Coherent, Inc. Reports First Fiscal Quarter Results
SANTA CLARA, Calif., Jan. 29, 2019 /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 first fiscal quarter ended December 29, 2018.
FINANCIAL HIGHLIGHTS
Three Months Ended
Dec. 29, 2018 Sep. 29, 2018 Dec. 30, 2017
---
GAAP Results
(in millions, except
per share data)
Net
sales $
383.1 $
461.5 $
477.6
Net
income $
35.6 $
73.2 $
41.9
Diluted
EPS $
1.45 $
2.99 $
1.67
Non-GAAP Results
(in millions, except per share data)
Net
income $
51.1 $
78.8 $
88.6
Diluted
EPS $
2.09 $
3.22 $
3.54
FIRST FISCAL QUARTER DETAILS
For the first quarter of fiscal 2019, Coherent announced net sales of $383.1 million and net income, on a U.S. generally accepted accounting principles (GAAP) basis, of $35.6 million, or $1.45 per diluted share. These results compare to net sales of $477.6 million and net income of $41.9 million, or $1.67 per diluted share, for the first quarter of fiscal 2018 and net sales of $461.5 million and net income of $73.2 million, or $2.99 per diluted share, for the fourth quarter of fiscal 2018.
Non-GAAP net income for the first quarter of fiscal 2019 was $51.1 million, or $2.09 per diluted share. Non-GAAP net income for the first quarter of fiscal 2018 was $88.6 million, or $3.54 per diluted share. Non-GAAP net income for the fourth quarter of fiscal 2018 was $78.8 million, or $3.22 per diluted share. Reconciliations of GAAP to non-GAAP financial measures for the three months ended December 29, 2018, September 29, 2018 and December 30, 2017 appear in the financial statements portion of this release under the heading "Reconciliation of GAAP to Non-GAAP net income."
"Our end markets exhibited a wide range of behavior in the first fiscal quarter. Materials processing was broadly impacted by eroding conditions in China tied to tariffs, rising consumer debt and declining consumer confidence. This was partially offset by wins in Tier 1 automotive with Asian and European suppliers as well as an uptick in medical device manufacturing. Our other commercial markets are faring much better. In microelectronics, semicap and advanced packaging had double-digit bookings growth and the display business was in-line with prior expectations. Orders in our instrumentation business were close to record levels with contributions from bioinstrumentation, medical OEM, aerospace and defense customers," said John Ambroseo, President and CEO of Coherent. "We remain very optimistic about the long-term opportunities for the industry and for Coherent, but uncertainty in China is clouding our near-term visibility. A tariff deal or local stimulus would provide welcome relief, but it is difficult to predict if or when either might occur," 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
Dec. 29, 2018 Sep. 29, 2018 Dec. 30, 2017
Net sales $
383,146 $
461,548 $
477,565
Cost of
sales(A)(B)(C)(D)(E) 233,796 271,646 260,542
Gross profit 149,350 189,902 217,023
Operating expenses:
Research &
development(A)(B)(E) 28,942 32,108 31,392
Selling, general &
administrative(A)(B)(E)(F) 64,557 72,758 73,437
Other impairment
charges(G) 265
Amortization of
intangible assets(C) 3,040 2,527 2,606
Total operating
expenses 96,539 107,393 107,700
Income from
operations 52,811 82,509 109,323
Other income
(expense), net(B) (9,151) (5,827) (8,500)
Income from
continuing
operations, before
income taxes 43,660 76,682 100,823
Provision for income
taxes (H) 8,110 3,497 58,920
Net income from
continuing
operations 35,550 73,185 41,903
Income (loss) from
discontinued
operations, net of
income taxes (2)
Net income $
35,550 $
73,185 $
41,901
Net income (loss) per
share:
Basic earnings per
share $
1.46 $
3.02 $
1.70
Diluted earnings per
share $
1.45 $
2.99 $
1.67
Shares used in
computations:
Basic 24,268 24,236 24,635
Diluted 24,472 24,490 25,025
(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
Dec. 29, 2018 Sep. 29, 2018 Dec. 30, 2017
Cost of sales $
1,237 $
1,229 $
988
Research & development 650 869 668
Selling, general &
administrative 5,989 6,571 5,420
Impact on income from
operations $
7,876 $
8,669 $
7,076
For the fiscal quarters ended December 29, 2018, September 29, 2018 and December 30, 2017, the impact on net income, net of tax was $6,643 ($0.27 per diluted share), $7,414 ($0.30 per diluted share) and $5,467 ($0.22 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
Dec. 29, 2018 Sep. 29, 2018 Dec. 30, 2017
Cost of sales $
(95) $
34 $
78
Research & development (286) 303 359
Selling, general &
administrative (1,712) 1,579 1,627
Impact on income from
operations $
(2,093) $
1,916 $
2,064
For the fiscal quarter ended December 29, 2018, the impact on other income (expense), net from losses on deferred compensation plan assets was $2,073. For the fiscal quarters ended September 29, 2018 and December 30, 2017, the impact on other income (expense), net from gains on deferred compensation plan assets was $1,957 and $1,906, respectively.
(C) Amortization of intangibles is
included in cost of sales and
operating expenses as
summarized below:
Amortization of
intangibles
Three Months Ended
Dec. 29, 2018 Sep. 29, 2018 Dec. 30, 2017
Cost of sales $
12,027 $
11,874 $
12,494
Amortization of
intangible assets 3,040 2,527 2,606
Impact on income
from operations $
15,067 $
14,401 $
15,100
For the fiscal quarters ended December 29, 2018, September 29, 2018 and December 30, 2017, the impact on net income, net of tax was $10,818 ($0.45 per diluted share), $10,220 ($0.42 per diluted share) and $10,773 ($0.43 per diluted share), respectively.
(D) For the fiscal quarter ended December
29, 2018, the impact of inventory
step-up costs related to
acquisitions was $456 ($353 net of
tax ($0.01 per diluted share)).
(E) For the fiscal quarters ended
December 29, 2018, September 29,
2018 and December 30, 2017, the
impact of restructuring charges was
$476 ($351 net of tax ($0.01 per
diluted share)), $871 ($632 net of
tax ($0.02 per diluted share)), and
$1,160 ($850 net of tax ($0.04 per
diluted share)), respectively.
(F) For the fiscal quarter ended
September 29, 2018, the impact of
costs related to acquisitions was
$206 ($206 net of tax ($0.01 per
diluted share)).
(G) For the fiscal quarter ended December
30, 2017, other impairment charges
were $265 ($265 net of tax ($0.01
per diluted share)).
(H) The fiscal quarter ended December 29,
2018 included $2,598 ($0.10 per
diluted share) of excess tax
benefits for employee stock-based
compensation. The fiscal quarter
ended September 29, 2018 included
$16,203 ($0.66 per diluted share) of
primarily a one-time additional
income tax net benefit due to
adjustments calculated under the
provisions of the Tax Act as well as
a $3,367 ($0.14 per diluted share)
tax charge due to an increase in
valuation allowances against
deferred tax assets. The fiscal
quarter ended December 30, 2017
included $41,745 ($1.67 per diluted
share) of a largely one time
additional income tax expense due to
the provisions under the Tax Act as
well as $12,451 ($0.50 per diluted
share) of excess tax benefits for
employee stock-based compensation.
Summarized balance sheet information is as follows (unaudited, in thousands):
Dec. 29, 2018 Sep. 29, 2018
ASSETS
---
Current assets:
Cash, cash equivalents,
restricted cash and short-
term investments $
320,843 $
311,473
Accounts receivable, net 330,892 355,208
Inventories 493,156 486,741
Prepaid expenses and other
assets 84,141 85,080
Total current assets 1,229,032 1,238,502
Property and equipment, net 320,933 311,793
Other assets 703,647 709,674
Total assets $
2,253,612 $
2,259,969
LIABILITIES AND STOCKHOLDERS'
EQUITY
---
Current liabilities:
Short-term borrowings $
46,670 $
5,072
Accounts payable 74,738 70,292
Other current liabilities 255,703 297,474
Total current liabilities 377,111 372,838
Other long-term liabilities 559,018 572,667
Total stockholders' equity 1,317,483 1,314,464
Total liabilities and
stockholders' equity $
2,253,612 $
2,259,969
Reconciliation of GAAP to Non-GAAP net income (unaudited, in thousands, except per share data, net of tax):
Three Months Ended
Dec. 29, 2018 Sep. 29, 2018 Dec. 30, 2017
GAAP net income from
continuing
operations $
35,550 $
73,185 $
41,903
Stock-based
compensation
expense 6,643 7,414 5,467
Amortization of
intangible assets 10,818 10,220 10,773
Restructuring
charges 351 632 850
Non-recurring tax
expense (benefit) (12,836) 41,745
Tax benefit from
stock-based
compensation
expense (2,598) (12,451)
Other impairment
charges 265
Acquisition-related
costs 206
Purchase accounting
step-up 353
Non-GAAP net income $
51,117 $
78,821 $
88,552
Non-GAAP net income
per diluted share $
2.09 $
3.22 $
3.54
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 belief regarding long-term opportunities for the Company and its industry; the Company's near-term visibility, including with respect to uncertainty in China; any relief that would be provided by a tariff deal or local stimulus in China and the possibility of predicting such occurrences; and uncertainty of the timing and magnitude of a potential recovery in China. 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 ability to successfully rectify execution issues on a going forward basis, our and our customers' exposure to risks associated with worldwide economic conditions, in particular in China, 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, including trade relations between the United States and China and Chinese monetary 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. . P. O. Box 54980, Santa Clara, California 95056-0980 . Telephone (408) 764-4000
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