10-QPeriod: Q1 FY2012

COHERENT CORP. Quarterly Report for Q1 Ended Sep 30, 2011

Filed November 8, 2011For Securities:COHR

Summary

COHERENT CORP. (COHR) reported a slight increase in net earnings attributable to II-VI Incorporated for the three months ended September 30, 2011, to $18.58 million from $18.37 million in the prior year, with diluted EPS remaining steady at $0.29. Despite a significant 15% rise in total revenues to $138.37 million, net earnings were flat year-over-year. This was attributed to shifts in product mix, higher commodity pricing impacting certain business units, and increased investment in research and development, particularly within the telecommunications market. The company made a significant strategic acquisition of Aegis Lightwave, Inc. for approximately $46.1 million, strengthening its product portfolio for high-speed optical networks. This acquisition, along with the earlier acquisition of Max Levy Autograph, Inc., contributed to revenue growth. However, the company is facing some headwinds, including a softening order pattern in the infrared optics market and uncertainty surrounding the flooding in Thailand, which may impact its telecommunications businesses. Management is actively monitoring these events and assessing potential material adverse impacts.

Financial Highlights

51 data points
Beta

Revenue

$138.37M

39.8% Gross Margin

Net Income

$18.58M

13.4% Net Margin

EPS (Diluted)

$0.29

Total Assets

$665.93M

Cash & Equivalents

$110.79M

Free Cash Flow

$1.58M

Financial Statements
Beta
Revenue$138.37M
Cost of Revenue$83.36M
Gross Profit$55.01M
R&D Expenses$5.16M
SG&A Expenses$26.81M
Operating Expenses$113.77M
Interest Expense$59K
Net Income$18.58M
EPS (Basic)$0.30
EPS (Diluted)$0.29
Shares Outstanding (Basic)62.70M
Shares Outstanding (Diluted)64.06M

Key Highlights

  • 1Revenue increased by 15.2% to $138.37 million for the three months ended September 30, 2011, compared to $120.13 million in the prior year, driven by acquisitions and demand across multiple segments.
  • 2Net earnings attributable to II-VI Incorporated remained stable at $18.58 million ($0.29 diluted EPS), despite increased revenues, due to unfavorable product mix and higher costs.
  • 3The company completed the acquisition of Aegis Lightwave, Inc. for approximately $46.1 million in July 2011, enhancing its offerings in high-speed optical networks.
  • 4Goodwill increased significantly from $64.26 million to $85.83 million, primarily due to the Aegis acquisition.
  • 5Operating cash flow improved to $14.29 million from $11.06 million, but investing activities showed a substantial outflow of $58.83 million, largely due to the Aegis acquisition and increased capital expenditures.
  • 6The company is monitoring potential impacts from softening demand in the infrared optics market and the recent flooding in Thailand on its telecommunication businesses.
  • 7Share-based compensation expense increased to $4.58 million from $3.73 million, reflecting ongoing investment in employee incentives.

Frequently Asked Questions

Revenue growth was primarily driven by the inclusion of revenues from recently acquired companies, Max Levy Autograph, Inc. (acquired Dec 2010) and Aegis Lightwave, Inc. (acquired July 2011), as well as increased demand across the Infrared Optics, Military & Materials, and Advanced Products Group segments.

Net earnings remained relatively flat year-over-year despite increased revenues primarily due to a less favorable product mix, particularly at the Photop business unit, higher commodity pricing impacting the PRM business unit, and increased investments in internal research and development for product expansion.

The company is closely monitoring the impact of the flooding in Thailand on its contract manufacturer, Fabrinet, which could affect its telecommunication businesses within the Near-Infrared Optics segment. Management is assessing whether these events will have a material adverse impact on future results of operations.

Total debt increased from $18.73 million at June 30, 2011, to $25.90 million at September 30, 2011. This increase was primarily due to net long-term borrowings of $5.705 million to support working capital requirements, with the company utilizing its new $50 million credit facility.