01—Abstract
Summary
Summary of the 10-Q filed May 12, 2014. Cited figures are marked; the original filing is the authoritative source.
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.
02—Key points
Key Highlights
- Consolidated 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.
- Bookings showed robust growth, up 35.3% for the quarter and 32.5% for the nine months, indicating strong customer demand and order pipeline.
- Net 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.
- Gross 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.
- Research 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.
- The 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.
- A 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.
03—One dollar
Follow one dollar
Of each $1.00 of revenue in Q3 FY2014, Coherent Corp. kept $0.05.
- Revenue$173.6M100.0%
- Cost of revenue−$118.9M68.5%
- Gross profit$54.7M31.5%
- Operating costs−$45.9M26.5%
- Operating income$8.7M5.0%
- Interest, other & tax−$212,0000.1%
- Net income$8.5M4.9%
04—Financials
Financial Highlights
Figures from 10-QQ3 FY2014filed May 12, 2014Financial Statements
Q3 FY2014 against Q3 FY2013
| Line item | Q3 FY2014Q3 FY2013 | Change |
|---|---|---|
| Revenue | $173.56M$143.94M | +20.6% |
| Cost of Revenue | $118.86M$92.99M | +27.8% |
| Gross Profit | $54.69M$50.95M | +7.3% |
| R&D Expenses | $12.10M$5.78M | +109.3% |
| SG&A Expenses | $33.85M$27.00M | +25.3% |
| Operating Expenses | $164.53M$124.82M | +31.8% |
| Operating Income | $8.74M$18.17M | −51.9% |
| Interest Expense | $1.41M$449K | +214.5% |
| Net Income | $8.53M$15.87M | −46.2% |
| EPS (Basic) | $0.14$0.26 | −46.2% |
| EPS (Diluted) | $0.13$0.25 | −48.0% |
| Shares Outstanding (Basic) | 62.35M62.13M | +0.4% |
| Shares Outstanding (Diluted) | 63.75M63.72M | 0.0% |
05—Questions
Frequently Asked Questions
What were the main drivers of revenue growth in this quarter?
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.
Why did net earnings and gross margin decrease despite revenue growth?
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.
How is the company addressing the profitability challenges in the newly acquired businesses?
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.
What is the company's outlook on liquidity and capital resources?
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.
06—Continue