UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)

[ X ] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended ~~March 31,~~September 29, 2013

[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to

Commission file number 0-21154

CREE, INC.

(Exact name of registrant as specified in its charter)



North Carolina		56-1572719
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification No.)

4600 Silicon Drive Durham, North Carolina		27703
(Address of principal executive offices)		(Zip Code)

(919) 407-5300

(Registrant’s telephone number, including area code)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

Yes [ X ] No [ ]

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).

Yes [ X ] No [ ]

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer”, “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.



Large accelerated filer [X]				Accelerated filer [ ]
Non-accelerated filer [ ] (Do not check if a smaller reporting company)				Smaller reporting company [ ]

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

Yes [ ] No[ X]

The number of shares outstanding of the registrant’s common stock, par value $0.00125 per share, as of ~~April 17,~~October 16, 2013, was ~~117,923,891~~120,702,745.

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CREE, INC.

FORM 10-Q

For the Quarterly Period Ended ~~March 31,~~September 29, 2013

INDEX



Description		Page No.

PART I - FINANCIAL INFORMATION

Item 1.	Financial Statements	3

	Consolidated Balance Sheets as of ~~March 31,~~September 29, 2013 (unaudited) and June ~~24, 2012~~30, 2013	3

	Consolidated Statements of Income for the three ~~and nine~~ months ended ~~March 31,~~September 29, 2013 (unaudited) and ~~March 25,~~September 23, 2012 (unaudited)	4

	Consolidated Statements of Comprehensive Income for the three ~~and nine~~ months ended ~~March 31,~~September 29, 2013 (unaudited) and ~~March 25,~~September 23, 2012 (unaudited)	5

	Consolidated Statements of Cash ~~Flow~~Flows for the ~~nine~~three months ended ~~March 31,~~September 29, 2013 (unaudited) and ~~March 25,~~September 23, 2012 (unaudited)	6

	Notes to Consolidated Financial Statements (unaudited)	7

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	21

Item 3.	Quantitative and Qualitative Disclosures About Market Risk	3330

Item 4.	Controls and Procedures	3330

PART II – OTHER INFORMATION

Item 1.	Legal Proceedings	3331

Item 1A.	Risk Factors	3331

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	4542

Item 3.	Defaults Upon Senior Securities	4542

Item 4.	Mine Safety Disclosures	4542

Item 5.	Other Information	4542

Item 6.	Exhibits	4643

SIGNATURE		4744
Exhibit Index		4845

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PART I - FINANCIAL INFORMATION

Item 1. Financial Statements

CREE, INC.

CONSOLIDATED BALANCE SHEETS


	March 31, 2013		June 24, 2012		September 29, 2013		June 30, 2013
	(unaudited)				(unaudited)
	(Thousands, except par value)				(In thousands, except par value)
ASSETS
Current assets:
Cash and cash equivalents	$	178,438	$	178,885		$187,882		$190,069
Short-term investments	758,613		565,628		900,965		833,846
Total cash, cash equivalents, and short-term investments	937,051		744,513
Total cash, cash equivalents and short-term investments					1,088,847		1,023,915
Accounts receivable, net	181,877		152,258		209,250		192,507
Inventories	195,743		188,849		217,307		197,001
Deferred income taxes	22,410		21,744		26,208		26,125
Prepaid expenses and other current assets	62,831		56,917		108,640		76,218
Total current assets	1,399,912		1,164,281		1,650,252		1,515,766
Property and equipment, net	550,237		582,461		550,121		542,833
Intangible assets, net	362,442		376,075		352,630		357,525
Goodwill	616,345		616,345		616,345		616,345
Other assets	8,552		8,336		23,795		19,941
Total assets	$	2,937,488	$	2,747,498		$3,193,143		$3,052,410
LIABILITIES AND SHAREHOLDERS’ EQUITY
Current liabilities:
Accounts payable, trade	$	112,416	$	78,873		$148,513		$121,441
Accrued salaries and wages	40,286		29,837		41,948		41,407
Income taxes payable	4,405		3,834		10,851		1,315
Other current liabilities	41,459		36,633		57,468		43,248
Total current liabilities	198,566		149,177		258,780		207,411
Long-term liabilities:
Deferred income taxes	15,926		15,609		25,720		25,504
Other long-term liabilities	14,797		22,695		27,886		12,843
Total long-term liabilities	30,723		38,304		53,606		38,347
Commitments and contingencies (Note 12)
Commitments and contingencies (Note 11)
Shareholders’ equity:
Preferred stock, par value $0.01; 3,000 shares authorized at March 31, 2013 and June 24, 2012; none issued and outstanding	—		—
Common stock, par value $0.00125; 200,000 shares authorized at March 31, 2013 and June 24, 2012; 117,869 and 115,906 shares issued and outstanding at March 31, 2013 and June 24, 2012, respectively	146		144
Preferred stock, par value $0.01; 3,000 shares authorized at September 29, 2013 and June 30, 2013; none issued and outstanding					—		—
Common stock, par value $0.00125; 200,000 shares authorized at September 29, 2013 and June 30, 2013; 120,315 and 119,623 shares issued and outstanding at September 29, 2013 and June 30, 2013, respectively					149		148
Additional paid-in-capital	1,951,011		1,861,502		2,067,849		2,025,764
Accumulated other comprehensive income, net of taxes	11,121		11,133		9,766		8,244
Retained earnings	745,921		687,238		802,993		772,496
Total shareholders’ equity	2,708,199		2,560,017		2,880,757		2,806,652
Total liabilities and shareholders’ equity	$	2,937,488	$	2,747,498		$3,193,143		$3,052,410

The accompanying notes are an integral part of the consolidated financial statements.

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CREE, INC.

(UNAUDITED)

CONSOLIDATED STATEMENTS OF INCOME


	Three Months Ended					Nine Months Ended				Three Months Ended
	March 31, 2013		March 25, 2012			March 31, 2013		March 25, 2012		September 29, 2013		September 23, 2012
	(Thousands, except per share amounts)									(In thousands, except per share amounts)
Revenue, net	$	348,934	$	284,801		$	1,010,973	$	857,899		$391,006		$315,753
Cost of revenue, net	215,924		185,388			628,438		555,340		240,249		199,704
Gross profit	133,010		99,413			382,535		302,559		150,757		116,049
Operating expenses:
Research and development	39,036		36,148			116,524		106,436		41,743		37,547
Sales, general and administrative	62,140		50,074			174,885		144,789		64,278		52,645
Amortization of acquisition-related intangibles	7,719		7,368			23,108		18,660		7,287		7,670
Loss on disposal or impairment of long-lived assets	863		816			2,385		2,088		657		898
Total operating expenses	109,758		94,406			316,902		271,973		113,965		98,760
Operating income	23,252		5,007			65,633		30,586		36,792		17,289
Non-operating income:
Other non-operating income (expense), net	494		324			2,622		1,187
Interest income, net	2,018		1,859			5,756		5,628
Non-operating income, net										2,818		3,385
Income before income taxes	25,764		7,190			74,011		37,401		39,610		20,674
Income tax expense (benefit)	3,607		(2,299		)	15,328		3,015
Income tax expense										9,113		4,551
Net income	$	22,157	$	9,489		$	58,683	$	34,386		$30,497		$16,123
Earnings per share:
Basic	$	0.19	$	0.08		$	0.51	$	0.30		$0.26		$0.14
Diluted	$	0.19	$	0.08		$	0.50	$	0.30		$0.25		$0.14
Shares used in per share calculation:
Basic	116,682		115,641			116,059		114,348		119,564		115,539
Diluted	118,608		116,074			116,768		114,879		122,364		115,960

The accompanying notes are an integral part of the consolidated financial statements.

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CREE, INC.

(UNAUDITED)

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME


	Three Months Ended					Nine Months Ended						Three Months Ended
	March 31, 2013			March 25, 2012		March 31, 2013			March 25, 2012			September 29, 2013		September 23, 2012
	(In thousands)											(In thousands)
Net income	$	22,157		$	9,489	$	58,683		$	34,386			$30,497		$16,123
Other comprehensive income:
Currency translation (loss) gain, net of tax benefit (expense) of $90, $(167), $(1) and $55, respectively	(145		)	273		5			(89		)
Net unrealized gain (loss) on available-for-sale securities, net of tax (expense) benefit of $(75), $(290), $(22) and $915, respectively	67			480		(17		)	(1,512		)
Other comprehensive (loss) income	(78		)	753		(12		)	(1,601		)
Currency translation gain, net of tax expense of $0 and $110, respectively												259		182
Net unrealized gain on available-for-sale securities, net of tax expense of $782 and $323, respectively												1,263		533
Other comprehensive income												1,522		715
Comprehensive income	$	22,079		$	10,242	$	58,671		$	32,785			$32,019		$16,838

The accompanying notes are an integral part of the consolidated financial statements.

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CREE, INC.

(UNAUDITED)

CONSOLIDATED STATEMENTS OF CASH ~~FLOW~~FLOWS


	Nine Months Ended						Three Months Ended
	March 31, 2013			March 25, 2012			September 29, 2013			September 23, 2012
	(In thousands)						(In thousands)
Cash flows from operating activities:
Net income	$	58,683		$	34,386			$30,497			$16,123
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization	114,370			104,855			39,481			36,474
Stock-based compensation	40,945			34,884			14,578			12,485
Excess tax benefit from share-based payment arrangements	(3,636		)	(263		)	(5,666		)	(42		)
Loss on disposal or impairment of long-lived assets	2,385			2,088			657			898
Amortization of premium/discount on investments	7,075			6,099			2,435			2,264
Changes in operating assets and liabilities, net of effect of acquisition:
Changes in operating assets and liabilities:
Accounts receivable	(29,624		)	(25,321		)	(16,613		)	(10,054		)
Inventories	(6,866		)	19,184			(19,782		)	9,002
Prepaid expenses and other assets	(6,472		)	7,004			(36,998		)	(3,030		)
Accounts payable, trade	33,495			(430		)	22,960			9,680
Accrued salaries and wages and other liabilities	13,715			(11,909		)	37,687			11,886
Net cash provided by operating activities	224,070			170,577			69,236			85,686
Cash flows from investing activities:
Purchases of property and equipment	(55,406		)	(75,206		)	(33,680		)	(12,597		)
Purchases of available-for-sale investments	(533,884		)	(234,622		)	(196,312		)	(179,601		)
Proceeds from maturities of available-for-sale investments	297,740			127,805			116,510			78,504
Proceeds from sale of property and equipment	301			5			—			47
Proceeds from sale of available-for-sale investments	36,089			274,453			12,295			12,886
Purchase of acquired business, net of cash acquired	—			(456,008		)
Purchases of patent and licensing rights	(15,794		)	(11,959		)	(4,769		)	(5,548		)
Net cash used in investing activities	(270,954		)	(375,532		)	(105,956		)	(106,309		)
Cash flows from financing activities:
Net proceeds from issuance of common stock	43,352			4,035			28,741			5,286
Excess tax benefit from share-based payment arrangements	3,636			263			5,666			42
Repurchases of common stock	(638		)	—
Net cash provided by financing activities	46,350			4,298			34,407			5,328
Effects of foreign exchange changes on cash and cash equivalents	87			1,116			126			262
Net change in cash and cash equivalents	(447		)	(199,541		)
Net decrease in cash and cash equivalents							(2,187		)	(15,033		)
Cash and cash equivalents:
Beginning of period	178,885			390,598			190,069			178,885
End of period	$	178,438		$	191,057			$187,882			$163,852

The accompanying notes are an integral part of the consolidated financial statements.

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CREE, INC.

(UNAUDITED)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Note 1. Basis of Presentation and Changes in Significant Accounting Policies

Overview

Cree, Inc. (the ~~“Company”)~~Company) is a leading innovator of lighting-class light emitting diode (LED) products, lighting products and semiconductor products for power and radio-frequency (RF) applications. The Company's products are targeted for applications such as indoor and outdoor lighting, video displays, transportation, electronic signs and signals, power supplies, ~~solar~~ inverters and wireless systems.

The Company develops and manufactures semiconductor materials and devices primarily based on silicon carbide (SiC), gallium nitride (GaN) and related compounds. ~~The physical and electronic~~In many cases, the properties of SiC and GaN offer technical advantages over traditional silicon, gallium arsenide (GaAs) and other materials used for electronic ~~and opto-electronic~~ applications.

The Company's LED products consist of LED components, LED chips and SiC materials. As LED technology improves, the Company believes the potential market for LED lighting will continue to expand. The Company's success in selling LED products depends upon the ability to offer innovative products and its ability to enable its customers to develop and market ~~LED based~~LED-based products that successfully compete and drive LED adoption against traditional lighting products.

The Company's lighting products consist of both LED and traditional lighting systems. The Company designs, manufactures and sells lighting fixtures and lamps for the commercial, industrial and consumer markets.

In addition, the Company develops, manufactures and sells power and RF devices. The Company's power products are made from SiC and provide increased efficiency, faster switching speeds ~~than~~and reduced system size and weight over comparable silicon-based power ~~devices for a given power level.~~devices. The Company's RF devices are made from GaN and ~~produce higher power densities~~provide improved efficiency, bandwidth and frequency of operation as compared to silicon or gallium arsenide.

The majority of the Company's products are manufactured at its production facilities located in North Carolina, Wisconsin and China. The Company also uses contract manufacturers for certain aspects of product fabrication, assembly and packaging. The Company operates research and development facilities in North Carolina, California, Wisconsin, India and China.

Cree, Inc. is a North Carolina corporation established in 1987 and is headquartered in Durham, North Carolina.

~~The~~As of September 29, 2013, the Company ~~currently operates its business as~~has three reportable segments:

LED Products

Lighting Products

Power and RF Products

For financial results by reportable segment, please refer to Note 12 "Reportable Segments."

Basis of Presentation

The consolidated balance sheet at ~~March 31,~~September 29, 2013, the consolidated statements of income for the three ~~and nine~~ months ended ~~March 31,~~September 29, 2013 and ~~March 25,~~September 23, 2012, the consolidated statements of comprehensive income for the three ~~and nine~~ months ended ~~March 31,~~September 29, 2013 and ~~March 25,~~September 23, 2012, and the consolidated statements of cash ~~flow~~flows for the ~~nine~~three months ended ~~March 31,~~September 29, 2013 and ~~March 25,~~September 23, 2012 (collectively, the ~~“consolidated~~consolidated financial ~~statements”)~~statements) have been prepared by the Company and have not been audited. In the opinion of management, all normal and recurring adjustments necessary to present fairly the consolidated financial position, results of operations and cash flows at ~~March 31,~~September 29, 2013, and for all periods presented, have been made. All significant intercompany accounts and transactions have been eliminated. The consolidated balance sheet at June ~~24, 2012~~30, 2013 has been derived from the audited financial statements as of that date. ~~The~~ ~~nine~~ ~~month period ended~~ ~~March 31, 2013~~ ~~includes one additional week as compared to the~~ ~~nine~~ ~~month period ended~~ ~~March 25, 2012~~.

Certain information and footnote disclosures normally included in annual financial statements prepared in accordance with accounting principles generally accepted in the United States of America ~~(“U.S. GAAP”)~~(U.S. GAAP) have been condensed or omitted. These financial statements should be read in conjunction with the consolidated financial statements and notes thereto included in the Company’s Annual Report on Form 10-K for the fiscal year ended June ~~24, 2012~~30, 2013 ~~(“fiscal~~(fiscal ~~2012~~2013”). The results of operations for the

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three ~~and nine~~ months ended ~~March 31,~~September 29, 2013 are not necessarily indicative of the operating results that may be attained for the entire fiscal year ending June ~~30, 2013~~29, 2014 ~~(“fiscal~~(fiscal ~~2013~~2014”).

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The preparation of consolidated financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenues and expenses, and the disclosure of contingent assets and liabilities. Actual amounts could differ materially from those estimates.

Certain fiscal ~~2012~~2013 amounts in the accompanying consolidated financial statements have been reclassified to conform to the fiscal ~~2013~~2014 presentation. These reclassifications had no effect on previously reported consolidated net income or shareholders’ equity.

~~Recently Adopted~~

New Accounting ~~Pronouncements~~Standards

Presentation of ~~Comprehensive Income~~an Unrecognized Tax Benefit When a Net Operating Loss Carryforward or Tax Credit Carryforward Exists

In ~~June 2011,~~July 2013, the Financial Accounting Standards Board ~~("FASB")~~(FASB) issued ~~new~~Accounting Standards Update (ASU) No. 2013-11, Income Taxes (Topic 740): Presentation of an Unrecognized Tax Benefit When a Net Operating Loss Carryforward or Tax Credit Carryforward Exists. The ASU provides guidance ~~concerning~~regarding the presentation in the statement of ~~total comprehensive income~~financial position of an unrecognized tax benefit when a net operating loss carryforward or a tax credit carryfoward exists. The ASU generally provides that an entity's unrecognized tax benefit, or a portion of its unrecognized tax benefit, should be presented in its financial statements as a reduction to a deferred tax asset for a net operating loss carryforward, a similar tax loss, or a tax credit carryforward. The ASU applies prospectively to all entities that have unrecognized tax benefits when a net operating loss carryforward, a similar tax loss, or a tax credit carryforward exists at the reporting date, and ~~its components. Under~~is effective for fiscal years, and interim periods within those years, beginning after December 15, 2013. The Company early adopted this guidance an entity has the option to present the total of comprehensive income, the components of net income, and the components of other comprehensive income either in a single continuous statement of comprehensive income or in two separate but consecutive statements. This guidance also requires an entity to present on the face of the financial statements reclassification adjustments from other comprehensive income to net income. In December 2011, the FASB issued an accounting standards update that deferred the presentation requirement for other comprehensive income reclassifications on the face of the financial statements. This guidance, as amended, became effective for the Company beginning inwith the first quarter of fiscal ~~2013.~~2014. The Company's adoption of ~~the new accounting~~this guidance did not have a significant impact on ~~the~~its consolidated financial statements.

~~Reporting of Amounts Reclassified Out of Accumulated Other Comprehensive Income~~

In February 2013, the FASB issued an accounting standards update (ASU) No. 2013-02, Comprehensive Income (Topic 220): Reporting of Amounts Reclassified Out of Accumulated Other Comprehensive Income, which seeks to improve the transparency of reporting reclassifications out of accumulated other comprehensive income. In particular, the ASU requires an entity to report the effect of significant reclassifications out of accumulated other comprehensive income on the respective line items in net income if the amount being reclassified is required under U.S. GAAP to be reclassified in its entirety to net income. For other amounts that are not required under U.S. GAAP to be reclassified in their entirety to net income in the same reporting period, an entity is required to cross-reference other disclosures required under U.S. GAAP that provide additional detail about those amounts. This would be the case when a portion of the amount reclassified out of accumulated other comprehensive income is reclassified to a balance sheet account (e.g., inventory) instead of directly to income or expense in the same reporting period.

The ASU applies to all entities that issue financial statements that are presented in conformity with U.S. GAAP and that report items of other comprehensive income. Public companies are required to comply for all reporting periods presented, both annual and interim periods. For public entities, the ASU is effective prospectively for reporting periods beginning after December 15, 2012. This guidance became effective for the Company beginning in the third quarter of fiscal 2013. The Company's adoption of the new accounting guidance did not have a significant impact on the consolidated financial statements.

Note 2. Acquisitions

On August 17, 2011, the Company entered into a Stock Purchase Agreement with all of the shareholders of Ruud Lighting, Inc. ~~("Ruud Lighting")~~(Ruud Lighting). Pursuant to the terms of the Stock Purchase Agreement and concurrently with the execution of the Stock Purchase Agreement, the Company acquired all of the outstanding share capital of Ruud Lighting in exchange for consideration consisting of 6.1 million shares of the Company's common stock valued at approximately $211.0 million and $372.2 million cash, subject to certain post-closing adjustments. Following the acquisition, the Company recorded certain post-closing purchase price adjustments resulting in a $2.3 million reduction to the purchase price and a total purchase price of approximately $666.0 million. See Note 11 “Commitments and Contingencies” for a discussion of the amounts receivable from the Stock Purchase Agreement escrow funds. The acquisition allowed the Company to expand its product portfolio into outdoor LED lighting.

Prior to the Company completing its acquisition of Ruud Lighting, Ruud Lighting completed the re-acquisition of its e-conolight business by purchasing all of the membership interests of E-conolight LLC ~~("E-conolight")~~(E-conolight). Ruud Lighting previously sold its e-conolight business in March 2010 and had been providing operational services to E-conolight since that date. In connection with the stock purchase transaction with Ruud Lighting, the Company funded Ruud Lighting's re-acquisition of E-conolight and repaid Ruud Lighting's outstanding debt in the aggregate amount of approximately $85.0 million.

~~Following~~The assets, liabilities and operating results of Ruud Lighting have been included in the Lighting Products segment of the Company’s consolidated financial statements from the date of acquisition and are reflected in all periods presented in the ~~Company recorded certain post-closing purchase price adjustments resulting in a~~ ~~$2.3 million~~ ~~reduction to the purchase price and a total purchase price of approximately~~ ~~$666.0 million~~.accompanying unaudited consolidated financial statements.

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~~The Company incurred total transaction costs related to the acquisition of approximately~~ ~~$3.6 million, of which,~~ ~~$3.1 million~~ were expensed in the first quarter of fiscal 2012, in accordance with U.S. GAAP. These transaction costs were included in "Sales, general and administrative" expense in the consolidated statements of income. Ruud Lighting is included in the Lighting Products segment.

~~The amounts of revenue, operating income (loss), and net income (loss) of Ruud Lighting in the consolidated statements of income from and including August 17, 2011 to~~ ~~March 25, 2012~~ ~~are as follows (in thousands, except per share data):~~

Three Months Ended Nine Months Ended
March 25,
2012 March 25,
2012
Revenue $ 56,598
$ 140,089
Operating income (loss) (1,376 ) (251 )
Net income (loss) (1,207 ) (552 )
Basic net income (loss) per share $ (0.01 ) $ —
Diluted net income (loss) per share $ (0.01 ) $ —

The following unaudited pro forma information presents a summary of the Company's consolidated results of operations as if the Ruud Lighting acquisition occurred as of June 27, 2011 (in thousands, except per share data).

Nine Months Ended
March 25,
2012
Revenue $ 888,231
Operating income 28,879
Net income 32,401
Basic net income per share $ 0.28
Diluted net income per share $ 0.28

~~The total revenue for Ruud Lighting included in the pro forma table above was~~ ~~$171.6 million~~ ~~for the~~ ~~nine~~ ~~month period from June 27, 2011 to~~ ~~March 25, 2012~~.

Note 3. Financial Statement Details

Accounts ~~Receivable,~~receivable, net

The following table ~~presents a summary of~~summarizes the components of accounts receivable, net (in thousands):


	March 31, 2013			June 24, 2012			September 29, 2013			June 30, 2013
Billed trade receivables	$	208,807		$	173,145			$236,481			$220,307
Unbilled contract receivables	1,364			1,576			1,107			1,171
	210,171			174,721			237,588			221,478
Allowance for sales returns, discounts, and other incentives	(25,714		)	(20,681		)
Allowance for sales returns, discounts and other incentives							(25,568		)	(26,500		)
Allowance for bad debts	(2,580		)	(1,782		)	(2,770		)	(2,471		)
Total accounts receivable, net	$	181,877		$	152,258			$209,250			$192,507

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Inventories

The following table ~~presents a summary of~~summarizes the components of inventories (in thousands):


	March 31, 2013		June 24, 2012		September 29, 2013		June 30, 2013
Raw material	$	61,230	$	57,618		$68,779		$62,253
Work-in-progress	71,243		74,241		66,737		68,146
Finished goods	63,270		56,990		81,791		66,602
Total inventories	$	195,743	$	188,849		$217,307		$197,001

Other current liabilities

The following table ~~presents a summary of~~summarizes the components of other current liabilities (in thousands):


	March 31, 2013		June 24, 2012		September 29, 2013		June 30, 2013
Accrued taxes	$	15,110	$	11,615		$28,780		$21,436
Accrued professional fees	8,403		7,412		6,390		4,493
Accrued warranty	7,146		5,513		5,040		5,259
Accrued other	10,800		12,093		17,258		12,060
Total other current liabilities	$	41,459	$	36,633		$57,468		$43,248

~~Other non-operating~~Accumulated other comprehensive income, ~~(expense),~~ net of taxes

The following table ~~presents a summary of~~summarizes the components of accumulated other comprehensive income, net of taxes (in thousands):



	September 29, 2013		June 30, 2013
Currency translation gain		$8,751		$8,492
Net unrealized gain (loss) on available-for-sale securities	1,015		(248		)
Total accumulated other comprehensive income, net of taxes		$9,766		$8,244

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Non-operating income, net

The following table summarizes the components of non-operating income, ~~(expense),~~ net (in thousands):


	Three Months Ended				Nine Months Ended					Three Months Ended
	3/31/2013		3/25/2012		3/31/2013		3/25/2012			September 29, 2013		September 23, 2012
Foreign currency gain (loss), net	$	296	$	190	$	424	$	211			$264		($173	)
Gain on sale of investments, net	48		4		84		1,001			10		28
Interest income, net										2,341		1,792
Other, net	150		130		2,114		(25		)	203		1,738
Total other non-operating income (expense), net	$	494	$	324	$	2,622	$	1,187
Total non-operating income, net											$2,818		$3,385

Reclassifications ~~Out~~out of ~~Accumulated Other Comprehensive Income~~accumulated other comprehensive income

The following table ~~presents a summary of~~summarizes the amounts reclassified out of accumulated other comprehensive income (in thousands):


Accumulated Other Comprehensive Income Component	Amount Reclassified from Accumulated Other Comprehensive Income									Affected Line Item in the Statement of Income	Amount Reclassified from Accumulated Other Comprehensive Income				Affected Line Item in the Statement of Income
	Three Months Ended					Nine Months Ended					Three Months Ended
	3/31/2013		3/25/2012			3/31/2013		3/25/2012			September 29, 2013		September 23, 2012
Net unrealized gain (loss) on available-for-sale securities, net of tax expense (benefit)
Net unrealized gain on available-for-sale securities, net of tax expense
	$	43	$	4		$	80	$	1,001	Other non-operating income (expense), net		$10		$28	Non-operating income, net
	43		4			80		1,001		Income before income taxes	10		28		Income before income taxes
	6		(1		)	17		81		Income tax expense (benefit)	2		6		Income tax expense
	$	37	$	5		$	63	$	920	Net income		$8		$22	Net income

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Note 4. Investments

Short-term investments consist of ~~high grade~~ municipal ~~and~~bonds, corporate bonds, non-U.S. certificates of deposit, U.S. agency securities and ~~other debt~~non-U.S. government securities. The Company classifies its marketable securities as available-for-sale based upon management’s determination that the underlying cash invested in these securities is available for operations as necessary.

~~The following tables provide a summary of~~All marketable investments ~~by type (in thousands):~~

March 31, 2013

Amortized
Cost

Gross Unrealized
Gains

Gross
Unrealized
Losses

Estimated Fair
Value
Municipal bonds $ 246,957
$ 1,496
$ (61 ) $ 248,392
Corporate bonds 176,963
2,468
(101 ) 179,330
Certificates of deposit 265,000
—
—
265,000
U.S. agency securities 56,391
333
(1 ) 56,723
Non-U.S. government securities 9,139
29
—
9,168
Total $ 754,450
$ 4,326
$ (163 ) $ 758,613

June 24, 2012

Amortized
Cost

Gross
Unrealized
Gains

Gross
Unrealized
Losses

Estimated Fair
Value
Municipal bonds $ 209,626
$ 2,036
$ (58 ) $ 211,604
Corporate bonds 144,942
1,848
(123 ) 146,667
Certificates of deposit 130,000
—
—
130,000
U.S. agency securities 68,156
450
(7 ) 68,599
Non-U.S. government securities 8,746
15
(3 ) 8,758
Total $ 561,470
$ 4,349
$ (191 ) $ 565,628

are classified as available-for-sale.

1110

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The following tables summarize marketable investments (in thousands):



	September 29, 2013
	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Estimated Fair Value
Municipal bonds		$272,382		$1,255		($502	)		$273,135
Corporate bonds	207,130		1,704		(1,049		)	207,785
U.S. agency securities	31,222		226		—			31,448
Non-U.S. certificates of deposit	380,000		—		—			380,000
Non-U.S. government securities	8,587		12		(2		)	8,597
Total		$899,321		$3,197		($1,553	)		$900,965

	June 30, 2013
	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Estimated Fair Value
Municipal bonds		$250,206		$817		($1,314	)		$249,709
Corporate bonds	192,147		1,678		(1,765		)	192,060
U.S. agency securities	39,288		186		—			39,474
Non-U.S. certificates of deposit	345,000		—		—			345,000
Non-U.S. government securities	7,608		14		(19		)	7,603
Total		$834,249		$2,695		($3,098	)		$833,846

The following tables present the gross unrealized losses and estimated fair value of the Company's investment securities, aggregated by investment type and the length of time that individual ~~investments~~investment securities have been in a continuous unrealized loss position (in ~~thousands)~~thousands, except numbers of securities):


	March 31, 2013														September 29, 2013
	Less than 12 Months					Greater than 12 Months				Total					Less than 12 Months					Greater than 12 Months				Total
	Fair Value		Unrealized Loss			Fair Value		Unrealized Loss		Fair Value		Unrealized Loss			Fair Value		Unrealized Loss			Fair Value		Unrealized Loss		Fair Value		Unrealized Loss
Municipal bonds	$	25,869	$	(61	)	$	—	$	—	$	25,869	$	(61	)		$91,293		($502	)		$—		$—		$91,293		($502	)
Corporate bonds	37,174		(101		)	—		—		37,174		(101		)	86,129		(1,049		)	—		—		86,129		(1,049		)
U.S. agency securities	2,002		(1		)	—		—		2,002		(1		)
Non-U.S. government securities															3,545		(2		)	—		—		3,545		(2		)
Total	$	65,045	$	(163	)	$	—	$	—	$	65,045	$	(163	)		$180,967		($1,553	)		$—		$—		$180,967		($1,553	)
Number of securities with an unrealized loss			33					—				33					95					—				95

	June 24, 2012														June 30, 2013
	Less than 12 Months					Greater than 12 Months				Total					Less than 12 Months					Greater than 12 Months				Total
	Fair Value		Unrealized Loss			Fair Value		Unrealized Loss		Fair Value		Unrealized Loss			Fair Value		Unrealized Loss			Fair Value		Unrealized Loss		Fair Value		Unrealized Loss
Municipal bonds	$	30,102	$	(58	)	$	—	$	—	$	30,102	$	(58	)		$126,926		($1,314	)		$—		$—		$126,926		($1,314	)
Corporate bonds	30,550		(123		)	—		—		30,550		(123		)	102,010		(1,765		)	—		—		102,010		(1,765		)
U.S. agency securities	3,014		(7		)	—		—		3,014		(7		)
Non-U.S. government securities	1,543		(3		)	—		—		1,543		(3		)	5,534		(19		)	—		—		5,534		(19		)
Total	$	65,209	$	(191	)	$	—	$	—	$	65,209	$	(191	)		$234,470		($3,098	)		$—		$—		$234,470		($3,098	)
Number of securities with an unrealized loss			33					—				33					123					—				123

The Company utilizes specific identification in computing realized gains and losses on the sale of investments. Realized gains from the sale of investments for the three months ended September 29, 2013 of approximately $10 thousand were included in

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"Non-operating income, net" and unrealized gains and losses are included as a separate component of equity, net of tax, unless the loss is determined to be other-than-temporary.

The Company evaluates its investments for possible impairment or a decline in fair value below cost basis that is deemed to be other-than-temporary on a periodic basis. It considers such factors as the length of time and extent to which the fair value has been below the cost basis, the financial condition of the investee, and its ability and intent to hold the investment for a period of time that may be sufficient for an anticipated full recovery in market value. Accordingly, the Company considers declines in its securities to be temporary in nature, and does not consider its securities to be impaired as of September 29, 2013 and June 30, 2013.

The contractual maturities of marketable investments atas of ~~March 31,~~September 29, 2013 were as follows (in thousands):


	March 31, 2013										September 29, 2013
	Within One Year		After One, Within Five Years		After Five, Within Ten Years		After Ten Years		Total		Within One Year		After One, Within Five Years		After Five, Within Ten Years		After Ten Years		Total
Municipal bonds	$	59,355	$	189,037	$	—	$	—	$	248,392		$35,206		$237,929		$—		$—		$273,135
Corporate bonds	25,404		151,426		2,500		—		179,330		30,662		177,123		—		—		207,785
Certificates of deposit	265,000		—		—		—		265,000
U.S. agency securities	20,145		36,578		—		—		56,723		4,042		27,406		—		—		31,448
Non-U.S. certificates of deposit											380,000		—		—		—		380,000
Non-U.S. government securities	3,012		6,156		—		—		9,168		5,599		2,998		—		—		8,597
Total	$	372,916	$	383,197	$	2,500	$	—	$	758,613		$455,509		$445,456		$—		$—		$900,965

Note 5. Fair Value of Financial Instruments

Under U.S. GAAP, fair value is defined as the price that would be received to sell an asset or paid to transfer a liability (i.e., ~~“the~~the exit ~~price”)~~price) in an orderly transaction between market participants at the measurement date. In determining fair value, the Company uses various valuation approaches, including quoted market ~~prices and discounted cash flows.~~prices. U.S. GAAP also establishes a hierarchy for inputs used in measuring fair value that maximizes the use of observable inputs and minimizes the use of unobservable inputs by requiring that the most observable inputs be used when available.

~~Table of Contents~~

Observable inputs are obtained from independent sources and can be validated by a third party, whereas unobservable inputs reflect assumptions regarding what a third party would use in pricing an asset or liability. The fair value hierarchy is categorized into three levels based on the reliability of inputs as follows:

Level 1 - Valuations based on quoted prices in active markets for identical instruments that the Company is able to access. Since valuations are based on quoted prices that are readily and regularly available in an active market, valuation of these products does not entail a significant degree of judgment.

Level 2 - Valuations based on quoted prices in active markets for instruments that are similar, or quoted prices in markets that are not active for identical or similar instruments, and model-derived valuations in which all significant inputs and significant value drivers are observable in active markets.

Level 3 - Valuations based on inputs that are unobservable and significant to the overall fair value measurement.

The financial assets for which the Company performs recurring fair value remeasurements are cash equivalents and short-term investments. As of ~~March 31,~~September 29, 2013, financial assets utilizing Level 1 inputs included money market funds. Financial assets utilizing Level 2 inputs included municipal bonds, corporate bonds, non-U.S. certificates of deposit, ~~corporate bonds and municipal bonds,~~ U.S. agency securities and non-U.S. government securities. Level 2 assets are valued using a third-party pricing services consensus price, which is a weighted average price based on multiple sources. These sources determine prices utilizing market income models which factor in, where applicable, transactions of similar assets in active markets, transactions of identical assets in infrequent markets, interest rates, bond or credit default swap spreads and volatility. The Company does not have any significant financial assets requiring the use of Level 3 inputs. There were no transfers between Level 1 and Level 2 during the ~~nine~~three months ended ~~March 31,~~September 29, 2013.

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The following table sets forth financial instruments carried at fair value within the U.S. GAAP hierarchy (in thousands):

March 31, 2013 June 24, 2012
Level 1 Level 2 Level 3 Total Level 1 Level 2 Level 3 Total
Assets:
Cash equivalents:
Municipal bonds $ —
$ —
$ —
$ —
$ —
$ 3,000
$ —
$ 3,000
Money market funds 3,564
—
—
3,564
31,318
—
—
31,318
Total cash equivalents 3,564
—
—
3,564
31,318
3,000
—
34,318
Short-term investments:
Municipal bonds —
248,392
—
248,392
—
211,604
—
211,604
Corporate bonds —
179,330
—
179,330
—
146,667
—
146,667
Certificates of deposit —
265,000
—
265,000
—
130,000
—
130,000
U.S. agency securities —
56,723
—
56,723
—
68,599
—
68,599
Non-U.S. government securities —
9,168
—
9,168
—
8,758
—
8,758
Total short-term investments —
758,613
—
758,613
—
565,628
—
565,628
Total assets $ 3,564
$ 758,613
$ —
$ 762,177
$ 31,318
$ 568,628
$ —
$ 599,946

~~The Company utilizes specific identification in computing realized gains and losses on the sale of investments. Realized gains from the sale of investments for the~~ ~~nine~~ ~~months ended~~ ~~March 31, 2013~~ ~~of approximately~~ ~~$84 thousand~~ ~~are included in "Other non-operating income (expense), net" and unrealized gains and losses are included as a separate component of equity, net of tax, unless the loss is determined to be “other-than-temporary.”~~

The Company evaluates its investments for possible impairment or a decline in fair value below cost basis that is deemed to be “other-than-temporary” on a periodic basis. It considers such factors as the length of time and extent to which fair value has been below cost basis, the financial condition of the investee, and its ability and intent to hold the investment for a period of time that may be sufficient for an anticipated recovery in market value.

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~~Note 6. Derivative Instruments and Hedging Activities~~



	September 29, 2013								June 30, 2013
	Level 1		Level 2		Level 3		Total		Level 1		Level 2		Level 3		Total
Assets:
Cash equivalents:
Municipal bonds		$—		$—		$—		$—		$—		$2,009		$—		$2,009
Money market funds	13,903		—		—		13,903		12,589		—		—		12,589
Total cash equivalents	13,903		—		—		13,903		12,589		2,009		—		14,598
Short-term investments:
Municipal bonds	—		273,135		—		273,135		—		249,709		—		249,709
Corporate bonds	—		207,785		—		207,785		—		192,060		—		192,060
U.S. agency securities	—		31,448		—		31,448		—		39,474		—		39,474
Non-U.S. certificates of deposit	—		380,000		—		380,000		—		345,000		—		345,000
Non-U.S. government securities	—		8,597		—		8,597		—		7,603		—		7,603
Total short-term investments	—		900,965		—		900,965		—		833,846		—		833,846
Total assets		$13,903		$900,965		$—		$914,868		$12,589		$835,855		$—		$848,444

The Company operates internationally and thus is exposed to potential adverse changes in foreign currency exchange rates. In the third quarter of fiscal 2013, the Company entered into a foreign currency forward contract (a derivative instrument) as a means of reducing its exposure to foreign currency rate changes on accounts payable denominated in a foreign currency. The primary purpose of the Company's foreign currency hedging activities is to protect against the volatility of earnings associated with foreign currency transactions. The Company's strategy is to enter into foreign currency forward contracts so that losses or gains resulting from its foreign currency exposures are offset by gains or losses on the forward currency forward contracts in order to mitigate the risk and volatility associated with its foreign currency transactions. Such derivative instruments contain credit risk to the extent that the counterparty fails to perform under the contract. The Company seeks to mitigate such risks by limiting its counterparties to major financial institutions. In addition, the potential risk of loss with any one counterparty resulting from this type of credit risk is monitored. Management does not expect material losses as a result of nonperformance by counterparties.

Derivative instruments are recognized as either assets or liabilities and are measured at fair value. The accounting for changes in the fair value of a derivative instrument depends on the intended use of the derivative instrument and the resulting designation. The Company did not designate its foreign currency forward contract as a hedge for accounting purposes, and accordingly, the Company adjusted the contract to fair value by recognizing a gain on the derivative instrument in current earnings within "Other non-operating income (expense), net".

The Company continually monitors its exposure to fluctuations in foreign currency exchange rates. The Company may enter into additional foreign currency forward contracts in the future to mitigate its changing exposure to foreign currency exchange rate fluctuations, principally related to payables and receivables generated from sales and purchases denominated in non-functional currencies. The Company's intent is that foreign currency forward contracts will have terms corresponding to the duration and will mature upon settlement of the underlying asset or liability. The Company does not hold or issue financial instruments for speculative or trading purposes.

~~There were~~ no ~~foreign currency forward contracts outstanding as of~~ ~~March 31, 2013~~ or ~~June 24, 2012~~.

~~The weighted average total notional amount of foreign currency forward contracts outstanding during the three months ended~~ ~~March 31, 2013~~ ~~was~~ ~~$102 thousand, purchased in U.S. dollar equivalents. The weighted average total notional amount of foreign currency forward contracts outstanding during the~~ ~~nine~~ ~~months ended~~ ~~March 31, 2013~~ ~~was~~ ~~$33 thousand, purchased in U.S. dollar equivalents.~~

~~The table below provides a summary of the effect of the derivative instrument on the unaudited condensed consolidated statements of income (in thousands):~~

Derivatives Not Designated as Hedging Instruments Location of Gain (Loss) Recognized in Net Income Amount of Gain (Loss) Recognized in Net Income
Three months ended Nine Months Ended
March 31, 2013 March 25, 2012 March 31, 2013 March 25, 2012
Foreign currency forward contract Other non-operating income (expense), net $ 8
$ —
$ 8
$ —

The above gain on the derivative instrument includes the cost of entering into the contract (i.e. forward points), and was generally offset by a corresponding foreign currency loss on the underlying hedged transaction (i.e. accounts payable). The net gain on both the derivative instrument and the corresponding hedged transaction are reflected in "Other non-operating income (expense), net" in the accompanying unaudited consolidated statements of income.

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Note 7.6. Intangible Assets

The following table presents the components of intangible assets, net (in thousands):


	March 31, 2013							June 24, 2012							September 29, 2013							June 30, 2013
	Gross		Accumulated amortization			Net		Gross		Accumulated amortization			Net		Gross		Accumulated Amortization			Net		Gross		Accumulated Amortization			Net
Intangible assets with finite lives:
Customer relationships	$	137,440	$	(57,485	)	$	79,955	$	137,440	$	(51,103	)	$	86,337		$137,440		($61,451	)		$75,989		$137,440		($59,611	)		$77,829
Developed technology	162,760		(48,379		)	114,381		160,360		(33,141		)	127,219		162,760		(58,424		)	104,336		162,760		(53,476		)	109,284
Non-compete agreements	10,244		(3,547		)	6,697		10,244		(2,077		)	8,167		10,244		(4,527		)	5,717		10,244		(4,037		)	6,207
Trade names, finite-lived	520		(487		)	33		520		(469		)	51		520		(499		)	21		520		(493		)	27
Patent and license rights	111,672		(33,176		)	78,496		97,812		(28,791		)	69,021		120,364		(36,677		)	83,687		116,147		(34,849		)	81,298
Total intangible assets with finite lives	422,636		(143,074		)	279,562		406,376		(115,581		)	290,795		431,328		(161,578		)	269,750		427,111		(152,466		)	274,645
In-process research and development, indefinite-lived	—					—		2,400					2,400
Trade names, indefinite-lived	82,880					82,880		82,880					82,880		82,880					82,880		82,880					82,880
Total intangible assets	$	505,516	$	(143,074	)	$	362,442	$	491,656	$	(115,581	)	$	376,075		$514,208		($161,578	)		$352,630		$509,991		($152,466	)		$357,525

Total amortization ~~expense, including the amortization~~ of ~~acquisition related intangibles, patents and license rights,~~intangible assets recognized during the three ~~and nine~~ months ended ~~March 31,~~September 29, 2013 was $9.4 million ~~and~~ ~~$28.2 million, respectively.~~. For the three ~~and nine~~ months ended ~~March 25,~~September 23, 2012, total amortization ~~expense, including the amortization~~ of ~~acquisition related intangibles, patents and license rights,~~intangible assets recognized was $~~8.9~~9.2 million ~~and~~ ~~$22.9 million, respectively.~~.

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Total ~~annual~~future amortization expense of definite-lived intangible assets is estimated to be as follows (in thousands):

Fiscal Year Ending
June 30, 2013 (remainder of fiscal 2013) $ 9,460
June 29, 2014 35,806
June 28, 2015 32,831
June 26, 2016 32,553
June 25, 2017 30,587
Thereafter 138,325
Total $ 279,562



Fiscal Year Ending
June 29, 2014 (remainder of fiscal 2014)		$27,264
June 28, 2015	33,509
June 26, 2016	33,230
June 25, 2017	31,257
June 24, 2018	30,094
Thereafter	114,396
Total		$269,750

Note 8.7. Shareholders’ Equity

As of ~~March 31,~~September 29, 2013, pursuant to an extension of the ~~Company is~~stock repurchase program authorized by the Board of Directors, the Company is authorized to repurchase shares of its common stock having an aggregate purchase price not exceeding $200.0 million for all purchases from June ~~14, 2012~~20, 2013 through the ~~June 30, 2013~~expiration of the ~~program.~~program on June 29, 2014. During the ~~nine~~three months ended ~~March 31,~~September 29, 2013, there were no repurchases of common stock by the Company under the share repurchase program.

~~Table of Contents~~

Note 9.8. Earnings Per Share

The following presents the computation of basic earnings per share (in thousands, except per share ~~data)~~amounts):


	Three Months Ended				Nine Months Ended				Three Months Ended
	March 31, 2013		March 25, 2012		March 31, 2013		March 25, 2012		September 29, 2013		September 23, 2012
Basic:
Net income	$	22,157	$	9,489	$	58,683	$	34,386		$30,497		$16,123
Weighted average common shares - basic	116,682		115,641		116,059		114,348
Weighted average common shares									119,564		115,539
Basic earnings per share	$	0.19	$	0.08	$	0.51	$	0.30		$0.26		$0.14

The following computation reconciles the differences between the basic and diluted earnings per share presentations (in thousands, except per share ~~data)~~amounts):


	Three Months Ended				Nine Months Ended				Three Months Ended
	March 31, 2013		March 25, 2012		March 31, 2013		March 25, 2012		September 29, 2013		September 23, 2012
Diluted:
Net income	$	22,157	$	9,489	$	58,683	$	34,386		$30,497		$16,123
Weighted average common shares - basic	116,682		115,641		116,059		114,348		119,564		115,539
Dilutive effect of stock options, unvested shares and ESPP purchase rights	1,926		433		709		531
Dilutive effect of stock options, nonvested shares and ESPP purchase rights									2,800		421
Weighted average common shares - diluted	118,608		116,074		116,768		114,879		122,364		115,960
Diluted earnings per share	$	0.19	$	0.08	$	0.50	$	0.30		$0.25		$0.14

Potential common shares that would have the effect of increasing diluted earnings per share are considered to be ~~antidilutive~~anti-dilutive and as such, these shares are not included in calculating diluted earnings per share. For the three ~~and nine~~ months ended ~~March 31,~~September 29, 2013 and September 23, 2012, there were ~~2.2~~1.1 million and ~~8.7~~8.4 million, respectively, of potential common shares not included in the calculation of diluted earnings per share because their effect was ~~antidilutive. For the~~ ~~three and nine~~ ~~months ended~~ ~~March 25, 2012, there were~~ ~~7.9 million~~ ~~and~~ ~~6.8 million, respectively, of potential common shares not included in the calculation of diluted earnings per share because their effect was antidilutive.~~anti-dilutive.

Note ~~10.~~9. Stock-Based Compensation

The Company currently has one equity-based compensation plan, the 2004 Long-Term Incentive Compensation Plan, from which stock-based compensation awards can be granted to employees and directors. In addition, the Company has equity-based compensation plans that have been terminated ~~as to~~so that no future grants can be made under these plans, but under which options are currently outstanding.

~~During~~Prior to the first quarter of fiscal 2013, the Company’s stock-based awards had been service-based only. Beginning in fiscal 2013, the Company ~~initiated~~issued grants of awards that also contain performance-based ~~stock option and stock unit awards.~~conditions. Performance-based conditions are generally

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tied to future financial and/or operating performance of the Company. The compensation expense ~~for an award~~ with ~~a performance condition is based on the probable outcome of that performance condition. Compensation expense~~respect to performance-based grants is recognized if the Company believes it is probable that the performance condition will be ~~achieved~~achieved. The Company reassesses the probability of the achievement of the performance condition at each reporting period, and ~~is adjusted~~adjusts the compensation expense for subsequent changes in the estimate or actual outcome. As with non-performance based awards, compensation expense is recognized over the vesting period. The vesting period runs from the date of grant to the expected date that the performance objective is likely to be achieved.

The Company also has an Employee Stock Purchase Plan ~~("ESPP")~~(ESPP) that provides employees with the opportunity to purchase ~~the Company’s~~ common stock at a discount. The ESPP ~~was amended~~limits employee contributions to 15% of each employee’s compensation (as defined in the ~~second quarter~~plan). The ESPP allows employees to purchase shares at a 15% discount to the fair market value of ~~fiscal 2012 to increase~~common stock on the ~~six-month participation period to a~~purchase date during the twelve-month participation period, divided into two equal six-month purchase periods, and ~~to provide for~~provides a look-back feature. At the end of each six-month period in April and October, employees participating in the plan purchase the Company's common stock through the ESPP at a 15% ~~less than~~discount to the fair market value of the common stock on the first day of the twelve-month participation period or the purchase date, whichever is lower. The plan ~~amendment~~ also provides for an automatic reset feature to start participants on a new twelve-month participation period if the ~~share value~~stock price declines during the first six-month purchase period.

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Stock Option Awards

The following table summarizes ~~outstanding~~ option ~~awards as of~~ ~~March 31, 2013, and changes~~activity during the ~~nine~~three months ~~then~~ endedSeptember 29, 2013 (shares in thousands):


	Number of Shares		Weighted-Average Exercise Price		Number of Shares		Weighted-Average Exercise Price
Outstanding at June 24, 2012	8,800		$	36.71
Outstanding at June 30, 2013					8,657			$35.67
Granted	3,354		28.31		2,792		54.86
Exercised	(1,569	)	27.79		(767	)	37.42
Forfeited or expired	(453	)	37.41		(83	)	34.16
Outstanding at March 31, 2013	10,132		$	35.28
Outstanding at September 29, 2013					10,599			$40.61

Restricted Stock ~~and Stock Unit~~ Awards

A summary of nonvested ~~shares of~~ restricted stock awards (RSAs) and restricted stock unit awards (RSUs) outstanding under the Company’s 2004 Long-Term Incentive Compensation Plan as of ~~March 31,~~September 29, 2013, and changes during the ~~nine~~three months then ended, isare as follows ~~(shares in thousands)~~(in thousands, except per share data):


	Number of Shares/Units		Weighted- Average Grant- Date Fair Value		Number of RSAs/RSUs		Weighted-Average Grant-Date Fair Value
Nonvested at June 24, 2012	517		$	37.41
Nonvested at June 30, 2013					647			$33.80
Granted	350		28.11		512		54.60
Vested	(181	)	35.16		(215	)	33.79
Forfeited	(7	)	29.86		(7	)	35.45
Nonvested at March 31, 2013	679		$	33.29
Nonvested at September 29, 2013					937			$45.16

Stock-Based Compensation Valuation and Expense

The Company accounts for its employee stock-based compensation plan using the fair value method. The fair value method requires the Company to estimate the grant date fair value of its stock-based awards and amortize this fair value to compensation expense over the requisite service period or vesting term.

ToThe Company currently uses the Black-Scholes option-pricing model to estimate the fair value of the Company's stock option ~~awards, the Company currently uses the Black-Scholes option-valuation model.~~and ESPP awards. The determination of the fair value of stock-based payment awards on the date of grant using an ~~option-valuation~~option-pricing model is affected by the ~~Company's~~Company’s stock price as well as assumptions regarding a number of complex and subjective variables. These variables include the expected stock price volatility over the term of the awards, actual and projected employee stock option exercise behaviors, the risk-free interest rate and expected dividends. Due to the inherent limitations of option-valuation models, ~~available today, including~~ future events that are unpredictable and the estimation process utilized in determining the valuation of the stock-based awards, the ultimate value realized by award holders may vary significantly from the amounts expensed in the ~~Company's~~Company’s financial statements.

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For ~~restricted stock~~RSAs and ~~stock unit awards,~~RSUs, the grant date fair value is based upon the market price of the ~~Company's~~Company’s common stock on the date of the grant. This fair value is then amortized to compensation expense over the requisite service period or vesting term.

Stock-based compensation expense is ~~reduced by~~recognized net of estimated forfeitures such that expense is recognized only for those stock-based awards that are expected to vest. A forfeiture rate is estimated at the time of grant and revised, if necessary, in subsequent periods if actual forfeitures differ from initial estimates.

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Total stock-based compensation expense was as follows (in thousands):


	Three Months Ended				Nine Months Ended				Three Months Ended
Income Statement Classification	March 31, 2013		March 25, 2012		March 31, 2013		March 25, 2012
Cost of revenue, net	$	2,334	$	2,104	$	6,875	$	5,433
									September 29, 2013		September 23, 2012
Income Statement Classification:
Cost of goods sold										$2,379		$2,284
Research and development	3,441		2,738		10,445		7,769		3,712		3,056
Sales, general and administrative	8,140		7,407		23,625		21,682		8,487		7,145
Total	$	13,915	$	12,249	$	40,945	$	34,884		$14,578		$12,485

Note ~~11.~~10. Income Taxes

The variation between the Company's effective income tax rate and the U.S. statutory rate of ~~35 percent~~35% is ~~primarily~~ due to ~~(i) the inclusion, in the~~ ~~third~~ ~~quarter of fiscal~~ ~~2013~~, of the tax benefit related to the retroactive reinstatement and extension of the research and development credit, including the cumulative effect of the decrease in the Company's full year estimated effective tax rate as a ~~result, and (ii) a higher~~ percentage of the Company's projected income for the full year being derived from international locations with lower tax rates than the U.S. ~~The research~~ and ~~development credit, which had previously expired on December 31, 2011, was reinstated as part~~the impact of tax credits available in the current year. A change in the mix of pretax income of the ~~American Taxpayer Relief Act of 2012 enacted~~Company's various tax jurisdictions can have a material impact on ~~January 2, 2013. This legislation retroactively reinstated and extended~~ the ~~credit from the previous expiration date through December 31, 2013.~~ Company's periodic effective tax rate.

U.S. GAAP requires a two-step approach to recognizing and measuring uncertain tax positions. The first step is to evaluate the tax position for recognition by determining if the weight of available evidence indicates that it is more likely than not that the position will be sustained on audit, including resolution of related appeals or litigation processes, if any. The second step is to measure the tax benefit as the largest amount that is cumulatively more than ~~50 percent~~50% likely to be realized upon ultimate settlement.

As of June ~~24, 2012~~30, 2013, the Company's liability for unrecognized tax benefits was $~~4.4~~2.7 million. ~~During~~The Company recognized a $10.3 million increase to the liability for unrecognized tax benefits due to uncertainty regarding an application for a method of accounting change for tax purposes filed in August 2013. In addition, there was a ~~nine~~$0.7 million ~~months ended~~ ~~March 31, 2013, there were~~ no ~~changes~~decrease to the amount of unrecognized tax ~~benefits.~~benefits following the settlement of prior year tax audits. As a result, the total liability for unrecognized tax benefits as of ~~March 31,~~September 29, 2013 was $~~4.4~~12.3 million. If any portion of this ~~$4.4~~$12.3 million is recognized, the Company will then include that portion in the computation of its effective tax rate. Although the ultimate timing of the resolution and/or closure of audits is highly uncertain, the Company believes it is reasonably possible that approximately $~~3.4~~1.4 million of gross unrecognized tax benefits will change in the next 12 months as a result of pending audit settlements or statute requirements.

The Company files U.S. federal, U.S. state and foreign tax returns. For U.S. federal purposes, the Company is generally no longer subject to tax examinations for fiscal years ended June 28, 2009 and prior. For U.S. state tax returns, the Company is generally no longer subject to tax examinations for fiscal years prior to ~~2009~~.2010. For foreign purposes, the Company is generally no longer subject to examination for tax periods ~~2002~~2003 and prior. Certain carryforward tax attributes generated in prior years remain subject to examination and adjustment. The Company is currently under ~~inquiry by the Hong Kong Inland Revenue Department for the fiscal year ended~~ ~~June 29, 2008~~ ~~("fiscal~~ ~~2008") through the fiscal year ended~~ ~~June 27, 2010~~ ~~("fiscal~~ ~~2010"). The Company is also currently under~~ audit by the German Federal Central Tax Office for the fiscal year ended June 29, 2008 (fiscal 2008) through the fiscal year ended June 27, 2010 (fiscal 2010). During the first quarter of fiscal 2014, the Company settled its examination with the Hong Kong Inland Revenue Department for fiscal 2008 through fiscal 2010. This settlement resulted in the Company recognizing tax expense of ~~2010~~$0.3 million. in the first quarter of fiscal 2014, fully offset by a decrease to the amount of unrecognized tax benefits.

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Note ~~12.~~11. Commitments and Contingencies

Warranties

The following table summarizes the changes in the Company's product warranty liabilities (in thousands):

Balance at June 24, 2012 $ 5,513
Warranties accrued in current period 2,873
Changes in estimates for pre-existing warranties 787
Expenditures (2,027 )
Balance at March 31, 2013 $ 7,146



	Three Months Ended
	September 29, 2013
Balance at beginning of period		$6,171
Warranties accrued in current period	553
Changes in estimates for pre-existing warranties	(430		)
Expenditures	(312		)
Balance at end of period		$5,982

Product warranties are estimated and recognized at the time the Company recognizes revenue. The warranty periods range from ~~ninety~~90 days to ~~ten~~10 years. The Company accrues warranty liabilities at the time of sale, based on historical and projected incident rates and expected future warranty costs. The warranty reserves, which are primarily related to Lighting ~~products,~~Products, are

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evaluated on a quarterly basis based on various factors including historical warranty claims, assumptions about the frequency of warranty claims, and assumptions about the frequency of product failures derived from quality testing, field monitoring and the Company's reliability estimates. As of September 29, 2013, $942 thousand of the Company's product warranty liabilities were classified as long-term.

Litigation

The Company is currently a party to various legal proceedings, including those described in the Company's Annual Report on Form 10-K for fiscal ~~2012 and in the Company's Quarterly Reports on Form 10-Q for the first and second quarters of fiscal~~ 2013. The following is provided as an update to the Company's legal proceedings as contained in ~~those reports.~~that report. Unless otherwise indicated, the potential losses for claims against the Company in these matters are not reasonably estimable.

Cooper Lighting Litigation

~~In addition to the previously disclosed litigation with~~Ruud Lighting, Inc. filed a complaint for patent infringement against Cooper Lighting, LLC in the U.S. District Court for the Eastern District of Wisconsin on April 2, 2010. The complaint as amended seeks injunctive relief and damages for infringement of two U.S. patents owned by Ruud Lighting: No. 7,686,469, entitled "LED Lighting Fixture"; and No. 7,891,835, entitled “Light-Directed Apparatus with Protected Reflector-Shield and Lighting Fixture Utilizing Same.” On May 23, 2012, Ruud Lighting filed a second complaint for patent infringement against Cooper Lighting, LLC in the U.S. District Court for the Eastern District of Wisconsin. The complaint seeks injunctive relief and damages for infringement of a third U.S. patent owned by Ruud Lighting, No. 7,952,262, entitled “Modular LED Unit Incorporating Interconnected Heat Sinks Configured To Mount and Hold Adjacent LED Modules." In each of these actions Cooper Lighting has filed an answer and counterclaims in which it denies any infringement and seeks a declaratory judgment that the asserted claims of the patents are invalid. On February 19, 2013, the Company, as successor-in-interest to Ruud Lighting, Inc., filed a third complaint for patent infringement against Cooper Lighting in the U.S. District Court for the Eastern District of Wisconsin. The complaint seeks injunctive relief and damages for infringement of two U.S. patents owned by the Company, No. 8,282,239, entitled “Light-Directing Apparatus with Protected Reflector-Shield and Lighting Fixture Utilizing Same” and No. 8,070,306, entitled “LED Lighting Fixture.”

~~Also,~~Cooper Lighting, LLC filed a complaint for patent infringement against the Company and Ruud Lighting, Inc. in the U.S. District Court for the Northern District of Georgia on September 7, 2012. The complaint seeks injunctive relief and damages for infringement of one U.S. patent owned by Cooper Lighting, LLC: No. 8,210,722, entitled "LED Device for Wide Beam Generation." The Company has filed an answer in which it denies any infringement and asserts that the patent is invalid as ~~previously reported,~~ well as other defenses.

Illumination Management Solutions, Inc., a subsidiary of Cooper Lighting, LLC, filed a complaint for patent infringement against Ruud Lighting in the U.S. District Court for the Eastern District of Texas on June 7, 2010. The action was later transferred to the U.S. District Court for the Eastern District of Wisconsin. As amended in January 2012, the complaint alleged that Ruud Lighting ~~infringed~~ is infringing two U.S. patents owned by Illumination Management Solutions, No. 7,674,018 and No. 7,993,036, each entitled "LED Device for Wide Beam Generation." It also alleged that Ruud Lighting and its then president, Alan Ruud, who served on the plaintiff's board of directors in 2006 and 2007 when Ruud Lighting was a shareholder of the plaintiff, conspired to misuse confidential information obtained from the plaintiff to file patent applications and to obtain patents assigned to Ruud Lighting. The complaint sought injunctive relief, damages and ownership of the patent applications and patents alleged to have been wrongfully filed and obtained. The court in October 2012 granted partial summary judgment in favor of Ruud Lighting, finding that most of the accused products did not infringe either of the asserted patents. The court in February 2013 entered final judgment in which the court 1) dismissed the claims relating to most of the accused products, finding that they did not infringe either of the

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asserted patents; 2) dismissed with prejudice and with the consent of the parties the claims with respect to the remaining accused products; 3) severed the conspiracy claim, which was subsequently voluntarily dismissed; and 4) dismissed the remaining claims and counterclaims without prejudice. In March 2013, the plaintiffs filed a notice of appeal from this judgment to the U.S. Court of Appeals for the Federal Circuit.

~~Dow Corning Litigation~~

~~Dow Corning Compound Semiconductor~~Ruud Lighting is a defendant in an action commenced by Illumination Management Solutions ~~LLC filed a complaint against~~in the ~~Company in~~U.S. District Court for the Central District of California on June 8, 2010 and later transferred to the U.S. District Court for the Eastern District of ~~Michigan~~Wisconsin. As amended in January 2013, the complaint names as defendants Ruud Lighting and two of its employees, Alan Ruud and Christopher Ruud, and asserts that the defendants engaged in wrongful acts arising out of the relationship between the plaintiff and Ruud Lighting in 2006 and 2007 when Ruud Lighting was a shareholder of the plaintiff and Alan Ruud served on ~~September 27, 2011.~~the plaintiff's board of directors. The complaint ~~sought~~alleges that the defendants breached fiduciary duties and otherwise acted improperly by pursuing a ~~declaratory judgment~~plan to compete with the plaintiff and that the defendants misused information obtained from the plaintiff as fiduciaries and subject to a non-disclosure agreement. These allegedly wrongful acts included filing patent applications and obtaining patents assigned to Ruud Lighting on inventions claimed by the plaintiff. The complaint also alleges that Ruud Lighting: 1) marketed its LED products without reference to certain optical technology claimed by the plaintiff, thereby breaching a marketing agreement with the plaintiff and engaging in unfair competition and false advertising; and 2) breached the marketing agreement by failing to give the plaintiff a right of first refusal to integrate the plaintiff's optical technology into Ruud Lighting LED products. The complaint further alleges that the plaintiff ~~did~~is entitled to a correction of the inventors named in one or more patents to add a founder of the plaintiff as an inventor. The complaint seeks to recover damages, all profits and other gains realized by defendants as a result of the acts complained of, attorneys' fees, ownership of any interest in the patent applications and patents alleged to have been wrongfully filed and obtained, and correction of the named inventors on one or more patents.

In September 2013, the Company and the Cooper Lighting and Illumination Management Solutions parties reached a binding term sheet agreement to settle all six cases. This non-cash settlement agreement provides for a royalty-free cross license of all of the patents-in-suit in the six cases for the life of the patents; a royalty-free cross license of each of the Company’s and Cooper Lighting’s LED luminaire patent portfolios for 7 years (with carve-outs of the Company’s LED chip, LED component and LED replacement lamp patents from the cross license, as well as carve-outs for certain LED luminaires of Cooper Lighting that are not ~~infringe three U.S. patents owned~~for general illumination); and a supply agreement, with no minimum purchase commitment and with a 7 year term, whereby the Company may sell Cooper Lighting LED components and modules. The parties are negotiating the terms of the definitive agreements to effect this binding agreement. The Company recorded a $17.4 million non-cash litigation settlement charge in the first quarter of fiscal 2014, representing the current estimated fair value of the patent licenses to be provided to the Cooper Lighting and Illumination Management Solutions parties in excess of the fair value patent license rights to be received by the Company ~~relating~~under the terms of the proposed cross license agreement. This $17.4 million obligation will be amortized into income over the reminder of the 7 year license period.

In conjunction with the September 2013 settlement with the Cooper Lighting and Illumination Management Solutions parties, the Company also recorded a $17.4 million offset to ~~high quality silicon carbide materials~~the non-cash litigation charge to reflect the amount receivable by the Company from the Stock Purchase Agreement escrow funds, including cash and ~~that~~common stock consideration, pursuant to a letter agreement approved by the ~~patents are invalid.~~Audit Committee, which the Company entered into during September 2013 with Christopher Ruud, acting as the Seller Representative for the former Ruud Lighting shareholders. The ~~patents in suit were: No. 7,294,324, entitled “Low Basal Plane Dislocation Bulk Grown SiC Wafers”; No. 7,314,520, entitled “Low 1C Screw Dislocation 3 Inch Silicon Carbide Wafer”;~~escrow consideration will be provided to the Company upon the execution of the final settlement agreement with the Cooper Lighting and No. 7,314,521, entitled “Low Micropipe 100 MM Silicon Carbide Wafer.” The district court dismissed the action with prejudice in March 2013 for lack of subject matter jurisdiction on the grounds that at the time the complaint was filed there was no substantial or immediate controversy between the parties regarding the patents-in-suit.Illumination Management Solutions parties.

The Fox Group Litigation

The Fox Group, Inc. filed a complaint for patent infringement against the Company in the U.S. District Court for the Eastern District of Virginia on June 29, 2010. The complaint, which sought injunctive relief and damages, asserted that the Company was infringing two U.S. patents relating to high quality silicon carbide material: No. 6,534,026, entitled "Low Defect Density Silicon Carbide" (the "'026 patent"); and No. 6,562,130, entitled "Low Defect Axially Grown Single Crystal Silicon Carbide" (the "'130 patent"). The district court granted summary judgment in favor of the Company in August 2011. The court determined that the Company did not infringe the '026 patent and that the claims of the '130 patent asserted against the Company are invalid. The Fox Group appealed the ~~judgment~~decision to the U.S. Court of Appeals for the Federal Circuit, which affirmed the judgment. The Fox Group's petition for a rehearing with the Federal Circuit was denied in February 2013 and the Fox Group filed a writ of certiorari with the U.S. Supreme Court in May 2013. The U.S. Supreme court denied the writ of certiorari on October 15, 2013, thereby exhausting the Fox Group’s appeals in this matter.

1918

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~~Lighting Science Group Litigation~~

Lighting Science Group Corporation filed a complaint for patent infringement against the Company in the U.S. District Court for the Middle District of Florida on April 10, 2013. The complaint seeks injunctive relief and damages for alleged infringement of U.S. patent No. 8.201,968, entitled “Low Profile Light."

Note ~~13.~~12. Reportable Segments

The Company's~~three~~ operating and reportable segments ~~include:~~are:

LED Products

Lighting Products

Power and RF Products

Reportable Segments Description

The Company's LED Products segment includes LED ~~components,~~chips, LED ~~chips,~~components and SiC materials. The Company's Lighting Products segment consists of both LED and traditional lighting systems, with its primary focus on LED lighting. The Company's Power and RF Products segment includes power devices and RF devices.

Financial Results by Reportable Segment

The ~~following~~ table below reflects the results of the Company's reportable segments as reviewed by the Chief Operating Decision Maker (CODM) for the three ~~and nine~~ months ended ~~March 31,~~September 29, 2013 and ~~March 25,~~September 23, 2012. The Company's CODM is the Chief Executive Officer.

The Company uses substantially the same accounting policies to derive the segment results reported below as those used in the Company's consolidated financial statements.

The Company's CODM does not review inter-segment revenue when evaluating segment performance and allocating resources to each segment. Thus, inter-segment revenue is not included in the segment revenues presented in the ~~following table.~~table below. As such, total segment revenue in the table below is equal to the Company's consolidated revenue.

The Company's CODM reviews gross profit as the lowest and only level of segment profit. As such, all items below gross profit in the consolidated ~~statement~~statements of income must be included to reconcile the consolidated gross profit presented in the ~~following~~ table below to the Company's consolidated income before income taxes.

In order to determine gross profit for each reportable segment, the Company allocates direct costs and indirect costs to each segment's cost of ~~sales.~~revenue. The Company allocates indirect costs, such as employee benefits for manufacturing employees, shared facilities services, information technology, purchasing, and customer service, when the costs are identifiable and beneficial to the reportable segment. The Company allocates these indirect costs based on a reasonable measure of utilization that considers the specific facts and circumstances of the costs being allocated. Inventory is normally transferred between the Company's reportable segments at cost. However, due to the vertically-integrated nature of the Company's business and the fixed cost nature of the Company's manufacturing operations, the Company will apportion, as necessary, lower of cost or market write-downs on products among the segments involved in producing the products. The lower of cost or market write-down is apportioned based on each ~~segments'~~segment's proportional production cost and is reported as an increase to each segment's cost of ~~sales.~~revenue. The Company's CODM evaluates segment performance and resource allocation after apportionment of any lower of cost or market write-downs. ~~For the three and nine months ended March 31, 2013, the Company allocated~~ ~~$2.2 million~~ ~~for a lower of cost or market write-down from the Lighting Products segment to the LED Products segment.~~

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Unallocated costs in the table below are not reviewed by the Company's CODM when evaluating segment performance and allocating resources to each segment. These unallocated costs ~~include variable compensation costs for~~consist primarily of manufacturing ~~employees consisting primarily of~~employees' stock-based compensation, expenses for profit sharing and quarterly or annual incentive plans, matching contributions under the Company's 401(k) plan and acquisition related costs.

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Revenues, gross profit and gross margin for each of the Company's segments were as follows (in thousands, except percentages):


	Three Months Ended						Nine Months Ended						Three Months Ended
	March 31, 2013			March 25, 2012			March 31, 2013			March 25, 2012			September 29, 2013			September 23, 2012
	(In thousands)
Revenue
Revenues:
LED Products	$	195,561		$	180,944		$	584,070		$	571,884			$218,023			$187,547
Lighting Products	130,659			86,527			361,446			233,936			147,918			108,073
Power and RF Products	22,714			17,330			65,457			52,079			25,065			20,133
Total Revenue	$	348,934		$	284,801		$	1,010,973		$	857,899
Total revenue														$391,006			$315,753

Gross Profit
LED Products	$	85,728		$	70,257		$	245,381		$	218,319
Lighting Products	39,966			24,640			115,449			72,517
Power and RF Products	12,033			7,954			35,253			21,970
Total Segment Gross Profit	137,727			102,851			396,083			312,806
Unallocated Costs	(4,717		)	(3,438		)	(13,548		)	(10,247		)
Consolidated Gross Profit	$	133,010		$	99,413		$	382,535		$	302,559
Gross Profit and Gross Margin:
LED Products gross profit														$101,653			$75,467
LED Products gross margin													46.6		%	40.2		%
Lighting Products gross profit													39,818			34,100
Lighting Products gross margin													26.9		%	31.6		%
Power and RF Products gross profit													13,456			10,422
Power and RF Products gross margin													53.7		%	51.8		%
Total segment reporting													154,927			119,989
Unallocated costs													(4,170		)	(3,940		)
Consolidated gross profit														$150,757			$116,049
Consolidated gross margin													38.6		%	36.8		%

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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

Information set forth in this Quarterly Report on Form 10-Q contains various “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended (the ~~“Securities Act”)~~Securities Act), and Section 21E of the Securities Exchange Act of 1934, as amended (the ~~“Exchange Act”)~~Exchange Act). All information contained in this report relative to future markets for our products and trends in and anticipated levels of revenue, gross margins and expenses, as well as other statements containing words such as “believe,” “project,” “may,” “will,” “anticipate,” “target,” “plan,” “estimate,” “expect” and “intend” and other similar expressions constitute forward-looking statements. These forward-looking statements are subject to business, economic and other risks and uncertainties, both known and unknown, and actual results may differ materially from those contained in the forward-looking statements. Any forward-looking statements we make are as of the date made, and except as required under the U.S. federal securities laws and the rules and regulations of the Securities and Exchange Commission (the ~~"SEC")~~SEC), we have no duty to update them if our views later change. These forward-looking statements should not be relied upon as representing our views as of any date subsequent to the date of this Quarterly Report. Examples of risks and uncertainties that could cause actual results to differ materially from historical performance and any forward-looking statements include, but are not limited to, those described in “Risk Factors” in Part II, Item 1A of this Quarterly Report.

The following discussion is designed to provide a better understanding of our unaudited consolidated financial statements, including a brief discussion of our business and products, key factors that impacted our performance, and a summary of our operating results. The following discussion should be read in conjunction with the unaudited condensed consolidated financial statements and the notes thereto included in Part I, Item 1 of this Quarterly Report on Form 10-Q, and the consolidated financial statements and notes thereto and Management’s Discussion and Analysis of Financial Condition and Results of Operations contained in our Annual Report on Form 10-K for the year ended June ~~24, 2012~~30, 2013. Historical results and percentage relationships among any amounts in the financial statements are not necessarily indicative of trends in operating results for any future periods.

Overview

Cree, Inc. (Cree, we, our, or us) is a leading innovator of lighting-class light emitting diode (LED) products, lighting products and semiconductor products for power and radio-frequency (RF) applications. Our products are targeted for applications such as indoor and outdoor lighting, video displays, transportation, electronic signs and signals, power supplies, inverters and wireless systems.

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We develop and manufacture semiconductor materials and devices primarily based on silicon carbide (SiC), gallium nitride (GaN) and related compounds. In many cases, the ~~physical and electronic~~ properties of SiC and GaN offer technical advantages over traditional silicon, gallium arsenide (GaAs) and other materials used for electronic ~~and opto-electronic~~ applications.

Our LED products consist of LED components, LED chips and SiC materials. As LED technology improves, we believe the potential market for LED lighting will continue to expand. Our success in selling LED products depends upon our ability to offer innovative products and our ability to enable our customers to develop and market LED based products that successfully compete and drive LED adoption against traditional lighting products.

Our lighting products consist of both LED and traditional lighting systems. We design, manufacture and sell lighting fixtures and lamps for the commercial, industrial and consumer markets.

In addition, we develop, manufacture and sell power and RF devices. Our power products are made from SiC and provide increased efficiency, faster switching speeds ~~than~~and reduced system size and weight over comparable silicon-based power ~~devices for a given power level.~~devices. Our RF devices are made from GaN and ~~produce higher power densities~~provide improved efficiency, bandwidth and frequency of operation as compared to silicon or gallium arsenide.

The majority of our products are manufactured at our production facilities located in North Carolina, Wisconsin and China. We also use contract manufacturers for certain aspects of product fabrication, assembly and packaging. We operate research and development facilities in North Carolina, California, Wisconsin, India and China.

Cree, Inc. is a North Carolina corporation established in 1987, and our headquarters are in Durham, North Carolina.

Reportable Segments

WeAs of September 29, 2013, we have three reportable segments:

LED Products

Lighting Products

Power and RF Products

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Reportable segments are components of an entity that have separate financial data that the entity's Chief Operating Decision Maker (CODM) regularly reviews when allocating resources and assessing performance. Our CODM is the Chief Executive Officer.

For financial results by reportable segment, please refer to Note 12 "Reportable Segments."

Industry Dynamics and Trends

There are a number of industry factors that affect our business which include, among others:

Overall Demand for Products and Applications using LEDs. Our potential for growth depends significantly on the adoption of LEDs within the general lighting market and our ability to affect this rate of adoption. Although the market for LED lighting has grown in recent years, adoption of LEDs for general lighting is relatively new, still limited, and faces significant challenges before widespread adoption. Demand also fluctuates based on various market cycles, a continuously evolving LED industry supply chain, and demand dynamics in the market. These uncertainties make demand difficult to forecast for us and our customers.

Intense and Constantly Evolving Competitive Environment. Competition in the LED and lighting industry is intense. Many companies have made significant investments in LED development and production equipment. Traditional lighting companies and new entrants are investing in ~~LED based~~LED-based lighting products as LED adoption has gained momentum. Traditional lighting companies have taken steps to try and limit access to their sales channels, including lighting agents and distributors. Product pricing pressures exist as market participants often undertake pricing strategies to gain or protect market share, increase the utilization of their production capacity and open new applications to ~~LED based~~LED-based solutions. To remain competitive, market participants must continuously increase product performance and reduce costs. To address these competitive pressures, we have invested in R&D activities to support new product development to deliver higher levels of performance and lower costs to differentiate our products in the market.

Technological Innovation and Advancement. Innovations and advancements in LED, ~~technology~~power and RF technologies continue to expand the potential commercial application ~~of LEDs~~for our products, particularly in the general illumination, ~~market.~~power electronics and wireless markets. However, new technologies or standards could emerge, or improvements could be made in existing technologies, that could reduce or limit the demand for ~~LEDs~~our products in certain markets.

Regulatory Actions Concerning Energy Efficiency. Many countries have already instituted or have announced plans to institute government regulations and programs designed to encourage or mandate increased energy efficiency, even in some cases banning forms of incandescent lighting, which are advancing the adoption of more energy efficient lighting solutions such as LEDs. Government agencies are also involved in setting standards for LED lighting, which can affect market acceptance and the availability of rebates from government agencies or third parties such as utilities. While this trend is generally positive, these regulations are affected by changing political priorities and evolving technical standards which can modify or limit the effectiveness of these new regulations.

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Intellectual Property Issues. Market participants rely on patented and non-patented proprietary information relating to product development, manufacturing capabilities and other core competencies of their business. Protection of intellectual property is critical. Therefore, steps such as additional patent applications, confidentiality and non-disclosure agreements, as well as other security measures are generally taken. To enforce or protect intellectual property rights, litigation or threatened litigation commonly occurs.

Financial Results

The following is a summary of our financial results for the ~~nine~~three months ended ~~March 31,~~September 29, 2013:

Revenues increased to $~~1,011.0~~391.0 million for the ~~nine~~three months ended ~~March 31,~~September 29, 2013 from $~~857.9~~315.8 million for the ~~nine~~three months ended ~~March 25,~~September 23, 2012.

For the ~~nine~~three months ended ~~March 31,~~September 29, 2013, gross margins improved to ~~37.8%~~38.6% from ~~35.3%~~36.8% for the ~~nine~~three months ended ~~March 25,~~September 23, 2012. For the three months ended September 29, 2013, gross profit increased to $150.8 from $116.0 million for the three months ended September 23, 2012.

Operating income was $~~65.6~~36.8 million in the ~~nine~~three months ended ~~March 31,~~September 29, 2013 compared to $~~30.6~~17.3 million in the ~~nine~~three months ended ~~March 25,~~September 23, 2012. Net income per diluted share for the ~~nine~~three months ended ~~March 31,~~September 29, 2013, was $~~0.50~~0.25 compared to $~~0.30~~0.14 for the ~~nine~~three months ended ~~March 25,~~September 23, 2012.

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Combined cash, cash equivalents and short-term investments increased to $1.1 billion at September 29, 2013 compared to $1.0 billion at June 30, 2013. Cash provided by operating activities was $69.2 million for the three months ended September 29, 2013, compared to $85.7 million for the three months ended September 23, 2012.

Inventory increased to $~~195.7~~217.3 million at ~~March 31,~~September 29, 2013 compared to $~~188.8~~197.0 million at June ~~24, 2012~~.

~~Combined cash, cash equivalents and marketable investments increased to~~ ~~$937.1 million~~ at ~~March 31,~~30, 2013 ~~compared to~~ ~~$744.5 million~~ at ~~June 24, 2012~~.

Business Outlook

We project that the markets for our products will remain highly competitive during fiscal ~~2013~~2014. We ~~are~~anticipate focusing on the following key areas, among others, in response to this competitive environment:

~~Accelerate adoption ofLED lighting.~~Lead with innovation and drive to cost parity. We continue to work ~~to develop~~on developing new LEDs, LED lighting systems, and Power and RF devices to ~~increase the lumens per dollar, which brings LED lighting closer to price~~deliver improved value that approaches cost parity with ~~conventional~~existing technology and ~~reduces~~solutions. We believe that as our technology approaches cost parity, the ~~payback time~~market for these products will expand significantly.

Build the ~~customer.~~ Cree brand. We are ~~focused on delivering best-in-class products for key lighting categories and expanding our sales channels~~working to build the Cree brand in both the commercial and ~~access more customers.~~consumer lighting segments by expanding our product offerings and continuing to invest in marketing the value of the Cree LED bulb and LED lighting directly to the end user. The level of investment will vary from quarter to quarter to optimize new product introductions, utility rebates, channel opportunities and seasonal trends.


•	~~Grow LED component sales through product innovation.~~ ~~We are working to leverage our SC~~³ Technology™ next generation LED platform into a range of new LED component products that are targeted to deliver more lumens per dollar to the customer. We are also developing component and module products targeted to simplify our customers' product designs and reduce their time to market.

~~Leverage technology leadership in Power and RF~~Focus on select market segments to ~~open new applications for these products.~~drive LED adoption. In ~~the power product line,~~addition to our broad sales strategies, we are ~~working~~focused on a number of market segments where we can upgrade existing lighting and drive LED adoption with ~~our customers to combine our SiC MOSFET~~a combination of new product offerings, short payback, expanded services and Schottky diodes technology to enable power modules for solar, uninterruptable power supplies (UPS) and motor control applications. In the RF product line, we are developing GaN based products to access new applications.innovative channel approaches.

Translate product innovation into revenue and profit growth. We target ~~incremental improvement~~revenue growth from ~~factory cost reductions, process improvements~~new products and increased LED adoption and profit growth from the combination of higher sales, lower cost ~~new product designs.~~products and operating expense leverage.

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Results of Operations

The following table sets forth certain consolidated statement of income data for the periods ~~indicated:~~indicated (in thousands, except per share amounts and percentages):


	Three Months Ended									Nine Months Ended								Three Months Ended
	March 31, 2013				March 25, 2012					March 31, 2013				March 25, 2012				September 29, 2013				September 23, 2012
(in thousands, except per share amounts and percentages)	Dollars		% of Revenue		Dollars			% of Revenue		Dollars		% of Revenue		Dollars		% of Revenue
																		Dollars		% of Revenue		Dollars		% of Revenue
Revenue, net	$	348,934	100	%	$	284,801		100	%	$	1,010,973	100	%	$	857,899	100	%		$391,006	100	%		$315,753	100	%
Cost of revenue, net	215,924		62	%	185,388			65	%	628,438		62	%	555,340		65	%	240,249		61	%	199,704		63	%
Gross profit	133,010		38	%	99,413			35	%	382,535		38	%	302,559		35	%	150,757		39	%	116,049		37	%
Research and development	39,036		11	%	36,148			13	%	116,524		12	%	106,436		12	%	41,743		11	%	37,547		12	%
Sales, general and administrative	62,140		18	%	50,074			18	%	174,885		17	%	144,789		17	%	64,278		16	%	52,645		17	%
Amortization of acquisition-related intangibles	7,719		2	%	7,368			3	%	23,108		2	%	18,660		2	%	7,287		2	%	7,670		2	%
Loss on disposal or impairment of long-lived assets	863		—	%	816			—	%	2,385		—	%	2,088		—	%	657		—	%	898		—	%
Operating income	23,252		7	%	5,007			2	%	65,633		6	%	30,586		4	%	36,792		9	%	17,289		5	%
Other non-operating income (expense), net	494		—	%	324			—	%	2,622		—	%	1,187		—	%
Interest income, net	2,018		1	%	1,859			1	%	5,756		1	%	5,628		1	%
Non-operating income, net																		2,818		1	%	3,385		1	%
Income before income taxes	25,764		7	%	7,190			3	%	74,011		7	%	37,401		4	%	39,610		10	%	20,674		7	%
Income tax expense (benefit)	3,607		1	%	(2,299		)	(1	)%	15,328		2	%	3,015		—	%
Income tax expense																		9,113		2	%	4,551		1	%
Net income	22,157		6	%	9,489			3	%	58,683		6	%	34,386		4	%		$30,497	8	%		$16,123	5	%
Basic earnings per share																			$0.26				$0.14
Diluted earnings per share	$	0.19			$	0.08				$	0.50			$	0.30				$0.25				$0.14

~~Our fiscal 2013 results include a nominal benefit~~

Table of ~~an additional week included in the~~ ~~nine~~ ~~month period ended~~ ~~March 31, 2013, as compared to the~~ ~~nine~~ ~~month period ended~~ ~~March 25, 2012~~.Contents

Revenues

Revenues for the three ~~and nine~~ months ended ~~March 31,~~September 29, 2013 and ~~March 25,~~September 23, 2012 were comprised of the following (in thousands, except percentages):


	Three Months Ended										Nine Months Ended										Three Months Ended
	March 31, 2013			March 25, 2012			Change				March 31, 2013			March 25, 2012			Change				September 29, 2013			September 23, 2012			Change
LED Products	$	195,561		$	180,944		$	14,617	8	%	$	584,070		$	571,884		$	12,186	2	%		$218,023			$187,547			$30,476	16	%
Percent of revenue	56		%	64		%					58		%	67		%					56		%	60		%
Lighting Products	130,659			86,527			44,132		51	%	361,446			233,936			127,510		55	%	147,918			108,073			39,845		37	%
Percent of revenue	37		%	30		%					36		%	27		%					38		%	34		%
Power and RF Products	22,714			17,330			5,384		31	%	65,457			52,079			13,378		26	%	25,065			20,133			4,932		24	%
Percent of revenue	7		%	6		%					6		%	6		%					6		%	6		%
Total revenue	$	348,934		$	284,801		$	64,133	23	%	$	1,010,973		$	857,899		$	153,074	18	%		$391,006			$315,753			$75,253	24	%

Our consolidated revenue increased ~~23%~~24% to $~~348.9~~391.0 million in the ~~third~~first quarter of fiscal 2014 from $315.8 million in the first quarter of fiscal 2013 ~~from~~ ~~$284.8 million~~. Revenue increased in ~~the~~ ~~third~~ ~~quarter of fiscal2012. This year-over-year increase is due to higher sales across~~ all ~~three~~ of our ~~reportable~~ segments, ~~but driven primarily by the~~with substantial increases in our Lighting Products ~~segment. For the~~ ~~nine~~ ~~months ended~~ ~~March 31, 2013, our consolidated revenue increased~~ ~~18%~~ to ~~$1,011.0 million~~ ~~from~~ ~~$857.9 million~~ ~~for the~~ ~~nine~~ ~~months ended~~ ~~March 25, 2012. This increase is due to increased~~

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~~sales of our existing products as discussed above,~~ and ~~recognition of revenues from the Ruud Lighting acquisition for a full first quarter of fiscal year 2013.~~LED Products segments.

LED Products Segment Revenue

LED Products revenue represents the largest portion of our revenue with ~~approximately~~ 56% and ~~64%~~60% of our total revenues for the ~~third~~first quarter of fiscal ~~2013~~2014 and fiscal ~~2012~~2013, respectively.

LED Products revenue increased ~~approximately~~ 8%16% to $~~195.6~~218.0 million in the ~~third~~first quarter of fiscal 2014 from $187.5 million in the first quarter of fiscal 2013 ~~from~~ ~~$180.9 million~~ ~~in the~~ ~~third~~ ~~quarter of fiscal~~ ~~2012, and approximately~~ 2% to ~~$584.1 million~~ ~~for the~~ ~~nine~~ ~~months ended~~ ~~March 31, 2013~~ ~~from~~ ~~$571.9 million~~ ~~for the~~ ~~nine~~ ~~months ended~~ ~~March 25, 2012~~.

~~Changes~~ The increase in revenue ~~are~~was the result of an overall increase in the number of units sold, primarily from our newer products, partially offset by a decline in selling prices. The average selling prices for our LED products decreased in fiscal ~~2013~~2014 compared to fiscal ~~2012~~2013, due primarily to market downward pricing pressure and sales of new lower cost products.

Lighting Products Segment Revenue

Lighting Products revenue represents ~~approximately~~ ~~37%~~38% and ~~30%~~34% of our total revenues for the ~~third~~first quarter of fiscal ~~2013~~2014 and fiscal ~~2012~~2013, respectively.

Lighting Products revenue increased ~~approximately~~ ~~51%~~37% to $~~130.7~~147.9 million in the ~~third~~first quarter of fiscal 2014 from $108.1 million in the first quarter of fiscal 2013 ~~from~~ ~~$86.5 million~~. The increase in ~~the~~ ~~third~~ ~~quarter of fiscal~~ ~~2012, and approximately~~ ~~55%~~ to ~~$361.4 million~~ ~~for the~~ ~~nine~~ ~~months ended~~ ~~March 31, 2013~~ ~~from~~ ~~$233.9 million~~ ~~for the~~ ~~nine~~ ~~months ended~~ ~~March 25, 2012~~.

~~The quarterly and year-to-date changes were~~revenue was the result of an overall increase in the number of units sold. ~~On a year-to-date basis, the increases were also the result of recognizing a full quarter of sales in the first quarter of fiscal 2013 for products acquired from Ruud Lighting.~~ The ~~increases were~~increased volume was partially offset by a reduction in selling prices primarily due to ~~market downward pricing pressure and~~ sales of new lower cost products.

Power and RF Products Segment Revenue

Power and RF Products revenue represents ~~approximately~~ 7%6% and 6% of our total revenues for the ~~third~~first quarter of fiscal ~~2013~~2014 and fiscal ~~2012~~2013, respectively.

Power and RF Products revenue increased ~~approximately~~ ~~31%~~24% to $~~22.7~~25.1 million in the ~~third~~first quarter of fiscal 2014 from $20.1 million in the first quarter of fiscal 2013 ~~from~~ ~~$17.3 million~~ ~~in the~~ ~~third~~ ~~quarter of fiscal~~ ~~2012, and approximately~~ ~~26%~~ to ~~$65.5 million~~ ~~for the~~ ~~nine~~ ~~months ended~~ ~~March 31, 2013~~ ~~from~~ ~~$52.1 million~~ ~~for the~~ ~~nine~~ ~~months ended~~ ~~March 25, 2012~~.

The ~~increases~~increase in revenue ~~are~~was the result of higher sales of RF products in fiscal ~~2013~~2014 compared to fiscal ~~2012~~2013 ~~when the Power and RF Products segment revenue was impacted by the delays for RF orders related to certain military programs and lower demand in the solar inverter market.~~. The average selling prices for our power and RF products decreased in fiscal ~~2013~~2014 compared to fiscal ~~2012~~2013 due to a change in product ~~mix and reductions in product pricing.~~mix.

Unallocated Revenue

All of our revenue is allocated to our reportable segments. Our CODM does not review inter-segment revenue when evaluating performance and allocating resources to each segment, and inter-segment revenue is not included in the segment revenues presented above. As such, total segment revenue in the table above is equal to our consolidated revenue.

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Gross Profit and Gross Margin

Gross profit and gross margin for the three ~~and nine~~ months ended ~~March 31,~~September 29, 2013 and ~~March 25,~~September 23, 2012 were comprised of the following (in thousands, except percentages):


	Three Months Ended											Nine Months Ended											Three Months Ended
	March 31, 2013			March 25, 2012			Change					March 31, 2013			March 25, 2012			Change					September 29, 2013			September 23, 2012			Change
LED Products gross profit	$	85,728		$	70,257		$	15,471		22	%	$	245,381		$	218,319		$	27,062		12	%		$101,653			$75,467			$26,186		35	%
LED Products gross margin	43.8		%	38.8		%						42.0		%	38.2		%						46.6		%	40.2		%
Lighting Products gross profit	39,966			24,640			15,326			62	%	115,449			72,517			42,932			59	%	39,818			34,100			5,718			17	%
Lighting Products gross margin	30.6		%	28.5		%						31.9		%	31.0		%						26.9		%	31.6		%
Power and RF Products gross profit	12,033			7,954			4,079			51	%	35,253			21,970			13,283			60	%	13,456			10,422			3,034			29	%
Power and RF Products gross margin	53.0		%	45.9		%						53.9		%	42.2		%						53.7		%	51.8		%
Unallocated costs	(4,717		)	(3,438		)	(1,279		)	37	%	(13,548		)	(10,247		)	(3,301		)	32	%	(4,170		)	(3,940		)	(230		)	6	%
Consolidated gross profit	$	133,010		$	99,413		$	33,597		34	%	$	382,535		$	302,559		$	79,976		26	%		$150,757			$116,049			$34,708		30	%
Consolidated gross margin	38.1		%	34.9		%						37.8		%	35.3		%						38.6		%	36.8		%

Our consolidated gross profit increased ~~34%~~30% to $~~133.0~~150.8 million in the ~~third~~first quarter of fiscal 2014 from $116.0 million in the first quarter of fiscal 2013 ~~from~~ ~~$99.4 million~~ ~~in the~~ ~~third~~ ~~quarter of fiscal~~ ~~2012~~. Our consolidated gross margin increased to ~~38.1%~~38.6% in the ~~third~~first quarter of fiscal 2014 from 36.8% in the first quarter of fiscal 2013 ~~from~~ ~~34.9%~~ ~~in the~~ ~~third~~ ~~quarter of fiscal~~ ~~2012. For the~~ ~~nine~~ ~~months ended~~ ~~March 31, 2013, our consolidated gross profit increased~~ ~~26%~~ to ~~$382.5 million~~ ~~from~~ ~~$302.6 million~~ ~~for the~~ ~~nine~~ ~~months ended~~ ~~March 25, 2012. For the~~ ~~nine~~ ~~months ended~~ ~~March 31, 2013, our consolidated gross margin increased to~~ ~~37.8%~~ ~~from~~ ~~35.3%~~ ~~for the~~ ~~nine~~ ~~months ended~~ ~~March 25, 2012~~.

LED Products Segment Gross Profit and Gross Margin

LED Products gross profit increased ~~approximately~~ ~~22%~~35% to $~~85.7~~101.7 million in the ~~third~~first quarter of fiscal 2014 from $75.5 million in the first quarter of fiscal 2013 ~~from~~and gross margin increased to ~~$70.3 million~~46.6% in the ~~third~~first quarter of fiscal ~~2012~~2014 ~~and LED Products gross margin increased to~~from ~~43.8%~~40.2% in the ~~third~~first quarter of fiscal 2013 ~~from~~ ~~38.8%~~ ~~in the~~ ~~third~~ ~~quarter of fiscal~~ ~~2012. For the~~ ~~nine~~ ~~months ended~~ ~~March 31, 2013, LED Products gross profit increased approximately~~ ~~$27.1 million~~ to ~~$245.4 million~~ ~~from~~ ~~$218.3 million~~ ~~for the~~ ~~nine~~ ~~months ended~~ ~~March 25, 2012, and increased to~~ ~~42.0%~~ ~~for the~~ ~~nine~~ ~~months ended~~ ~~March 31, 2013~~ ~~from~~ ~~38.2%~~ ~~for the~~ ~~nine~~ ~~months ended~~ ~~March 25, 2012~~. LED Products gross profit and gross margin increased due to higher revenue, factory cost reductions, the introduction of new lower cost products and higher factory utilization. These benefits more than offset the decline in the average selling prices in fiscal ~~2013~~2014 as compared to fiscal ~~2012~~2013.

Lighting Products Segment Gross Profit and Gross Margin

Lighting Products gross profit increased ~~approximately~~ ~~62%~~17% to $~~40.0~~39.8 million in the ~~third~~first quarter of fiscal 2014 from $34.1 million in the first quarter of fiscal 2013 ~~from~~. Lighting Products gross margin decreased to ~~$24.6 million~~26.9% in the ~~third~~first quarter of fiscal ~~2012, and increased approximately~~ ~~59%~~ to ~~$115.4 million~~2014 from ~~$72.5 million~~ ~~for the~~ ~~nine~~ ~~months ended~~ ~~March 25, 2012. Lighting Products gross margin increased to~~ ~~30.6%~~31.6% in the ~~third~~first quarter of fiscal 2013 ~~from~~ ~~28.5%~~ ~~in the~~ ~~third~~ ~~quarter of fiscal~~ ~~2012, and increased to~~ ~~31.9%~~ ~~for the~~ ~~nine~~ ~~months ended~~ ~~March 31, 2013~~ ~~from~~ ~~31.0%~~ ~~for the~~ ~~nine~~ ~~months ended~~ ~~March 25, 2012~~. Lighting Products gross profit increased ~~for both quarter-to-date and year-to-date~~ due to ~~higher overall revenues.~~growth in LED lighting products sales. Lighting Products gross ~~margins increased, for both quarter-to-date and year-to-date periods,~~margin decreased in the first quarter of fiscal 2014 primarily due to ~~factory cost reductions, the introduction~~sales of ~~new lower cost~~our consumer LED bulb products, ~~and higher factory utilization. These benefits more than offset the decline~~which had no sales in the ~~average selling prices in~~first quarter of fiscal 2013 ~~as compared to fiscal~~ ~~2012~~., and which have gross margins at the lower end of the range of our Lighting Products segment products' gross margins.

Power and RF Products Segment Gross Profit and Gross Margin

Power and RF Products gross profit increased ~~approximately~~ ~~51%~~29% to $~~12.0~~13.5 million in the ~~third~~first quarter of fiscal 2014 from $10.4 million in the first quarter of fiscal 2013 ~~from~~ ~~$8.0 million~~ ~~in the~~ ~~third~~ ~~quarter of fiscal~~ ~~2012, and increased approximately~~ ~~60%~~ to ~~$35.3 million~~ ~~for the~~ ~~nine~~ ~~months ended~~ ~~March 31, 2013~~ ~~from~~ ~~$22.0 million~~ ~~for the~~ ~~nine~~ ~~months ended~~ ~~March 25, 2012~~. Power and RF Products gross margin increased to ~~53.0%~~53.7% in the ~~third~~first quarter of fiscal 2014 from 51.8% in the first quarter of fiscal 2013 ~~from~~ ~~45.9%~~ ~~in the~~ ~~third~~ ~~quarter of fiscal~~ ~~2012, and increased to~~ ~~53.9%~~ ~~for the~~ ~~nine~~ ~~months ended~~ ~~March 31, 2013~~ ~~from~~ ~~42.2%~~ ~~for the~~ ~~nine~~ ~~months ended~~ ~~March 25, 2012~~. These gross profit and gross margin increases are due primarily to higher revenue, factory cost reductions, increased factory utilization and introduction of new lower cost products. These benefits more than offset the decline in the average selling prices in fiscal ~~2013~~2014 as compared to fiscal ~~2012~~2013.

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Unallocated Costs

Unallocated costs were $~~4.7~~4.2 million and $~~3.4~~3.9 million in the ~~third~~first quarter of fiscal ~~2013~~2014 and ~~2012~~2013, respectively. These costs consist primarily of manufacturing employees' stock-based compensation, expenses for profit sharing and quarterly or annual incentive plans, ~~and~~ matching contributions under our 401(k) plan and acquisition related costs. These costs are not allocated to the reportable segments' gross profit because our CODM does not review them regularly when evaluating segment performance and allocating resources. ~~The increase of~~ ~~$1.3 million~~ ~~in the~~ ~~third~~ ~~quarter of fiscal~~ ~~2013~~ ~~is primarily attributable to higher incentive and stock-based compensation incurred as a result of improved business performance in fiscal 2013 as compared to fiscal 2012. For the~~ ~~nine~~ ~~months ended~~ ~~March 31, 2013~~ ~~and~~ ~~March 25, 2012, unallocated costs were~~ ~~$13.5 million~~ ~~and~~ ~~$10.2 million, respectively, increasing by~~ ~~$3.3 million~~ ~~for the reasons discussed above.~~

For further information on the allocation of costs to segment gross profit, refer to Note ~~13,~~12 "Reportable ~~Segments,"~~Segments" in our consolidated financial statements included in Item 1 of this Quarterly Report.

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Research and Development

Research and development expenses include costs associated with the development of new products, enhancements of existing products and general technology research. These costs consist primarily of employee salaries and related compensation costs, ~~development materials,~~ occupancy costs, consulting costs and the cost of development equipment and supplies.

The following sets forth our research and development expenses in dollars and as a percentage of revenues (in thousands, except percentages):


	Three Months Ended										Nine Months Ended										Three Months Ended
	March 31, 2013			March 25, 2012			Change				March 31, 2013			March 25, 2012			Change				September 29, 2013			September 23, 2012			Change
Research and development	$	39,036		$	36,148		$	2,888	8	%	$	116,524		$	106,436		$	10,088	9	%		$41,743			$37,547			$4,196	11	%
Percent of revenues	11		%	13		%					12		%	12		%					11		%	12		%

Research and development expenses in the ~~third~~first quarter of fiscal 2014 increased 11% to $41.7 million from $37.5 million in the first quarter of fiscal 2013 ~~increased~~ 8% to ~~$39.0 million~~ ~~from~~ ~~$36.1 million~~ ~~in the~~ ~~third~~ ~~quarter of fiscal~~ ~~2012~~. ~~For the~~ ~~nine~~ ~~months ended~~ ~~March 31, 2013, research and development expenses increased~~ 9% to ~~$116.5 million~~ ~~from~~ ~~$106.4 million~~ ~~for the~~ ~~nine~~ ~~months ended~~ ~~March 25, 2012. These increases were~~The increase was primarily due to increased spending on research and development activities focused on new higher performance and lower cost LED chips, LED components, LED lighting products and ~~power~~Power and RF products. Our research and development expenses vary significantly from quarter to quarter based on a number of factors, including the timing of new product introductions ~~the timing of expenditures~~ and the number and nature of our ongoing research and development activities. ~~However, we~~We anticipate that in general our research and development expenses will continue to increase over time to support future growth.

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Sales, General and Administrative

Sales, general and administrative expenses ~~are composed~~were comprised primarily of costs associated with our sales and marketing personnel and our executive and administrative personnel (for example, finance, human resources, information technology and legal) and consist of 1) salaries and related compensation costs, 2) consulting and other professional services (such as litigation and other outside legal counsel fees, audit and other compliance costs), 3) marketing and advertising expenses, 4) facilities and insurance costs and 4)5) travel and other costs. The following table sets forth our sales, general and administrative expenses in dollars and as a percentage of revenues (in thousands, except percentages):


	Three Months Ended										Nine Months Ended										Three Months Ended
	March 31, 2013			March 25, 2012			Change				March 31, 2013			March 25, 2012			Change				September 29, 2013			September 23, 2012			Change
Sales, general and administrative	$	62,140		$	50,074		$	12,066	24	%	$	174,885		$	144,789		$	30,096	21	%		$64,278			$52,645			$11,633	22	%
Percent of revenues	18		%	18		%					17		%	17		%					16		%	17		%

Sales, general and administrative expenses in the ~~third~~first quarter of fiscal 2014 increased 22% to $64.3 million from $52.6 million in the first quarter of fiscal 2013 ~~increased~~ ~~24%~~ to ~~$62.1 million~~ ~~from~~ ~~$50.1 million~~ ~~in the~~ ~~third~~ ~~quarter of fiscal~~ ~~2012~~. ~~For the~~ ~~nine~~ ~~months ended~~ ~~March 31, 2013, sales, general and administrative expenses increased~~ ~~21%~~ to ~~$174.9 million~~ ~~from~~ ~~$144.8 million~~ ~~for the~~ ~~nine~~ ~~months ended~~ ~~March 25, 2012. These increases are~~This increase was primarily due to an increase in spending on sales and marketing for lighting products, including commissions, trade shows and advertising, as we continue to expand our direct sales resources and channels and invest in building and promoting the Cree ~~brands. Additionally, these increases include personnel additions during fiscal 2013 to support our growth.~~brand.

Amortization of Acquisition Related Intangibles

As a result of our acquisitions, we have recognized various intangible assets, ~~that require amortization,~~ including customer relationships and developed technologies. During fiscal 2012,, we acquired Ruud Lighting, resulting in $206.0 million of amortizable intangible assets, ~~consisting~~principally composed of developed technology, customer relationships and trade ~~names, in-process research and development, and non-compete agreements. During~~names. In fiscal 2008, we acquired ~~LLF,~~LED Lighting Fixtures, Inc. (LLF), resulting in an additional $41.2 million of amortizable intangible assets. These intangible assets are principally composed of developed technology that specifically relates to technologies underlying the development of LED lighting products for the general illumination market. During fiscal 2007, we acquired INTRINSIC Semiconductor Corporation and COTCO Luminant Device Limited (now Cree Hong Kong Limited) (COTCO), resulting in $63.7 million of amortizable intangible assets principally composed of customer relationships and developed technology.

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Amortization of intangible assets related to our acquisitions is as follows (in thousands, except percentages):


	Three Months Ended									Nine Months Ended									Three Months Ended
	March 31, 2013		March 25, 2012		Change					March 31, 2013		March 25, 2012		Change					September 29, 2013		September 23, 2012		Change
INTRINSIC	$	186	$	186	$	—		—	%	$	558	$	558	$	—		—	%
Ruud Lighting																				$5,746		$5,693		$53		1	%
COTCO	1,040		1,265		(225		)	(18	)%	3,121		3,793		(672		)	(18	)%	753		1,041		(288		)	(28	)%
LLF	750		750		—			—	%	2,249		2,250		(1		)	—	%	750		750		—			—	%
Ruud Lighting	5,743		5,167		576			11	%	17,180		12,059		5,121			42	%
INTRINSIC																			38		186		(148		)	(80	)%
Total	$	7,719	$	7,368	$	351		5	%	$	23,108	$	18,660	$	4,448		24	%		$7,287		$7,670		($383	)	(5	)%

~~We recognized amortization of acquisition related intangibles of~~ ~~$7.7 million~~ ~~in the~~ ~~third~~ ~~quarter of fiscal~~ ~~2013~~ ~~compared to~~ ~~$7.4 million~~ ~~in the~~ ~~third~~ ~~quarter of fiscal~~ ~~2012. For the~~ ~~nine~~ ~~months ended~~ ~~March 31, 2013, we recognized amortization of acquisition related intangibles of~~ ~~$23.1 million~~ ~~compared to~~ ~~$18.7 million~~ ~~for the~~ ~~nine~~ ~~months ended~~ ~~March 25, 2012. Amortization of acquisition related intangibles increased in the~~ ~~third~~ ~~quarter of fiscal~~ ~~2013~~ ~~compared to the~~ ~~third~~ ~~quarter of fiscal~~ ~~2012, primarily due to the completion of in-process research and development projects in fiscal~~ ~~2013. For the~~ ~~nine~~ ~~months ended~~ ~~March 31, 2013~~ ~~compared to the~~ ~~nine~~ ~~months ended~~ ~~March 25, 2012, amortization of acquisition related intangibles increased primarily due to the acquisition of Ruud Lighting occurring during the first quarter of fiscal~~ ~~2012~~.

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Loss on Disposal or Impairment of Long-Lived Assets

We operate a capital intensive business. As such, we dispose of a certain level of our equipment in the normal course of business as our production ~~processes change~~process changes due to production improvement initiatives or product mix changes. Due to the risk of technological obsolescence or changes in our production ~~processes,~~process, we regularly review our equipment and capitalized patent costs for possible ~~impairments in value.~~impairment. The following table sets forth our loss on disposal or impairment of long-lived assets (in thousands, except percentages):

Three Months Ended Nine Months Ended
March 31,
2013 March 25,
2012 Change March 31,
2013 March 25,
2012 Change
Loss on disposal or impairment of long-lived assets, net $ 863
$ 816
$ 47
6 % $ 2,385
$ 2,088
$ 297
14 %



	Three Months Ended
	September 29, 2013		September 23, 2012		Change
Loss on disposal or impairment of long-lived assets, net		$657		$898		($241	)	(27	)%

We recognized a net loss of $~~0.9~~0.7 million on the disposal of long-lived assets in the ~~third~~first quarter of fiscal ~~2013~~2014 compared to a net loss of $~~0.8~~0.9 million in the ~~third~~first quarter of fiscal ~~2012~~2013. ~~For the~~ ~~nine~~ ~~months ended~~ ~~March 31, 2013, we recognized a~~This net loss of ~~$2.4 million~~ ~~compared to~~ ~~$2.1 million~~ ~~for the~~ ~~nine~~ ~~months ended~~ ~~March 25, 2012. These net losses~~ resulted from the disposal of equipment due to manufacturing process changes and the abandonment of certain patent assets.

Non-Operating Income, Net

The following table sets forth our non-operating income, net (in thousands, except percentages):

Three Months Ended Nine Months Ended
March 31,
2013 March 25,
2012 Change March 31,
2013 March 25,
2012 Change
Other non-operating income (expense), net $ 494
$ 324
$ 170
52 % $ 2,622
$ 1,187
$ 1,435
121 %
Interest income, net 2,018
1,859
159
9 % 5,756
5,628
128
2 %
Total $ 2,512
$ 2,183
$ 329
15 % $ 8,378
$ 6,815
$ 1,563
23 %



	Three Months Ended
	September 29, 2013		September 23, 2012			Change
Foreign currency gain (loss), net		$264		($173	)		$437		(253	)%
Gain on sale of investments, net	10		28			(18		)	(64	)%
Interest income, net	2,341		1,792			549			31	%
Other, net	203		1,738			(1,535		)	(88	)%
Total non-operating income, net		$2,818		$3,385			($567	)	(17	)%

We have no debt or active lines of credit and we are in a net interest income position. Our investments ~~typically~~ consist of ~~fixed interest rate securities such as high-grade corporate debt, commercial paper, government securities,~~ municipal bonds, corporate bonds, non-U.S. certificates of deposit, U.S. agency securities and ~~other fixed interest rate investments.~~non-U.S. government securities. The primary objective of our investment policy is preservation of principal.

~~Other non-operating income (expense)~~Foreign currency gain (loss), net. Foreign currency gain (loss), net consists primarily of remeasurement adjustments resulting from consolidating our international subsidiaries. The change in foreign currency gain (loss), net is ~~typically comprised of gains~~primarily due to fluctuations in the exchange rate between Chinese Yuan and the United States Dollar.

Gain on ~~sales~~sale of investments, ~~and foreign exchange gains and losses. Other non-operating income,~~net. Gain on sale of investments, net ~~increased~~was $10 thousand in the first quarter of fiscal ~~third~~2014 compared to $28 thousand in the first quarter of fiscal 2013 ~~compared to the~~ .

~~third~~Interest income, net. ~~quarter of fiscal~~ ~~2012, primarily due to favorable foreign currency exchange rates fluctuations. For the~~ ~~nine~~ ~~months ended~~ ~~March 31, 2013~~ ~~compared to the~~ ~~nine~~ ~~months ended~~ ~~March 25, 2012, other non-operating~~Interest income, net ~~increased primarily due to a one-time payment received~~was $2.3 million in the first quarter of fiscal 2014 compared to $1.8 million in the first quarter of fiscal 2013. The increase in interest income was due to having higher invested cash and investment balances.

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Other, net. Other, net was $0.2 million in the first quarter of fiscal 2014 compared to $1.7 million in the first quarter of fiscal 2013. The decrease for the first quarter of fiscal 2014 is due primarily to a onetime payment received in connection with the SemiLEDs patent litigation settlement ~~partially offset by a decrease~~which occurred in ~~gains from~~ the ~~sale~~first quarter of ~~investments.~~fiscal 2013.

Income Tax Expense ~~(Benefit)~~

The following table sets forth our income tax expense ~~(benefit)~~ in dollars and our effective tax rate (in thousands, except percentages):

Three Months Ended Nine Months Ended
March 31, 2013 March 25, 2012 Change March 31, 2013 March 25, 2012 Change
Income tax expense (benefit) $ 3,607
$ (2,299 ) $ 5,906
(257 )% $ 15,328
$ 3,015
$ 12,313
408 %
Effective Tax Rate 14.0 % (32.0 )% 20.7 % 8.1 %



	Three Months Ended
	September 29, 2013			September 23, 2012			Change
Income tax expense		$9,113			$4,551			$4,562	100	%
Effective tax rate	23.0		%	22.0		%

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The variation between our effective income tax rate and the U.S. statutory rate of 35 percent is ~~primarily~~ due to 1) the inclusion, in the third quarter of fiscal 2013, of the tax benefit related to the retroactive reinstatement and extension of the research and development credit, including the cumulative effect of the decrease in our full year estimated effective tax rate as a ~~result, and 2) a higher~~ percentage of our projected income for the full year being derived from international locations with lower tax rates than the U.S. ~~The research~~ and ~~development credit, which had previously expired~~the impact of tax credits available in the current year. A change in the mix of pretax income of our various tax jurisdictions can have a material impact on December 31, 2011, was reinstated as part of the American Taxpayer Relief Act of 2012 enacted on January 2, 2013. This legislation retroactively reinstated and extended the credit from the previous expiration date through December 31, 2013. our periodic effective tax rate.

We recognized income tax expense of $~~3.6~~9.1 million for an effective tax rate of ~~14.0%~~23.0% in the ~~third~~first quarter of fiscal ~~2013~~2014 as compared to income tax ~~benefit~~expense of $~~2.3~~4.6 million for an effective tax rate of ~~(32.0)%~~22.0% in the ~~third~~first quarter of fiscal ~~2012. For the~~ ~~nine~~ ~~months ended~~ ~~March 31,~~ 2013~~, we recognized income tax expense of~~ ~~$15.3 million~~ ~~for an effective tax rate of~~ ~~20.7%~~ ~~compared to~~ ~~$3.0 million~~ ~~for an effective tax rate of~~ ~~8.1%~~ ~~for the~~ ~~nine~~ ~~months ended~~ ~~March 25, 2012~~. The increase in our effective tax rate for the three ~~and~~ ~~nine~~month comparable ~~periods~~period is due to ~~1) higher overall pre-tax income relative to our tax credits, 2)~~ a ~~higher percentage~~greater portion of our ~~projected~~ income ~~for the full year~~ being ~~derived from U.S. operations that are taxed at a~~earned in higher tax ~~rate than international locations and 3) the inclusion of a tax benefit related to a prior year audit settlement recorded in the third quarter of fiscal 2012.~~jurisdictions.

Liquidity and Capital Resources

Overview

We require cash to fund our operating expenses and working capital requirements, including outlays for research and development, capital expenditures, strategic acquisitions and investments. Our principal sources of liquidity are cash on hand, marketable investments and cash generated from operations. Our ability to generate cash from operations has been one of our fundamental strengths and has provided us with substantial flexibility in meeting our operating, financing and investing needs. We have no debt or active lines of credit and have minimal lease commitments.

Based on past performance and current expectations, we believe our cash and cash equivalents, investments, cash generated from operations and our ability to access capital markets will satisfy our working capital needs, capital expenditures, investment requirements, stock repurchases, contractual obligations, commitments and other liquidity requirements associated with our operations through at least the next 12 months.

From time to time, we evaluate strategic opportunities, including potential acquisitions, divestitures or investments in complementary businesses and we anticipate continuing to make such evaluations. We may also access capital markets through the issuance of debt or additional shares of common stock in connection with the acquisition of complementary businesses or other significant assets or for other strategic opportunities.

We ~~have and~~ may ~~continue to~~ use a portion of our available cash and cash equivalents, or funds underlying our marketable securities, to repurchase shares of our common ~~stock.~~stock pursuant to repurchase programs authorized by our Board of Directors. With our strong working capital position, we believe that we have the ability to continue to invest in further development of our products and, when necessary or appropriate, make selective acquisitions or other strategic investments to strengthen our product portfolio, secure key intellectual properties, or expand our production capacity.

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Liquidity

Our liquidity and capital resources depend on our cash flows from operations and our working capital. The significant components of our working capital are liquid assets such as cash and cash equivalents, short-term investments, ~~and~~ accounts receivable and inventories, reduced by trade accounts payable, accrued salaries and wages, and other accrued expenses. Our working capital increased to $~~1.201~~1.4 billion as of ~~March 31,~~September 29, 2013 from $~~1.015~~1.3 billion as of June ~~24, 2012~~30, 2013, primarily due to $69 millioncash ~~flows~~ provided by operating activities ofand $~~224.1~~29 million, cash provided by the net issuances of common stock from employee option exercises, which were partially offset by payments for patent and licensing rights and purchases of property and equipment of $~~71.2~~38 million.

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The following table presents the components of our cash conversion cycle for our ~~third~~first quarter of fiscal ~~2013~~2014 and fourth quarter of fiscal ~~2012~~2013:


	March 31, 2013	June 24, 2012	Change				September 29, 2013	June 30, 2013	Change
Days of sales outstanding^(a)	47	45	2		4	%	48	46	2		4	%
Days of supply in inventory^(b)	82	85	(3	)	(4	)%	81	76	5		7	%
Days in accounts payable^(c)	(47)	(36)	(11	)	31	%	(56)	(47)	(9	)	19	%
Cash conversion cycle	82	94	(12	)	(13	)%	73	75	(2	)	(3	)%


a)	Days of sales outstanding (DSO) measures the average collection period of our receivables. DSO is based on the ending net trade receivables and the revenue for the quarter then ended. DSO is calculated by dividing ending accounts receivable, net of applicable allowances and reserves, by the average net revenue per day for the respective 90 day period.


b)	Days of supply in inventory (DSI) measures the average number of days from procurement to sale of our product. DSI is based on ending inventory and cost of revenue, net sold for the quarter then ended. DSI is calculated by dividing ending inventory by average cost of revenue, net per day for the respective 90 day period.


c)	Days in accounts payable (DPO) measures the average number of days our payables remain outstanding before payment. DPO is based on ending accounts payable and cost of revenue, net for the quarter then ended. DPO is calculated by dividing ending accounts payable by the average cost of revenue, net per day for the respective 90 day period.

The decrease in the cash conversion cycle was primarily driven by ~~a decrease in days supply in inventory as a result of increased sales and~~ an increase in days in accounts payable, partially offset by an increase in ~~the~~ days ~~sales outstanding as more shipments occurred later in the quarter due to Chinese New Year, outdoor lighting business seasonality and the timing~~ of ~~new product launches.~~inventory.

As of ~~March 31,~~September 29, 2013, ~~all~~we had unrealized losses on our investments of $1.6 million. All of our investments had investment grade ratings, and any such investments that were in an unrealized loss position at ~~March 31,~~September 29, 2013 were in such position due to interest rate changes, sector credit rating changes or company-specific rating changes. As we intend and believe that we have the ability to hold such investments for a period of time that will be sufficient for anticipated recovery in market value, we currently expect to receive the full principal or recover our cost basis in these securities. The declines in value of the securities in our portfolio are considered to be temporary in nature and, accordingly, we do not believe these securities are impaired as of ~~March 31,~~September 29, 2013.

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Cash Flows

In summary, our cash flows were as follows (in thousands, except percentages):


	Nine Months Ended											Three Months Ended
	March 31, 2013			March 25, 2012			Change					September 29, 2013			September 23, 2012			Change
Cash provided by operating activities	$	224,070		$	170,577		$	53,493		31	%		$69,236			$85,686			($16,450	)	(19	)%
Cash used in investing activities	(270,954		)	(375,532		)	104,578			(28	)%	(105,956		)	(106,309		)	353			—	%
Cash provided by financing activities	46,350			4,298			42,052			978	%	34,407			5,328			29,079			546	%
Effects of foreign exchange changes	87			1,116			(1,029		)	(92	)%	126			262			(136		)	(52	)%
Net (decrease) increase in cash and cash equivalents	$	(447	)	$	(199,541	)	$	199,094
Net decrease in cash and cash equivalents													($2,187	)		($15,033	)		$12,846		(85	)%

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The following is a discussion of our primary sources and uses of cash in our operating, investing and financing activities.

Cash Flows from Operating Activities

Net cash provided by operating activities was $~~224.1~~69.2 million in the first ~~nine~~three months of fiscal 2014 compared to $85.7 million for the first three months of fiscal 2013 ~~compared~~. The decrease was primarily due to ~~$170.6 million~~ ~~for~~an increase in our working capital balances, partially offset by higher year-over-year net income in the first ~~nine~~three months of fiscal ~~2012. The increase was primarily due to the year-over-year increase in our net income, coupled with a reduction of our working capital balances in the first~~ ~~nine~~ ~~months of fiscal~~ ~~2013~~2014 compared to the same period of fiscal ~~2012.~~2013.

Cash Flows from Investing Activities

Our investing activities primarily relate to transactions within our investments, strategic acquisitions, purchase of property, plant and equipment and payments for patent and license rights. Net cash used in investing activities was $~~271.0~~106.0 million compared to $106.3 million for the first ~~nine~~three months of fiscal 2013. In the first three months of fiscal 2014, our purchases of property and equipment were $33.7 million as compared to $~~375.5~~12.6 million for the first ~~nine~~three months of fiscal ~~2012~~2013. This ~~year-over-year decrease in cash used in investing activities~~increase was ~~primarily the result~~offset by lower net purchases of ~~the~~ ~~$456.0 million~~ ~~cash expended~~investments in the first ~~quarter~~three months of fiscal ~~2012 for~~2014 compared to the ~~acquisition~~same period of ~~Ruud Lighting, partially offset by the proceeds from the sale of investments to fund the acquisition.~~fiscal 2013.

We ~~are continuing~~continue to actively manage our capital ~~spending~~spending. For fiscal 2014, we target approximately $120.0 million of capital investment to support our strategic ~~priorities to lead the market, drive adoption of LED lighting, accelerate cost reductions and support incremental capacity as needed. For fiscal~~ ~~2013, we target capital expenditures to be slightly less than 2012 levels.~~priorities.

Cash Flows from Financing Activities

Net cash provided by financing activities was $~~46.4~~34.4 million for the first ~~nine~~three months of fiscal 2014 and $5.3 million for the first three months of fiscal 2013 ~~and~~ ~~$4.3 million~~ ~~for~~. For the first ~~nine~~three months of fiscal ~~2012. For the first~~ ~~nine~~2014 ~~months of~~and fiscal 2013 ~~and fiscal 2012,~~, our financing activities primarily consisted of proceeds of $~~47.0~~34.4 million and $~~4.3~~5.3 million, respectively, from net issuances of common stock pursuant to the exercise of employee stock options, ~~and purchases under our employee stock purchase plan,~~ including the excess tax benefit on those exercises.

Off-Balance Sheet Arrangements

We do not use off-balance sheet arrangements with unconsolidated entities or related parties, nor do we use any other forms of off-balance sheet arrangements. Accordingly, our liquidity and capital resources are not subject to off-balance sheet risks from unconsolidated entities. As of ~~March 31,~~September 29, 2013, we did not have any off-balance sheet arrangements, as defined in Item 303(a)(4)(ii) of SEC Regulation S-K.

We have entered into operating leases primarily for certain of our U.S. and international facilities in the normal course of business. ~~These arrangements are often referred to as a form of off-balance-sheet financing.~~ Please refer to Part II, Item 7 of our Annual Report on Form 10-K for the fiscal year ended June ~~24, 2012~~30, 2013, in the section entitled “Contractual Obligations” for the future minimum lease payments due under our operating leases as of June ~~24, 2012~~30, 2013. There have been no significant changes to the contractual obligations discussed therein.

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Critical Accounting Policies and Estimates

For information about our critical accounting policies and estimates, see the “Critical Accounting Policies and Estimates” section of “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations” in our Annual Report on Form 10-K for the fiscal year ended June ~~24, 2012~~30, 2013.

~~Recently Adopted~~New Accounting ~~Pronouncements~~Standards

See Note 1, “Basis of Presentation and Changes in Significant Accounting Policies,” to our unaudited consolidated financial statements in Part I, Item 1 of this Quarterly Report for a description of ~~recent~~new accounting ~~pronouncements,~~standards, including the ~~estimated~~ effects, if any, on our consolidated financial statements.

Item 3. Quantitative and Qualitative Disclosures About Market Risk

For quantitative and qualitative disclosures about our market risks, see “Part II. Item 7A. Quantitative and Qualitative Disclosures About Market Risk” of our Annual Report on Form 10-K for the fiscal year ended June ~~24, 2012~~30, 2013. ~~Our exposures~~There have been

no material changes to ~~market risks have not changed materially since~~ ~~June 24, 2012~~, except that 1) effective October 22, 2012, our Board of Directors approved a change to our cash management policy to permit us to acquire investments rated "A" grade or better. Previously, our cash management policy permitted us to acquire investments rated "AA" grade or better; and 2) during the third quarter of fiscal 2013 we entered into our first forward contract to mitigate foreign exchange risks. Please refer to Note 6 to our unaudited financial statements in Part I, Item 1 of this Quarterly Report for additional information.amounts presented therein.

Item 4. Controls and Procedures

Our management, with the participation of our Chief Executive Officer and Chief Financial Officer, has evaluated the effectiveness of our disclosure controls and procedures (as such term is defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act) as of the end of the period covered by this Form 10-Q. Based on such evaluation, our Chief Executive Officer and Chief Financial

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Officer concluded that, as of the end of the period covered by ~~the~~this Form 10-Q, our disclosure controls and procedures are effective in that they provide reasonable assurances that the information we are required to disclose in the reports we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods required by the SEC’s rules and forms and that such information is accumulated and communicated to management, including our Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure.

We routinely review our internal control over financial reporting and from time to time make changes intended to enhance the effectiveness of our internal control over financial reporting. We will continue to evaluate the effectiveness of our disclosure controls and procedures and internal control over financial reporting on an ongoing basis and will take action as appropriate. There have been no changes to our internal control over financial reporting, as such term is defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act, during the ~~third~~first quarter of fiscal ~~2013~~2014 that materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

PART II – OTHER INFORMATION

Item 1. Legal Proceedings

The information required by this item is set forth under Note ~~12,~~11, “Commitments and Contingencies,” to our unaudited financial statements in Part I, Item 1 of this Quarterly Report and is incorporated herein by reference.

Item 1A. Risk Factors

Described below are various risks and uncertainties that may affect our business. The descriptions below include any material changes to and supersede the description of the risk factors affecting our business previously disclosed in “Part I, Item IA. Risk Factors” of our Annual Report on Form 10-K for the fiscal year ended June ~~24, 2012 and any subsequent periodic reports.~~30, 2013. If any of the risks described below actually occurs, our business, financial condition or results of operations could be materially and adversely affected.

Our operating results are substantially dependent on the development and acceptance of new products.

Our future success may depend on our ability to develop new, higher performing and lower cost solutions for existing and new markets and for customers to accept those solutions. We must introduce new products in a timely and cost-effective manner,

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and we must secure production orders for those products from our customers. The development of new products is a highly complex process, and we have in some instances experienced delays in completing the development and introduction of new products. Our research and development efforts are aimed at solving increasingly complex problems, and we do not expect that all of our projects will be successful. The successful development, introduction and ~~introduction~~acceptance of ~~these~~ new products depends on a number of factors, including the following:

achievement of technology breakthroughs required to make commercially viable devices;

the accuracy of our predictions for market requirements beyond near term visibility;

our ability to predict, influence, and/or react to evolving standards;

acceptance of our new product designs;

acceptance of new technology in certain markets;

the availability of qualified research and development personnel;

our timely completion of product designs and development;

our ability to ~~expand direct customer sales and influence key distribution customers to adopt our products;~~

~~our ability to~~ develop repeatable processes to manufacture new products in sufficient quantities, with the desired specifications and at competitive costs;

our ability to effectively transfer products and technology ~~developed in one country~~from development to ~~our manufacturing facilities in other countries;~~manufacturing;

our customers' ability to develop competitive products incorporating our products; and

acceptance of our customers' products by the market.

If any of these or other similar factors becomes problematic, we may not be able to develop and introduce these new products in a timely or cost-effective manner.

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If we are unable to effectively develop, manage and expand our sales and distribution channels for our products, our operating results may suffer.

We have expanded into business channels that are different from those in which we have historically operated as we grow our business and sell more LED and lighting products. For example, in the third quarter of fiscal 2012, we consolidated the Cree and BetaLED lighting product lines sales agents for each major market in North America which resulted in a disruption in the project pipeline and lower than targeted sales for our indoor lighting products. Lighting sales agents have in the past and may ~~also~~in the future choose to drop our product lines from their portfolio to avoid losing access to our competitors' lighting products, resulting in a disruption in the project pipeline and lower than targeted sales for our lighting products. If we are unable to effectively penetrate these channels or develop alternate channels to ensure our products are reaching the appropriate customer base, our financial results may be adversely impacted. In addition, if we successfully penetrate or develop these channels, we cannot guarantee that customers will accept our products or that we will be able to manufacture and deliver them in the timeline established by our customers.

We sell a substantial portion of our products to distributors. We rely on distributors to develop and expand their customer base as well as anticipate demand from their customers. If they are not successful, our growth and profitability may be adversely impacted. Distributors must balance the need to have enough products in stock in order to meet their customers' needs against their internal target inventory levels and the risk of potential inventory obsolescence. The risks of inventory obsolescence are especially true with technological products. The distributors' internal target inventory levels vary depending on market cycles and a number of factors within each distributor over which we have very little, if any, control.

We typically recognize revenue on products sold to distributors when the item is shipped and title passes to the distributor (sell-in method). Certain distributors have limited rights to return inventory under stock rotation programs and have limited price protection rights for which we make estimates. We evaluate inventory levels in the distribution channel, current economic trends and other related factors in order to account for these factors in our judgments and estimates. As inventory levels and product return trends change, we may have to revise our estimates and incur additional costs, and our gross margins and operating results could be adversely impacted.

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We face significant challenges managing our growth as the market adopts LEDs for general lighting.

Our potential for growth depends significantly on the adoption of LEDs within the general lighting market and our ability to affect this rate of adoption. Although the market for LED lighting has grown rapidly in recent years, adoption of LEDs for general lighting is relatively new, still limited and faces significant challenges before widespread adoption. In order to manage our growth and business strategy effectively in light of uncertainty related to the pace of adoption, we must continue to:

maintain, expand and purchase adequate manufacturing facilities and equipment to meet customer demand;

maintain a sufficient supply of raw materials to support our growth;

expand research and development, sales and marketing, technical support, distribution capabilities and administrative functions;

manage organizational complexity and communication;

expand the skills and capabilities of our current management team;

add experienced senior level managers; and

attract and retain qualified employees.

While we intend to focus on managing our costs and expenses, over the long term we expect to invest substantially to support our growth and may have additional unexpected costs. For example, in ~~March~~ 2013, we ~~completed the 208,000 square foot expansion to~~expanded our ~~Wisconsin manufacturing and warehouse facilities to support our LED lighting products production and we are targeting to continue expanding our LED products manufacturing~~ facilities in ~~China. However, such~~Wisconsin and North Carolina. Such investments take time to become fully operational, and we may not be able to expand quickly enough to exploit targeted market opportunities. There are also inherent execution risks in starting up a new factory or expanding production capacity that could increase costs and reduce our operating results, including design and construction cost overruns, poor production process yields and reduced quality control during the start-up phase.

We are also increasingly dependent on information technology to enable us to improve the effectiveness of our operations and to maintain financial accuracy and efficiency. If we do not allocate and effectively manage the resources necessary to build,implement, upgrade, integrate and sustain the proper technology infrastructure, we could be subject to transaction errors, processing inefficiencies, loss of customers, business disruptions or loss of or damage to intellectual property through security breach.

In connection with our efforts to cost-effectively manage our growth, we have increasingly relied on contractors for production capacity, logistics support and certain administrative functions including hosting of certain information technology software applications. If these service providers do not perform effectively, we may not be able to achieve the expected cost savings and

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may incur additional costs to correct errors or fulfill customer demand. Depending on the function involved, such errors may also lead to business disruption, processing inefficiencies or the loss of or damage to intellectual property through security breach, or impact employee morale. Our operations may also be negatively impacted if any of these service providers do not have the financial capability to meet our growing needs.

The markets in which we operate are highly competitive and have evolving technical requirements.

The markets for our products are highly competitive. In the LED market, we compete with companies that manufacture orand sell LED chips and LED components. In the lighting market, we compete with companies that manufacture and sell traditional and LED lighting products, many of which have larger and more established sales channels. Competitors continue to offer new products with aggressive pricing and improved performance. Competitive pricing pressures may change and could accelerate the rate of decline of our average sales prices.

With the growth potential for LEDs, we may face increased competition in the future. If the investment in new capacity exceeds the growth in demand, the LED market is likely to become more competitive with additional pricing pressures. Additionally, new technologies could emerge or improvements could be made in existing technologies that may also reduce the demand for LEDs in certain markets. There are also new technologies, such as organic LEDs (OLEDs), which could potentially have the same impact on LED demand for backlighting, which could impact the overall LED market.

As competition increases, in order to continue to grow our business, we need to continue to develop new products that meet or exceed the needs of our customers. Therefore, our ability to continually produce more efficient, higher brightness and lower cost LEDs and lighting products that meet the evolving needs of our customers will be critical to our success. Competitors may

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also try to align with some of our strategic customers. This could mean lower prices for our products, reduced demand for our products and a corresponding reduction in our ability to recover development, engineering and manufacturing costs. Any of these developments could have an adverse effect on our business, results of operations or financial condition.

~~Global economic conditions could materially adversely impact demand for our products and services.~~

Our operations and performance depend significantly on worldwide economic conditions. Uncertainty about global economic conditions could result in customers postponing purchases of our products and services in response to tighter credit, unemployment, negative financial news and/or declines in income or asset values and other macroeconomic factors, which could have a material negative effect on demand for our products and services and accordingly, on our business, results of operations and financial condition.

We rely on a number of key sole source and limited source suppliers, and are subject to high price volatility on certain commodity inputs, variations in parts quality, and raw material consistency and availability.

We depend on a number of sole source and limited source suppliers for certain raw materials, ~~including rare earth elements,~~ components, services and equipment used in manufacturing our products, including key materials and equipment used in critical stages of our manufacturing processes. Although alternative sources generally exist for these items, qualification of many of these alternative sources could take up to six months or longer. Where possible, we attempt to identify and qualify alternative sources for our sole and limited source suppliers.

We generally purchase these sole or limited source items with purchase orders, and we have limited guaranteed supply arrangements with such suppliers. Some of our sources can have variations in attributes and availability which can affect our ability to produce products in sufficient volume or quality. We do not control the time and resources that these suppliers devote to our business, and we cannot be sure that these suppliers will perform their obligations to us. Additionally, general shortages in the marketplace of certain raw materials or key components may adversely impact our business. In the past, we have experienced decreases in our production yields when suppliers have varied from previously agreed upon specifications, ~~that~~which have also impacted our cost of sales.

Additionally, the inability of our suppliers to access capital efficiently could cause disruptions in their businesses, thereby negatively impacting ours. This risk may increase if an economic downturn negatively affects key suppliers or a significant number of our other suppliers. Any delay in product delivery or other interruption or variation in supply from these suppliers could prevent us from meeting commercial demand for our products. If we were to lose key suppliers, if our key suppliers were unable to support our demand for any reason, or if we were unable to identify and qualify alternative suppliers, our manufacturing operations could be interrupted or hampered significantly.

We rely on arrangements with independent shipping companies for the delivery of our products from vendors and to customers in both the United States and abroad. The failure or inability of these shipping companies to deliver products, or the unavailability of their shipping services, even temporarily, could have a material adverse effect on our business. We may also be adversely affected by an increase in freight surcharges due to rising fuel costs and added security.

In our fabrication process we consume a number of precious metals and other commodities, which are subject to high price volatility. Our operating margins could be significantly affected if we are not able to pass along price increases to our customers. In addition, production could be disrupted by the unavailability of the resources used in production such as water, silicon, electricity and gases. Future environmental regulations could restrict supply or increase the cost of certain of those materials.

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We operate in an industry that is subject to significant fluctuation in supply and demand that affects our revenue and profitability.

The LED lighting industry is in the early stages of adoption and is characterized by constant and rapid technological change, rapid product obsolescence and price erosion, evolving standards, short product life-cycles and fluctuations in product supply and demand. The industry has experienced significant fluctuations, often in connection with, or in anticipation of, product cycles and changes in general economic conditions. As the markets for our products mature, additional fluctuations may result from variability and consolidations within the industry's customer base. These fluctuations have been characterized by lower product demand, production overcapacity, higher inventory levels and increased pricing pressure. We have experienced these conditions in our business in the past and may experience such conditions in the future, which could have a material negative impact on our business, ~~and~~ results of ~~operations.~~operations or financial condition.

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In addition, as we diversify our product offerings and as pricing differences in the average selling prices among our product lines widen, a change in the mix of sales among our product lines may increase volatility in our revenue and gross margin from period to period.

As a result of our continued expansion into new markets, we may compete with existing customers who may reduce their orders.

Through acquisitions and organic growth, we continue to expand into new ~~markets.~~markets and new market segments. Many of our existing customers who purchase our LED products develop and manufacture products using those chips and components that are offered into the same lighting markets. As a result, some of our current customers perceive us as a competitor in these ~~new markets.~~market segments. In response, our customers may reduce or discontinue their orders for our LED products. This reduction in or discontinuation of orders could occur faster than our sales growth in these new markets, which could adversely affect our business, results of operations or financial condition.

We depend on a limited number of customers, including distributors, for a substantial portion of our revenues, and the loss of, or a significant reduction in purchases by, one or more of these customers could adversely affect our operating results.

We receive a significant amount of our revenues from a limited number of customers, including distributors, ~~who~~one of which represented greater than 10% of our ~~two largest customers~~consolidated revenues in fiscal ~~2012.~~2013. Most of our customer orders are made on a purchase order basis, which does not generally require any long-term customer commitments. Therefore, these customers may alter their purchasing behavior with little or no notice to us for various reasons, including: developing, or, in the case of our distributors, their customers developing, their own product solutions; choosing to purchase product from our competitors; incorrectly forecasting end market demand for their products; or experiencing a reduction in their market share in the markets for which they purchase our products. If our customers alter their purchasing behavior, if our customers' purchasing behavior does not match our expectations, or if we encounter any problems collecting amounts due from them, our financial condition and results of operations could be negatively impacted.

Our results of operations, financial condition and business could be harmed if we are unable to balance customer demand and capacity.

As customer demand for our products changes, we must be able to ramp up or adjust our production capacity to meet demand. We are continually taking steps to address our manufacturing capacity needs for our products. If we are not able to increase our production capacity at our targeted rate, or if there are unforeseen costs associated with adjusting our capacity levels, we may not be able to achieve our financial targets.

Conversely, due to the proportionately high fixed cost nature of our business (such as facility expansion costs), if demand does not increase at the rate forecasted, we may not be able to scale our manufacturing expenses or overhead costs to correspond to the demand. This could result in lower margins and adversely impact our business and results of operations. Additionally, if product demand decreases or we fail to forecast demand accurately, we may be required to recognize impairments on our long-lived assets or recognize excess inventory write off charges. We have in the past and may in the future be required to recognize excess capacity charges, which would have a negative impact on our results of operations.

In addition, our efforts to improve quoted delivery lead-time performance may result in corresponding reductions in order backlog. A decline in backlog levels could result in more variability and less predictability in our quarter-to-quarter net sales and operating results.

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Global economic conditions could materially adversely impact demand for our products and services.

If we fail to evaluate and execute strategic opportunities successfully, our business may suffer.

From time to time, we evaluate strategic opportunities available to us for product, technology or business transactions, such as business acquisitions or divestitures. If we choose to enter into such transactions, we face certain risks, such as the failure of an acquired business to meet our performance expectations, diversion of management attention, identification of additional liabilities relating to the acquired business, ~~retention~~loss of existing customers of our current and acquired businesses due to concerns that new product lines may be in competition with the ~~customers of~~customers' existing product lines, and difficulty integrating an acquired business's operations, personnel and financial and operating systems into our current business.

We may not be able to adequately address these risks or any other problems that arise from our recent or future acquisitions or divestitures. Any failure to successfully evaluate strategic opportunities and address risks or other problems that arise related to any such business transaction could adversely affect our business, results of operations or financial condition.

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Our revenue is highly dependent on our customers' ability to produce, market and sell more integrated products.

Our revenue in our LED Products and Power and RF Products segments depends on getting our products designed into a larger number of our customers' products and in turn, our customers' ability to produce, market and sell their products. For example, we have current and prospective customers that create, or plan to create, lighting systems using our LED components. However, the traditional lighting industry is still developing technical expertise with LED-related designs, which may limit the success of our customers' products. Even if our customers are able to develop and produce LED lighting products and products that incorporate our Power and RF products, there can be no assurance that our customers will be successful in marketing and selling these products in the marketplace.

The adoption of or changes in government and/or industry policies, standards or regulations relating to the efficiency, performance, use or other aspects of ~~LED~~ lighting ~~or changes in government and/or industry policies, standards or regulations that discourage the use of certain traditional lighting technologies,~~ could impact the demand for our products.

The adoption of or changes in government and/or industry policies, standards or regulations relating to the efficiency, performance or other aspects of LED lighting may impact the demand for our products. Demand for our products may also be impacted by changes in government and/or industry policies, standards or regulations that discourage the use of certain traditional lighting technologies. These constraints may be eliminated or delayed by legislative action, which could have a negative impact on demand for our products.

If governments, their agencies or ~~regulated~~ utilities reduce their demand for our products or discontinue or curtail their funding, our business may suffer.

Changes in governmental budget priorities could adversely affect our business and results of operations. U.S. and foreign government agencies have purchased products directly from us and products from our customers, and U.S. government agencies have historically funded a portion of our research and development activities. When the government changes budget priorities, such as in times of war or financial crisis, our research and development funding and our product sales to government entities and government-funded customers are at risk. For example, demand and payment for our products and our customers' products may be affected by public sector budgetary cycles, funding authorizations, or utility rebates. Funding reductions or delays could negatively impact demand for our products. If government or utility funding is discontinued or significantly reduced, our business and results of operations could be adversely affected.

Variations in our production yields could impact our ability to reduce costs and could cause our margins to decline and our operating results to suffer.

All of our products are manufactured using technologies that are highly complex. The number of usable items, or yield, from our production processes may fluctuate as a result of many factors, including but not limited to the following:

variability in our process repeatability and control;

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contamination of the manufacturing environment;

equipment failure, power outages, information or other system failures or variations in the manufacturing process;

lack of consistency and adequate quality and quantity of piece parts and other raw materials, and other bill of materials items;

inventory shrinkage or human errors;

defects in production processes (including system assembly) either within our facilities or at our ~~contractors;~~suppliers; and

any transitions or changes in our production process, planned or unplanned.

In the past, we have experienced difficulties in achieving acceptable yields on certain products, which has adversely affected our operating results. We may experience similar problems in the future, and we cannot predict when they may occur or their severity.

In addition, our ability to convert volume manufacturing to larger diameter substrates can be an important factor in ~~allowing for~~providing a more cost effective manufacturing process. If we are unable to make this transition in a timely or cost effective manner, our results could be negatively impacted.

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In some instances, we may offer products for future delivery at prices based on planned yield improvements or increased cost efficiencies from other production advances. Failure to achieve these planned improvements or advances could have a significant impact on our margins and operating results.

Catastrophic events may disrupt our business.

A disruption or failure of our systems or operations in the event of a natural disaster, health pandemic, such as an influenza outbreak within our workforce, or man-made catastrophic event could cause delays in completing sales, continuing production or performing other critical functions of our business, particularly if a catastrophic event occurred at our primary manufacturing locations in the U.S. and China. This could severely affect our ability to conduct normal business operations and, as a result, our operating results could be adversely affected. There may also be secondary impacts that are unforeseeable as well, such as impacts to our customers, which could cause delays in new orders, delays in completing sales or even order cancellations.

If our products fail to perform or fail to meet customer requirements or expectations, we could incur significant additional costs, including costs associated with the recall of those items.

The manufacture of our products involves highly complex processes. Our customers specify quality, performance and reliability standards that we must meet. If our products do not meet these standards, we may be required to replace or rework the products. In some cases, our products may contain undetected defects or flaws that only become evident after shipment. Even if our products meet standard specifications, our customers may attempt to use our products in applications they were not designed for or in products that were not designed or manufactured properly, resulting in product failures and creating customer satisfaction issues.

We have experienced product quality, performance or reliability problems from time to time and defects or failures may occur in the future. If failures or defects occur, we may need to recall our products. These recalls could result in significant losses due to:

costs associated with the removal, collection and destruction of the product recalled;

payments made to replace recalled product;

the write down or destruction of existing inventory subject to the recall;

lost sales due to the unavailability of product for a period of time;

delays, cancellations or rescheduling of orders for our products; or

increased product returns.

A significant product recall could also result in adverse publicity, damage to our reputation, and a loss of customer or consumer confidence in our products. We also may be the target of product liability lawsuits or regulatory proceedings by the Consumer Product Safety Commission (CPSC), and could suffer losses from a significant product liability judgment or adverse CPSC finding against us if the use of our products at issue is determined to have caused ~~injury.~~injury or contained a substantial product hazard.

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We provide warranty periods ranging from ninety days to ten years on our products. The standard warranty on nearly all of our new LED lighting products, which represent an increasing portion of our sales, is ten years. WeAs a result, we may experience an increase in warranty ~~claims as a result of the extension of the warranty period.~~claims. Increased warranty claims could result in significant losses due to a rise in warranty expense and costs associated with customer support.

A significant product recall or product liability case, or a significant increase in warranty claims, could also result in adverse publicity, damage to our reputation, and a loss of customer confidence in our products.

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Our operations in foreign countries expose us to certain risks inherent in doing business internationally, which may adversely affect our business, results of operations or financial condition.

As a result of acquisitions and organic growth, we have operations, manufacturing facilities and contract manufacturing arrangements in foreign countries that expose us to certain risks. For example, fluctuations in exchange rates may affect our revenues, expenses and results of operations as well as the value of our assets and liabilities as reflected in our financial statements. We are also subject to other types of risks, including the following:

protection of intellectual property and trade secrets;

tariffs, customs and other barriers to importing/exporting materials and products in a cost effective and timely manner;

timing and availability of export licenses;

rising labor costs;

disruptions in or inadequate infrastructure of the countries where we operate;

difficulties in accounts receivable collections;

difficulties in staffing and managing international operations;

the burden of complying with foreign and international laws and treaties; and

the burden of complying with and changes in international taxation policies.

In some instances, we have been provided and may continue to receive incentives from foreign governments to encourage our investment in certain countries, regions, or areas outside of the United States. In particular, we have received and may continue to receive such incentives in connection with our operations in Asia, as Asian national and local governments seek to encourage the development of the technology industry. Government incentives may include tax rebates, reduced tax rates, favorable lending policies and other measures, some or all of which may be available to us due to our foreign operations. Any of these incentives could be reduced or eliminated by governmental authorities at any time. Any reduction or elimination of incentives currently provided to our operations could adversely affect our business and results of operations. These same governments also may provide increased incentives to or require production processes that favor local companies, which could further negatively impact our business and results of operations.

Abrupt political change, terrorist activity and armed conflict pose a risk of general economic disruption in affected countries, which could also result in an adverse effect on our business and results of operations.

Litigation could adversely affect our operating results and financial condition.

We are often involved in litigation, primarily patent litigation, as described in more detail in Note 12 "Commitments and Contingencies" to our consolidated financial statements included in "Item 8, Financial Statements and Supplementary Data" of our Annual Report on Form 10-K for fiscal ~~2012~~2013 and in Note 1211, "Commitments and Contingencies," to our unaudited financial statements in Part I, Item 1 of this Quarterly Report. Defending against existing and potential litigation will likely require significant attention and resources and, regardless of the outcome, result in significant legal expenses, which could adversely affect our ~~operating~~ results unless covered by insurance or recovered from third parties. If our defenses are ultimately unsuccessful, or if we are unable to achieve a favorable resolution, we could be liable for damage awards that could materially affect our results of operations and financial condition.

Where necessary, we may initiate litigation to enforce our patent or other intellectual property rights. Any such litigation may require us to spend a substantial amount of time and money and could distract management from our day-to-day operations. Moreover, there is no assurance that we will be successful in any such litigation.

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Our business may be impaired by claims that we, or our customers, infringe the intellectual property rights of others.

Vigorous protection and pursuit of intellectual property rights characterize our industry. These traits have resulted in significant and often protracted and expensive litigation. Litigation to determine the validity of patents or claims by third parties of infringement of patents or other intellectual property rights could result in significant legal expense and divert the efforts of our technical personnel and management, even if the litigation results in a determination favorable to us. In the event of an adverse result in such litigation, we could be required to:

pay substantial damages;

indemnify our customers;

stop the manufacture, use and sale of products found to be infringing;

incur asset impairment charges;

discontinue the use of processes found to be infringing;

expend significant resources to develop non-infringing products or processes; or

obtain a license to use third party technology.

There can be no assurance that third parties will not attempt to assert infringement claims against us, or our customers, with respect to our products. In addition, our customers may face infringement claims directed to the customer's products that incorporate our products, and an adverse result could impair the customer's demand for our products. We have also promised certain of our customers that we will indemnify them in the event they are sued by our competitors for infringement claims directed to the products we supply. Under these indemnification obligations, we may be responsible for future payments to resolve infringement claims against them.

From time to time, we receive correspondence asserting that our products or processes are or may be infringing patents or other intellectual property rights of others. If we believe the assertions may have merit or in other appropriate circumstances, we may take steps to seek to obtain a license or to avoid the infringement. ~~However, we~~We cannot predict, however, whether a license will be available; that we would find the terms of any license offered acceptable; or that we would be able to develop an alternative solution. Failure to obtain a necessary license or develop an alternative solution could cause us to incur substantial liabilities and costs and to suspend the manufacture of affected products.

There are limitations on our ability to protect our intellectual property.

Our intellectual property position is based in part on patents owned by us and patents licensed to us. We intend to continue to file patent applications in the future, where appropriate, and to pursue such applications with U.S. and certain foreign patent authorities.

~~However, our~~Our existing patents are subject to expiration and re-examination and we cannot be sure that additional patents will be issued on any new applications around the covered technology or that our existing or future patents will not be successfully contested by third parties. Also, since issuance of a valid patent does not prevent other companies from using alternative, non-infringing technology, we cannot be sure that any of our patents, or patents issued to others and licensed to us, will provide significant commercial protection, especially as new competitors enter the market.

We periodically discover products that are counterfeit reproductions of our products or that otherwise infringe on our intellectual property rights. The actions we take to establish and protect trademarks, patents, and other intellectual property rights may not be adequate to prevent imitation of our products by others, and therefore, may adversely affect our sales and our brand and result in the shift of customer preference away from our products. Further, the actions we take to establish and protect trademarks, patents and other intellectual property rights could result in significant legal expense and divert the efforts of our technical personnel and management, even if the litigation or other action results in a determination favorable to us.

We also rely on trade secrets and other non-patented proprietary information relating to our product development and manufacturing activities. We try to protect this information through appropriate efforts to maintain its secrecy, including requiring employees and third parties to sign confidentiality agreements. We cannot be sure that these efforts will be successful or that the confidentiality agreements will not be breached. We also cannot be sure that we would have adequate remedies for any breach of such agreements or other misappropriation of our trade secrets, or that our trade secrets and proprietary know-how will not otherwise become known or be independently discovered by others.

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We may be required to ~~record~~recognize a significant charge to earnings if our goodwill or other intangible assets become impaired.

Goodwill and purchased intangible assets with indefinite lives are not amortized, but are reviewed for impairment annually and more frequently when events or changes in circumstances indicate that the carrying value of an asset may not be recoverable. We assess the recoverability of the unamortized balance of our definite-lived intangible assets when indicators of potential impairment are present. Factors that may indicate that the carrying value of our goodwill or other intangible assets may not be recoverable include a decline in our stock price and market capitalization and slower growth rates in our industry. ~~We may be required to recognize~~The recognition of a significant charge to earnings in our consolidated financial statements ~~during the period in which~~resulting from any impairment of our goodwill or other intangible assets ~~is determined to exist, which~~ could adversely impact our results of operations.

We may be subject to confidential information theft or misuse, which could harm our business and results of operations.

We face attempts by others to gain unauthorized access to our information technology systems on which we maintain proprietary and other confidential information. Our security measures may be breached as the result of industrial or other espionage actions of outside parties, employee error, malfeasance, or otherwise, and, as a result, an unauthorized party may obtain access to our systems. Additionally, outside parties may attempt to access our confidential information through other means, for example by fraudulently inducing our employees to disclose confidential information. We actively seek to prevent, detect and investigate any unauthorized access, which sometimes occurs. We might be unaware of any such access or unable to determine its magnitude and effects. The theft and/or unauthorized use or publication of our trade secrets and other confidential business information as a result of such an incident could adversely affect our competitive position and the value of our investment in research and development could be reduced. Our business could be subject to significant disruption, and we could suffer monetary or other losses.

We are subject to risks related to international sales and purchases.

We expect that revenue from international sales will continue to represent ~~the majority~~a significant portion of our total revenue. As such, a significant slowdown or instability in ~~these~~relevant foreign economies, including ~~the recent~~ economic instability in Europe, or lower investments in new infrastructure could have a negative impact on our sales. We also purchase a portion of the materials included in our products from overseas sources.

Our international sales and purchases are subject to numerous U.S. and foreign laws and regulations, including, without limitation, tariffs, trade barriers, regulations relating to import-export control, technology transfer restrictions, the International Traffic in Arms Regulation promulgated under the Arms Export Control Act, the Foreign Corrupt Practices Act and the anti-boycott provisions of the U.S. Export Administration Act. If we fail to comply with these laws and regulations, we could be liable for administrative, civil or criminal liabilities, and in the extreme case, we could be suspended or debarred from government contracts or have our export privileges suspended, which could have a material adverse effect on our business.

International sales and purchases are also subject to a variety of other risks, including risks arising from currency fluctuations, collection issues and taxes. Our international sales are subject to variability as our selling prices become less competitive in countries with currencies that are declining in value against the U.S. Dollar and more competitive in countries with currencies that are increasing in value against the U.S. Dollar. In addition, our international purchases can become more expensive if the U.S. Dollar weakens against the foreign currencies in which we are billed.

We have entered and may in the future enter into foreign currency derivative financial instruments in an effort to manage or hedge some of our foreign exchange rate risk. We may not be able to engage in hedging transactions in the future, and even if we do, foreign currency fluctuations may still have a material adverse effect on our results of ~~operations and financial performance.~~operations.

Our business may be adversely affected by uncertainties in the global financial markets and our or our customers' or suppliers' ability to access the capital markets.

Global financial markets continue to reflect uncertainty about a sustained global economic recovery. Given these uncertainties, there could be future disruptions in the global economy, financial markets and consumer confidence. If economic conditions deteriorate unexpectedly, our business and results of operations could be materially and adversely affected. For example, our customers, including our distributors and their customers, may experience difficulty obtaining the working capital and other financing necessary to support historical or projected purchasing patterns, which could negatively affect our results of operations.

Although we believe we have adequate liquidity and capital resources to fund our operations internally, our inability to access the capital markets on favorable terms in the future, or at all, may adversely affect our financial performance. The inability to

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obtain adequate financing from debt or capital sources in the future could force us to self-fund strategic initiatives or even forego certain opportunities, which in turn could potentially harm our performance.

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Changes in our effective tax rate may affect our results.

Our future effective tax rates may be affected by a number of factors including:

the jurisdiction in which profits are determined to be earned and taxed;

changes in government administrations, such as the Presidency and Congress of the U.S. as well as in the states and countries in which we operate;

changes in tax laws or interpretation of such tax laws and changes in generally accepted accounting principles;

the resolution of issues arising from tax audits with various authorities;

changes in the valuation of our deferred tax assets and liabilities;

adjustments to estimated taxes upon finalization of various tax returns;

increases in expenses not deductible for tax purposes, including write-offs of acquired in-process research and development and impairment of goodwill in connection with acquisitions;

changes in available tax credits;

the recognition and measurement of uncertain tax positions;

the lack of sufficient excess tax benefits (credits) in our additional paid in capital pool in situations where our realized tax deductions for certain stock-based compensation awards (such as non-qualified stock options and restricted stock) are less than those originally anticipated; and

the repatriation of non-U.S. earnings for which we have not previously provided for U.S. taxes, or any changes in legislation that may result in these earnings being taxed within the U.S., regardless of our decision regarding repatriation of funds.

For example, proposals have been made by various U.S. governmental bodies to change the U.S. tax laws that include, among other things, limiting U.S. tax deductions for expenses related to un-repatriated foreign-source income and modifying the U.S. foreign tax credit rules. Although the scope of the proposed changes is unclear, it is possible that these or other changes in U.S. tax laws could increase our U.S. income tax liability and adversely affect our profitability. At this time, we cannot determine the timing that the proposed changes, if enacted, would become effective.

Any significant increase or decrease in our future effective tax rates could impact net income for future periods. In addition, the determination of our income tax provision requires complex estimations, significant judgments and significant knowledge and experience concerning the applicable tax laws. To the extent our income tax liability materially differs from our income tax provisions due to factors, including the above, which were not anticipated at the time we estimated our tax provision, our net income or cash flows could be affected.

In order to compete, we must attract, motivate and retain key employees, and our failure to do so could harm our results of operations.

Hiring and retaining qualified executives, scientists, engineers, technical staff and sales personnel is critical to our business, and competition for experienced employees in our industry can be intense. As a global company, this issue is not limited to the United States, but includes our other locations such as Europe and China. For example, there is substantial competition in China for qualified and capable personnel, particularly experienced engineers and technical personnel, which may make it difficult for us to recruit and retain qualified employees. Also, within Huizhou, China, there are other large companies building manufacturing plants that will likely ~~attract~~compete for qualified employees. If we are unable to staff sufficient and adequate personnel at our China facilities, we may experience lower revenues or increased manufacturing costs, which would adversely affect our results of operations.

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To help attract, motivate and retain key employees, we use benefits such as stock-based compensation awards, which include non-qualified stock options and restricted stock. If the value of such ~~stock~~equity awards does not appreciate, as measured by the performance of the price of our common stock, or if our share-based compensation otherwise ceases to be viewed as a valuable benefit, our ability to attract, retain and motivate employees could be weakened, which could harm our business and results of operations.

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Failure to comply with applicable environmental laws and regulations worldwide could harm our business and results of operations.

The manufacturing, assembling and testing of our products require the use of hazardous materials that are subject to a broad array of environmental, health and safety laws and regulations. Our failure to comply with any of these applicable laws or regulations could result in:

regulatory penalties, fines, legal liabilities, and the forfeiture of certain tax benefits;

suspension of production;

alteration of our fabrication, assembly and test processes; and

curtailment of our operations or sales.

In addition, our failure to manage the use, transportation, emission, discharge, storage, recycling or disposal of hazardous materials could subject us to increased costs or future liabilities. Existing and future environmental laws and regulations could also require us to acquire pollution abatement or remediation equipment, modify our product designs or incur other expenses, such as permit costs, associated with such laws and regulations. Many new materials that we are evaluating for use in our operations may be subject to regulation under existing or future environmental laws and regulations that may restrict our use of one or more of such materials in our manufacturing, assembly and test processes or products. Any of these restrictions could harm our business and results of operations by increasing our expenses or requiring us to alter our manufacturing processes.

Our results could vary as a result of the methods, estimates and judgments that we use in applying our accounting policies, including changes in the accounting ~~regulations~~standards to be applied.

The methods, estimates and judgments that we use in applying our accounting policies have a significant impact on our results (see “Critical Accounting Policies and Estimates” in “Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations” in our Annual Report on Form 10-K for fiscal ~~2012~~2013). Such methods, estimates and judgments are, by their nature, subject to substantial risks, uncertainties and assumptions, and factors may arise over time that lead us to change our methods, estimates and judgments. Changes in those methods, estimates and judgments could significantly affect our ~~results.~~results of operations or financial condition.

Likewise, our results may be impacted due to changes in the accounting standards to be applied, such as the increased use of fair value measurement standards and proposed changes in revenue recognition requirements.

New regulations related to conflict-free minerals may force us to incur additional expenses.

The Dodd-Frank Wall Street Reform and Consumer Protection Act contains provisions to improve transparency and accountability concerning the supply of minerals originating from the conflict zones of the Democratic Republic of Congo (DRC) and adjoining countries. As a result, in August 2012 the SEC established new annual disclosure and reporting requirements for those companies who may use “conflict” minerals mined from the DRC and adjoining countries in their products. These new requirements required us to undertake due diligence efforts beginning in the 2013 calendar year, with initial disclosure requirements beginning in May 2014. These new requirements could affect the sourcing and availability of certain minerals used in the manufacture of our products. As a result, we may not be able to obtain the relevant minerals at competitive prices and there will likely be additional costs associated with complying with the new due diligence procedures as required by the SEC. In addition, as our supply chain is complex, we may face reputational challenges with our customers and other stakeholders if we are unable to sufficiently verify the origins of all minerals used in our products through the due diligence procedures that we implement, and we may incur additional costs as a result of changes to product, processes or sources of supply as a consequence of these new requirements.

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We are exposed to fluctuations in the market value of our investment portfolio and in interest rates, and therefore, impairment of our investments or lower investment income could harm our earnings.

We are exposed to market value and inherent interest rate risk related to our investment portfolio. We have historically invested portions of our available cash in fixed interest rate securities such as high-grade corporate debt, commercial paper, government securities and other fixed interest rate investments. The primary objective of our investment policy is preservation of principal. However, our investments are generally not FDIC insured and may lose value and/or become illiquid regardless of their credit rating.

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Our stock price may be volatile.

Historically, our common stock has experienced substantial price volatility, particularly as a result of significant fluctuations in our revenue, earnings and margins over the past few years, and variations between our actual financial results and the published expectations of analysts. For example, the closing price per share of our common stock on the NASDAQ Global Select Market ranged from a low of $22.78 to a high of $~~55.28~~65.70 ~~in the first nine months of~~during fiscal 2013. If our future operating results or margins are below the expectations of stock market analysts or our investors, our stock price will likely decline.

Speculation and opinions in the press or investment community about our strategic position, financial condition, results of operations, or significant transactions can also cause changes in our stock price. In particular, speculation around our market opportunities for energy efficient lighting may have a dramatic effect on our stock price, especially as various government agencies announce their planned investments in energy efficient technology, including lighting.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

~~Not applicable.~~

There were no sales of unregistered securities during the first quarter of fiscal 2014. The following table summarizes our stock repurchase activity for the first quarter of fiscal 2014 (in thousands, except per share data):



Period	Total number of shares purchased ⁽¹⁾	Average price paid per share		Total number of shares purchased as a part of publicly announced program	Maximum dollar value of shares that may yet be purchased under the program ⁽²⁾
July 1, 2013 to July 28, 2013	—		$—	—		$200,000
July 29, 2013 to August 25, 2013	—	—		—	200,000
August 26, 2013 to September 29, 2013	76	55.49		—	200,000
Total	76		$55.49	—		$200,000

(1) Represents shares repurchased to satisfy tax withholding obligations that arose on the vesting of shares of restricted stock.

(2) On January 18, 2001, we announced the authorization by our Board of Directors of a program to repurchase shares of our outstanding common stock. Several times since then, the Board of Directors has renewed the program and increased the number of shares that can be repurchased under the program. As of September 29, 2013, pursuant to an extension of the stock repurchase program by the Board of Directors, we are authorized to repurchase shares of our common stock having an aggregate purchase price not exceeding $200 million for all purchases from June 20, 2013 through the June 29, 2014 expiration of the program. During the three months ended September 29, 2013, we repurchased zero shares of common stock under the repurchase program.

Item 3. Defaults Upon Senior Securities

Not applicable.

Item 4. Mine Safety Disclosures

Not applicable.

Item 5. Other Information

Not applicable.

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Item 6. Exhibits

The following exhibits are being filed herewith and are numbered in accordance with Item 601 of Regulation S-K:



Exhibit No.			Description
~~4.1~~10.1			~~Amendment No. 1 to Amended and Restated Rights Agreement, dated as of January 29, 2013~~Management Incentive Compensation Plan (incorporated herein by reference to Exhibit ~~4.1~~10.1 of the ~~Company's~~Company’s Current Report on Form 8-K, dated ~~January 29,~~August 30, 2013, as filed with the Securities and Exchange Commission on ~~January 31,~~September 5, 2013).
10.2			Notice of Grant to Charles M. Swoboda, dated August 30, 2013 (incorporated herein by reference to Exhibit 10.2 of the Company’s Current Report on Form 8-K, dated August 30, 2013, filed with the Securities and Exchange Commission on September 5, 2013)
10.3			Notice of Grant to Michael E. McDevitt, dated August 30, 2013 (incorporated herein by reference to Exhibit 10.3 of the Company’s Current Report on Form 8-K, dated August 30, 2013, filed with the Securities and Exchange Commission on September 5, 2013)
10.4			Notice of Grant to Norbert W. G. Hiller, dated August 30, 2013 (incorporated herein by reference to Exhibit 10.4 of the Company’s Current Report on Form 8-K, dated August 30, 2013, filed with the Securities and Exchange Commission on September 5, 2013)
10.5			Notice of Grant to Tyrone D. Mitchell, Jr., dated August 30, 2013 (incorporated herein by reference to Exhibit 10.5 of the Company’s Current Report on Form 8-K, dated August 30, 2013, filed with the Securities and Exchange Commission on September 5, 2013)
10.6			Form of Master Performance Unit Award Agreement (incorporated herein by reference to Exhibit 10.6 of the Company’s Current Report on Form 8-K, dated August 30, 2013, filed with the Securities and Exchange Commission on September 5, 2013)
10.7			Form of Stock Unit Award Agreement (Time-Based)
10.8			Form of Stock Unit Award Agreement (Performance-Based)
31.1			Certification by Chief Executive Officer pursuant to Rule 13a-14(a) under the Securities Exchange Act of 1934, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
31.2			Certification by Chief Financial Officer pursuant to Rule 13a-14(a) under the Securities Exchange Act of 1934, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
32.1			Certification by Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
32.2			Certification by Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
101			The following materials from Cree Inc.’s Quarterly Report on Form 10-Q for the fiscal quarter ended ~~March 31,~~September 29, 2013 formatted in XBRL (eXtensible Business Reporting Language) ~~and furnished electronically herewith:~~: (i) Consolidated Balance Sheets; (ii) Consolidated Statements of Income; (iii) Consolidated Statements of Comprehensive Income; (iv) Consolidated Statements of Cash ~~Flow;~~Flows; and (v) Notes to Consolidated Financial Statements

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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 thereunto duly authorized.



	CREE, INC.

~~April 24,~~October 23, 2013

	/s/ MICHAEL E. MCDEVITT
	Michael E. McDevitt
	Executive Vice President and Chief Financial Officer
	(Authorized Officer and Principal Financial and Chief Accounting Officer)

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EXHIBIT INDEX



Exhibit No.			Description
~~4.1~~10.1			~~Amendment No. 1 to Amended and Restated Rights Agreement, dated as of January 29, 2013~~Management Incentive Compensation Plan (incorporated herein by reference to Exhibit ~~4.1~~10.1 of the ~~Company's~~Company’s Current Report on Form 8-K, dated ~~January 29,~~August 30, 2013, as filed with the Securities and Exchange Commission on ~~January 31,~~September 5, 2013).
10.2			Notice of Grant to Charles M. Swoboda, dated August 30, 2013 (incorporated herein by reference to Exhibit 10.2 of the Company’s Current Report on Form 8-K, dated August 30, 2013, filed with the Securities and Exchange Commission on September 5, 2013)
10.3			Notice of Grant to Michael E. McDevitt, dated August 30, 2013 (incorporated herein by reference to Exhibit 10.3 of the Company’s Current Report on Form 8-K, dated August 30, 2013, filed with the Securities and Exchange Commission on September 5, 2013)
10.4			Notice of Grant to Norbert W. G. Hiller, dated August 30, 2013 (incorporated herein by reference to Exhibit 10.4 of the Company’s Current Report on Form 8-K, dated August 30, 2013, filed with the Securities and Exchange Commission on September 5, 2013)
10.5			Notice of Grant to Tyrone D. Mitchell, Jr., dated August 30, 2013 (incorporated herein by reference to Exhibit 10.5 of the Company’s Current Report on Form 8-K, dated August 30, 2013, filed with the Securities and Exchange Commission on September 5, 2013)
10.6			Form of Master Performance Unit Award Agreement (incorporated herein by reference to Exhibit 10.6 of the Company’s Current Report on Form 8-K, dated August 30, 2013, filed with the Securities and Exchange Commission on September 5, 2013)
10.7			Form of Stock Unit Award Agreement (Time-Based)
10.8			Form of Stock Unit Award Agreement (Performance-Based)
31.1			Certification by Chief Executive Officer pursuant to Rule 13a-14(a) under the Securities Exchange Act of 1934, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
31.2			Certification by Chief Financial Officer pursuant to Rule 13a-14(a) under the Securities Exchange Act of 1934, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
32.1			Certification by Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
32.2			Certification by Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
101			The following materials from Cree Inc.’s Quarterly Report on Form 10-Q for the fiscal quarter ended ~~March 31,~~September 29, 2013 formatted in XBRL (eXtensible Business Reporting Language) ~~and furnished electronically herewith:~~: (i) Consolidated Balance Sheets; (ii) Consolidated Statements of Income; (iii) Consolidated Statements of Comprehensive Income; (iv) Consolidated Statements of Cash ~~Flow;~~Flows; and (v) Notes to Consolidated Financial Statements

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Derivatives Not Designated as Hedging Instruments	Location of Gain (Loss) Recognized in Net Income	Amount of Gain (Loss) Recognized in Net Income
		Three months ended				Nine Months Ended
		March 31, 2013		March 25, 2012		March 31, 2013		March 25, 2012
Foreign currency forward contract	Other non-operating income (expense), net	$	8	$	—	$	8	$	—



Fiscal Year Ending
June 30, 2013 (remainder of fiscal 2013)	$	9,460
June 29, 2014	35,806
June 28, 2015	32,831
June 26, 2016	32,553
June 25, 2017	30,587
Thereafter	138,325
Total	$	279,562



Balance at June 24, 2012	$	5,513
Warranties accrued in current period	2,873
Changes in estimates for pre-existing warranties	787
Expenditures	(2,027		)
Balance at March 31, 2013	$	7,146