------------    --------
                                    
 Product revenue                    $105,963    $     --     $105,963
 Contract revenue                      7,423          --        7,423
                                    --------------------     --------
 Total revenue                       113,386          --      113,386
                                    
 Cost of product revenue              72,580        (914)(a)   71,666
 Cost of contract revenue              6,066          --        6,066
                                    --------------------     --------
 Total cost of sales                  78,646        (914)      77,732
                                    
 Gross margin                         34,740         914       35,654
 Gross margin percentage                30.6%                    31.4%
                                    
 Operating expenses:                
 Research and development             12,777        (897)(a)   11,880
 Sales, general and administrative    18,164      (3,164)(a,e) 15,000
 Amortization of                    
  acquisition-related intangibles      4,048      (4,048)(b)       --
 Gain on disposal of assets              734          --          734
                                    --------------------     --------
 Total operating expenses             35,723      (8,109)      27,614
                                    
 Operating income                       (983)      9,023        8,040
 Operating income percentage            -0.9%                     7.1%
                                    
 Non-operating income:              
 Gain (loss) on investments         
  in securities                       14,117     (14,117)(d)       --
 Interest and other non-operating   
  income, net                          3,727          --        3,727
                                    --------------------     --------
 Income from continuing operations  
  before income taxes                 16,861      (5,094)      11,767
                                    
 Income tax expense (benefit)          3,994      (1,206)(f)    2,788
                                    --------------------     --------
 Net income from                    
  continuing operations               12,867      (3,888)       8,979
                                    
 Gain (loss) from discontinued      
  operations, net of related tax        (154)         --         (154)
                                    --------------------     --------
 Net income                         $ 12,713    $ (3,888)    $  8,825
                                    ====================     ========
                                    
 Earnings per diluted share:        
 From continuing operations         $   0.15    $  (0.05)    $   0.10
 From discontinued operations       $  (0.00)   $     --     $  (0.00)
                                    --------------------     --------
 From net income                    $   0.15    $  (0.05)    $   0.10
                                    ====================     ========
                                    
 Weighted average shares of         
  common stock outstanding, basic     84,683          --       84,683
                                    
 Weighted average shares of         
  common stock outstanding,         
  diluted                             86,566          --       86,566


 (a) Non-cash stock-based compensation expense of $1,302 in costs of
     product revenue, $1,446 in research and development and $2,685 in
     sales, general and administrative for the three months ended
     September 28, 2008, and $914 in costs of product revenue, $897 in
     research and development and $1,400 in sales, general and
     administrative for the three months ended September 23, 2007.
 (b) Amortization expense of $4,062 for the three months ended
     September 28, 2008, and $4,048 for the three months ended
     September 23, 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) Gain on the sale of 500,000 shares of Color Kinetics Corporation
     common stock.
 (e) Personal property assessment of $1.7 million related to the audit
     of our 2002 through 2007 property tax returns.
 (f) Tax effects of non-cash stock-based compensation, amortization
     related to acquisitions, gain on the sale of Color Kinetics
     common stock and the personal property assessment related to the
     audit of our 2002 through 2007 personal property tax returns.


            

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