II-VI Incorporated Achieves Record Fourth Quarter and Fiscal Year 2013 Revenues; Exits Tellurium and Selenium Chemical Businesses; Increases HIGHYAG Ownership to 100% PITTSBURGH, Aug. 1, 2013 (GLOBE NEWSWIRE) -- II-VI Incorporated (Nasdaq:IIVI) today reported results for its fourth quarter and fiscal year ended June 30, 2013. Bookings for the quarter increased 2% to $145.4 million compared to $142.0 million in the fourth quarter of last fiscal year. Bookings for the fiscal year ended June 30, 2013 decreased 1% to $527.2 million compared to $534.9 million for 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 13% to a record $155.0 million from $136.9 million in the fourth quarter of last fiscal year. Revenues for the fiscal year ended June 30, 2013 increased 4% to a record $558.4 million from $534.6 million for last fiscal year. Net earnings attributed to II-VI Incorporated for the quarter were $10.0 million, or $0.16 per share-diluted, compared to net earnings of $14.4 million, or $0.22 per share-diluted, in the fourth quarter of last fiscal year. For the fiscal year ended June 30, 2013, net earnings attributable to II-VI Incorporated were $50.8 million, or $0.80 per share-diluted, compared to net earnings of $60.3 million or $0.94 per share-diluted, for the same period last fiscal year. The Company's subsidiary Pacific Rare Specialty Metals & Chemicals, Inc. (PRM), a business in the Company's Military & Materials segment, will discontinue its tellurium product line, will downsize its selenium product line to focus on providing selenium metal to the II-VI Infrared Optics business unit, and will maintain production of its rare earth element. The Company believes this revised business model will better focus PRM on providing a reliable supply of selenium for the Company's own internal needs while significantly decreasing write-downs and profit volatility associated with minor metal index price changes. This decision comes after careful and deliberate evaluation of the Company's long-term strategy for creating sustained shareholder value. Results include the following in the attached condensed consolidated statements of earnings: *An impairment charge for PRM property, plant and equipment, and inventory write-offs of $4.4 million, or $0.07 per share-diluted for the quarter and fiscal year ended June 30, 2013. This expense is included in cost of goods sold. *Write-downs of PRM tellurium and selenium inventory of $1.3 million, or $0.02 per share-diluted, and $2.7 million, or $0.04 per share-diluted, for the fourth quarter and fiscal year ended June 30, 2013, respectively. These amounts compare to write-downs of PRM tellurium and selenium inventory of $2.2 million, or $0.03 per share-diluted, and $8.3 million, or $0.13 per share-diluted, for the fourth quarter and fiscal year ended June 30, 2012, respectively. These write-downs were necessitated by declines in global raw material index pricing and are included in cost of goods sold. *Transaction expenses related to the Company's three acquisitions completed during the June 30, 2013 fiscal year. These expenses were insignificant for the current quarter and were $1.1 million or $0.02 per share-diluted for the fiscal year ended June 30, 2013. These expenses are included in selling, general and administrative expenses. *After-tax income of $3.7 million, or $0.06 per share-diluted, was recognized for the fiscal year ended June 30, 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 July 2013, HIGHYAG Lasertechnologie GmbH (HIGHYAG) changed from being 75% owned by the Company to 100%. Effective July 1, 2013, II-VI will record 100% of the operating results of HIGHYAG in the Company's Infrared Optics segment. The price for the 25% equity of HIGHYAG the Company did not already own will be $7.6 million; in additiona dividend of $1.0 million also was declared and is payable to the minority shareholder. Both items are included in accruals and other current liabilities in the attached June 30, 2013 condensed consolidated balance sheet. Francis J. Kramer, president and chief executive officer said, "We are pleased to report record revenues for the fourth quarter and fiscal year 2013. As global industrial customers continued to use and deploy CO lasers, Infrared Optics bookings for the quarter increased 10% from the same period last fiscal year. At our Marlow Industries subsidiary, revenues increased 33% from the year-ago quarter and 28% from the preceding quarter of 2013 as their new personal comfort product line gained traction. We also made substantial progress on integrating the three businesses that joined our Company through acquisitions in November and December 2012." Kramer continued, "During the quarter we made the difficult but necessary decision to refocus PRM on processing rare earth material and providing a crucial raw material, selenium metal, for use by II-VI Infrared Optics. Ceasing the commercial production and sale of tellurium and selenium chemicals substantially reduces our future exposure to volatility of tellurium and selenium index pricing." Kramer concluded, "We continue to operate our business on solid fundamental values: core strategic capabilities, the power of vertical integration, and sound financial management. During this fiscal year, we established a new record for cash flow from operations: $107.6 million, a 22% increase from the previous record set in fiscal year 2012. Our free cash flow for fiscal 2013 was $82.3 million, an increase of 82% compared to the prior fiscal year. We believe we have positioned II-VI Incorporated to capitalize on the acquisitions and strategic business decisions we made in fiscal year 2013 and look forward to a successful year in fiscal 2014." During the quarter ended December 31, 2012, 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 assets) December 21, 2012 LightWorks Optics, Inc. (LightWorks) M Cubed joined the Advanced Products Group segment, the Oclaro assets 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 Incorporated (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 Year Ended June 30, June 30, % % $000's, except % 2013 2012 Increase 2013 2012 Increase (Decrease) (Decrease) Bookings: Infrared Optics $ 57,420 $ 52,067 10% $ 200,691 $ (3)% 206,050 Near-Infrared 42,106 44,711 (6)% 145,736 155,066 (6)% Optics Military & 26,823 21,877 23% 94,108 106,307 (11)% Materials Advanced Products 19,029 23,304 (18)% 86,702 67,442 29% Group Total Bookings $ 145,378 $ 141,959 2% $ 527,237 $ (1)% 534,865 Revenues: Infrared Optics $ 53,467 $ 53,375 --% $ 203,319 $ 1% 201,611 Near-Infrared 41,389 39,858 4% 154,852 140,001 11% Optics Military & 30,273 26,982 12% 104,437 118,462 (12)% Materials Advanced Products 29,916 16,695 79% 95,788 74,556 28% Group Total Revenues $ 155,045 $ 136,910 13% $ 558,396 $ 4% 534,630 Segment Earnings (Loss): Infrared Optics $ 13,114 $ 13,423 (2)% $ 49,457 $ 51,095 (3)% Near-Infrared 2,991 5,506 (46)% 19,628 14,060 40% Optics Military & (2,360) (1,722) (37)% (6,133) (1,658) (270)% Materials Advanced Products 1,425 485 194% 1,750 8,442 (79)% Group Total Segment $ 15,170 $ 17,692 (14)% $ 64,702 $ 71,939 (10)% 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 Year Ended June 30, June 30, $000's, except share information 2013 2012 2013 2012 EBITDA $ 26,548 $ 28,545 $ 112,786 $ 113,800 Cash paid for capital expenditures $ 7,775 $ 10,069 $ 25,273 $42,840 Net borrowings (repayments) on $(7,000) $(1,000) $ 102,000 $(7,295) indebtedness Share-based compensation expense, $ 2,727 $ 2,353 $ 11,959 $ 11,584 pre-tax Cash paid for shares repurchased through the Company's share repurchase $ -- $ 4,988 $ 19,978 $ 4,988 program Shares repurchased through the -- 301,716 1,141,022 301,716 Company's share repurchase program The June 30, 2012 condensed consolidated balance sheet has been adjusted to conform the presentation of the redeemable noncontrolling interest to the June 30, 2013 financial reporting presentation. Outlook For the first fiscal quarter ending September 30, 2013, the Company currently forecasts revenues to range from $140 million to $145 million and earnings per share to range from $0.18 to $0.23.Comparable results for the quarter ended September 30, 2012 were revenues of $132.3 million and earnings per share of $0.20.For the fiscal year ending June 30, 2014, the Company expects revenues to increase between 6% and 9% and earnings per share to increase between 20% and 30% compared to the fiscal year ended June 30, 2013.Comparable results for the fiscal year ended June 30, 2013 were revenues of $558.4 million and earnings per share of $0.80.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 Thursday, August 1, 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/njlfdto.A replay of the webcast will be available for two 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 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 segment, 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 segment, 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 segment, LightWorks Optical Systems, Inc. (formerly Exotic Electro-Optics and LightWorks Optics, Inc.) manufactures products for military applications and precision optical systems, and components for defense, aerospace, industrial and life science applications. Pacific Rare Specialty Metals & Chemicals (PRM) produces and refines a rare earth element and selenium, 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. In the Company's Advanced Products Group segment, 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 and Quarterly Reports on Form 10-Q for the quarters ended September 30, 2012, December 31, 2012 and March 31, 2013; (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 Year Ended June 30, June 30, 2013 2012 2013 2012 Revenues Net sales: Domestic $ 72,107 $ 57,864 $ 241,045 $ 214,822 International 82,938 79,046 317,351 319,808 Total Revenues 155,045 136,910 558,396 534,630 Costs, Expenses & Other Expense (Income) Cost of goods sold 104,185 88,648 360,830 341,889 Internal research and development 5,697 5,533 22,689 21,410 Selling, general and administrative 29,993 25,037 110,175 99,392 Interest expense 452 28 1,160 212 Other expense (income), net (442) (1,721) (7,155) (7,168) Total Costs, Expenses, and Other 139,885 117,525 487,699 455,735 Expense (Income) Earnings Before Income Taxes 15,160 19,385 70,697 78,895 Income Taxes 4,922 4,614 18,766 17,620 Net Earnings 10,238 14,771 51,931 61,275 Less:Net Earnings Attributable to 212 325 1,118 969 Noncontrolling Interest Net Earnings Attributable to II-VI $ 10,026 $ 14,446 $ 50,813 $ 60,306 Incorporated Net Earnings Attributable to II-VI Incorporated Diluted Earnings Per $ 0.16 $ 0.22 $ 0.80 $ 0.94 Share: Net Earnings Attributable to II-VI $ 0.16 $ 0.23 $ 0.81 $ 0.96 Incorporated Basic Earnings Per Share: Average Shares Outstanding- Diluted 63,622 64,579 63,884 64,385 Average Shares Outstanding- Basic 62,180 63,019 62,411 62,823 II-VI Incorporated and Subsidiaries Condensed Consolidated Balance Sheets (Unaudited) ($000) June 30, June 30, 2013 2012 Assets Current Assets Cash and cash equivalents $ 185,433 $ 134,944 Accounts receivable 107,173 104,761 Inventories 141,859 137,607 Deferred income taxes 10,794 10,796 Prepaid and refundable income taxes 4,543 8,488 Prepaid and other current assets 11,342 13,777 Total Current Assets 461,144 410,373 Property, plant & equipment, net 170,672 153,918 Goodwill 123,352 80,748 Other intangible assets, net 86,701 44,014 Investment 11,203 10,661 Deferred income taxes 2,696 145 Other assets 8,034 6,627 Total Assets $ 863,802 $ 706,486 Liabilities, Redeemable Noncontrolling Interest and Shareholders' Equity Current Liabilities Accounts payable $ 23,617 $ 29,420 Accruals and other current liabilities 70,817 54,308 Total Current Liabilities 94,434 83,728 Long-term debt 114,036 12,769 Deferred income taxes 4,095 5,883 Other liabilities 15,129 12,720 Total Liabilities 227,694 115,100 Redeemable noncontrolling interest -- 5,160 Total Shareholders' Equity 636,108 586,226 Total Liabilities, Redeemable Noncontrolling Interest and $ 863,802 $ 706,486 Shareholders' Equity II-VI Incorporated and Subsidiaries Condensed Consolidated Statements of Cash Flows (Unaudited) ($000) Year Ended June 30, 2013 2012 Net cash provided by operating activities $ 107,607 $ 88,069 Cash Flows from Investing Activities Additions to property, plant and equipment (25,273) (42,840) Purchases of businesses, net of cash acquired (126,193) (46,141) Proceeds received on contractual settlement from Thailand 4,797 -- flood Proceeds from sale of equity investment 2,138 3,478 Other investing activities -- 615 Net cash used in investing activities (144,531) (84,888) Cash Flows from Financing Activities Proceeds from long-term borrowings 113,000 7,000 Payments on long-term borrowings (11,000) (14,295) Payment of debt issuance costs (560) -- Purchases of treasury stock (19,978) (4,988) Payments on earn-out arrangement -- (6,000) Proceeds from exercises of stock options 4,104 2,658 Distributions on noncontrolling interest (284) -- Minimum tax withholding requirements (138) -- Excess tax benefits from share-based compensation expense 635 821 Net cash provided by (used in) financing activities 85,779 (14,804) Effect of exchange rate changes on cash and cash 1,634 (2,893) equivalents Net increase (decrease) in cash and cash equivalents 50,489 (14,516) Cash and Cash Equivalents at Beginning of Period 134,944 149,460 Cash and Cash Equivalents at End of Period $ 185,433 $ 134,944 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 Year Ended June 30, June 30, 2013 2012 2013 2012 Reported Net Earnings Attributable to $ 10,026 $ 14,446 $ 50,813 $ 60,306 II-VI Incorporated Add back: Write-downs of tellurium and selenium 1,293 2,296 2,688 8,743 inventory Discontinuance of tellurium and selenium 4,434 -- 4,434 -- chemical businesses Income tax impact on unusual items -- (114) -- (437) Adjusted Non-GAAP Net Earnings $ 15,753 $ 16,628 $ 57,935 $ 68,612 Attributable to II-VI Incorporated Per share data: Net Earnings Attributable to II-VI Incorporated: Net Earnings Attributable to II-VI $ 0.16 $ 0.22 $ 0.80 $ 0.94 Incorporated Diluted Earnings Per Share: Net Earnings Attributable to II-VI $ 0.16 $ 0.23 $ 0.81 $ 0.96 Incorporated Basic Earnings Per Share: Per share, After-Tax Impact of Write-Downs of Unusual Items: Net Earnings Attributable to II-VI $ 0.09 $ 0.03 $ 0.11 $ 0.13 Incorporated Diluted Earnings Per Share: Net Earnings Attributable to II-VI $ 0.09 $ 0.03 $ 0.11 $ 0.13 Incorporated Basic Earnings Per Share: Adjusted Non-GAAP Net Earnings Attributable to II-VI Incorporated: Adjusted Non-GAAP Net Earnings Diluted $ 0.25 $ 0.26 $ 0.91 $ 1.07 Earnings Per Share: Adjusted Non-GAAP Net Earnings Basic $ 0.25 $ 0.26 $ 0.93 $ 1.09 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 Year Ended Earnings and EBITDA to Net Earnings June 30, June 30, 2013 2012 2013 2012 Total Segment Earnings $ 15,170 $ 17,692 $ 64,702 $ 71,939 Interest expense 452 28 1,160 212 Other expense (income), net (442) (1,721) (7,155) (7,168) Income taxes 4,922 4,614 18,766 17,620 Net earnings $ 10,238 $ 14,771 $ 51,931 $ 61,275 EBITDA $ 26,548 $ 28,545 $ 112,786 $ 113,800 Interest expense 452 28 1,160 212 Depreciation and amortization 10,936 9,132 40,929 34,693 Income taxes 4,922 4,614 18,766 17,620 Net earnings $ 10,238 $ 14,771 $ 51,931 $ 61,275 CONTACT: II-VI Incorporated Craig A. Creaturo, Chief Financial Officer and Treasurer (724) 352-4455 firstname.lastname@example.org
II-VI Incorporated Achieves Record Fourth Quarter and Fiscal Year 2013 Revenues; Exits Tellurium and Selenium Chemical
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