DURHAM, N.C., Aug. 7, 2007 (PRIME NEWSWIRE) -- Cree, Inc. (Nasdaq:CREE), a market-leading innovator of semiconductors that enhance the value of solid-state lighting, power and communications products, today announced revenue of $111.2 million for its fiscal fourth quarter ended June 24, 2007. This represents a 23% increase compared to the fiscal third quarter and a 4% increase compared to revenue of $106.7 million reported for the year-ago period. GAAP net income for the fourth quarter was $6.4 million, or $0.08 per diluted share, compared to net income of $13.2 million or $0.17 per diluted share for the fourth quarter of 2006.
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 in accordance with GAAP, which are excluded from non-GAAP results based on management's determination that they are not directly reflective of on-going operations. The schedules attached to this press release include a reconciliation of the GAAP financial information to the non-GAAP results.
GAAP EPS of $0.08 per diluted share includes a net expense of $1.0 million or $0.01 per diluted share due to certain items. These items consist of a gain from the sale of marketable securities of $0.09 per diluted share, expenses related to the COTCO acquisition of $0.07 per diluted share, stock-based compensation expense of $0.02 per diluted share and certain tax adjustments that reduced earnings by $0.01 per diluted share. On a non-GAAP basis, adjusted to exclude these items, net income for the fourth quarter of fiscal 2007 was $7.4 million, or $0.09 per diluted share. On a non-GAAP basis, adjusted to exclude similar items as in fiscal 2007, net income for the fourth quarter of fiscal 2006 was $17.2 million, or $0.22 per diluted share.
For fiscal year 2007, Cree reported revenue of $394.1 million, which represents a 7% decrease compared to revenue of $423.0 million for fiscal 2006. GAAP net income was $57.3 million, or $0.72 per diluted share, compared to $76.7 million, or $0.98 per diluted share for fiscal 2006. On a non-GAAP basis net income for fiscal year 2007 was $35.4 million, or $0.44 per diluted share, compared to $83.2 million, or $1.06 per diluted share, for fiscal 2006.
"Fiscal 2007 was a challenging but successful year for Cree as we made great strides in our transformation from an LED chip and SiC materials technology company into a components company positioned to lead the LED lighting revolution," stated Chuck Swoboda, Cree chairman and CEO. "In the fourth quarter, we again delivered financial results that were in line with our previously announced targets, and the COTCO integration is off to a good start. We believe the combination of growing XLamp(r) LED sales, our new high-brightness, packaged LED product line and a more stable LED chip business has put Cree in a strong position for growth in fiscal 2008."
Recent Business Highlights: * Completed the acquisition of COTCO, a leading supplier of high-brightness, packaged LEDs in China, for consideration valued at approximately $204 million. * Announced commercial availability of XLamp LEDs with minimum luminous flux of 100 lumens at 350 mA, a performance increase of almost 70% in the last year. XLamp LEDs are the first LEDs to be available in volume with this level of performance. * Announced that Toronto is joining Raleigh, N.C. in a city-wide initiative to install LED lighting throughout its infrastructure. As part of the LED City(tm) program, Toronto intends to evaluate, deploy and promote the use of LEDs across multiple lighting applications because LEDs provide an energy-efficient, mercury-free solution helping to preserve the environment, while delivering more flexible and longer-lasting lighting than traditional lighting technologies. Q4 Financial Metrics: * On a GAAP basis, gross margin was 29%. On a non-GAAP basis, gross margin was 32% of revenue and excludes $0.5 million of stock-based compensation expense and the write-up of the acquired inventory as part of the COTCO purchase accounting, which resulted in an additional $3.0 million of costs of goods sold during the fourth quarter. * Cash flow from operations was $26.7 million. * Cash and investments equaled $294.3 million.
Business Outlook:
For its first quarter of fiscal 2008 ending September 23, 2007, Cree currently targets revenue in a range of $110 million to $115 million with GAAP earnings of $0.15 to $0.18 per diluted share and non-GAAP earnings of $0.09 to $0.12 per diluted share. Non-GAAP earnings per diluted share exclude expenses related to the amortization of acquired intangibles, an expected gain from the sale of marketable securities, stock-based compensation expense and the related tax effects.
Cree will host a conference call at 5:00 p.m. Eastern time today to review the highlights of the fourth quarter fiscal 2007 results and the first quarter fiscal 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 August 21, 2007.
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 June 24, 2007" at http://www.cree.com/investor/metrics.htm.
Non-GAAP Financial Measures
In addition to disclosing results determined in accordance with GAAP, Cree has determined to begin furnishing non-GAAP results of operations that exclude certain items. By disclosing this non-GAAP information, 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 operating 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.
About Cree, Inc.
Cree is a market-leading innovator and manufacturer of semiconductors that enhance the value of solid-state lighting, power and communications products by significantly increasing their energy performance and efficiency. Key to Cree's market advantage is its world-class materials expertise in silicon carbide (SiC) and gallium nitride (GaN) for chips and packaged devices that can handle more power in a smaller space while producing less heat than other available technologies, materials and products.
Cree drives its increased performance technology into multiple applications, including exciting alternatives in brighter and more-tunable light for general illumination, backlighting for more- vivid displays, optimized power management for high-current, switch-mode power supplies and variable-speed motors, and more-effective wireless infrastructure for data and voice communications. Cree customers range from innovative lighting-fixtures makers to defense-related federal agencies.
Cree's product families include blue and green LED chips, lighting LEDs in all colors, LED backlighting solutions, power-switching devices and radio-frequency/wireless devices. For additional information please refer to www.cree.com.
The Cree, Inc. logo is available at http://www.primenewswire.com/newsroom/prs/?pkgid=3529
The schedules attached to this release are an integral part of the release. This press release contains forward-looking statements involving risks and uncertainties, both known and unknown, that may cause actual results to differ materially from those indicated. Actual results, including with respect to our targets and prospects, could differ materially due to a number of factors, including our ability to complete development and commercialization of products under development, such as our pipeline of brighter LED chips and packaged products; our ability to lower costs; potential changes in demand; increasing price competition in key markets; the risk that, due to the complexity of our manufacturing processes and transition of production to larger wafers, we may experience production delays that preclude us from shipping sufficient quantities to meet customer orders or that result in higher production costs and lower margins; risks associated with the ramp-up of our production for our new products; 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 on-going litigation; that the possibility that the pending acquisition of Color Kinetics by Philips may not be completed or may be delayed; 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 25, 2006, 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 and XLamp are registered trademarks of Cree, Inc., and the COTCO logo is a registered trademark of COTCO Luminant Device Limited. LED City is a trademark of Cree, Inc.
CREE, INC.
CONSOLIDATED STATEMENTS OF INCOME
(in thousands, except per share data)
Three Months Ended Twelve Months Ended
--------------------- ---------------------
6/24/2007 6/24/2007
(Unaudited) 6/25/2006 (Unaudited) 6/25/2006
--------- --------- --------- ---------
Product revenue $ 103,459 $ 99,001 $ 364,718 $ 394,383
Contract revenue 7,709 7,705 29,403 28,569
--------- --------- --------- ---------
Total revenue 111,168 106,706 394,121 422,952
Cost of product
revenue 73,350 56,778 237,125 202,412
Cost of contract
revenue 6,073 4,767 23,008 19,647
--------- --------- --------- ---------
Total cost of
revenue 79,423 61,545 260,133 222,059
Gross margin 31,745 45,161 133,988 200,893
Operating expenses:
Research and
development 14,564 13,961 58,836 54,871
Sales, general and
administrative 15,471 11,365 53,105 44,760
Amortization of
acquisition related
intangibles 3,664 -- 4,192 --
Loss on disposal or
impairment of
long-lived assets 1,170 1,513 1,199 2,421
--------- --------- --------- ---------
Total operating
expenses 34,869 26,839 117,332 102,052
Operating income (3,124) 18,322 16,656 98,841
Non-operating income:
Gain on investments
in securities 7,822 -- 19,233 583
Other non-operating
income 244 1 238 46
Net interest income 3,140 4,116 14,984 12,893
--------- --------- --------- ---------
Income from
continuing
operations before
income taxes 8,082 22,439 51,111 112,363
Income tax (benefit)
expense 1,566 10,061 918 32,404
--------- --------- --------- ---------
Net income from
continuing
operations 6,516 12,378 50,193 79,959
Income (loss) from
discontinued
operations, net of
related tax effect (83) 866 7,141 (3,286)
Net income $ 6,433 $ 13,244 $ 57,334 $ 76,673
========= ========= ========= =========
Diluted earnings per
share:
Income from
continuing
operations $ 0.08 $ 0.16 $ 0.63 $ 1.02
(Loss) income from
discontinued
operations $ (0.00) $ 0.01 $ 0.09 $ (0.04)
--------- --------- --------- ---------
Net income $ 0.08 $ 0.17 $ 0.72 $ 0.98
========= ========= ========= =========
Weighted average
shares of common
stock outstanding,
basic 83,815 77,049 78,560 76,270
Weighted average
shares of common
stock outstanding,
diluted 84,929 78,978 79,496 78,207
CREE, INC.
CONSOLIDATED BALANCE SHEETS
(in thousands)
6/24/2007
(Unaudited) 6/25/2006
---------- ----------
Assets:
Current assets:
Cash, cash equivalents and short
term investments $ 242,655 $ 256,218
Accounts receivable, net 79,668 68,363
Inventory, net 71,068 29,994
Income taxes receivable 7,947 200
Deferred income taxes 23,573 10,092
Prepaid expenses and other
current assets 8,920 11,237
Assets of discontinued operations 301 394
---------- ----------
Total current assets 434,132 376,498
Property and equipment, net 372,345 342,238
Long-term investments held to
maturity 68,363 119,400
Long-term marketable securities -- 29,072
Intangible assets, net 96,138 30,286
Goodwill 141,777 --
Deferred income taxes 1,227 --
Other assets 2,248 2,706
---------- ----------
Total assets $1,116,230 $ 900,200
========== ==========
Liabilities and Shareholders' Equity:
Current liabilities:
Accounts payable, trade $ 32,942 $ 23,214
Accrued salaries and wages 10,241 8,828
Income taxes payable 4,504 --
Deferred income taxes 844 --
Other current liabilities 5,415 4,256
Liabilities of discontinued
operations 505 1,092
---------- ----------
Total current liabilities 54,451 37,390
Long term liabilities:
Deferred income taxes and
contingent tax reserves 44,550 33,310
Other long-term liabilities 129 --
Long term liabilities of
discontinued operations 1,103 1,887
---------- ----------
Total long term liabilities 45,782 35,197
Shareholders' Equity:
Common stock 106 96
Additional paid-in-capital 713,778 580,804
Comprehensive income 9,826 11,758
Retained earnings 292,287 234,955
---------- ----------
Total shareholders' equity 1,015,997 827,613
---------- ----------
Total liabilities and
shareholders' equity $1,116,230 $ 900,200
========== ==========
The following is a reconciliation showing how Cree, Inc.'s fourth quarter income statements for fiscal 2007 and 2006 would appear if they were adjusted for the items noted below.
CREE, INC.
Reconciling Items to Q4 Financial Statements -- GAAP to Non-GAAP
(in thousands, except per share amounts)
(Unaudited)
Three Months Ended
June 24, 2007
------------------------------------------
Adjust- As
GAAP ments Adjusted
-------- -------- --------
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)(b) 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 29% 32%
Operating expenses:
Research and development 14,564 (1,680)(a)(c) 12,884
Sales, general and
administrative 15,471 (1,272)(a) 14,199
Amortization of
acquisition related
intangibles 3,664 (3,664)(c) --
Loss on disposal of
assets 1,170 -- 1,170
-------- -------- --------
Total operating expenses 34,869 (6,616) 28,253
Operating income (3,124) 10,157 7,033
Non-operating income:
Gain (loss) on
investments in
securities 7,822 (7,822)(d) --
Other non-operating
income 244 -- 244
Net interest income 3,140 -- 3,140
-------- -------- --------
Income from continuing
operations before
income taxes 8,082 2,335 10,417
Income tax expense 1,566 1,323(e) 2,889
-------- -------- --------
Net income from
continuing operations 6,516 1,012 7,528
Loss 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
Three Months Ended
June 25, 2006
------------------------------------------
Adjust- As
GAAP ments Adjusted
--------- --------- ---------
Product revenue $ 99,001 $ -- $ 99,001
Contract revenue 7,705 -- 7,705
--------- --------- ---------
Total revenue 106,706 -- 106,706
Cost of product revenue 56,778 (1,242)(a) 55,536
Cost of contract revenue 4,767 -- 4,767
--------- --------- ---------
Total cost of sales 61,545 (1,242) 60,303
Gross margin 45,161 1,242 46,403
Gross margin percentage 42% 43%
Operating expenses:
Research and development 13,961 (931)(a) 13,030
Sales, general and
administrative 11,365 (1,137)(a) 10,228
Amortization of
acquisition related
intangibles -- --(a) --
Loss on disposal of
assets 1,513 -- 1,513
--------- --------- ---------
Total operating expenses 26,839 (2,068) 24,771
Operating income 18,322 3,310 21,632
Non-operating income:
Gain (loss) on
investments in
securities -- --
Other non-operating
income 1 -- 1
Net interest income 4,116 -- 4,116
--------- --------- ----------
Income from continuing
operations before
income taxes 22,439 3,310 25,749
Income tax expense 10,061 (1,740)(f) 8,321
--------- --------- ----------
Net income from
continuing operations 12,378 5,050 17,428
Loss from discontinued
operations, net of
related tax 866 (1,045)(g) (179)
--------- --------- ---------
Net income $ 13,244 $ 4,005 $ 17,249
========= ========= =========
Earnings per diluted
share:
From continuing
operations $ 0.16 $ 0.06 $ 0.22
From discontinued
operations $ 0.01 $ (0.01) $ (0.00)
--------- --------- ---------
From net income $ 0.17 $ 0.05 $ 0.22
========= ========= =========
Weighted average shares
of common stock
outstanding, basic 77,049 -- 77,049
Weighted average shares
of common stock
outstanding, diluted 78,978 -- 78,978
(a) Non-cash stock-based compensation expense of $550,000 in costs
of product revenue, $730,000 in research and development and
$1.3 million in sale, general and administrative for the three
months ended June 24, 2007 and $1.2 million in costs of product
revenue, $931,000 in research and development and $1.1 million
in sale, general and administrative for the three months ended
June 25, 2006.
(b) FAS 141 adjustment of $3.0 million related to valuation of
inventory in connection with the purchase of COTCO.
(c) IPR&D charge of $950,000 specifically related to the COTCO
acquisition and amortization expense of $3.7 million recognized
on intangible assets resulting from current year acquisitions.
(d) Gain on the sale of 364,000 shares of Color Kinetics common stock.
(e) Tax effects of $1.2 million for non-cash stock based
compensation, $1.1 million related to current year acquisitions,
$775,000 of tax benefit related to the release of valuation
allowances on deferred tax assets related to Federal capital
loss carry forwards and other year end provision adjustments.
(f) Tax adjustments for non-cash stock based compensation that are
offset by $1.8 million of additional tax expense related to
investment in Color Kinetics and other end-of-year tax
adjustments.
(g) Year to date tax adjustment of $1.1 million to reclassify to
discontinued operations certain tax benefits associated with the
Cree Microwave shutdown.
The following is a reconciliation showing how Cree, Inc.'s year to date income statements for fiscal 2007 and 2006 would appear if they were adjusted for the items noted below.
CREE, INC.
Reconciling Items to Twelve Months Financial Statements -
GAAP to Non-GAAP
(in thousands, except per share amounts)
(Unaudited)
Twelve Months Ended
June 24, 2007
-------------------------------------------
Adjust- As
GAAP ments 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)(b) 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% 36%
Operating expenses:
Research and development 58,836 (4,286)(a)(c) 54,550
Sales, general and
administrative 53,105 (5,047)(a)(c) 48,058
Amortization of
acquisition related
intangibles 4,192 (4,192)(c) --
Loss on disposal of assets 1,199 -- 1,199
--------- --------- ---------
Total operating expenses 117,332 (13,525) 103,807
Operating income 16,656 19,853 36,509
Non-operating income:
Gain (loss) on investments
in securities 19,233 (19,233)(d) --
Other non-operating income 238 -- 238
Net interest income 14,984 -- 14,984
--------- --------- ---------
Income from continuing
operations before
income taxes 51,111 620 51,731
Income tax expense 918 15,029(e) 15,947
--------- --------- ---------
Net income from continuing
operations 50,193 (14,409) 35,784
Loss from discontinued
operations, net of
related tax 7,141 (7,566)(f) (425)
--------- --------- ---------
Net income $ 57,334 $ (21,975) $ 35,359
========= ========= =========
Earnings per diluted
share:
From continuing
operations $ 0.63 $ (0.19) $ 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
Twelve Months Ended
June 25, 2006
------------------------------------------
Adjust- As
GAAP ments Adjusted
--------- --------- ---------
Product revenue $ 394,383 $ -- $ 394,383
Contract revenue 28,569 -- 28,569
--------- --------- ---------
Total revenue 422,952 -- 422,952
Cost of product revenue 202,412 (4,330)(a) 198,082
Cost of contract revenue 19,647 -- 19,647
--------- --------- ---------
Total cost of sales 222,059 (4,330) 217,729
Gross margin 200,893 4,330 205,223
Gross margin percentage 47% 49%
Operating expenses:
Research and development 54,871 (4,089)(a) 50,782
Sales, general and
administrative 44,760 (4,485)(a) 40,275
Amortization of
acquisition related
intangibles -- -- --
Loss on disposal of assets 2,421 -- 2,421
--------- --------- ---------
Total operating expenses 102,052 (8,574) 93,478
Operating income 98,841 12,904 111,745
Non-operating income:
Gain (loss) on investments
in securities 583 (583) --
Other non-operating income 46 -- 46
Net interest income 12,893 -- 12,893
--------- --------- ---------
Income from continuing
operations before
income taxes 112,363 12,321 124,684
Income tax expense 32,404 8,279(g) 40,683
--------- --------- ---------
Net income from continuing
operations 79,959 4,042 84,001
Loss from discontinued
operations, net of
related tax (3,286) 2,460(h) (826)
--------- --------- ---------
Net income $ 76,673 $ 6,502 $ 83,175
========= ========= =========
Earnings per diluted
share:
From continuing
operations $ 1.02 $ 0.05 $ 1.07
From discontinued
operations $ (0.04) $ 0.03 $ (0.01)
--------- --------- ---------
From net income $ 0.98 $ 0.08 $ 1.06
========= ========= =========
Weighted average shares
of common stock
outstanding, basic 76,270 -- 76,270
Weighted average shares
of common stock
outstanding, diluted 78,207 -- 78,207
(a) Non-cash stock-based compensation expense of $3.3 million in
costs of product revenue, $3.4 million in research and
development and $5.0 million in sale, general and administrative
for the year ended June 24, 2007 and $4.3 million in costs of
product revenue, $4.1 million in research and development and
$4.5 million in sale, general and administrative for the year
ended June 25, 2006.
(b) FAS 141 adjustment of $3.0 million related to valuation of
inventory in connection with the purchase of COTCO
(c) IPR&D charge of $950,000 specifically related to the COTCO
acquisition and amortization expense of $4.2 million recognized
on intangible assets resulting from current year acquisitions.
(d) Gain on the sale of 1,296,000 shares of Color Kinetics common
stock.
(e) Tax effects for non-cash stock based compensation, amortization
of intangible assets, tax benefit related to the release of
contingent tax reserves associated with the completion of our
research and experimentation tax credit study, tax benefit
related to the completion of Internal Revenue Service audits of
fiscal 2003, 2004 and 2005 Federal tax returns, tax benefit of
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.
(f) 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.
(g) Tax adjustments for non-cash stock-based compensation less the
gain on sale of Color Kinetics stock. Also includes $3.2 million
tax benefit related to investment in Color Kinetics and $1.2
million of end-of-year and prior year tax adjustments.
(h) Includes costs to terminate an operating lease in Sunnyvale, CA
of $3.6 million, severance of $624,000, inventory write-down of
$668,000 and fixed asset impairments of $303,000, net or related
tax benefit.