II-VI Incorporated Reports Fiscal Second Quarter Earnings
II-VI Incorporated Reports Fiscal Second Quarter Earnings
PITTSBURGH, Jan. 22, 2013 (GLOBE NEWSWIRE) -- II-VI Incorporated (Nasdaq:IIVI)
today reported results for its second fiscal quarter ended December 31, 2012.
During the second quarter, the Company completed three acquisitions:
November 1, 2012 M Cubed Technologies, Inc. (M Cubed)
December 3, 2012 The thin-film filter business and interleaver product line
of Oclaro, Inc. (the Oclaro Business and Product Line)
December 21, 2012 LightWorks Optics, Inc. (LightWorks)
M Cubed joined the Advanced Products Group segment, the Oclaro Business and
Product Line became a part of Photop Technologies, Inc. in the Near-Infrared
Optics segment, and LightWorks joined the Military & Materials segment.
Bookings for the second quarter increased 9% to $127,134,000 compared to
$116,883,000 in the second quarter of last fiscal year. Bookings for the six
months ended December 31, 2012 decreased 2% to $241,527,000 compared to
$247,130,000 for the same period last fiscal year. Bookings are defined as
customer orders received that are expected to be converted into revenues
during the next 12 months.
Revenues for the second quarter decreased 1% to $125,889,000 from $126,757,000
in the second quarter of last fiscal year. Revenues for the six months ended
December 31, 2012 decreased 3% to $258,181,000 from $265,130,000 for the same
period last fiscal year.
Net earnings attributable to II-VI Incorporated for the quarter were
$12,200,000, or $0.19 per share-diluted, compared to net earnings of
$13,287,000, or $0.21 per share-diluted, in the second quarter of last fiscal
year. For the six months ended December 31, 2012, net earnings attributable to
II-VI Incorporated were $24,918,000, or $0.39 per share-diluted, compared to
net earnings of $31,866,000, or $0.50 per share-diluted, for the same period
last fiscal year.
Results include the following:
* Transaction expenses related to our three recent acquisitions of $0.8
million, or $0.01 per share-diluted, for the three months ended December
31, 2012 and $1.1 million or $0.02 per share-diluted, for the six months
ended December 31, 2012. These expenses are included in selling, general
and administrative expenses in the attached condensed consolidated
statements of earnings.
* After-tax income of $3.7 million, or $0.06 per share-diluted, from a
settlement with a former contract manufacturer for damages incurred in the
October 2011 flooding in Thailand for the three and six months ended
December 31, 2012. The majority of this settlement amount is included in
other expense (income), net in the attached condensed consolidated
statements of earnings.
* Write-downs of tellurium and selenium inventory of $0.8 million, or $0.01
per share-diluted, and $1.3 million, or $0.02 per share-diluted, for the
three and six months ended December 31, 2012, respectively. These amounts
compare to write-downs of tellurium and selenium inventory of $2.2
million, or $0.03 per share-diluted, and $2.5 million, or $0.04 per
share-diluted, for the three and six months ended December 31, 2011,
respectively. These write-downs, taken by Pacific Rare Specialty Metals &
Chemicals, Inc. (PRM), a business in the Military & Materials segment,
were necessitated by declines in global raw material index pricing. This
expense is included in cost of goods sold in the attached condensed
consolidated statements of earnings.
Francis J. Kramer, president and chief executive officer said, "Revenues from
our recent acquisitions during the quarter helped to offset demand weakness
that we experienced during the last few weeks of the quarter. In the Military
& Materials segment, PRM continues to adjust to lower index pricing and
reduced demand for tellurium and selenium while experiencing start-up
challenges with its new product line. In the Advanced Products Group, the
addition of M Cubed bolstered revenues but those gains were offset by
acquisition costs and lower demand for commercial products at Marlow
Industries. Our tax rate increased due to the effect of changes in the mix of
earnings sourced to higher tax jurisdictions and specific items that were
required to be reported in the current quarter."
Kramer continued, "During the quarter we utilized our cash reserves and
borrowing capacity to complete the acquisitions of three businesses whose
technologies and expertise we are integrating into the II-VI family of
companies. With these acquisitions we acquired over $36 million in
backlog. Our financial and business fundamentals remain solid. Cash flow from
operations year to date has increased 42% from the year-ago period."
As discussed below under "Use of Non-GAAP Financial Measures," the Company is
presenting non-GAAP financial measures in this release. Investors should
consider adjusted measures in addition to, and not as a substitute for, or
superior to, financial performance measures prepared in accordance with
generally accepted accounting principles ("GAAP"). Please refer to the
attached reconciliation between GAAP and adjusted financial measures prepared
in accordance with GAAP and the non-GAAP adjusted financial measures.
Segment Information
The following segment information includes segment earnings (defined as
earnings before income taxes, interest expense and other expense or income,
net). Management believes segment earnings are a useful performance measure
because they reflect the results of segment performance over which management
has direct control. Effective July 1, 2012, the Company changed its segment
reporting structure to include VLOC in the Company's Military & Materials
segment. VLOC was previously reported in the Company's Near-Infrared Optics
segment. All segment information presented in this earnings release has been
retrospectively adjusted to include VLOC in the Military & Materials segment.
Three Months Ended Six Months Ended
December 31, December 31,
% %
Increase Increase
2012 2011 (Decrease) 2012 2011 (Decrease)
Bookings:
Infrared Optics $ 44,575 $ 43,773 2% $ 92,101 $ 94,871 (3)%
Near-Infrared 35,665 29,955 19% 70,783 61,780 15%
Optics
Military & 27,475 31,527 (13)% 45,215 57,877 (22)%
Materials
Advanced Products 19,419 11,628 67% 33,428 32,602 3%
Group
Total Bookings $ 127,134 $ 116,883 9% $ $ 247,130 (2)%
241,527
Revenues:
Infrared Optics $ 45,410 $ 46,762 (3)% $ 96,966 $ 97,558 (1)%
Near-Infrared 36,996 32,525 14% 77,642 63,514 22%
Optics
Military & 21,360 30,646 (30)% 45,295 61,426 (26)%
Materials
Advanced Products 22,123 16,824 31% 38,278 42,632 (10)%
Group
Total Revenues $ 125,889 $ 126,757 (1)% $ $ 265,130 (3)%
258,181
Segment Earnings
(Loss):
Infrared Optics $ 10,532 $ 11,470 (8)% $ 22,374 $ 23,827 (6)%
Near-Infrared 5,141 2,386 115% 12,863 4,946 160%
Optics
Military & (1,075) (1,088) 1% (3,223) 1,022 (415)%
Materials
Advanced Products 337 1,470 (77)% (485) 7,478 (106)%
Group
Total Segment $ 14,935 $ 14,238 5% $ 31,529 $ 37,273 (15)%
Earnings
Other Selected Financial Information
The following other selected financial information includes earnings before
interest, income taxes, depreciation and amortization (EBITDA). The Company
believes EBITDA is a useful performance measure because it reflects operating
profitability before certain non-operating expenses and non-cash charges.
Three Months Ended Six Months Ended
December 31, December 31,
2012 2011 2012 2011
EBITDA $ 29,649 $ 24,266 $ 56,075 $ 57,241
Cash paid for capital expenditures $ 7,248 $ 10,356 $ 13,177 $ 23,068
Net borrowings (repayments) on $ 107,000 $ (5,000) $ 112,000 $ 705
indebtedness
Share-based compensation expense, $ 3,074 $ 2,618 $ 6,534 $ 7,176
pre-tax
Cash paid for shares repurchased
through the Company's share repurchase $ 4,941 $ -- $ 10,840 $ --
program
Shares repurchased through the 300,000 -- 617,042 --
Company's share repurchase program
Outlook
For the third fiscal quarter ending March 31, 2013, the Company currently
forecasts revenues to range from $145 million to $150 million and earnings per
share to range from $0.24 to $0.28. Comparable results for the quarter ended
March 31, 2012 were revenues of $132.6 million and earnings per share of
$0.22. For the fiscal year ending June 30, 2013, the Company expects revenues
to range from $560 million to $570 million and earnings per share to range
from $0.91 to $0.99. Comparable results for the year ended June 30, 2012 were
revenues of $534.6 million and earnings per share of $0.94. As discussed in
more detail below, actual results may differ from these forecasts due to
various factors including, but not limited to, changes in product demand,
competition and general economic conditions.
Webcast Information
The Company will host a conference call at 9:00 a.m. Eastern Time on Tuesday,
January 22, 2013 to discuss these results. The conference call will be
broadcast live over the internet and can be accessed by all interested parties
from the Company's web site at www.ii-vi.com as well as at
http://tinyurl.com/ab46mr3. A replay of the webcast will be available for 2
weeks following the call.
Use of Non-GAAP Financial Measures
The Company has disclosed adjusted financial measurements in this press
release that present financial information that is not in accordance with
GAAP. These measurements are not a substitute for GAAP measurements, although
the Company's management does use these measurements as an aid in monitoring
the Company's on-going financial performance. The adjusted Non-GAAP net
earnings attributable to II-VI Incorporated and adjusted Non-GAAP earnings per
share measure the earnings of the Company excluding unusual items that are
considered by management to be outside of the normal on-going operations of
the Company. There are limitations with the use of non-GAAP financial
measures, including that non-GAAP financial measures used by the Company may
be calculated differently from, and therefore may not be comparable to,
similarly titled measures used by other companies, that there can be no
assurance that excluded items in the non-GAAP financial measures will not
occur in the future and that there could be cash costs associated with items
excluded in the non-GAAP financial measures. The Company compensates for these
limitations by using these Non-GAAP financial measures as supplements to GAAP
financial measures and by providing the reconciliations of the Non-GAAP
financial measures to their most comparable GAAP financial measures. Investors
should consider adjusted measures in addition to, and not as a substitute for,
or superior to, financial performance measures prepared in accordance with
GAAP.
About II-VI Incorporated
II-VI Incorporated, a global leader in engineered materials and optoelectronic
components, is a vertically-integrated manufacturing company that creates and
markets products for diversified markets including industrial manufacturing,
military and aerospace, high-power electronics, optical communications, and
thermoelectronics applications. Headquartered in Saxonburg, Pennsylvania,
with manufacturing, sales, and distribution facilities worldwide, the Company
produces numerous crystalline compounds including zinc selenide for infrared
laser optics, silicon carbide for high-power electronic and microwave
applications, and bismuth telluride for thermoelectric coolers.
In the Company's infrared optics business, II-VI Infrared manufactures optical
and opto-electronic components for industrial laser and thermal imaging
systems and HIGHYAG Lasertechnologie GmbH (HIGHYAG) manufactures
fiber-delivered beam delivery systems and processing tools for industrial
lasers.
In the Company's near-infrared optics business, Photop Technologies, Inc.
(Photop) manufactures crystal materials, optics, microchip lasers and
opto-electronic modules for use in optical communication networks and other
diverse consumer and commercial applications. Photop Aegis, Inc. (Aegis)
manufactures tunable optical devices required for high speed optical networks
that provide the bandwidth expansion necessary for increasing internet
traffic. Through its Australian subsidiary, Photop AOFR Pty Limited, Aegis
also manufactures fused fiber components, including those required for fiber
lasers for material processing applications, as well as optical couplers used
primarily in the optical communication industry.
In the Company's military & materials business, Exotic Electro-Optics (EEO)
manufactures infrared products for military applications, Pacific Rare
Specialty Metals & Chemicals (PRM) produces and refines selenium and tellurium
materials and Max Levy Autograph, Inc. (MLA) manufactures micro-fine
conductive mesh patterns for optical, mechanical and ceramic components for
applications such as circuitry, metrology standards, targeting calibration and
suppression of electro-magnetic interference. VLOC manufactures near-infrared
and visible light products for industrial, scientific, military, medical
instruments and laser gain materials and products for solid-state YAG and YLF
lasers. LightWorks Optics, Inc. (LightWorks) manufactures precision optical
systems and components for defense, aerospace, industrial and life science
applications.
In the Company's advanced products group, the Wide Bandgap Materials (WBG)
group manufactures and markets single crystal silicon carbide substrates for
use in the solid-state lighting, wireless infrastructure, RF electronics and
power switching industries. Marlow Industries, Inc. (Marlow) designs and
manufactures thermoelectric cooling and power generation solutions for use in
defense, space, photonics, telecommunications, medical, consumer and
industrial markets. Worldwide Materials Group (WMG) provides expertise in
materials development, process development and manufacturing scale up. M Cubed
Technologies, Inc. (M Cubed) develops and markets advanced composite materials
serving the semiconductor, display, industrial and defense markets.
Forward-looking Statements
This press release contains forward-looking statements based on certain
assumptions and contingencies that involve risks and uncertainties. The
forward-looking statements are made pursuant to the safe harbor provisions of
the Private Securities Litigation Reform Act of 1995 and relate to the
Company's performance on a going-forward basis. The forward-looking statements
in this press release involve risks and uncertainties, which could cause
actual results, performance or trends to differ materially from those
expressed in the forward-looking statements herein or in previous
disclosures. The Company believes that all forward-looking statements made by
it have a reasonable basis, but there can be no assurance that management's
expectations, beliefs or projections as expressed in the forward-looking
statements will actually occur or prove to be correct. In addition to general
industry and global economic conditions, factors that could cause actual
results to differ materially from those discussed in the forward-looking
statements in this press release include, but are not limited to: (i) the
failure of any one or more of the assumptions stated above to prove to be
correct; (ii) the risks relating to forward-looking statements and other "Risk
Factors" discussed in the Company's Annual Report on Form 10-K for the fiscal
year ended June 30, 2012; (iii) the purchasing patterns from customers and
end-users; (iv) the timely release of new products, and acceptance of such new
products by the market; (v) the introduction of new products by competitors
and other competitive responses; and/or (vi) the Company's ability to devise
and execute strategies to respond to market conditions. The Company disclaims
any obligation to update information contained in these forward-looking
statements whether as a result of new information, future events or
developments, or otherwise.
II-VI Incorporated and Subsidiaries
Condensed Consolidated Statements of
Earnings (Unaudited)
($000 except per share data)
Three Months Ended Six Months Ended
December 31, December 31,
2012 2011 2012 2011
Revenues
Net sales:
Domestic $ 51,479 $ 50,156 $ 103,762 $ 105,725
International 74,410 76,601 154,419 159,405
Total Revenues 125,889 126,757 258,181 265,130
Costs, Expenses & Other Expense
(Income)
Cost of goods sold 79,019 83,289 162,476 166,652
Internal research and development 5,626 5,016 11,211 10,179
Selling, general and administrative 26,309 24,214 52,965 51,026
Interest expense 223 77 259 136
Other expense (income), net (4,551) (1,506) (5,312) (3,136)
Total Costs, Expenses, and Other 106,626 111,090 221,599 224,857
Expense (Income)
Earnings Before Income Taxes 19,263 15,667 36,582 40,273
Income Taxes 6,796 2,147 10,983 8,039
Net Earnings 12,467 13,520 25,599 32,234
Less: Net Earnings Attributable to 267 233 681 368
Noncontrolling Interests
Net Earnings Attributable to II-VI $ 12,200 $ 13,287 $ 24,918 $ 31,866
Incorporated
Net Earnings Attributable to II-VI
Incorporated Diluted Earnings Per $ 0.19 $ 0.21 $ 0.39 $ 0.50
Share:
Net Earnings Attributable to II-VI $ 0.19 $ 0.21 $ 0.40 $ 0.51
Incorporated Basic Earnings Per Share:
Average Shares Outstanding - Diluted 64,022 64,194 64,110 64,166
Average Shares Outstanding - Basic 62,580 62,720 62,683 62,709
II-VI Incorporated and Subsidiaries
Condensed Consolidated Balance Sheets (Unaudited)
($000)
December 31, June 30,
2012 2012
Assets
Current Assets
Cash and cash equivalents $ 162,810 $ 134,944
Accounts receivable 93,758 104,761
Inventories 151,942 137,607
Deferred income taxes 10,861 10,796
Prepaid and refundable income taxes 4,936 8,488
Prepaid and other current assets 12,613 13,777
Total Current Assets 436,920 410,373
Property, plant & equipment, net 184,025 153,918
Goodwill 123,075 80,748
Other intangible assets, net 76,094 44,014
Investment 11,254 10,661
Deferred income taxes 6,519 145
Other assets 8,973 6,627
Total Assets $ 846,860 $ 706,486
Liabilities and Shareholders' Equity
Current Liabilities
Accounts payable $ 29,930 $ 29,420
Accruals and other current liabilities 52,530 54,308
Total Current Liabilities 82,460 83,728
Long-term debt 124,482 12,769
Deferred income taxes 4,632 5,883
Other liabilities 17,827 12,720
Total Liabilities 229,401 115,100
Total II-VI Incorporated Shareholders' Equity 615,782 589,957
Noncontrolling Interests 1,677 1,429
Total Shareholders' Equity 617,459 591,386
Total Liabilities and Shareholders' Equity $ 846,860 $ 706,486
II-VI Incorporated and Subsidiaries
Condensed Consolidated Statements of Cash Flows
(Unaudited)
($000) Six Months Ended
December 31,
2012 2011
Net cash provided by operating activities $ 60,977 $ 42,913
Cash Flows from Investing Activities
Additions to property, plant and equipment (13,177) (23,068)
Purchases of businesses, net of cash acquired (126,397) (46,141)
Proceeds received on contractual settlement from Thailand 2,436 --
flood
Proceeds from collection of note receivable 1,395 --
Other investing activities 70 24
Net cash used in investing activities (135,673) (69,185)
Cash Flows from Financing Activities
Proceeds from long-term borrowings 113,000 7,000
Payments on long-term borrowings (1,000) (6,295)
Payment of debt issuance costs (560) --
Purchases of treasury stock (10,840) --
Distributions of noncontrolling interests (217) --
Minimum tax withholding requirements (137) --
Proceeds from exercises of stock options 1,625 452
Excess tax benefits from share-based compensation expense 387 122
Net cash provided by financing activities 102,258 1,279
Effect of exchange rate changes on cash and cash 304 (634)
equivalents
Net increase (decrease) in cash and cash equivalents 27,866 (25,627)
Cash and Cash Equivalents at Beginning of Period 134,944 149,460
Cash and Cash Equivalents at End of Period $ 162,810 $ 123,833
II-VI Incorporated and Subsidiaries
Reconciliation of Selected Non-GAAP Financial Measurements
($000 except per share amounts)
Reconciliation of Reported Net Earnings
to Non-GAAP Net Earnings
(Unaudited)
Three Months Ended Six Months Ended
December 31, December 31,
2012 2011 2012 2011
Reported Net Earnings Attributable to $ 12,200 $ 13,287 $ 24,918 $ 31,866
II-VI Incorporated
Add back:
Write-downs of tellurium and selenium 824 2,300 1,324 2,607
inventory
Income tax impact on unusual items (41) (116) (66) (131)
Adjusted Non-GAAP Net Earnings $ 12,983 $ 15,471 $ 26,176 $ 34,342
Attributable to II-VI Incorporated
Per share data:
Net Earnings Attributable to II-VI
Incorporated:
Net Earnings Attributable to II-VI $ 0.19 $ 0.21 $ 0.39 $ 0.50
Incorporated Diluted Earnings Per Share:
Net Earnings Attributable to II-VI $ 0.19 $ 0.21 $ 0.40 $ 0.51
Incorporated Basic Earnings Per Share:
Per share, After-Tax Impact of
Write-Downs of Tellurium and Selenium
Inventory on:
Net Earnings Attributable to II-VI $ 0.01 $ 0.03 $ 0.02 $ 0.04
Incorporated Diluted Earnings Per Share:
Net Earnings Attributable to II-VI $ 0.01 $ 0.03 $ 0.02 $ 0.04
Incorporated Basic Earnings Per Share:
Adjusted Non-GAAP Net Earnings
Attributable to II-VI Incorporated:
Adjusted Non-GAAP Net Earnings Diluted $ 0.20 $ 0.24 $ 0.41 $ 0.54
Earnings Per Share:
Adjusted Non-GAAP Net Earnings Basic $ 0.21 $ 0.25 $ 0.42 $ 0.55
Earnings Per Share:
Below is a reconciliation of the Segment Earnings and EBITDA reported in this
press release to reported Net Earnings.
Reconciliation of Segment Three Months Ended Six Months Ended
Earnings and EBITDA to Net Earnings December 31, December 31,
2012 2011 2012 2011
Total Segment Earnings $ 14,935 $ 14,238 $ 31,529 $ 37,273
Interest expense 223 77 259 136
Other expense (income), net (4,551) (1,506) (5,312) (3,136)
Income taxes 6,796 2,147 10,983 8,039
Net earnings $ 12,467 $ 13,520 $ 25,599 $ 32,234
EBITDA $ 29,649 $ 24,266 $ 56,075 $ 57,241
Interest expense 223 77 259 136
Depreciation and amortization 10,163 8,522 19,234 16,832
Income taxes 6,796 2,147 10,983 8,039
Net earnings $ 12,467 $ 13,520 $ 25,599 $ 32,234
CONTACT: II-VI Incorporated
Craig A. Creaturo, Chief Financial Officer and Treasurer
(724) 352-4455
ccreaturo@ii-vi.com
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