IPG Photonics Reports Revenue Growth of 17% for Fourth Quarter and 19% for Full Year 2012 High-Power Lasers for Materials Processing Applications Drive Growth; Provides Positive Outlook for First Quarter of 2013 Business Wire OXFORD, Mass. -- February 15, 2013 IPG Photonics Corporation (NASDAQ: IPGP) today reported financial results for the fourth quarter and fiscal year ended December 31, 2012. Three Months Ended Twelve Months Ended December 31, December 31, (In millions, 2012 2011 % 2012 2011 % except per Change Change share data) Revenue $ 145.0 $ 123.5 17% $ 562.5 $ 474.5 19% Gross margin 51.8 % 53.8 % 54.2 % 54.2 % Operating $ 47.3 $ 46.1 3% $ 208.9 $ 175.5 19% income Operating 32.6 % 37.3 % 37.1 % 37.0 % margin Net income attributable to IPG $ 34.9 $ 31.1 12% $ 145.0 $ 117.8 23% Photonics Corporation Earnings per diluted $ 0.67 $ 0.64 5% $ 2.81 $ 2.41 17% share Management Comments “IPG ended a solid year of financial and operational performance with strong results for the fourth quarter,” said Dr. Valentin Gapontsev, IPG Photonics’ Chief Executive Officer. “Revenues for the quarter increased 17% over the prior year and net income increased by 12%, driven by high-power laser sales for materials processing applications. Looking at the full year, our 19% revenue growth and 23% net income growth demonstrates the wide and growing acceptance of IPG’s technology across a variety of applications.” “Materials Processing sales, which make up the majority of our business, grew 14% for the fourth quarter,” said Dr. Gapontsev. “High-power laser sales increased 10% from the prior year, driven by cutting and welding applications, primarily used by automotive, heavy industry and general manufacturing. On a geographic basis, we performed well across most regions, particularly in North America and Asia.” “In 2012, IPG spent approximately $68 million on capital expenditures to support manufacturing and new technology infrastructure, as well as expand capacity for the assembly of finished product,” Dr. Gapontsev said. Business Outlook and Financial Guidance “We are excited by IPG’s prospects for growth in 2013,” said Dr. Gapontsev. “We are pleased with the start of the year as order flow was very strong in January despite a book-to-bill that was less than one in Q4. We are making progress on increasing sales to current major OEMs and new applications. We believe that fiber laser technology continues to make market share gains over legacy laser technologies and non-laser technologies.” “While revenues in the first quarter have historically been lighter on a sequential basis due to seasonality, we expect to report sequential growth over Q4 2012, as well as year-over-year. The continued market penetration of our products give us confidence that IPG will grow in 2013 as we strengthen our technology and competitive lead in the laser market, expand our product portfolio and enter into new applications,” concluded Dr. Gapontsev. IPG Photonics expects revenue in the range of $145 million to $155 million for the first quarter of 2013. The Company anticipates earnings per diluted share in the range of $0.65 to $0.75 based on 52,116,000 diluted common shares, which includes 51,110,000 basic common shares outstanding and 1,006,000 potentially dilutive options at December 31, 2012. As discussed in more detail below, actual results may differ from this guidance due to various factors including, but not limited to, product demand, competition and general economic conditions. This guidance is subject to the risks outlined in the Company’s reports with the SEC, and assumes that exchange rates remain at present levels. Conference Call Reminder The Company will hold a conference call to review its financial results and business highlights today, February 15, 2013 at 10:00 a.m. ET. The conference call will be webcast live and can be accessed on the “Investors” section of the Company’s website at www.ipgphotonics.com. The conference call also can be accessed by dialing (877) 709-8155 or (201) 689-8881. Interested parties that are unable to listen to the live call may access an archived version of the webcast, which will be available for approximately one year on IPG’s website. About IPG Photonics Corporation IPG Photonics Corporation is the world leader in high-power fiber lasers and amplifiers. Founded in 1990, IPG pioneered the development and commercialization of optical fiber-based lasers for use in diverse applications, primarily materials processing. Fiber lasers have revolutionized the industry by delivering superior performance, reliability and usability at a lower total cost of ownership compared with conventional lasers, allowing end users to increase productivity and decrease operating costs. IPG has its headquarters in Oxford, Massachusetts, and has additional plants and offices throughout the world. For more information, please visit www.ipgphotonics.com. Safe Harbor Statement Information and statements provided by the Company and its employees, including statements in this press release, that relate to future plans, events or performance are forward-looking statements. These statements involve risks and uncertainties. Any statements in this press release that are not statements of historical fact are forward-looking statements, including, but not limited to, increasing sales to current major OEMs and new applications, making market share gains, sequential growth over Q4 2012, continued market penetration of IPG's products, continued growth in 2013, strengthening of IPG's technology and competitive lead, expanding the Company's product lead and entering into new applications, and guidance for the first quarter of 2013. Factors that could cause actual results to differ materially include risks and uncertainties, including risks associated with the strength or weakness of the business conditions in industries and geographic markets that the Company serves, particularly the effect of economic downturns; reduction in customer capital expenditures; potential order cancellations and push-outs and financial and credit market issues; the Company’s ability to penetrate new applications for fiber lasers and increase market share; the rate of acceptance and penetration of IPG’s products; effective management of growth; level of fixed costs from its vertical integration; intellectual property infringement claims and litigation; interruption in supply of key components, including from transportation disruptions from natural and man-made events; manufacturing risks; inventory write-downs; foreign currency fluctuations; competitive factors, including declining average selling prices; building and expanding field service and support operations; uncertainties pertaining to customer orders; demand for products and services; development of markets for the Company's products and services; and other risks identified in the Company's SEC filings. Readers are encouraged to refer to the risk factors described in the Company's Annual Report on Form 10-K (filed with the SEC on February 27, 2012) and its periodic reports filed with the SEC, as applicable. Actual results, events and performance may differ materially. Readers are cautioned not to rely on the forward-looking statements, which speak only as of the date hereof. The Company undertakes no obligation to update the forward-looking statements that may be made to reflect events or circumstances after the date hereof or to reflect the occurrence of unanticipated events. IPG PHOTONICS CORPORATION CONSOLIDATED STATEMENTS OF INCOME Three Months Ended December Twelve Months Ended 31, December 31, 2012 2011 2012 2011 (in thousands, except per share data) NET SALES $ 145,030 $ 123,524 $ 562,528 $ 474,482 COST OF SALES 69,856 57,100 257,801 217,227 GROSS PROFIT 75,174 66,424 304,727 257,255 OPERATING EXPENSES: Sales and 7,074 5,280 23,845 21,731 marketing Research and 9,270 6,580 31,401 25,422 development General and 9,937 9,943 39,231 37,442 administrative Loss (gain) on foreign 1,634 (1,449 ) 1,362 (2,862 ) exchange Total operating 27,915 20,354 95,839 81,733 expenses OPERATING 47,259 46,070 208,888 175,522 INCOME OTHER INCOME (EXPENSE), Net: Interest (expense) (222 ) (96 ) 319 (681 ) income, net Other income 989 208 8 (257 ) (expense), net Total other income 767 112 327 (938 ) (expense) INCOME BEFORE PROVISION FOR 48,026 46,182 209,215 174,584 INCOME TAXES PROVISION FOR (13,114 ) (14,327 ) (61,471 ) (53,575 ) INCOME TAXES NET INCOME 34,912 31,855 147,744 121,009 LESS: NET INCOME ATTRIBUTABLE TO NONCONTROLLING - 769 2,740 3,250 INTERESTS NET INCOME ATTRIBUTABLE TO IPG PHOTONICS CORPORATION $ 34,912 $ 31,086 $ 145,004 $ 117,759 NET INCOME ATTRIBUTABLE TO IPG PHOTONICS CORPORATION PER SHARE: Basic $ 0.68 $ 0.65 $ 2.87 $ 2.48 Diluted $ 0.67 $ 0.64 $ 2.81 $ 2.41 WEIGHTED AVERAGE SHARES OUTSTANDING: Basic 51,110 47,564 50,477 47,365 Diluted 52,116 48,685 51,536 48,685 IPG PHOTONICS CORPORATION SUPPLEMENTAL SCHEDULE OF STOCK-BASED COMPENSATION Three Months Ended Twelve Months Ended December 31, December 31, (In thousands) 2012 2011 2012 2011 Cost of sales $ 594 $ 428 $ 2,184 $ 1,731 Sales and marketing 225 297 1,052 1,503 Research and 351 247 1,327 1,036 development General and 1,037 896 4,002 3,778 administrative Total stock-based 2,207 1,868 8,565 8,048 compensation Tax benefit (691 ) (569 ) (2,629 ) (2,551 ) recognized Net stock-based $ 1,516 $ 1,299 $ 5,936 $ 5,497 compensation IPG PHOTONICS CORPORATION SUPPLEMENTAL SCHEDULE OF ACQUISITION RELATED COSTS IN COST OF SALES Three Months Ended Twelve Months Ended December 31, December 31, (In thousands) 2012 2011 2012 2011 Cost of sales Step-up of $ 460 $ - $ 460 $ - inventory (1) Amortization of intangible 204 362 1,228 1,341 assets (2) Total acquisition $ 664 $ 362 $ 1,688 $ 1,341 related costs (1) Amount relates to Microsystems step-up adjustment on inventory sold during the period (2) Amount relates to intangible amortization expense during periods presented including amortization of acquired patents IPG PHOTONICS CORPORATION CONSOLIDATED BALANCE SHEETS December 31, December 31, 2012 2011 (In thousands, except share and per share data) ASSETS CURRENT ASSETS: Cash and cash equivalents $ 384,053 $ 180,234 Short-term investments - 25,451 Accounts receivable, net 96,630 75,755 Inventories, net 139,618 116,978 Prepaid income taxes and income 13,071 13,285 taxes receivable Prepaid expenses and other 18,639 11,855 current assets Deferred income taxes, net 12,948 10,899 Total current assets 664,959 434,457 DEFERRED INCOME TAXES, NET 2,107 4,830 GOODWILL 2,898 - INTANGIBLE ASSETS, NET 7,510 6,157 PROPERTY, PLANT AND EQUIPMENT, 210,563 155,202 NET OTHER ASSETS 7,461 7,486 TOTAL $ 895,498 $ 608,132 LIABILITIES AND EQUITY CURRENT LIABILITIES: Revolving line-of-credit $ 2,442 $ 7,057 facilities Current portion of long-term 1,675 1,613 debt Accounts payable 17,783 11,122 Accrued expenses and other 51,723 47,285 liabilities Deferred income taxes, net 9,831 5,405 Income taxes payable 42,443 21,230 Total current liabilities 125,897 93,712 DEFERRED INCOME TAXES AND OTHER 12,660 8,961 LONG-TERM LIABILITIES LONG-TERM DEBT, NET OF CURRENT 14,014 15,726 PORTION Total liabilities 152,571 118,399 REDEEMABLE NONCONTROLLING - 46,123 INTERESTS COMMITMENTS AND CONTINGENCIES IPG PHOTONICS CORPORATION STOCKHOLDERS’ EQUITY: Common stock, $0.0001 par value, 175,000,000 shares authorized; 51,359,247 shares issued and outstanding at December 31, 5 5 2012; 47,616,115 shares issued and outstanding at December 31, 2011 Additional paid-in capital 511,039 332,585 Retained earnings 234,977 122,833 Accumulated other comprehensive (3,094 ) (12,100 ) loss Total IPG Photonics Corporation 742,927 443,323 stockholders’ equity NONCONTROLLING INTERESTS - 287 Total equity 742,927 443,610 TOTAL $ 895,498 $ 608,132 IPG PHOTONICS CORPORATION CONSOLIDATED STATEMENTS OF CASH FLOWS Twelve Months Ended December 31, 2012 2011 (In thousands) CASH FLOWS FROM OPERATING ACTIVITIES: Net income $ 147,744 $ 121,009 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 26,357 23,962 Provisions for inventory, warranty & bad 19,967 15,346 debt Other 15,342 7,561 Changes in assets and liabilities that provided (used) cash: Accounts receivable/payable (18,331 ) (21,703 ) Inventories (22,975 ) (56,139 ) Other 7,395 (2,685 ) Net cash provided by operating activities 175,499 87,351 CASH FLOWS FROM INVESTING ACTIVITIES: Purchases of property, plant and (68,408 ) (53,007 ) equipment Proceeds (purchases) of short-term 25,452 (25,451 ) investments Acquisition of businesses, net of cash (11,596 ) (750 ) acquired Other (929 ) 109 Net cash used in investing activities (55,481 ) (79,099 ) CASH FLOWS FROM FINANCING ACTIVITIES: Line-of-credit facilities (4,430 ) 43 Principal payments on long-term (2,117 ) (1,432 ) borrowings Purchase of noncontrolling interests (700 ) - (Purchase) sale of redeemable (55,400 ) 19,972 noncontrolling interests Exercise of employee stock options and issuances under employee stock purchase 5,480 5,268 plan Tax benefits from exercise of employee 4,679 8,034 stock options Proceeds from follow-on public offering, 167,928 - net of offering expenses Distributions to shareholders (33,353 ) - Net cash provided by financing activities 82,087 31,885 EFFECT OF CHANGES IN EXCHANGE RATES ON 1,714 (7,763 ) CASH AND CASH EQUIVALENTS NET INCREASE IN CASH AND CASH EQUIVALENTS 203,819 32,374 CASH AND CASH EQUIVALENTS — Beginning of 180,234 147,860 period CASH AND CASH EQUIVALENTS — End of period $ 384,053 $ 180,234 SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION: Cash paid for interest $ 864 $ 1,089 Cash paid for income taxes $ 25,980 $ 39,199 Contact: IPG Photonics Corporation Tim Mammen, 508-373-1100 Chief Financial Officer or Sharon Merrill Dennis Walsh, 617-542-5300 Senior Consultant
IPG Photonics Reports Revenue Growth of 17% for Fourth Quarter and 19% for Full Year 2012
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