Coherent, Inc. Reports Third Fiscal Quarter Results

Three Months Ended

Nine Months Ended

July 1, 2017

April 1, 2017

July 2, 2016

July 1, 2017

July 2, 2016

GAAP Results

(in millions except per share data)

Net sales

$

464.1

$

422.8

$

218.8

$

1,233.0

$

608.9

Net income

$

61.1

$

41.8

$

18.7

$

133.4

$

56.7

Diluted EPS

$

2.46

$

1.69

$

0.76

$

5.39

$

2.33

Non-GAAP Results

(in millions except per share data)

Net income

$

83.4

$

72.1

$

26.2

$

218.8

$

75.4

Diluted EPS

$

3.36

$

2.91

$

1.07

$

8.85

$

3.10

Three Months Ended

Nine Months Ended

July 1, 2017

April 1, 2017

July 2, 2016

July 1, 2017

July 2, 2016

Net sales

$

464,107

$

422,833

$

218,767

$

1,233,013

$

608,924

Cost of sales^{(A)(B)(D)(E)(F)}

256,921

243,318

124,208

704,798

341,868

Gross profit

207,186

179,515

94,559

528,215

267,056

Operating expenses:

Research & development^(A)(B)(F)

30,483

30,536

21,441

88,103

61,536

Selling, general & administrative^{(A)(B)(E)(F)(G)}

72,383

72,451

46,256

218,602

123,970

Gain from business combination^(C)

—

—

—

(5,416)

—

  Amortization of intangible assets^(D)

3,743

5,439

574

13,060

1,975

Total operating expenses

106,609

108,426

68,271

314,349

187,481

Income from operations

100,577

71,089

26,288

213,866

79,575

Other income (expense), net^{(B) (H)}

(7,942)

(10,255)

852

(13,025)

(1,150)

Income from continuing operations, before income taxes

92,635

60,834

27,140

200,841

78,425

Provision for income taxes ^(I)

29,764

18,646

8,490

65,084

21,708

Net income from continuing operations

62,871

42,188

18,650

135,757

56,717

Loss from discontinued operations, net of income taxes

(1,754)

(343)

—

(2,387)

—

Net income

$

61,117

$

41,845

$

18,650

$

133,370

$

56,717

Net income per share:

Basic from continuing operations

2.56

1.72

0.77

5.55

2.35

Basic from discontinued operations

(0.07)

(0.01)

—

(0.10)

—

Basic earnings per share

$

2.49

$

1.71

$

0.77

$

5.45

$

2.35

Diluted from continuing operations

2.53

1.70

0.76

5.49

2.33

Diluted from discontinued operations

(0.07)

(0.01)

—

(0.10)

—

Diluted earnings per share

$

2.46

$

1.69

$

0.76

$

5.39

$

2.33

Shares used in computations:

Basic

24,537

24,496

24,192

24,460

24,108

Diluted

24,823

24,757

24,467

24,741

24,355

(A)   

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

Stock-based compensation expense

Three Months Ended

Nine Months Ended

July 1, 2017

April 1, 2017

July 2, 2016

July 1, 2017

July 2, 2016

Cost of sales

$

880

$

778

$

677

$

2,618

$

1,876

Research & development

639

597

610

2,289

1,646

Selling, general & administrative

5,373

5,308

4,402

18,323

11,299

Impact on income from operations

$

6,892

$

6,683

$

5,689

$

23,230

$

14,821

For the quarters ended July 1, 2017, April 1, 2017 and July 2, 2016, the impact on net income, net of tax was $5,041 ($0.20 per diluted share), $4,868 ($0.20 per diluted share) and $4,101 ($0.17 per diluted share), respectively. For the nine months ended July 1, 2017 and July 2, 2016, the impact on net income, net of tax was $18,075 ($0.73 per diluted share) and $11,371 ($0.47 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

Nine Months Ended

July 1, 2017

April 1, 2017

July 2, 2016

July 1, 2017

July 2, 2016

Cost of sales

$

53

$

69

$

69

$

123

$

35

Research & development

163

308

330

496

166

Selling, general & administrative

1,014

1,430

1,619

2,382

836

Impact on income from operations

$

1,230

$

1,807

$

2,018

$

3,001

$

1,037

For the quarters ended July 1, 2017, April 1, 2017 and July 2, 2016, the impact on other income (expense), net from gains or losses on deferred compensation plan assets was income of $1,204, income of $1,812 and income of $1,867, respectively. For the nine months ended July 1, 2017 and July 2, 2016, the impact on other income (expense) net from gains or losses on deferred compensation plan assets was income of $3,027 and income of $981, respectively.

(C)  

For the nine months ended July 1, 2017, the gain from business combination was $5,416 ($3,426 net of tax ($0.14 per diluted share)).

(D)  

For the quarters ended July 1, 2017, April 1, 2017 and July 2, 2016, the impact of amortization of intangibles expense was $15,452 ($10,870 net of tax ($0.44 per diluted share)), $16,763 ($12,573 net of tax ($0.51 per diluted share)), and $2,032 ($1,400 net of tax ($0.06 per diluted share)), respectively. For the nine months ended July 1, 2017 and July 2, 2016, the impact of amortization of intangible expense was $44,303 ($31,169 net of tax ($1.26 per diluted share)) and $6,201 ($4,270 net of tax ($0.18 per diluted share)), respectively.

(E)  

For the quarters ended July 1, 2017 and April 1, 2017, the impact of inventory step-up costs related to acquisitions was $4,445 ($3,172 net of tax ($0.13 per diluted share)) and $13,019 ($9,401 net of tax ($0.38 per diluted share)), respectively. For the nine months ended July 1, 2017, the impact of inventory and favorable lease step-up costs related to acquisitions was $26,768 ($19,042 net of tax ($0.77 per diluted share)).

(F)  

For the quarters ended July 1, 2017 and April 1, 2017, the impact of restructuring charges was $1,500 ($1,131 net of tax ($0.05 per diluted share)) and $557 ($378 net of tax ($0.02 per diluted share)), respectively. For the nine months ended July 1, 2017, the impact of restructuring charges was $9,119 ($6,109 net of tax ($0.25 per diluted share)).

(G)    

The quarters ended July 1, 2017, April 1, 2017 and July 2, 2016 included $426 ($269 net of tax ($0.01 per diluted share)), $2,933 ($2,664 net of tax ($0.11 per diluted share)) and $3,050 ($2,012 net of tax ($0.08 per diluted share)), respectively, of costs related to the acquisition of Rofin. The nine months ended July 1, 2017 and July 2, 2016 included $17,587 ($17,425 net of tax ($0.70 per diluted share)) and $6,634 ($4,276 net of tax ($0.18 per diluted share)), respectively, of costs related to the acquisition of Rofin.

(H)  

For the nine months ended July 1, 2017, the gain on our hedge of the debt commitment and issuance of the debt was $11,298 ($7,147 net of tax ($0.29 per diluted share)) and interest expense on the debt commitment was $2,665 ($1,844 net of tax ($0.07 per diluted share)).

(I)    

The nine months ended July 2, 2016 included $1,221 ($0.05 per diluted share) non-recurring tax benefit from the renewal of the R&D tax credit for fiscal 2015.

July 1, 2017

October 1, 2016

ASSETS

Current assets:

Cash, cash equivalents, restricted cash and short-term investments

$

473,487

$

399,953

Accounts receivable, net

277,853

165,715

Inventories

402,849

212,898

Prepaid expenses and other assets

74,827

37,073

Assets held-for-sale

32,556

—

  Total current assets

1,261,572

815,639

Property and equipment, net

268,622

127,443

Other assets

748,235

218,066

  Total assets

$

2,278,429

$

1,161,148

LIABILITIES AND STOCKHOLDERS' EQUITY

Current liabilities:

Short-term borrowings

$

5,485

$

20,000

Accounts payable

72,755

45,182

Other current liabilities

301,069

136,312

Total current liabilities

379,309

201,494

Other long-term liabilities

831,078

48,826

Total stockholders' equity

1,068,042

910,828

Total liabilities and stockholders' equity

$

2,278,429

$

1,161,148

Three Months Ended

Nine Months Ended

July 1, 2017

April 1, 2017

July 2, 2016

July 1, 2017

July 2, 2016

GAAP net income from continuing operations

$

62,871

$

42,188

$

18,650

$

135,757

$

56,717

Stock-based compensation expense

5,041

4,868

4,101

18,075

11,371

Restructuring charges

1,131

378

—

6,109

—

Amortization of intangible assets

10,870

12,573

1,400

31,169

4,270

Gain on business combination

—

—

—

(3,426)

—

Non-recurring tax benefit

—

—

—

—

(1,221)

Acquisition-related costs

269

2,664

2,012

17,425

4,276

Interest expense on debt commitment

—

—

—

1,844

—

Gain on hedge of debt and debt commitment

—

—

—

(7,147)

—

Purchase accounting step-up

3,172

9,401

—

19,042

—

Non-GAAP net income

$

83,354

$

72,072

$

26,163

$

218,848

$

75,413

Non-GAAP net income per diluted share

$

3.36

$

2.91

$

1.07

$

8.85

$

3.10