IPG Photonics Reports Revenue Growth of 14% for the Fourth Quarter Driven by 22% Increase in Materials Processing Sales Q4 Inventory Provision and Foreign Exchange Loss Reduce Earnings $58.4 Million in Cash Provided by Operating Activities in Q4 Business Wire OXFORD, Mass. -- February 14, 2014 IPG Photonics Corporation (NASDAQ:IPGP) today reported financial results for the fourth quarter and fiscal year ended December31, 2013. Three Months Ended Twelve Months Ended December 31, December 31, (In millions, 2013 2012 % 2013 2012 % except per Change Change share data) Revenue $ 165.9 $ 145.0 14 % $ 648.0 $ 562.5 15 % Gross margin 49.2 % 51.8 % 52.5 % 54.2 % Operating $ 48.9 $ 47.3 3 % $ 218.1 $ 208.9 4 % income Operating 29.5 % 32.6 % 33.7 % 37.1 % margin Net income attributable to IPG $ 36.6 $ 34.9 5 % $ 155.8 $ 145.0 7 % Photonics Corporation Earnings per diluted $ 0.70 $ 0.67 4 % $ 2.97 $ 2.81 6 % share Management Comments "IPG ended a year of financial and operational performance with a strong fourth quarter as we continued to extend our lead and capitalize on growing demand for fiber laser technology," said Dr.Valentin Gapontsev, IPG Photonics’ Chief Executive Officer. "Revenues for the quarter increased 14% over the prior year driven by high-power laser sales for materials processing applications. While net income for the quarter increased by 5%, our profitability and margins were affected by a $5.9 million inventory provision and $1.6 million from foreign exchange transaction losses. The inventory provision and foreign exchange transaction losses reduced diluted earnings per share, net of tax, by $0.07 and $0.02, respectively, while the lower effective tax rate during the quarter benefited earnings per share by $0.03." “Materials Processing sales, which make up the majority of our business, grew 22% for the fourth quarter,” said Dr.Gapontsev. “High-power laser sales increased 24% 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 Asian, North American and European markets.” "For the full year, revenue grew 15% primarily from high-power fiber laser sales," said Dr. Gapontsev. "Asia was the strongest performing region for us geographically. Fiscal 2013 earnings per share rose to $2.97, a 6% increase over 2012. In 2013, we invested in the business, substantially expanding IPG's R&D spending, as well as adding facilities and headcount in other areas. While this reduced growth of net income in 2013, it has strengthened and enhanced IPG's product portfolio, management and technological advantages, positioning IPG for further growth in 2014 and beyond." “During the fourth quarter, IPG generated $58.4 million in cash from operations and used $22.6 million to finance capital expenditures,” said Dr. Gapontsev. “We ended the quarter with $448.8 million in cash and cash equivalents.” Business Outlook and Financial Guidance “Order flow in the fourth quarter was strong and the book-to-bill ratio was greater than one," said Dr. Gapontsev. "At the end of 2013, our backlog, which included $132.6 million of orders with firm shipment dates and $132.4 million of frame agreements that we expect to ship within one year, grew to $265.0 million, a 31% increase from year-end 2012.” “Looking ahead, we are excited by IPG’s prospects for growth in 2014. Fiber laser technology continues to gain adoption over traditional laser technologies and non-laser technologies. The continued market penetration and acceptance of our existing products and new product introductions give us confidence in our opportunities to grow revenues, improve margins, and enter into new applications,” concluded Dr.Gapontsev. IPG Photonics expects revenue in the range of $160 million to $175 million for the first quarter of 2014. The Company anticipates earnings per diluted share in the range of $0.69 to $0.83 based on 52,487,000 diluted common shares, which includes 51,660,000 basic common shares outstanding and 827,000 potentially dilutive options at December31, 2013. 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 today, February14, 2014 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. An archived version of the webcast 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, IPG’s prospects for growth in 2014, fiber laser technology continuing gains over legacy laser technologies and non-laser technologies, continued market penetration of its products, opportunities to grow revenues, improve margins, expand its product portfolio and enter into new applications, and guidance for the first quarter of 2014. 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 downturns in the markets IPG serves; uncertainties and adverse changes in the general economic conditions of markets; 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; high levels of fixed costs from IPG's vertical integration; the appropriateness of the Company's manufacturing capacity for the level of demand; competitive factors, including declining average selling prices; the effect of acquisitions and investments; inventory write-downs; foreign currency fluctuations; intellectual property infringement claims and litigation; interruption in supply of key components; manufacturing risks; building and expanding field service and support operations; inability to manage risks associated with international customers and operations; 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 28, 2013) 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, 2013 2012 2013 2012 (in thousands, except per share data) NET SALES $ 165,859 $ 145,030 $ 648,034 $ 562,528 COST OF SALES 84,337 69,856 308,136 257,801 GROSS PROFIT 81,522 75,174 339,898 304,727 OPERATING EXPENSES: Sales and 7,178 7,074 26,692 23,845 marketing Research and 10,878 9,270 41,660 31,401 development General and 13,049 9,937 50,863 39,231 administrative Loss on foreign 1,564 1,634 2,536 1,362 exchange Total operating 32,669 27,915 121,751 95,839 expenses OPERATING 48,853 47,259 218,147 208,888 INCOME OTHER INCOME (EXPENSE), NET: Interest income 24 (222 ) (1 ) 319 (expense), net Other income, 106 989 155 8 net Total other income 130 767 154 327 (expense) INCOME BEFORE PROVISION FOR 48,983 48,026 218,301 209,215 INCOME TAXES PROVISION FOR (12,388 ) (13,114 ) (62,521 ) (61,471 ) INCOME TAXES NET INCOME 36,595 34,912 155,780 147,744 LESS: NET INCOME ATTRIBUTABLE TO — — — 2,740 NONCONTROLLING INTERESTS NET INCOME ATTRIBUTABLE TO $ 36,595 $ 34,912 $ 155,780 $ 145,004 IPG PHOTONICS CORPORATION NET INCOME ATTRIBUTABLE TO IPG PHOTONICS CORPORATION PER SHARE: Basic $ 0.71 $ 0.68 $ 3.02 $ 2.87 Diluted $ 0.70 $ 0.67 $ 2.97 $ 2.81 WEIGHTED AVERAGE SHARES OUTSTANDING: Basic 51,660 51,110 51,548 50,477 Diluted 52,487 52,116 52,375 51,536 IPG PHOTONICS CORPORATION SUPPLEMENTAL SCHEDULE OF STOCK-BASED COMPENSATION Three Months Ended December Twelve Months Ended 31, December 31, (In thousands) 2013 2012 2013 2012 Cost of sales $ 863 $ 594 $ 3,187 $ 2,184 Sales and 267 225 1,195 1,052 marketing Research and 552 351 1,929 1,327 development General and 1,434 1,037 5,409 4,002 administrative Total stock-based 3,116 2,207 11,720 8,565 compensation Tax benefit (1,012 ) (691 ) (3,784 ) (2,629 ) recognized Net stock-based $ 2,104 $ 1,516 $ 7,936 $ 5,936 compensation IPG PHOTONICS CORPORATION SUPPLEMENTAL SCHEDULE OF ACQUISITION RELATED COSTS IN COST OF SALES Three Months Ended December Twelve Months Ended 31, December 31, (In thousands) 2013 2012 2013 2012 Cost of sales Step-up of inventory $ — $ 460 $ 1,318 $ 460 (1) Amortization of intangible assets 180 204 721 1,228 (2) Total acquisition $ 180 $ 664 $ 2,039 $ 1,688 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, 2013 2012 (In thousands, except share and per share data) ASSETS CURRENT ASSETS: Cash and cash equivalents $ 448,776 $ 384,053 Accounts receivable, net 103,803 96,630 Inventories 172,700 139,618 Prepaid income taxes and 15,996 13,071 income taxes receivable Prepaid expenses and other 30,836 18,639 current assets Deferred income taxes, net 14,232 12,948 Total current assets 786,343 664,959 DEFERRED INCOME TAXES, NET 4,799 2,107 GOODWILL 455 2,898 INTANGIBLE ASSETS, NET 9,564 7,510 PROPERTY, PLANT AND 252,245 210,563 EQUIPMENT, NET OTHER ASSETS 7,810 7,461 TOTAL $ 1,061,216 $ 895,498 LIABILITIES AND EQUITY CURRENT LIABILITIES: Revolving line-of-credit $ 3,296 $ 2,442 facilities Current portion of 1,333 1,505 long-term debt Accounts payable 18,787 17,783 Accrued expenses and other 59,336 51,451 liabilities Deferred income taxes, net 2,109 9,831 Income taxes payable 15,218 42,443 Total current liabilities 100,079 125,455 DEFERRED INCOME TAXES AND OTHER LONG-TERM 21,835 13,102 LIABILITIES LONG-TERM DEBT, NET OF 11,333 14,014 CURRENT PORTION Total liabilities 133,247 152,571 COMMITMENTS AND CONTINGENCIES IPG PHOTONICS CORPORATION STOCKHOLDERS’ EQUITY: Common stock, $0.0001 par value, 175,000,000 shares authorized; 51,930,978 shares issued and outstanding at December 5 5 31, 2013; 51,359,247 shares issued and outstanding at December 31, 2012 Additional paid-in capital 538,908 511,039 Retained earnings 390,757 234,977 Accumulated other (1,701 ) (3,094 ) comprehensive loss Total IPG Photonics Corporation stockholders’ 927,969 742,927 equity TOTAL $ 1,061,216 $ 895,498 IPG PHOTONICS CORPORATION CONSOLIDATED STATEMENTSOFCASHFLOWS Twelve Months Ended December 31, 2013 2012 (In thousands) CASH FLOWS FROM OPERATING ACTIVITIES: Net income $ 155,780 $ 147,744 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 32,291 26,144 Provisions for inventory, warranty & bad 25,482 19,967 debt Other 5,379 15,342 Changes in assets and liabilities that (used) provided cash: Accounts receivable/payable (9,017 ) (18,331 ) Inventories (47,581 ) (22,975 ) Other (42,967 ) 7,385 Net cash provided by operating activities 119,367 175,276 CASH FLOWS FROM INVESTING ACTIVITIES: Purchases of property, plant and equipment (70,919 ) (68,184 ) Proceeds from sales of property, plant and 236 — equipment Proceeds from sale of investment 495 — Proceeds from short-term investments — 25,451 Acquisition of businesses (5,555 ) (11,596 ) Other (143 ) (928 ) Net cash used in investing activities (75,886 ) (55,257 ) CASH FLOWS FROM FINANCING ACTIVITIES: Line-of-credit facilities 853 (4,430 ) Principal payments on long-term borrowings (2,852 ) (2,117 ) Purchase of noncontrolling interests — (700 ) Purchase of redeemable noncontrolling — (55,400 ) interests Tax benefits from exercise of employee 8,874 4,679 stock options Exercise of employee stock options and issuances under employee stock purchase 7,274 5,480 plan Proceeds from follow-on public offering, 167,928 net of offering expenses Distributions to shareholders — (33,353 ) Net cash provided by financing activities 14,149 82,087 EFFECT OF CHANGES IN EXCHANGE RATES ON CASH 7,093 1,713 AND CASH EQUIVALENTS NET INCREASE IN CASH AND CASH EQUIVALENTS 64,723 203,819 CASH AND CASH EQUIVALENTS — Beginning of 384,053 180,234 period CASH AND CASH EQUIVALENTS — End of period $ 448,776 $ 384,053 SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION: Cash paid for interest $ 208 $ 864 Cash paid for income taxes $ 89,611 $ 25,980 Contact: IPG Photonics Corporation Tim Mammen, 508-373-1100 Chief Financial Officer or Sharon Merrill David Calusdian, 617-542-5300 Executive Vice President
IPG Photonics Reports Revenue Growth of 14% for the Fourth Quarter Driven by 22% Increase in Materials Processing Sales
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