10-QPeriod: Q1 FY2008

COHERENT CORP. Quarterly Report for Q1 Ended Sep 30, 2007

Filed November 7, 2007For Securities:COHR

Summary

II-VI Incorporated (COHR) reported a solid increase in revenue and net earnings for the first quarter of fiscal year 2008 compared to the same period in fiscal year 2007. Total revenues grew by 20% to $72.7 million, while net earnings saw a significant 28% jump to $9.6 million, translating to a diluted EPS of $0.32. This performance was driven by strong contributions from the Military & Materials and Near-Infrared Optics segments, bolstered by acquisitions and increased product shipments. The company also demonstrated robust booking growth of 27%, indicating future revenue potential. While the Infrared Optics segment experienced a temporary dip in earnings due to production challenges, management is actively addressing these issues. The company maintains a healthy liquidity position with a strong cash balance and available borrowing capacity, suggesting financial stability for ongoing operations and growth initiatives.

Key Highlights

  • 1Revenue increased by 20% year-over-year to $72.7 million.
  • 2Net earnings grew by 28% year-over-year to $9.6 million, with diluted EPS at $0.32.
  • 3Bookings showed a significant increase of 27% year-over-year, signaling strong future demand.
  • 4The Military & Materials segment revenue nearly doubled (94% increase), boosted by the recent acquisition of PRM.
  • 5Near-Infrared Optics segment revenue grew by 35%, driven by strong performance in UV Filter assemblies.
  • 6The company's cash and cash equivalents increased to $35.7 million, and it has substantial available borrowing capacity.
  • 7An ongoing share repurchase program aims to offset the dilutive effects of stock option issuances.

Frequently Asked Questions

Revenue and earnings growth were primarily driven by improved financial results from the Military & Materials and Near-Infrared Optics segments. This was due to a combination of increased revenues from higher product shipments, successful integration of the PRM acquisition in the Military & Materials segment, and strong performance in UV Filter assemblies in the Near-Infrared Optics segment. Favorable impacts from foreign currency gains and increased earnings from equity investments also contributed positively.

The Infrared Optics segment experienced a 16% decrease in segment earnings due to yield and production capacity limitations in its material production operations, along with higher raw material costs. The company is actively addressing these issues and expects improvements in the second half of fiscal year 2008.

The company maintains a solid liquidity position with cash and cash equivalents of $35.7 million and an available borrowing capacity of $48.8 million under its credit facility. Net cash provided by operating activities was strong at $10.9 million. Total debt obligations decreased to $14.2 million. Management believes its cash flow from operations, cash reserves, and borrowing capacity are sufficient to fund its needs for fiscal year 2008.

The acquisition of PRM, completed on June 26, 2007, significantly boosted the Military & Materials segment's performance in this quarter. PRM contributed approximately $4.9 million in revenue and also added to segment earnings. While PRM's historical gross margins are lower than the company's average, its inclusion has helped lower the overall selling, general, and administrative expenses as a percentage of revenue.