10-QPeriod: Q2 FY2002

COHERENT CORP. Quarterly Report for Q2 Ended Dec 31, 2001

Filed February 13, 2002For Securities:COHR

Summary

II-VI Incorporated (now Coherent Corp.) reported its financial results for the quarter and six months ended December 31, 2001. While overall revenues saw a decline compared to the prior year, particularly in domestic sales and for the Laser Power Corporation and eV PRODUCTS segments, international sales showed some growth. The company experienced a decrease in net earnings for both the quarter and the year-to-date period, influenced by a challenging global economic environment and lower industrial demand. This downturn impacted order bookings across most segments, with a notable delay in a significant blanket order for laser optics and components. Despite revenue and earnings pressures, II-VI Incorporated demonstrated effective cost management, with selling, general, and administrative expenses decreasing as a percentage of revenue. The company also highlighted its continued investment in research and development, particularly in silicon carbide technology, and the strategic acquisition of Litton's Silicon Carbide Group. II-VI Incorporated maintained a focus on liquidity, generating positive cash flow from operations and believing its existing cash reserves and borrowing capacity are sufficient to meet its needs for fiscal year 2002.

Key Highlights

  • 1Revenue for the three months ended December 31, 2001, decreased by 14% to $27.4 million compared to $31.7 million in the prior year's quarter.
  • 2Net earnings for the three months ended December 31, 2001, declined to $1.7 million ($0.12 per diluted share) from $2.3 million ($0.16 per diluted share) in the same period of the prior year.
  • 3For the six months ended December 31, 2001, net earnings were $4.1 million ($0.29 per diluted share), down from $4.3 million ($0.31 per diluted share) in the prior year's period.
  • 4Order bookings experienced a significant decrease of 34% for the quarter and 21% for the six-month period, primarily attributed to the weak global economy and lower industrial demand.
  • 5Manufacturing gross margin percentage decreased to 32% for the quarter and 34% for the six months, impacted by lower sales volumes and production issues at subsidiaries.
  • 6The company adopted SFAS 142, discontinuing the amortization of goodwill, which positively impacted reported net earnings and EPS compared to prior periods when goodwill amortization was expensed.
  • 7II-VI Incorporated acquired the Litton Systems, Inc. Silicon Carbide Group for approximately $2.2 million, strengthening its R&D capabilities in this area.

Frequently Asked Questions

The primary drivers for the revenue decline were the weak worldwide economy and lower industrial demand, which specifically impacted lower industrial capital spending and production, thereby decreasing demand for the company's laser optics and component products.

The adoption of SFAS 142, which requires goodwill to be tested for impairment rather than amortized, meant that goodwill amortization expenses from prior periods were no longer recognized. This resulted in higher reported net earnings and earnings per share for the current periods compared to the prior year's comparable periods, when goodwill amortization was expensed.

The company forecasted revenues to decrease approximately 5% from the second quarter of fiscal year 2002, with earnings per share projected to range between $0.07 and $0.11. The company also anticipates income from operations for both the third and fourth quarters of fiscal 2002 to be lower than the second quarter.

The company has a $45.0 million secured credit agreement and reported total borrowings of $39.0 million at December 31, 2001. It generated $7.5 million in cash from operations in the first six months of fiscal 2002 and believes its internally generated funds, cash reserves, and available borrowing capacity are sufficient to fund its working capital needs, capital expenditures, and debt payments for fiscal year 2002.