- Revenues of $262M increased 18% compared to Q1 FY17
- GAAP EPS of $0.32 increased 23% compared to Q1 FY17
- Adjusted EPS of $0.35 increased 35% compared to Q1 FY17
PITTSBURGH, Oct. 31, 2017 (GLOBE NEWSWIRE) -- II-VI Incorporated IIVI ("II-VI" or the "Company") today reported results for its first fiscal quarter ended September 30, 2017.
"All of our segments got off to a great start in Q1," said Dr. Vincent D. Mattera, Jr. President and CEO, II-VI Incorporated. "They all saw year-over-year growth in the end markets of materials processing, optical communications, and wireless communications. We did not experience as much seasonal softness as anticipated. We expect to see broad-based growth in fiscal year 2018 led by our core markets as well as our emerging markets, including 3D sensing, EUV lithography and the rapidly-developing electric vehicle ecosystem."
| Table 1 | |||||||||||||||||||||||
| $ Millions, except per share amounts, % and Book to Bill | |||||||||||||||||||||||
| (Unaudited) | |||||||||||||||||||||||
| % Increase | |||||||||||||||||||||||
| Three Months Ended | (Decrease) from | ||||||||||||||||||||||
| Sept 30, | June 30, | Sept 30, | June 30, | Sept 30, | |||||||||||||||||||
| 2017 | 2017 | 2016 | 2017 | 2016 | |||||||||||||||||||
| Revenues | $ | 261.5 | $ | 273.7 | $ | 221.5 | (4 | %) | 18 | % | |||||||||||||
| Operating income | $ | 29.8 | $ | 35.7 | $ | 23.7 | (17 | %) | 26 | % | |||||||||||||
| Adjusted operating income (1) | $ | 31.8 | $ | 35.7 | $ | 23.7 | (11 | %) | 34 | % | |||||||||||||
| Net earnings | $ | 21.1 | $ | 32.6 | $ | 16.3 | (35 | %) | 29 | % | |||||||||||||
| Adjusted net earnings (1) | $ | 22.7 | $ | 32.6 | $ | 16.3 | (30 | %) | 39 | % | |||||||||||||
| Diluted earnings per share | $ | 0.32 | $ | 0.50 | $ | 0.26 | (36 | %) | 23 | % | |||||||||||||
| Adjusted diluted earnings per share (1) | $ | 0.35 | $ | 0.50 | $ | 0.26 | (30 | %) | 35 | % | |||||||||||||
| Other Selected Financial Metrics | |||||||||||||||||||||||
| Book to Bill (2) | 0.96 | 1.00 | 1.10 | ||||||||||||||||||||
| Gross margin | 40.5 | % | 39.7 | % | 39.5 | % | 80 bps | 100 bps | |||||||||||||||
| Operating margin | 11.4 | % | 13.0 | % | 10.7 | % | (160 bps) | 70 bps | |||||||||||||||
| Adjusted operating margin (1) | 12.2 | % | 13.0 | % | 10.7 | % | (80 bps) | 150 bps | |||||||||||||||
| Return on sales | 8.1 | % | 11.9 | % | 7.4 | % | (380 bps) | 70 bps | |||||||||||||||
| Adjusted return on sales (1) | 8.7 | % | 11.9 | % | 7.4 | % | (320 bps) | 130 bps | |||||||||||||||
(1) Excludes one-time expenses relating to acquisition of Kaiam Laser Limited in fiscal year 2018. See Table 7 for Reconciliation of Reported Earnings to Adjusted Net Earnings.
(2) Book to Bill ratio is calculated by dividing orders the company expects to convert to revenue within the next twelve months by revenues recognized during the period.
Outlook
The outlook for the second fiscal quarter ending December 31, 2017 is revenue of $272 million to $282 million and earnings per share of $0.35 to $0.38. This is all at prevailing exchange rates and all earnings per share comments refer to diluted shares. Comparable results for the quarter ended December 31, 2016 were revenues of $231.8 million and diluted earnings per share of $0.37. As discussed in more detail below, actual results may differ from these forecasts due to various factors including, but not limited to, changes in product demand, competition and general economic conditions.
Segment Information
Operating income is defined as earnings before income taxes, interest expense and other expense or income, net.
| Table 2 | ||||||||||||||||||||||
| Segment Book to Bill, Revenues, Operating Income and Margins | ||||||||||||||||||||||
| $ Millions, except % and Book to Bill | ||||||||||||||||||||||
| (Unaudited) | ||||||||||||||||||||||
| Three Months Ended | % Increase (Decrease) from | |||||||||||||||||||||
| Sept 30, | June 30, | Sept 30, | June 30, | Sept 30, | ||||||||||||||||||
| 2017 | 2017 | 2016 | 2017 | 2016 | ||||||||||||||||||
| Book to Bill: | ||||||||||||||||||||||
| II-VI Laser Solutions | 1.08 | 1.00 | 1.02 | |||||||||||||||||||
| II-VI Photonics | 0.78 | 0.92 | 1.09 | |||||||||||||||||||
| II-VI Performance Products | 1.13 | 1.13 | 1.27 | |||||||||||||||||||
| Total Book to Bill | 0.96 | 1.00 | 1.10 | |||||||||||||||||||
| Revenues: | ||||||||||||||||||||||
| Adjusted II-VI Laser Solutions | $ | 92.7 | $ | 94.9 | $ | 79.3 | (2 | %) | 17 | % | ||||||||||||
| Acquired business | 0.6 | - | - | - | - | |||||||||||||||||
| Consolidated II-VI Laser Solutions | $ | 93.3 | $ | 94.9 | $ | 79.3 | (2 | %) | 18 | % | ||||||||||||
| II-VI Photonics | 110.6 | 112.7 | 95.8 | (2 | %) | 15 | % | |||||||||||||||
| II-VI Performance Products | 57.6 | 66.1 | 46.4 | (13 | %) | 24 | % | |||||||||||||||
| Total Revenues | $ | 261.5 | $ | 273.7 | $ | 221.5 | (4 | %) | 18 | % | ||||||||||||
| Operating Income: | ||||||||||||||||||||||
| Adjusted II-VI Laser Solutions | $ | 5.3 | $ | 8.3 | $ | 6.7 | (36 | %) | (21 | %) | ||||||||||||
| Acquired business's one-time expenses | (2.0 | ) | - | - | - | - | ||||||||||||||||
| Consolidated II-VI Laser Solutions | $ | 3.3 | $ | 8.3 | $ | 6.7 | (60 | %) | (51 | %) | ||||||||||||
| II-VI Photonics | 19.5 | 17.3 | 13.9 | 13 | % | 40 | % | |||||||||||||||
| II-VI Performance Products | 7.0 | 10.1 | 3.1 | (31 | %) | 126 | % | |||||||||||||||
| Total Operating Income | $ | 29.8 | $ | 35.7 | $ | 23.7 | (17 | %) | 26 | % | ||||||||||||
| Adjusted Operating Income | $ | 31.8 | $ | 35.7 | $ | 23.7 | (11 | %) | 34 | % | ||||||||||||
| Operating Margin: | ||||||||||||||||||||||
| Adjusted II-VI Laser Solutions | 5.7 | % | 8.7 | % | 8.4 | % | (300 bps) | (270 bps) | ||||||||||||||
| II-VI Laser Solutions | 3.5 | % | 8.7 | % | 8.4 | % | (520 bps) | (490 bps) | ||||||||||||||
| II-VI Photonics | 17.6 | % | 15.4 | % | 14.5 | % | 220 bps | 310 bps | ||||||||||||||
| II-VI Performance Products | 12.2 | % | 15.3 | % | 6.7 | % | (310 bps) | 550 bps | ||||||||||||||
| Total Operating Margin | 11.4 | % | 13.0 | % | 10.7 | % | (160 bps) | 70 bps | ||||||||||||||
| Total Adjusted Operating Margin | 12.2 | % | 13.0 | % | 10.7 | % | (80 bps) | 150 bps | ||||||||||||||
Table 3 is a reconciliation of Adjusted Operating Income reported in this press release to reported Net Earnings.
| Table 3 | ||||||||||||||
| Reconciliation of Operating Income to Net Earnings | ||||||||||||||
| $ Millions | ||||||||||||||
| (Unaudited) | Three Months Ended | |||||||||||||
| | ||||||||||||||
| Sept 30, | June 30, | Sept 30, | ||||||||||||
| 2017 | 2017 | 2016 | ||||||||||||
| Adjusted operating income | $ | 31.8 | $ | 35.7 | $ | 23.7 | ||||||||
| Acquired business's one-time expenses | (2.0 | ) | - | - | ||||||||||
| Operating income | $ | 29.8 | $ | 35.7 | $ | 23.7 | ||||||||
| Interest expense | 3.6 | 2.3 | 1.2 | |||||||||||
| Other expense (income), net | (0.7 | ) | (0.4 | ) | (1.4 | ) | ||||||||
| Income taxes | 5.8 | 1.2 | 7.6 | |||||||||||
| Net Earnings | $ | 21.1 | $ | 32.6 | $ | 16.3 | ||||||||
Table 4 is a reconciliation of Operating Income reported in this press release to adjusted EBITDA.
| Table 4 | ||||||||||||
| Reconciliation of Operating Income to Adjusted EBITDA | ||||||||||||
| $ Millions | ||||||||||||
| (Unaudited) | Three Months Ended | |||||||||||
| Sept 30, | June 30, | Sept 30, | ||||||||||
| 2017 | 2017 | 2016 | ||||||||||
| Operating income | $ | 29.8 | $ | 35.7 | $ | 23.7 | ||||||
| Depreciation and amortization | 18.9 | 18.9 | 14.9 | |||||||||
| Other income (expense) | 0.7 | 0.4 | 1.4 | |||||||||
| Acquired business's one-time expenses | 2.0 | - | - | |||||||||
| Acquired depreciation and amortization | (1.0 | ) | - | - | ||||||||
| Adjusted EBITDA | $ | 50.4 | $ | 55.0 | $ | 40.0 | ||||||
Table 5 is a reconciliation of adjusted EBITDA reported in this press release to reported Net Earnings.
| Table 5 | ||||||||||||||
| Reconciliation of EBITDA to Net Earnings | ||||||||||||||
| $ Millions | ||||||||||||||
| (Unaudited) | Three Months Ended | |||||||||||||
| Sept 30, | June 30, | Sept 30, | ||||||||||||
| 2017 | 2017 | 2016 | ||||||||||||
| Adjusted EBITDA | $ | 50.4 | $ | 55.0 | $ | 40.0 | ||||||||
| Adjusted EBITDA margin (3)(4) | 19.3 | % | 20.1 | % | 18.1 | % | ||||||||
| Acquired business's one-time expenses | (2.0 | ) | - | - | ||||||||||
| Acquired depreciation and amortization | 1.0 | - | - | |||||||||||
| EBITDA | $ | 49.4 | $ | 55.0 | $ | 40.0 | ||||||||
| EBITDA margin (4) | 18.9 | % | 20.1 | % | 18.1 | % | ||||||||
| Interest expense | $ | 3.6 | $ | 2.3 | $ | 1.2 | ||||||||
| Depreciation and amortization | 18.9 | 18.9 | 14.9 | |||||||||||
| Income taxes | 5.8 | 1.2 | 7.6 | |||||||||||
| Net Earnings | $ | 21.1 | $ | 32.6 | $ | 16.3 | ||||||||
(3) EBITDA is defined as earnings before interest, income taxes, depreciation and amortization.
(4) EBITDA margin is defined as earnings before interest, incomes taxes, depreciation and amortization divided by revenues.
Table 6 is a table of other selected financial information.
| Other Selected Financial Information | ||||||||
| $ Millions, except share information | ||||||||
| (Unaudited) | Three Months Ended | |||||||
| Sept 30, | June 30, | Sept 30, | ||||||
| 2017 | 2017 | 2016 | ||||||
| Share-based compensation expense, pre-tax | $ | 6.3 | $ | 3.5 | $ | 4.1 | ||
| Cash paid for shares repurchased | $ | 49.9 | $ | - | $ | - | ||
| Shares repurchased | 1,414,900 | - | - | |||||
Webcast Information
The Company will host a conference call at 9:00 a.m. Eastern Time on Tuesday, October 31, 2017 to discuss these results. The conference call will be broadcast live over the internet and can be accessed by all interested parties from the Company's website at www.ii-vi.com as well as at http://tinyurl.com/yd46uxga. A replay of the webcast will be available for two weeks following the call.
Use of Non-GAAP Financial Measures
The Company has disclosed financial measurements in this press release that present financial information considered to be non-GAAP financial measures. These measurements are not a substitute for GAAP measurements, although the Company's management uses these measurements as an aid in monitoring the Company's on-going financial performance. The adjusted non-GAAP net earnings and the adjusted non-GAAP earnings per share measure the earnings of the Company, excluding non-recurring or unusual items that are considered by the management to be outside the Company's standard operation. EBITDA is an adjusted non-GAAP financial measurement that is considered by management to be useful in measuring the profitability between companies within the industry by reflecting operating results of the Company excluding non-operating factors. There are limitations associated with the use of non-GAAP financial measures, including that such measures may not be entirely comparable to similarly titled measures used by other companies, due to potential differences among calculation methodologies. Thus, there can be no assurance that items excluded from the non-GAAP financial measures will not occur in the future, or that there could be cash costs associated with items excluded from the non-GAAP financial measures. The Company compensates for these limitations by using these non-GAAP financial measures as supplements to GAAP financial measures and by providing the reconciliations of the non-GAAP financial measures to their most comparable GAAP financial measures. Investors should consider adjusted measures in addition to, and not as a substitute for, or superior to, financial performance measures prepared in accordance with GAAP.
About II-VI Incorporated
II-VI Incorporated, a global leader in engineered materials and optoelectronic components, is a vertically integrated manufacturing company that develops innovative products for diversified applications in the industrial, optical communications, military, life sciences, semiconductor equipment, and consumer markets. Headquartered in Saxonburg, Pennsylvania, the Company has research and development, manufacturing, sales, service, and distribution facilities worldwide. The Company produces a wide variety of application-specific photonic and electronic materials and components, and deploys them in various forms, including integrated with advanced software to enable our customers. For more information, please visit us at www.ii-vi.com.
Forward-looking Statements
This press release contains forward-looking statements relating to future events and expectations that are based on certain assumptions and contingencies. The forward-looking statements are made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995 and relate to the Company's performance on a going-forward basis. The forward-looking statements in this press release involve risks and uncertainties, which could cause actual results, performance or trends to differ materially from those expressed in the forward-looking statements herein or in previous disclosures. The Company believes that all forward-looking statements made by it in this release have a reasonable basis, but there can be no assurance that management's expectations, beliefs or projections as expressed in the forward-looking statements will actually occur or prove to be correct. In addition to general industry and global economic conditions, factors that could cause actual results to differ materially from those discussed in the forward-looking statements in this press release include, but are not limited to: (i) the failure of any one or more of the assumptions stated above to prove to be correct; (ii) the risks relating to forward-looking statements and other "Risk Factors" discussed in the Company's Annual Report on Form 10-K for the fiscal year ended June 30, 2017; (iii) the purchasing patterns of customers and endusers; (iv) the timely release of new products, and acceptance of such new products by the market; (v) the introduction of new products by competitors and other competitive responses; (vi) the Company's ability to assimilate recently acquired businesses, and risks, costs and uncertainties associated with such acquisitions; (vii) our ability to achieve the anticipated benefits of capital investments that we make;and/or (viii) the Company's ability to devise and execute strategies to respond to market conditions. The Company disclaims any obligation to update information contained in these forward-looking statements whether as a result of new information, future events or developments, or otherwise.
| II-VI Incorporated and Subsidiaries | ||||||||||||
| Condensed Consolidated Statements of Earnings (Unaudited) | ||||||||||||
| ($000 except per share data) | ||||||||||||
| Three Months Ended | ||||||||||||
| September 30, | June 30, | September 30, | ||||||||||
| 2017 | 2017 | 2016 | ||||||||||
| Revenues | $ | 261,503 | $ | 273,717 | $ | 221,520 | ||||||
| Costs, Expenses & Other Expense (Income) | ||||||||||||
| Cost of goods sold | 155,528 | 164,939 | 133,918 | |||||||||
| Internal research and development | 25,574 | 25,966 | 21,832 | |||||||||
| Selling, general and administrative | 50,624 | 47,137 | 42,079 | |||||||||
| Interest expense | 3,645 | 2,262 | 1,246 | |||||||||
| Other expense (income), net | (767 | ) | (445 | ) | (1,402 | ) | ||||||
| Total Costs, Expenses, & Other Expense (Income) | 234,604 | 239,859 | 197,673 | |||||||||
| Earnings Before Income Taxes | 26,899 | 33,858 | 23,847 | |||||||||
| Income Taxes | 5,758 | 1,211 | 7,553 | |||||||||
| Net Earnings | $ | 21,141 | $ | 32,647 | $ | 16,294 | ||||||
| Diluted Earnings Per Share | $ | 0.32 | $ | 0.50 | $ | 0.26 | ||||||
| Basic Earnings Per Share | $ | 0.34 | $ | 0.52 | $ | 0.26 | ||||||
| Average Shares Outstanding - Diluted | 65,283 | 65,032 | 63,590 | |||||||||
| Average Shares Outstanding - Basic | 62,744 | 63,099 | 62,020 | |||||||||
| II-VI Incorporated and Subsidiaries | ||||||||||
| Condensed Consolidated Balance Sheets (Unaudited) | ||||||||||
| ($000) | ||||||||||
| September 30, | June 30, | |||||||||
| 2017 | 2017 | |||||||||
| Assets | ||||||||||
| Current Assets | ||||||||||
| Cash and cash equivalents | $ | 241,285 | $ | 271,888 | ||||||
| Accounts receivable | 192,828 | 193,379 | ||||||||
| Inventories | 224,461 | 203,695 | ||||||||
| Prepaid and refundable income taxes | 6,410 | 6,732 | ||||||||
| Prepaid and other current assets | 28,704 | 26,602 | ||||||||
| Total Current Assets | 693,688 | 702,296 | ||||||||
| Property, plant & equipment, net | 460,859 | 367,728 | ||||||||
| Goodwill | 270,103 | 250,342 | ||||||||
| Other intangible assets, net | 135,905 | 133,957 | ||||||||
| Investment | 11,998 | 11,727 | ||||||||
| Deferred income taxes | 2,950 | 3,023 | ||||||||
| Other assets | 8,302 | 8,224 | ||||||||
| Total Assets | $ | 1,583,805 | $ | 1,477,297 | ||||||
| Liabilities and Shareholders' Equity | ||||||||||
| Current Liabilities | ||||||||||
| Current portion of long-term debt | $ | 20,000 | $ | 20,000 | ||||||
| Accounts payable | 73,271 | 65,540 | ||||||||
| Accruals and other current liabilities | 85,204 | 99,412 | ||||||||
| Total Current Liabilities | 178,475 | 184,952 | ||||||||
| Long-term debt | 384,742 | 322,022 | ||||||||
| Capital lease obligation | 23,144 | 23,415 | ||||||||
| Deferred income taxes | 23,751 | 15,345 | ||||||||
| Other liabilities | 29,931 | 31,000 | ||||||||
| Total Liabilities | 640,043 | 576,734 | ||||||||
| Total Shareholders' Equity | 943,762 | 900,563 | ||||||||
| Total Liabilities and Shareholders' Equity | $ | 1,583,805 | $ | 1,477,297 | ||||||
| II-VI Incorporated and Subsidiaries | |||||||||
| Condensed Consolidated Statements of Cash Flows (Unaudited) | |||||||||
| ($000) | |||||||||
| Three Months Ended | |||||||||
| September 30, | |||||||||
| 2017 | 2016 | ||||||||
| Cash Flows from Operating Activities | |||||||||
| Net cash provided by operating activities | $ | 12,383 | $ | 19,513 | |||||
| Cash Flows from Investing Activities | |||||||||
| Additions to property, plant & equipment | (37,426 | ) | (29,994 | ) | |||||
| Purchase of business, net of cash acquired | (79,465 | ) | - | ||||||
| Other investing activities | 136 | 145 | |||||||
| Net cash used in investing activities | (116,755 | ) | (29,849 | ) | |||||
| Cash Flows from Financing Activities | |||||||||
| Proceeds from issuance of 0.25% convertible senior notes due 2022 | 345,000 | - | |||||||
| Proceeds from borrowings under Credit Facility | 40,000 | 24,000 | |||||||
| Payments on borrowings under Credit Facility | (257,000 | ) | (10,000 | ) | |||||
| Purchases of treasury stock | (49,875 | ) | - | ||||||
| Proceeds from exercises of stock options | 3,706 | 1,745 | |||||||
| Payments in satisfaction of employees' minimum tax obligations | (3,608 | ) | (2,230 | ) | |||||
| Debt issuance costs | (10,061 | ) | (1,384 | ) | |||||
| Other financing activities | - | 139 | |||||||
| Net cash provided by financing activities | 68,162 | 12,270 | |||||||
| Effect of exchange rate changes on cash and cash equivalents | 5,607 | (283 | ) | ||||||
| Net (decrease) increase in cash and cash equivalents | (30,603 | ) | 1,651 | ||||||
| Cash and Cash Equivalents at Beginning of Period | 271,888 | 218,445 | |||||||
| Cash and Cash Equivalents at End of Period | $ | 241,285 | $ | 220,096 | |||||
| Table 7 | ||||||||||||
| Reconciliation of Selected Non-GAAP Financial Measurements | ||||||||||||
| ($ Millions, except per share amounts) | ||||||||||||
| (Unaudited) | ||||||||||||
| Three Months Ended | ||||||||||||
| Sept 30, | June 30, | Sept 30, | ||||||||||
| 2017 | 2017 | 2016 | ||||||||||
| Reported Net Earnings | $ | 21.1 | $ | 32.6 | $ | 16.3 | ||||||
| Add back: | ||||||||||||
| Acquisition transaction expenses and one-time expenses | 2.0 | - | - | |||||||||
| Income tax impact on unusual items | (0.4 | ) | - | - | ||||||||
| Adjusted Net Earnings | $ | 22.7 | $ | 32.6 | $ | 16.3 | ||||||
| Per share data: | ||||||||||||
| Reported Net Earnings: | ||||||||||||
| Net Earnings - Diluted Earnings Per Share | $ | 0.32 | $ | 0.50 | $ | 0.26 | ||||||
| Net Earnings - Basic Earnings Per Share | $ | 0.34 | $ | 0.52 | $ | 0.26 | ||||||
| Per share, After-Tax Impact of Special Items on | ||||||||||||
| Net Earnings - Diluted Earnings Per Share | $ | 0.02 | $ | - | $ | - | ||||||
| Net Earnings - Basic Earnings Per Share | $ | 0.03 | $ | - | $ | - | ||||||
| Adjusted Net Earnings | ||||||||||||
| Adjusted Net Earnings - Diluted Earnings Per Share | $ | 0.35 | $ | 0.50 | $ | 0.26 | ||||||
| Adjusted Net Earnings - Basic Earnings Per Share | $ | 0.36 | $ | 0.52 | $ | 0.26 | ||||||
CONTACT:
Mark Lourie
Director, Corporate Communications
Mark.lourie@ii-vi.com
www.ii-vi.com
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