CREE, INC. CONDENSED CONSOLIDATED STATEMENTS OF INCOME (in thousands, except per share amounts and percentages) (unaudited) Three Months Ended September 28, 2014 $ 427,672 Revenue, net September 29, 2013 $ 391,006 Cost of revenue, net 291,852 240,249 Gross profit 135,820 150,757 Gross margin percentage 31.8 % 38.6 % Operating expenses: Research and development 46,725 41,743 Sales, general and administrative 69,692 64,278 6,499 7,287 Amortization or impairment of acquisition-related intangibles Loss on disposal or impairment of long-lived assets Total operating expenses Operating income Operating income percentage 1,447 657 124,363 113,965 11,457 36,792 2.7 % 9.4 % Non-operating income, net 2,904 2,818 Income before income taxes 14,361 39,610 3,231 9,113 Income tax expense Net income $ 11,130 $ 30,497 Diluted earnings per share $ 0.09 $ 0.25 Shares used in diluted per share calculation: 121,143 5 122,364