01—Abstract
Summary
Summary of the 10-K filed August 28, 2014. Cited figures are marked; the original filing is the authoritative source.
For the fiscal year ended June 30, 2014, II-VI Incorporated (now Coherent Corp.) reported net revenues of $683.3 milliona, a 24% increase driven by strategic acquisitions, particularly in the Active Optical Products segment.
Despite revenue growth, earnings from continuing operations declined to $38.3 millionb ($0.60 per diluted share) from $58.7 million ($0.90 per diluted share) in the prior year. This decline was attributed to increased research and development expenses, selling, general, and administrative costs, and integration costs related to recent acquisitions, including significant purchase accounting adjustments and restructuring charges. The company is actively managing its debt, which increased significantly due to acquisitions, and maintains a focus on vertical integration and strategic investments in manufacturing to support future growth.
The company reorganized into three reporting segments effective July 1, 2014: II-VI Laser Solutions, II-VI Photonics, and II-VI Performance Products, aiming for enhanced operational visibility. The filing highlights the company's diverse product portfolio serving multiple high-tech markets, including industrial lasers, optical communications, and defense. Management expressed confidence in the company's ability to fund working capital, capital expenditures, and growth initiatives through operating cash flow, existing cash reserves, and available borrowing capacity.
02—Key points
Key Highlights
- Revenue increased by 24% to $683.3 million, largely due to acquisitions in the Active Optical Products segment.
- Net earnings from continuing operations decreased to $38.3 million ($0.60/share) from $58.7 million ($0.90/share) in the prior year.
- The company underwent a significant organizational realignment, restructuring into three new reporting segments effective July 1, 2014.
- Bookings increased by 32.7% to $691.3 million, driven by new acquisitions and growth in specific legacy product lines like EUV lithography components.
- R&D expenses increased significantly, rising to $42.5 million (6.2% of revenue) from $22.7 million (4.1% of revenue) in the prior year, reflecting investment in new technologies.
- Long-term debt increased substantially to $222 million from $114 million, primarily to finance recent acquisitions.
- The company generated $95.5 million in net cash from operating activities.
03—One dollar
Follow one dollar
Of each $1.00 of revenue in FY2014, Coherent Corp. kept $0.06.
- Revenue$683.3M100.0%
- Cost of revenue−$456.5M66.8%
- Gross profit$226.7M33.2%
- Operating costs−$180.2M26.4%
- Operating income$46.5M6.8%
- Interest, other & tax−$8.0M1.2%
- Net income$38.4M5.6%
Where FY2014 revenue went
$683.3M- Cost of revenue: $456.5M, 67% of revenue
- SG&A: $137.7M, 20% of revenue
- Net income: $38.4M, 5.6% of revenue
- R&D: $42.5M, 6.2% of revenue
- Interest, other & tax: $8.0M, 1.2% of revenue
Kept 5.6% as net income
Full revenue history →04—Financials
Financial Highlights
Figures from 10-KFY2014filed August 28, 2014Financial Statements
FY2014 against FY2013
| Line item | FY2014FY2013 | Change |
|---|---|---|
| Revenue | $683.26M$551.08M | +24.0% |
| Cost of Revenue | $456.55M$347.56M | +31.4% |
| Gross Profit | $226.72M$203.52M | +11.4% |
| R&D Expenses | $42.52M$22.69M | +87.4% |
| SG&A Expenses | $137.71M$109.34M | +25.9% |
| Operating Expenses | $637.62M$473.59M | +34.6% |
| Operating Income | $46.49M$71.49M | −35.0% |
| Interest Expense | $4.48M$1.16M | +286.1% |
| Net Income | $38.45M$50.81M | −24.3% |
| EPS (Basic) | $0.62$0.81 | −23.5% |
| EPS (Diluted) | $0.60$0.80 | −25.0% |
| Shares Outstanding (Basic) | 62.25M62.41M | −0.3% |
| Shares Outstanding (Diluted) | 63.69M63.88M | −0.3% |
05—Questions
Frequently Asked Questions
What were the main drivers of revenue growth in fiscal year 2014?
Revenue growth was primarily driven by the acquisitions of Oclaro's Semiconductor Laser business and Fiber Amplifier and Micro-Optics business, which formed the new Active Optical Products segment. Additionally, increased bookings and revenues were seen in the Infrared Optics segment for diamond windows used in EUV lithography and in the Advanced Products Group for silicon carbide wafers.
Why did net earnings decline despite revenue growth?
Net earnings declined due to several factors, including higher research and development expenses (up to 6.2% of revenue), increased selling, general, and administrative costs, restructuring charges related to integrating new acquisitions, purchase accounting adjustments for acquired inventory, and increased interest expense from higher debt levels taken on to finance the acquisitions.
How did the company finance its acquisitions, and what is the impact on its balance sheet?
The company financed its acquisitions primarily through increased long-term borrowings, which led to a significant increase in total debt to $242 million as of June 30, 2014, from $114 million in the prior year. The company also amended its credit facility to increase borrowing capacity.
What changes did the company make to its reporting structure?
Effective July 1, 2014, the company realigned its organizational structure into three reporting segments: II-VI Laser Solutions, II-VI Photonics, and II-VI Performance Products. This change aims to provide enhanced visibility into operations and business drivers.
06—Continue