10-QPeriod: Q2 FY2016

COHERENT CORP. Quarterly Report for Q2 Ended Dec 31, 2015

Filed February 8, 2016For Securities:COHR

Summary

For the second quarter of fiscal year 2016, COHERENT CORP. (COHR) reported revenues of $191.5 million, an increase of 8% compared to the prior year's same period, driven primarily by strong performance in the II-VI Photonics segment, fueled by demand from the Chinese broadband initiative and undersea communication network build-outs. While net earnings decreased to $19.0 million ($0.30 per diluted share) from $22.1 million ($0.35 per diluted share) in the prior year's quarter, the six-month year-to-date net earnings increased to $36.2 million ($0.58 per diluted share) from $34.4 million ($0.55 per diluted share). The company has strategically expanded its capabilities with recent acquisitions, including EpiWorks and the pending acquisition of ANADIGICS, Inc., aimed at bolstering its technology platforms and production capacity. Despite a slight dip in operating income for the II-VI Laser Solutions and II-VI Performance Products segments, the significant growth in II-VI Photonics, particularly in bookings and operating income, indicates a positive shift in the company's revenue mix towards higher-margin products. Management expresses confidence in sufficient liquidity to fund working capital, capital expenditures, and growth objectives.

Financial Highlights

50 data points
Beta

Revenue

$191.43M

37.3% Gross Margin

Net Income

$18.99M

9.9% Net Margin

EPS (Diluted)

$0.30

Total Assets

$1.04B

Cash & Equivalents

$177.08M

Free Cash Flow

$30.39M

Financial Statements
Beta
Revenue$191.43M
Cost of Revenue$120.09M
Gross Profit$71.34M
R&D Expenses$12.15M
SG&A Expenses$37.41M
Operating Income$21.78M
Interest Expense$597K
Net Income$18.99M
EPS (Basic)$0.31
EPS (Diluted)$0.30
Shares Outstanding (Basic)61.16M
Shares Outstanding (Diluted)62.67M

Key Highlights

  • 1Total revenues for the three months ended December 31, 2015 increased 8% to $191.5 million, compared to $176.8 million in the prior year period.
  • 2Net earnings for the three months ended December 31, 2015 decreased to $19.0 million ($0.30/share diluted) from $22.1 million ($0.35/share diluted) in the prior year.
  • 3Six-month net earnings increased to $36.2 million ($0.58/share diluted) from $34.4 million ($0.55/share diluted) in the prior year.
  • 4The II-VI Photonics segment showed significant growth, with bookings up 48% and revenues up 22% year-over-year for the quarter, driven by the Chinese broadband initiative and undersea communication networks.
  • 5Gross margin improved to 37.3% of revenues for the quarter, up from 35.7% in the prior year, attributed to higher volumes, favorable product mix, and restructuring benefits.
  • 6The company announced two acquisitions: EpiWorks (completed Feb 1, 2016 for ~$43M) and ANADIGICS, Inc. (pending, ~$61M), aimed at expanding technology platforms and capacity.
  • 7As of December 31, 2015, the company had $177.1 million in cash and cash equivalents and $136.1 million in available borrowing capacity.

Frequently Asked Questions

Revenue growth was primarily driven by the II-VI Photonics segment, which saw a 22% increase in revenue year-over-year. This growth was fueled by increased demand from the Chinese broadband initiative and the build-out of undersea communication networks, particularly for transport and amplification component products like 980nm pumps.

Net earnings decreased in the three months ended December 31, 2015, primarily because the prior year's comparable period included a significant one-time settlement gain of $7.7 million related to acquisition purchase agreements. Excluding this one-time item, the current period's financial results showed improvement due to higher revenues and gross margins.

The company completed the acquisition of EpiWorks on February 1, 2016, for approximately $43 million in cash, with potential earn-out payments. It also entered into an agreement to acquire ANADIGICS, Inc. for approximately $61 million, expected to close in March 2016. These acquisitions are expected to expand the company's technology platforms and production capacity for semiconductor lasers.

The company has a credit facility with a revolving credit line of $225 million and a $100 million Term Loan, maturing in September 2018. As of December 31, 2015, the company was in compliance with all financial covenants and had $136.1 million in aggregate availability under its lines of credit. The company believes its cash flow from operations, cash reserves, and borrowing capacity are sufficient to meet its obligations and growth objectives.