Coherent, Inc. Reports First Fiscal Quarter Results
SANTA CLARA, Calif., Feb. 5, 2020 /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 28, 2019.
FINANCIAL HIGHLIGHTS
Three Months Ended
Dec. 28, 2019 Sep. 28, 2019 Dec. 29,
2018
---
GAAP Results
(in millions, except
per share data)
Net
sales $
320.8 $
335.5 $
383.1
Net
income $
5.8 $
0.6 $
35.6
Diluted
EPS $
0.24 $
0.03 $
1.45
Non-GAAP Results
(in millions, except per share data)
Net
income $
20.7 $
21.4 $
51.1
Diluted
EPS $
0.86 $
0.89 $
2.09
FIRST FISCAL QUARTER DETAILS
For the first quarter of fiscal 2020, Coherent announced net sales of $320.8 million and net income, on a U.S. generally accepted accounting principles (GAAP) basis, of $5.8 million, or $0.24 per diluted share.
These results compare to net sales of $383.1 million and net income of $35.6 million, or $1.45 per diluted share, for the first quarter of fiscal 2019 and net sales of $335.5 million and net income of $0.6 million, or $0.03 per diluted share, for the fourth quarter of fiscal 2019.
Non-GAAP net income for the first quarter of fiscal 2020 was $20.7 million, or $0.86 per diluted share. 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 fourth quarter of fiscal 2019 was $21.4 million, or $0.89 per diluted share. Reconciliations of GAAP to non-GAAP financial measures for the three months ended December 28, 2019, September 28, 2019 and December 29, 2018 appear in the financial statements portion of this release under the heading "Reconciliation of GAAP to Non-GAAP net income."
Effective September 29, 2019, Coherent adopted ASC 842 - Lease Accounting and applied the new guidance to all leases existing as of the date of adoption. Coherent's reported results for the first quarter of fiscal 2020 reflect the application of ASC 842, while prior period amounts have not been adjusted and continue to be reported in accordance with its historical lease accounting.
"Overall market conditions appear to be stabilizing and demand trends in certain end markets were encouraging in our first fiscal quarter. Orders from the microelectronics market were well above a book-to-bill of one. We received new ELA system orders, and service revenues reflected increases in consumer purchases of OLED-equipped handsets. The wafer fab equipment market has accelerated over the past three months after two major chip manufacturers announced higher capex budgets for 2020, which contributed to better than expected bookings during fiscal Q1. The advanced packaging market is also trending up due to 5G investments in China," said John Ambroseo, Coherent's President and Chief Executive Officer. "The materials processing (MP) market took another step forward with a book-to-bill of one in a seasonally-adjusted quarter. Concerns about weak PMIs in the Eurozone are partially offset by strength in North America and a domestic-led recovery in China. Competition remains tough in the MP market, especially in China where domestic suppliers are gaining share through a combination of improved performance and reliability coupled with aggressive pricing," he added.
The Company notes that it continues to monitor the dynamic and evolving impact on global trade stemming from the novel coronavirus outbreak. This developing trend will have an adverse effect on the Company's financial performance. The magnitude of the impact will not be fully understood until after China-based customer and supplier work forces return from the government-extended lunar new year holiday. While we continue to monitor the situation, at this point in time we have assumed a revenue decrease of $20 to $25 million as the impact on our second fiscal quarter outlook.
The Company also announced that its Board of Directors has approved an authorization for the Company to repurchase, from time to time, an aggregate of $100 million of its common stock. The program will expire on January 31, 2021 if not fully utilized earlier.
CONFERENCE CALL REMINDER
Coherent 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 investor relations page of the company's website at investors.coherent.com. 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 investor relations page.
Summarized statement of operations information is as follows (unaudited, in thousands, except per share data):
Three Months Ended
Dec. 28, 2019 Sep. 28, 2019 Dec. 29, 2018
Net sales $
320,771 $
335,464 $
383,146
Cost of
sales(A)(B)(C)(D)(E) 211,518 227,069 233,796
Gross profit 109,253 108,395 149,350
Operating expenses:
Research &
development(A)(B)(E) 28,680 27,258 28,942
Selling, general &
administrative(A)(B)(E)(F) 68,551 70,551 64,557
Amortization of
intangible assets(C) 1,432 2,012 3,040
Total operating
expenses 98,663 99,821 96,539
Income from
operations 10,590 8,574 52,811
Other expense,
net(B)(E) (3,034) (5,258) (9,151)
Income before income
taxes 7,556 3,316 43,660
Provision for income
taxes (G) 1,763 2,692 8,110
Net income $
5,793 $
624 $
35,550
Net income per share:
Basic earnings per
share $
0.24 $
0.03 $
1.46
Diluted earnings per
share $
0.24 $
0.03 $
1.45
Shares used in
computations:
Basic 23,971 23,919 24,268
Diluted 24,160 24,118 24,472
(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. 28, 2019 Sep. 28, 2019 Dec. 29, 2018
Cost of sales $
1,182 $
1,240 $
1,237
Research & development 561 763 650
Selling, general &
administrative 6,049 7,928 5,989
Impact on income from
operations $
7,792 $
9,931 $
7,876
For the fiscal quarters ended
December 28, 2019, September 28,
2019 and December 29, 2018, the
impact on net income, net of tax
was $6,936 ($0.29 per diluted
share), $9,091 ($0.38 per diluted
share) and $6,643 ($0.27 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. 28, 2019 Sep. 28, 2019 Dec. 29, 2018
Cost of sales $
113 $
80 $
(95)
Research & development 243 234 (286)
Selling, general &
administrative 1,799 1,889 (1,712)
Impact on income from
operations $
2,155 $
2,203 $
(2,093)
For the fiscal quarters ended
December 28, 2019, September 28,
2019 and December 29, 2018, the
impact on other expense, net from
gains or losses on deferred
compensation plan assets was income
of $2,292, income of $2,146 and
expense of $2,073, respectively.
(C) Amortization of intangibles is
included in cost of sales and
operating expenses as summarized
below:
Amortization of
intangibles
Three Months Ended
Dec. 28, 2019 Sep. 28, 2019 Dec. 29, 2018
Cost of sales $
10,880 $
11,723 $
12,027
Amortization of
intangible assets 1,432 2,012 3,040
Impact on income
from operations $
12,312 $
13,735 $
15,067
For the fiscal quarters ended
December 28, 2019, September 28,
2019 and December 29, 2018, the
impact on net income, net of tax was
$8,942 ($0.37 per diluted share),
$9,832 ($0.41 per diluted share),
and $10,818 ($0.45 per diluted
share), respectively.
(D) For the fiscal quarter ended December
29, 2018, the impact of inventory
and favorable lease step-up costs
related to acquisitions was $456
($353 net of tax ($0.01 per diluted
share)).
(E) For the fiscal quarters ended
December 28, 2019, September 28,
2019 and December 29, 2018, the
impact of restructuring charges was
$933 ($666 net of tax ($0.03 per
diluted share)), $92 ($131 net of
tax ($0.00 per diluted share)), and
$476 ($351 net of tax ($0.01 per
diluted share)), respectively.
(F) For the fiscal quarter ended December
28, 2019, selling, general &
administrative expense includes a
legal settlement related to an asset
recovery of $1,365 ($1,106 net of
tax ($0.05 per diluted share)).
(G) The fiscal quarters ended December
28, 2019 and September 28, 2019
included non-recurring income tax
net expense of $149 ($0.01 per
diluted share) and $1,720 ($0.07 per
diluted share), respectively. The
fiscal quarters ended December 28,
2019, September 28, 2019 and
December 29, 2018 included $714
($0.03 per diluted share), $36
($0.00 per diluted share) and $2,598
($0.10 per diluted share) of excess
tax benefits for employee stock-
based compensation, respectively.
Summarized balance sheet information is as follows (unaudited, in thousands):
Dec. 28, 2019 Sep. 29, 2019
ASSETS
---
Current assets:
Cash, cash equivalents,
restricted cash and short-
term investments $
350,320 $
306,745
Accounts receivable, net 235,933 267,553
Inventories 449,571 442,530
Prepaid expenses and other
assets 86,997 77,993
Total current assets 1,122,821 1,094,821
Property and equipment, net 327,673 323,434
Other assets 753,564 664,914
Total assets $
2,204,058 $
2,083,169
LIABILITIES AND STOCKHOLDERS'
EQUITY
---
Current liabilities:
Short-term borrowings $
16,809 $
14,863
Accounts payable 55,851 51,531
Other current liabilities 183,763 173,920
Total current liabilities 256,423 240,314
Other long-term liabilities 641,660 558,119
Total stockholders' equity 1,305,975 1,284,736
Total liabilities and
stockholders' equity $
2,204,058 $
2,083,169
Reconciliation of GAAP to Non-GAAP net income (unaudited, in thousands, (other than per share data), net of tax):
Three Months Ended
Dec. 28, 2019 Sep. 28, 2019 Dec. 29, 2018
GAAP net income from
continuing operations $
5,793 $
624 $
35,550
Stock-based compensation
expense 6,936 9,091 6,643
Amortization of intangible
assets 8,942 9,832 10,818
Restructuring charges 666 131 351
Non-recurring tax expense 149 1,720
Tax benefit from stock-
based compensation
expense (714) (36) (2,598)
Other impairment/asset
charges (recoveries) (1,106)
Purchase accounting step-
up 353
Non-GAAP net income $
20,666 $
21,362 $
51,117
Non-GAAP net income per
diluted share $
0.86 $
0.89 $
2.09
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 demand trends in certain markets, bookings, book-to-bill and strength in North America and recovery in China relating to PMIs, and our preliminary estimate of the revenue impact the corona virus will have on our second fiscal quarter. 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. Coherent and its business, including the aforementioned forward-looking statements, are subject to risks and uncertainties, including, but not limited to, risks associated with the effects of the coronavirus on our business, particularly the possibility of (1) extended shutdowns at our China-based suppliers and customers and (2) increased shutdowns of other factories in our supply chain as the virus becomes more widespread; 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 successful implementation of our customer design wins, our and our customers' exposure to risks associated with worldwide economic conditions, in particular in China and the Eurozone, 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 products, worldwide government economic policies, including trade relations between the United States and China, our ability to manage our expanded operations, our ability to successfully transfer the manufacturing of our High Power Fiber Lasers and related business and operations between facilities, our ability to successfully manage our planned site consolidation projects and achieve anticipated savings, the impact on global trade arising from coronavirus-related actions by world governments and other risks identified in Coherent's SEC filings. Readers are encouraged to refer to the risk disclosures and critical accounting policies described in Coherent's 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.
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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SOURCE Coherent, Inc.
