Cree Earnings Drop In Fourth Quarter - Just As Company Warned Last Month
Posted August 10, 2006
DURHAM, N.C. — Just as the company had predicted on July 12,
earnings dropped sharply in the fourth quarter ending June 25, the company said Thursday after the markets closed.
The light-emitting diode and silicon chip manufacturer reported a profit on $13.2 million, on 17 cents per share. That's down from $21 million or 27 cents a share from the same quarter in 2005.
Cree (Nasdaq: CREE) issued an earnings alert in July, forecasting the earnings drop. The news triggered a sharp 25 percent plunge in its stock to as low as $16.95.
In that warning, Cree cited "lower LED sales" for the revenue dip, but said demand wasn't the problem.
"The shortfall in LED sales stemmed primarily from production challenges, which limited the company's ability to meet customer orders for the quarter," Cree said.
Cree also cut its gross margin forecast to 42 percent from a forecast range of 46-47 percent.
Cree shares had rebounded a bit since then, closing Thursday at $18.11, up 34 cents on the day. But after the earnings announcement share prices dropped immediately 2 percent in after-hours trading.
The earnings report did match revised analysts' expectations as polled by Thomson Financial at 17 cents.
The company also said that the first quarter of fiscal year 2007 would produce flat, if not slightly lower revenues, with a forecast of revenues from $102 million to $106 million and profits of 14 to 17 cents a share.
"Although the fourth quarter was more challenging than we expected, we remain optimistic that we can expand our business by leveraging strengths in LED chip and (silicon carbide) materials technology to broaden our product line with higher-value, component-level products for the emerging markets in LED lighting and power," said Cree Chief Executive Officer Chuck Swoboda in a statement.
Cree opened a new $300 million production facility in Research Triangle Park on Tuesday. The additional production capacity is expected to help the company address a problem with LED production capacity.
Income for the fourth quarter did increase to $106.7 million from $98.2 million in 2005.
Net revenues were cut 3 cents a share by stock options expense of $2.3 million.
For fiscal year 2005, Cree reported record revenues of $423 million, an increase of 10 percent over 2005. However, net revenues dropped to $76.7 million, or 98 cents. Profits for 2005 were $91.1 million, or $1.18 per share.