Cree Sells its Lighting Business to Focus More on RF and Power

Cree has announced that they will be selling their Lighting Products business unit (“Cree Lighting”), which includes the LED lighting fixtures, lamps, and corporate lighting solutions business for commercial, industrial and consumer applications, to IDEAL INDUSTRIES, INC. for approximately $310 million.

The announcements builds on Cree’s strategy, announced in February 2018, to create a more focused, powerhouse semiconductor company, providing growth capital for Wolfspeed, its core Power and RF business, and equips Cree with additional resources to expand its semiconductor operations. The deal also enables Cree Lighting to gain additional global focus, channel support and investment as it becomes a growth engine for the IDEAL team.

IDEAL is a fourth-generation, family-owned, growing global company, serving as a market leader in electric power control and management. Cree Lighting’s portfolio and SmartCast Technology are complementary to IDEAL’s advanced control business and channel of suppliers, distributors, agents, and customer relationships.

The closing of the transaction is anticipated to occur in the fourth quarter of fiscal 2019 and is subject to receipt of required regulatory approvals and satisfaction of customary closing conditions.

Based on the agreement to sell Cree Lighting, it will be classified as discontinued operations as of FY19 3Q. As a result, Cree is updating its guidance to reflect continuing operations only.

For its third quarter of fiscal 2019 ending March 31, 2019, Cree targets revenue from continuing operations in a range of $271 million to $277 million. Wolfspeed revenue is targeted in a range of $139 million to $141 million, and LED Products revenue is targeted in a range of $132 million to $136 million. GAAP gross margin from continuing operations is targeted at approximately 35%, with non-GAAP gross margin from continuing operations targeted at approximately 36%. GAAP net loss from continuing operations is targeted at $(14) million to $(9) million, or $(.14) to $(.09) per diluted share. Non-GAAP net income from continuing operations is targeted to be in a range of $14 million to $18 million, or $0.14 to $0.18 earnings per diluted share. Targeted non-GAAP income from continuing operations excludes $27 million of expenses, net of tax, related to stock-based compensation expense, the amortization or impairment of acquisition-related intangibles, interest accretion on our convertible notes' issue costs and fair value adjustments, executive severance and expenses relating to the disposition. The GAAP and non-GAAP targets do not include any estimated change in the fair value of Cree’s Lextar investment. The Company also expects to incur a GAAP impairment charge on the Cree Lighting intangible assets, which charge will be reflected in discontinued operations when Cree reports its third-quarter results.

The Company will provide a complete review of Q3 results and FY19 Q4 outlook on its regularly scheduled financial results call on May 1 at 5:00 p.m. EDT.

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