COHR
$154.03
Coherent
$7.52
5.13%
Earnings Details
3rd Quarter June 2019
Tuesday, July 30, 2019 4:01:00 PM
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Summary

Coherent (COHR) Recent Earnings

Coherent (COHR) reported 3rd Quarter June 2019 earnings of $0.98 per share on revenue of $339.2 million. The consensus earnings estimate was $1.05 per share on revenue of $349.2 million. Revenue fell 29.7% compared to the same quarter a year ago.

Coherent Inc is a supplier of photonics-based solutions in a range of commercial and scientific research applications. It designs, manufactures, services and markets lasers and related accessories for a diverse group of customers.

Results
Reported Earnings
$0.98
Earnings Whisper
-
Consensus Estimate
$1.05
Reported Revenue
$339.2 Mil
Revenue Estimate
$349.2 Mil
Growth
Earnings Growth
Revenue Growth
Power Rating
Grade
Earnings Release

Coherent, Inc. Reports Third Fiscal Quarter Results

SANTA CLARA, Calif., July 30, 2019 /PRNewswire/ -- Coherent, Inc. (NASDAQ, COHR), one of the world's leading providers of lasers, laser-based technologies and laser-based system solutions in a broad range of scientific, commercial and industrial applications, today announced financial results for its third fiscal quarter ended June 29, 2019.

Coherent Logo (PRNewsFoto/Coherent, Inc.) (PRNewsFoto/Coherent, Inc.)

FINANCIAL HIGHLIGHTS


Three Months Ended


Nine Months Ended


Jun. 29, 2019


Mar. 30, 2019


Jun. 30, 2018


Jun. 29, 2019


Jun. 30, 2018

GAAP Results










(in millions, except per share data)










Net sales

$

339.2



$

372.9



$

482.3



$

1,095.2



$

1,441.0


Net income (loss)

$

(3.1)



$

20.8



$

67.0



$

53.2



$

174.2


Diluted EPS

$

(0.13)



$

0.85



$

2.69



$

2.19



$

6.98












Non-GAAP Results










(in millions, except per share data)












Net income

$

32.1



$

39.2



$

87.3



$

122.4



$

260.1


Diluted EPS

$

1.33



$

1.61



$

3.51



$

5.03



$

10.42


THIRD FISCAL QUARTER DETAILS

For the third quarter of fiscal 2019, Coherent announced net sales of $339.2 million and net loss, on a U.S. generally accepted accounting principles (GAAP) basis, of $(3.1) million, or $(0.13) per diluted share. In June 2019, the company internally announced its plans to relocate the manufacturing and engineering of its High Power Fiber Lasers products (HPFL) at its Hamburg, Germany facility to its Tampere, Finland location and exit a portion of its HPFL business sometime in fiscal 2020.  In conjunction with this announcement, the company recorded a restructuring charge, related to estimated severance and inventory write-offs, in the third quarter of fiscal 2019 of $20.9 million, which was the primary driver of the GAAP net loss in the quarter.  These results compare to net sales of $482.3 million and net income of $67.0 million, or $2.69 per diluted share, for the third quarter of fiscal 2018 and net sales of $372.9 million and net income of $20.8 million, or $0.85 per diluted share, for the second quarter of fiscal 2019.

Non-GAAP net income for the third quarter of fiscal 2019 was $32.1 million, or $1.33 per diluted share. Non-GAAP net income for the third quarter of fiscal 2018 was $87.3 million, or $3.51 per diluted share. Non-GAAP net income for the second quarter of fiscal 2019 was $39.2 million, or $1.61 per diluted share.  Reconciliations of GAAP to non-GAAP financial measures for the three months ended June 29, 2019, March 30, 2019 and June 30, 2018 and nine months ended June 29, 2019 and June 30, 2018 appear in the financial statements portion of this release under the heading "Reconciliation of GAAP to Non-GAAP net income."

"The June quarter highlighted contrasting outlooks for two major markets.  We received the first new order for the phase 2 buildout of OLED production capacity. This is a welcome development given our competitive positioning in a cycle that could extend as far as 2023. In materials processing, headwinds strengthened during the quarter due to a combination of weakening macro demand, continued pressure from tariffs and aggressive discounting in China from domestic and foreign competitors.  Reinvigorating demand and resolving tariffs requires government actions.  Addressing the competitive dynamic is based upon products and applications, which led us to put greater emphasis on welding and joining where invention and process IP is still being created," said John Ambroseo, President and CEO of Coherent.  "We are also taking steps to improve the overall efficiency of our business. We have launched two site consolidation projects that we expect to generate approximately $24 million in annual run rate savings upon completion," Ambroseo added.

CONFERENCE CALL REMINDER

Coherent 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 and a transcript of management's prepared remarks 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.

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


Three Months Ended


Nine Months Ended


Jun. 29, 2019


Mar. 30, 2019


Jun. 30, 2018


Jun. 29, 2019


Jun. 30, 2018











Net sales

$

339,170



$

372,860



$

482,342



$

1,095,176



$

1,441,025


Cost of sales(A)(B)(C)(D)(E)

241,167



242,143



274,006



717,106



800,236


Gross profit

98,003



130,717



208,336



378,070



640,789


Operating expenses:










Research & development(A)(B)(E)

30,692



30,461



34,303



90,095



100,478


Selling, general & administrative(A)(B)(E)(F)(H)

67,686



69,463



70,291



201,706



220,874


Other impairment charges(G)

 





611





766


  Amortization of intangible assets(C)

 

6,782



1,926



2,607



11,748



8,163


Total operating expenses

105,160



101,850



107,812



303,549



330,281


Income (loss) from operations

(7,157)



28,867



100,524



74,521



310,508


Other income (expense), net(B)

(4,386)



(4,252)



(7,625)



(17,789)



(25,635)


Income (loss) from continuing operations, before income taxes

(11,543)



24,615



92,899



56,732



284,873


Provision (benefit) for income taxes (H)

(8,444)



3,865



25,929



3,531



110,698


Net income (loss) from continuing operations

(3,099)



20,750



66,970



53,201



174,175


Income (loss) from discontinued operations, net of income taxes









(2)


Net income (loss)

$

(3,099)



$

20,750



$

66,970



$

53,201



$

174,173












Net income (loss) per share:










Basic earnings per share

$

(0.13)



$

0.86



$

2.72



$

2.20



$

7.06


Diluted earnings per share

$

(0.13)



$

0.85



$

2.69



$

2.19



$

6.98












Shares used in computations:










Basic

24,054



24,232



24,658



24,185



24,684


Diluted

24,196



24,332



24,877



24,333



24,971




(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


Jun. 29, 2019


Mar. 30, 2019


Jun. 30, 2018


Jun. 29, 2019


Jun. 30, 2018

Cost of sales

$

1,231



$

1,172



$

1,168



$

3,640



$

3,174


Research & development

794



783



838



2,227



2,378


Selling, general & administrative

7,630



7,049



6,577



20,668



18,517


Impact on income (loss) from operations

$

9,655



$

9,004



$

8,583



$

26,535



$

24,069





For the fiscal quarters ended June 29, 2019, March 30, 2019 and June 30, 2018, the impact on net income (loss), net of tax was $8,243 ($0.34 per diluted share), $7,543 ($0.31 per diluted share) and $7,549 ($0.30 per diluted share), respectively. For the nine months ended June 29, 2019 and June 30, 2018, the impact on net income (loss), net of tax was $22,429 ($0.92 per diluted share) and $20,251 ($0.81 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


Jun. 29, 2019


Mar. 30, 2019


Jun. 30, 2018


Jun. 29, 2019


Jun. 30, 2018

Cost of sales

$

(19)



$

62



$

11



$

(52)



$

117


Research & development

(24)



118



46



(192)



533


Selling, general & administrative

87



1,155



414



(470)



2,643


Impact on income (loss) from operations

$

44



$

1,335



$

471



$

(714)



$

3,293





For the fiscal quarters ended June 29, 2019, March 30, 2019 and June 30, 2018, the impact on other income (expense), net from gains or losses on deferred compensation plan assets was income of $12, $1,250 and $416, respectively. For the nine months ended June 29, 2019 and June 30, 2018, the impact on other income (expense), net from gains or losses on deferred compensation plan assets was expense of $811 and income of $3,090, respectively.



(C)

Amortization of intangibles is included in cost of sales and operating expenses as summarized below:



Amortization of intangibles

Three Months Ended


Nine Months Ended


Jun. 29, 2019


Mar. 30, 2019


Jun. 30, 2018


Jun. 29, 2019


Jun. 30, 2018

Cost of sales

$

11,844



$

12,106



$

12,602



$

35,977



$

37,475


Amortization of intangible assets

6,782



1,926



2,607



11,748



8,163


Impact on income (loss)  from operations

$

18,626



$

14,032



$

15,209



$

47,725



$

45,638





For the fiscal quarters ended June 29, 2019, March 30, 2019 and June 30, 2018, the impact on net income (loss), net of tax was $13,278 ($0.55 per diluted share), $10,022 ($0.41 per diluted share), and $10,859 ($0.44 per diluted share), respectively. For the nine months ended June 29, 2019 and June 30, 2018, the impact on net income (loss), net of tax was $34,118 ($1.40 per diluted share) and $32,563 ($1.31 per diluted share), respectively.



(D)

For the fiscal quarter ended June 30, 2018, the impact of inventory and favorable lease step-up costs related to acquisitions was $392 ($281 net of tax ($0.01 per diluted share)). For the nine months ended June 29, 2019 and June 30, 2018, the impact of inventory and favorable lease step-up costs related to acquisitions was $456 ($353 net of tax ($0.01 per diluted share)) and $803 ($574 net of tax ($0.02 per diluted share)), respectively.



(E)

For the fiscal quarters ended June 29, 2019, March 30, 2019 and June 30, 2018, the impact of restructuring charges was $21,273 ($14,771 net of tax ($0.61 per diluted share)), $880 ($768 net of tax ($0.03 per diluted share)), and $1,192 ($870 net of tax ($0.04 per diluted share)), respectively. For the nine months ended June 29, 2019 and June 30, 2018, the impact of restructuring charges was $22,629 ($15,890 net of tax ($0.65 per diluted share)) and $3,078 ($2,275 net of tax ($0.09 per diluted share)),  respectively.



(F)

For the fiscal quarter and nine months ended June 30, 2018, the impact of costs related to acquisitions included $129 ($129 net of tax ($0.01 per diluted share)) and $529 ($529 net of tax ($0.02 per diluted share)), respectively.



(G)

For the fiscal quarter and nine months ended June 30, 2018, other impairment charges was a charge of $611 ($611 net of tax ($0.02 per diluted share) and $766 ($766 net of tax ($0.03 per diluted share)), respectively. For the fiscal quarter and nine months ended June 29, 2019, selling, general & administrative expense includes an asset recovery of $1,337 ($1,083 net of tax ($0.04 per diluted share)).



(H)

The fiscal quarters ended June 29, 2019, March 30, 2019 and June 30, 2018 included a charge of $4 ($0.00 per diluted share), a charge of $123 ($0.01 per diluted share), and a benefit of $4 ($0.00 per diluted share) of excess tax charges (benefits) for employee stock-based compensation, respectively. The nine months ended June 29, 2019 and June 30, 2018 included a benefit of $2,471 ($0.10 per diluted share) and $12,754 ($0.51 per diluted share) of excess tax benefits for employee stock-based compensation, respectively. The nine months ended June 30, 2018 included $41,745 ($1.67 per diluted share) of non-recurring tax expense due to the U.S. Tax Cuts and Jobs Act transition tax and deferred tax remeasurement.


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


Jun. 29, 2019


Sep. 29, 2018

ASSETS




Current assets:




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

$

319,398



$

311,473


Accounts receivable, net

269,057



355,208


Inventories

469,486



486,741


Prepaid expenses and other assets

87,372



85,080


Total current assets

1,145,313



1,238,502


Property and equipment, net

323,974



311,793


Other assets

667,371



709,674


Total assets

$

2,136,658



$

2,259,969






LIABILITIES AND STOCKHOLDERS' EQUITY




Current liabilities:




Short-term borrowings

$

45,283



$

5,072


Accounts payable

62,954



70,292


Other current liabilities

180,277



297,474


Total current liabilities

288,514



372,838


Other long-term liabilities

546,933



572,667


Total stockholders' equity

1,301,211



1,314,464


Total liabilities and stockholders' equity

$

2,136,658



$

2,259,969


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


Three Months Ended


Nine Months Ended


Jun. 29, 2019


Mar. 30, 2019


Jun. 30, 2018


Jun. 29, 2019


Jun. 30, 2018

GAAP net income from continuing operations

$

(3,099)



$

20,750



$

66,970



$

53,201



$

174,175


Stock-based compensation expense

8,243



7,543



7,549



22,429



20,251


Amortization of intangible assets

13,278



10,022



10,859



34,118



32,563


Restructuring charges

14,771



768



870



15,890



2,275


Non-recurring tax expense









41,745


Tax charge (benefit) from stock-based compensation expense

4



123



(4)



(2,471)



(12,754)


Other impairment/asset charges (recoveries)

(1,083)





611



(1,083)



766


Acquisition-related costs





129





529


Purchase accounting step-up





281



353



574


Non-GAAP net income

$

32,114



$

39,206



$

87,265



$

122,437



$

260,124


Non-GAAP net income per diluted share

$

1.33



$

1.61



$

3.51



$

5.03



$

10.42


RISKS AND UNCERTAINTIES

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 company's plans with respect to its High Power Fiber Lasers business in Hamburg, Germany and Tampere, Finland, the company's commentary regarding a possible OLED production cycle extending as far as 2023 and its competitive positioning in that cycle, the requirement of government actions to reinvigorate demand and resolve tariffs in materials processing, steps the company has taken to improve the efficiency of its business, and the company's anticipated run rate savings of approximately $24 million in connection with two site consolidation projects. 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. Coherent and its business, including the aforementioned forward-looking statements, are subject to risks and uncertainties, including, but not limited to, risks associated with growth in demand for our products, customer acceptance and adoption of our products, the worldwide demand for flat panel displays and adoption of OLED for mobile displays, the pricing and availability of OLED displays, the demand for and use of our products in commercial applications, our ability to generate sufficient cash to fund capital spending or debt repayment, our successful implementation of our customer design wins, our and our customers' exposure to risks associated with worldwide economic conditions, in particular in China and the Eurozone, our customers' ability to cancel long-term purchase orders, the ability of our customers to forecast their own end markets, our ability to accurately forecast future periods, 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 products, worldwide government economic policies, including trade relations between the United States and China, our ability to integrate the business of Rofin and other acquisitions successfully, manage our expanded operations and achieve anticipated synergies, our ability to successfully transfer the manufacturing of our High Power Fiber Lasers and related business and operations between facilities, our ability to successfully manage our planned site consolidation projects and achieve anticipated savings, and other risks identified in Coherent's SEC filings. Readers are encouraged to refer to the risk disclosures and critical accounting policies described in Coherent's Forms 10-K, 10-Q and 8-K, including the risks identified in today's financial press release, as applicable and as filed from time-to-time.

Founded in 1966, Coherent, Inc. is one of the world's leading providers of lasers, laser-based technologies and laser-based system solutions in a broad range of scientific, commercial and industrial customers. Our common stock is listed on the Nasdaq Global Select Market and is part of the Russell 1000 and Standard & Poor's MidCap 400 Index. For more information about Coherent, visit the company's website at www.coherent.com for product and financial updates.

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SOURCE Coherent, Inc.