10-QPeriod: Q3 FY2002

COHERENT CORP. Quarterly Report for Q3 Ended Mar 31, 2002

Filed May 14, 2002For Securities:COHR

Summary

II-VI Incorporated (now Coherent Corp.) reported a decline in revenue and net earnings for the third quarter and first nine months of fiscal year 2002 compared to the prior year. This downturn was attributed to a weak worldwide economy and reduced industrial demand, impacting sales across most of its business segments. Despite the revenue challenges, the company saw an increase in order bookings for the third quarter, driven by specific orders in its eV PRODUCTS and Laser Power Corporation segments, and contract bookings for Silicon Carbide development. The company also adopted SFAS 142, ceasing goodwill amortization, which improved reported earnings. Management expects revenues and income from operations to be consistent with the third quarter for the fourth quarter, with an earnings per share forecast between $0.07 and $0.11.

Key Highlights

  • 1Revenue for the third quarter of fiscal 2002 decreased by 16% to $27.4 million, and for the nine-month period, revenue decreased by 8% to $83.6 million, primarily due to a weak global economy and lower industrial demand.
  • 2Net earnings for the third quarter of fiscal 2002 were $1.16 million ($0.08 per diluted share), a decrease from $2.44 million ($0.17 per diluted share) in the prior year's quarter. For the nine months, net earnings were $5.25 million ($0.37 per diluted share), down from $6.74 million ($0.48 per diluted share) in the prior year.
  • 3Order bookings increased by 9% in the third quarter to $36.5 million, driven by contract research and development, significant military orders at Laser Power Corporation, and Silicon Carbide development contracts, though nine-month bookings were down 11%.
  • 4The company adopted SFAS 142 effective July 1, 2001, discontinuing the amortization of goodwill. Pro forma adjusted net earnings (excluding goodwill amortization) for the nine months ended March 31, 2001, were $7.89 million, compared to $5.25 million for the same period in fiscal 2002.
  • 5Manufacturing gross margin declined to 31% for the third quarter and 33% for the nine months, down from 36% and 38% respectively in the prior year, attributed to lower sales volumes and specific production issues at subsidiaries.
  • 6The company acquired the Litton Systems, Inc. Silicon Carbide (SiC) Group for approximately $2.2 million in October 2001 to complement its SiC research and development efforts.
  • 7Management forecasts fourth-quarter revenues and income from operations to be consistent with the third quarter, with diluted EPS projected between $0.07 and $0.11.

Frequently Asked Questions

The decline in revenue and net earnings for the third quarter and first nine months of fiscal year 2002 is primarily attributed to a weak worldwide economy and reduced industrial demand, which negatively impacted sales across most of the company's business segments.

The adoption of SFAS 142, which eliminated goodwill amortization, has improved the reported earnings. While actual net earnings for the nine months ended March 31, 2002, were $5.25 million, the pro forma adjusted net earnings for the same period in fiscal 2001 (which excluded goodwill amortization) were significantly higher at $7.89 million, highlighting the impact of this accounting change on year-over-year comparisons.

The company has a $45 million secured credit agreement with a term loan and line of credit option. As of March 31, 2002, total borrowings were $37.3 million. Internally generated funds, existing cash reserves, and available borrowing capacity are believed to be sufficient to cover working capital needs, capital expenditures, and debt payments for fiscal 2002.

For the fourth quarter of fiscal 2002, the company forecasts revenues and income from operations to be consistent with the third quarter. Diluted earnings per share are expected to range from $0.07 to $0.11. For the full fiscal year 2002, the company anticipates revenues and income from operations to be lower than the prior fiscal year by approximately 10% and 25%, respectively.