Market Overview

Coherent, Inc. Reports Third Fiscal Quarter Results

Share:

Coherent, Inc. Reports Third Fiscal Quarter Results

PR Newswire

SANTA CLARA, Calif., July 31, 2018 /PRNewswire/ -- Coherent, Inc. (NASDAQ, COHR), one of the world's leading providers of lasers, laser-based technologies and laser-based system solutions in a broad range of scientific, commercial and industrial applications, today announced financial results for its third fiscal quarter ended June 30, 2018.

Coherent Logo (PRNewsFoto/Coherent, Inc.) (PRNewsFoto/Coherent, Inc.)

FINANCIAL HIGHLIGHTS


Three Months Ended


Nine Months Ended


June 30,


March 31,


July 1,


June 30,


July 1,


2018


2018


2017


2018


2017

GAAP Results










(in millions except per share data)










Net sales

$

482.3



$

481.1



$

464.1



$

1,441.0



$

1,233.0


Net income

$

67.0



$

65.3



$

61.1



$

174.2



$

133.4


Diluted EPS

$

2.69



$

2.61



$

2.46



$

6.98



$

5.39












Non-GAAP Results










(in millions except per share data)









Net income

$

87.3



$

84.3



$

83.4



$

260.1



$

218.8


Diluted EPS

$

3.51



$

3.37



$

3.36



$

10.42



$

8.85


THIRD FISCAL QUARTER DETAILS

For the third fiscal quarter ended June 30, 2018, Coherent announced net sales of $482.3 million and net income, on a U.S. generally accepted accounting principles (GAAP) basis, of $67.0 million, or $2.69 per diluted share. These results compare to net sales of $464.1 million and net income of $61.1 million, or $2.46 per diluted share, for the third quarter of fiscal 2017.

Non-GAAP net income for the third quarter of fiscal 2018 was $87.3 million, or $3.51 per diluted share.  Non-GAAP net income for the third quarter of fiscal 2017 was $83.4 million, or $3.36 per diluted share. Reconciliations of GAAP to non-GAAP financial measures for the three months ended June 30, 2018, March 31, 2018 and July 1, 2017 and nine months ended June 30, 2018 and July 1, 2017 appear in the financial statements portion of this release under the heading "Reconciliation of GAAP to Non-GAAP net income."

Net sales for the second fiscal quarter of 2018 were $481.1 million and net income, on a GAAP basis, was $65.3 million, or $2.61 per diluted share. Non-GAAP net income for the second quarter of fiscal 2018 was $84.3 million, or $3.37 per diluted share.

Results for the nine months ended June 30, 2018 include additional income tax expense of $41.7 million, or $1.67 per diluted share, due to the provisions under the Tax Cuts and Jobs Act (the "Tax Act") as well as a benefit of $12.8 million, or $0.51 per diluted share, from the adoption of new rules for accounting for excess tax benefits and deficiencies for employee stock-based compensation. The Securities and Exchange Commission has issued rules that allow for a measurement period of up to one year after the enactment date of the Tax Act to finalize the recording of the related tax impacts. Coherent currently anticipates finalizing and recording any resulting adjustments by the end of the fourth fiscal quarter ending September 29, 2018.

As previously announced, on November 7, 2016, Coherent completed its acquisition of Rofin-Sinar Technologies, Inc. ("Rofin"), one of the world's leading developers and manufacturers of high-performance industrial laser sources and laser-based solutions and components. As a result, Rofin's operating results were consolidated for the period from November 7, 2016 through July 1, 2017 in Coherent's nine months results ended July 1, 2017. Subsequent to the first quarter of fiscal 2017, Rofin's operating results are consolidated in Coherent's results for the full quarter and year-to-date.

"There continues to be intense interest and speculation about the flat panel display market.  From our vantage point, demand for OLED displays remains robust, but growth in the OLED share of the display market is being hindered by pricing and availability.  This can only be corrected when one or more vendors becomes able to compete with the primary OLED display provider in the marketplace.  We believe that this short-term dynamic will lead to a down year for OLED equipment spending by display manufacturers in 2019 before a reacceleration of investment in 2020.  Growth in our other businesses will largely compensate for the decrease in our flat panel display business such that fiscal 2019 revenue should be within 5% of fiscal 2018," said John Ambroseo, Coherent's President and Chief Executive Officer.  "As a result of our business diversity, we remain confident in our longer-term business outlook. We utilized the previously approved stock repurchase authorization to buy back approximately $100 million of common stock during the June quarter," Ambroseo added.

CONFERENCE CALL REMINDER

The Company will host a conference call today to discuss its financial results at 1:30 P.M. Pacific (4:30 P.M. Eastern). A listen-only broadcast of the conference call and a transcript of management's prepared remarks can be accessed on the Company's website at http://www.coherent.com/Investors/. For those who are not able to listen to the live broadcast, the call will be archived for approximately three months on the Company's website.

Summarized statement of operations information is as follows (unaudited, in thousands except per share data):


Three Months Ended


Nine Months Ended


June 30,


March 31,


July 1,


June 30,


July 1,


2018


2018


2017


2018


2017











Net sales

$

482,342



$

481,118



$

464,107



$

1,441,025



$

1,233,013


Cost of sales(A)(B)(D)(E)(F)

274,006



265,688



256,921



800,236



704,798


Gross profit

208,336



215,430



207,186



640,789



528,215


Operating expenses:










Research & development(A)(B)(F)

34,303



34,783



30,483



100,478



88,103


Selling, general & administrative(A)(B)(E)(F)(G)

70,291



77,146



72,383



220,874



218,602


Gain from business combination(C)









(5,416)


Other impairment charges(recoveries) (I)

611



(110)





766




  Amortization of intangible assets(D)

2,607



2,950



3,743



8,163



13,060


     Total operating expenses

107,812



114,769



106,609



330,281



314,349


Income from operations

100,524



100,661



100,577



310,508



213,866


Other income (expense), net(B) (H)

(7,625)



(9,510)



(7,942)



(25,635)



(13,025)


Income from continuing operations, before income taxes

92,899



91,151



92,635



284,873



200,841


Provision for income taxes (J)

25,929



25,849



29,764



110,698



65,084


Net income from continuing operations

66,970



65,302



62,871



174,175



135,757


Income (loss) from discontinued operations, net of income taxes





(1,754)



(2)



(2,387)


Net income

$

66,970



$

65,302



$

61,117



$

174,173



$

133,370












Net income (loss) per share:










Basic from continuing operations

2.72



2.64



2.56



7.06



5.55


Basic from discontinued operations





(0.07)





(0.10)


Basic earnings per share

$

2.72



$

2.64



$

2.49



$

7.06



$

5.45


Diluted from continuing operations

2.69



2.61



2.53



6.98



5.49


Diluted from discontinued operations





(0.07)





(0.10)


Diluted earnings per share

$

2.69



$

2.61



$

2.46



$

6.98



$

5.39












Shares used in computations:










Basic

24,658



24,761



24,537



24,684



24,460


Diluted

24,877



25,010



24,823



24,971



24,741




(A)

Stock-based compensation expense included in operating results is summarized below (all footnote amounts are unaudited, in thousands, except per share data):

 

Stock-based compensation expense

Three Months Ended


Nine Months Ended


June 30,


March 31,


July 1,


June 30,


July 1,


2018


2018


2017


2018


2017

Cost of sales

$

1,168



$

1,018



$

880



$

3,174



$

2,618


Research & development

838



872



639



2,378



2,289


Selling, general & administrative

6,577



6,520



5,373



18,517



18,323


Impact on income from operations

$

8,583



$

8,410



$

6,892



$

24,069



$

23,230





For the fiscal quarters ended June 30, 2018, March 31, 2018 and July 1, 2017, the impact on net income, net of tax was $7,549 ($0.30 per diluted share), $7,235 ($0.29 per diluted share) and $5,041 ($0.20 per diluted share), respectively. For the nine months ended June 30, 2018 and July 1, 2017, the impact on net income, net of tax was $20,251 ($0.81 per diluted share) and $18,075 ($0.73 per diluted share), respectively.



(B)

Changes in deferred compensation plan liabilities are included in cost of sales and operating expenses while gains and losses on deferred compensation plan assets are included in other income (expense), net.  Deferred compensation expense (benefit) included in operating results is summarized below:

 

Deferred compensation expense (benefit)

Three Months Ended


Nine Months Ended


June 30,


March 31,


July 1,


June 30,


July 1,


2018


2018


2017


2018


2017

Cost of sales

$

11



$

28



$

53



$

117



$

123


Research & development

46



128



163



533



496


Selling, general & administrative

414



602



1,014



2,643



2,382


Impact on income from operations

$

471



$

758



$

1,230



$

3,293



$

3,001





For the fiscal quarters ended June 30, 2018, March 31, 2018 and July 1, 2017, the impact on other income (expense), net from gains or losses on deferred compensation plan assets was income of $416, $768 and $1,204, respectively. For the nine months ended June 30, 2018 and July 1, 2017, the impact on other income (expense) net from gains or losses on deferred compensation plan assets was income of $3,090 and $3,027, respectively.



(C)

For the nine months ended July 1, 2017, the gain from business combination was $5,416 ($3,426 net of tax ($0.14 per diluted share)).



(D)

For the fiscal quarters ended June 30, 2018, March 31, 2018 and July 1, 2017, the impact of amortization of intangibles expense was $15,209 ($10,859 net of tax ($0.44 per diluted share)), $15,329 ($10,931 net of tax ($0.44 per diluted share)) and $15,452 ($10,870 net of tax ($0.44 per diluted share)), respectively. For the nine months ended June 30, 2018 and July 1, 2017, the impact of amortization of intangible expense was $45,638 ($32,563 net of tax ($0.81 per diluted share)) and $44,303 ($31,169 net of tax ($1.26 per diluted share)), respectively.



(E)

For the fiscal quarter ended June 30, 2018, March 31, 2018 and July 1, 2017, the impact of inventory and favorable lease step-up costs related to acquisitions was $392 ($281 net of tax ($0.01 per diluted share)), $411 ($293 net of tax ($0.01 per diluted share)) and $4,445 ($3,172 net of tax ($0.13 per diluted share)), respectively. For the nine months ended June 30, 2018 and July 1, 2017, the impact of inventory and favorable lease step-up costs related to acquisitions was $803 ($574 net of tax ($0.02 per diluted share)) and $26,768 ($19,042 net of tax ($0.77 per diluted share)), respectively.



(F)

For the fiscal quarters ended June 30, 2018, March 31, 2018 and July 1, 2017, the impact of restructuring charges was $1,192 ($870 net of tax ($0.04 per diluted share)), $726 ($555 net of tax ($0.02 per diluted share)) and $1,500 ($1,131 net of tax ($0.05 per diluted share)), respectively. For the nine months ended June 30, 2018 and July 1, 2017, the impact of restructuring charges was $3,078 ($2,275 net of tax ($0.09 per diluted share)) and $9,119 ($6,109 net of tax ($0.25 per diluted share)), respectively.



(G)

For the fiscal quarters ended June 30, 2018, March 31, 2018 and July 1, 2017, the impact of costs related to acquisitions included $129 ($129 net of tax ($0.01 per diluted share), $400 ($400 net of tax ($0.01 per diluted share)) and $426 ($269 net of tax ($0.01 per diluted share)), respectively.  The nine months ended June 30, 2018 and July 1, 2017 included $529 ($529 net of tax ($0.02 per diluted share)) and $17,587 ($17,425 net of tax ($0.70 per diluted share)) of costs related to acquisitions, respectively.



(H)

For the nine months ended July 1, 2017, the gain on our hedge of the debt commitment and issuance of the debt was $11,298 ($7,147 net of tax ($0.29 per diluted share)) and interest expense on the debt commitment was $2,665 ($1,844 net of tax ($0.07 per diluted share)).



(I)

For the fiscal quarters ended June 30, 2018 and March 31, 2018, other impairment charges (recoveries) was an impairment charge of $611 ($611 net of tax ($0.02 per diluted share)) and a recovery of $110 ($110 net of tax ($0.00 per diluted share)), respectively. For the nine months ended June 30, 2018, other impairment charges (recoveries) was an impairment charge of $766 ($766 net of tax ($0.03 per diluted share)).



(J)

The nine months ended June 30, 2018 included $41,745 ($1.67 per diluted share) non-recurring tax expense due to the U.S. Tax Cuts and Jobs Act transition tax and deferred tax remeasurement and $12,754 ($0.51 per diluted share) tax benefit from the adoption of new rules for accounting for excess tax benefits and tax deficiencies for employee stock-based compensation. The quarters ended June 30, 2018 and March 31, 2018 included a tax benefit of $4 ($0.00 per diluted share) and $299 ($0.01 per diluted share), respectively, from the adoption of new rules for accounting for excess tax benefits and tax deficiencies for employee stock-based compensation.

Summarized balance sheet information is as follows (unaudited, in thousands):


June 30,


September 30,


2018


2017

ASSETS




Current assets:




Cash, cash equivalents, restricted cash and short-term investments

$

233,540



$

476,673


Accounts receivable, net

337,560



305,668


Inventories

494,967



414,807


Prepaid expenses and other assets

88,490



70,268


Assets held-for-sale



44,248


     Total current assets

1,154,557



1,311,664


Property and equipment, net

303,214



278,850


Other assets

729,797



747,286


     Total assets

$

2,187,568



$

2,337,800






LIABILITIES AND STOCKHOLDERS' EQUITY




Current liabilities:




Short-term borrowings

$

7,076



$

5,078


Accounts payable

82,602



75,860


Other current liabilities

262,478



338,207


     Total current liabilities

352,156



419,145


Other long-term liabilities

604,261



755,391


Total stockholders' equity

1,231,151



1,163,264


     Total liabilities and stockholders' equity

$

2,187,568



$

2,337,800


Reconciliation of GAAP to Non-GAAP net income (unaudited, in thousands (other than per share data), net of tax):


Three Months Ended


Nine Months Ended


June 30,


March 31,


July 1,


June 30,


July 1,


2018


2018


2017


2018


2017

GAAP net income from continuing operations

$

66,970



$

65,302



$

62,871



$

174,175



$

135,757


Stock-based compensation expense

7,549



7,235



5,041



20,251



18,075


Amortization of intangible assets

10,859



10,931



10,870



32,563



31,169


Restructuring charges

870



555



1,131



2,275



6,109


Gain on business combination









(3,426)


Non-recurring tax expense (benefit)







41,745




Tax benefit from stock-based compensation expense

(4)



(299)





(12,754)




Interest expense on debt commitment

 









1,844


Gain on hedge of debt and debt commitment

 









(7,147)


Other impairment charges (recoveries)

611



(110)





766




Acquisition-related costs

129



400



269



529



17,425


Purchase accounting step-up

281



293



3,172



574



19,042


Non-GAAP net income

$

87,265



$

84,307



$

83,354



$

260,124



$

218,848


Non-GAAP net income per diluted share

$

3.51



$

3.37



$

3.36



$

10.42



$

8.85


RISKS AND UNCERTAINTIES

This press release contains forward-looking statements, as defined under the Federal securities laws. These forward-looking statements include the statements in this press release that relate to the Company's outlook for its flat panel display business and demand for OLED displays, actual and projected spending by display manufacturers and the expectation that growth in the Company's other businesses will result in fiscal 2019 revenue that is within 5% of fiscal 2018 revenue.  These forward-looking statements are not guarantees of future results and are subject to risks, uncertainties and assumptions that could cause our actual results to differ materially and adversely from those expressed in any forward-looking statement. The Company and its business, including the aforementioned forward-looking statements, are subject to risks and uncertainties, including, but not limited to, risks associated with growth in demand for our products, customer acceptance and adoption of our products, the worldwide demand for flat panel displays and adoption of OLED for mobile displays, the pricing and availability of OLED displays, the demand for and use of our products in commercial applications, our ability to generate sufficient cash to fund capital spending or debt repayment, our successful implementation of our customer design wins, our and our customers' exposure to risks associated with worldwide economic conditions, our customers' ability to cancel long-term purchase orders, the ability of our customers to forecast their own end markets, our ability to accurately forecast future periods, continued timely availability of products and materials from our suppliers, our ability to timely ship our products and our customers' ability to accept such shipments, our ability to have our customers qualify our product offerings, worldwide government economic policies, our ability to integrate the business of Rofin and other acquisitions successfully, manage our expanded operations and achieve anticipated synergies, and other risks identified in the Company's SEC filings. Readers are encouraged to refer to the risk disclosures and critical accounting policies described in the Company's reports on Forms 10-K, 10-Q and 8-K, including the risks identified in today's financial press release, as applicable and as filed from time-to-time by the Company.

Founded in 1966, Coherent, Inc. is one of the world's leading providers of lasers, laser-based technologies and laser-based system solutions in a broad range of scientific, commercial and industrial customers. Our common stock is listed on the Nasdaq Global Select Market and is part of the Russell 1000 and Standard & Poor's MidCap 400 Index. For more information about Coherent, visit the company's website at www.coherent.com for product and financial updates.

5100 Patrick Henry Dr., Santa Clara, California  95054 . Telephone (408) 764-4000

 

Cision View original content with multimedia:http://www.prnewswire.com/news-releases/coherent-inc-reports-third-fiscal-quarter-results-300689580.html

SOURCE Coherent, Inc.

View Comments and Join the Discussion!