DURHAM, N.C., Aug. 12, 2008 (PRIME NEWSWIRE) -- Cree, Inc. (Nasdaq:CREE), a market leader in LED lighting, today announced revenue of $135.9 million for its fiscal fourth quarter ended June 29, 2008. This represents a 9% increase compared to the fiscal third quarter of 2008 and a 22% increase compared to revenue of $111.2 million reported for the fourth fiscal quarter last year. GAAP net income for the fourth quarter was $8.4 million, or $0.09 per diluted share, compared to net income of $6.4 million or $0.08 per diluted share for the fourth quarter of fiscal 2007.
The remainder of this press release highlights the company's financial results on both a GAAP and a non-GAAP basis. The GAAP results include certain costs, charges, gains and losses that are excluded from non-GAAP results. By publishing the non-GAAP measures, management intends to provide investors with additional information to further analyze the company's performance, core results and underlying trends. Cree's management evaluates results and makes operating decisions using both GAAP and non-GAAP measures included in this press release. Non-GAAP results are not prepared in accordance with GAAP, and non-GAAP information should be considered a supplement to, and not a substitute for, financial statements prepared in accordance with GAAP. Investors and potential investors are encouraged to review the reconciliation of non-GAAP financial measures to their most directly comparable GAAP measures attached to this press release.
GAAP net income from continuing operations was $0.07 per diluted share for the fourth quarter of fiscal 2008. This amount excludes a gain from discontinued operations of $0.02 per diluted share and includes expenses totaling $7.9 million, net of tax, or $0.09 per diluted share related to amortization of acquired intangibles and stock-based compensation expense. On a non-GAAP basis, adjusted to exclude these items, net income from continuing operations for the fourth quarter of fiscal 2008 was $14.5 million, or $0.16 per diluted share. Included in non-GAAP earnings is a $0.03 per diluted share benefit primarily due to a state franchise tax credit that reduced G&A for the quarter. Excluding this $0.03 per diluted share benefit, non-GAAP earnings were consistent with the company's previously announced target range. On a non-GAAP basis, net income from continuing operations for the fourth quarter of fiscal 2007 was $7.4 million, or $0.09 per diluted share.
For fiscal year 2008, Cree reported revenue of $493.3 million, which represents a 25% increase compared to revenue of $394.1 million for fiscal 2007. GAAP net income was $33.4 million, or $0.38 per diluted share, compared to $57.3 million, or $0.72 per diluted share for fiscal 2007. On a non-GAAP basis net income for fiscal year 2008 was $47.2 million, or $0.54 per diluted share, compared to $35.4 million, or $0.44 per diluted share, for fiscal 2007.
"Q4 represented a strong finish to a very successful year," stated Chuck Swoboda, Cree chairman and CEO. "Revenue exceeded our previously announced guidance due to strong LED sales, which grew 11% sequentially and 27% from a year ago. We have executed our strategy to transform Cree into a broad-based LED company with chips, components and systems that are leading the LED lighting revolution. While we recognize that there is caution in the market about the global economic environment, we remain optimistic about the year ahead as the momentum continues to build for our new products and energy-efficient lighting."
Recent Business Highlights:
-- Introduced several new LED lighting products:
* Announced a new version of the LR6 designed for 220V
to 240V electrical systems to address Europe, Asia and
other major markets.
* Released the LR4, a four-inch architectural recessed LED down
light for new construction and renovation projects. The LR4
delivers up to 540 lumens of high-quality, dimmable light from
less than 11 watts of power.
* Demonstrated the XLamp(r) MC-E LED at LIGHTFAIR International.
The multi-chip LED retains the same footprint as Cree's
existing XLamp XR family LEDs while providing four times the
light output of the existing XR-E.
* Announced a new standard for lighting-class LEDs with the
introduction of the XLamp XP-E and XP-C LEDs. These
breakthrough LEDs have the smallest footprint in the industry
for lighting-class LEDs-providing the same high-quality
lighting performance and proven reliability as Cree XR-E and
XR-C LEDs in an 80-percent smaller package.
-- Cree's flagship LED recessed down light, the LR6, won a
prestigious Silver International Design Excellence Award (IDEA)
in the EcoDesign category. IDEA is one of the most prominent
design competitions in the world, celebrating cutting-edge
products and product concepts.
-- Announced the LED University(tm) program with North Carolina
State University, Marquette University, University of California
at Santa Barbara, University of Arkansas and Tianjin Polytechnic
University. Each of the participating universities is conducting
LED lighting pilots to determine the cost and environmental
benefits of switching to LED lighting in campus applications.
-- Welcomed Anchorage, Alaska, into the LED City(r) program.
Anchorage Mayor Mark Begich announced his city's participation
in conjunction with an energy-related initiative for the
retrofit of all 16,000 municipal roadway lights with high-
efficiency LED fixtures.
-- Entered into an agreement with Toyoda Gosei providing each
company with access to the other's patents relating to LED chip
and packaged LED technology.
Q4 2008 Financial Metrics:
-- Gross margin was 34% of revenue.
-- Inventory decreased $3.2 million from Q3 to $80.2 million and
represents 80 days of inventory (DOI), a decrease of 12 days
from Q3.
-- Accounts receivable decreased $1.2 million from Q3 to $110.4
million, resulting in days sales outstanding of 73, a decrease
of 7 days from Q3.
-- Cash flow from operations was $36.7 million.
-- Cash and investments decreased $27.3 million to $371.0 million
from Q3, as we used $51.1 million to repurchase approximately 2
million shares at an average cost of $25.96 per share.
Business Outlook:
For its first quarter of fiscal 2009 ending September 28, 2008, Cree targets revenue in a range of $138 million to $142 million with GAAP earnings of $0.06 to $0.08 per diluted share and non-GAAP earnings of $0.13 to $0.15 per diluted share, based on an estimated 89.5 million diluted weighted average shares. Targeted non-GAAP earnings exclude expenses related to the amortization of acquired intangibles of $0.03 per diluted share and stock-based compensation expense of $0.04 per diluted share.
Cree will host a conference call at 5:00 p.m. Eastern time today to review the highlights of the fiscal fourth quarter 2008 results and the fiscal first quarter 2009 business outlook, including significant factors and assumptions underlying the targets noted above. The conference call will be available to the public through a live audio web broadcast via the Internet. Log on to Cree's website at www.cree.com and go to "Investor Relations - Overview" for webcast details. The call will be archived and available on the website through August 26, 2008.
Supplemental financial information, including the non-GAAP reconciliation following this press release, is available in the "Investor Relations" section of Cree's website, under "Financial Metrics," "Quarter ending June 29, 2008," at www.cree.com.
About Cree, Inc.
Cree is leading the LED lighting revolution and setting the stage to obsolete the incandescent light bulb through the use of energy-efficient, environmentally friendly LED lighting. Cree is a market-leading innovator of lighting-class LEDs, LED lighting solutions, and semiconductor solutions for wireless and power applications.
Cree's product families include recessed LED down lights, lighting-class power LEDs, high-brightness LEDs, blue and green LED chips, power-switching devices and radio-frequency/wireless devices. Cree solutions are driving improvements in applications such as general illumination, backlighting, electronic signs and signals, variable-speed motors, and wireless communications.
For additional product and company information, please refer to www.cree.com.
The Cree, Inc. logo is available at http://www.primenewswire.com/newsroom/prs/?pkgid=3529
The schedules following this release are an integral part of the release. This press release contains forward-looking statements involving risks and uncertainties, both known and unknown, that may cause actual results to differ materially from those indicated. Actual results, including with respect to our targets and prospects, could differ materially due to a number of factors, including our ability to complete development and commercialization of products under development, such as our pipeline of brighter LED chips, LED components and LED lighting retrofit solutions; our ability to lower costs; potential changes in demand; increasing price competition in key markets; the risk that, due to the complexity of our manufacturing processes and transition of production to larger wafers, we may experience production delays that preclude us from shipping sufficient quantities to meet customer orders or that result in higher production costs and lower margins; risks associated with the ramp-up of our production for our new products, as well as production at our Huizhou facility and subcontractors; risks resulting from the concentration of our business among few customers, including the risk that customers may reduce or cancel orders or fail to honor purchase commitments; the rapid development of new technology and competing products that may impair demand or render our products obsolete; the potential lack of customer acceptance for our products; risks associated with our recent acquisitions; risks associated with ongoing litigation; and other factors discussed in our filings with the Securities and Exchange Commission (SEC), including our report on Form 10-K for the fiscal year ended June 24, 2007, and subsequent reports filed with the SEC. Except as required under the U.S. federal securities laws and the rules and regulations of the SEC, Cree disclaims any obligation to update any forward-looking statements after the date of this release, whether as a result of new information, future events, developments, changes in assumptions or otherwise.
Cree, the Cree logo, XLamp and LED City are registered trademarks, and LED University is a trademark, of Cree, Inc.
CREE, INC.
CONSOLIDATED STATEMENTS OF INCOME
(in thousands, except per share data)
Three Months Ended Years Ended
-------------------- --------------------
June 29, June 24, June 29, June 24,
2008 2007 2008 2007
--------- --------- --------- ---------
(Unaudited) (Unaudited)
Product revenue $ 129,443 $ 103,459 $ 464,907 $ 364,718
Contract revenue 6,482 7,709 28,389 29,403
--------- --------- --------- ---------
Total revenue 135,925 111,168 493,296 394,121
Cost of product revenue 84,897 73,350 304,663 237,125
Cost of contract revenue 5,286 6,073 22,806 23,008
--------- --------- --------- ---------
Total cost of revenue 90,183 79,423 327,469 260,133
Gross margin 45,742 31,745 165,827 133,988
Gross margin percentage 33.7% 28.6% 33.6% 34.0%
Operating expenses:
Research and development 15,763 14,564 58,846 58,836
Sales, general and
administrative 19,158 15,471 76,607 53,105
Amortization of
acquisition-related
intangibles 4,806 3,664 17,127 4,192
Loss on disposal and
impairment of long-lived
assets 719 1,170 1,206 1,199
--------- --------- --------- ---------
Total operating expenses 40,446 34,869 153,786 117,332
Operating income 5,296 (3,124) 12,041 16,656
Operating income
percentage 3.9% -2.8% 2.4% 4.2%
Non-operating income:
Gain on sale of
investments, net -- 7,822 14,117 19,233
Interest and other non-
operating income, net 2,699 3,384 14,891 15,222
--------- --------- --------- ---------
Income from continuing
operations before income
taxes 7,995 8,082 41,049 51,111
Income tax expense 1,352 1,566 9,237 918
--------- --------- --------- ---------
Net income from
continuing operations 6,643 6,516 31,812 50,193
Income (loss) from
discontinued operations,
net of related tax
effect 1,803 (83) 1,627 7,141
--------- --------- --------- ---------
Net income $ 8,446 $ 6,433 $ 33,439 $ 57,334
========= ========= ========= =========
Diluted earnings per
share:
Income from continuing
operations $ 0.07 $ 0.08 $ 0.36 $ 0.63
Income (loss) from
discontinued
operations $ 0.02 $ (0.00) $ 0.02 $ 0.09
--------- --------- --------- --------
Net income $ 0.09 $ 0.08 $ 0.38 $ 0.72
========= ========= ========= =========
Weighted average shares
of common stock
outstanding, basic 88,380 83,815 86,366 78,560
Weighted average shares
of common stock
outstanding, diluted 89,615 84,929 88,077 79,496
CREE, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands)
June 29, March 30, June 24,
2008 2008 2007
---------- ---------- ----------
Assets: (Unaudited) (Unaudited)
Current assets:
Cash, cash equivalents and
short-term investments $ 312,428 $ 336,965 $ 242,655
Accounts receivable, net 110,376 111,604 79,668
Inventory, net 80,161 83,328 71,068
Income taxes receivable 9,825 2,000 7,947
Deferred income taxes 4,578 20,886 23,573
Prepaid expenses and other
current assets 12,900 11,918 8,920
Assets of discontinued
operations 2,600 133 301
---------- ---------- ----------
Total current assets 532,868 566,834 434,132
Property and equipment, net 348,013 351,222 372,345
Long-term investments 58,604 61,369 68,363
Intangible assets, net 126,037 129,644 96,138
Goodwill 244,003 187,873 141,777
Deferred income taxes -- 7,053 1,227
Other assets 3,882 2,296 2,248
---------- ---------- ----------
Total assets $1,313,407 $1,306,291 $1,116,230
========== ========== ==========
Liabilities and Shareholders'
Equity:
Current liabilities:
Accounts payable, trade $ 37,402 $ 44,797 $ 32,940
Accrued salaries and wages 13,471 14,337 10,241
Income taxes payable 5,314 -- 4,504
Deferred income taxes -- 3,343 844
Other current liabilities 7,938 4,758 5,415
Contingent payment due related
to COTCO acquisition 60,000 -- --
Liabilities of discontinued
operations 550 541 505
---------- ---------- ----------
Total current liabilities 124,675 67,776 54,449
Long-term liabilities:
Deferred income taxes 38,048 55,937 38,758
Other long-term liabilities 4,199 5,014 5,921
Long-term liabilities of
discontinued operations 745 835 1,103
---------- ---------- ----------
Total long-term liabilities 42,992 61,786 45,782
Shareholders' Equity:
Common stock 110 112 106
Additional paid-in-capital 811,015 851,362 713,778
Accumulated other comprehensive
income 8,923 8,008 9,826
Retained earnings 325,692 317,247 292,289
---------- ---------- ----------
Total shareholders' equity 1,145,740 1,176,729 1,015,999
---------- ---------- ----------
Total liabilities and
shareholders' equity $1,313,407 $1,306,291 $1,116,230
========== ========== ==========
The following is a reconciliation showing how Cree, Inc.'s fourth
quarter income statements for fiscal 2008 and 2007 would appear if
they were adjusted for the items noted below.
CREE, INC.
Reconciling Items to Q4 2008 & 2007 Financial Statements -
GAAP to Non-GAAP
(in thousands, except per share amounts)
(Unaudited)
Three Months Ended
June 29, 2008
--------------------------------
GAAP Adjustments Non-GAAP
-------- -------- --------
Product revenue $129,443 $ -- $129,443
Contract revenue 6,482 -- 6,482
-------- -------- --------
Total revenue 135,925 -- 135,925
Cost of product revenue 84,897 (703) (a) 84,194
Cost of contract revenue 5,286 -- 5,286
-------- -------- --------
Total cost of sales 90,183 (703) 89,480
Gross margin 45,742 703 46,445
Gross margin percentage 33.7% 34.2%
Operating expenses:
Research and development 15,763 (1,331) (a) 14,432
Sales, general and
administrative 19,158 (2,638) (a) 16,520
Amortization of acquisition-
related intangibles 4,806 (4,806) (b) --
Loss on disposal and impairment
of long-lived assets 719 -- 719
-------- -------- --------
Total operating expenses 40,446 (8,775) 31,671
Operating income 5,296 9,478 14,774
Operating income percentage 3.9% 10.9%
Non-operating income:
Gain (loss) on investments in
securities -- -- --
Interest and other non-operating
income, net 2,699 -- 2,699
-------- -------- --------
Income from continuing
operations before income taxes 7,995 9,478 17,473
Income tax expense (benefit) 1,352 1,603 (c) 2,955
-------- -------- --------
Net income from continuing
operations 6,643 7,875 14,518
(Loss) gain from discontinued
operations, net of related tax 1,803 (1,820) (g) (17)
-------- -------- --------
Net income $ 8,446 $ 6,055 $ 14,501
======== ======== ========
Earnings per diluted share:
From continuing operations $ 0.07 $ 0.09 $ 0.16
From discontinued operations $ 0.02 $ (0.02) $ (0.00)
-------- -------- --------
From net income $ 0.09 $ 0.07 $ 0.16
======== ======== ========
Weighted average shares of common
stock outstanding, basic 88,380 -- 88,380
Weighted average shares of common
stock outstanding, diluted 89,615 -- 89,615
Three Months Ended
June 24, 2007
-----------------------------------
GAAP Adjustments Non-GAAP
-------- -------- --------
Product revenue $103,459 $ -- $103,459
Contract revenue 7,709 -- 7,709
-------- -------- --------
Total revenue 111,168 -- 111,168
Cost of product revenue 73,350 (3,541) (a),(d) 69,809
Cost of contract revenue 6,073 -- 6,073
-------- -------- --------
Total cost of sales 79,423 (3,541) 75,882
Gross margin 31,745 3,541 35,286
Gross margin percentage 28.6% 31.7%
Operating expenses:
Research and development 14,564 (1,680) (a),(e) 12,884
Sales, general and
administrative 15,471 (1,272) (a) 14,199
Amortization of acquisition-
related intangibles 3,664 (3,664) (b) --
Loss on disposal and
impairment of long-lived
assets 1,170 -- 1,170
-------- -------- --------
Total operating expenses 34,869 (6,616) 28,253
Operating income (3,124) 10,157 7,033
Operating income percentage -2.8% 6.3%
Non-operating income:
Gain (loss) on investments in
securities 7,822 (7,822) (f) --
Interest and other non-
operating income, net 3,384 -- 3,384
-------- -------- --------
Income from continuing
operations before income taxes 8,082 2,335 10,417
Income tax expense (benefit) 1,566 1,323 (c) 2,889
-------- -------- --------
Net income from continuing
operations 6,516 1,012 7,528
(Loss) gain from discontinued
operations, net of related
tax (83) -- (83)
-------- -------- --------
Net income $ 6,433 $ 1,012 $ 7,445
======== ======== ========
Earnings per diluted share:
From continuing operations $ 0.08 $ 0.01 $ 0.09
From discontinued operations $ (0.00) $ -- $ (0.00)
-------- -------- --------
From net income $ 0.08 $ 0.01 $ 0.09
======== ======== ========
Weighted average shares of
common stock outstanding,
basic 83,815 -- 83,815
Weighted average shares of
common stock outstanding,
diluted 84,929 -- 84,929
(a) Non-cash stock-based compensation expense of $703,000 in costs
of product revenue, $1,331,000 in research and development and
$2,638,000 in sales, general and administrative for the three
months ended June 29, 2008, and $550,000 in costs of product
revenue, $730,000 in research and development and $1,272,000 in
sales, general and administrative for the three months ended
June 24, 2007.
(b) Amortization expense of $4,806,000 for the three months ended
June 29, 2008, and $3,664,000 for the three months ended June
24, 2007, recognized on intangible assets resulting from
acquisitions.
(c) Tax effects of non-cash stock-based compensation expense,
amortization related to acquisition related intangible assets
and other non-GAAP adjustments.
(d) FAS 141 adjustment of $3.0 million related to the valuation of
inventory in connection with the purchase of COTCO.
(e) IPR&D charge of $950,000 specifically related to the COTCO
acquisition.
(f) Gain on the sale of shares of Color Kinetics common stock.
(g) Net gain on sale of certain patents related to the discontinued
Cree Microwave segment.
The following is a reconciliation showing how Cree, Inc.'s income
statements for fiscal years 2008 and 2007 would appear if they were
adjusted for the items noted below.
CREE, INC.
Reconciling Items to Annual Financial Statements - GAAP to Non-GAAP
(in thousands, except per share amounts)
(Unaudited)
Year Ended
June 29, 2008
----------------------------------
As
GAAP Adjustments Adjusted
-------- -------- --------
Product revenue $464,907 $ -- $464,907
Contract revenue 28,389 -- 28,389
-------- -------- --------
Total revenue 493,296 -- 493,296
Cost of product revenue 304,663 (2,913)(a) 301,750
Cost of contract revenue 22,806 -- 22,806
-------- -------- --------
Total cost of sales 327,469 (2,913) 324,556
Gross margin 165,827 2,913 168,740
Gross margin percentage 33.6% 34.2%
Operating expenses:
Research and development 58,846 (4,362)(a) 54,484
Sales, general and
administrative 76,607 (9,758)(a),(b) 66,849
Amortization of acquisition-
related intangibles 17,127 (17,127)(c) --
Loss on disposal and
impairment of long-lived
assets 1,206 -- 1,206
-------- -------- --------
Total operating expenses 153,786 (31,247) 122,539
Operating income 12,041 34,160 46,201
Operating income percentage 2.4% 9.4%
Non-operating income:
Gain (loss) on investments in
securities 14,117 (14,117)(d) --
Interest and other non-
operating income, net 14,891 -- 14,891
-------- -------- --------
Income from continuing
operations before income
taxes 41,049 20,043 61,092
Income tax expense 9,237 4,510 (f) 13,747
-------- -------- --------
Net income from continuing
operations 31,812 15,533 47,345
(Loss) gain from discontinued
operations, net of related tax 1,627 (1,820) (g) (193)
-------- -------- --------
Net income $ 33,439 $ 13,713 $ 47,152
======== ======== ========
Earnings per diluted share:
From continuing operations $ 0.36 $ 0.18 $ 0.54
From discontinued operations $ 0.02 $ (0.02) $ (0.00)
-------- -------- --------
From net income $ 0.38 $ 0.16 $ 0.54
======== ======== ========
Weighted average shares of
common stock outstanding,
basic 86,366 -- 86,366
Weighted average shares of
common stock outstanding,
diluted 88,077 -- 88,077
Year Ended
June 24, 2007
-----------------------------------
As
GAAP Adjustments Adjusted
-------- -------- --------
Product revenue $364,718 $ -- $364,718
Contract revenue 29,403 -- 29,403
-------- -------- --------
Total revenue 394,121 -- 394,121
Cost of product revenue 237,125 (6,328)(a),(i) 230,797
Cost of contract revenue 23,008 -- 23,008
-------- -------- --------
Total cost of sales 260,133 (6,328) 253,805
Gross margin 133,988 6,328 140,316
Gross margin percentage 34.0% 35.6%
Operating expenses:
Research and development 58,836 (4,286) (a),(e) 54,550
Sales, general and
administrative 53,105 (5,047) (a) 48,058
Amortization of acquisition-
related intangibles 4,192 (4,192) (c) --
Loss on disposal and impairment
of long-lived assets 1,199 -- 1,199
-------- -------- --------
Total operating expenses 117,332 (13,525) 103,807
Operating income 16,656 19,853 36,509
Operating income percentage 4.2% 9.3%
Non-operating income:
Gain (loss) on investments in
securities 19,233 (19,233) (d) --
Interest and other non-
operating income, net 15,222 -- 15,222
-------- -------- --------
Income from continuing
operations before income
taxes 51,111 620 51,731
Income tax expense 918 15,029 (f) 15,947
-------- -------- --------
Net income from continuing
operations 50,193 (14,409) 35,784
(Loss) gain from discontinued
operations, net of related tax 7,141 (7,566) (h) (425)
-------- -------- --------
Net income $ 57,334 $(21,975) $ 35,359
======== ======== ========
Earnings per diluted share:
From continuing operations $ 0.63 $ (0.18) $ 0.45
From discontinued operations $ 0.09 $ (0.10) $ (0.01)
-------- -------- --------
From net income $ 0.72 $ (0.28) $ 0.44
======== ======== ========
Weighted average shares of
common stock outstanding,
basic 78,560 -- 78,560
Weighted average shares of
common stock outstanding,
diluted 79,496 -- 79,496
(a) Non-cash stock-based compensation expense of $2,913,000 in
costs of product revenue, $4,362,000 in research and
development and $8,710,000 in sale, general and administrative
for the year ended June 29, 2008, and $3,300,000 in costs of
product revenue, $3,400,000 in research and development and
$5,047,000 in sale, general and administrative for the year
ended June 24, 2007.
(b) Personal property assessment of $1,048,000 related to
finalizing the audits of our 2002 through 2007 property tax
returns.
(c) Amortization expense of $17,127,000 for the year ended June 29,
2008, and $4,192,000 for the year ended June 24, 2007,
recognized on acquisition-related intangibles.
(d) Gain on the sale of shares of Color Kinetics common stock
during the respective periods.
(e) IPR&D charge of $950,000 specifically related to the COTCO
acquisition.
(f) Tax effects of non-cash stock-based compensation expense,
amortization related to acquisition-related intangible assets
and other non-GAAP adjustments.
(g) Net gain on sale of certain patents related to the discontinued
Cree Microwave segment.
(h) Tax benefit related to the release of contingent tax
reserves associated with the completion of Internal Revenue
Service audits of fiscal 2003, 2004 and 2005 Federal tax
returns, and gain realized as a result of entering into a
sublease agreement at Cree Microwave.
(i) FAS 141 adjustment of $3.0 million related to the valuation of
inventory in connection with the purchase of COTCO.