10-KPeriod: FY2016

COHERENT CORP. Annual Report, Year Ended Jun 30, 2016

Filed August 26, 2016For Securities:COHR

Summary

Coherent Corp. (formerly II-VI Incorporated) reported total revenues of $827.2 million for the fiscal year ended June 30, 2016, a 11% increase year-over-year, driven primarily by strong performance in its II-VI Photonics segment. This segment experienced a significant 25% revenue growth due to demand in optical communications, data centers, and broadband initiatives. While overall net earnings slightly decreased to $65.5 million from $66.0 million in the prior year, this was impacted by the dilutive effect of recent acquisitions (EpiWorks and ANADIGICS) and associated expenses, which together negatively impacted earnings by $0.32 per share. The company also noted a higher effective income tax rate due to an $8.5 million valuation allowance on certain deferred tax assets. Coherent Corp. continues to invest in research and development, particularly in high-volume VCSEL technology for future applications, with R&D expenses increasing to 7.3% of revenues. The company's strategic focus remains on developing advanced engineered materials and optoelectronic components for various high-growth markets. The II-VI Laser Solutions segment saw a 5% revenue increase, though operating income declined due to acquisition-related costs. The II-VI Performance Products segment experienced modest growth in both bookings and revenues. The company's financial position remained solid, with increased bookings of $875.3 million and a backlog of $290 million, indicating positive future revenue potential.

Financial Highlights

51 data points
Beta

Revenue

$827.22M

37.8% Gross Margin

Net Income

$65.49M

7.9% Net Margin

EPS (Diluted)

$1.04

Total Assets

$1.21B

Cash & Equivalents

$218.44M

Free Cash Flow

$64.80M

Financial Statements
Beta
Revenue$827.22M
Cost of Revenue$514.40M
Gross Profit$312.81M
R&D Expenses$60.35M
SG&A Expenses$160.65M
Operating Income$91.81M
Interest Expense$3.08M
Net Income$65.49M
EPS (Basic)$1.07
EPS (Diluted)$1.04
Shares Outstanding (Basic)61.37M
Shares Outstanding (Diluted)62.91M

Key Highlights

  • 1Total revenues increased by 11% to $827.2 million for FY2016, driven by the II-VI Photonics segment's 25% growth.
  • 2II-VI Photonics segment benefited from strong demand in optical communications, data centers, and broadband initiatives.
  • 3Net earnings saw a slight decrease to $65.5 million, impacted by the dilutive effect of recent acquisitions (EpiWorks, ANADIGICS) and associated expenses, which reduced EPS by $0.32.
  • 4Research and development expenses increased to 7.3% of revenues, with a focus on VCSEL technology.
  • 5Bookings grew by 15% to $875.3 million, and the backlog stood at $290 million as of June 30, 2016.
  • 6The company is strategically investing in new product development and market penetration, leveraging vertical integration and cost-effective manufacturing.
  • 7The II-VI Laser Solutions segment's operating income decreased by 34% due to acquisition-related costs, despite a 5% revenue increase.

Frequently Asked Questions

The primary driver for revenue growth was the II-VI Photonics segment, which saw a 25% increase. This was fueled by strong demand across various optical communication markets, including data center infrastructure, China's broadband initiatives, and the expansion of undersea networks. The II-VI Laser Solutions and II-VI Performance Products segments also contributed to revenue growth, albeit at a slower pace.

The acquisitions of EpiWorks and ANADIGICS contributed approximately $13.9 million in revenues. However, they were dilutive to earnings, with the combined impact of operating losses, acquisition-related expenses, and severance costs reducing the company's earnings by $0.32 per share for the fiscal year ended June 30, 2016.

Coherent Corp. is committed to investing in R&D to drive organic growth and maintain its market position. The company's R&D expenses increased to 7.3% of revenues in FY2016, with a particular focus on developing technology for high-volume VCSEL production for consumer devices and next-generation sensing and datacom applications. The company anticipates this percentage to continue to increase as it invests in its growth strategy.

The company's total debt increased from $176.0 million to $235.9 million, largely due to borrowings to finance acquisitions. However, cash and cash equivalents also increased to $218.4 million. The company had available borrowing capacity and believed its cash flow from operations, existing cash reserves, and credit facilities were sufficient to fund its working capital needs, capital expenditures, and growth initiatives for the upcoming fiscal year. Subsequent to the fiscal year, the company entered into an amended credit facility, increasing its revolving credit facility.