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IPG Photonics Reports Revenue Growth of 14% for the Fourth Quarter Driven by 22% Increase in Materials Processing Sales

  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
 
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