Cree, Inc. announced unaudited consolidated earnings results for the second quarter and six months ended December 30, 2012. For the quarter, revenue increased 10% sequentially to a record $346 million, which was greater than targeted range of $320 million to $340 million. GAAP earnings increased sequentially to $20.4 million or $0.18 per diluted share for the second quarter of fiscal 2013, and non-GAAP earnings increased sequentially to $36.9 million or $0.32 per diluted share. Non-GAAP earnings excluded $16.5 million of expense net of tax or $0.14 per diluted share from the amortization of acquired intangibles and stock-based compensation. GAAP and non-GAAP earnings per share exceeded the high end of targeted range. Cash provided by operations was $92 million and capital expenditures were $22 million, including $4 million related to patents, which resulted in free cash flow of $70 million. Net interest income and other for the quarter was $2.5 million. Operating income was $25,092,000 and income before income taxes was $27,573,000 against operating income of $12,192,000 and income before income taxes of $13,881,000 a year ago. Non-GAAP operating income was $47,355,000 against $31,257,000 a year ago.

For the six months, revenue, net was $662,039,000, operating income was $42,381,000, income before income taxes was $48,247,000 and net income was $36,526,000 or $0.31 per diluted share against revenue, net of $573,098,000, operating income of $25,579,000, income before income taxes of $30,211,000 and net income of $24,897,000 or $0.22 per diluted share for the same period a year ago. Non-GAAP operating income was $84,799,000 against $64,057,000 a year ago. Non-GAAP net income was $68,636,000 against $56,603,000 a year ago. Earnings per share non-GAAP diluted net income per share was $0.59 against $0.50 a year ago. Cash flow from operations was $178,294,000 against $122,237,000 a year ago. CapEx spending was $30,430,000 against $53,038,000 a year ago.

The company provided earnings guidance for the third quarter ending March 31, 2013. The company targets revenue in a range of $325 million to $345 million with GAAP gross margin targeted to be similar to second quarter and non-GAAP gross margin targeted to be 39.5%+/-. This target is based on a number of factors that could vary, including overall demand, product mix, cost reduction programs, factory execution and the competitive environment. GAAP gross margin targets include stock-based compensation expense of approximately $2.4 million, while non-GAAP targets do not. Operating expenses are targeted to be similar to second quarter on both a GAAP and non-GAAP basis. The tax rate is targeted at 17.0% for fiscal third quarter. GAAP net income is targeted at $17 million to $23 million, or $0.15 to $0.20 per diluted share. Non-GAAP net income is targeted in a range of $35 million to $41 million, or $0.30 to $0.35 per diluted share. The GAAP and non-GAAP net income targets are based on an estimated 116.7 million diluted weighted average shares. Targeted non-GAAP earnings exclude expenses related to the amortization of acquired intangibles and stock-based compensation expense of $0.15 per diluted share. Net interest income and other is targeted to be approximately $2 million. Charges for amortization of acquired intangibles in the amount of $7.7 million.

The company currently target tax rate to be 22% for the full fiscal 2013 year.