Cree Reports Record Quarterly Revenue for the Second Quarter of Fiscal Year 2009

Q2 2009 Revenue Increased 24 Percent Year-Over-Year to $148 Million


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.


            

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