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No. of Recommendations: 49
Here's my spreadsheet updated w/ the 10-K info:

Company Name: Cree, Inc.
Units: $millions except for per share data
Qtr. Ending Sep-98 Dec-98 Mar-99 Jun-99 Sep-99 Dec-99 Mar-00 Jun-00 FY98 FY99 FY00
Income Statement Metrics
Gross Margin 46.1% 47.1% 48.3% 48.9% 49.0% 54.9% 57.6% 54.5% 33.5% 45.3% 51.8%
Product Gross Margin 49.5% 50.2% 51.8% 47.0% 48.0% 54.5% 58.1% 57.4% 37.7% 49.5% 55.1%
Contract Gross Margin 22.6% 15.2% 23.0% 55.8% 56.5% 58.1% 54.0% 27.5% 17.4% 19.9% 24.2%
Operating Margin 27.4% 26.7% 27.1% 23.4% 30.6% 32.5% 31.9% 38.6% 18.4% 25.9% 33.9%
Net Margin 19.3% 20.3% 21.1% 19.2% 21.8% 22.8% 30.4% 34.0% 14.2% 19.9% 28.1%
EPS $0.09 $0.11 $0.12 $0.13 $0.14 $0.17 $0.25 $0.32 $0.22 $0.41 $0.87
TTM EPS $0.27 $0.32 $0.37 $0.44 $0.48 $0.55 $0.68 $0.87
Sequential EPS Growth 41% 17% 10% 10% 8% 23% 46% 32%
YoY EPS Growth 100% 91% 77% 99% 53% 60% 113% 155% 60% 90% 112%
Pro forma EPS after SFAS 123 $0.15 $0.29 $0.61

Balance Sheet Metrics
Cash to Debt Ratio 1.39 1.37 No Debt No Debt No Debt No Debt No Debt No Debt 2.12 101.86 No Debt
Net Cash 3.9 3.7 53.3 48.7 45.0 43.9 230.6 262.1 9.67 48.21 262.15
Acct. Receivables 11.7 12.1 14.0 16.3 16.9 18.5 24.6 15.8 10.5 6.1 15.8
Seq A/R Growth 12% 4% 16% 16% 4% 9% 33% -36% 36% -41% 158%
Inventories 3.2 3.4 3.9 4.0 4.1 4.6 7.1 9.3 2.5 4.0 9.3
Seq Inv Growth 28% 5% 14% 2% 2% 14% 54% 32% -36% 57% 134%
Acct. Payables 5.0 4.1 4.8 7.5 5.4 6.1 7.0 14.2 5.6 7.8 14.2
Seq A/P Growth -11% -18% 18% 55% -28% 13% 14% 103% 149% 39% 83%
Period Sales 12.3 14.0 16.0 20.0 20.9 24.8 29.5 33.4 44.0 62.4 108.6
Seq Revenue Growth -5% 14% 14% 25% 4% 19% 19% 13% 52% 42% 74%
YoY Revenue Growth 20% 39% 50% 54% 70% 77% 84% 66%
COGS 6.6 7.4 8.3 10.3 10.6 11.2 12.5 15.2 29 34 52
DSO 87 79 80 74 74 68 76 43 87 36 53
DIO 45 42 43 35 35 38 52 56 32 43 65
DPO 68 50 53 67 46 50 51 85 70 83 99
CCC 63 70 69 43 62 56 77 14 49 (4) 19
Foolish Flow Ratio 2.36 2.92 2.42 2.21 1.96 1.70 1.34 1.17 2.32 2.15 1.17

Cash Flow Statement Metrics
Op Cash Flow Margin 9.9% 11.5% 16.9% 14.4% 37.5% 20.8% 15.6% 32.3% 27.4% 32.6% 58.0%
TTM OCFM 23.4% 26.9% 25.4% 32.6% 37.6% 40.1% 38.8% 58.0%
Cash Net Flow Margin -23.4% -12.5% -17.3% -12.4% -11.6% -9.5% -18.1% 3.5% -8.6% -34.1% -14.6%
TTM CNFM -18.9% -14.4% -31.6% -34.1% -29.2% -26.5% -28.8% -14.6%

Return on Equity 14.1% 16.0% 14.4% 13.6% 13.2% 13.2% 11.1% 10.5%
Return on Invested Cap 13.0% 14.2% 14.5% 14.5% 15.1% 16.2% 17.3% 18.7%

Notes:

1. Cree included pro forma EPS in accordance w/ SFAS 123 for the first time to my knowledge. I've highlighted this to draw your attention to it. Everyone make sure to look at what the stock options are costing you, it's part of the cost of doing business these days.

2. The June 1999/2000 quarters and FY1999/2000 columns include the effect of the Nitres acquisition. Everything else doesn't, so there are some bumps in the metrics because of this.

3. Flowie and CCC have dropped considerably, this makes me a bit more comfortable w/ the rise in inventory. Biggest change in Q4 is the doubling of Payables. This is the largest contributor to driving the Flowie and CCC lower.

4. Positive FCF in Q4, haven't seen that in a while.

5. A/R in Q3 includes about $3 million in interest receivables whereas Q4 does not because Cree now separates trade receivables from interest receivables. So the drop from Q3 to Q4 is not as big as it appears.

6. ROE is still dropping as expected because of the secondary. ROIC has bumped up a bit though. I've defined ROIC as TTM NOPAT / Average (Tot. Assets - Cash & Equiv - Cur. Liab + ST Debt + Payables) because a lot, if not all, the cash has not been deployed in operations yet. It is being held to pay for the factory.

Marv
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No. of Recommendations: 0
Marv,

Another superb job of analysis. It will take me the weekend to digess all of the data and reading all of the SEC report. On the surface it looks great and as for the information what intrigues me is the shift to the high brightness LEDs. I really look forward to the increased capacity when the additions to the factory are complete. Also I look forward to the progress that CREE Lighting makes as it progress to an LED light bulb we can all use.

Again, great job.

Cheers,
GreenKahuna
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Thanks for a great post Marv. I was wondering if you could give a footnote on some of your acronyms. Specifically, what does "cogs", "dso", "dio", "dpo", "ccc" stand for? Is the cash flow margin the same thing as theflow ratio? Thanks

Wildhart
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Wildhart,

To save madmarv some keystrokes in responding to your questions
(especially after such a thoughtful and thorough post!), I'll
try to tackle a few of these acronyms:

cogs = cost of goods sold (this item immediately follows Revenue
on an income statement)

dso = days sales outstanding (qtrly Accounts Receivable/91)

ccc = cash conversion cycle (I think - since I don't use it
myself much, but probably should)

Hope This Helps,
pz
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Specifically, what does "cogs", "dso", "dio", "dpo", "ccc" stand for?

COGS is cost of goods sold, you net that from revenue to get gross profit. dso = days sales outstanding, which measures how quickly you collect your receivables (lower is better, meaning you're collecting your receivables quicker and therefore have cash on hand quicker). dio is days inventory outstanding, measuring how quickly you convert inventory into a receivable (the lower the better, similar to dso, in that you want to convert your inventory quickly to get your cash sooner). dpo, days payable outstanding measures how long on average you take to pay your vendors (the higher the better, meaning your getting free financing for a longer period of time, called "riding the trade"). ccc is new to me, sorry.

ezeekial
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Thanks madmarv...

Fellow fools please correct me it I'm wrong, but looking at the big picture, for a young company the numbers are pretty darn good. AND CREE is most likely in the process of building capicity for new products with great potential (Blue laser, Power chips, and Hi power RF).
IMHO the future looks very bright for this company.
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COGS = Cost of Goods Sold
DSO = Days of Sales Outstanding = 91.25 * Accts. Receivable / Quarterly Revenue
DIO - Days of Inventory Outstanding = 91.25 * Inventory / Quarterly COGS
DPO = Days of Payables Outstanding = 91.25 & Accts. Payable / Quarterly COGS

CCC = Cash Conversion Cycle = DSO + DIO - DPO

For annual numbers, replace 91.25 with 365 and use annual revenue and COGS.

This article explains what the CCC tells you:
http://www.fool.com/portfolios/rulemaker/1999/rulemaker991102.htm

Operating Cash Flow Margin = Cash Flow from Operations / Quarterly Revenue

Cash Net Flow Margin = (Cash FLow from Operations - Capitalized Expenditures) / Quarterly Revenue

This link explains the CNFM or Cash King Margin:
http://www.fool.com/portfolios/RuleMaker/RuleMakerStep6.htm#11

BTW, I forgot to mention that in addition to Property and Equipment, I'm including Patent Rights in Cap ex.

Marv
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Thanks, Marv for sharing your hard work and resulting spreadsheet. I never cease to be amazed at how generous "Cree-tins" are with information and analyses of our favorite company. This Board continues to out perform the rest of the market. :)

And our baby seems to be growing nicely. No marathoner yet but capable of greater distances and better times. Lets hope Cree gets strong enough to fight off competitors and reap its own rewards for its developments. Have a great weekend.

Alan
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Sorry if I missed it, but do we know why contract margin dropped from 54% to 27%? It had been >50% for 4 consecutive qtrs. Thanks, Paul
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The Q4 results includes the acquisition of Nitres, the previous quarters do not. IIRC, Nitres is primarily a research tank so a Q3 to Q4 comparison of their research division is not meaningful.

Marv
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