COHERENT, INC. SANTA CLARA, Calif., Aug. 4, 2020 /PRNewswire/ -- Coherent, Inc. (NASDAQ: COHR), one of the world's leading providers of lasers, laser-based technologies and laser-based system solutions in a broad range of scientific, commercial and industrial applications, today announced financial results for its third fiscal quarter ended July 4, 2020.
FINANCIAL HIGHLIGHTS
Three Months Ended | Nine Months Ended | ||||||||||||||||||
Jul. 4, 2020 | Apr. 4, 2020 | Jun. 29, 2019 | Jul. 4, 2020 | Jun. 29, 2019 | |||||||||||||||
GAAP Results | |||||||||||||||||||
(in millions, except per share data) | |||||||||||||||||||
Net sales | $ | 298.3 | $ | 293.1 | $ | 339.2 | $ | 912.2 | $ | 1,095.2 | |||||||||
Net income (loss) | $ | (8.7) | $ | (418.9) | $ | (3.1) | $ | (421.8) | $ | 53.2 | |||||||||
Diluted EPS | $ | (0.36) | $ | (17.39) | $ | (0.13) | $ | (17.52) | $ | 2.19 | |||||||||
Non-GAAP Results | |||||||||||||||||||
(in millions, except per share data) | |||||||||||||||||||
Net income | $ | 12.6 | $ | 14.8 | $ | 32.1 | $ | 48.1 | $ | 122.4 | |||||||||
Diluted EPS | $ | 0.52 | $ | 0.61 | $ | 1.33 | $ | 1.99 | $ | 5.03 | |||||||||
THIRD FISCAL QUARTER DETAILS
For the third quarter of fiscal 2020, Coherent announced net sales of $298.3 million and net loss, on a U.S. generally accepted accounting principles (GAAP) basis, of $8.7 million, or $0.36 per diluted share.
These results compare to net sales of $339.2 million and net loss of $3.1 million, or $0.13 per diluted share, for the third quarter of fiscal 2019 and net sales of $293.1 million and net loss of $418.9 million, or $17.39 per diluted share, for the second quarter of fiscal 2020. The net loss for the second quarter of fiscal 2020 includes $424.3 million, net of tax, in non-cash goodwill and other impairment charges, primarily related to the impairment of all goodwill and certain long-lived assets in our Industrial Lasers & Systems segment.
Non-GAAP net income for the third quarter of fiscal 2020 was $12.6 million, or $0.52 per diluted share. Non-GAAP net income for the third quarter of fiscal 2019 was $32.1 million, or $1.33 per diluted share. Non-GAAP net income for the second quarter of fiscal 2020 was $14.8 million, or $0.61 per diluted share. Reconciliations of GAAP to non-GAAP financial measures for the three months ended July 4, 2020, April 4, 2020 and June 29, 2019 and nine months ended July 4, 2020 and June 29, 2019 appear in the financial statements portion of this release under the heading "Reconciliation of GAAP to Non-GAAP net income (loss)."
Effective September 29, 2019, Coherent adopted ASC 842 - Lease Accounting and applied the new guidance to all leases existing as of the date of adoption. Coherent reported results for the first, second and third quarters of fiscal 2020 that reflect the application of ASC 842, while prior period amounts have not been adjusted and continue to be reported in accordance with its historical lease accounting.
"Our Q3 performance is encouraging, even though the current quarter was again impacted by COVID-19. We grew revenue sequentially, with Microelectronics more than overcompensating the headwinds in Material Processing and OEM components. Our focus on operational excellence and cash yielded promising initial results and positions us well for the quarters to come," said Andy Mattes, Coherent President and CEO. "Every day I learn more about the breadth and depth of our company and I am proud to see how our employees are meeting the challenges of a very difficult macro environment."
CONFERENCE CALL REMINDER
Coherent will host a conference call today to discuss its financial results at 1:30 P.M. Pacific (4:30 P.M. Eastern). A listen-only broadcast of the conference call and a transcript of management's prepared remarks can be accessed on the investor relations page of the company's website at investors.coherent.com. For those who are not able to listen to the live broadcast, the call will be archived for approximately three months on the company's investor relations page.
Summarized statement of operations information is as follows (unaudited, in thousands, except per share data):
Three Months Ended | Nine Months Ended | ||||||||||||||||||
Jul. 4, 2020 | Apr. 4, 2020 | Jun. 29, 2019 | Jul. 4, 2020 | Jun. 29, 2019 | |||||||||||||||
Net sales | $ | 298,330 | $ | 293,147 | $ | 339,170 | $ | 912,248 | $ | 1,095,176 | |||||||||
Cost of sales(A)(B)(C)(D)(E) | 203,053 | 199,036 | 241,167 | 613,607 | 717,106 | ||||||||||||||
Gross profit | 95,277 | 94,111 | 98,003 | 298,641 | 378,070 | ||||||||||||||
Operating expenses: | |||||||||||||||||||
Research & development(A)(B)(E) | 28,283 | 29,794 | 30,692 | 86,757 | 90,095 | ||||||||||||||
Selling, general & administrative(A)(B)(E)(F) | 67,525 | 61,307 | 67,686 | 197,383 | 201,706 | ||||||||||||||
Goodwill and other impairment charges(G) | — | 451,025 | — | 451,025 | — | ||||||||||||||
Amortization of intangible assets(C) | 643 | 1,296 | 6,782 | 3,371 | 11,748 | ||||||||||||||
Total operating expenses | 96,451 | 543,422 | 105,160 | 738,536 | 303,549 | ||||||||||||||
Income (loss) from operations | (1,174) | (449,311) | (7,157) | (439,895) | 74,521 | ||||||||||||||
Other expense, net(B)(E) | (4,282) | (5,663) | (4,386) | (12,979) | (17,789) | ||||||||||||||
Income (loss) before income taxes | (5,456) | (454,974) | (11,543) | (452,874) | 56,732 | ||||||||||||||
Provision for (benefit from) income taxes (H) | 3,252 | (36,061) | (8,444) | (31,046) | 3,531 | ||||||||||||||
Net income (loss) | $ | (8,708) | $ | (418,913) | $ | (3,099) | $ | (421,828) | $ | 53,201 | |||||||||
Net income (loss) per share: | |||||||||||||||||||
Basic | $ | (0.36) | $ | (17.39) | $ | (0.13) | $ | (17.52) | $ | 2.20 | |||||||||
Diluted | $ | (0.36) | $ | (17.39) | $ | (0.13) | $ | (17.52) | $ | 2.19 | |||||||||
Shares used in computations: | |||||||||||||||||||
Basic | 24,159 | 24,095 | 24,054 | 24,075 | 24,185 | ||||||||||||||
Diluted | 24,159 | 24,095 | 24,054 | 24,075 | 24,333 | ||||||||||||||
(A) | Stock-based compensation expense included in operating results is summarized below (all footnote amounts are unaudited, in thousands, except per share data): |
Stock-based compensation expense | Three Months Ended | Nine Months Ended | |||||||||||||||||
Jul. 4, 2020 | Apr. 4, 2020 | Jun. 29, 2019 | Jul. 4, 2020 | Jun. 29, 2019 | |||||||||||||||
Cost of sales | $ | 1,237 | $ | 1,011 | $ | 1,231 | $ | 3,430 | $ | 3,640 | |||||||||
Research & development | 1,469 | 894 | 794 | 2,924 | 2,227 | ||||||||||||||
Selling, general & administrative | 11,680 | 6,993 | 7,630 | 24,722 | 20,668 | ||||||||||||||
Impact on income (loss) from operations | $ | 14,386 | $ | 8,898 | $ | 9,655 | $ | 31,076 | $ | 26,535 | |||||||||
For the fiscal quarters ended July 4, 2020, April 4, 2020 and June 29, 2019, the impact on net income (loss), net of tax was $12,834 ($0.53 per diluted share), $7,892 ($0.33 per diluted share) and $8,243 ($0.34 per diluted share), respectively. For the nine months ended July 4, 2020 and June 29, 2019, the impact on net income (loss), net of tax was $27,662 ($1.14 per diluted share) and $22,429 ($0.92 per diluted share), respectively.
(B) | Changes in deferred compensation plan liabilities are included in cost of sales and operating expenses while gains and losses on deferred compensation plan assets are included in other income (expense), net. Deferred compensation expense (benefit) included in operating results is summarized below: |
Deferred compensation expense (benefit) | Three Months Ended | Nine Months Ended | |||||||||||||||||
Jul. 4, 2020 | Apr. 4, 2020 | Jun. 29, 2019 | Jul. 4, 2020 | Jun. 29, 2019 | |||||||||||||||
Cost of sales | $ | 14 | $ | (5) | $ | (19) | $ | 122 | $ | (52) | |||||||||
Research & development | 72 | (213) | (24) | 102 | (192) | ||||||||||||||
Selling, general & administrative | 353 | (1,176) | 87 | 976 | (470) | ||||||||||||||
Impact on income (loss) from operations | $ | 439 | $ | (1,394) | $ | 44 | $ | 1,200 | $ | (714) | |||||||||
For the fiscal quarters ended July 4, 2020, April 4, 2020 and June 29, 2019, the impact on other expense, net from gains or losses on deferred compensation plan assets was income of $687, expense of $1,364 and income of $12, respectively. For the nine months ended July 4, 2020 and June 29, 2019, the impact on other expense, net from gains or losses on deferred compensation plan assets was income of $1,616 and expense of $811, respectively.
(C) | Amortization of intangibles is included in cost of sales and operating expenses as summarized below: |
Amortization of intangibles | Three Months Ended | Nine Months Ended | |||||||||||||||||
Jul. 4, 2020 | Apr. 4, 2020 | Jun. 29, 2019 | Jul. 4, 2020 | Jun. 29, 2019 | |||||||||||||||
Cost of sales | $ | 2,304 | $ | 10,611 | $ | 11,844 | $ | 23,795 | $ | 35,977 | |||||||||
Amortization of intangible assets | 643 | 1,296 | 6,782 | 3,371 | 11,748 | ||||||||||||||
Impact on income (loss) from operations | $ | 2,947 | $ | 11,907 | $ | 18,626 | $ | 27,166 | $ | 47,725 | |||||||||
For the fiscal quarters ended July 4, 2020, April 4, 2020 and June 29, 2019, the impact on net income (loss), net of tax was $2,139 ($0.09 per diluted share), $8,660 ($0.36 per diluted share), and $13,278 ($0.55 per diluted share), respectively. For the nine months ended July 4, 2020 and June 29, 2019, the impact on net income (loss), net of tax was $19,741 ($0.81 per diluted share) and $34,118 ($1.40 per diluted share), respectively.
(D) | For the nine months ended June 29, 2019, the impact of inventory step-up costs related to acquisitions was $456 ($353 net of tax ($0.01 per diluted share)). |
(E) | For the fiscal quarters ended July 4, 2020, April 4, 2020 and June 29, 2019, the impact of restructuring charges was $518 ($397 net of tax ($0.02 per diluted share)), $1,079 ($798 net of tax ($0.03 per diluted share)), and $21,273 ($14,771 net of tax ($0.61 per diluted share)), respectively. For the nine months ended July 4, 2020 and June 29, 2019, the impact of restructuring charges was $2,530 ($1,861 net of tax ($0.08 per diluted share)) and $22,629 ($15,890 net of tax ($0.65 per diluted share)), respectively. |
(F) | For the three and nine months ended July 4, 2020, selling, general & administrative expense includes an accelerated compensation charge for our former CEO of $941 ($732 net of tax ($0.03 per diluted share). For the nine months ended July 4, 2020, selling, general & administrative expense includes a legal settlement related to an asset recovery of $1,365 ($1,106 net of tax ($0.05 per diluted share)). For the three and nine months ended June 29, 2019, selling, general & administrative expense includes a legal settlement related to an asset recovery of $1,337 ($1,083 net of tax ($0.04 per diluted share)), respectively. |
(G) | For the fiscal quarter ended April 4, 2020, goodwill and other impairment charges included a $327,203 ($327,203 net of tax ($13.58 per diluted share)) charge for impairment of goodwill, a $121,350 ($94,651 net of tax ($3.92 per diluted share)) charge for impairment of long-lived assets and a $2,472 ($2,472 net of tax ($0.10 per diluted share)) charge for impairment of an investment. For the nine months ended July 4, 2020, goodwill and other impairment charges included a $327,203 ($327,203 net of tax ($13.63 per diluted share)) charge for impairment of goodwill, a $121,350 ($94,651 net of tax ($3.91 per diluted share)) charge for impairment of long-lived assets and a $2,472 ($2,472 net of tax ($0.10 per diluted share)) charge for impairment of an investment. |
(H) | The fiscal quarter ended July 4, 2020 included a non-recurring income tax charge of $5,261 ($0.21 per diluted share) and the fiscal quarter ended April 4, 2020 included non-recurring income tax net benefit of $7,612 ($0.31 per diluted share). The fiscal quarters ended July 4, 2020, April 4, 2020 and June 29, 2019 included a benefit of $51 ($0.00 per diluted share), a benefit of $314 ($0.01 per diluted share) and a charge of $4 ($0.00 per diluted share) of excess tax charges (benefits) for employee stock-based compensation, respectively. The nine months ended July 4, 2020 included non-recurring income tax net benefit of $2,202 ($0.09 per diluted share). The nine months ended July 4, 2020 and June 29, 2019 included $1,079 ($0.05 per diluted share) and $2,471 ($0.10 per diluted share) of excess tax benefits for employee stock-based compensation, respectively. |
Summarized balance sheet information is as follows (unaudited, in thousands):
Jul. 4, 2020 | Sep. 28, 2019 | ||||||
ASSETS | |||||||
Current assets: | |||||||
Cash, cash equivalents, restricted cash and short-term investments | $ | 421,626 | $ | 306,745 | |||
Accounts receivable, net | 197,757 | 267,553 | |||||
Inventories | 448,972 | 442,530 | |||||
Prepaid expenses and other assets | 90,237 | 77,993 | |||||
Total current assets | 1,158,592 | 1,094,821 | |||||
Property and equipment, net | 251,453 | 323,434 | |||||
Other assets | 360,080 | 664,914 | |||||
Total assets | $ | 1,770,125 | $ | 2,083,169 | |||
LIABILITIES AND STOCKHOLDERS' EQUITY | |||||||
Current liabilities: | |||||||
Short-term borrowings | $ | 16,554 | $ | 14,863 | |||
Accounts payable | 68,484 | 51,531 | |||||
Other current liabilities | 178,479 | 173,920 | |||||
Total current liabilities | 263,517 | 240,314 | |||||
Long-term liabilities | 613,102 | 558,119 | |||||
Total stockholders' equity | 893,506 | 1,284,736 | |||||
Total liabilities and stockholders' equity | $ | 1,770,125 | $ | 2,083,169 | |||
Reconciliation of GAAP to Non-GAAP net income (loss) (unaudited, in thousands, (other than per share data), net of tax):
Three Months Ended | Nine Months Ended | ||||||||||||||||||
Jul. 4, 2020 | Apr. 4, 2020 | Jun. 29, 2019 | Jul. 4, 2020 | Jun. 29, 2019 | |||||||||||||||
GAAP net income (loss) | $ | (8,708) | $ | (418,913) | $ | (3,099) | $ | (421,828) | $ | 53,201 | |||||||||
Stock-based compensation expense | 12,834 | 7,892 | 8,243 | 27,662 | 22,429 | ||||||||||||||
Amortization of intangible assets | 2,139 | 8,660 | 13,278 | 19,741 | 34,118 | ||||||||||||||
Restructuring charges and other | 1,129 | 798 | 14,771 | 2,593 | 15,890 | ||||||||||||||
Non-recurring tax expense (benefit) | 5,261 | (7,612) | — | (2,202) | — | ||||||||||||||
Tax charge (benefit) from stock-based compensation expense | (51) | (314) | 4 | (1,079) | (2,471) | ||||||||||||||
Goodwill and other impairment/asset charges (recoveries) | — | 424,326 | (1,083) | 423,220 | (1,083) | ||||||||||||||
Purchase accounting step-up | — | — | — | — | 353 | ||||||||||||||
Non-GAAP net income | $ | 12,604 | $ | 14,837 | $ | 32,114 | $ | 48,107 | $ | 122,437 | |||||||||
Non-GAAP net income per diluted share | $ | 0.52 | $ | 0.61 | $ | 1.33 | $ | 1.99 | $ | 5.03 | |||||||||
RISKS AND UNCERTAINTIES
This press release contains forward-looking statements, as defined under the Federal securities laws. These forward-looking statements include the statements in this press release that relate to confidence in the Company's business outlook. These forward-looking statements are not guarantees of future results and are subject to risks, uncertainties and assumptions that could cause our actual results to differ materially and adversely from those expressed in any forward-looking statement. Coherent and its business, including the aforementioned forward-looking statements, are subject to risks and uncertainties, including, but not limited to, risks associated with the recovery of global and regional economies from the negative effects of COVID-19 and related private and public sector measures; the impact of COVID-19 related matters on our business; global demand, acceptance and adoption of our products; the worldwide demand for flat panel displays and adoption of OLED for mobile displays; the pricing and availability of OLED displays; the demand for and use of our products in commercial applications; our ability to generate sufficient cash to fund capital spending or debt repayment; our successful implementation of our customer design wins; our and our customers' exposure to risks associated with worldwide economic conditions; our customers' ability to cancel long-term purchase orders; the ability of our customers to forecast their own end markets; our ability to accurately forecast future periods; continued timely availability of products and materials from our suppliers; our ability to timely ship our products and our customers' ability to accept such shipments; our ability to have our customers qualify our products; worldwide government economic policies, including trade relations between the United States and China; our ability to manage our expanded operations; our ability to successfully transfer the manufacturing of our High Power Fiber Lasers and related business and operations between facilities; our ability to successfully manage our planned site consolidation projects and other cost reduction programs and to achieve the related anticipated savings and improved operational efficiencies; and other risks identified in Coherent's SEC filings. Readers are encouraged to refer to the risk disclosures and critical accounting policies described in Coherent's Forms 10-K, 10-Q and 8-K, including the risks identified in today's financial press release, as applicable and as filed from time-to-time.
Founded in 1966, Coherent, Inc. is one of the world's leading providers of lasers, laser-based technologies and laser-based system solutions in a broad range of scientific, commercial and industrial customers. Our common stock is listed on the Nasdaq Global Select Market and is part of the Russell 1000 and Standard & Poor's MidCap 400 Index. For more information about Coherent, visit the company's website at www.coherent.com for product and financial updates.
5100 Patrick Henry Dr. P. O. Box 54980, Santa Clara, California 95056–0980 . Telephone (408) 764-4000
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