10-QPeriod: Q3 FY2014

COHERENT CORP. Quarterly Report for Q3 Ended Mar 31, 2014

Filed May 12, 2014For Securities:COHR

Summary

COHERENT CORP. (COHR) reported its financial results for the quarter ending March 31, 2014. The company saw a significant increase in bookings and revenues, largely driven by the recent acquisitions of Oclaro's fiber amplifier and micro-optics business (Network Solutions) and its Switzerland-based semiconductor laser business (Laser Enterprise). These acquisitions, completed in late 2013, expanded the company's 'Active Optical Products' segment. Despite revenue growth, the company experienced a decrease in net earnings and gross margin compared to the prior year period. This was primarily due to integration costs, restructuring charges, and purchase accounting adjustments related to the acquisitions. The company is actively working to align the cost structure of these new businesses and achieve planned synergies to improve future financial performance. Significant investments in Research and Development were also noted, particularly in the Near Infrared Optics segment.

Financial Highlights

52 data points
Beta

Revenue

$173.56M

31.5% Gross Margin

Net Income

$8.53M

4.9% Net Margin

EPS (Diluted)

$0.13

Total Assets

$1.09B

Cash & Equivalents

$185.69M

Free Cash Flow

$6.25M

Financial Statements
Beta
Revenue$173.56M
Cost of Revenue$118.86M
Gross Profit$54.69M
R&D Expenses$12.10M
SG&A Expenses$33.85M
Operating Expenses$164.53M
Operating Income$8.74M
Interest Expense$1.41M
Net Income$8.53M
EPS (Basic)$0.14
EPS (Diluted)$0.13
Shares Outstanding (Basic)62.35M
Shares Outstanding (Diluted)63.75M

Key Highlights

  • 1Consolidated revenues increased by 20.6% year-over-year for the quarter and 24.8% for the nine months, largely due to the integration of recently acquired businesses.
  • 2Bookings showed robust growth, up 35.3% for the quarter and 32.5% for the nine months, indicating strong customer demand and order pipeline.
  • 3Net earnings attributable to II-VI Incorporated decreased significantly to $8.5 million for the quarter ($0.13/share diluted) from $15.9 million ($0.25/share diluted) in the prior year quarter.
  • 4Gross margin decreased to 31.5% in the current quarter from 35.4% in the prior year, impacted by restructuring charges and the lower operating margin profile of the acquired businesses.
  • 5Research and Development expenses increased significantly, both in absolute terms and as a percentage of revenue, reflecting continued investment in product development, particularly in the Near Infrared Optics segment.
  • 6The company amended and restated its credit agreement, increasing its revolving credit facility to $225 million and adding a $100 million Term Loan, providing increased liquidity.
  • 7A new share repurchase program was authorized in February 2014 for up to $20 million, with $12.0 million repurchased by the end of the quarter.

Frequently Asked Questions

Revenue growth was primarily driven by the recent acquisitions of Oclaro's fiber amplifier and micro-optics business (Network Solutions) and its Switzerland-based semiconductor laser business (Laser Enterprise), which were integrated into the new 'Active Optical Products' segment.

The decrease in net earnings and gross margin was largely due to integration costs, restructuring charges, and purchase accounting adjustments related to the acquisitions. The company also incurred higher interest expenses due to increased borrowings to finance these acquisitions.

The company is implementing planned synergies and cost-saving actions to align the cost structure of the acquired businesses with current and future revenue levels. These efforts are expected to strengthen the financial performance of these businesses going forward.

The company believes its cash flow from operations, existing cash reserves, and available borrowing capacity are sufficient to fund its working capital needs, capital expenditures, share repurchases, and growth objectives for the next twelve months. The amended credit facility provides enhanced liquidity.