Coherent, Inc. Reports First Fiscal Quarter Results

February 7, 2018 | By forimmediaterele | Filed in: Press Releases.

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SANTA CLARA, Calif., Feb. 7, 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 first fiscal quarter ended December 30, 2017.

FINANCIAL HIGHLIGHTS

Three Months Ended

Dec. 30, 2017

Sep. 30, 2017

Dec. 31, 2016

GAAP Results

(in millions except per share data)

Net sales

$

477.6

$

490.3

$

346.1

Net income

$

41.9

$

73.8

$

30.4

Diluted EPS

$

1.67

$

2.96

$

1.23

Non-GAAP Results

(in millions except per share data)

Net income

$

88.6

$

92.5

$

63.4

Diluted EPS

$

3.54

$

3.72

$

2.57

FIRST FISCAL QUARTER DETAILS

For the first fiscal quarter ended December 30, 2017, Coherent announced net sales of $477.6 million and net income, on a U.S. generally accepted accounting principles (GAAP) basis, of $41.9 million, or $1.67 per diluted share.  These results include $41.7 million, or $1.67 per diluted share, of largely one time additional income tax expense due to the provisions under the Tax Cuts and Jobs Act as well as a $12.5 million, or $0.50 per diluted share, benefit 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 quarter ending September 29, 2018. These results compare to net sales of $346.1 million and net income of $30.4 million, or $1.23 per diluted share, for the first quarter of fiscal 2017.

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 first quarter of fiscal 2017 was $63.4 million, or $2.57 per diluted share. Reconciliations of GAAP to non-GAAP financial measures for the three months ended December 30, 2017, September 30, 2017 and December 31, 2016 appear in the financial statements portion of this release under the heading “Reconciliation of GAAP to Non-GAAP net income.”

Net sales for the fourth quarter of fiscal 2017 were $490.3 million and net income, on a GAAP basis, was $73.8 million, or $2.96 per diluted share. Non-GAAP net income for the fourth quarter of fiscal 2017 was $92.5 million, or $3.72 per diluted share.

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 December 31, 2016 in Coherent’s first fiscal quarter results ended December 31, 2016, and a full quarter of Rofin’s operating results in Coherent’s fourth and first fiscal quarter results ended September 30, 2017 and December 30, 2017, respectively.

“There has been a lot of turbulence in the display market over the last several weeks, raising investors’ concerns about the timing and/or sustainability of the investment cycle.  We conducted a channel check and the results indicated no current sign of customers seeking to delay or cancel deliveries of existing ELA systems.  We also reviewed fab utilization rates and system installations and concluded that service revenues are in-line with our expectations. During the quarter, orders from semicap applications were strong for expansion of memory capacity.  We received our first volume order for high-power fiber lasers from one of the largest Chinese machine tool manufacturers.  We also saw a solid uptick in medical device manufacturing workstations,” stated John Ambroseo, Coherent’s President and Chief Executive Officer.  “We were pleased with our financial results for the first quarter of fiscal 2018, which enabled another €75 million voluntary debt payment.  We have now repaid approximately one third of the debt used to finance the Rofin transaction.  In addition, as a result of our strong cash generation, our Board has approved a share repurchase authorization of up to $100 million,” he 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. 30, 2017

Sep. 30, 2017

Dec. 31, 2016

Net sales

$

477,565

$

490,298

$

346,073

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

260,542

268,244

204,559

Gross profit

217,023

222,054

141,514

Operating expenses:

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

31,392

31,063

27,084

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

73,437

73,482

73,768

Gain from business combination(C)

(5,416)

Impairment of assets held for sale (I)

265

2,916

  Amortization of intangible assets(D)

2,606

2,964

3,878

  Total operating expenses

107,700

110,425

99,314

Income from operations

109,323

111,629

42,200

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

(8,500)

(10,415)

5,172

Income from continuing operations, before income taxes

100,823

101,214

47,372

Provision for income taxes (J)

58,920

28,327

16,674

Net income from continuing operations

41,903

72,887

30,698

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

(2)

865

(290)

Net income

$

41,901

$

73,752

$

30,408

Net income (loss) per share:

Basic from continuing operations

1.70

2.97

1.26

Basic from discontinued operations

0.03

(0.01)

Basic earnings per share

$

1.70

$

3.00

$

1.25

Diluted from continuing operations

1.67

2.93

1.25

Diluted from discontinued operations

0.03

(0.01)

Diluted earnings per share

$

1.67

$

2.96

$

1.23

Shares used in computations:

Basic

24,635

24,568

24,347

Diluted

25,025

24,883

24,644

(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. 30, 2017

Sep. 30, 2017

Dec. 31, 2016

Cost of sales

$

988

$

923

$

960

Research & development

668

684

1,053

Selling, general & administrative

5,420

5,588

7,642

Impact on income from operations

$

7,076

$

7,195

$

9,655

For the quarters ended December 30, 2017, September 30, 2017 and December 31, 2016, the impact on net income, net of tax was $5,467 ($0.22 per diluted share), $5,277 ($0.21 per diluted share) and $8,166 ($0.33 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. 30, 2017

Sep. 30, 2017

Dec. 31, 2016

Cost of sales

$

78

$

43

$

1

Research & development

359

133

25

Selling, general & administrative

1,627

692

(62)

Impact on income from operations

$

2,064

$

868

$

(36)

For the quarters ended December 30, 2017, September 30, 2017 and December 31, 2016, the impact on other income (expense), net from gains or losses on deferred compensation plan assets was income of $1,906, $883 and $10, respectively.

(C)

For the quarter ended December 31, 2016, the gain from business combination was $5,416 ($3,426 net of tax ($0.14 per diluted share)).

(D)

For the quarters ended December 30, 2017, September 30, 2017 and December 31, 2016, the impact of amortization of intangibles expense was $15,100 ($10,773 net of tax ($0.43 per diluted share)), $16,253 ($11,546 net of tax ($0.46 per diluted share)), and $12,088 ($7,726 net of tax ($0.31 per diluted share)), respectively.

(E)

For the quarter ended December 31, 2016, the impact of inventory and favorable lease step-up costs related to acquisitions was $9,304 ($6,469 net of tax ($0.26 per diluted share)).

(F)

For the quarters ended December 30, 2017, September 30, 2017 and December 31, 2016, the impact of restructuring charges was $1,160 ($850 net of tax ($0.04 per diluted share)),  $3,201 ($2,273 net of tax ($0.09 per diluted share)) and $7,062 ($4,600 net of tax ($0.19 per diluted share)), respectively.

(G)

The quarter ended December 31, 2016 included $14,228 ($14,492 net of tax ($0.59 per diluted share)) of costs related to the acquisition of Rofin.

(H)

For the quarter ended December 31, 2016, 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 quarters ended December 30, 2017 and September 30, 2017, the impairment of net assets held for sale was $265 ($265 net of tax ($0.01 per diluted share)) and $2,916 ($1,885 net of tax ($0.08 per diluted share)), respectively.

(J)

The quarter ended December 30, 2017 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 $12,451 ($0.50 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 quarter ended September 30, 2017 included $1,358 ($0.05 per diluted share) non-recurring tax benefit from the closure of audits.

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

Dec. 30, 2017

Sept. 30, 2017

ASSETS

Current assets:

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

$

424,546

$

476,673

Accounts receivable, net

309,132

305,668

Inventories

432,809

414,807

Prepaid expenses and other assets

77,003

70,268

Assets held-for-sale

8,577

44,248

  Total current assets

1,252,067

1,311,664

Property and equipment, net

291,308

278,850

Other assets

733,284

747,286

  Total assets

$

2,276,659

$

2,337,800

LIABILITIES AND STOCKHOLDERS’ EQUITY

Current liabilities:

Short-term borrowings

$

6,928

$

5,078

Accounts payable

81,397

75,860

Other current liabilities

304,876

338,207

  Total current liabilities

393,201

419,145

Other long-term liabilities

688,077

755,391

Total stockholders’ equity

1,195,381

1,163,264

  Total liabilities and stockholders’ equity

$

2,276,659

$

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

Dec. 30, 2017

Sep. 30, 2017

Dec. 31, 2016

GAAP net income from continuing operations

$

41,903

$

72,887

$

30,698

Stock-based compensation expense

5,467

5,277

8,166

Amortization of intangible assets

10,773

11,546

7,726

Restructuring charges

850

2,273

4,600

Gain on business combination

(3,426)

Non-recurring tax expense (benefit)

41,745

(1,358)

Tax benefit from stock-based compensation expense

(12,451)

Impairment of assets held for sale

265

1,885

Acquisition-related costs

14,492

Interest expense on debt commitment

1,844

Gain on hedge of debt and debt commitment

(7,147)

Purchase accounting step-up

6,469

Non-GAAP net income

$

88,552

$

92,510

$

63,422

Non-GAAP net income per diluted share

$

3.54

$

3.72

$

2.57

RISKS AND UNCERTAINTIES

The Company and its business are subject to risks and uncertainties, including, but not limited to, risks associated with growth in demand for our products, customer acceptance of our products, the worldwide demand for flat panel displays, the demand for and use of our products in commercial applications, our ability to general 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, customer acceptance and adoption of our new product offerings, 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 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, 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 for 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.

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SOURCE Coherent, Inc.

Related Links

http://www.coherent.com

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