DURHAM, N.C., Oct. 18, 2007 (PRIME NEWSWIRE) -- Cree, Inc. (Nasdaq:CREE), a market-leading innovator of semiconductors that enhance the value of solid-state lighting, power and communications products, today announced revenue of $113.4 million for its fiscal first quarter ended September 23, 2007. This represents a 2% increase compared to the fiscal fourth quarter and a 9% increase compared to revenue of $103.9 million reported one year ago. GAAP net income for the first quarter was $12.7 million, or $0.15 per diluted share, compared to net income of $13.3 million or $0.17 per diluted share for the first quarter of fiscal 2007.
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 EPS of $0.15 per diluted share includes a benefit of $3.9 million, net of tax, or $0.05 per diluted share due to certain items. These items consist of a gain from the sale of marketable securities of $0.12 per diluted share, offset by amortization of acquired intangibles of $0.03 per diluted share, stock-based compensation expense of $0.03 per diluted share and property tax expense adjustments of $0.01 per diluted share. On a non-GAAP basis, adjusted to exclude these items, net income for the first quarter of fiscal 2008 was $8.8 million, or $0.10 per diluted share. On a non-GAAP basis, adjusted to exclude similar items as in fiscal 2008, net income for the first quarter of fiscal 2007 was $15.6 million, or $0.20 per diluted share.
"We got off to a good start in Q1, as Cree again delivered financial results that were in line with our previously announced targets," stated Chuck Swoboda, Cree chairman and CEO. "The LED business expanded both quarter-over-quarter and year-over-year, led by our XLamp(r) LED product line, and we made good strides increasing our capacity for these products during the quarter. Overall, we believe our strategy to increase sales by growing our LED component product lines while maintaining the current level of LED chip sales is on track. As we look ahead, we think our business will grow as the LED Lighting Revolution continues to gain momentum."
Recent Business Highlights:
* Announced plans to triple white XLamp LED manufacturing capacity by expanding production at our COTCO facility in China. This initiative is part of Cree's strategy to accelerate the adoption of LED lighting in China and to build momentum for the LED lighting revolution worldwide.
* Demonstrated continued leadership in the development of lighting-class LEDs by achieving light output of more than 1,000 lumens - an amount equivalent to the output of a standard household light bulb - from a single LED in our R&D labs.
* Achieved the highest announced efficacy from a high-power LED in R&D. The results, which have been verified by the National Institute of Standards (NIST), confirmed that the cool-white (5,813 K) LED achieved 129 lumens per watt efficacy and the warm white (2,950 K) LED achieved 99 lumens per watt efficacy.
* Expanded the existing patent cross license agreements with Nichia, and announced that Cree and Nichia have agreed to resolve any future patent disputes involving products of either company, or any affiliate in which it owns a controlling interest, through a process that eliminates any potential impact on customers.
Q1 Financial Metrics:
* Gross margin was 31% of revenue.
* Results included an investment gain of $14.1 million, $10.8 million net of tax, associated with Color Kinetics being acquired by Royal Philips Electronics.
* Cash flow from operations was $25.6 million.
* Cash and investments increased $38.2 million to $332.5 million.
Business Outlook:
For its second quarter of fiscal 2008 ending December 30, 2007, Cree currently targets revenue in a range of $115 million to $119 million with GAAP earnings of $0.03 to $0.05 per diluted share and non-GAAP earnings of $0.10 to $0.12 per diluted share, based on 87 million diluted shares. Targeted non-GAAP earnings exclude expenses related to the amortization of acquired intangibles of $3.0 million, net of tax, and stock-based compensation expense of $3.3 million, net of tax.
Cree will host a conference call at 5:00 p.m. Eastern time today to review the highlights of the fiscal first quarter 2008 results and the fiscal second 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 November 1, 2007.
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 September 23, 2007" at http://www.cree.com/investor/metrics.htm.
About Cree, Inc.
Cree is a market-leading innovator and manufacturer of semiconductors and devices that enhance the value of solid-state lighting, power and communications products by significantly increasing their energy performance and efficiency. Key to Cree's market advantage is its world-class materials expertise in silicon carbide (SiC) and gallium nitride (GaN) for chips and packaged devices that can handle more power in a smaller space while producing less heat than other available technologies, materials and products.
Cree drives its increased performance technology into multiple applications, including exciting alternatives in brighter and more-tunable light for general illumination, backlighting for more-vivid displays, optimized power management for high-current, switch-mode power supplies and variable-speed motors, and more-effective wireless infrastructure for data and voice communications. Cree customers range from innovative lighting-fixture makers to defense-related federal agencies.
Cree's product families include blue and green LED chips, lighting LEDs, LEDs for backlighting, power-switching devices and radio-frequency/wireless devices. 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 and packaged products; 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; 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 on-going 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 of Cree, Inc.
CREE, INC.
CONSOLIDATED STATEMENTS OF INCOME
(in thousands, except per share data)
Three Months Ended
----------------------
9/23/2007 9/24/2006
(Unaudited) (Unaudited)
--------- ---------
Product revenue $ 105,963 $ 97,418
Contract revenue 7,423 6,492
--------- ---------
Total revenue 113,386 103,910
Cost of product revenue 72,580 55,873
Cost of contract revenue 6,066 5,137
--------- ---------
Total cost of revenue 78,646 61,010
Gross margin 34,740 42,900
Operating expenses:
Research and development 12,777 14,366
Sales, general and administrative 18,164 11,946
Amortization of acquisition related
intangibles 4,048 --
Loss on disposal or impairment of
long-lived assets 734 97
--------- ---------
Total operating expenses 35,723 26,409
Operating (loss) income (983) 16,491
Non-operating income:
Gain (loss) on sale of investments, net 14,117 (1)
Other non-operating income 12 --
Interest income, net 3,715 3,866
--------- ---------
Income from continuing operations before
income taxes 16,861 20,356
Income tax expense 3,994 6,989
--------- ---------
Net income from continuing operations 12,867 13,367
Loss from discontinued operations, net
of related tax effect (154) (77)
--------- ---------
Net income $ 12,713 $ 13,290
========= =========
Diluted earnings per share:
Income from continuing operations $ 0.15 $ 0.17
Loss from discontinued operations $ (0.00) $ (0.00)
--------- ---------
Net income $ 0.15 $ 0.17
========= =========
Weighted average shares of common
stock outstanding, basic 84,683 77,061
Weighted average shares of common
stock outstanding, diluted 86,566 78,039
CREE, INC.
CONSOLIDATED BALANCE SHEETS
(in thousands)
9/23/2007
(Unaudited) 6/25/2007
----------- ----------
Assets:
Current assets:
Cash, cash equivalents and short
term investments $ 253,288 $ 242,655
Accounts receivable, net 86,058 79,668
Inventory, net 64,740 71,068
Income taxes receivable 10,763 7,947
Deferred income taxes 19,939 23,573
Prepaid expenses and other current
assets 10,814 8,920
Assets of discontinued operations 150 301
---------- ----------
Total current assets 445,752 434,132
Property and equipment, net 364,685 372,345
Long-term investments held to
maturity 79,185 68,363
Intangible assets, net 92,893 96,138
Goodwill 144,332 141,777
Other assets 3,247 3,475
---------- ----------
Total assets $1,130,094 $1,116,230
========== ==========
Liabilities and Shareholders'
Equity:
Current liabilities:
Accounts payable, trade $ 31,521 $ 32,940
Accrued salaries and wages 10,258 10,241
Income taxes payable 5,551 4,504
Other current liabilities 6,965 6,259
Liabilities of discontinued
operations 515 505
---------- ----------
Total current liabilities 54,810 54,449
Long-term liabilities:
Deferred income taxes 36,499 38,758
Contingent tax reserves 5,792 5,792
Other long-term liabilities 149 129
Long-term liabilities of
discontinued operations 1,014 1,103
---------- ----------
Total long-term liabilities 43,454 45,782
Shareholders' Equity:
Common stock 106 106
Additional paid-in-capital 725,595 713,778
Comprehensive income 1,163 9,826
Retained earnings 304,966 292,289
---------- ----------
Total shareholders' equity 1,031,830 1,015,999
---------- ----------
Total liabilities and shareholders'
equity $1,130,094 $1,116,230
========== ==========
The following is a reconciliation showing how Cree, Inc.'s first
quarter income statements for fiscal 2008 and 2007 would appear
if they were adjusted for the items noted below.
CREE, INC.
Reconciling Items to Q1 Financial Statements - GAAP to Non-GAAP
(in thousands, except per share amounts)
(Unaudited)
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 31% 31%
Operating expenses:
Research and development 12,777 (897)(a) 11,880
Sales, general and
administrative 18,164 (3,164)(a)(b) 15,000
Amortization of acquisition
related intangibles 4,048 (4,048)(c) --
Loss on disposal of assets 734 -- 734
---------------------- ---------
Total operating expenses 35,723 (8,109) 27,614
Operating (loss) income (983) 9,023 8,040
Non-operating income:
Gain (loss) on investments
in securities 14,117 (14,117)(d) --
Other non-operating income 12 -- 12
Net interest income 3,715 -- 3,715
---------------------- ---------
Income from continuing
operations before income
taxes 16,861 (5,094) 11,767
Income tax expense 3,994 (1,206)(e) 2,788
---------------------- ---------
Net income from continuing
operations 12,867 (3,888) 8,979
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
Three Months Ended
September 24, 2006
-------------------------------------
GAAP Adjustments Non-GAAP
----------------------- ---------
Product revenue $ 97,418 $ -- $ 97,418
Contract revenue 6,492 -- 6,492
---------------------- ---------
Total revenue 103,910 -- 103,910
Cost of product revenue 55,873 (1,207)(a) 54,666
Cost of contract revenue 5,137 -- 5,137
---------------------- ---------
Total cost of sales 61,010 (1,207) 59,803
Gross margin 42,900 1,207 44,107
Gross margin percentage 41% 42%
Operating expenses:
Research and development 14,366 (1,123)(a) 13,243
Sales, general and
administrative 11,946 (1,377)(a) 10,569
Amortization of acquisition
related intangibles -- -- --
Loss on disposal of assets 97 -- 97
---------------------- ---------
Total operating expenses 26,409 (2,500) 23,909
Operating (loss) income 16,491 3,707 20,198
Non-operating income:
Gain (loss) on investments in
securities (1) (1)
Other non-operating income -- -- --
Net interest income 3,866 -- 3,866
---------------------- ---------
Income from continuing
operations before income
taxes 20,356 3,707 24,063
Income tax expense 6,989 1,355(f) 8,344
---------------------- ---------
Net income from continuing
operations 13,367 2,352 15,719
Loss from discontinued
operations, net of related
tax (77) -- (77)
---------------------- ---------
Net income $ 13,290 $ 2,352 $ 15,642
====================== =========
Earnings per diluted share:
From continuing operations $ 0.17 $ 0.03 $ 0.20
From discontinued operations $ (0.00) $ -- $ (0.00)
---------------------- ---------
From net income $ 0.17 $ 0.03 $ 0.20
====================== =========
Weighted average shares of
common stock outstanding,
basic 77,061 -- 77,061
Weighted average shares of
common stock outstanding,
diluted 78,039 -- 78,039
(a) Non-cash stock-based compensation expense of $914,00 in
costs of product revenue, $897,000 in research and
development and $1.4 million in sales, general and
administrative for the three months ended September 23, 2007
and $1.2 million in costs of product revenue, $1.1 million
in research and development and $1.4 million in sales,
general and administrative for the three months ended
September 24, 2006.
(b) Personal property assessment of $1.7 million related to the
audit of our 2002 through 2007 property tax returns.
(c) Amortization expense of $4.0 million recognized on
intangible assets resulting from prior year acquisitions.
(d) Gain on the sale of 500,000 shares of Color Kinetics
Corporation common stock.
(e) Tax effects of $768,000 for non-cash stock based
compensation, $959,000 million related to amortization
expense of prior year acquisitions, $3.3 million related to
the sale of Color Kinetics common stock and $410,000 related
to the audit of our 2002 through 2007 personal property tax
returns.
(f) Tax effect related to non-cash stock-based compensation
expense and the change in the valuation allowance due to
changes in the fair market value of Color Kinetics common
stock.