DURHAM, N.C., Jan. 20, 2009 (GLOBE NEWSWIRE) -- Cree, Inc. (Nasdaq:CREE), a market leader in LED lighting, today announced revenue of $147.6 million for its second quarter of fiscal 2009, ended December 28, 2008. This represents a 24% increase compared to revenue of $119.0 million reported for the second fiscal quarter last year and a 5% increase compared to the fiscal first quarter of 2009. Revenue included $5.6 million in patent licensing fees which were not factored into previously announced targets. GAAP net income for the second quarter was $10.7 million, or $0.12 per diluted share, compared to net income of $6.6 million, or $0.08 per diluted share, for the second quarter of fiscal 2008. Net income included approximately $4.4 million, or $0.05 per diluted share, related to the patent licensing fees, as well as a franchise tax benefit, which was not factored into previously announced targets.
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 $0.12 per diluted share for the second quarter of fiscal 2009 includes expenses totaling $7.1 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 second quarter of fiscal 2009 was $17.8 million, or $0.20 per diluted share. On a non-GAAP basis, adjusted to exclude comparable items, net income for the second quarter of fiscal 2008 was $12.2 million, or $0.14 per diluted share.
"Cree delivered excellent financial results again despite challenging economic conditions, driven by strength in LED product sales for lighting applications," stated Chuck Swoboda, Cree chairman and CEO. "In the third quarter of fiscal 2009, we expect that lower demand for our products in consumer, mobile and automotive applications will be partially offset by growth in LED sales for commercial lighting applications. As we look ahead to calendar 2009, we are targeting that LED lighting adoption will continue to gain momentum as product availability increases and recognition of the benefits grows from new installations like the Federal Reserve and the planned Pentagon renovation."
Recent Business Highlights:
-- Announced volume availability of the LR24, a recessed LED luminaire that offers high-quality, energy-efficient light for the largest commercial lighting market, suspended-ceiling applications traditionally addressed by linear fluorescents. The LR24 has already been installed at the U.S. Federal Reserve in Washington, D.C., as part of their ongoing energy-efficiency program, and the Pentagon plans to install 4,200 of the luminaires as part of a major renovation currently underway. -- Announced the high-volume availability of XLamp XP-E LEDs with output up to 122 lumens, the highest commercially available minimum flux for a single-die LED, at 350 mA, in the industry today. The volume availability of these XLamp LEDs is aimed at further stimulating the LED lighting market, driving applications in outdoor and indoor general illumination as well as portable and retail display lighting. -- Achieved industry-best reported R&D results of 161 lumens per watt for a white power LED. These results demonstrate Cree's continued commitment to deliver industry-leading performance through a constant focus on innovation and R&D. -- Entered into a patent license agreement granting Mitsubishi Chemical Corporation (MCC) an exclusive license (subject to certain exceptions) to manufacture and sell freestanding GaN substrates, with Cree to receive over the life of the agreement a combination of guaranteed payments and royalties on the sale of GaN substrates. -- Agreed with Bridgelux, Inc. to settle the parties' patent infringement litigation and to dismiss all claims and counterclaims in the suits. As part of the settlement, Cree granted Bridgelux a license to the Cree and Boston University patents at issue in the litigation, and Bridgelux agreed to pay a license fee and royalties. In addition, Bridgelux and Cree have entered into a supply agreement under which Cree will become a significant supplier to Bridgelux. -- Welcomed Indian Wells, California, to the LED City(r) Program. The city has replaced much of the lighting in City Hall, with all circular recessed lighting converted to the Cree LR6 LED light, reducing electricity consumption by 80%. The city plans to evaluate LED lighting for other municipal lighting applications to further increase energy savings. -- Welcomed Notre Dame, Madison Area Technical College, and the University of California, Davis to the LED University Program(tm). Notre Dame is implementing four pilot installations to evaluate the feasibility of LED lighting across the campus and is already realizing energy savings of 81% compared to incandescent lighting in the Hesburgh Library.
Q2 2009 Financial Metrics:
-- GAAP gross margin was 38% of revenue compared to 35% in Q2 of fiscal 2008, and non-GAAP gross margin was 39% compared to 36% in Q2 of fiscal 2008. Q2 gross margin included approximately 200 basis points of benefit related to the MCC and Bridgelux license agreements. -- Accounts receivable increased $5.1 million from Q1 of fiscal 2009 to $108.6 million, resulting in days sales outstanding of 66, the same as Q1 of fiscal 2009. -- Inventory decreased $0.4 million from Q1 of fiscal 2009 to $78.8 million and represents 78 days of inventory, the same as Q1 of fiscal 2009. -- Cash and investments increased $26.5 million to $365.5 million, with cash flow from operations of $40.7 million and free cash flow (cash flow from operations less capital expenditures) of $23.2 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 third quarter of fiscal 2009 ending March 29, 2009, Cree targets revenue in a range of $128 million to $135 million with GAAP earnings of $0.02 to $0.05 per diluted share and non-GAAP earnings of $0.10 to $0.13 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 $0.03 per diluted share and stock-based compensation expense of $0.05 per diluted share.
Cree will host a conference call at 5:00 p.m. Eastern time today to review the highlights of the fiscal second quarter 2009 results and the fiscal third 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 February 3, 2009.
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 December 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.
The Cree, Inc. logo is available at http://www.globenewswire.com/newsroom/prs/?pkgid=3529
For additional product and company information, 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 current uncertainty in global economic conditions that could negatively affect product demand, collectability of receivables and other related matters as consumers and businesses may defer purchases or payments, or default on payments, 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; 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, and LED University is a trademark of Cree, Inc.
CREE, INC. CONSOLIDATED STATEMENTS OF INCOME (in thousands, except per share data) Three Months Ended Six Months Ended ------------------- ------------------- Dec. 28, Dec. 30, Dec. 28, Dec. 30, 2008 2007 2008 2007 -------- -------- -------- -------- (Unaudited) (Unaudited) Product revenue $137,595 $111,341 $272,288 $217,304 Contract revenue 4,446 7,658 10,131 15,081 Up-front license fees 5,582 -- 5,582 -- -------- -------- -------- -------- Total revenue 147,623 118,999 288,001 232,385 Cost of product revenue 86,831 71,251 173,475 143,831 Cost of contract revenue 3,790 5,952 8,161 12,018 Up-front license fees 506 -- 506 -- -------- -------- -------- -------- Total cost of revenue 91,127 77,203 182,142 155,849 Gross profit 56,496 41,796 105,859 76,536 Gross margin percentage 38.3% 35.1% 36.8% 32.9% Operating expenses: Research and development 18,441 14,901 35,716 27,678 Sales, general and administrative 21,843 18,211 44,761 36,373 Amortization of acquisition-related intangibles 4,062 4,048 8,124 8,096 Loss on disposal and impairment of long-lived assets 645 474 1,050 1,209 -------- -------- -------- -------- Total operating expenses 44,991 37,634 89,651 73,356 Operating income 11,505 4,162 16,208 3,180 Operating income percentage 7.8% 3.5% 5.6% 1.4% Non-operating income: Gain on sale of investments, net 53 -- 65 14,117 Interest and other non- operating income, net 2,507 4,582 5,484 8,309 -------- -------- -------- -------- Income from continuing operations before income taxes 14,065 8,744 21,757 25,606 Income tax expense 3,218 2,104 4,972 6,098 -------- -------- -------- -------- Net income from continuing operations 10,847 6,640 16,785 19,508 Loss from discontinued operations, net of related tax effect (151) (20) (170) (174) -------- -------- -------- -------- Net income $ 10,696 $ 6,620 $ 16,615 $ 19,334 ======== ======== ======== ======== Diluted earnings per share: Income from continuing operations $ 0.12 $ 0.08 $ 0.19 $ 0.22 Loss from discontinued operations $ (0.00) $ (0.00) $ (0.00) $ (0.00) -------- -------- -------- -------- Net income $ 0.12 $ 0.08 $ 0.19 $ 0.22 ======== ======== ======== ======== Weighted average shares of common stock outstanding, basic 88,057 85,190 87,954 84,936 ======== ======== ======== ======== Weighted average shares of common stock outstanding, diluted 88,511 86,848 88,619 86,713 ======== ======== ======== ========
CREE, INC. CONDENSED CONSOLIDATED BALANCE SHEETS (in thousands) Dec. 28, June 29, 2008 2008 ---------- ---------- (Unaudited) Assets: Current assets: Cash, cash equivalents and short-term investments $ 322,193 $ 312,428 Accounts receivable, net 108,552 110,376 Inventory, net 78,816 80,161 Income taxes receivable 18,064 9,825 Deferred income taxes 5,032 4,578 Prepaid expenses and other current assets 14,125 13,000 Assets of discontinued operations 2,002 2,600 ---------- ---------- Total current assets 548,784 532,968 Property and equipment, net 339,793 348,013 Long-term investments 43,325 58,604 Intangible assets, net 118,890 125,037 Goodwill 248,365 244,003 Other assets 7,342 4,782 ---------- ---------- Total assets $1,306,499 $1,313,407 ========== ========== Liabilities and Shareholders' Equity: Current liabilities: Accounts payable, trade $ 43,988 $ 37,402 Accrued salaries and wages 15,206 13,471 Income taxes payable 9,780 5,314 Deferred income taxes 1,178 -- Other current liabilities 4,631 7,938 Contingent payment due related to LLF acquisition 4,400 -- Contingent payment due related to COTCO acquisition -- 60,000 Liabilities of discontinued operations 480 550 ---------- ----------- Total current liabilities 79,663 124,675 Long-term liabilities: Deferred income taxes 45,123 38,048 Other long-term liabilities 4,212 4,199 Long-term liabilities of discontinued operations 834 745 ---------- ---------- Total long-term liabilities 50,169 42,992 Shareholders' Equity: Common stock 110 110 Additional paid-in-capital 823,762 811,015 Accumulated other comprehensive income 10,488 8,923 Retained earnings 342,307 325,692 ---------- ---------- Total shareholders' equity 1,176,667 1,145,740 ---------- ---------- Total liabilities and shareholders' equity $1,306,499 $1,313,407 ========== ==========
The following is a reconciliation showing how Cree, Inc.'s second quarter income statements for fiscal 2009 and 2008 would appear if they were adjusted for the items noted below.
CREE, INC. Reconciling Items to Q2 2009 & 2008 Financial Statements - GAAP to Non-GAAP (in thousands, except per share amounts) (Unaudited) Three Months Ended December 28, 2008 ---------------------------------------------- GAAP Adjustments Non-GAAP -------------- -------------- -------------- Product revenue $ 137,595 $ -- $ 137,595 Contract revenue 4,446 -- 4,446 Up-front license fees 5,582 -- 5,582 -------------- -------------- -------------- Total revenue 147,623 -- 147,623 Cost of product revenue 86,831 (883)(a) 85,948 Cost of contract revenue 3,790 -- 3,790 Cost of up-front license fees 506 -- 506 -------------- -------------- -------------- Total cost of sales 91,127 (883) 90,244 Gross margin 56,496 883 57,379 Gross margin percentage 38.3% 38.9% Operating expenses: Research and development 18,441 (1,247)(a) 17,194 Sales, general and administrative 21,843 (2,979)(a) 18,864 Amortization of acquisition-related intangibles 4,062 (4,062)(b) -- Gain on disposal of assets 645 -- 645 -------------- -------------- -------------- Total operating expenses 44,991 (8,288) 36,703 Operating income 11,505 9,171 20,676 Operating income percentage 7.8% 14.0% Non-operating income: Gain on investments in securities 53 -- 53 Interest and other non-operating income, net 2,507 -- 2,507 -------------- -------------- -------------- Income from continuing operations before income taxes 14,065 9,171 23,236 Income tax expense 3,218 2,098(c) 5,316 -------------- -------------- -------------- Net income from continuing operations 10,847 7,073 17,920 Loss from discontinued operations, net of related tax (151) -- (151) -------------- -------------- -------------- Net income $ 10,696 $ 7,073 $ 17,769 ============== ============== ============== Earnings per diluted share: From continuing operations $ 0.12 $ 0.07 $ 0.20 From discontinued operations $ (0.00) $ -- $ (0.00) -------------- -------------- -------------- From net income $ 0.12 $ 0.07 $ 0.20 ============== ============== ============== Weighted average shares of common stock outstanding, basic 88,057 -- 88,057 ============== ============== ============== Weighted average shares of common stock outstanding, diluted 88,511 -- 88,511 ============== ============== ==============
Three Months Ended December 30, 2007 ---------------------------------------------- GAAP Adjustments Non-GAAP -------------- -------------- -------------- Product revenue $ 111,341 $ -- $ 111,341 Contract revenue 7,658 -- 7,658 Up-front license fees -- -- -- -------------- -------------- -------------- Total revenue 118,999 -- 118,999 Cost of product revenue 71,251 (726)(a) 70,525 Cost of contract revenue 5,952 -- 5,952 Cost of up-front license fees -- -- -- -------------- -------------- -------------- Total cost of sales 77,203 (726) 76,477 Gross margin 41,796 726 42,522 Gross margin percentage 35.1% 35.7% Operating expenses: Research and development 14,901 (1,039)(a) 13,862 Sales, general and administrative 18,211 (1,492)(a,d) 16,719 Amortization of acquisition-related intangibles 4,048 (4,048)(b) -- Gain on disposal of assets 474 -- 474 -------------- -------------- -------------- Total operating expenses 37,634 (6,579) 31,055 Operating income 4,162 7,305 11,467 Operating income percentage 3.5% 9.6% Non-operating income: Gain on investments in securities -- -- -- Interest and other non-operating income, net 4,582 -- 4,582 -------------- -------------- -------------- Income from continuing operations before income taxes 8,744 7,305 16,049 Income tax expense 2,104 1,753(e) 3,857 -------------- -------------- -------------- Net income from continuing operations 6,640 5,552 12,192 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 ============== ============== ============== (a) Non-cash stock-based compensation expense of $883 in costs of product revenue, $1,247 in research and development and $2,979 in sales, general and administrative for the three months ended December 28, 2008 and $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. (b) Amortization expense of $4,062 for the three months ended December 28, 2008 and $4,048 for the three months ended December 30, 2007 recognized on intangible assets resulting from acquisitions. (c) Estimated tax effects of non-cash stock-based compensation expense and amortization related to acquisition-related intangible assets based upon the Company's effective tax rate for the given period. (d) Reversal of $682 in personal property assessment related to settling the audits of the Company's 2002 through 2007 property tax returns with the County of Durham, NC. (e) Estimated tax effects of non-cash stock-based compensation expense, amortization related to acquisition-related intangible assets and the reversal of a portion of the amount accrued related to our personal property tax assessments based upon the Company's overall consolidated effective tax rate for the given period.
The following is a reconciliation showing how Cree, Inc.'s year-to-date income statements for fiscal 2009 and 2008 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 28, 2008 ---------------------------------------------- GAAP Adjustments As Adjusted -------------- -------------- -------------- Product revenue $ 272,288 $ -- $ 272,288 Contract revenue 10,131 -- 10,131 Up-front license fees 5,582 -- 5,582 -------------- -------------- -------------- Total revenue 288,001 -- 288,001 Cost of product revenue 173,475 (2,185)(a) 171,290 Cost of contract revenue 8,161 -- 8,161 Cost of up-front license fees 506 -- 506 -------------- -------------- -------------- Total cost of sales 182,142 (2,185) 179,957 Gross margin 105,859 2,185 108,044 Gross margin percentage 37% 38% Operating expenses: Research and development 35,716 (2,693)(a) 33,023 Sales, general and administrative 44,761 (5,664)(a) 39,097 Amortization of acquisition-related intangibles 8,124 (8,124)(b) -- Loss on disposal and impairment of long-lived assets 1,050 -- 1,050 -------------- -------------- -------------- Total operating expenses 89,651 (16,481) 73,170 Operating income 16,208 18,666 34,874 Operating income percentage 5.6% 12.1% Non-operating income: Gain (loss) on investments in securities 65 -- 65 Interest and other non-operating income, net 5,484 -- 5,484 -------------- -------------- -------------- Income from continuing operations before income taxes 21,757 18,666 40,423 Income tax expense 4,972 4,338(c) 9,310 -------------- -------------- -------------- Net income from continuing operations 16,785 14,328 31,113 Loss from discontinued operations, net of related tax (170) -- (170) -------------- -------------- -------------- Net income $ 16,615 $ 14,328 $ 30,943 ============== ============== ============== Earnings per diluted share: From continuing operations $ 0.19 $ 0.16 $ 0.35 From discontinued operations $ (0.00) $ -- $ (0.00) -------------- -------------- -------------- From net income $ 0.19 $ 0.16 $ 0.35 ============== ============== ============== Weighted average shares of common stock outstanding, basic 87,954 -- 87,954 ============== ============== ============== Weighted average shares of common stock outstanding, diluted 88,619 -- 88,619 ============== ============== ==============
Six Months Ended December 30, 2007 ---------------------------------------------- GAAP Adjustments As Adjusted -------------- -------------- -------------- Product revenue $ 217,304 $ -- $ 217,304 Contract revenue 15,081 -- 15,081 Up-front license fees -- -- -- -------------- -------------- -------------- 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 Cost of up-front license fees -- -- -- -------------- -------------- -------------- 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,d) 31,717 Amortization of acquisition-related intangibles 8,096 (8,096)(b) -- Loss on disposal and impairment of long-lived assets 1,209 -- 1,209 -------------- -------------- -------------- Total operating expenses 73,356 (14,688) 58,668 Operating income 3,180 16,328 19,508 Operating income percentage 1.4% 8.4% Non-operating income: Gain (loss) on investments in securities 14,117 (14,117)(e) -- Interest and other non-operating income, net 8,309 -- 8,309 -------------- -------------- -------------- Income from continuing operations before income taxes 25,606 2,211 27,817 Income tax expense 6,098 547(f) 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) $ -- $ (0.01) -------------- -------------- -------------- 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 ============== ============== ============== (a) Non-cash stock-based compensation expense of $2,185 in costs of product revenue, $2,693 in research and development and $5,664 in sales, general and administrative for the six months ended December 28, 2008 and $1,640 in costs of product revenue, $1,936 in research and development and $3,068 in sales, general and administrative for the six months ended December 30, 2007. (b) Amortization expense of $8,124 for the six months ended December 28, 2008 and $8,096 for the six months ended December 30, 2007 recognized on intangible assets resulting from prior-year acquisitions. (c) Estimated tax effects of non-cash stock-based compensation expense and amortization related to acquisition-related intangible assets based upon the Company's effective tax rate for the given period. (d) Personal property assessment of $1,048 related to finalizing the audits of the Company's 2002 through 2007 property tax returns. (e) Gain on the sale of 500,000 shares of Color Kinetics Incorporated common stock during the six months ended December 30, 2007. (f) Estimated tax effects of non-cash stock-based compensation expense, personal property tax assessment, amortization related to acquisition-related intangible assets and gain on sale of Color Kinetics Incorporated common stock based upon the Company's overall consolidated effective tax rate for the given period.