Coherent, Inc. Reports Fourth Fiscal Quarter and Year-End Results

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Nov 04, 2014, 04:01 ET

SANTA CLARA, Calif., Nov. 4, 2014 /PRNewswire/ -- Coherent, Inc. (NASDAQ, COHR), a world leader in providing photonics based solutions to the commercial and scientific research markets, today announced financial results for its fourth fiscal quarter and fiscal year ended September 27, 2014.

FINANCIAL HIGHLIGHTS

	Three Months Ended			Year Ended
	Sept. 27, 2014	June 28, 2014	Sept. 28, 2013	Sept. 27, 2014	Sept. 28, 2013
GAAP Results
(in millions except per share data)
Bookings	$182.7	$244.5	$200.3	$890.5	$767.3
Net sales	$205.3	$196.5	$213.1	$794.6	$810.1
Net income	$19.1	$13.0	$20.5	$59.1	$66.4
Diluted EPS	$0.76	$0.52	$0.83	$2.36	$2.70

Non-GAAP Results
(in millions except per share data)
Net income	$24.2	$18.2	$25.6	$79.9	$87.4
Diluted EPS	$0.96	$0.73	$1.03	$3.19	$3.56

FOURTH FISCAL QUARTER DETAILS

For the fourth fiscal quarter ended September 27, 2014, Coherent announced net sales of $205.3 million and net income, on a U.S. generally accepted accounting principles (GAAP) basis, of $19.1 million, or $0.76 per diluted share. These results compare to net sales of $213.1 million and net income of $20.5 million, or $0.83 per diluted share, for the fourth quarter of fiscal 2013.

Non-GAAP net income for the fourth quarter of fiscal 2014 was $24.2 million, or $0.96 per diluted share. Non-GAAP net income for the fourth quarter of fiscal 2013 was $25.6 million, or $1.03 per diluted share. Beginning in the second quarter of fiscal 2013, the Company revised its presentation of non-GAAP net income and non-GAAP diluted EPS for all periods presented to exclude the effect of intangibles amortization and inventory step up costs. For a complete overview of the differences between GAAP and non-GAAP results, please see the reconciliation table included at the end of this release.

Net sales for the third quarter of fiscal 2014 were $196.5 million and net income, on a GAAP basis, was $13.0 million, or $0.52 per diluted share. Non-GAAP net income for the third quarter of fiscal 2014 was $18.2 million, or $0.73 per diluted share.

Bookings received during the fourth fiscal quarter ended September 27, 2014 of $182.7 million decreased 8.8% from $200.3 million in the same prior year period and decreased by 25.3% compared to bookings of $244.5 million in the immediately preceding quarter. The book-to-bill ratio was 0.89, and ending backlog expected to ship in the next 12 months was $328.3 million at September 27, 2014, compared to a backlog of $344.3 million at June 28, 2014 and a backlog of $285.8 million at September 28, 2013.

For the fiscal year ended September 27, 2014, Coherent posted net sales of $794.6 million and net income of $59.1 million ($2.36 per diluted share) on a GAAP basis compared to the prior year net sales of $810.1 million and net income on a GAAP basis of $66.4 million ($2.70 per diluted share). Bookings received for the fiscal year ended September 27, 2014 were $890.5 million, compared to $767.3 million in bookings received during fiscal 2013.

"There are shifting fortunes within the mobile display industry. The recent successful launch of Apple's iPhone 6 and the continued emergence of Chinese smartphone manufacturers have led to a share shift from OLED to LCD. We first saw the impact of this shift during our third fiscal quarter of 2014 when service demand eased from OLED customers and the impact continued through the fourth fiscal quarter. Ultimately, the demand self-corrects with the growth of the installed base of FPD laser systems, the emergence of more OLED-equipped devices, higher penetration of LTPS-enabled LCD and OLED displays and the super-sizing of mobile screens," said John Ambroseo, Coherent's President and Chief Executive Officer. "Other parts of the microelectronics market are equally dynamic. Service demand from semi capex customers is strong due to high fab utilization rates. Investments in leading edge nodes are unaffected. Capacity expansion in legacy nodes will be the swing vote for 2015 sales. The API market is mirroring the shifts in FPD where certain supply chains are modestly adding capacity. Based upon current inventory burn rates at OEMs, a broader API bookings recovery is likely a fiscal Q2 or Q3 event. Finally, delays in the release of certain consumer electronics products have postponed follow-on orders for sapphire processing," Ambroseo added.

Coherent ended the quarter with cash, cash equivalents and short term investments of $318.3 million, an increase of $15.0 million from cash, cash equivalents and short term investments of $303.3 million at June 28, 2014, and an increase of $68.2 million from cash, cash equivalents and short term investments of $250.1 million at September 28, 2013.

On July 25, 2014, the Board of Directors authorized a buyback program authorizing us to repurchase up to $25 million of our common stock from time to time. No shares were repurchased during the fourth quarter of fiscal 2014.

CONFERENCE CALL REMINDER

The Company will host a conference call today to discuss its financial results at 1:30 P.M. Pacific (4:30 P.M. Eastern). A listen-only broadcast of the conference call can be accessed on the company's website at http://www.coherent.com/Investors/. For those who are not able to listen to the live broadcast, the call will be archived for approximately three months on the company's website. A transcript of management's prepared remarks can be found at http://www.coherent.com/Investors/.

Summarized statement of operations information is as follows (unaudited, in thousands except per share data):

		Three Months Ended						Year Ended
		Sept. 27, 2014		June 28, 2014		Sept. 28, 2013		Sept. 27, 2014		Sept. 28, 2013

Net Sales	$	205,344	$	196,517	$	213,141	$	794,639	$	810,126
Cost of sales^(A)(B)(C)(D)		124,426		122,256		128,100		481,249		487,855
Gross profit		80,918		74,261		85,041		313,390		322,271
Operating expenses:
Research & development^(A)(B)		18,674		19,046		21,556		79,070		82,785
Selling, general & administrative^(A)(B)		37,617		37,226		36,437		154,030		149,513
Intangibles amortization^(C)		733		841		988		3,424		5,074
Total operating expenses		57,024		57,113		58,981		236,524		237,372
Income from operations		23,894		17,148		26,060		76,866		84,899
Other income (expense), net^(B)		1,756		(223)		(308)		2,353		(1,403)
Income before income taxes		25,650		16,925		25,752		79,219		83,496
Provision for income taxes ^(E)		6,553		3,926		5,237		20,113		17,141
Net income	$	19,097	$	12,999	$	20,515	$	59,106	$	66,355

Net income per share:
Basic	$	0.77	$	0.52	$	0.84	$	2.39	$	2.75
Diluted	$	0.76	$	0.52	$	0.83	$	2.36	$	2.70

Shares used in computations:
Basic		24,880		24,837		24,385		24,760		24,138
Diluted		25,230		25,115		24,836		25,076		24,555

(A)

Stock-related compensation expense included in operating results is summarized below (all footnote amounts are unaudited, in thousands, except per share data):

Stock-related compensation expense		Three Months Ended						Year Ended
		Sept. 27, 2014		June 28, 2014		Sept. 28, 2013		Sept. 27, 2014		Sept. 28, 2013
Cost of sales	$	596	$	611	$	546	$	2,393	$	2,151
Research & development		507		504		454		2,033		1,852
Selling, general & administrative		3,587		3,552		3,615		14,471		14,889
Impact on income from operations	$	4,690	$	4,667	$	4,615	$	18,897	$	18,892

	For the quarters ended September 27, 2014, June 28, 2014 and September 28, 2013, the impact on net income, net of tax was $3,382 ($0.13 per diluted share), $3,397 ($0.14 per diluted share) and $3,146 ($0.13 per diluted share), respectively. For the years ended September 27, 2014 and September 28, 2013, the impact on net income, net of tax was $13,654 ($0.54 per diluted share) and $13,600 ($0.55 per diluted share), respectively.

(B)	Changes in deferred compensation plan liabilities are included in cost of sales and operating expenses while gains and losses on deferred compensation plan assets are included in other income (expense), net. Deferred compensation expense (benefit) included in operating results is summarized below:

Deferred compensation expense (benefit)		Three Months Ended						Year Ended
		Sept. 27, 2014		June 28, 2014		Sept. 28, 2013		Sept. 27, 2014		Sept. 28, 2013
Cost of sales	$	24	$	22	$	3	$	143	$	89
Research & development		126		77		3		622		373
Selling, general & administrative		651		351		(22)		3,571		2,311
Impact on income from operations	$	801	$	450	$	(16)	$	4,336	$	2,773

	For the quarters ended September 27, 2014, June 28, 2014 and September 28, 2013, the impact on other income (expense) net from gains or losses on deferred compensation plan assets was income of $780, income of $406 and expense of $100, respectively. For the years ended September 27, 2014 and September 28, 2013, the impact on other income (expense) net was income of $4,317 and income of $2,637, respectively.

(C)	For the quarters ended September 27, 2014, June 28, 2014 and September 28, 2013, the impact of amortization of intangibles expense was $2,312 ($1,713 net of tax ($0.07 per diluted share)), $2,402 ($1,832 net of tax ($0.07 per diluted share)) and $2,454 ($1,912 net of tax ($0.08 per diluted share)), respectively. For the years ended September 27, 2014 and September 28, 2013, the impact of amortization of intangibles expense was $9,593 ($7,131 net of tax ($0.28 per diluted share)) and $9,767 ($7,748 net of tax ($0.32 per diluted share)), respectively.

(D)	For the year ended September 28, 2013, the impact on net income of our inventory step up costs related to our recent acquisitions was $1,589 ($1,112 net of tax ($0.05 per diluted share)).

(E)	The year ended September 28, 2013 included $1,398 ($0.06 per diluted share) benefit from the renewal of the R&D tax credit for fiscal 2012.

Summarized balance sheet information is as follows (unaudited, in thousands):

		Sept. 27, 2014		Sept. 28, 2013
ASSETS
Current assets:
Cash, cash equivalents and short-term investments	$	318,275	$	250,110
Accounts receivable, net		137,324		136,759
Inventories		170,483		168,067
Prepaid expenses and other assets		54,973		74,290
Total current assets		681,055		629,226
Property and equipment, net		107,424		114,333
Other assets		210,896		222,919
Total assets	$	999,375	$	966,478

LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable	$	32,784		36,565
Other current liabilities		84,535		109,263
Total current liabilities		117,319		145,828
Other long-term liabilities		62,407		62,132
Total stockholders' equity		819,649		758,518
Total liabilities and stockholders' equity	$	999,375	$	966,478

Reconciliation of GAAP to Non-GAAP net income (unaudited, in thousands, net of tax):

		Three Months Ended						Year Ended
		Sept. 27, 2014		June 28, 2014		Sept. 28, 2013		Sept. 27, 2014		Sept. 28, 2013
GAAP net income	$	19,097	$	12,999	$	20,515	$	59,106	$	66,355
Stock-related compensation expense		3,382		3,397		3,146		13,654		13,600
Intangibles amortization		1,713		1,832		1,912		7,131		7,748
Inventory step-up		—		—		—		—		1,112
Non-recurring tax expense (release) items		—		—		—		—		(1,398)
Non-GAAP net income	$	24,192	$	18,228	$	25,573	$	79,891	$	87,417

Non-GAAP net income per diluted share	$	0.96	$	0.73	$	1.03	$	3.19	$	3.56

FORWARD-LOOKING STATEMENTS

This press release contains forward-looking statements, as defined under the Federal securities laws. These forward-looking statements include the statements in this press release that relate to the demand for the Company's products and services, growth of OLED-enabled devices, growth of the installed base of the Company's products, factors and components driving 2015 sales of the Company's products, the timing and effect of a recovery of API bookings. These forward-looking statements are not guarantees of future results and are subject to risks, uncertainties and assumptions that could cause our actual results to differ materially and adversely from those expressed in any forward-looking statement. Factors that could cause actual results to differ materially include risks and uncertainties, including, but not limited to, risks associated with any general market recovery, growth in demand for our products, the worldwide demand for flat panel displays, the demand for and use of the Company's products in commercial applications, our successful implementation of our customer design wins, our and our customers' exposure to risks associated with worldwide economic conditions, the mix and pricing of our products, our ability to control expenses, the ability of our customers to forecast their own end markets, our ability to accurately forecast future periods, customer acceptance and adoption of our new product offerings, continued timely availability of products and materials from our suppliers, our ability to timely ship our products and our customers' ability to accept such shipments, our ability to have our customers qualify our product offerings, our ability to forecast and meet our expenses, worldwide government economic policies and other risks identified in the Company's SEC filings. Readers are encouraged to refer to the risk disclosures and critical accounting policies and estimates described in the Company's reports on Forms 10-K, 10-Q and 8-K, as applicable and as filed from time-to-time by the Company. Actual results, events and performance may differ materially from those presented herein. Readers are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date hereof. The Company undertakes no obligation to update these forward-looking statements as a result of events or circumstances after the date hereof or to reflect the occurrence of unanticipated events.

Founded in 1966, Coherent, Inc. is a world leader in providing photonics based solutions to the commercial and scientific research markets and part of the Standard & Poor's SmallCap 600 Index and the Russell 2000. Please direct any questions to Leen Simonet, Chief Financial Officer at 408-764-4110. For more information about Coherent, visit the Company's Web site at http://www.coherent.com/ for product and financial updates.

SOURCE Coherent, Inc.