Coherent, Inc. Reports Third Fiscal Quarter Results

SANTA CLARA, Calif., Aug. 4, 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 third fiscal quarter ended July 4, 2020.

FINANCIAL HIGHLIGHTS

                                                             
        Three Months Ended                                             
            Nine Months Ended


                                           Jul. 4, 2020                              Apr. 4, 2020 Jun. 29, 2019                 Jul. 4, 2020                Jun. 29, 2019


                 GAAP Results


      (in millions, except
       per share data)


      Net
       sales                                             $
        
          298.3                                        $
         293.1                                              $
         339.2    $
        
           912.2  $
         1,095.2


      Net
       income
       (loss)                                            $
        
          (8.7)                                     $
         (418.9)                                             $
         (3.1)   $
         
        (421.8)    $
         53.2


      Diluted
       EPS                                              $
        
          (0.36)                                     $
         (17.39)                                            $
         (0.13)   $
         
        (17.52)    $
         2.19




                 Non-GAAP Results



     (in millions, except per share data)


      Net
       income                                             $
        
          12.6                                         $
         14.8                                               $
         32.1     $
        
           48.1    $
         122.4


      Diluted
       EPS                                                $
        
          0.52                                         $
         0.61                                               $
         1.33     $
        
           1.99     $
         5.03

THIRD FISCAL QUARTER DETAILS

For the third quarter of fiscal 2020, Coherent announced net sales of $298.3 million and net loss, on a U.S. generally accepted accounting principles (GAAP) basis, of $8.7 million, or $0.36 per diluted share.

These results compare to net sales of $339.2 million and net loss of $3.1 million, or $0.13 per diluted share, for the third quarter of fiscal 2019 and net sales of $293.1 million and net loss of $418.9 million, or $17.39 per diluted share, for the second quarter of fiscal 2020. The net loss for the second quarter of fiscal 2020 includes $424.3 million, net of tax, in non-cash goodwill and other impairment charges, primarily related to the impairment of all goodwill and certain long-lived assets in our Industrial Lasers & Systems segment.

Non-GAAP net income for the third quarter of fiscal 2020 was $12.6 million, or $0.52 per diluted share. Non-GAAP net income for the third quarter of fiscal 2019 was $32.1 million, or $1.33 per diluted share. Non-GAAP net income for the second quarter of fiscal 2020 was $14.8 million, or $0.61 per diluted share. Reconciliations of GAAP to non-GAAP financial measures for the three months ended July 4, 2020, April 4, 2020 and June 29, 2019 and nine months ended July 4, 2020 and June 29, 2019 appear in the financial statements portion of this release under the heading "Reconciliation of GAAP to Non-GAAP net income (loss)."

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 reported results for the first, second and third quarters of fiscal 2020 that 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.

"Our Q3 performance is encouraging, even though the current quarter was again impacted by COVID-19. We grew revenue sequentially, with Microelectronics more than overcompensating the headwinds in Material Processing and OEM components. Our focus on operational excellence and cash yielded promising initial results and positions us well for the quarters to come," said Andy Mattes, Coherent President and CEO. "Every day I learn more about the breadth and depth of our company and I am proud to see how our employees are meeting the challenges of a very difficult macro environment."

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                                            
     Nine Months Ended


                                  Jul. 4, 2020                             Apr. 4, 2020       Jun. 29, 2019             Jul. 4, 2020                Jun. 29, 2019





     Net sales                                $
        
           298,330                       $
          293,147                                  $
        339,170                         $
         
          912,248  $
       1,095,176


      Cost of
       sales(A)(B)(C)(D)(E)            203,053                                 199,036                        241,167                              613,607             717,106



     Gross profit                      95,277                                  94,111                         98,003                              298,641             378,070


      Operating expenses:


      Research &
       development(A)(B)(E)             28,283                                  29,794                         30,692                               86,757              90,095


      Selling, general &
       administrative(A)(B)(E)(F)       67,525                                  61,307                         67,686                              197,383             201,706


      Goodwill and other
       impairment charges(G)                                                  451,025                                                            451,025


        Amortization of
         intangible assets(C)              643                                   1,296                          6,782                                3,371              11,748


      Total operating
       expenses                         96,451                                 543,422                        105,160                              738,536             303,549


      Income (loss) from
       operations                      (1,174)                              (449,311)                        (7,157)                           (439,895)             74,521


      Other expense,
       net(B)(E)                       (4,282)                                (5,663)                       (4,386)                            (12,979)           (17,789)


      Income (loss) before
       income taxes                    (5,456)                              (454,974)                       (11,543)                           (452,874)             56,732


      Provision for (benefit
       from) income taxes (H)            3,252                                (36,061)                       (8,444)                            (31,046)              3,531


      Net income (loss)                        $
        
           (8,708)                    $
          (418,913)                                 $
        (3,099)                      $
          
         (421,828)    $
       53,201




      Net income (loss) per
       share:



     Basic                                     $
        
           (0.36)                      $
          (17.39)                                  $
        (0.13)                        $
          
         (17.52)      $
       2.20



     Diluted                                   $
        
           (0.36)                      $
          (17.39)                                  $
        (0.13)                        $
          
         (17.52)      $
       2.19




      Shares used in
       computations:



     Basic                             24,159                                  24,095                         24,054                               24,075              24,185



     Diluted                           24,159                                  24,095                         24,054                               24,075              24,333




     (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


                                        Jul. 4, 2020                             Apr. 4, 2020       Jun. 29, 2019            Jul. 4, 2020               Jun. 29, 2019


     Cost of sales                                    $
        
          1,237                                          $
     1,011                                            $
     1,231          $
      
      3,430  $
      3,640


     Research & development                    1,469                                            894                                     794                               2,924  2,227


     Selling, general &
      administrative                          11,680                                          6,993                                   7,630                              24,722 20,668


     Impact on income
      (loss) from
      operations                                     $
        
          14,386                                          $
     8,898                                            $
     9,655         $
      
      31,076 $
      26,535


For the fiscal quarters ended July 4, 2020, April 4, 2020 and June 29, 2019, the impact on net income (loss), net of tax was $12,834 ($0.53 per diluted share), $7,892 ($0.33 per diluted share) and $8,243 ($0.34 per diluted share), respectively. For the nine months ended July 4, 2020 and June 29, 2019, the impact on net income (loss), net of tax was $27,662 ($1.14 per diluted share) and $22,429 ($0.92 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


                                        Jul. 4, 2020                             Apr. 4, 2020         Jun. 29, 2019                 Jul. 4, 2020       Jun. 29, 2019


     Cost of sales                                    $
        
           14                                                 $
         (5)                                    $
       (19)          $
      
      122  $
     (52)


     Research & development                       72                                            (213)                                        (24)                          102  (192)


     Selling, general &
      administrative                             353                                          (1,176)                                          87                           976  (470)


     Impact on income
      (loss) from
      operations                                     $
        
           439                                              $
        (1,394)                                      $
       44         $
      
      1,200 $
     (714)


For the fiscal quarters ended July 4, 2020, April 4, 2020 and June 29, 2019, the impact on other expense, net from gains or losses on deferred compensation plan assets was income of $687, expense of $1,364 and income of $12, respectively. For the nine months ended July 4, 2020 and June 29, 2019, the impact on other expense, net from gains or losses on deferred compensation plan assets was income of $1,616 and expense of $811, respectively.

                            (C)               Amortization of intangibles is
                                               included in cost of sales and
                                               operating expenses as
                                               summarized below:



                  Amortization of
                   intangibles                      
         Three Months Ended                                                       
     Nine Months Ended


                                  Jul. 4, 2020                           Apr. 4, 2020       Jun. 29, 2019           Jul. 4, 2020         Jun. 29, 2019


     Cost of sales                             $
     
       2,304                                               $
     10,611                                    $
     11,844         $
     
     23,795 $
     35,977


     Amortization of
      intangible assets                    643                                        1,296                                  6,782                          3,371 11,748


     Impact on income
      (loss) from
      operations                               $
     
       2,947                                               $
     11,907                                    $
     18,626         $
     
     27,166 $
     47,725


For the fiscal quarters ended July 4, 2020, April 4, 2020 and June 29, 2019, the impact on net income (loss), net of tax was $2,139 ($0.09 per diluted share), $8,660 ($0.36 per diluted share), and $13,278 ($0.55 per diluted share), respectively. For the nine months ended July 4, 2020 and June 29, 2019, the impact on net income (loss), net of tax was $19,741 ($0.81 per diluted share) and $34,118 ($1.40 per diluted share), respectively.

     (D) For the nine months ended June 29,
          2019, 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 July
          4, 2020, April 4, 2020 and June 29,
          2019, the impact of restructuring
          charges was $518 ($397 net of tax
          ($0.02 per diluted share)), $1,079
          ($798 net of tax ($0.03 per diluted
          share)), and $21,273 ($14,771 net
          of tax ($0.61 per diluted share)),
          respectively. For the nine months
          ended July 4, 2020 and June 29,
          2019, the impact of restructuring
          charges was $2,530 ($1,861 net of
          tax ($0.08 per diluted share)) and
          $22,629 ($15,890 net of tax ($0.65
          per diluted share)), respectively.




     (F) For the three and nine months ended
          July 4, 2020, selling, general &
          administrative expense includes an
          accelerated compensation charge for
          our former CEO of $941 ($732 net of
          tax ($0.03 per diluted share). For
          the nine months ended July 4, 2020,
          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)). For the three
          and nine months ended June 29,
          2019, selling, general &
          administrative expense includes a
          legal settlement related to an
          asset recovery of $1,337 ($1,083
          net of tax ($0.04 per diluted
          share)), respectively.




     (G) For the fiscal quarter ended April
          4, 2020, goodwill and other
          impairment charges included a
          $327,203 ($327,203 net of tax
          ($13.58 per diluted share)) charge
          for impairment of goodwill, a
          $121,350 ($94,651 net of tax ($3.92
          per diluted share)) charge for
          impairment of long-lived assets
          and a $2,472 ($2,472 net of tax
          ($0.10 per diluted share)) charge
          for impairment of an investment.
          For the nine months ended July 4,
          2020, goodwill and other impairment
          charges included a $327,203
          ($327,203 net of tax ($13.63 per
          diluted share)) charge for
          impairment of goodwill, a $121,350
          ($94,651 net of tax ($3.91 per
          diluted share)) charge for
          impairment of long-lived assets
          and a $2,472 ($2,472 net of tax
          ($0.10 per diluted share)) charge
          for impairment of an investment.




     (H) The fiscal quarter ended July 4,
          2020 included a non-recurring
          income tax charge of $5,261 ($0.21
          per diluted share) and the fiscal
          quarter ended April 4, 2020
          included non-recurring income tax
          net benefit of $7,612 ($0.31 per
          diluted share). The fiscal quarters
          ended July 4, 2020, April 4, 2020
          and June 29, 2019 included a
          benefit of $51 ($0.00 per diluted
          share), a benefit of $314 ($0.01
          per diluted share) and a charge of
          $4 ($0.00 per diluted share) of
          excess tax charges (benefits) for
          employee stock-based compensation,
          respectively. The nine months ended
          July 4, 2020 included non-
          recurring income tax net benefit of
          $2,202 ($0.09 per diluted share).
          The nine months ended July 4, 2020
          and June 29, 2019 included $1,079
          ($0.05 per diluted share) and
          $2,471 ($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):

                                                                Jul. 4, 2020                                Sep. 28, 2019


                                             ASSETS

                            ---


     Current assets:


      Cash, cash equivalents,
       restricted cash and short-
       term investments                                                        $
        
        421,626                        $
        306,745


      Accounts receivable, net                                       197,757                        267,553



     Inventories                                                    448,972                        442,530


      Prepaid expenses and other
       assets                                                         90,237                         77,993



     Total current assets                                         1,158,592                      1,094,821


      Property and equipment, net                                    251,453                        323,434



     Other assets                                                   360,080                        664,914



     Total assets                                                           $
        
        1,770,125                      $
        2,083,169




                                  LIABILITIES AND STOCKHOLDERS'
                                              EQUITY

                            ---


     Current liabilities:


      Short-term borrowings                                                     $
        
        16,554                         $
        14,863



     Accounts payable                                                68,484                         51,531


      Other current liabilities                                      178,479                        173,920


      Total current liabilities                                      263,517                        240,314


      Long-term liabilities                                          613,102                        558,119


      Total stockholders' equity                                     893,506                      1,284,736


      Total liabilities and
       stockholders' equity                                                  $
        
        1,770,125                      $
        2,083,169


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

                                                   
          Three Months Ended                                             
       Nine Months Ended


                                Jul. 4, 2020                                 Apr. 4, 2020         Jun. 29, 2019            Jul. 4, 2020                Jun. 29, 2019


     GAAP net income (loss)                  $
          
            (8,708)                     $
            (418,913)                                  $
              (3,099)             $
          
         (421,828)    $
           53,201


     Stock-based compensation
      expense                         12,834                                       7,892                           8,243                                       27,662     22,429


     Amortization of intangible
      assets                           2,139                                       8,660                          13,278                                       19,741     34,118


     Restructuring charges and
      other                            1,129                                         798                          14,771                                        2,593     15,890


     Non-recurring tax expense
      (benefit)                        5,261                                     (7,612)                                                                    (2,202)


     Tax charge (benefit) from
      stock-based compensation
      expense                           (51)                                      (314)                              4                                      (1,079)   (2,471)


     Goodwill and other
      impairment/asset charges
      (recoveries)                                                              424,326                         (1,083)                                     423,220    (1,083)


     Purchase accounting step-
      up                                                                                                                                                                 353


     Non-GAAP net income                      $
          
            12,604                        $
             14,837                                    $
              32,114              $
         
             48,107    $
           122,437


     Non-GAAP net income per
      diluted share                             $
          
            0.52                          $
             0.61                                      $
              1.33                $
         
             1.99       $
           5.03


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 confidence in the Company's business outlook. 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 recovery of global and regional economies from the negative effects of COVID-19 and related private and public sector measures; the impact of COVID-19 related matters on our business; global demand, 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 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 other cost reduction programs and to achieve the related anticipated savings and improved operational efficiencies; 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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