LED lighting company Cree posted a quarterly loss resulting from a 12 percent drop in revenue and tens of millions of dollars in restructuring costs.
The Durham-based company reported after the markets closed Tuesday that revenue for its fiscal fourth quarter that ended June 28 totaled $382.2 million, down from $436.3 million a year ago. Revenue, which has been buffeted by intense competition among LED makers that has depressed prices, also fell 7 percent compared to the preceding quarter.
“It’s a very challenging competitive environment,” CEO Chuck Swoboda said in an interview.
However, the company is projecting that revenue in its new fiscal year will rise about 10 percent.
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Driven by demand for LED lighting from the commercial sector, “we are confident we can deliver revenue and profit growth in fiscal 2016,” Swoboda said during a conference call with analysts.
In the fourth quarter, Cree’s adjusted net loss totaled $20.6 million, or 19 cents per share, down from a profit of $51.3 million, or 42 cents per share, a year earlier.
The company, which announced in late June that it was restructuring its LED business in light of a diminished revenue outlook, recognized $84 million in restructuring costs in the quarter.
Of that amount, $38 million stemmed from adjusted inventory already delivered to distributors, which was written down to reflect lower prices. That was included in Cree’s adjusted bottom-line number. Another $46 million pegged to reducing manufacturing capacity and overhead costs wasn’t included.
Based on GAAP, or generally accepted accounting principles, the net loss for the fourth quarter was $88 million, or 83 cents per share, including the manufacturing and overhead write-down. That compares to net income of $29.9 million a year ago.
An additional $18 million in restructuring costs is anticipated over the next two quarters.
The restructuring includes reducing excess capacity by consolidating two LED manufacturing facilities in Durham into one. It will also will combine two plants in China into one. The consolidation of the Durham facilities is expected to be completed by the end of December.
Cree, which has 2,600 workers locally and 6,800 worldwide, hasn’t disclosed how jobs will be affected.
When Cree announced the restructuring in late June, it also lowered its projections for fiscal fourth-quarter revenue. That triggered a 10 percent drop in its stock the following day.
Earlier Tuesday, Cree shares closed at $25.20, down 64 cents. Its shares have fallen nearly 50 percent in the past 12 months.
Cree makes the top-selling LED light bulbs, sold exclusively by Home Depot, as well as indoor and outdoor LED light fixtures and components that other companies use in LED lights. Its LEDs also illuminate mobile phones, televisions, electric signs and car dashboards.
Lighting products revenue rose 10 percent to $229.2 million in the latest quarter, but LED product sales – which accounts for 32 percent of revenue – fell 39 percent.
Cree is in the midst of reshaping itself.
In addition to the restructuring, it announced in May that it planned to spin off its power and radio frequency subsidiary into a separate publicly traded company while retaining majority ownership of the business.
Swoboda said Tuesday that the business will remain in Durham after the spin-off is completed.
Revenue for what will be called the Cree Power & RF Division after the spin-off rose 15 percent in the just-completed fiscal year to $123.9 million, accounting for 8 percent of total revenue. It also generates higher gross margins than Cree’s mainstay businesses.
Cree plans to use the funds raised from the initial public offering to invest in its future growth.
Cree’s power components are used in computer servers, uninterruptible power supplies and for solar energy. Its RF transistors and integrated circuits are used in radar and telecommunications systems.
For the full fiscal year, Cree posted revenue of $1.63 billion, down 1 percent from a year ago. Adjusted net income was $72 million, or 64 cents per share, versus $203 million a year earlier.