Coherent, Inc. Reports Third Fiscal Quarter Results
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.
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
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SOURCE Coherent, Inc.
