Cree Reports Financial Results for Fourth Quarter and Fiscal Year 2006: Record Revenue of $423 Million for Year

Net income for the fourth quarter was $13.2 million, or $0.17 per share, compared to $21 million or $0.27 per share for the fourth quarter of 2005. The fiscal fourth quarter 2006 results include stock compensation expense of $2.3 million net of tax, or $0.03 per share. Fourth quarter net income also includes $1.8 million, or $0.02 per share, of additional tax expense related to the company’s investment in Color Kinetics and other end-of-year tax adjustments. The end-of-year tax expense was $1.7 million lower than the company previously estimated in its press release on July 12, 2006.For fiscal year 2006, Cree reported record revenue of $423 million, which represents a 10% increase over the revenue of $384.5 million for fiscal 2005. Net income was $76.7 million, or $0.98 per share, compared to $91.1 million or $1.18 per share for fiscal 2005. The fiscal 2006 results include stock compensation expense of $8.9 million net of tax, or $0.11 per share. Cree Microwave segment results for fiscal 2005 have been reclassified as discontinued operations to conform to the fiscal 2006 presentation in accordance with generally accepted accounting principles.“We are pleased to report that Cree achieved record revenue and solid earnings for fiscal 2006,” stated Chuck Swoboda, Cree Chairman and CEO. “Although the fourth quarter was more challenging than we expected, we remain optimistic that we can expand our business by leveraging our strengths in LED chip and SiC materials technology to broaden our product line with higher-value, component-level products for the emerging markets in LED lighting and power. These markets are projected to grow rapidly in the coming years as the global need for more energy-efficient and environmentally sound technology increases. While this strategy may limit our operating results in the near term, we believe these investments are critical to put Cree in position to increase shareholder value over the next several years."
Quarterly Financial Highlights:

* Net income from continuing operations for the fourth quarter was $12.4 million, or $0.16 per share.

* Gross profit was 42% of revenue.

* Operating profit was 17% of revenue.

* Cash flow from operations was $29 million.

* Accounts receivable was $68 million, which represents 47 days sales outstanding (DSO). DSO is calculated using our trailing monthly revenue profile.

* Inventory was $30 million and represented 44 days of inventory.


Annual Financial Highlights:

* Net income from continuing operations for fiscal 2006 was $80 million, or $1.02 per share.

* Gross profit was 47% of revenue.

* Operating profit was 23% of revenue.

* Cash flow from operations was $152 million.

* Cash and investments increased to $376 million.

Business Outlook:

For its first quarter of fiscal 2007, Cree currently targets revenue in a range of $102 million to $106 million with earnings of $0.14 to $0.17 per share, including the impact of $0.03 per share in our estimate for the cost of expensing stock compensation.

Cree will host a conference call at 5:00 p.m. Eastern time today to review the highlights of the fourth quarter fiscal 2006 results and the first quarter fiscal 2007 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 onto 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 24, 2006.

Supplemental financial information is available under “Q4 ’06 Financial Metrics” in the “Investor Relations” section of Cree’s web site at http://www.cree.com/investor/metrics.htm.

About Cree, Inc.
Cree is a market-leading innovator and manufacturer of semiconductors that enhance the value of solid-state lighting, power and communications products by significantly increasing their energy performance and efficiency. Key to Cree’s market advantage is its world-class materials expertise in silicon carbide (SiC) and gallium nitride (GaN) for chips and packaged devices that can handle more power in a smaller space while producing less heat than other available technologies, materials and products.

Cree drives its increased performance technology into multiple applications, including exciting alternatives in brighter and more-tunable light for general illumination, backlighting for more-
vivid displays, optimized power management for high-current switch-mode power supplies and variable-speed motors, and more-effective wireless infrastructure for data and voice
communications. Cree customers range from innovative lighting-fixtures makers to defense-related federal agencies.

Cree’s product families include blue and green LED chips, lighting LEDs in all colors, LED backlighting solutions, power-switching devices and radio-frequency/wireless devices. For additional information please refer to www.cree.com .