Cree Reports Record Revenue for the Fourth Quarter and Fiscal Year 2008

Annual Revenue Increased 25 Percent to $493 Million


DURHAM, N.C., Aug. 12, 2008 (PRIME NEWSWIRE) -- Cree, Inc. (Nasdaq:CREE), a market leader in LED lighting, today announced revenue of $135.9 million for its fiscal fourth quarter ended June 29, 2008. This represents a 9% increase compared to the fiscal third quarter of 2008 and a 22% increase compared to revenue of $111.2 million reported for the fourth fiscal quarter last year. GAAP net income for the fourth quarter was $8.4 million, or $0.09 per diluted share, compared to net income of $6.4 million or $0.08 per diluted share for the fourth 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 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 net income from continuing operations was $0.07 per diluted share for the fourth quarter of fiscal 2008. This amount excludes a gain from discontinued operations of $0.02 per diluted share and includes expenses totaling $7.9 million, net of tax, or $0.09 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 from continuing operations for the fourth quarter of fiscal 2008 was $14.5 million, or $0.16 per diluted share. Included in non-GAAP earnings is a $0.03 per diluted share benefit primarily due to a state franchise tax credit that reduced G&A for the quarter. Excluding this $0.03 per diluted share benefit, non-GAAP earnings were consistent with the company's previously announced target range. On a non-GAAP basis, net income from continuing operations for the fourth quarter of fiscal 2007 was $7.4 million, or $0.09 per diluted share.

For fiscal year 2008, Cree reported revenue of $493.3 million, which represents a 25% increase compared to revenue of $394.1 million for fiscal 2007. GAAP net income was $33.4 million, or $0.38 per diluted share, compared to $57.3 million, or $0.72 per diluted share for fiscal 2007. On a non-GAAP basis net income for fiscal year 2008 was $47.2 million, or $0.54 per diluted share, compared to $35.4 million, or $0.44 per diluted share, for fiscal 2007.

"Q4 represented a strong finish to a very successful year," stated Chuck Swoboda, Cree chairman and CEO. "Revenue exceeded our previously announced guidance due to strong LED sales, which grew 11% sequentially and 27% from a year ago. We have executed our strategy to transform Cree into a broad-based LED company with chips, components and systems that are leading the LED lighting revolution. While we recognize that there is caution in the market about the global economic environment, we remain optimistic about the year ahead as the momentum continues to build for our new products and energy-efficient lighting."

Recent Business Highlights:



 -- Introduced several new LED lighting products:

    * Announced a new version of the LR6 designed for 220V
      to 240V electrical systems to address Europe, Asia and
      other major markets.

    * Released the LR4, a four-inch architectural recessed LED down
      light for new construction and renovation projects. The LR4
      delivers up to 540 lumens of high-quality, dimmable light from
      less than 11 watts of power.

    * Demonstrated the XLamp(r) MC-E LED at LIGHTFAIR International.
      The multi-chip LED retains the same footprint as Cree's
      existing XLamp XR family LEDs while providing four times the
      light output of the existing XR-E.

    * Announced a new standard for lighting-class LEDs with the
      introduction of the XLamp XP-E and XP-C LEDs. These
      breakthrough LEDs have the smallest footprint in the industry
      for lighting-class LEDs-providing the same high-quality
      lighting performance and proven reliability as Cree XR-E and
      XR-C LEDs in an 80-percent smaller package.

 -- Cree's flagship LED recessed down light, the LR6, won a
    prestigious Silver International Design Excellence Award (IDEA)
    in the EcoDesign category. IDEA is one of the most prominent
    design competitions in the world, celebrating cutting-edge
    products and product concepts.

 -- Announced the LED University(tm) program with North Carolina
    State University, Marquette University, University of California
    at Santa Barbara, University of Arkansas and Tianjin Polytechnic
    University. Each of the participating universities is conducting
    LED lighting pilots to determine the cost and environmental
    benefits of switching to LED lighting in campus applications.

 -- Welcomed Anchorage, Alaska, into the LED City(r) program.
    Anchorage Mayor Mark Begich announced his city's participation
    in conjunction with an energy-related initiative for the
    retrofit of all 16,000 municipal roadway lights with high-
    efficiency LED fixtures.

 -- Entered into an agreement with Toyoda Gosei providing each
    company with access to the other's patents relating to LED chip
    and packaged LED technology.

Q4 2008 Financial Metrics:



 -- Gross margin was 34% of revenue.

 -- Inventory decreased $3.2 million from Q3 to $80.2 million and
    represents 80 days of inventory (DOI), a decrease of 12 days
    from Q3.

 -- Accounts receivable decreased $1.2 million from Q3 to $110.4
    million, resulting in days sales outstanding of 73, a decrease
    of 7 days from Q3.

 -- Cash flow from operations was $36.7 million.

 -- Cash and investments decreased $27.3 million to $371.0 million
    from Q3, as we used $51.1 million to repurchase approximately 2
    million shares at an average cost of $25.96 per share.

Business Outlook:

For its first quarter of fiscal 2009 ending September 28, 2008, Cree targets revenue in a range of $138 million to $142 million with GAAP earnings of $0.06 to $0.08 per diluted share and non-GAAP earnings of $0.13 to $0.15 per diluted share, based on an estimated 89.5 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 $0.04 per diluted share.

Cree will host a conference call at 5:00 p.m. Eastern time today to review the highlights of the fiscal fourth quarter 2008 results and the fiscal first 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 August 26, 2008.

Supplemental financial information, including the non-GAAP reconciliation following this press release, is available in the "Investor Relations" section of Cree's website, under "Financial Metrics," "Quarter ending June 29, 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.primenewswire.com/newsroom/prs/?pkgid=3529

The schedules following this release are an integral part of the release. This press release contains forward-looking statements involving risks and uncertainties, both known and unknown, that may cause actual results to differ materially from those indicated. Actual results, including with respect to our targets and prospects, could differ materially due to a number of factors, including our ability to complete development and commercialization of products under development, such as our pipeline of brighter LED chips, LED components and LED lighting retrofit solutions; our ability to lower costs; potential changes in demand; increasing price competition in key markets; the risk that, due to the complexity of our manufacturing processes and transition of production to larger wafers, we may experience production delays that preclude us from shipping sufficient quantities to meet customer orders or that result in higher production costs and lower margins; risks associated with the ramp-up of our production for our new products, as well as production at our Huizhou facility and subcontractors; risks resulting from the concentration of our business among few customers, including the risk that customers may reduce or cancel orders or fail to honor purchase commitments; the rapid development of new technology and competing products that may impair demand or render our products obsolete; the potential lack of customer acceptance for our products; risks associated with our recent 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 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, 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       Years Ended
                          --------------------  --------------------
                           June 29,   June 24,   June 29,   June 24,
                             2008       2007       2008       2007
                          ---------  ---------  ---------  ---------
                               (Unaudited)     (Unaudited)

 Product revenue          $ 129,443  $ 103,459  $ 464,907  $ 364,718
 Contract revenue             6,482      7,709     28,389     29,403
                          ---------  ---------  ---------  ---------
 Total revenue              135,925    111,168    493,296    394,121

 Cost of product revenue     84,897     73,350    304,663    237,125
 Cost of contract revenue     5,286      6,073     22,806     23,008
                          ---------  ---------  ---------  ---------
 Total cost of revenue       90,183     79,423    327,469    260,133

 Gross margin                45,742     31,745    165,827    133,988
 Gross margin percentage       33.7%      28.6%      33.6%      34.0%

 Operating expenses:
 Research and development    15,763     14,564     58,846     58,836
 Sales, general and
  administrative             19,158     15,471     76,607     53,105
 Amortization of
  acquisition-related
  intangibles                 4,806      3,664     17,127      4,192
 Loss on disposal and
  impairment of long-lived
  assets                        719      1,170      1,206      1,199
                          ---------  ---------  ---------  ---------
 Total operating expenses    40,446     34,869    153,786    117,332

 Operating income             5,296     (3,124)    12,041     16,656
 Operating income
  percentage                    3.9%     -2.8%        2.4%       4.2%

 Non-operating income:
 Gain on sale of
  investments, net               --      7,822     14,117     19,233
 Interest and other non-
  operating income, net       2,699      3,384     14,891     15,222
                          ---------  ---------  ---------  ---------
 Income from continuing
  operations before income
  taxes                       7,995      8,082     41,049     51,111

 Income tax expense           1,352      1,566      9,237        918
                          ---------  ---------  ---------  ---------
 Net income from
  continuing operations       6,643      6,516     31,812     50,193

  Income (loss) from
   discontinued operations,
   net of related tax
   effect                     1,803        (83)     1,627      7,141
                          ---------  ---------  ---------  ---------
 Net income               $   8,446  $   6,433  $  33,439  $  57,334
                          =========  =========  =========  =========

 Diluted earnings per
  share:
 Income from continuing
  operations              $    0.07  $    0.08  $    0.36  $    0.63
  Income (loss) from
   discontinued
   operations             $    0.02  $   (0.00) $    0.02  $    0.09
                           ---------  ---------  ---------  --------
 Net income               $    0.09  $    0.08  $    0.38  $    0.72
                          =========  =========  =========  =========

 Weighted average shares
  of common stock
  outstanding, basic         88,380     83,815     86,366     78,560

 Weighted average shares
  of common stock
  outstanding, diluted       89,615     84,929     88,077     79,496



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

                                  June 29,    March 30,   June 24,
                                    2008        2008        2007
                                 ----------  ----------  ----------
 Assets:                         (Unaudited) (Unaudited)
 Current assets:
 Cash, cash equivalents and
  short-term investments         $  312,428  $  336,965  $  242,655
 Accounts receivable, net           110,376     111,604      79,668
 Inventory, net                      80,161      83,328      71,068
 Income taxes receivable              9,825       2,000       7,947
 Deferred income taxes                4,578      20,886      23,573
 Prepaid expenses and other
  current assets                     12,900      11,918       8,920
 Assets of discontinued
  operations                          2,600         133         301
                                 ----------  ----------  ----------
 Total current assets               532,868     566,834     434,132

 Property and equipment, net        348,013     351,222     372,345
 Long-term investments               58,604      61,369      68,363
 Intangible assets, net             126,037     129,644      96,138
 Goodwill                           244,003     187,873     141,777
 Deferred income taxes                   --       7,053       1,227
 Other assets                         3,882       2,296       2,248
                                 ----------  ----------  ----------
 Total assets                    $1,313,407  $1,306,291  $1,116,230
                                 ==========  ==========  ==========

 Liabilities and Shareholders'
  Equity:
 Current liabilities:
 Accounts payable, trade         $   37,402  $   44,797  $   32,940
 Accrued salaries and wages          13,471      14,337      10,241
 Income taxes payable                 5,314          --       4,504
 Deferred income taxes                   --       3,343         844
 Other current liabilities            7,938       4,758       5,415
 Contingent payment due related
  to COTCO acquisition               60,000          --          --
 Liabilities of discontinued
  operations                            550         541         505
                                 ----------  ----------  ----------
 Total current liabilities          124,675      67,776      54,449

 Long-term liabilities:
 Deferred income taxes               38,048      55,937      38,758
 Other long-term liabilities          4,199       5,014       5,921
 Long-term liabilities of
  discontinued operations               745         835       1,103
                                 ----------  ----------  ----------
 Total long-term liabilities         42,992      61,786      45,782

 Shareholders' Equity:
 Common stock                           110         112         106
 Additional paid-in-capital         811,015     851,362     713,778
 Accumulated other comprehensive
  income                              8,923       8,008       9,826
 Retained earnings                  325,692     317,247     292,289
                                 ----------  ----------  ----------
 Total shareholders' equity       1,145,740   1,176,729   1,015,999
                                 ----------  ----------  ----------
 Total liabilities and
  shareholders' equity           $1,313,407  $1,306,291  $1,116,230
                                 ==========  ==========  ==========

 The following is a reconciliation showing how Cree, Inc.'s fourth
 quarter income statements for fiscal 2008 and 2007 would appear if
 they were adjusted for the items noted below.


                               CREE, INC.
        Reconciling Items to Q4 2008 & 2007 Financial Statements -
                            GAAP to Non-GAAP
                 (in thousands, except per share amounts)
                              (Unaudited)

                                         Three Months Ended
                                            June 29, 2008
                                  --------------------------------
                                    GAAP   Adjustments    Non-GAAP
                                  --------  --------      --------

 Product revenue                  $129,443  $     --      $129,443
 Contract revenue                    6,482        --         6,482
                                  --------  --------      --------
 Total revenue                     135,925        --       135,925

 Cost of product revenue            84,897      (703) (a)   84,194
 Cost of contract revenue            5,286        --         5,286
                                  --------  --------      --------
 Total cost of sales                90,183      (703)       89,480

 Gross margin                       45,742       703        46,445
 Gross margin percentage              33.7%                   34.2%

 Operating expenses:
 Research and development            15,763    (1,331) (a)   14,432
 Sales, general and
  administrative                     19,158    (2,638) (a)   16,520
 Amortization of acquisition-
  related intangibles                 4,806    (4,806) (b)       --
 Loss on disposal and impairment
  of long-lived assets                  719        --           719
                                   --------  --------      --------
 Total operating expenses            40,446    (8,775)       31,671

 Operating income                     5,296     9,478        14,774
 Operating income percentage            3.9%                   10.9%

 Non-operating income:
 Gain (loss) on investments in
  securities                             --        --            --
 Interest and other non-operating
  income, net                         2,699        --         2,699
                                   --------  --------      --------
 Income from continuing
  operations before income taxes      7,995     9,478        17,473

 Income tax expense (benefit)         1,352     1,603  (c)    2,955
                                   --------  --------      --------
 Net income from continuing
  operations                          6,643     7,875        14,518

 (Loss) gain from discontinued
  operations, net of related tax      1,803    (1,820) (g)      (17)
                                   --------  --------      --------
 Net income                        $  8,446  $  6,055      $ 14,501
                                   ========  ========      ========

 Earnings per diluted share:
 From continuing operations        $   0.07  $   0.09      $   0.16
 From discontinued operations      $   0.02  $  (0.02)     $  (0.00)
                                   --------  --------      --------
 From net income                   $   0.09  $   0.07      $   0.16
                                   ========  ========      ========

 Weighted average shares of common
  stock outstanding, basic           88,380        --        88,380

 Weighted average shares of common
  stock outstanding, diluted         89,615        --        89,615

                                         Three Months Ended
                                           June 24, 2007
                                -----------------------------------
                                  GAAP   Adjustments       Non-GAAP
                                --------  --------         --------

 Product revenue                $103,459  $     --         $103,459
 Contract revenue                  7,709        --            7,709
                                --------  --------         --------
 Total revenue                   111,168        --          111,168

 Cost of product revenue          73,350    (3,541) (a),(d)  69,809
 Cost of contract revenue          6,073        --            6,073
                                --------  --------         --------
 Total cost of sales              79,423    (3,541)          75,882

 Gross margin                     31,745     3,541           35,286
 Gross margin percentage            28.6%                      31.7%

 Operating expenses:
 Research and development         14,564    (1,680) (a),(e)  12,884
 Sales, general and
  administrative                  15,471    (1,272) (a)      14,199
 Amortization of acquisition-
  related intangibles              3,664    (3,664) (b)          --
 Loss on disposal and
  impairment of long-lived
  assets                           1,170        --            1,170
                                --------  --------         --------
 Total operating expenses         34,869    (6,616)          28,253

 Operating income                 (3,124)   10,157            7,033
 Operating income percentage        -2.8%                       6.3%

 Non-operating income:
 Gain (loss) on investments in
  securities                       7,822    (7,822) (f)          --
 Interest and other non-
  operating income, net            3,384        --            3,384
                                --------  --------         --------
 Income from continuing
  operations before income taxes   8,082     2,335           10,417

 Income tax expense (benefit)      1,566     1,323  (c)       2,889
                                --------  --------         --------
 Net income from continuing
  operations                       6,516     1,012            7,528

 (Loss) gain from discontinued
  operations, net of related
  tax                                (83)       --              (83)
                                --------  --------         --------
 Net income                     $  6,433  $  1,012         $  7,445
                                ========  ========         ========

 Earnings per diluted share:
 From continuing operations     $   0.08  $   0.01         $   0.09
 From discontinued operations   $  (0.00) $     --         $  (0.00)
                                --------  --------         --------
 From net income                $   0.08  $   0.01         $   0.09
                                ========  ========         ========

 Weighted average shares of
  common stock outstanding,
  basic                           83,815        --           83,815

 Weighted average shares of
  common stock outstanding,
  diluted                         84,929        --           84,929


 (a) Non-cash stock-based compensation expense of $703,000 in costs
     of product revenue, $1,331,000 in research and development and
     $2,638,000 in sales, general and administrative for the three
     months ended June 29, 2008, and $550,000 in costs of product
     revenue, $730,000 in research and development and $1,272,000 in
     sales, general and administrative for the three months ended
     June 24, 2007.

 (b) Amortization expense of $4,806,000 for the three months ended
     June 29, 2008, and $3,664,000 for the three months ended June
     24, 2007, recognized on intangible assets resulting from
     acquisitions.

 (c) Tax effects of non-cash stock-based compensation expense,
     amortization related to acquisition related intangible assets
     and other non-GAAP adjustments.

 (d) FAS 141 adjustment of $3.0 million related to the valuation of
     inventory in connection with the purchase of COTCO.

 (e) IPR&D charge of $950,000 specifically related to the COTCO
     acquisition.

 (f) Gain on the sale of shares of Color Kinetics common stock.

 (g) Net gain on sale of certain patents related to the discontinued
     Cree Microwave segment.

 The following is a reconciliation showing how Cree, Inc.'s income
 statements for fiscal years 2008 and 2007 would appear if they were
 adjusted for the items noted below.


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

                                              Year Ended
                                            June 29, 2008
                                 ----------------------------------
                                                               As
                                   GAAP   Adjustments      Adjusted
                                 --------  --------        --------

 Product revenue                 $464,907  $     --        $464,907
 Contract revenue                  28,389        --          28,389
                                 --------  --------        --------
 Total revenue                    493,296        --         493,296

 Cost of product revenue          304,663    (2,913)(a)     301,750
 Cost of contract revenue          22,806        --          22,806
                                 --------  --------        --------
 Total cost of sales              327,469    (2,913)        324,556

 Gross margin                     165,827     2,913         168,740
 Gross margin percentage             33.6%                     34.2%

 Operating expenses:
 Research and development          58,846    (4,362)(a)      54,484
 Sales, general and
  administrative                   76,607    (9,758)(a),(b)  66,849
 Amortization of acquisition-
  related intangibles              17,127   (17,127)(c)          --
 Loss on disposal and
  impairment of long-lived
   assets                           1,206        --           1,206
                                 --------  --------        --------
 Total operating expenses         153,786   (31,247)        122,539

 Operating income                  12,041    34,160          46,201
 Operating income percentage          2.4%                      9.4%

 Non-operating income:
 Gain (loss) on investments in
  securities                       14,117   (14,117)(d)          --
 Interest and other non-
  operating income, net            14,891        --          14,891
                                 --------  --------        --------
 Income from continuing
  operations before income
  taxes                            41,049    20,043          61,092

 Income tax expense                 9,237     4,510 (f)      13,747
                                 --------  --------        --------
 Net income from continuing
  operations                       31,812    15,533          47,345

 (Loss) gain from discontinued
   operations, net of related tax   1,627    (1,820) (g)       (193)
                                 --------  --------        --------
 Net income                      $ 33,439  $ 13,713        $ 47,152
                                 ========  ========        ========

 Earnings per diluted share:
 From continuing operations      $   0.36  $   0.18        $   0.54
 From discontinued operations    $   0.02  $  (0.02)       $  (0.00)
                                 --------  --------        --------
 From net income                 $   0.38  $   0.16        $   0.54
                                 ========  ========        ========

 Weighted average shares of
  common stock outstanding,
  basic                            86,366        --          86,366

 Weighted average shares of
  common stock outstanding,
  diluted                          88,077        --          88,077

                                             Year Ended
                                            June 24, 2007
                                 -----------------------------------
                                                              As
                                  GAAP   Adjustments       Adjusted
                                 --------  --------        --------

 Product revenue                 $364,718  $     --        $364,718
 Contract revenue                  29,403        --          29,403
                                 --------  --------        --------
 Total revenue                    394,121        --         394,121

 Cost of product revenue          237,125    (6,328)(a),(i) 230,797
 Cost of contract revenue          23,008        --          23,008
                                 --------  --------        --------
 Total cost of sales              260,133    (6,328)        253,805

 Gross margin                     133,988     6,328         140,316
 Gross margin percentage             34.0%                     35.6%

 Operating expenses:
 Research and development          58,836    (4,286) (a),(e) 54,550
 Sales, general and
  administrative                   53,105    (5,047) (a)     48,058
 Amortization of acquisition-
  related intangibles               4,192    (4,192) (c)         --
 Loss on disposal and impairment
  of long-lived assets              1,199        --           1,199
                                 --------  --------        --------
 Total operating expenses         117,332   (13,525)        103,807

 Operating income                  16,656    19,853          36,509
 Operating income percentage          4.2%                      9.3%

 Non-operating income:
 Gain (loss) on investments in
  securities                       19,233   (19,233) (d)         --
 Interest and other non-
  operating income, net            15,222        --          15,222
                                 --------  --------        --------
 Income from continuing
  operations before income
  taxes                            51,111       620          51,731

 Income tax expense                   918    15,029 (f)      15,947
                                 --------  --------        --------
 Net income from continuing
  operations                       50,193   (14,409)         35,784

 (Loss) gain from discontinued
  operations, net of related tax    7,141    (7,566) (h)       (425)
                                 --------  --------        --------
 Net income                      $ 57,334  $(21,975)       $ 35,359
                                 ========  ========        ========

 Earnings per diluted share:
 From continuing operations      $   0.63  $  (0.18)       $   0.45
 From discontinued operations    $   0.09  $  (0.10)       $  (0.01)
                                 --------  --------        --------
 From net income                 $   0.72  $  (0.28)       $   0.44
                                 ========  ========        ========

 Weighted average shares of
  common stock outstanding,
  basic                            78,560        --          78,560

 Weighted average shares of
  common stock outstanding,
  diluted                          79,496        --          79,496


 (a) Non-cash stock-based compensation expense of $2,913,000 in
     costs of product revenue, $4,362,000 in research and
     development and $8,710,000 in sale, general and administrative
     for the year ended June 29, 2008, and $3,300,000 in costs of
     product revenue, $3,400,000 in research and development and
     $5,047,000 in sale, general and administrative for the year
     ended June 24, 2007.

 (b) Personal property assessment of $1,048,000 related to
     finalizing the audits of our 2002 through 2007 property tax
     returns.

 (c) Amortization expense of $17,127,000 for the year ended June 29,
     2008, and $4,192,000 for the year ended June 24, 2007,
     recognized on acquisition-related intangibles.

 (d) Gain on the sale of shares of Color Kinetics common stock
     during the respective periods.

 (e) IPR&D charge of $950,000 specifically related to the COTCO
     acquisition.

 (f) Tax effects of non-cash stock-based compensation expense,
     amortization related to acquisition-related intangible assets
     and other non-GAAP adjustments.

 (g) Net gain on sale of certain patents related to the discontinued
     Cree Microwave segment.

 (h) Tax benefit related to the release of contingent tax
     reserves associated with the completion of Internal Revenue
     Service audits of fiscal 2003, 2004 and 2005 Federal tax
     returns, and gain realized as a result of entering into a
     sublease agreement at Cree Microwave.

 (i) FAS 141 adjustment of $3.0 million related to the valuation of
     inventory in connection with the purchase of COTCO.


            

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