10-QPeriod: Q2 FY2011

COHERENT CORP. Quarterly Report for Q2 Ended Dec 31, 2010

Filed February 8, 2011For Securities:COHR

Summary

II-VI Incorporated (COHR) reported strong financial performance for the quarter and six months ended December 31, 2010, demonstrating significant year-over-year growth across key metrics. Revenues surged by 76% and 79% respectively, driven by robust demand across its diverse business segments, particularly Infrared Optics, Military & Materials, and Compound Semiconductor Group. This revenue growth, coupled with improved manufacturing gross margins and operational efficiencies, resulted in a substantial increase in net earnings attributable to II-VI Incorporated, which grew by 220% and 205% for the respective periods. The company also made strategic acquisitions, notably Max Levy Autograph, Inc. (MLA) in December 2010, contributing to increased goodwill and segment performance. The company ended the period with a strong cash position and ample liquidity, positioning it well for continued growth.

Financial Highlights

45 data points
Beta

Revenue

$120.89M

41.4% Gross Margin

Net Income

$19.16M

15.8% Net Margin

EPS (Diluted)

$0.30

Total Assets

$566.84M

Cash & Equivalents

$119.27M

Free Cash Flow

$12.56M

Financial Statements
Beta
Revenue$120.89M
Cost of Revenue$70.85M
Gross Profit$50.04M
R&D Expenses$3.36M
SG&A Expenses$21.99M
Operating Expenses$96.68M
Interest Expense$25K
Net Income$19.16M
EPS (Basic)$0.31
EPS (Diluted)$0.30
Shares Outstanding (Basic)62.08M
Shares Outstanding (Diluted)63.78M

Key Highlights

  • 1Significant revenue growth of 76% for the quarter and 79% for the six months ended December 31, 2010, compared to the prior year.
  • 2Net earnings attributable to II-VI Incorporated increased substantially by 220% for the quarter and 205% for the six months ended December 31, 2010.
  • 3Manufacturing gross margin improved to 42% for both the quarter and six months, up from 38% and 39% respectively in the prior year.
  • 4Acquisition of Max Levy Autograph, Inc. (MLA) in December 2010, adding to goodwill and contributing to the Military & Materials segment.
  • 5Strong cash flow from operations of $33.0 million for the six months ended December 31, 2010.
  • 6Healthy liquidity with $119.3 million in cash and cash equivalents and $59.1 million in available borrowing capacity.
  • 7Diluted earnings per share showed significant improvement, rising to $0.60 for the quarter and $1.18 for the six months, from $0.20 and $0.41 respectively in the prior year.

Frequently Asked Questions

The significant revenue increase was driven by broad-based demand across most of the company's business units, reflecting a general improvement in the worldwide economy. Specifically, the Infrared Optics segment saw increased demand from OEM and aftermarket customers, the Military & Materials segment benefited from increased demand for selenium and tellurium as well as orders related to the Joint Strike Fighter program, and the Compound Semiconductor Group saw growth from its gesture recognition product line and a government contract for Silicon Carbide growth.

The acquisition of Photop Technologies, Inc. in January 2010 significantly contributed to the Near-Infrared Optics segment's performance, bolstering revenues and segment earnings. The more recent acquisition of Max Levy Autograph, Inc. (MLA) in December 2010 added to the Military & Materials segment and resulted in preliminary goodwill of $9.7 million. While the results of MLA were insignificant for the reported periods, it is expected to contribute to future performance.

The company maintains a strong liquidity position with $119.3 million in cash and cash equivalents and $59.1 million in available borrowing capacity under its credit facility. Management believes that cash flow from operations, existing cash reserves, and available borrowing capacity will be sufficient to fund its working capital needs, capital expenditures, debt payments, and internal growth for the remainder of fiscal year 2011.

The company is exposed to foreign currency exchange rate fluctuations, particularly with the Japanese Yen. To mitigate this risk, it uses foreign currency forward exchange contracts to hedge transactional exposure on export sales. It also has a Yen-denominated loan that helps minimize foreign currency exposure. For other foreign subsidiaries, local currencies are used, and translation adjustments are recorded in other comprehensive income.