DURHAM, N.C., Jan. 22, 2008 (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 $119 million for its fiscal second quarter ended December 30, 2007. This represents a 5% increase compared to the fiscal first quarter of 2008 and a 34% increase compared to revenue of $88.8 million reported one year ago. GAAP net income for the second quarter was $6.6 million, or $0.08 per diluted share, compared to net income of $16.5 million or $0.21 per diluted share for the second quarter of fiscal 2007. Please note, the second quarter of fiscal year 2008 consisted of 14 weeks, compared to 13 weeks for the second quarter of fiscal year 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 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 earnings of $0.08 per diluted share includes certain expenses totaling $5.6 million, net of tax, or $0.06 per diluted share due to certain items. These items consist of amortization of acquired intangibles of $0.04 per diluted share, stock-based compensation expense of $0.3 per diluted share, and a one-time property tax gain of $0.01 per diluted share. On a non-GAAP basis, adjusted to exclude these items, net income for the second quarter of fiscal 2008 was $12.2 million, or $0.14 per diluted share. On a non-GAAP basis, adjusted to exclude similar items as in fiscal 2008, as well as a gain on the sale of investments, net income for the second quarter of fiscal 2007 was $7.2 million, or $0.09 per diluted share.
"Q2 was a strong quarter for Cree, as we continued to execute our strategy and delivered revenue and earnings at the high end of our previously announced target range," stated Chuck Swoboda, Cree chairman and CEO. "The revenue growth was driven by higher LED sales, with XLamp(r) orders and shipments growing double digits sequentially as we were successful in bringing on-line additional XLamp capacity in China. Looking ahead, the global momentum for sustainable, energy-efficient lighting products continued to build with the passage of the new U.S. Energy bill, which will require the use of more-efficient lighting technology and should further accelerate the adoption of LEDs."
Recent Business Highlights:
* Revealed plans to convert all lighting at Cree's Durham headquarters and manufacturing facility to LED lighting. Energy usage for lighting has decreased by 48% in phase one of the conversion, and the results are available at www.ledworkplace.org. The combination of energy savings, reduced maintenance and disposal costs, and the environmental savings demonstrate that LED lighting is now a real alternative to traditional lighting solutions.
* Launched the Cree Solutions Providers network to offer customers a full range of LED lighting-system solutions and design assistance to help accelerate time to market and reduce product development costs.
* Announced that Ann Arbor, MI, will join Raleigh, NC, and Toronto in the growing LED City(tm) initiative. Ann Arbor plans to become the first U.S. city to convert 100 percent of its downtown streetlights to LED technology, and full implementation is projected to cut the city's public lighting energy use in half and reduce greenhouse gas emissions by 2,425 tons of CO2 annually.
* Commercially released zero micropipe ZMP(tm) 100-mm, n-type silicon carbide (SiC) substrates. With this achievement, Cree reinforces its position as the world's leading manufacturer of SiC-based semiconductor materials.
Q2 2008 Financial Metrics:
* Gross margin increased to 35% of revenue from 31% in Q1.
* Cash flow from operations was $35.1 million.
* Cash and investments increased $29.4 million to $361.9 million from Q1.
Business Outlook:
For its third quarter of fiscal 2008 ending March 30, 2008, which is comprised of 13 weeks, Cree targets revenue in a range of $120 million to $125 million with GAAP earnings of $0.07 to $0.09 per diluted share and non-GAAP earnings of $0.14 to $0.16 per diluted share, based on an estimated 87.3 million diluted weighted average shares. Targeted non-GAAP earnings exclude expenses related to the amortization of acquired intangibles of $3.1 million, net of tax, and stock-based compensation expense of $3.0 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 second quarter 2008 results and the fiscal third 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 February 5, 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 December 30, 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 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, as well as production at our COTCO 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 and ZMP are trademarks, of Cree, Inc.
The Cree, Inc. logo is available at http://www.primenewswire.com/newsroom/prs/?pkgid=3529
CREE, INC.
CONSOLIDATED STATEMENTS OF INCOME
(in thousands, except per share data)
(Unaudited)
Three Months Ended Six Months Ended
-------------------- --------------------
12/30/07 12/24/06 12/30/07 12/24/06
--------- --------- --------- ---------
Product revenue $ 111,341 $ 81,522 $ 217,304 $ 178,940
Contract revenue 7,658 7,268 15,081 13,760
--------- --------- --------- ---------
Total revenue 118,999 88,790 232,385 192,700
Cost of product revenue 71,251 52,626 143,831 108,499
Cost of contract revenue 5,952 5,795 12,018 10,932
--------- --------- --------- ---------
Total cost of revenue 77,203 58,421 155,849 119,431
Gross margin 41,796 30,369 76,536 73,269
Operating expenses:
Research and development 14,901 14,287 27,678 28,653
Sales, general and
administrative 18,211 12,576 36,373 24,522
Amortization of
acquisition-related
intangibles 4,048 341 8,096 341
Loss on disposal or
impairment of long-lived
assets 474 85 1,209 182
--------- --------- --------- ---------
Total operating expenses 37,634 27,289 73,356 53,698
Operating income 4,162 3,080 3,180 19,571
Non-operating income:
Gain on sale of
investments, net -- 11,409 14,117 11,408
Other non-operating income 66 2 77 2
Interest income, net 4,516 3,980 8,232 7,846
--------- --------- --------- ---------
Income from continuing
operations before income
taxes 8,744 18,471 25,606 38,827
Income tax expense 2,104 2,208 6,098 9,197
--------- --------- --------- ---------
Net income from continuing
operations 6,640 16,263 19,508 29,630
(Loss) income from
discontinued operations,
net of related tax effect (20) 216 (174) 139
--------- --------- --------- ---------
Net income $ 6,620 $ 16,479 $ 19,334 $ 29,769
========= ========= ========= =========
Diluted earnings per share:
Income from continuing
operations $ 0.08 $ 0.21 $ 0.22 $ 0.38
(Loss) income from
discontinued operations $ (0.00) $ 0.00 $ (0.00) $ 0.00
--------- --------- --------- ---------
Net income $ 0.08 $ 0.21 $ 0.22 $ 0.38
========= ========= ========= =========
Weighted average shares of
common stock outstanding,
basic 85,190 76,948 84,936 77,005
Weighted average shares of
common stock outstanding,
diluted 86,848 78,093 86,713 78,043
CREE, INC.
CONSOLIDATED BALANCE SHEETS
(in thousands)
12/30/07
(Unaudited) 6/25/07
----------- -----------
Assets:
Current assets:
Cash, cash equivalents and short-term
investments $ 295,121 $ 242,655
Accounts receivable, net 90,520 79,668
Inventory, net 75,063 71,068
Income taxes receivable and prepaid income
taxes 3,246 7,947
Deferred income taxes 19,939 23,573
Prepaid expenses and other current assets 10,389 8,920
Assets of discontinued operations 150 301
----------- -----------
Total current assets 494,428 434,132
Property and equipment, net 354,252 372,345
Long-term investments held to maturity 66,828 68,363
Intangible assets, net 89,573 96,138
Goodwill 144,334 141,777
Other assets 3,526 3,475
----------- -----------
Total assets $ 1,152,941 $ 1,116,230
=========== ===========
Liabilities and Shareholders' Equity:
Current liabilities:
Accounts payable, trade $ 36,612 $ 32,940
Accrued salaries and wages 10,197 10,241
Income taxes payable 6,856 4,504
Other current liabilities 6,212 6,259
Liabilities of discontinued operations 572 505
----------- -----------
Total current liabilities 60,449 54,449
Long-term liabilities:
Deferred income taxes 36,499 38,758
Contingent tax reserves 5,792 5,792
Other long-term liabilities 173 129
Long-term liabilities of discontinued
operations 924 1,103
----------- -----------
Total long-term liabilities 43,388 45,782
Shareholders' Equity:
Common stock 107 106
Additional paid-in-capital 736,242 713,778
Comprehensive income 1,168 9,826
Retained earnings 311,587 292,289
----------- -----------
Total shareholders' equity 1,049,104 1,015,999
----------- -----------
Total liabilities and shareholders' equity $ 1,152,941 $ 1,116,230
=========== ===========
The following is a reconciliation showing how Cree, Inc.'s year todate
income statements for fiscal 2008 and 2007 would appear if theywere
adjusted for the items noted below.
CREE, INC
Reconciling Items to Q2 2008 & 2007 Financial Statements -
GAAP to Non-GAAP
(in thousands, except per share amounts)
(Unaudited)
Three Months Ended
December 30, 2007
-------------------------------------
GAAP Adjustments Non-GAAP
----------------------- ----------
Product revenue $ 111,341 $ -- $ 111,341
Contract revenue 7,658 -- 7,658
----------------------- ----------
Total revenue 118,999 -- 118,999
Cost of product revenue 71,251 (726)(a) 70,525
Cost of contract revenue 5,952 -- 5,952
----------------------- ----------
Total cost of sales 77,203 (726) 76,477
Gross margin 41,796 726 42,522
Gross margin percentage 35% 36%
Operating expenses:
Research and development 14,901 (1,039)(a) 13,862
Sales, general and
administrative 18,211 (1,492)(a)(b) 16,719
Amortization of acquisition-
related intangibles 4,048 (4,048)(c) --
Loss on disposal of assets 474 -- 474
----------------------- ----------
Total operating expenses 37,634 (6,579) 31,055
Operating (loss) income 4,162 7,305 11,467
Non-operating income:
Gain (loss) on investments in
securities -- -- --
Other non-operating income 66 -- 66
Net interest income 4,516 -- 4,516
----------------------- ----------
Income from continuing
operations before
income taxes 8,744 7,305 16,049
Income tax expense 2,104 1,753(d) 3,857
----------------------- ----------
Net income from continuing
operations 6,640 5,552 12,192
Income (loss) from
discontinued operations, net
of related tax (20) -- (20)
----------------------- ----------
Net income $ 6,620 $ 5,552 $ 12,172
======================= =========
Earnings per diluted share:
From continuing operations $ 0.08 $ 0.06 $ 0.14
From discontinued operations $ (0.00) $ -- $ (0.00)
----------------------- ----------
From net income $ 0.08 $ 0.06 $ 0.14
======================= =========
Weighted average shares
of common stock outstanding,
basic 85,190 -- 85,190
Weighted average shares of
common stock outstanding,
diluted 86,848 -- 86,848
Three Months Ended
December 24, 2006
-------------------------------------
GAAP Adjustments Non-GAAP
----------------------- ----------
Product revenue $ 81,522 $ -- $ 81,522
Contract revenue 7,268 -- 7,268
----------------------- ----------
Total revenue 88,790 -- 88,790
Cost of product revenue 52,626 (1,000)(a) 51,626
Cost of contract revenue 5,795 -- 5,795
----------------------- ----------
Total cost of sales 58,421 (1,000) 57,421
Gross margin 30,369 1,000 31,369
Gross margin percentage 34% 35%
Operating expenses:
Research and development 14,287 (652)(a) 13,635
Sales, general and
administrative 12,576 (1,066)(a) 11,510
Amortization of acquisition-
related intangibles 341 (341)(c) --
Loss on disposal of assets 85 -- 85
----------------------- ----------
Total operating expenses 27,289 (2,059) 25,230
Operating (loss) income 3,080 3,059 6,139
Non-operating income:
Gain (loss) on investments in
securities 11,409 (11,351)(e) 58
Other non-operating income 2 -- 2
Net interest income 3,980 -- 3,980
----------------------- ----------
Income from continuing
operations before
income taxes 18,471 (8,292) 10,179
Income tax expense 2,208 715(f) 2,923
----------------------- ----------
Net income from continuing
operations 16,263 (9,007) 7,256
Income (loss) from
discontinued operations, net
of related tax 216 (287)(g) (71)
----------------------- ----------
Net income $ 16,479 $ (9,294) $ 7,185
======================= =========
Earnings per diluted share:
From continuing operations $ 0.21 $ (0.12) $ 0.09
From discontinued operations $ 0.00 $ (0.00) $ (0.00)
----------------------- ----------
From net income $ 0.21 $ (0.12) $ 0.09
======================= =========
Weighted average shares
of common stock outstanding,
basic 76,948 -- 76,948
Weighted average shares of
common stock outstanding,
diluted 78,093 -- 78,093
(a) Non-cash stock-based compensation expense of $726 in costs of
product revenue, $1,039 in research and development and $2,174 in
sales, general and administrative for the three months ended
December 30, 2007 and $1,000 in costs of product revenue, $652 in
research and development and $1,066 in sales, general and
administrative for the three months ended December 24, 2006.
(b) Reversal of $682 in personal property assessment related to
settling the audits of our 2002 through 2007 property tax returns
with the County of Durham.
(c) Amortization expense of $4,048 for the three months ended
December 30, 2007 and $341 for the three months ended December
24, 2006 recognized on intangible assets resulting from
prior-year acquisitions.
(d) Tax effects of non-cash stock-based compensation expense, the
reversal of a portion of the amount accrued related to our
personal property tax assessments and amortization related to
acquisition-related intangible assets.
(e) Gain on the sale of 931,000 shares of Color Kinetics Incorporated
common stock.
(f) Tax effect related to non-cash stock-based compensation expense,
the change in valuation allowance on our investment in Color
Kinetics Incorporated common stock and the retroactive
reinstatement of R&D tax credit, and amortization of
acquisition-related intangible assets.
(g) Gain realized as a result of entering into a sublease agreement
at Cree Microwave.
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 Six Months Financial Statements - GAAP to
Non-GAAP
(in thousands, except per share amounts)
(Unaudited)
Six Months Ended
December 30, 2007
-------------------------------------
GAAP Adjustments As Adjusted
----------------------- ----------
Product revenue $ 217,304 $ -- $ 217,304
Contract revenue 15,081 -- 15,081
----------------------- ----------
Total revenue 232,385 -- 232,385
Cost of product revenue 143,831 (1,640)(a) 142,191
Cost of contract revenue 12,018 -- 12,018
----------------------- ----------
Total cost of sales 155,849 (1,640) 154,209
Gross margin 76,536 1,640 78,176
Gross margin percentage 33% 34%
Operating expenses:
Research and development 27,678 (1,936)(a) 25,742
Sales, general and
administrative 36,373 (4,656)(a)(b) 31,717
Amortization of acquisition-
related intangibles 8,096 (8,096)(c) --
Loss on disposal of assets 1,209 -- 1,209
----------------------- ----------
Total operating expenses 73,356 (14,688) 58,668
Operating income 3,180 16,328 19,508
Non-operating income:
Gain (loss) on investments in
securities 14,117 (14,117)(d) --
Other non-operating income 77 -- 77
Net interest income 8,232 -- 8,232
----------------------- ----------
Income from continuing
operations before income
taxes 25,606 2,211 27,817
Income tax expense 6,098 547(e) 6,645
----------------------- ----------
Net income from continuing
operations 19,508 1,664 21,172
Loss from discontinued
operations, net of
related tax (174) -- (174)
----------------------- ----------
Net income $ 19,334 $ 1,664 $ 20,998
======================= =========
Earnings per diluted share:
From continuing operations $ 0.22 $ 0.02 $ 0.24
From discontinued operations $ (0.00) $ -- $ (0.00)
----------------------- ----------
From net income $ 0.22 $ 0.02 $ 0.24
======================= =========
Weighted average shares of
common stock outstanding,
basic 84,936 -- 84,936
Weighted average shares of
common stock outstanding,
diluted 86,713 -- 86,713
Six Months Ended
December 24, 2006
------------------------------------
GAAP Adjustments As Adjusted
----------------------- ----------
Product revenue $ 178,940 $ -- $ 178,940
Contract revenue 13,760 -- 13,760
----------------------- ----------
Total revenue 192,700 -- 192,700
Cost of product revenue 108,499 (2,207)(a) 106,292
Cost of contract revenue 10,932 -- 10,932
----------------------- ----------
Total cost of sales 119,431 (2,207) 117,224
Gross margin 73,269 2,207 75,476
Gross margin percentage 38% 39%
Operating expenses:
Research and development 28,653 (1,775)(a) 26,878
Sales, general and
administrative 24,522 (2,443)(a) 22,079
Amortization of acquisition-
related intangibles 341 (341)(c) --
Loss on disposal of assets 182 -- 182
----------------------- ----------
Total operating expenses 53,698 (4,559) 49,139
Operating income 19,571 6,766 26,337
Non-operating income:
Gain (loss) on investments in
securities 11,408 (11,351)(d) 57
Other non-operating income 2 -- 2
Net interest income 7,846 -- 7,846
----------------------- ----------
Income from continuing
operations before income
taxes 38,827 (4,585) 34,242
Income tax expense 9,197 1,594(e) 10,791
----------------------- ----------
Net income from continuing
operations 29,630 (6,179) 23,451
Loss from discontinued
operations, net of
related tax 139 (271)(f) (132)
----------------------- ----------
Net income $ 29,769 $ (6,450) $ 23,319
======================= =========
Earnings per diluted share:
From continuing operations $ 0.38 $ (0.08) $ 0.30
From discontinued operations $ 0.00 $ (0.00) $ (0.00)
----------------------- ----------
From net income $ 0.38 $ (0.08) $ 0.30
======================= =========
Weighted average shares of
common stock outstanding,
basic 77,005 -- 77,005
Weighted average shares of
common stock outstanding,
diluted 78,043 -- 78,043
(a) Non-cash stock-based compensation expense of $1,640 in costs of
product revenue, $1,936 in research and development and $3,608 in
sales, general and administrative for the six months ended
December 30, 2007 and $2,207 in costs of product revenue, $1,775
in research and development and $2,443 in sale, general and
administrative for the six months ended December 24, 2006.
(b) Personal property assessment of $1,048 related to finalizing the
audits of our 2002 through 2007 property tax returns.
(c) Amortization expense of $8,096 for the six months ended December
30, 2007 and $341 for the six months ended December 24, 2006
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 six months ended December 30, 2007 and on
the sale of 931,000 shares of Color Kinetics Incorporated common
stock during the six months ended December 24, 2006.
(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) Gain realized as a result of entering into a sublease agreement
at Cree Microwave.