Transaction Sharpens Cree’s Strategic Focus on
LED Lighting
Cree, Inc. (Nasdaq: CREE), a market leader in LED lighting,
today announced execution of a definitive agreement to sell its
Wolfspeed Power and RF division (“Wolfspeed”), which includes the
silicon carbide substrate business for power, RF and gemstone
applications, to Infineon Technologies AG (FSE: IFX / OTCQX: IFNNY)
for $850 million in cash.
In 2015, the Company announced its strategy to become a more
focused LED lighting company. As part of that strategy, the Company
also announced the proposed IPO of Wolfspeed to create a more
focused Power and RF management team, raise capital to fuel
Wolfspeed’s growth and unlock value for Cree shareholders.
Subsequent to that announcement, the Company was approached by
several parties interested in acquiring the business directly.
After evaluating the strategic options, the Company concluded that
selling Wolfspeed to Infineon is the best decision for our
shareholders, employees and customers.
“Selling Wolfspeed to Infineon speeds our transition to a more
focused LED lighting company while providing significant resources
to accelerate our growth,” stated Chuck Swoboda, Cree chairman and
CEO. “Divesting Wolfspeed is targeted to reduce short-term profits,
but increase free cash flow. We believe this is the right decision
for the company, as it unlocks value, increases management focus on
the core business and supports our mission to build a more valuable
LED lighting technology company. We target using the capital
raised, combined with improved free cash flow, to fund select
M&A, as well as to support additional stock buybacks.”
The business to be acquired by Infineon generated pro-forma
revenue of $173 million in the last twelve months ending March 27,
2016*. Both Cree’s Board of Directors and Infineon’s Supervisory
Board have approved the transaction. J.P. Morgan Securities LLC
served as the company’s financial adviser on the transaction. The
closing of the transaction is expected by the end of calendar year
2016, and is subject to customary closing conditions and regulatory
approvals, including HSR and CFIUS clearance. The Company targets
approximately $585 million of net proceeds after tax and other deal
related costs.
*Attached as an exhibit to this press release is a
reconciliation schedule comparing Cree’s historical segment
information presentation to the pro-forma segment information for
revenue, gross profit and gross margin for the segments
reclassified to reflect the assets to be sold as part of the
Wolfspeed business. These assets include certain assets formerly
part of the LED Product segment relating to the silicon carbide
substrate business for power, RF and gemstone applications
described above.
FY16 Q4 Business Update
Commercial lighting gained momentum in Q4, as orders increased,
customer service improved significantly and nine new products or
significant upgrades were released. LED Products also executed
well, delivering solid quarter over quarter revenue growth.
Preliminary revenue results for Q4 were at the upper end of the
Company’s target range at approximately $388 million.
- Lighting Products revenue was in line
with the expectations for this segment in the Company’s previously
announced revenue targets at approximately $197 million.
- LED Products revenue was higher than
the expectations for this segment in the Company’s previously
announced revenue targets at approximately $160 million due in part
to the benefit of licensing revenue.
- Wolfspeed revenue was in line with the
expectations for this segment in the Company’s previously announced
revenue targets at approximately $31 million.
The Company will provide a complete review of Q4 results and
FY17 Q1 outlook on its regularly scheduled financial results call
on August 16th at 5:00 p.m. EDT.
Conference Call:
The Company plans to hold a conference call today at 8:00 a.m.
EDT to discuss the transaction and these preliminary results. The
conference call will be available to the public through a live
audio web broadcast via the internet. For webcast details, visit
Cree’s website at investor.cree.com/events.cfm.
About Cree, Inc.
Cree is leading the LED lighting revolution and making
energy-wasting traditional lighting technologies obsolete through
the use of energy-efficient, mercury-free LED lighting. Cree is a
market-leading innovator of lighting-class LEDs, lighting products
and semiconductor products for power and radio frequency (RF)
applications.
Cree's product families include LED lighting systems and bulbs,
blue and green LED chips, high-brightness LEDs, lighting-class
power LEDs, power-switching devices and RF devices. Cree's products
are driving improvements in applications such as general
illumination, electronic signs and signals, power supplies and
inverters.
For additional product and Company information, please refer to
www.cree.com.
Forward Looking Statements:
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 in
the forward-looking statements. Forward-looking statements by their
nature address matters that are, to different degrees, uncertain,
such as statements about the potential timing or consummation of
the proposed transaction or the anticipated benefits thereof,
including future financial and operating results. Actual results,
including with respect to our targets and prospects, could differ
materially due to a number of factors, including the risk that the
transaction may be delayed or may not occur; the ability to obtain
regulatory approval or the possibility that such regulatory
approval may result in the imposition of conditions that could
cause the parties to abandon the transaction; the risk that one or
more of the conditions to closing of the transaction may not be
satisfied; the possibility that anticipated benefits of the
proposed transaction will not be realized, including the amount of
cash to be realized by Cree from the transaction or its resulting
ability to pursue select strategic transactions and stock
repurchases; potential business uncertainty, including changes to
existing business relationships during the pendency before closing
that could affect Cree’s financial performance; that we may not
obtain sufficient orders to achieve our targeted revenues; price
competition in key markets; the risk that we or our channel
partners are not able to develop and expand customer bases and
accurately anticipate demand from end customers, which can result
in increased inventory and reduced orders as we experience wide
fluctuations in supply and demand; the risk that our commercial
lighting results will continue to suffer if new issues arise
regarding the new ERP system we implemented in the third quarter of
fiscal 2016; the risk that we may experience production
difficulties that preclude us from shipping sufficient quantities
to meet customer orders or that result in higher production costs
and lower margins; our ability to lower costs; the risk that our
results will suffer if we are unable to balance fluctuations in
customer demand and capacity; product mix; risks associated with
the ramp-up of production of our new products, and our entry into
new business channels different from those in which we have
historically operated; the risk that customers do not maintain
their favorable perception of our brand and products, resulting in
lower demand for our products; the risk that our products fail to
perform or fail to meet customer requirements or expectations,
resulting in significant additional costs, including costs
associated with the potential recall of our products; the risk that
retail customers may alter promotional pricing, increase promotion
of a competitor's products over our products or reduce their
inventory levels, all of which could negatively affect product
demand; the risk that our equity method investments may experience
periods of significant stock price volatility causing us to
recognize fair value losses on our investment; the risk that we
have an increasingly complex supply chain and its ability to scale
to enable maintaining a sufficient supply of raw materials; ongoing
uncertainty in global economic conditions, infrastructure
development or customer demand 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; the risk we may be required to record a
significant charge to earnings if our goodwill or amortizable
assets become impaired; our ability to complete development and
commercialization of products under development, such as our
pipeline of improved LED chips, LED components and LED lighting
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; risks
related to our multi-year warranty periods for LED lighting
products; risks associated with acquisitions, divestitures or
investments; 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 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 28, 2015, and subsequent reports filed with the SEC.
These forward-looking statements represent Cree's judgment as of
the date of this release. Except as required under the U.S. federal
securities laws and the rules and regulations of the SEC, Cree
disclaims any intent or 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, INC.
PRO FORMA SEGMENT
RECLASSIFICATION
TWELVE TRAILING MONTHS ENDED MARCH
2016
(unaudited)
(in thousands, except
percentages)
Three Months Ended June 28, 2015
Three Months Ended September 27,
2015
Three Months Ended December 27,
2015
Three Months Ended March 27,
2016
Twelve Months Ended March 27, 2016 Reported
Change Pro Forma Reported
Change Pro Forma
Reported Change Pro
Forma Reported Change
Pro Forma Reported Change
Pro Forma Revenue
Lighting Products
$229,139 $— $229,139 $248,031 $— $248,031 $254,970 $— $254,970
$187,714 $— $187,714 $919,854 $— $919,854 Percent of Revenue 60 %
60 % 58 % 58 % 59 % 59 % 51 % 51 % 57 % 57 % LED Products 122,231
(12,871 ) 109,360 148,208 (14,684 ) 133,524 153,362 (14,566 )
138,796 150,189 (14,636 ) 135,553 573,990 (56,757 ) 517,233 Percent
of Revenue 32 % 29 % 35 % 31 % 35 % 32 % 41 % 37 % 36 % 32 %
Wolfspeed 30,787 12,871 43,658 29,250 14,684 43,934 27,474 14,566
42,040 29,016 14,636 43,652 116,527 56,757 173,284 Percent of
Revenue 8 % 11 % 7 % 10 % 6 % 10 % 8 % 12 % 7 % 11 % Total $382,157
$— $382,157 $425,489 $— $425,489 $435,806 $— $435,806 $366,919 $—
$366,919 $1,610,371 $— $1,610,371
Gross Profit/ Gross
Margin Lighting Products $56,934 $— $56,934 $69,081 $— $69,081
$72,642 $— $72,642 $48,808 $— $48,808 $247,465 $— $247,465 Gross
Margin 24.8 % 24.8 % 27.9 % 27.9 % 28.5 % 28.5 % 26.0 % 26.0 % 26.9
% 26.9 % LED Products 8,506 (8,492 ) 14 51,668 (9,793 ) 41,875
52,719 (9,780 ) 42,939 52,102 (9,272 ) 42,830 164,995 (37,337 )
127,658 Gross Margin 7.0 % 66.0 % — % 34.9 % 66.7 % 31.4 % 34.4 %
67.1 % 30.9 % 34.7 % 63.4 % 31.6 % 28.7 % 65.8 % 24.7 % Wolfspeed
16,163 7,956 24,119 14,323 9,446 23,769 14,346 9,372 23,718 13,477
8,794 22,271 58,309 35,568 93,877 Gross Margin 52.5 % 61.8 % 55.2 %
49.0 % 64.3 % 54.1 % 52.2 % 64.3 % 56.4 % 46.4 % 60.1 % 51.0 % 50.0
% 62.7 % 54.2 % Unallocated costs (4,913 ) 536 (4,377 ) (4,499 )
347 (4,152 ) (5,262 ) 408 (4,854 ) (5,354 ) 478 (4,876 ) (20,028 )
1,769 (18,259 ) Total $76,690 $— $76,690 $130,573 $— $130,573
$134,445 $— $134,445 $109,033 $— $109,033 $450,741 $— $450,741
Gross Margin 20.1 % 20.1 % 30.7 % 30.7 % 30.8 % 30.8 % 29.7 % 29.7
% 28.0 % 28.0 %
The above reconciliation schedule compares Cree’s historical
segment information presentation to the pro-forma segment
information for revenue, gross profit and gross margin for the
segments reclassified to reflect the assets to be sold as part of
the Wolfspeed business. These assets include certain assets
formerly part of the LED Product segment relating to the silicon
carbide substrate business for power, RF and gemstone
applications
View source
version on businesswire.com: http://www.businesswire.com/news/home/20160714005516/en/
Cree, Inc.Raiford Garrabrant, 919-407-7895Director, Investor
RelationsFax: 919-407-5615investorrelations@cree.com
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