Exhibit 99.1
| For Immediate Release |
Press
Release
|
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Contact:
|
Raiford
Garrabrant
|
|
Cree,
Inc.
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|
|
Director,
Investor Relations
|
|
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Ph:
919-287-7895
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|
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Fax:
919-313-5615
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|
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Email:
raiford_garrabrant@cree.com
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Cree
Reports Financial Results for the Third Quarter of Fiscal Year
2008
DURHAM, N.C., April 22, 2008
– Cree, Inc. (Nasdaq: CREE), a market-leading innovator of lighting-class LEDs,
LED lighting retrofit solutions, and semiconductor solutions for backlighting,
wireless and power applications, today announced revenue of $125.0 million for
its fiscal third quarter ended March 30, 2008. This represents a 5%
increase compared to the fiscal second quarter of 2008 and a 38% increase
compared to revenue of $90.3 million reported for the third fiscal quarter last
year. GAAP net income for the third quarter was $5.7 million, or
$0.06 per diluted share, compared to net income of $21.1 million or $0.27 per
diluted share for the third quarter of fiscal 2007. The
acquisition of LED Lighting Fixtures, Inc., which closed during the quarter,
increased revenue by $0.7 million and reduced earnings by $0.01 per diluted
share.
The
remainder of this press release highlights the company’s financial results on
both a GAAP and a non-GAAP basis. The GAAP results include certain
costs, charges, gains and losses 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
earnings of $0.06 per diluted share includes expenses totaling $6.4 million, net
of tax, or $0.07 per diluted share due to certain items. These items
consist of amortization of acquired intangibles of $0.04 per diluted share and
stock-based compensation expense of $0.03 per diluted share. On a
non-GAAP basis, adjusted to exclude these items, net income for the third
quarter of fiscal 2008 was $12.0 million, or $0.14 per diluted
share. On a non-GAAP basis, adjusted to exclude similar items as in
fiscal 2008 and a non-recurring tax benefit of $0.22 per diluted share, net
income for the third quarter of fiscal 2007 was $4.7 million, or $0.06 per
diluted share.
“Cree’s
strategy to drive revenue growth by focusing on LED lighting continued to pay
dividends in Q3, as we delivered financial performance that was in line with our
previously announced guidance,” stated Chuck Swoboda, Cree Chairman and
CEO. “Revenue growth was led by higher sales of LED components, which
exceeded sales of LED chips for the first time. In addition, we took
another bold step in leading the LED lighting revolution with our acquisition of
LED
Lighting Fixtures, which positions us even better to drive the adoption of LED
lighting going forward. For Q4, we target growth from XLamp® LEDs,
high-brightness LED components and our new LED lighting solutions, all of which
are benefitting from the rising demand for energy-efficient LED
lighting.”
Recent Business
Highlights:
|
Ø
|
Acquired
LED Lighting Fixtures, which is recognized in the lighting industry as the
first company to develop a viable, energy-efficient, “no-compromise”
retrofit LED down light for general illumination. The
acquisition:
|
|
·
|
Expands
Cree’s market opportunity by providing direct access to the lighting
market
|
|
·
|
Enables
Cree to drive retrofit solutions to convert existing lighting
infrastructure to energy-efficient lighting and to accelerate the adoption
of LED lighting
|
|
·
|
Sets the stage for Cree to help obsolete the light bulb |
|
Ø
|
Announced
that Austin, TX, and the Tianjin Economic Development Area (TEDA) in
China, will join the growing LED City™
initiative. Austin plans to evaluate and deploy
state-of-the-art LED lighting technology across its municipal
infrastructure, and is offering rebates that cover approximately 30
percent of the upfront cost of LEDs to help businesses explore the
benefits of this new technology. The TEDA is the first city
area in China to join the program, and has partnered with Tianjin
Polytechnic University to develop the expertise necessary to accelerate
the adoption of LED lighting in
China.
|
Q3 2008 Financial
Metrics:
| Ø |
Gross
margin was 35% of revenue.
|
| Ø |
Cash
flow from operations was $5.5
million.
|
| Ø |
Cash
and investments increased $36.4 million to $398.3 million from
Q2.
|
Business Outlook:
For its
fourth quarter of fiscal 2008 ending June 29, 2008, Cree targets revenue in a
range of $129 million to $133 million with GAAP earnings of $0.04 to $0.06 per
diluted share and non-GAAP earnings of $0.12 to $0.14 per diluted share, based
on an estimated 91 million diluted weighted average shares. Targeted
non-GAAP earnings exclude expenses related to the amortization of acquired
intangibles of $3.6 million, net of tax, and stock based compensation expense of
$3.6 million, net of tax. Our GAAP and Non-GAAP earnings targets
reflect approximately $0.04 and $0.03 per diluted share, respectively,
representing expected lower interest income, higher patent litigation expense
and the dilution resulting from our acquisition of LED Lighting Fixtures,
Inc.
Cree will
host a conference call at 5:00 p.m. Eastern time today to review the highlights
of the fiscal third quarter 2008 results and the fiscal fourth 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 May 6,
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 March 30, 2008”, at http://www.cree.com/investor/metrics.htm.
- 2
-
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 retrofit solutions, and semiconductor solutions for
backlighting, wireless and power applications.
Cree’s
product families include blue and green LED chips, high brightness LEDs,
lighting-class power LEDs, 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 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, 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 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 is a trademark, of
Cree, Inc.
- 3
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CREE, INC.
|
||||||||||||
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CONSOLIDATED
STATEMENTS OF INCOME
|
||||||||||||
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(in
thousands, except per share
data)
|
||||||||||||
| Three Months Ended | Nine Months Ended | |||||||||||
|
3/30/2008
|
3/25/2007
|
3/30/2008
|
3/25/2007
|
|||||||||
|
(Unaudited)
|
(Unaudited)
|
(Unaudited)
|
(Unaudited)
|
|||||||||
|
Product
revenue
|
$ | 118,160 | $ | 82,318 | $ | 335,464 | $ | 261,258 | ||||
|
Contract
revenue
|
6,826 | 7,935 | 21,907 | 21,695 | ||||||||
|
Total
revenue
|
124,986 | 90,253 | 357,371 | 282,953 | ||||||||
|
Cost of product
revenue
|
75,935 | 55,279 | 219,766 | 163,778 | ||||||||
|
Cost of contract
revenue
|
5,502 | 6,002 | 17,520 | 16,934 | ||||||||
|
Total cost of
revenue
|
81,437 | 61,281 | 237,286 | 180,712 | ||||||||
|
Gross
margin
|
43,549 | 28,972 | 120,085 | 102,241 | ||||||||
|
Operating
expenses:
|
||||||||||||
|
Research and
development
|
15,405 | 15,619 | 43,083 | 44,272 | ||||||||
|
Sales, general and
administrative
|
21,076 | 13,115 | 57,449 | 37,636 | ||||||||
|
Amortization of acquisition
related intangibles
|
4,225 | 186 | 12,321 | 528 | ||||||||
|
(Gain) loss on disposal and
impairment of long-lived assets
|
(722 | ) | (154 | ) | 487 | 28 | ||||||
|
Total operating
expenses
|
39,984 | 28,766 | 113,340 | 82,464 | ||||||||
|
Operating
income
|
3,565 | 206 | 6,745 | 19,777 | ||||||||
|
Non-operating
income:
|
||||||||||||
|
Gain on sale of investments,
net
|
- | - | 14,117 | 11,411 | ||||||||
|
Interest and other non-operating
income, net
|
3,884 | 3,993 | 12,193 | 11,838 | ||||||||
|
Income from continuing operations
before income taxes
|
7,449 | 4,199 | 33,055 | 43,026 | ||||||||
|
Income tax expense
(benefit)
|
1,787 | (9,846 | ) | 7,885 | (649 | ) | ||||||
|
Net income from continuing
operations
|
5,662 | 14,045 | 25,170 | 43,675 | ||||||||
|
(Loss) income from
discontinued operations, net of related tax effect
|
(2 | ) | 7,085 | (176 | ) | 7,224 | ||||||
|
Net income
|
$ | 5,660 | $ | 21,130 | $ | 24,994 | $ | 50,899 | ||||
|
Diluted earnings per
share:
|
||||||||||||
|
Income from continuing
operations
|
$ | 0.06 | $ | 0.18 | $ | 0.29 | $ | 0.56 | ||||
|
(Loss) income from discontinued
operations
|
$ | (0.00 | ) | $ | 0.09 | $ | (0.00 |
)
|
$ | 0.09 | ||
|
Net income
|
$ | 0.06 | $ | 0.27 | $ | 0.29 | $ | 0.65 | ||||
|
Weighted average shares of
common
|
||||||||||||
|
stock
outstanding, basic
|
87,211 | 76,417 | 85,695 | 76,809 | ||||||||
|
Weighted average shares of
common
|
||||||||||||
|
stock
outstanding, diluted
|
88,905 | 77,134 | 87,506 | 77,729 | ||||||||
- 4
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CREE,
INC.
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||||||||||
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CONDENSED
CONSOLIDATED BALANCE SHEETS
|
||||||||||
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(in
thousands)
|
||||||||||
|
3/30/2008
|
12/30/2007
|
|||||||||
|
(Unaudited)
|
(Unaudited)
|
6/24/2007
|
||||||||
|
Assets:
|
||||||||||
|
Current
assets:
|
||||||||||
|
Cash,
cash equivalents and short term investments
|
$ | 336,965 | $ | 295,121 | $ | 242,655 | ||||
|
Accounts
receivable, net
|
111,604 | 90,520 | 79,668 | |||||||
|
Inventory,
net
|
83,328 | 75,063 | 71,068 | |||||||
|
Income
taxes receivable and prepaid income taxes
|
2,000 | 3,246 | 7,947 | |||||||
|
Deferred
income taxes
|
20,886 | 19,939 | 23,573 | |||||||
|
Prepaid
expenses and other current assets
|
11,918 | 10,389 | 8,920 | |||||||
|
Assets
of discontinued operations
|
133 | 150 | 301 | |||||||
|
Total
current assets
|
566,834 | 494,428 | 434,132 | |||||||
|
Property
and equipment, net
|
351,222 | 354,252 | 372,345 | |||||||
|
Long-term
investments
|
61,369 | 66,828 | 68,363 | |||||||
|
Intangible
assets, net
|
129,643 | 89,573 | 96,138 | |||||||
|
Goodwill
|
187,874 | 144,334 | 141,777 | |||||||
|
Other
assets
|
9,349 | 3,526 | 3,475 | |||||||
|
Total
assets
|
$ | 1,306,291 | $ | 1,152,941 | $ | 1,116,230 | ||||
|
Liabilities
and Shareholders' Equity:
|
||||||||||
|
Current
liabilities:
|
||||||||||
|
Accounts
payable, trade
|
$ | 44,797 | $ | 36,612 | $ | 32,940 | ||||
|
Accrued
salaries and wages
|
14,337 | 10,197 | 10,241 | |||||||
|
Income
taxes payable
|
- | 6,856 | 4,504 | |||||||
|
Other
current liabilities
|
8,101 | 6,212 | 6,259 | |||||||
|
Liabilities
of discontinued operations
|
541 | 572 | 505 | |||||||
|
Total
current liabilities
|
67,776 | 60,449 | 54,449 | |||||||
|
Long-term
liabilities:
|
||||||||||
|
Deferred
income taxes
|
55,937 | 36,499 | 38,758 | |||||||
|
Contingent
tax reserves
|
4,852 | 5,792 | 5,792 | |||||||
|
Other
long-term liabilities
|
162 | 173 | 129 | |||||||
|
Long-term
liabilities of discontinued operations
|
835 | 924 | 1,103 | |||||||
|
Total
long-term liabilities
|
61,786 | 43,388 | 45,782 | |||||||
|
Shareholders'
Equity:
|
||||||||||
|
Common
stock
|
112 | 107 | 106 | |||||||
|
Additional
paid-in-capital
|
851,362 | 736,242 | 713,778 | |||||||
|
Accumulated
other comprehensive income
|
8,008 | 1,168 | 9,826 | |||||||
|
Retained
earnings
|
317,247 | 311,587 | 292,289 | |||||||
|
Total
shareholders' equity
|
1,176,729 | 1,049,104 | 1,015,999 | |||||||
|
Total
liabilities and shareholders' equity
|
$ | 1,306,291 | $ | 1,152,941 | $ | 1,116,230 | ||||
- 5
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The
following is a reconciliation showing how Cree, Inc.'s third quarter
income statements for fiscal 2008
and 2007 would appear if they were adjusted for the items noted
below.
|
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CREE,
INC.
|
||||||||||||||||||||
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Reconciling
Items to Q3 2008 & 2007 Financial Statements - GAAP to
Non-GAAP
|
||||||||||||||||||||
|
(in
thousands, except per share amounts)
|
||||||||||||||||||||
|
(Unaudited)
|
||||||||||||||||||||
|
Three
Months Ended
|
Three
Months Ended
|
|||||||||||||||||||
|
March
30, 2008
|
March
25, 2007
|
|||||||||||||||||||
|
GAAP
|
Adjustments
|
Non-GAAP
|
GAAP
|
Adjustments
|
Non-GAAP | |||||||||||||||
|
Product
revenue
|
$ | 118,160 | $ | - | $ | 118,160 | $ | 82,318 | $ | - | $ | 82,318 | ||||||||
|
Contract
revenue
|
6,826 | - | 6,826 | 7,935 | - | 7,935 | ||||||||||||||
|
Total
revenue
|
124,986 | - | 124,986 | 90,253 | - | 90,253 | ||||||||||||||
|
Cost
of product revenue
|
75,935 | (569 | ) |
(a)
|
75,366 | 55,279 | (580 | ) |
(a)
|
54,699 | ||||||||||
|
Cost
of contract revenue
|
5,502 | - | 5,502 | 6,002 | - | 6,002 | ||||||||||||||
|
Total
cost of sales
|
81,437 | (569 | ) | 80,868 | 61,281 | (580 | ) | 60,701 | ||||||||||||
|
Gross
margin
|
43,549 | 569 | 44,118 | 28,972 | 580 | 29,552 | ||||||||||||||
|
Gross
margin percentage
|
35 | % | 35 | % | 32 | % | 33 | % | ||||||||||||
|
Operating
expenses:
|
||||||||||||||||||||
|
Research
and development
|
15,405 | (1,095 | ) |
(a)
|
14,310 | 15,619 | (831 | ) |
(a)
|
14,788 | ||||||||||
|
Sales,
general and administrative
|
21,076 | (2,466 | ) |
(a)
|
18,610 | 13,115 | (1,331 | ) |
(a)
|
11,784 | ||||||||||
|
Amortization
of acquisition related intangibles
|
4,225 | (4,225 | ) |
(b)
|
- | 186 | (186 | ) |
(b)
|
- | ||||||||||
|
Gain
on disposal of assets
|
(722 | ) | - | (722 | ) | (154 | ) | - | (154 | ) | ||||||||||
|
Total
operating expenses
|
39,984 | (7,786 | ) | 32,198 | 28,766 | (2,348 | ) | 26,418 | ||||||||||||
|
Operating
income
|
3,565 | 8,355 | 11,920 | 206 | 2,928 | 3,134 | ||||||||||||||
|
Non-operating
income:
|
||||||||||||||||||||
|
Gain
(loss) on investments in securities
|
- | - | - | - | - | - | ||||||||||||||
|
Interest
and other non-operating income, net
|
3,884 | - | 3,884 | 3,993 | - | 3,993 | ||||||||||||||
|
Income
from continuing operations before income taxes
|
7,449 | 8,355 | 15,804 | 4,199 | 2,928 | 7,127 | ||||||||||||||
|
Income
tax expense (benefit)
|
1,787 | 2,005 |
(c)
|
3,792 | (9,846 | ) | 12,036 |
(d)
|
2,190 | |||||||||||
|
Net
income from continuing operations
|
5,662 | 6,350 | 12,012 | 14,045 | (9,108 | ) | 4,937 | |||||||||||||
|
(Loss)
gain from discontinued operations, net of related tax
|
(2 | ) | - | (2 | ) | 7,085 | (7,286 | ) |
(e)
|
(201 | ) | |||||||||
|
Net
income
|
$ | 5,660 | $ | 6,350 | $ | 12,010 | $ | 21,130 | $ | (16,394 | ) | $ | 4,736 | |||||||
|
Earnings
per diluted share:
|
||||||||||||||||||||
|
From
continuing operations
|
$ | 0.06 | $ | 0.07 | $ | 0.14 | $ | 0.18 | $ | (0.12 | ) | $ | 0.06 | |||||||
|
From
discontinued operations
|
$ | (0.00 | ) | $ | - | $ | (0.00 | ) | $ | 0.09 | $ | (0.09 | ) | $ | (0.00 | ) | ||||
|
From
net income
|
$ | 0.06 | $ | 0.07 | $ | 0.14 | $ | 0.27 | $ | (0.22 | ) | $ | 0.06 | |||||||
|
Weighted
average shares of common
|
||||||||||||||||||||
|
stock
outstanding, basic
|
87,211 | - | 87,211 | 76,417 | - | 76,417 | ||||||||||||||
|
Weighted
average shares of common
|
||||||||||||||||||||
|
stock
outstanding, diluted
|
88,905 | - | 88,905 | 77,134 | - | 77,134 | ||||||||||||||
|
(a)
Non-cash stock-based compensation expense of $569 in costs of product
revenue, $1,095 in research and development and $2,466 in sales, general
and administrative for the three months ended March 30, 2008 and $580 in
costs of product revenue, $831 in research and development and $1,331 in
sales, general and administrative for the three months ended March 25,
2007.
|
||||||||||||||||||||
|
(b)
Amortization expense of $4,225 for the three months ended March 30, 2008
and $186 for the three months ended March 25, 2007 recognized on
intangible assets resulting from acquisitions.
|
||||||||||||||||||||
|
(c)
Tax effects of non-cash stock-based compensation expense and amortization
related to acquisition related intangible assets.
|
||||||||||||||||||||
|
(d)
Tax effects for non-cash stock-based compensation, tax benefit related to
the change in estimate of contingent tax reserves associated with our
research and experimentation tax credit benefit related to the completion
of Internal Revenue Service audits of fiscal 2003, 2004 and 2005 Federal
tax returns, tax benefit related to the release of valuation allowances on
deferred tax assets related to Federal capital loss carry forwards and
income tax return to provision adjustments associated with the filing of
our fiscal 2006 federal tax returns.
|
||||||||||||||||||||
|
(e)
Tax benefit related to the the release of contingent tax reserves
associated with the completion of Internal Revenue Service audits of
fiscal 2003, 2004 and 2005 Federal tax returns.
|
||||||||||||||||||||