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

SANTA CLARA, Calif., Nov. 7, 2017 /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 fourth fiscal quarter and fiscal year ended September 30, 2017.

FINANCIAL HIGHLIGHTS



Three Months Ended


Year Ended


Sep. 30, 2017


July 1, 2017


Oct. 1, 2016


Sep. 30, 2017


Oct. 1, 2016

GAAP Results










(in millions except per share data)









Net sales

$

490.3



$

464.1



$

248.5



$

1,723.3



$

857.4


Net income

$

73.8



$

61.1



$

30.8



$

207.1



$

87.5


Diluted EPS

$

2.96



$

2.46



$

1.25



$

8.36



$

3.58












Non-GAAP Results










(in millions except per share data)









Net income

$

92.5



$

83.4



$

40.5



$

311.4



$

115.9


Diluted EPS

$

3.72



$

3.36



$

1.65



$

12.57



$

4.75


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

FOURTH FISCAL QUARTER AND FISCAL YEAR DETAILS

For the fourth fiscal quarter ended September 30, 2017, Coherent announced net sales of $490.3 million and net income, on a U.S. generally accepted accounting principles (GAAP) basis, of $73.8 million, or $2.96 per diluted share.  These results compare to net sales of $248.5 million and net income of $30.8 million, or $1.25 per diluted share, for the fourth quarter of fiscal 2016.

Non-GAAP net income for the fourth quarter of fiscal 2017 was $92.5 million, or $3.72 per diluted share.  Non-GAAP net income for the fourth quarter of fiscal 2016 was $40.5 million, or $1.65 per diluted share. Reconciliations of GAAP to non-GAAP financial measures for the three months ended September 30, 2017, July 1, 2017 and October 1, 2016, and for the fiscal years ended September 30, 2017 and October 1, 2016 appear in the financial statements portion of this release under the heading "Reconciliation of GAAP to Non-GAAP net income".

Net sales for the third quarter of fiscal 2017 were $464.1 million and net income, on a GAAP basis, was $61.1 million, or $2.46 per diluted share. Non-GAAP net income for the third quarter of fiscal 2017 was $83.4 million, or $3.36 per diluted share.

For the fiscal year ended September 30, 2017, Coherent posted net sales of $1,723.3 million and net income of $207.1 million, or $8.36 per diluted share, on a GAAP basis compared to the prior year net sales of $857.4 million and net income on a GAAP basis of $87.5 million, or $3.58 per diluted share.  For the fiscal year ended September 30, 2017, Coherent posted net income on a non-GAAP basis of $311.4 million, or $12.57 per diluted share, compared to the prior year net income on a non-GAAP basis of $115.9 million, or $4.75 per diluted share.

As previously announced, on November 7, 2016, Coherent completed its acquisition of Rofin-Sinar Technologies, Inc. ("Rofin"), one of the world's leading developers and manufacturers of high-performance industrial laser sources and laser-based solutions and components. As a result, Rofin's operating results were consolidated for the period from November 7, 2016 through December 31, 2016 in Coherent's first fiscal quarter results ended December 31, 2016, and a full quarter of Rofin's operating results in Coherent's second, third and fourth fiscal quarter results ended April 1, 2017, July 1, 2017 and September 30, 2017, respectively.

"Coherent capped a record setting year with a record setting fourth fiscal quarter.  Customer demand over the course of fiscal 2017 was outstanding and resulted in record annual orders of over $2.0 billion.  Microelectronics orders led the way due to sustained strength in OLED deployment and service, very high semi capex spending and a modest rebound in advanced packaging.  Materials processing orders grew dramatically based upon the Rofin acquisition and organic growth.  OEM instrumentation also put up impressive numbers as growth in the core diagnostic and therapeutic space was complemented by organic and acquisitive growth in the aerospace and defense market," said John Ambroseo, Coherent's President and Chief Executive Officer.  "These record results drove strong cash flow and as a result, we made a voluntary 75 million Euro prepayment in September on our debt.  As we enter fiscal 2018, we are very well positioned with backlog at an all-time high, synergies flowing in from the integration of Rofin, and very strong cash generation. The outlook remains positive across the company's four verticals and sets us up for another strong year from operations," Ambroseo added.

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 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


Year Ended



Sep. 30,
2017


July 1,
2017


Oct. 1,
2016


Sep. 30,
2017


Oct. 1,
2016












Net Sales

$

490,298


$

464,107


$

248,461


$

1,723,311


$

857,385


Cost of sales (A)(B)(E)(G)(H)


268,244



256,921



134,125



973,042



475,993


Gross profit


222,054



207,186



114,336



750,269



381,392


Operating expenses:











Research & development (A)(B)(H)


31,063



30,483



20,265



119,166



81,801


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


73,482



72,383



45,168



292,084



169,138


Gain on business combination (C)








(5,416)




Impairment of assets held for sale (D)


2,916







2,916




Amortization of intangible assets (E)


2,964



3,743



864



16,024



2,839


Total operating expenses


110,425



106,609



66,297



424,774



253,778


Income from operations


111,629



100,577



48,039



325,495



127,614


Other income (expense), net (B)(I)


(10,415)



(7,942)



(3,568)



(23,440)



(4,718)


Income from continuing operations, before income taxes


101,214



92,635



44,471



302,055



122,896


Provision for income taxes (J)


28,327



29,764



13,686



93,411



35,394


Net income from continuing operations


72,887



62,871



30,785



208,644



87,502


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


865



(1,754)





(1,522)




Net Income

$

73,752


$

61,117


$

30,785


$

207,122


$

87,502













Net income (loss) per share:











Basic from continuing operations


2.97



2.56



1.27



8.52



3.62


Basic from discontinued operations


0.03



(0.07)





(0.06)




Basic earnings per share

$

3.00


$

2.49


$

1.27


$

8.46


$

3.62


Diluted from continuing operations


2.93



2.53



1.25



8.42



3.58


Diluted from discontinued operations


0.03



(0.07)





(0.06)




Diluted earnings per share

$

2.96


$

2.46


$

1.25


$

8.36


$

3.58













Shares used in computations:











Basic


24,568



24,537



24,244



24,487



24,142


Diluted


24,883



24,823



24,582



24,777



24,415


 

(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


Year Ended



Sep. 30,
2017


July 1,
2017


Oct. 1,
2016


Sep. 30,
2017


Oct. 1,
2016

Cost of sales

$

923


$

880


$

682


$

3,541


$

2,558


Research & development


684



639



622



2,973



2,268


Selling, general & administrative


5,588



5,373



4,032



23,911



15,331


Impact on income from operations

$

7,195


$

6,892


$

5,336


$

30,425


$

20,157





For the quarters ended Sep. 30, 2017, July 1, 2017 and Oct. 1, 2016, the impact on net income, net of tax was $5,277 ($0.21 per diluted share), $5,041 ($0.20 per diluted share) and $3,890 ($0.16 per diluted share), respectively. For the years ended Sep. 30, 2017 and Oct. 1, 2016, the impact on net income, net of tax was $23,352 ($0.94 per diluted share) and $15,261 ($0.63 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



Sep. 30,
2017


July 1,
2017


Oct. 1,
2016


Sep. 30,
2017


Oct. 1,
2016

Cost of sales

$

43


$

53


$

43


$

166


$

78


Research & development


133



163



167



629



333


Selling, general & administrative


692



1,014



883



3,074



1,719


Impact on income from operations

$

868


$

1,230


$

1,093


$

3,869


$

2,130





For the quarters ended Sep. 30, 2017, July 1, 2017 and Oct. 1, 2016, the impact on other income net from gains or losses on deferred compensation plan assets was income of $883, $1,204 and $1,007, respectively. For the years ended Sep. 30, 2017 and Oct. 1, 2016, the impact on other income net from gain or losses on deferred compensation plan assets was income of $3,909 and $1,988, respectively. The net gain on deferred compensation assets excludes a death benefit of $1,301 in the quarter and year ended Sep. 30, 2017.



(C)   

For the year ended Sep. 30, 2017, the gain from business combination was $5,416 ($3,426 net of tax ($0.14 per diluted share)).



(D)   

For the quarter and year ended Sep. 30, 2017, the impairment of net assets held for sale was $2,916 ($1,885 net of tax ($0.08 per diluted share)).



(E)   

For the quarters ended Sep. 30, 2017, July 1, 2017 and Oct. 1, 2016, the impact of amortization of intangible expense was $16,253 ($11,546 net of tax ($0.46 per diluted share)), $15,452 ($10,870 net of tax ($0.44 per diluted share)) and $2,249 ($1,554 net of tax ($0.06 per diluted share)), respectively. For the years ended Sep. 30, 2017 and Oct. 1, 2016, the impact of amortization of intangible expense was $60,556 ($42,715 net of tax ($1.72 per diluted share)) and $8,450 ($5,824 net of tax ($0.24 per diluted share)), respectively.



(F)   

The quarters ended July 1, 2017 and Oct. 1, 2016 included $426 ($269 net of tax ($0.01 per diluted share)) and $3,177 ($2,077 net of tax ($0.08 per diluted share)), respectively, of costs related to the acquisition of Rofin. The years ended Sep. 30, 2017 and Oct. 1, 2016 included $17,587 ($17,425 net of tax ($0.70 per diluted share)) and $9,811 ($6,353 net of tax ($0.26 per diluted share)), respectively, of costs related to the acquisition of Rofin.



(G)  

For the quarter ended July 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)). For the year ended Sep. 30, 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)).



(H)  

For the quarters ended Sep. 30, 2017 and July 1, 2017, the impact of restructuring charges was $3,201 ($2,273 net of tax ($0.09 per diluted share)) and $1,500 ($1,131 net of tax ($0.05 per diluted share)), respectively. For the year ended Sep. 30, 2017, the impact of restructuring charges was $12,320 ($8,382 net of tax ($0.34 per diluted share)).



(I)     

For the quarter ended Oct.1, 2016, the loss on our hedge of the debt commitment was $2,234 ($1,413 net of tax ($0.06 per diluted share)). For the years ended Sep. 30, 2017 and Oct. 1, 2016, the gain (loss) on our hedge of the debt commitment and issuance of debt was a gain of $11,298 ($7,147 net of tax ($0.29 per diluted share)) and a loss of $2,234 ($1,413 net of tax ($0.06 per diluted share)), respectively. For the quarter ended Oct. 1, 2016, interest expense on the debt commitment was $1,089 ($754 net of tax ($0.03 per diluted share)). For the years ended Sep. 30, 2017 and Oct. 1, 2016, interest expense on the debt commitment was $2,665 ($1,844 net of tax ($0.07 per diluted share)) and $1,089 ($754 net of tax ($0.03 per diluted share)), respectively.



(J)    

The quarter and year ended Sep. 30, 2017 included a $1,358 ($0.05 per diluted share) non-recurring tax benefit from the closure of audits. The year ended Oct. 1, 2016 included a $1,221 ($0.05 per diluted share), non-recurring tax benefit from the renewal of the R&D tax credit for fiscal 2015.

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



Sep. 30,
2017


Oct. 1,
2016

ASSETS





Current assets:





Cash, cash equivalents and short-term investments

$

476,673


$

399,953


Accounts receivable, net


305,668



165,715


Inventories


414,807



212,898


Assets held for sale


44,248




Prepaid expenses and other assets


70,268



37,073


    Total current assets


1,311,664



815,639


Property and equipment, net


278,850



127,443


Other assets


747,286



218,066


    Total assets

$

2,337,800


$

1,161,148







LIABILITIES AND STOCKHOLDERS' EQUITY





Current liabilities:





Short-term borrowings

$

5,078


$

20,000


Accounts payable


75,860



45,182


Other current liabilities


338,207



136,312


    Total current liabilities


419,145



201,494


Other long-term liabilities


755,391



48,826


Total stockholders' equity


1,163,264



910,828


    Total liabilities and stockholders' equity

$

2,337,800


$

1,161,148


Certain reclassifications have been made to prior year amounts to conform to the current year's presentation.

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



Three Months Ended


Year Ended



Sep. 30,
2017


July 1,
2017


Oct. 1,
2016


Sep. 30,
2017


Oct. 1,
2016

GAAP net income from continuing operations

$

72,887


$

62,871


$

30,785


$

208,644


$

87,502


Stock-based compensation expense


5,277



5,041



3,890



23,352



15,261


Amortization of intangible assets


11,546



10,870



1,554



42,715



5,824


Restructuring charges


2,273



1,131





8,382




Non-recurring tax benefit


(1,358)







(1,358)



(1,221)


Impairment of assets held for sale


1,885







1,885




Acquisition-related costs




269



2,077



17,425



6,353


Interest expense on debt commitment

 






754



1,844



754


(Gain) loss on hedge of debt and debt commitment

 






1,413



(7,147)



1,413


Gain on business combination








(3,426)




Purchase accounting step-up




3,172





19,042




Non-GAAP net income

$

92,510


$

83,354


$

40,473


$

311,358


$

115,886













Non-GAAP net income per diluted share

$

3.72


$

3.36


$

1.65


$

12.57


$

4.75


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 Company's financial and business position, timing of conversion of backlog, expected synergies from the integration of Rofin-Sinar Technologies, Inc., outlook for the Company's business in the Company's vertical markets and the expected strong year from operations. 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, customer acceptance of our products, the worldwide demand for flat panel displays, the demand for and use of our products in commercial applications, our ability to general 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, 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, 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 convert backlog into revenue, our ability to have our customers qualify our product offerings, worldwide government economic policies, our ability to integrate the business of Rofin successfully, manage our expanded operations and achieve anticipated synergies, 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 one of the world's leading providers of lasers, laser-based technologies and laser-based system solutions for 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.

For further information: Kevin Palatnik, EVP & Chief Financial Officer, +1 (408) 764 -4110, Kevin.Palatnik@coherent.com

Please Read Before Continuing

Risk factors: Except for the historical information contained here, many of the matters discussed in this Web site are forward-looking statements, based on expectations at the time they were made, that involve risks and uncertainties that could cause our results to differ materially from those expressed or implied by such statements. These risks are detailed in the “Factors That May Affect Future Results” section of our latest 10-K or 10-Q filing. Coherent assumes no obligation to update these forward-looking statements.


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