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18-01-2011 22:00:00

Cree Reports Financial Results for the Second Quarter of Fiscal Year 2011

Relateret indhold

Cree, Inc. (Nasdaq: CREE), a market leader in LED lighting, today

announced revenue of $257.0 million for its second quarter of fiscal

2011, ended December 26, 2010. This represents a 29% increase compared

to revenue of $199.5 million reported for the second fiscal quarter last

year and a 4% decrease compared to the first quarter of fiscal 2011.

GAAP net income for the second quarter increased 47% year-over-year to

$49.8 million, or $0.45 per diluted share, compared to GAAP net income

of $33.8 million, or $0.32 per diluted share, for the second quarter of

fiscal 2010. On a non-GAAP basis, net income for the second quarter of

fiscal 2011 increased 51% year-over-year to $60.7 million, or $0.55 per

diluted share, compared to non-GAAP net income for the second quarter of

fiscal 2010 of $40.2 million, or $0.38 per diluted share.

“Q2 results reflected continued growth in our LED lighting product line,

but revenue and earnings were lower than our targets due primarily to

lower sales to our LED component distributors in Asia,” stated Chuck

Swoboda, Cree chairman and CEO. “We are managing through an inventory

correction in Asia in the near term, but the opportunity in LED lighting

has not changed. Quarterly revenue increased 29% year-over-year and

based on the market trends we are seeing, and the success of our own LED

lighting business, we are more confident that we will see continued

adoption of LED lighting over the next several years.”

Q2 2011 Financial Metrics:

 

Second Quarter

(in thousands, except per share amounts and percentages)

 

 

 

 

2011

2010

Change

 

Net revenue

$256,983

$199,475

$57,508

29%

GAAP

 

 

 

 

 

Gross Margin

47.1%

47.2%

 

 

 

Operating Margin

21.6%

23.1%

 

 

 

Net Income

$49,775

$33,786

$15,989

47%

 

Earnings per diluted share

$0.45

$0.32

$0.13

41%

Non-GAAP

 

 

 

 

 

Gross Margin

47.7%

47.5%

 

 

 

Operating Margin

26.5%

27.6%

 

 

 

Net Income

$60,720

$40,202

$20,518

51%

 

Earnings per diluted share

$0.55

$0.38

$0.17

45%

  • Cash and investments increased $12.0 million from Q1 of fiscal 2011 to

    $1,110.8 million.

  • Cash flow from operations was $57.2 million. Free cash flow (cash flow

    from operations less capital expenditures) was ($7.5) million as we

    spent $64.7 million on capital expenditures.

  • Accounts receivable (net) increased $12.1 million from Q1 of fiscal

    2011 to $135.1 million, resulting in days sales outstanding of 47, an

    increase of 6 days from Q1 of fiscal 2011.

  • Inventory increased $19.6 million from Q1 of fiscal 2011 to $145.5

    million and represents 96 days of inventory, an increase of 14 days

    from Q1 of fiscal 2011.

  • Effective tax rate for Q2 was 13.7% primarily due to the benefit from

    an extension of the R&D tax credit.

Recent Business Highlights:

  • Announced that Denny’s Corporation has chosen energy-efficient LED

    lights from Cree as the preferred lighting standard for all its new

    and remodeled stores across the United States.

  • Shattered LED industry performance standards with the release of the

    Cree XLamp® XM-L LED.

  • Introduced the LED industry’s first lighting-class LED array, the Cree

    XLamp CXA20, to accelerate indoor LED lighting.

  • Released the XLamp XP-E High Efficiency White (HEW), the first

    high-power LEDs featuring Cree’s new Direct AttachTM LED

    technology.

Business Outlook:

For its third quarter of fiscal 2011 ending March 27, 2011, Cree targets

revenue in a similar range as the second quarter at $245 million to $265

million due to seasonality and the on-going inventory correction in

Asia. Q3 GAAP and non-GAAP gross margin is targeted at +/- 46%. GAAP

operating expenses are targeted to increase by approximately $7 million

to $73 million, or $62 million on a non-GAAP basis, due to increased

spending to support new product development, 150mm qualification and

additional sales and application resources. The tax rate is targeted at

21% for fiscal Q3. GAAP net income is targeted at $32 million to $40

million, or $0.29 to $0.36 per diluted share. Non-GAAP net income is

targeted in a range of $42 million to $50 million, or $0.38 to $0.45 per

diluted share, based on an estimated 110.6 million diluted weighted

average shares. Targeted non-GAAP earnings exclude expenses related to

the amortization of acquired intangibles of $0.02 per diluted share, and

stock-based compensation expense of $0.07 per diluted share.

Quarterly Conference Call:

Cree will host a conference call at 5:00 p.m. Eastern time today to

review the highlights of the fiscal second quarter 2011 results and the

fiscal third quarter 2011 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 — Financial Events and Presentations” for

webcast details. The call will be archived and available on the website

through March 1st, 2011.

Supplemental financial information, including the non-GAAP

reconciliation attached to this press release, is available in the

“Investor Relations” section of Cree’s website, under “Financial

Information”, “Quarterly Results”, at www.cree.com.

About Cree, Inc.

Cree is leading the LED lighting revolution and making energy-wasting

traditional lighting technologies obsolete through the use of

energy-efficient, environmentally friendly LED lighting. Cree is a

market-leading innovator of lighting-class LEDs, LED lighting, and

semiconductor solutions for wireless and power applications.

Cree’s product families include LED fixtures and bulbs, blue and green

LED chips, high-brightness LEDs, lighting-class power LEDs,

power-switching devices and radio-frequency/wireless devices. Cree

solutions are driving improvements in applications such as general

illumination, electronic signs and signals, variable-speed motors and

wireless systems.

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. Actual

results, including with respect to our targets and prospects, could

differ materially due to a number of factors, including risks associated

with the ramp-up of production of our new products, as well as

production at our new Huizhou facility; the risk that, due to the

complexity of our manufacturing processes, 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; the risk that our distributors are not able to accurately

anticipate demand from their end customers, which can result in

increased inventory and reduced orders; ongoing uncertainty in global

economic conditions that could negatively affect product demand,

collectability of receivables and other related matters as consumers and

businesses may defer purchases or payments, or default on payments, in

response to tight credit and negative financial news; our ability to

complete development and commercialization of products under

development, such as our pipeline of brighter LED chips, LED components

and LED lighting products; our ability to lower costs; increasing price

competition in key markets; 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 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 27, 2010, 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, and XLamp are registered trademarks, and Direct

Attach is a trademark, of Cree, Inc.

CREE, INC.

CONDENSED CONSOLIDATED STATEMENTS OF INCOME

(in thousands, except per share data)

 

 

 

 

 

Three Months Ended

Six Months Ended

December 26,

2010

December 27,

2009

December 26,

2010

December 27,

2009

(Unaudited)

(Unaudited)

 

Revenue, net

$

256,983

$

199,475

$

525,420

$

368,605

 

Cost of revenue, net

 

135,837

 

 

105,405

 

 

273,745

 

 

200,757

 

 

Gross profit

121,146

94,070

251,675

167,848

Gross margin percentage

47.1

%

47.2

%

47.9

%

45.5

%

 

Operating expenses:

Research and development

29,233

19,325

53,965

39,499

Sales, general and administrative

33,366

25,560

62,568

49,173

Amortization of acquisition related intangibles

2,706

3,045

5,412

6,090

Loss on disposal or impairment of long-lived assets

 

429

 

 

110

 

 

901

 

 

403

 

Total operating expenses

65,734

48,040

122,846

95,165

 

Operating income

55,412

46,030

128,829

72,683

Operating income percentage

21.6

%

23.1

%

24.5

%

19.7

%

 

Non-operating income:

Interest and other non-operating income, net

 

2,233

 

 

1,961

 

 

4,187

 

 

3,722

 

Income from operations before income taxes

57,645

47,991

133,016

76,405

 

Income tax expense

 

7,870

 

 

14,205

 

 

25,205

 

 

21,593

 

Income from continuing operations

$

49,775

 

$

33,786

 

$

107,811

 

$

54,812

 

 

Net income

$

49,775

 

$

33,786

 

$

107,811

 

$

54,812

 

 

Diluted earnings per share:

Net income

$

0.45

 

$

0.32

 

$

0.98

 

$

0.55

 

 

Weighted average shares of common

stock outstanding, diluted

 

109,976

 

 

106,607

 

 

109,817

 

 

99,836

 

CREE, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(in thousands)

 

 

 

 

 

 

December 26, 2010

June 27, 2010

(Unaudited)

Assets:

Current assets:

Cash, cash equivalents and short term investments

$

1,110,828

$

1,066,405

Accounts receivable, net

135,132

117,535

Inventories

145,517

112,241

Income taxes receivable

3,645

-

Deferred income taxes

19,435

18,823

Prepaid expenses and other current assets

 

38,671

 

40,159

Total current assets

1,453,228

1,355,163

 

Property and equipment, net

495,928

419,726

Intangible assets, net

103,621

106,109

Goodwill

326,178

313,019

Other assets

 

4,656

 

5,159

Total assets

$

2,383,611

$

2,199,176

 

Liabilities and Shareholders' Equity:

Current liabilities:

Accounts payable, trade

$

80,595

$

63,826

Accrued salaries and wages

19,760

26,247

Income taxes payable

-

14,375

Other current liabilities

21,414

15,643

Contingent payment due related to LLF acquisition

 

13,159

 

-

Total current liabilities

134,928

120,091

 

Long-term liabilities:

Deferred income taxes

39,398

39,398

Other long-term liabilities

 

20,469

 

11,639

Total long-term liabilities

59,867

51,037

 

Shareholders' Equity:

Common stock

136

135

Additional paid-in-capital

1,561,402

1,507,435

Accumulated other comprehensive income, net of taxes

11,160

12,171

Retained earnings

 

616,118

 

508,307

Total shareholders' equity

 

2,188,816

 

2,028,048

Total liabilities and shareholders' equity

$

2,383,611

$

2,199,176

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 net income,

non-GAAP earnings per diluted share, non-GAAP gross margin, non-GAAP

operating expenses 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 operating expenses, which is operating

expenses less stock-based compensation expense and charges for

amortization or impairment of acquired intangibles.

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

stock-based compensation expense or amortization or impairment of

acquired intangible assets, and the income taxes 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.

As described above, Cree excludes the following items from one or more

of its non-GAAP measures when applicable:

Stock-based compensation expense. This expense consists of

expenses for stock options, restricted stock and employee stock

purchases through its ESPP. Cree excludes stock-based

compensation expenses from its non-GAAP measures primarily because they

are non-cash expenses that Cree does not believe are reflective of

ongoing operating results.

Amortization or impairment of acquired intangible assets. Cree

incurs amortization or impairments of acquired intangible assets in

connection with acquisitions. Cree excludes these items because they

arise from Cree’s prior acquisitions and have no direct correlation to

the current operating results of Cree’s business.

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 stock-based compensation expense and amortization

of acquired intangible assets in future periods, including income taxes

associated with all of the foregoing.

In addition to the non-GAAP measures discussed above, Cree also uses

free cash flow as a measure of operating performance. Free cash flow

represents operating cash flows less net purchases of property and

equipment. Cree considers free cash flow to be 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, 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 financial performance is that it does not represent

the total increase or decrease in the company’s cash balance for the

period.

CREE, INC.

Reconciliation of GAAP to Non-GAAP Measures

(in thousands, except per share amounts)

(Unaudited)

 

 

 

Three Months Ended

 

Six Months Ended

December 26,

2010

December 27,

2009

December 26,

2010

December 27,

2009

 

GAAP Gross Profit

$

121,146

$

94,070

$

251,675

$

167,848

GAAP Gross Margin

47.1

%

47.2

%

47.9

%

45.5

%

Adjustment:

Stock-based compensation expense

 

1,351

 

 

729

 

 

2,483

 

 

1,554

 

Non-GAAP Gross Profit

$

122,497

$

94,799

$

254,158

$

169,402

Non-GAAP Gross Margin

47.7

%

47.5

%

48.4

%

46.0

%

 

Three Months Ended

Six Months Ended

December 26,

2010

December 27,

2009

December 26,

2010

December 27,

2009

 

GAAP operating income

$

55,412

$

46,030

$

128,829

$

72,683

GAAP operating income percentage

21.6

%

23.1

%

24.5

%

19.7

%

Adjustments:

Stock-based compensation expense

9,977

6,069

17,981

11,681

Amortization of acquisition-related intangible assets

 

2,706

 

 

3,045

 

 

5,412

 

 

6,090

 

Total adjustments to GAAP operating income

 

12,683

 

 

9,114

 

 

23,393

 

 

17,771

 

Non-GAAP operating income

68,095

55,144

152,222

90,454

Non-GAAP operating income percentage

26.5

%

27.6

%

29.0

%

24.5

%

 

Three Months Ended

Six Months Ended

December 26,

2010

December 27,

2009

December 26,

2010

December 27,

2009

 

GAAP net income

$

49,775

$

33,786

$

107,811

$

54,812

Adjustments:

Stock-based compensation expense

9,977

6,069

17,981

11,681

Amortization of acquisition-related intangible assets

 

2,706

 

 

3,045

 

 

5,412

 

 

6,090

 

Total adjustments to GAAP income before provision

for income taxes

 

12,683

 

 

9,114

 

 

23,393

 

 

17,771

 

Income tax effect

 

(1,738

)

 

(2,698

)

 

(4,421

)

 

(5,022

)

Non-GAAP net income

60,720

40,202

126,783

67,561

Diluted net income per share:

GAAP net income

$

0.45

 

$

0.32

 

$

0.98

 

$

0.55

 

Non-GAAP

$

0.55

 

$

0.38

 

$

1.15

 

$

0.68

 

Shares used in diluted net income per share calculation:

GAAP net income

 

109,976

 

 

106,607

 

 

109,817

 

 

99,836

 

Non-GAAP

 

109,976

 

 

106,607

 

 

109,817

 

 

99,836

 

 

Three Months Ended

Six Months Ended

December 26,

2010

December 27,

2009

December 26,

2010

December 27,

2009

Free Cash Flows

Cash flow from operations

$

57,237

$

21,511

$

145,755

$

82,699

Less: PP&E CapEx spending

 

64,738

 

 

41,437

 

 

126,387

 

 

61,826

 

Total Free Cash Flows

$

(7,501

)

$

(19,926

)

$

19,368

 

$

20,873

 

CREE, INC.

Additional Financial Information

(in thousands)

(Unaudited)

 

Three Months Ended

Six Months Ended

December 26,

2010

December 27,

2009

December 26,

2010

December 27,

2009

Stock-Based Compensation Expense

Cost of sales

$

1,351

$

729

$

2,483

$

1,554

 

Research and development

2,183

1,388

3,998

2,652

Sales, general and administrative

 

6,443

 

 

3,952

 

 

11,500

 

 

7,475

 

Total stock-based compensation in operating expense

8,626

5,340

15,498

10,127

 

 

 

 

Total Stock-Based Compensation Expense

$

9,977

 

$

6,069

 

$

17,981

 

$

11,681

 

 

 

 

December 26,

2010

June 27, 2010

Cash, Cash Equivalents and Investments

Cash and cash equivalents

$

465,557

$

397,431

Short term investments

 

645,271

 

 

668,974

 

Total Cash, Cash Equivalents and Investments

$

1,110,828

 

$

1,066,405

 

Cree, Inc.

Raiford Garrabrant

Director, Investor Relations

919-287-7895

Fax:

919-313-5615

investorrelations@cree.com

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