UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 OR 15(d) of The Securities Exchange Act of 1934
Date of Report (Date of Earliest Event Reported): June 2, 2005
CREE, INC.
(Exact name of registrant as specified in its charter)
North Carolina 0-21154 56-1572719
(State or other jurisdiction (Commission File (I.R.S. Employer
of incorporation) Number) Identification Number)
4600 Silicon Drive
Durham, North Carolina 27703
(Address of principal executive offices) (Zip Code)
(919) 313-5300
Registrant's telephone number, including area code
N/A
(Former name or former address, if changed since last report)
Check the appropriate box below if the Form 8-K filing is intended to
simultaneously satisfy the filing obligation of the registrant under any of the
following provisions:
[ ] Written communications pursuant to Rule 425 under the Securities Act (17 CFR
230.425)
[ ] Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR
240.14a-12)
[ ] Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange
Act (17 CFR 240.14d-2(b))
[ ] Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange
Act (17 CFR 240.13e-4(c))
Item 2.05 Costs Associated with Exit or Disposal Activities.
On June 2, 2005, Cree, Inc. (the "Company") and its wholly owned
subsidiary, Cree Microwave, Inc. ("Cree Microwave"), committed to a plan to
discontinue the operations of Cree Microwave's silicon radio frequency (RF) and
microwave semiconductor business located in Sunnyvale, California. This business
manufactures silicon-based laterally diffused metal oxide semiconductor (LDMOS)
and bipolar products. The Company intends to focus on wide bandgap RF and
microwave products based on its silicon carbide (SiC) and gallium nitride (GaN)
technology. Cree Microwave will accept last time buy orders for its silicon
LDMOS products through June 2005 and plans to wind down the operations of this
business by December 2005. Cree Microwave will make an initial reduction in
personnel to reflect current business levels. Additional lay-offs will occur as
operations are wound down. Ultimately, Cree Microwave expects to terminate a
total of approximately 80 employees. The decision to discontinue the Sunnyvale
operation was based upon management's review of the strategic alternatives and
the financial outlook for the business. For the nine months ended March 27,
2005, the Company incurred net operating pre-tax losses of $9.2 million related
to this segment of its business, or $0.08 per share, net of tax, assuming the
Company's estimated 31.1% tax rate for fiscal 2005.
The Company estimates that it will incur a total of approximately $13
million to $15 million in pre-tax expenses to close the Sunnyvale facility. Of
these costs, cash charges will include $1.8 million to $1.9 million for
severance and other employee related costs, relocation of production equipment
and other expenses to wind down the Sunnyvale operations over the next six
months. Other non-cash charges related to the closing of the facility include $6
million to $8 million in impairment charges related to inventory and equipment
as the business is targeted to operate in a negative cash flow position through
the wind down period ending in December 2005. Estimated expenses related to the
closing of the facility also include approximately $4.7 million for lease
obligations, as the Company and Cree Microwave are liable for lease expenses
from the expected December 2005 closure of the facility through the November
2011 expiration of its lease. The amount of the expense for lease obligations
was calculated assuming that Cree Microwave can sublease the facility beginning
in fiscal 2007. The Company targets that approximately $7 million to $9 million
of the total charges will be expensed in the fourth quarter of fiscal 2005,
while the remaining charges are expected to be recorded in the first and second
quarters of fiscal 2006.
Included herein as Exhibit 99.1 is the Company's press release issued on
June 2, 2005, which announced the discontinuation of its silicon RF and
microwave business.
This current report on Form 8-K contains forward-looking statements
involving risks and uncertainties, both known and unknown that may cause actual
results to differ materially from those indicated. 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 may differ materially due to a number of factors,
including increases in cash expenditures related to the discontinuation of
operations in Sunnyvale, California, Cree Microwave's ability to sublease the
Sunnyvale facility, the amount of last-time buy orders and the time needed to
fulfill such orders for silicon products, the Company's ability to complete the
wind-down process by the end of calendar year 2005, general economic conditions
and other factors discussed in Cree's filings with the Securities and Exchange
Commission, including its report on Form 10-K for the year ended June 27, 2004
and subsequent filings.
Item 2.06 Material Impairments.
Please see the information contained in Item 2.05 above for a discussion of
the material impairments resulting from the Company's decision to discontinue
the operations of its silicon RF and microwave business, which is hereby
incorporated by reference.
Item 9.01 Financial Statements and Exhibits
(c) Exhibits.
Exhibit No. Description
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99.1 Press Release dated June 2, 2005
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
CREE, INC.
Date: June 2, 2005
By: /s/ Cynthia B. Merrell
------------------------------------------
Cynthia B. Merrell
Chief Financial Officer
EXHIBIT INDEX
Exhibit No. Description
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99.1 Press Release dated June 2, 2005