10-QPeriod: Q1 FY2015

COHERENT CORP. Quarterly Report for Q1 Ended Sep 30, 2014

Filed November 7, 2014For Securities:COHR

Summary

Coherent Corp. (COHR) reported increased revenues and earnings for the third quarter of fiscal year 2014, driven by strong performance in its II-VI Laser Solutions and II-VI Photonics segments, largely due to contributions from prior year acquisitions. Total revenues grew 23.9% year-over-year to $185.8 million, with net earnings rising to $12.3 million, or $0.20 per diluted share, up from $9.7 million, or $0.15 per diluted share, in the prior year period. While overall revenue and earnings show positive trends, gross margins slightly decreased to 36.5% from 37.5%, attributed to the lower margin profiles of recently acquired businesses. The company also saw a significant increase in R&D expenses, reflecting continued investment in product development for key growth areas. Despite a challenging operational environment, the company maintained compliance with its debt covenants and has authorized a $50 million share repurchase program, demonstrating a commitment to shareholder value.

Financial Highlights

50 data points
Beta

Revenue

$185.83M

36.5% Gross Margin

Net Income

$12.30M

6.6% Net Margin

EPS (Diluted)

$0.20

Total Assets

$1.06B

Cash & Equivalents

$145.41M

Free Cash Flow

-$20.67M

Financial Statements
Beta
Revenue$185.83M
Cost of Revenue$117.97M
Gross Profit$67.86M
R&D Expenses$12.94M
SG&A Expenses$35.52M
Operating Expenses$169.32M
Operating Income$19.40M
Interest Expense$1.20M
Net Income$12.30M
EPS (Basic)$0.20
EPS (Diluted)$0.20
Shares Outstanding (Basic)61.51M
Shares Outstanding (Diluted)62.79M

Key Highlights

  • 1Total revenues increased by 23.9% to $185.8 million for the three months ended September 30, 2014, compared to $150.0 million in the prior year period.
  • 2Net earnings grew to $12.3 million ($0.20 per diluted share) from $9.7 million ($0.15 per diluted share) year-over-year.
  • 3Bookings increased by 27.5% to $181.7 million, driven by contributions from prior year acquisitions and increased demand for laser components.
  • 4Gross margin as a percentage of revenue slightly decreased to 36.5% from 37.5%, primarily due to the integration of acquired businesses with lower gross margin profiles.
  • 5Research and development expenses increased to $12.9 million (6.9% of revenues) from $7.7 million (5.1% of revenues) due to acquisitions supporting product development.
  • 6The company was in compliance with all financial covenants under its credit facilities.
  • 7A new $50 million share repurchase program was authorized in August 2014, with approximately $6.3 million already spent by the end of the quarter.

Frequently Asked Questions

Revenue growth was primarily driven by the full quarter contributions from prior year acquisitions, specifically Laser Enterprise and Network Solutions. Increased shipment volumes of CO2 and one-micron laser component parts also contributed significantly.

The decrease in gross margin percentage was mainly due to the integration of recent acquisitions (Laser Enterprise and Network Solutions), which operate with lower gross margin profiles compared to the company's established businesses.

The company reported compliance with all financial covenants under its existing credit facilities, which include a $225 million revolving credit facility and a $100 million term loan. As of September 30, 2014, the company had $145.4 million in cash and cash equivalents and $71.0 million in available borrowing capacity, which management believes is sufficient to fund operations and growth objectives.

In August 2014, the company's Board of Directors authorized a $50 million share repurchase program. By the end of the quarter, approximately $6.3 million had been spent on repurchasing shares, indicating a focus on returning value to shareholders.