Cree, Inc. (Nasdaq: CREE), a market leader in LED lighting,
today announced revenue of $388 million for its fourth quarter of
fiscal 2016, ended June 26, 2016. This represents a 2%
increase compared to revenue of $382 million reported for the
fourth quarter of fiscal 2015, and a 6% increase compared to the
third quarter of fiscal 2016. GAAP net loss for the fourth quarter
was $11 million, or $0.11 per diluted share, compared to GAAP net
loss of $88 million, or $0.83 per diluted share, for the fourth
quarter of fiscal 2015. On a non-GAAP basis, net income for the
fourth quarter of fiscal 2016 was $19 million, or $0.19 per diluted
share, compared to non-GAAP net loss for the fourth quarter of
fiscal 2015 of $21 million, or $0.19 per diluted share.
For fiscal year 2016, Cree reported revenue of $1.62 billion,
which represents a 1% decrease compared to revenue of $1.63 billion
for fiscal 2015. GAAP net loss was $22 million, or $0.21 per
diluted share, compared to net loss of $65 million, or $0.57 per
diluted share, for fiscal 2015. On a non-GAAP basis, net income for
fiscal year 2016 was $88 million, or $0.86 per diluted share,
compared to $71 million or $0.63 per diluted share, for fiscal
2015.
“Fiscal 2016 was a year of progress towards our goal to build a
more focused and valuable LED lighting technology company,” stated
Chuck Swoboda, Cree Chairman and CEO. “We successfully restructured
the LED business, improved commercial lighting fundamentals,
refocused our consumer business on premium LED bulbs, and unlocked
significant value with the agreement to sell Wolfspeed."
Q4 2016 Financial Metrics
(in thousands, except per share amounts and percentages)
Fourth Quarter 2016
2015 Change (unaudited) (unaudited)
Revenue, net $ 388,413 $ 382,157 $ 6,256 2 %
GAAP Gross
margin 29.1 % 20.1 % Operating margin (1.2 )% (25.1 )% Net loss $
(10,641 ) $ (88,100 ) $ 77,459 88 % Loss per diluted share $ (0.11
) $ (0.83 ) $ 0.72 87 %
Non-GAAP Gross margin 30.8 % 20.9 %
Operating margin 5.5 % (7.4 )% Net income (loss) $ 18,918 $ (20,718
) $ 39,636 191 % Earnings (loss) per diluted share $ 0.19 $ (0.19 )
$ 0.38 200 %
- Gross margin decreased from Q3 of
fiscal 2016 to 29.1% on a GAAP basis, and increased to 30.8% on a
non-GAAP basis.
- Cash and investments decreased by $15
million from Q3 of fiscal 2016 to $605 million.
- Accounts receivable, net decreased by
$13 million from Q3 of fiscal 2016 to $166 million, with days sales
outstanding of 38.
- Inventory increased by $2 million from
Q3 of fiscal 2016 to $300 million and represents 98 days of
inventory.
- Free cash flow was $41 million for Q4
of fiscal 2016, a $47 million increase sequentially.
Recent Business Highlights:
- Reached an agreement to sell Wolfspeed
to Infineon for $850 million in cash;
- Released many new Lighting products,
including the following:
- LN Series suspended luminaire
- HXB Series LED high bay luminaire
- ZR FD LED Series troffer
- RSW™ LED street luminaires
- OSQ™ 28L outdoor area and flood LED
luminaire
- Essentia® by Cree LED downlight and
track light portfolios
- XSP HO Series roadway luminaire
- Next-generation CPY-20L™ LED canopy
luminaires
- SmartCast® Manager software
- Launched the following new LED
products:
- XLamp® XT-E HE LED
- XLamp MHB-B LED
- XLamp XQ-E Photo Red LED
- Received a favorable Initial
Determination ruling from the U.S. International Trade Commission
in the company's case against Feit Electric and its Asian supplier,
Unity Opto;
- Reached favorable agreements to settle
patent disputes with Harvatek and Kingbright.
Business Outlook:
For its first quarter of fiscal 2017 ending September 25,
2016, Cree targets consolidated revenue, which includes both
continued and discontinued operations, in a range of $356 million
to $378 million. Consolidated GAAP net income is targeted at $5
million to $6 million, or $0.05 to $0.06 per diluted share.
Consolidated non-GAAP net income is targeted in a range of $10
million to $16 million, or $0.10 to $0.16 per diluted share.
Targeted consolidated non-GAAP earnings exclude $23 million of
expenses related to stock-based compensation expense, the
amortization or impairment of acquisition-related intangibles and
transaction costs associated with the sale of the Wolfspeed
business. The GAAP and non-GAAP targets do not include any
estimated change in the fair value of Cree’s Lextar investment.
For continuing operations, revenue is targeted in a range of
$310 million to $330 million. GAAP net income from continuing
operations is targeted at $2 million to $3 million, or $0.02 to
$0.03 per diluted share. Non-GAAP net income from continued
operations is targeted in a range of $6 million to $11 million, or
$0.06 to $0.11 per diluted share. Targeted non-GAAP earnings from
continuing operations exclude $20 million of expenses related to
stock-based compensation expense and the amortization or impairment
of acquisition-related intangibles. The GAAP and non-GAAP targets
do not include any estimated change in the fair value of Cree’s
Lextar investment.
For discontinued operations, revenue is targeted in a range of
$46 million to $48 million. GAAP net income from discontinued
operations is targeted at $2 million to $3 million, or $0.02 to
$0.03 per diluted share. Non-GAAP net income from discontinued
operations is targeted in a range of $4 million to $5 million, or
$0.04 to $0.05 per diluted share. Targeted non-GAAP earnings from
continuing discontinued operations exclude $3 million of expenses
related to stock-based compensation expense, the amortization or
impairment of acquisition-related intangibles and transaction costs
associated with the sale of the Wolfspeed business.
Quarterly Conference Call:
Cree will host a conference call at 5:00 p.m. Eastern time today
to review the highlights of the fourth quarter and fiscal year 2016
results and the fiscal first quarter 2017 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. For webcast details,
visit Cree's website at investor.cree.com/events.cfm.
Supplemental financial information, including the non-GAAP
reconciliation attached to this press release, is available on
Cree's website at investor.cree.com/results.cfm.
About Cree, Inc.
Cree is a market-leading innovator of lighting-class LEDs,
lighting products and semiconductor products for power and radio
frequency (RF) applications. Cree believes in better light
experiences and is delivering new innovative LED technology that
transforms the way people experience light through high-quality
interior and exterior LED lighting solutions.
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.
Non-GAAP Financial Measures:
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 and expenses which are excluded from non-GAAP
results. By publishing the non-GAAP measures, management intends to
provide investors with additional information to further analyze
the Company's performance, core results and underlying trends.
Cree's management evaluates results and makes operating decisions
using both GAAP and non-GAAP measures included in this press
release. Non-GAAP results are not prepared in accordance with GAAP
and non-GAAP information should be considered a supplement to, and
not a substitute for, financial statements prepared in accordance
with GAAP. Investors and potential investors are encouraged to
review the reconciliation of non-GAAP financial measures to their
most directly comparable GAAP measures attached to this press
release.
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. Actual results, including with
respect to our targets and prospects, could differ materially due
to a number of factors, including the risk 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 for this business; 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 the sale of our Wolfspeed business to
Infineon 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 Wolfspeed transaction; the risk
that one or more of the conditions to closing of the Wolfspeed
transaction may not be satisfied; the possibility that anticipated
benefits of the proposed Wolfspeed transaction will not be
realized, including the amount of cash to be realized by Cree from
the transaction or our 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 our financial
performance; the risk that our 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 generally; 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®, Essentia®, SmartCast® and XLamp® are registered
trademarks and CPY-20L™, RSW™, OSQ™, and Wolfspeed™ are trademarks
of Cree, Inc.
CREE, INC.
CONDENSED CONSOLIDATED STATEMENTS OF
(LOSS) INCOME
(in thousands, except per share amounts
and percentages)
(unaudited)
Three Months Ended Year Ended June 26,
2016 June 28, 2015 June 26,
2016 June 28, 2015 Revenue, net $
388,413 $ 382,157 $ 1,616,627 $ 1,632,505 Cost of revenue, net
275,390 305,467 1,129,553 1,158,586
Gross profit 113,023 76,690 487,074 473,919 Gross margin percentage
29.1 % 20.1 % 30.1 % 29.0 % Operating expenses: Research and
development 41,485 45,260 168,848 182,797 Sales, general and
administrative 68,609 76,803 283,052 290,730 Amortization or
impairment of acquisition-related intangibles 7,290 6,477 28,732
26,220 Loss on disposal or impairment of long-lived assets 430
44,081 16,913 47,722 Total operating
expenses 117,814 172,621 497,545 547,469 Operating loss
(4,791 ) (95,931 ) (10,471 ) (73,550 ) Operating loss percentage
(1.2 )% (25.1 )% (0.6 )% (4.5 )% Non-operating income
(expense), net 1,040 (14,155 ) (13,035 ) (10,389 ) Loss from
operations before income taxes (3,751 ) (110,086 ) (23,506 )
(83,939 ) Income tax expense (benefit) 6,890 (21,986 )
(1,970 ) (19,247 ) Net loss $ (10,641 ) $ (88,100 ) $ (21,536 ) $
(64,692 ) Diluted loss per share $ (0.11 ) $ (0.83 ) $ (0.21
) $ (0.57 ) Shares used in diluted per share calculation
100,663 106,558 101,783 113,022
CREE, INC.
CONDENSED CONSOLIDATED BALANCE
SHEETS
(in thousands)
June 26, 2016 June 28, 2015
(unaudited) ASSETS Current assets: Cash, cash
equivalents, and short-term investments $ 605,305 $ 713,191
Accounts receivable, net 165,611 186,157 Income tax receivable
6,304 — Inventories 300,317 280,576 Deferred income taxes — 39,190
Prepaid expenses 26,810 29,932 Other current assets 44,788 54,851
Assets held for sale 4,347 4,353 Total current assets
1,153,482 1,308,250 Property and equipment, net 599,723 635,072
Goodwill 618,828 616,345 Intangible assets, net 302,810 310,729
Other long-term investments 40,179 57,595 Deferred income taxes
38,564 8,951 Other assets 9,249 11,091 Total assets $
2,762,835 $ 2,948,033
LIABILITIES AND
SHAREHOLDERS’ EQUITY Current liabilities: Accounts payable,
trade $ 129,060 $ 163,128 Accrued salaries and wages 44,642 45,415
Income taxes payable — 2,035 Other current liabilities 46,072
44,208 Total current liabilities 219,774 254,786
Long-term liabilities: Long-term debt 160,000 200,000 Deferred
income taxes 943 10,211 Other long-term liabilities 14,294
21,084 Total long-term liabilities 175,237 231,295
Shareholders’ equity: Common stock 125 131 Additional
paid-in-capital 2,359,584 2,285,554 Accumulated other comprehensive
income, net of taxes 8,728 5,798 (Accumulated deficit)/retained
earnings (613 ) 170,469 Total shareholders’ equity 2,367,824
2,461,952 Total liabilities and shareholders’ equity $ 2,762,835
$ 2,948,033
CREE, INC.
FINANCIAL RESULTS BY OPERATING
SEGMENT
(in thousands, except
percentages)
(unaudited)
The following table reflects the results of the Company's
reportable segments as reviewed by the Company's Chief Executive
Officer, its Chief Operating Decision Maker or CODM, for the three
months and year ended June 26, 2016 and the three months and year
ended June 28, 2015. The CODM does not review inter-segment
transactions when evaluating segment performance and allocating
resources to each segment. As such, total segment revenue is equal
to the Company's consolidated revenue.
Three
Months Ended June 26, 2016 June 28,
2015 Change Lighting Products revenue $ 198,418 $
229,139 $ (30,721 ) (13 )%
Lighting Products percent of revenue
51 % 60 % LED Products revenue 159,076 122,231 36,845 30 % LED
Products percent of revenue 41 % 32 % Power and RF Products revenue
30,919 30,787 132 — % Power and RF Products percent of revenue 8 %
8 % Total revenue $ 388,413 $ 382,157 $ 6,256
2 %
Year Ended June 26, 2016
June 28, 2015 Change Lighting Products revenue $
889,133 $ 906,502 $ (17,369 ) (2 )% Lighting Products percent of
revenue 55 % 56 % LED Products revenue 610,835 602,082 8,753 1 %
LED Products percent of revenue 38 % 37 % Power and RF Products
revenue 116,659 123,921 (7,262 ) (6 )% Power and RF Products
percent of revenue 7 % 7 % Total revenue $ 1,616,627
$ 1,632,505 $ (15,878 ) (1 )%
Three Months
Ended June 26, 2016 June 28, 2015
Change Lighting Products gross profit $ 51,168 $ 56,934 $
(5,766 ) (10 )% Lighting Products gross margin 25.8 % 24.8 % LED
Products gross profit 55,878 8,506 47,372 557 % LED Products gross
margin 35.1 % 7.0 % Power and RF Products gross profit 13,923
16,163 (2,240 ) (14 )% Power and RF Products gross margin 45.0 %
52.5 % Contract manufacturer dispute related expenses (2,108 ) —
(2,108 ) T8 product recall charges (1,349 ) — (1,349 ) Unallocated
costs (4,489 ) (4,913 ) 424 9 % Consolidated gross profit $
113,023 $ 76,690 $ 36,333 47 % Consolidated
gross margin 29.1 % 20.1 %
Year Ended June
26, 2016 June 28, 2015 Change Lighting Products
gross profit $ 241,699 $ 235,542 $ 6,157 3 % Lighting Products
gross margin 27.2 % 26.0 % LED Products gross profit 212,367
190,912 21,455 11 % LED Products gross margin 34.8 % 31.7 % Power
and RF Products gross profit 56,069 67,764 (11,695 ) (17 )% Power
and RF Products gross margin 48.1 % 54.7 % Contract manufacturer
dispute related expenses (2,108 ) — (2,108 ) T8 product recall
charges (1,349 ) — (1,349 ) Unallocated costs (19,604 ) (20,299 )
695 3 % Consolidated gross profit $ 487,074 $ 473,919
$ 13,155 3 % Consolidated gross margin 30.1 % 29.0 %
Reportable Segments Description
The Company's Lighting Products segment primarily consists of
LED lighting systems and bulbs. The Company's LED Products segment
includes LED components, LED chips, and silicon carbide materials.
The Company's Power and RF Products segment includes power devices
and RF devices.
Financial Results by Reportable Segment
The Company's CODM reviews gross profit as the lowest and only
level of segment profit. As such, all items below gross profit in
the consolidated statements of income must be included to reconcile
the consolidated gross profit presented in the preceding table to
the Company's consolidated income before taxes.
The Company allocates direct costs and indirect costs to each
segment's cost of revenue. The allocation methodology is based on a
reasonable measure of utilization considering the specific facts
and circumstances of the cost being allocated.
Certain costs are not allocated when evaluating segment
performance. These unallocated costs consist primarily of
manufacturing employees' stock-based compensation, expenses for
profit sharing and quarterly or annual incentive plans and matching
contributions under the Company 401(k) Plan.
Cree, Inc.Non-GAAP Measures of
Financial Performance
To supplement the Company's consolidated financial statements
presented in accordance with generally accepted accounting
principles, or GAAP, Cree uses non-GAAP measures of certain
components of financial performance. These non-GAAP measures
include non-GAAP gross margin, non-GAAP operating income, non-GAAP
non-operating income, net, non-GAAP net income, non-GAAP earnings
per diluted share and free cash flow.
Reconciliation to the nearest GAAP measure of all historical
non-GAAP measures included in this press release can be found in
the tables included with this press release. In this press release,
Cree also presents its target for non-GAAP expenses, which are
expenses less expenses in the various categories described below.
Both our GAAP targets and non-GAAP targets do not include any
estimated changes in the fair value of our Lextar investment.
Non-GAAP measures presented in this press release are not in
accordance with or an alternative to measures prepared in
accordance with GAAP and may be different from non-GAAP measures
used by other companies. In addition, these non-GAAP measures are
not based on any comprehensive set of accounting rules or
principles. Non-GAAP measures have limitations in that they do not
reflect all of the amounts associated with Cree's results of
operations as determined in accordance with GAAP. These non-GAAP
measures should only be used to evaluate Cree's results of
operations in conjunction with the corresponding GAAP measures.
Cree believes that these non-GAAP measures, when shown in
conjunction with the corresponding GAAP measures, enhance
investors' and management's overall understanding of the Company's
current financial performance and the Company's prospects for the
future, including cash flows available to pursue opportunities to
enhance shareholder value. In addition, because Cree has
historically reported certain non-GAAP results to investors, the
Company believes the inclusion of non-GAAP measures provides
consistency in the Company's financial reporting.
For its internal budgeting process, and as discussed further
below, Cree's management uses financial statements that do not
include the items listed below and the income tax effects
associated with the foregoing. Cree's management also uses non-GAAP
measures, in addition to the corresponding GAAP measures, in
reviewing the Company's financial results.
Cree excludes the following items from one or more of its
non-GAAP measures when applicable:
Contract manufacturer dispute related expenses. The Company has
recognized charges associated with a dispute with a former Lighting
Products contract manufacturer, whom Cree ceased utilizing as of
the end of 2014. Because these charges relate to amounts from prior
fiscal years, Cree does not consider these charges to be reflective
of ongoing operating results.
T8 product recall charges. The Company has recognized charges
associated with the product recall of its Linear LED T8 Replacement
Lamps and the associated discontinuance of this product line.
Because these charges relate to the exit from a market segment,
Cree does not consider these charges to reflective of ongoing
operating results.
Stock-based compensation expense. This expense consists of
expenses for stock options, restricted stock, performance stock
awards and employee stock purchases through its ESPP. Cree excludes
stock-based compensation expenses from its non-GAAP measures
because they are non-cash expenses that Cree does not believe are
reflective of ongoing operating results.
Amortization or impairment of acquisition-related intangibles.
Cree incurs amortization or impairment of acquisition-related
intangibles in connection with acquisitions. Cree excludes these
items because they arise from Cree's prior acquisitions and have no
direct correlation to the ongoing operating results of Cree's
business.
Asset retirement charges. Cree has recognized charges for the
impact of the decision to abandon or retire certain property and
equipment prior to the end of their estimated useful lives. Because
these charges relate to assets which have been or will be retired
prior to the end of their estimated useful lives, Cree does not
consider these charges to be reflective of ongoing operating
results.
LED business restructuring charges or gains. In June 2015,
Cree’s board of directors approved a plan to restructure the LED
business. The restructuring, which was completed during fiscal
2016, reduced excess capacity and overhead in order to improve the
cost structure moving forward. The components of the restructuring
include the planned sale or abandonment of certain manufacturing
equipment, facility consolidation and the elimination of certain
positions. Because these charges relate to assets which have been
retired prior to the end of their estimated useful lives and
severance costs for eliminated positions, Cree does not consider
these charges to be reflective of ongoing operating results.
Similarly, Cree does not consider realized gains on the sale of
assets relating to the restructuring to be reflective of ongoing
operating results.
Changes in the fair value of our Lextar investment. The
Company's common stock ownership investment in Lextar Electronics
Corporation is accounted for utilizing the fair value option. As
such, changes in fair value are recognized in income, including
fluctuations due to the exchange rate between the New Taiwan Dollar
and the United States Dollar. Cree excludes the impact of these
gains or losses from its non-GAAP measures because they are
non-cash impacts that Cree does not believe are reflective of
ongoing operating results. Additionally, Cree excludes the impact
of dividends received on its Lextar investment as Cree does not
believe it is reflective of ongoing operating results.
Recognition of deferred IPO (Initial Public Offering) costs. The
Company has recognized an expense for previously deferred IPO costs
due to the delay in the anticipated timing of the planned initial
public offering of Wolfspeed, our Power and RF Products segment
plus the non-LED Materials and gemstones business, as required by
SEC guidance. Cree excludes the impact of this expense as Cree does
not consider this charge to be reflective of ongoing operating
results.
Transaction costs associated with the sale of the Wolfspeed
business. The Company has incurred transaction costs in conjunction
with the proposed sale of its Wolfspeed business to Infineon.
Because these costs were incurred relative to a portion of the
business which will be reported as discontinued operations in
fiscal 2017, Cree does not consider these charges to be reflective
on ongoing operating results.
Income tax effects of the foregoing non-GAAP items. This
amount is used to present each of the amounts described above on an
after-tax basis consistent with the presentation of non-GAAP net
income.
Cree expects to incur many of these same expenses, including
income taxes associated with these expenses, in future periods. In
addition to the non-GAAP measures discussed above, Cree also uses
free cash flow as a measure of operating performance and liquidity.
Free cash flow represents operating cash flows less net purchases
of property and equipment and patent and licensing rights. Cree
considers free cash flow to be an operating performance and a
liquidity measure that provides useful information to management
and investors about the amount of cash generated by the business
after the purchases of property and equipment, a portion of which
can then be used to, among other things, invest in Cree's business,
make strategic acquisitions, strengthen the balance sheet and
repurchase stock. A limitation of the utility of free cash flow as
a measure of operating performance and liquidity is that it does
not represent the residual cash flow available to the company for
discretionary expenditures, as it is excludes certain mandatory
expenditures such as debt service.
CREE, INC.
Reconciliation of GAAP to Non-GAAP
Measures
(in thousands, except per share amounts
and percentages)
(unaudited)
Non-GAAP Gross Margin
Three Months Ended Year Ended June 26,
2016 June 28, 2015 June 26,
2016 June 28, 2015 GAAP gross profit $
113,023 $ 76,690 $ 487,074 $ 473,919 GAAP gross margin percentage
29.1 % 20.1 % 30.1 % 29.0 % Adjustments: Contract manufacturer
dispute related expenses 2,108 — 2,108 — T8 product recall charges
1,349 — 1,349 — Stock-based compensation expense 3,170 3,325
12,394 12,836 Non-GAAP gross profit $ 119,650
$ 80,015 $ 502,925 $ 486,755 Non-GAAP
gross margin percentage 30.8 % 20.9 % 31.1 % 29.8 %
Non-GAAP Operating Income
(Loss)
Three Months Ended Year Ended June 26,
2016 June 28, 2015 June 26, 2016
June 28, 2015 GAAP operating loss $ (4,791 ) $
(95,931 ) $ (10,471 ) $ (73,550 ) GAAP operating income percentage
(1.2 )% (25.1 )% (0.6 )% (4.5 )% Adjustments: Contract manufacturer
dispute related expenses 2,108 — 2,108 — T8 product recall charges
1,349 — 1,349 — Stock-based compensation expense: Cost of revenue,
net 3,170 3,325 12,394 12,836 Research and development 3,289 3,728
13,842 16,524 Sales, general and administrative 7,952 7,988
32,491 34,941 Total stock-based compensation
expense 14,411 15,041 58,727 64,301 Amortization or impairment of
acquisition-related intangibles 7,290 6,477 28,732 26,220 Asset
retirement charges — — — 3,139 Costs associated with LED business
restructuring 133 45,981 17,710 45,981 Recognition of deferred IPO
costs — — 1,810 — Costs associated with sale of Power & RF
business 1,041 — 1,745 — Total
adjustments to GAAP operating loss 26,332 67,499
112,181 139,641 Non-GAAP operating income (loss) $
21,541 $ (28,432 ) $ 101,710 $ 66,091 Non-GAAP
operating income (loss) percentage 5.5 % (7.4 )% 6.3 % 4.0 %
Non-GAAP Non-Operating Income,
net
Three Months Ended Year Ended June 26,
2016 June 28, 2015 June 26, 2016
June 28, 2015 GAAP non-operating income (loss), net $
1,040 $ (14,155 ) $ (13,035 ) $ (10,389 ) Adjustment: Net changes
in the fair value of Lextar investment (59 ) 16,689 15,832
20,390 Non-GAAP non-operating income, net 981
2,534 2,797 10,001
Non-GAAP Net Income (Loss)
Three Months Ended Year Ended June 26,
2016 June 28, 2015 June 26, 2016
June 28, 2015 GAAP net loss $ (10,641 ) $ (88,100 ) $
(21,536 ) $ (64,692 ) Adjustments: Contract manufacturer dispute
related expenses 2,108 — 2,108 — T8 product recall charges 1,349 —
1,349 — Stock-based compensation expense 14,411 15,041 58,727
64,301 Amortization or impairment of acquisition-related
intangibles 7,290 6,477 28,732 26,220 Asset retirement charges — —
— 3,139 Costs associated with LED business restructuring 133 45,981
17,710 45,981 Recognition of deferred IPO costs — — 1,810 — Costs
associated with sale of Power & RF business 1,041 — 1,745 — Net
changes in the fair value of Lextar investment (59 ) 16,689
15,832 20,390 Total adjustments to GAAP net loss
before provision for income taxes 26,273 84,188 128,013 160,031
Income tax effect * 3,286 (16,806 ) (18,937 ) (24,421 )
Non-GAAP net income (loss) $ 18,918 $ (20,718 ) $ 87,540
$ 70,918 Earnings (loss) per share Non-GAAP
diluted net income (loss) per share $ 0.19 $ (0.19 ) $ 0.86 $ 0.63
Shares used in diluted net income (loss) per share
calculation Non-GAAP shares used 100,663 106,558 101,783 113,022
*Estimated income tax effect is based upon
the Company's overall consolidated effective tax rate for the given
period.
Free Cash Flow
Three Months Ended Year Ended June 26,
2016 June 28, 2015 June 26, 2016
June 28, 2015 Cash flow from operations $ 64,553 $
87,554 $ 203,316 $ 181,254 Less: PP&E spending (20,326 )
(47,883 ) (120,018 ) (206,160 ) Less: Patents spending (3,409 )
(4,940 ) (14,443 ) (19,491 ) Total free cash flow $ 40,818 $
34,731 $ 68,855 $ (44,397 )
CREE, INC.
PRO FORMA DISCONTINUED
OPERATIONS
(unaudited)
(in thousands, except per share amounts
and percentages)
The reconciliation tables below present Cree’s historical
GAAP information on a pro forma basis excluding the amounts
attributable to the Wolfspeed business that will be presented as
discontinued operations beginning in Cree's first quarter of fiscal
2017 ending September 25, 2016.
Three Months
Ended
September 27, 2015
Three Months Ended
December 27, 2015
Three Months Ended
March 27, 2016
Three Months Ended
June 26, 2016
Twelve Months Ended
June 26, 2016
As Reported Discontinued Operations Pro
forma
As Reported Discontinued Operations Pro
forma
As Reported Discontinued Operations Pro
forma
As Reported Discontinued Operations Pro
forma
As Reported
Discontinued Operations Pro
forma
Revenue, net $ 425,489 $ (43,939 ) $ 381,550 $ 435,806 $
(42,048 ) $ 393,758 $ 366,919 $ (43,670 ) $ 323,249 $
388,413 $ (46,717 ) $ 341,696 $ 1,616,627 $ (176,374 ) $
1,440,253 Cost of revenue, net 294,916 (20,556 ) 274,360
301,361 (18,706 ) 282,655
257,886 (21,863 ) 236,023 275,390
(23,820 ) 251,570 1,129,553 (84,945 )
1,044,608 Gross profit 130,573 (23,383 ) 107,190 134,445
(23,342 ) 111,103 109,033 (21,807 ) 87,226 113,023 (22,897 ) 90,126
487,074 (91,429 ) 395,645 Gross margin percentage 53.2 % 28.1 %
0.555 28.2 % 49.9 % 27 % 49 % 26.4 % 51.8 % 27.5 % Operating
expenses: — — — — Research and development 43,540 (10,809 ) 32,731
41,952 (10,389 ) 31,563 41,871 (11,179 ) 30,692 41,485 (12,035 )
29,450 168,848 (44,412 ) 124,436 Sales, general and administrative
75,263 (4,945 ) 70,318 74,691 (6,701 ) 67,990 64,489 (4,809 )
59,680 68,609 (6,378 ) 62,231 283,052 (22,833 ) 260,219
Amortization or impairment of acquisition-related intangibles 7,062
(594 ) 6,468 7,062 (594 ) 6,468 7,318 (864 ) 6,454 7,290 (865 )
6,425 28,732 (2,917 ) 25,815 Loss on disposal or impairment of
long-lived assets 14,573 (5,007 ) 9,566 2,014 (1 ) 2,013 (104 )
(165 ) (269 ) 430 (6 ) 424 16,913 (5,179 ) 11,734 Total operating
expenses 140,438 (21,355 ) 119,083 125,719
(17,685 ) 108,034 113,574 (17,017 )
96,557 117,814 (19,284 ) 98,530
497,545 (75,341 ) 422,204 Operating (loss) income
(9,865 ) (2,028 ) (11,893 ) 8,726 (5,657 ) 3,069 (4,541 ) (4,790 )
(9,331 ) (4,791 ) (3,613 ) (8,404 ) (10,471 ) (16,088 ) (26,559 )
Non-operating (expense) income, net (22,806 ) — (22,806 ) 8,014 —
8,014 717 — 717 1,040 — 1,040 (13,035 ) — (13,035 ) (Loss) income
from continuing operations before income taxes (32,671 ) (2,028 )
(34,699 ) 16,740 (5,657 ) 11,083 (3,824 ) (4,790 ) (8,614 ) (3,751
) (3,613 ) (7,364 ) (23,506 ) (16,088 ) (39,594 ) Income tax
(benefit) expense (8,182 ) (625 ) (8,807 ) 3,298
(1,742 ) 1,556 (3,976 ) (1,475 ) (5,451 )
6,890 (1,113 ) 5,777 (1,970 ) (4,955 ) (6,925
) Net (loss) income from continuing operations (24,489 ) (1,403 )
(25,892 ) 13,442 (3,915 ) 9,527 152 (3,315 ) (3,163 ) (10,641 )
(2,500 ) (13,141 ) (21,536 ) (11,133 ) (32,669 ) Discontinued
operations: (Loss) income from operations of Wolfspeed — 2,028
2,028 — 5,657 5,657 — 4,790 4,790 — 3,613 3,613 — 16,088 16,088
Income tax (benefit) expense — 625 625 —
1,742 1,742 — 1,475 1,475
— 1,113 1,113 — 4,955 4,955
(Loss) income on discontinued operations — 1,403
1,403 — 3,915 3,915
— 3,315 3,315 — 2,500
2,500 — 11,133 11,133 Net
(loss) income $ (24,489 ) $ — $ (24,489 ) $ 13,442
$ — $ 13,442 $ 152 $ — $
152 $ (10,641 ) $ — $ (10,641 ) $
(21,536 ) $ — $ (21,536 ) Basic (loss) earnings per share:
(Loss) income from continuing operations $ (0.24 ) $ (0.01 ) $
(0.25 ) $ 0.13 $ (0.04 ) $ 0.09 $ — $ (0.03 ) $ (0.03 ) $ (0.11 ) $
(0.02 ) $ (0.13 ) $ (0.21 ) $ (0.11 ) $ (0.32 ) Discontinued
operations, net of tax — 0.01 0.01 —
0.04 0.04 — 0.03 0.03
— 0.02 0.02 — 0.11
0.11 Net (loss) income $ (0.24 ) $ — $ (0.24 )
$ 0.13 $ — $ 0.13 $ — $ —
$ — $ (0.11 ) $ — $ (0.11 ) $
(0.21 ) $ — $ (0.21 ) Diluted (loss) earnings per share:
(Loss) income from continuing operations $ (0.24 ) $ (0.01 ) $
(0.25 ) $ 0.13 $ (0.04 ) $ 0.09 $ — $ (0.03 ) $ (0.03 ) $ (0.11 ) $
(0.02 ) $ (0.13 ) $ (0.21 ) $ (0.11 ) $ (0.32 ) Discontinued
operations, net of tax — 0.01 0.01 —
0.04 0.04 — 0.03 0.03
— 0.02 0.02 — 0.11
0.11 Net (loss) income $ (0.24 ) $ — $ (0.24 )
$ 0.13 $ — $ 0.13 $ — $ —
$ — $ (0.11 ) $ — $ (0.11 ) $
(0.21 ) $ — $ (0.21 ) Weighted average shares Basic
103,473 103,473 103,473 102,391 102,391 102,391 100,606 100,606
100,606 100,663 100,663 100,663 101,783 101,783 101,783 Diluted
103,473 103,473 103,473 102,521 102,521 102,521 101,221 101,221
101,221 100,663 100,663 100,663 100,663 100,663 100,663
CREE, INC. PRO FORMA SEGMENT RECLASSIFICATION
TWELVE TRAILING MONTHS ENDED JUNE 2016 (unaudited)
(in thousands, except percentages)
The reconciliation tables below compare
Cree’s historical GAAP segment information presentation to the
pro-forma segment information for each segment as reclassified to
reflect the sale of the Wolfspeed business. The Wolfspeed business
includes certain operations formerly part of the LED Product
segment relating to the silicon carbide substrate business for
power, RF and gemstone applications.
Three Months Ended
September 27, 2015
Three Months Ended
December 27, 2015
Three Months Ended
March 27, 2016
Three Months Ended
June 26, 2016
Twelve Months Ended
June 26, 2016
Reported Change Adjusted
Reported Change Adjusted
Reported Change Adjusted
Reported Change Adjusted
Reported Change Adjusted
Revenue
Lighting Products $ 248,031 $ — $ 248,031 $
254,970 $ — $ 254,970 $ 187,714 $ — $ 187,714 $ 198,418 $ — $
198,418 $ 889,133 $ — $ 889,133 Percent of Revenue 58 % 58 % 59 %
59 % 51 % 51 % 51 % 51 % 55 % 55 % LED Products 148,208 (14,689 )
133,519 153,362 (14,574 ) 138,788 150,189 (14,654 ) 135,535 159,076
(15,798 ) 143,278 610,835 (59,715 ) 551,120 Percent of Revenue 35 %
31 % 35 % 32 % 41 % 37 % 41 % 37 % 38 % 34 % Wolfspeed 29,250
14,689 43,939 27,474 14,574 42,048 29,016 14,654 43,670 30,919
15,798 46,717 116,659 59,715 176,374 Percent of Revenue 7 %
10 % 6 % 10 % 8 % 12 % 8 % 12 % 7 % 11
% Total $ 425,489 $ — $ 425,489 $ 435,806 $ — $ 435,806 $ 366,919 $
— $ 366,919 $ 388,413 $ — $ 388,413 $ 1,616,627 $ — $ 1,616,627
Gross Profit/ Gross Margin Lighting Products $ 69,081
$ — $ 69,081 $ 72,642 $ — $ 72,642 $ 48,808 $ — $ 48,808 $ 51,168 $
— $ 51,168 $ 241,699 $ — $ 241,699 Gross Margin 27.9 % 27.9 % 28.5
% 28.5 % 26.0 % 26.0 % 25.8 % 25.8 % 27.2 % 27.2 % LED Products
51,668 (9,793 ) 41,875 52,719 (9,780 ) 42,939 52,102 (9,272 )
42,830 55,878 (9,708 ) 46,170 212,367 (38,553 ) 173,814 Gross
Margin 34.9 % 66.7 % 31.4 % 34.4 % 67.1 % 30.9 % 34.7 % 63.3 % 31.6
% 35.1 % 61.5 % 32.2 % 34.8 % 64.6 % 31.5 % Wolfspeed 14,323 9,060
23,383 14,346 8,996 23,342 13,477 8,330 21,807 13,923 8,974 22,897
56,069 35,360 91,429 Gross Margin 49.0 % 61.7 % 53.2 % 52.2 % 61.7
% 55.5 % 46.4 % 56.8 % 49.9 % 45.0 % 56.8 % 49.0 % 48.1 % 59.2 %
51.8 % Contract manufacturer dispute related expenses — — — — — — —
— — (2,108 ) — (2,108 ) (2,108 ) — (2,108 ) T8 product recall
charges — — — — — — — — — (1,349 ) — (1,349 ) (1,349 ) — (1,349 )
Unallocated costs (4,499 ) 733 (3,766 ) (5,262 ) 784
(4,478 ) (5,354 ) 942 (4,412 ) (4,489 ) 734 (3,755 )
(19,604 ) 3,193 (16,411 ) Total $ 130,573 $ — $ 130,573 $
134,445 $ — $ 134,445 $ 109,033 $ — $ 109,033 $ 113,023 $ — $
113,023 $ 487,074 $ — $ 487,074 Gross Margin 30.7 % 30.7 % 30.8 %
30.8 % 29.7 % 29.7 % 29.1 % 29.1 % 30.1 % 30.1 %
View source
version on businesswire.com: http://www.businesswire.com/news/home/20160816006240/en/
Cree, Inc.Raiford GarrabrantDirector, Investor
Relations919-407-7895Fax:
919-407-5615investorrelations@cree.com
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