8-K

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): April 20, 2010

CREE, INC.

(Exact name of registrant as specified in its charter)

North Carolina	0-21154	56-1572719
(State or other jurisdiction of incorporation)	(Commission File Number)	(I.R.S. Employer 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 2.02 Results of Operations and Financial Condition

On April 20, 2010, Cree, Inc. (the “Company”) issued a press release announcing results for the fiscal quarter ended March 28, 2010.  The press release is attached as Exhibit 99.1 and incorporated into this report by reference.

The information in this report shall not be deemed “filed” for the purposes of Section 18 of the Securities Exchange Act of 1934, as amended, or otherwise subject to the liability of that section.  Furthermore, the information in this report shall not be deemed incorporated by reference into the filings of the Company under the Securities Act of 1933, as amended.

Item 9.01 Financial Statements and Exhibits

(d)           Exhibits

Exhibit No.	Description of Exhibit
99.1	Press release dated April 20, 2010

- 2 -

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.
By:	/s/ John T. Kurtzweil
	John T. Kurtzweil
	Executive Vice President - Finance, Chief Financial Officer and Treasurer

Date:  April 20, 2010

- 3 -

EXHIBIT INDEX

Exhibit No.	Description of Exhibit
99.1	Press release dated April 20, 2010

- 4 -

EX-99.1

Exhibit 99.1

For Immediate Release Press Release

Contact:	Raiford Garrabrant
	Cree, Inc.
	Director, Investor Relations
	Ph: 919-287-7895
	Fax: 919-313-5615
	Email: investorrelations@cree.com

Cree Reports Record Quarterly Revenue and Net Income for the Third Quarter of

Fiscal Year 2010

Quarterly Revenue increased 78% year-over-year to $234 Million

Quarterly Net Income increased more than tenfold to $44.6 Million

DURHAM, N.C., April 20, 2010 – Cree, Inc. (Nasdaq: CREE), a market leader in LED lighting, today announced record revenue of $234.1 million for its third quarter of fiscal 2010, ended March 28, 2010.  This represents a 78% increase compared to revenue of $131.1 million reported for the third fiscal quarter last year and a 17% increase compared to the second quarter of fiscal 2010.  GAAP net income for the third quarter increased more than tenfold yea r-over-year to $44.6 million, or $0.41 per diluted share, compared to GAAP net income of $4.0 million, or $0.05 per diluted share, for the third quarter of fiscal 2009. On a non-GAAP basis, net income for the third quarter of fiscal 2010 increased 333% year-over-year to $51.3 million, or $0.47 per diluted share, compared to non-GAAP net income for the third quarter of fiscal 2009 of $11.8 million or $0.13 per diluted share.

“We achieved record revenue and net income again in Q3 due to a combination of strong LED demand and solid execution with our factory ramp,” stated Chuck Swoboda, Cree Chairman and CEO.  “The LED lighting revolution continues to gain momentum and we remain focused on extending our leadership position while we build the scale, cost structure and channels to win in the market.”

Q3 2010 Financial Metrics:

		Third Quarter (in thousands, except per share amounts)
		2010	2009	Change
	Net revenue	$234,083	$131,144	$102,939	78%
GAAP
	Gross Margin	47.9%	36.1%
	Operating Margin	24.2%	2.2%
	Net Income	$44,630	$4,015	$40,615	1,012%
	Earnings per diluted share	$0.41	$0.05	$0.36	720%
Non-GAAP
	Gross Margin	48.1%	36.9%
	Operating Margin	27.9%	9.3%
	Net Income	$51,317	$11,836	$39,481	333%
	Earnings per diluted share	$0.47	$0.13	$0.34	262%

»   Cash and investments increased $36.9 million from Q2 of fiscal 2010 to $991.0 million.

»   Cash flow from operations was $72.9 million.  Free cash flow (cash flow from operations less capital expenditures) was $6.9 million as we spent $66.0 million on capital expenditures to support our capacity expansion.

»   Accounts receivable (net) increased $12.4 million from Q2 of fiscal 2010 to $125.8 million, resulting in days sales outstanding of 48, a decrease of 3 days from Q2 of fiscal 2010.

»   Inventory (net) increased $13.7 million from Q2 of fiscal 2010 to $107.0 million and represents 79 days of inventory, a decrease of 1 day from Q2 of fiscal 2010.

Recent Business Highlights:

»   Announced a breakthrough new lighting-class LED platform, the XLamp XM, which delivers record-breaking efficiency of 160 lumens per watt at 350mA

»   Achieved industry-best reported R&D results of 208 lumens per watt from a white high-power LED

»   Introduced the Cree LED Module LMR4, the first of a new LED module product line that brings Cree TrueWhiteTM technology to lighting manufacturers

»   Announced the Cree CR6TM product, a new 6-inch LED downlight designed for the residential market

»   Introduced the XLamp® MPL EasyWhiteTM LED, a breakthrough new lighting-class LED that can obsolete energy-inefficient light bulbs

- 2 -

»   Announced that Cree LED lamps have been selected for deployment in the Hyatt Regency Grand Cypress Resort in Orlando, Florida

Business Outlook:

For its fourth quarter of fiscal 2010 ending June 27, 2010, Cree targets revenue in a range of $255 million to $265 million with GAAP net income of $46 million to $49 million, or $0.41 to $0.44 per diluted share.  Non-GAAP net income is targeted to increase quarter-over-quarter to a range of $53 million to $56 million, or $0.48 to $0.51 per diluted share, based on an estimated 110.7 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 $0.05 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 third quarter 2010 results and the fiscal fourth quarter 2010 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 — Overview” for webcast details. The call will be archived and available on the website through May 4, 2010.

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 Metrics”, “Quarter ending March 28, 2010”, at www.cree.com.

About Cree, Inc.

Cree is leading the LED lighting revolution and setting the stage to obsolete the incandescent light bulb 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 backlighting, 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 communications.

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

- 3 -

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; ongoing uncertai nty 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), includ ing our report on Form 10-K for the fiscal year ended June 28, 2009, 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 CR6, Cree TrueWhite and EasyWhite are trademarks, of Cree, Inc.

- 4 -

CREE, INC.
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(in thousands, except per share data)
	Three Months Ended						Nine Months Ended
	March 28,			March 29,			March 28,			March 29,
	2010			2009			2010			2009
	(Unaudited)						(Unaudited)
Revenue, net	$	234,083		$	131,144		$	602,688		$	419,145
Cost of revenue, net		121,877			83,793			322,634			265,935
Gross profit		112,206			47,351			280,054			153,210
Gross margin percentage		47.9	%		36.1	%		46.5	%		36.6	%
Operating expenses:
Research and development		20,366			17,071			59,865			52,787
Sales, general and administrative		28,954			21,043			78,108			65,804
Amortization of acquisition related intangibles		3,045			4,062			9,135			12,186
Loss on disposal or impairment of long-lived assets		3,286			2,255			3,689			3,305
Total operating expenses		55,651			44,431			150,797			134,082
Operating income		56,555			2,920			129,257			19,128
Operating income percentage		24.2	%		2.2	%		21.4	%		4.6	%
Non-operating income:
Gain on sale of investments, net		-			13			1			78
Interest and other non-operating income, net		2,169			1,850			5,871			7,164
Income from operations before income taxes		58,724			4,783			135,129			26,370
Income tax expense		14,094			768			35,687			5,740
Net income	$	44,630		$	4,015		$	99,442		$	20,630
Diluted earnings per share:
Net income	$	0.41		$	0.05		$	0.97		$	0.23
Weighted average shares of common
stock outstanding, diluted		108,601			88,839			102,907			88,672

- 5 -

CREE, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands)
	March 28, 2010		June 28, 2009
	(Unaudited)
Assets:
Current assets:
Cash, cash equivalents and short term investments	$	987,857	$	417,653
Accounts receivable, net		125,834		103,035
Inventory, net		107,019		78,841
Income taxes receivable		1,526		1,526
Deferred income taxes		11,017		10,022
Prepaid expenses and other current assets		24,652		18,359
Total current assets		1,257,905		629,436
Property and equipment, net		400,378		320,110
Long-term investments		3,163		29,557
Intangible assets, net		108,299		113,328
Goodwill		313,564		304,791
Other assets		8,099		7,345
Total assets	$	2,091,408	$	1,404,567
Liabilities and Shareholders' Equity:
Current liabilities:
Accounts payable, trade	$	71,071	$	38,770
Accrued salaries and wages		25,772		16,732
Income taxes payable		9,164		8,139
Deferred income taxes		62		122
Other current liabilities		10,773		7,868
Contingent payment due related to COTCO acquisition		-		57,050
Total current liabilities		116,842		128,681
Long-term liabilities:
Deferred income taxes		43,869		42,752
Other long-term liabilities		5,407		8,386
Total long-term liabilities		49,276		51,138
Shareholders' Equity:
Common stock		134		112
Additional paid-in-capital		1,458,397		857,383
Accumulated other comprehensive income, net of taxes		11,300		11,236
Retained earnings		455,459		356,017
Total shareholders' equity		1,925,290		1,224,748
Total liabilities and shareholders' equity	$	2,091,408	$	1,404,567

- 6 -

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, and free cash flow.

Reconciliation to the nearest GAAP measure of all non-GAAP measures included in this press release can be found in the tables included with this press release.

These non-GAAP measures 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 purchasesthrough 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.

- 7 -

CREE, INC.
Reconciliation of GAAP to Non-GAAP Measures
(in thousands, except per share amounts)
(Unaudited)
	Three Months Ended						Nine Months Ended
	March 28,			March 29,			March 28,			March 29,
	2010			2009			2010			2009
GAAP Gross Profit	$	112,206		$	47,351		$	280,054		$	153,210
GAAP Gross Margin		47.9	%		36.1	%		46.5	%		36.6	%
Adjustment:
Stock-based compensation expense		471			1,013			2,025			3,198
Non-GAAP Gross Profit	$	112,677		$	48,364		$	282,079		$	156,408
Non-GAAP Gross Margin		48.1	%		36.9	%		46.8	%		37.3	%
	Three Months Ended						Nine Months Ended
	March 28,			March 29,			March 28,			March 29,
	2010			2009			2010			2009
GAAP operating income	$	56,555		$	2,920		$	129,257		$	19,128
GAAP operating income percentage		24.2	%		2.2	%		21.4	%		4.6	%
Adjustments:
Stock-based compensation expense		5,753			5,250			17,434			15,792
Amortization of acquisition-related intangible assets		3,045			4,062			9,135			12,186
Total adjustments to GAAP operating income		8,798			9,312			26,569			27,978
Non-GAAP operating income		65,353			12,232			155,826			47,106
Non-GAAP operating income percentage		27.9	%		9.3	%		25.9	%		11.2	%
	Three Months Ended						Nine Months Ended
	March 28,			March 29,			March 28,			March 29,
	2010			2009			2010			2009
GAAP net income	$	44,630		$	4,015		$	99,442		$	20,630
Adjustments:
Stock-based compensation expense		5,753			5,250			17,434			15,792
Amortization of acquisition-related intangible assets		3,045			4,062			9,135			12,186
Total adjustments to GAAP income before provision
for income taxes		8,798			9,312			26,569			27,978
Income tax effect		(2,111	)		(1,491	)		(7,016	)		(6,048	)
Non-GAAP net income		51,317			11,836			118,995			42,560
Diluted net income per share:
GAAP net income	$	0.41		$	0.05		$	0.97		$	0.23
Non-GAAP	$	0.47		$	0.13		$	1.16		$	0.48
Shares used in diluted net income per share calculation:
GAAP net income		108,601			88,839			102,907			88,672
Non-GAAP		108,601			88,839			102,907			88,672
	Three Months Ended						Nine Months Ended
	March 28,			March 29,			March 28,			March 29,
	2010			2009			2010			2009
Free Cash Flows
Cash flow from operations	$	72,932		$	49,873		$	155,631		$	134,613
Less:  PP&E CapEx spending		66,012			9,328			127,838			40,594
Total Free Cash Flows	$	6,920		$	40,545		$	27,793		$	94,019

- 8 -

CREE, INC.
Additional Financial Information
(in thousands)
(Unaudited)
	Three Months Ended				Nine Months Ended
	March 28,		March 29,		March 28,		March 29,
	2010		2009		2010		2009
Stock-Based Compensation Expense
Cost of sales	$	471	$	1,013	$	2,025	$	3,198
Research and development		937		1,402		3,589		4,095
Sales, general and administrative		4,345		2,835		11,820		8,499
Total stock-based compensation in operating expense		5,282		4,237		15,409		12,594
Total Stock-Based Compensation Expense	$	5,753	$	5,250	$	17,434	$	15,792
	March 28,		June 28,
	2010		2009
Cash, Cash Equivalents and Investments
Cash and cash equivalents	$	346,956	$	290,154
Short term investments		640,901		127,499
Long term investments		3,163		29,557
Total Cash, Cash Equivalents and Investments	$	991,020	$	447,210

- 9 -