II-VI Incorporated Reports Fiscal Third Quarter Earnings PITTSBURGH, April 23, 2013 (GLOBE NEWSWIRE) -- II-VI Incorporated (Nasdaq:IIVI) today reported results for its third fiscal quarter ended March 31, 2013. Bookings for the quarter decreased 4% to $140,332,000 compared to $145,776,000 in the third quarter of last fiscal year. Bookings for the nine months ended March 31, 2013 decreased 3% to $381,859,000 compared to $392,906,000 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 quarter increased 9% to $145,170,000 from $132,590,000 in the third quarter of last fiscal year. Revenues for the nine months ended March 31, 2013 increased 1% to $403,351,000 from $397,720,000 for the same period last fiscal year. Net earnings attributed to II-VI Incorporated for the quarter were $15,869,000, or $0.25 per share-diluted, compared to net earnings of $13,994,000, or $0.22 per share-diluted, in the third quarter of last fiscal year. For the nine months ended March 31, 2013, net earnings attributable to II-VI Incorporated were $40,787,000, or $0.64 per share-diluted, compared to net earnings of $45,860,000, or $0.71 per share-diluted, for the same period last fiscal year. Results include the following: *Transaction expenses related to three acquisitions completed during the quarter ended December 31, 2012 were insignificant for the current three months and were $1.1 million or $0.02 per share-diluted for the nine months ended March 31, 2013. These expenses are included in selling, general and administrative expenses in the condensed consolidated statements of earnings. *Write-downs of tellurium and selenium inventory were insignificant for the current three months and were $1.3 million, or $0.02 per share-diluted, for the nine months ended March 31, 2013.These amounts compare to write-downs of tellurium and selenium inventory of $3.6 million, or $0.06 per share-diluted, and $6.1 million, or $0.10 per share-diluted, for the three and nine months ended March 31, 2012, 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. *After-tax income of $3.7 million, or $0.06 per share-diluted, was recognized for the nine months ended March 31, 2013 from a settlement with a former contract manufacturer for damages incurred in the October 2011 flooding in Thailand.The majority of the settlement amount is included in other expense (income), net in the attached condensed consolidated statements of earnings. Francis J. Kramer, president and chief executive officer said, "We are reporting third quarter fiscal 2013 results in line with the guidance we issued on January 22, 2013.The results reflect operational improvements in several of our businesses, including Marlow Industries in our Advanced Product Group segment, as they begin to capitalize on new market opportunities. In addition, we also received full-quarter contributions from the three recent acquisitions we completed during the quarter ended December 31, 2012. We have experienced some cyclical softening in the optical communication market addressed primarily by our Near-Infrared Optics segment." Kramer continued, "In the Military and Materials segment, PRM continues to be impacted by the start-up of its new rare earth product line.We have lowered our expectations of this product line for the upcoming fourth quarter and have made long-term contractual adjustments with our customer, which should help improve operating results going forward.Demand for selenium and tellurium products continues to be low and, therefore, the pricing environment is a challenge.During the quarter, PRM did not experience any significant write-downs of its selenium and tellurium inventory, as was the case in the previous six quarters." Kramer concluded, "As anticipated, our tax rate reflects a favorable adjustment for the recent extension of the U.S. Research and Development Tax Credit. Cash generated from operations has increased 18% year over year and we are investing in strategic capacity initiatives and paying down long-term debt.During the quarter we completed the $25 million share repurchase program authorized in May 2012." During the quarter ended December 31, 2012, the Company completed three acquisitions: November 1, 2012 M Cubed Technologies, Inc. (M Cubed) The thin-film filter business and interleaver product line December 3, 2012 of Oclaro, Inc. (the Thin-Film Filter andInterleaver Operations) December 21, 2012 LightWorks Optics, Inc. (LightWorks) M Cubed joined the Advanced Products Group, the Thin-Film Filter and Interleaver Operations became a part of Photop Technologies, Inc. in the Near-Infrared Optics segment, and LightWorks joined the Military & Materials segment. 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 Nine Months Ended March 31, March 31, % % Increase Increase $000's, 2013 2012 (Decrease) 2013 2012 (Decrease) except % Bookings: Infrared $51,170 $59,112 (13)% $143,271 $153,983 (7)% Optics Near-Infrared 32,847 48,575 (32)% 103,630 110,355 (6)% Optics Military & 22,070 26,553 (17)% 67,285 84,430 (20)% Materials Advanced Products 34,245 11,536 197% 67,673 44,138 53% Group Total $140,332 $145,776 (4)% $381,859 $392,906 (3)% Bookings Revenues: Infrared $52,886 $50,678 4% $149,852 $148,236 1% Optics Near-Infrared 35,821 36,629 (2)% 113,463 100,143 13% Optics Military & 28,869 30,054 (4)% 74,164 91,480 (19)% Materials Advanced Products 27,594 15,229 81% 65,872 57,861 14% Group Total $145,170 $132,590 9% $403,351 $397,720 1% Revenues Segment Earnings (Loss): Infrared $13,969 $13,845 1% $36,343 $37,672 (4)% Optics Near-Infrared 3,774 3,608 5% 16,637 8,554 95% Optics Military & (550) (958) 43% (3,773) 64 (5,995)% Materials Advanced Products 810 479 69% 325 7,957 (96)% Group Total Segment $18,003 $16,974 6% $49,532 $54,247 (9)% 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 Nine Months Ended March 31, March 31, $000's, except share information 2013 2012 2013 2012 EBITDA $30,163 $28,014 $86,238 $85,255 Cash paid for capital expenditures $4,321 $9,703 $17,498 $32,771 Net borrowings (repayments) on $(3,000) $(7,000) $109,000 $(6,295) indebtedness Share-based compensation expense, $2,698 $2,055 $9,232 $9,231 pre-tax Cash paid for shares repurchased through the Company's share $9,138 $ -- $19,978 $ -- repurchase program Shares repurchased through the 523,980 -- 1,141,022 -- Company's share repurchase program Outlook For the fourth fiscal quarter ending June 30, 2013, the Company currently forecasts revenues to range from $147 million to $152 million and earnings per share to range from $0.20 to $0.25.Comparable results for the quarter ended June 30, 2012 were revenues of $136.9 million and earnings per share of $0.22.For the fiscal year ending June 30, 2013, the Company currently expects revenues to range from $550 million to $555 million and earnings per share to range from $0.84 to $0.89.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, April 23, 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/cjzg3e5.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 uses 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 associated 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 opto-electronic 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 Nine Months Ended March 31, March 31, 2013 2012 2013 2012 Revenues Net sales: Domestic $65,176 $51,233 $168,938 $156,958 International 79,994 81,357 234,413 240,762 Total Revenues 145,170 132,590 403,351 397,720 Costs, Expenses & Other Expense (Income) Cost of goods sold 94,169 86,589 256,645 253,241 Internal research and development 5,781 5,698 16,992 15,877 Selling, general and administrative 27,217 23,329 80,182 74,355 Interest expense 449 48 708 184 Other expense (income), net (1,401) (2,311) (6,713) (5,447) Total Costs, Expenses, and Other 126,215 113,353 347,814 338,210 Expense (Income) Earnings Before Income Taxes 18,955 19,237 55,537 59,510 Income Taxes 2,861 4,967 13,844 13,006 Net Earnings 16,094 14,270 41,693 46,504 Less:Net Earnings Attributable to 225 276 906 644 Noncontrolling Interests Net Earnings Attributable to II-VI $15,869 $13,994 $40,787 $45,860 Incorporated Net Earnings Attributable to II-VI Incorporated Diluted Earnings Per $0.25 $0.22 $0.64 $0.71 Share: Net Earnings Attributable to II-VI Incorporated Basic Earnings Per $0.26 $0.22 $0.65 $0.73 Share: Average Shares Outstanding- Diluted 63,724 64,628 63,965 64,314 Average Shares Outstanding- Basic 62,130 62,855 62,482 62,752 II-VI Incorporated and Subsidiaries Condensed Consolidated Balance Sheets (Unaudited) ($000) March 31, June 30, 2013 2012 Assets Current Assets Cash and cash equivalents $155,594 $134,944 Accounts receivable 103,640 104,761 Inventories 152,873 137,607 Deferred income taxes 9,652 10,796 Prepaid and refundable income taxes 6,549 8,488 Prepaid and other current assets 12,600 13,777 Total Current Assets 440,908 410,373 Property, plant & equipment, net 173,206 153,918 Goodwill 122,330 80,748 Other intangible assets, net 88,556 44,014 Investment 10,977 10,661 Deferred income taxes 3,507 145 Other assets 9,305 6,627 Total Assets $848,789 $706,486 Liabilities and Shareholders' Equity Current Liabilities Accounts payable $25,248 $29,420 Accruals and other current liabilities 55,809 54,308 Total Current Liabilities 81,057 83,728 Long-term debt 121,183 12,769 Deferred income taxes 4,375 5,883 Other liabilities 14,248 12,720 Total Liabilities 220,863 115,100 Total II-VI Incorporated Shareholders' Equity 626,229 589,957 Noncontrolling Interests 1,697 1,429 Total Shareholders' Equity 627,926 591,386 Total Liabilities and Shareholders' Equity $848,789 $706,486 II-VI Incorporated and Subsidiaries Condensed Consolidated Statements of Cash Flows (Unaudited) ($000) Nine Months Ended March 31, 2013 2012 Net cash provided by operating activities $68,119 $57,702 Cash Flows from Investing Activities Additions to property, plant and equipment (17,498) (32,771) Purchases of businesses, net of cash acquired (126,165) (46,141) Proceeds received on contractual settlement from 2,436 -- Thailand flood Proceeds from collection of note receivable 1,395 1,906 Other investing activities 57 18 Net cash used in investing activities (139,775) (76,988) Cash Flows from Financing Activities Proceeds from long-term borrowings 113,000 7,000 Payments on long-term borrowings (4,000) (13,295) Payment of debt issuance costs (560) -- Purchases of treasury stock (19,978) -- Payments on earn-out arrangement -- (6,000) Proceeds from exercises of stock options 3,836 1,896 Distributions on noncontrolling interests (284) -- Minimum tax withholding requirements (137) -- Excess tax benefits from share-based compensation 678 469 expense Net cash provided by (usedin) financing activities 92,555 (9,930) Effect of exchange rate changes on cash and cash (249) (978) equivalents Net increase (decrease) in cash and cash equivalents 20,650 (30,194) Cash and Cash Equivalents at Beginning of Period 134,944 149,460 Cash and Cash Equivalents at End of Period $155,594 $119,266 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 Nine Months Ended March 31, March 31, 2013 2012 2013 2012 Reported Net Earnings Attributable to $15,869 $13,994 $40,787 $45,860 II-VI Incorporated Add back: Write-downs of tellurium and selenium 71 3,840 1,395 6,447 inventory Income tax impact on unusual items (4) (191) (70) (322) Adjusted Non-GAAP Net Earnings $15,936 $17,643 $42,112 $51,985 Attributable to II-VI Incorporated Per share data: Net Earnings Attributable to II-VI Incorporated: Net Earnings Attributable to II-VI Incorporated Diluted Earnings Per $0.25 $0.22 $0.64 $0.71 Share: Net Earnings Attributable to II-VI $0.26 $0.22 $0.65 $0.73 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 Incorporated Diluted Earnings Per $0.00 $0.06 $0.02 $0.10 Share: Net Earnings Attributable to II-VI $0.00 $0.06 $0.02 $0.10 Incorporated Basic Earnings Per Share: Adjusted Non-GAAP Net Earnings Attributable to II-VI Incorporated: Adjusted Non-GAAP Net Earnings Diluted $0.25 $0.27 $0.66 $0.81 Earnings Per Share: Adjusted Non-GAAP Net Earnings Basic $0.26 $0.28 $0.67 $0.83 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 Earnings and EBITDA to Net Earnings Three Months Ended Nine Months Ended March 31, March 31, 2013 2012 2013 2012 Total Segment Earnings $18,003 $16,974 $49,532 $54,247 Interest expense 449 48 708 184 Other expense (income), net (1,401) (2,311) (6,713) (5,447) Income taxes 2,861 4,967 13,844 13,006 Net earnings $16,094 $14,270 $41,693 $46,504 EBITDA $30,163 $28,014 $86,238 $85,255 Interest expense 449 48 708 184 Depreciation and amortization 10,759 8,729 29,993 25,561 Income taxes 2,861 4,967 13,844 13,006 Net earnings $16,094 $14,270 $41,693 $46,504 CONTACT: II-VI Incorporated Craig A. Creaturo, Chief Financial Officer and Treasurer (724) 352-4455 email@example.com
II-VI Incorporated Reports Fiscal Third Quarter Earnings
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