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II-VI Incorporated Reports Fiscal 2015 Third Quarter Earnings; Achieved a Book to Bill Ratio of 1.07 on Increasing Revenues; Record Bookings and Backlog

  • Operating Income Doubled Compared to Q3 FY14
  • Net Earnings Increased 70% to $0.23 Per Share Compared to Q3 FY14

PITTSBURGH, April 28, 2015 (GLOBE NEWSWIRE) -- II-VI Incorporated (Nasdaq:IIVI) ("II-VI" or the "Company") today reported results for its third fiscal quarter ended March 31, 2015.

Francis J. Kramer, Chairman and Chief Executive Officer said, "We had a solid quarter. We continued to accomplish our goals to put the Laser Solutions and Photonics acquisition on a solid foundation. The Laser Enterprise wafer fab is operating on a more consistent basis and going forward, we expect this to drive synergies at other divisions. Our revenue growth was all organic, 5% year over year and 3% sequentially absorbing considerable currency effects. Year to date margin performance remained strong and book to bill ratio increased to 1.07 with strong bookings from Photonics.

Table 1
$ Millions, except per share amounts and %
(Unaudited)
Three Months Ended Nine Months Ended
Mar 31,
2015
Dec 31,
2014
Mar 31,
2014
Mar 31,
2015
Mar 31,
2014
Bookings(1) $ 195.7 $ 186.8 $ 187.5 $ 564.2 $ 497.9
Revenues $ 182.7 $ 176.8 $ 173.6 $ 545.3 $ 495.3
Operating income $ 17.7 $ 16.5 $ 8.7 $ 53.6 $ 31.8
Net earnings $ 14.5 $ 22.1 $ 8.5 $ 48.9 $ 25.8
Diluted earnings per share $ 0.23 $ 0.35 $ 0.13 $ 0.78 $ 0.40
Adjusted diluted earnings per share(2) $ 0.23 $ 0.24 $ 0.13 $ 0.67 $ 0.40
Other Selected Financial Metrics
Gross margin 36.0% 35.7% 31.5% 36.1% 33.2%
Operating margin 9.7% 9.3% 5.0% 9.8% 6.4%
Adjusted EBITDA margin(2) 15.8% 17.6% 13.6% 16.7% 14.9%
Adjusted return on sales(2) 7.9% 8.5% 4.9% 7.7% 5.2%
(1) Bookings are orders expected to convert to revenues within the next twelve months.
(2) EBITDA is defined as earnings before interest, income taxes, depreciation and amortization. Adjusted EBITDA, adjusted diluted earnings per share and adjusted return on sales excludes a one-time settlement that occurred in the Company's current second fiscal quarter related to certain payment obligations. See Tables 7 and 8 for Reconciliation of Reported Earnings to Non-GAAP Earnings.

As discussed below under "Use of Non-GAAP Financial Measures," the Company is presenting certain non-GAAP financial measures in this release. Investors should consider non-GAAP 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 schedules for the applicable GAAP to non-GAAP reconciliations.

Outlook

For the fourth fiscal quarter ending June 30, 2015, the Company currently forecasts revenues to range from $185 million to $193 million and earnings per share from continuing operations to range from $0.20-$0.24 per share-diluted. Comparable results for the quarter ended June 30, 2014 were revenues of $187.9 million and earnings per share from continuing operations of $0.20 per share-diluted. All financial performance measures included in these forecasts and their respective historical references were prepared in accordance with GAAP. 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.

Segment Simplification

As of July 1, 2014, the Company realigned from five to three reporting segments and reports its financial results as follows: (i) II-VI Laser Solutions, (ii) II-VI Photonics, and (iii) II-VI Performance Products. Segment information for all periods presented reflects the updated segment organization.

  • II-VI Laser Solutions contains the former Infrared Optics segment, the semiconductor laser portion of the former Active Optical Products segment, and smaller units of high-power laser technology from the former Near-Infrared Optics segment.
  • II-VI Photonics contains the remaining majority of the former Near-Infrared Optics segment as well as the pump laser and optical amplifier businesses of the former Active Optical Products segment.
  • II-VI Performance Products contains the former Military & Materials and the former Advanced Products Group segments.

Segment Information

Operating income is defined as net income before income taxes, interest expense and other expense or income, net.

Table 2
Segment Bookings, Revenues, Operating Income and Margins
$ Millions, except %
(Unaudited)
Three Months Ended Nine Months Ended
Mar 31,
2015
Dec 31,
2014
Mar 31,
2014
Mar 31,
2015
Mar 31,
2014
Bookings:
II-VI Laser Solutions $ 72.8 $ 67.5 $ 67.2 $ 210.3 $ 180.9
II-VI Photonics 72.0 66.1 63.2 204.4 156.0
II-VI Performance Products 50.9 53.2 57.1 149.5 161.0
Total Bookings $ 195.7 $ 186.8 $ 187.5 $ 564.2 $ 497.9
Revenues:
II-VI Laser Solutions $ 73.3 $ 67.7 $ 63.3 $ 213.8 $ 182.8
II-VI Photonics 64.3 60.9 58.3 188.8 155.3
II-VI Performance Products 45.1 48.2 52.0 142.7 157.2
Total Revenues $ 182.7 $ 176.8 $ 173.6 $ 545.3 $ 495.3
Operating Income:
II-VI Laser Solutions $ 14.1 $ 12.2 $ 4.0 $ 39.2 $ 16.4
II-VI Photonics 0.6 0.4 0.2 3.1 0.8
II-VI Performance Products 3.0 3.9 4.5 11.3 14.6
Total Operating Income $ 17.7 $ 16.5 $ 8.7 $ 53.6 $ 31.8
Operating Margin:
II-VI Laser Solutions 19.2% 18.0% 6.3% 18.3% 9.0%
II-VI Photonics 0.9% 0.7% 0.3% 1.6% 0.5%
II-VI Performance Products 6.7% 8.1% 8.7% 7.9% 9.3%
Total Operating Margin 9.7% 9.3% 5.0% 9.8% 6.4%
Table 3
Reconciliation of Operating Income to Net Earnings
$ Millions
(Unaudited)
Three Months Ended Nine Months Ended
Mar 31,
2015
Dec 31,
2014
Mar 31,
2014
Mar 31,
2015
Mar 31,
2014
Operating income $ 17.7 $ 16.5 $ 8.7 $ 53.6 $ 31.8
Interest expense 0.9 1.0 1.4 3.1 3.1
Other expense (income), net 1.5 (9.3) (1.7) (6.1) (2.8)
Income taxes 0.8 2.7 0.5 7.7 5.8
Income from discontinued operation -- -- -- -- (0.1)
Net Earnings $ 14.5 $ 22.1 $ 8.5 $ 48.9 $ 25.8
Table 4
Reconciliation of Operating Income to Adjusted EBITDA
$ Millions
(Unaudited)
Three Months Ended Nine Months Ended
Mar 31,
2015
Dec 31,
2014
Mar 31,
2014
Mar 31,
2015
Mar 31,
2014
Operating income, net $ 17.7 $ 16.5 $ 8.7 $ 53.6 $ 31.8
Depreciation and amortization 12.6 13.0 13.2 39.2 39.4
Other income (expense) (1.5) 9.3 1.7 6.1 2.8
Settlement agreement -- (7.7) -- (7.7) --
Adjusted EBITDA $ 28.8 $ 31.1 $ 23.6 $ 91.2 $ 74.0
Table 5
Reconciliation of Adjusted EBITDA to Net Earnings
$ Millions
(Unaudited)
Three Months Ended Nine Months Ended
Mar 31,
2015
Dec 31,
2014
Mar 31,
2014
Mar 31,
2015
Mar 31,
2014
Adjusted EBITDA $ 28.8 $ 31.1 $ 23.6 $ 91.2 $ 74.0
Settlement agreement -- 7.7 -- 7.7 --
EBITDA 28.8 38.8 23.6 98.9 74.0
Interest expense 0.9 1.0 1.4 3.1 3.1
Depreciation and amortization 12.6 13.0 13.2 39.2 39.4
Income taxes 0.8 2.7 0.5 7.7 5.8
Income from discontinued operation -- -- -- -- (0.1)
Net Earnings $ 14.5 $ 22.1 $ 8.5 $ 48.9 $ 25.8
Table 6
Other Selected Financial Information
$ Millions, except share information
(Unaudited)
Three Months Ended Nine Months Ended
Mar 31,
2015
Dec 31,
2014
Mar 31,
2014
Mar 31,
2015
Mar 31,
2014
Cash paid for capital expenditures $ 8.6 $ 10.1 $ 6.5 $ 40.2 $ 20.8
Net borrowings (payments) on indebtedness $ (24.5) $ (24.0) $ (20.0) $ (53.5) $ 149.0
Share-based compensation expense, pre-tax $ 2.6 $ 2.4 $ 2.5 $ 8.6 $ 9.7
Cash paid for shares repurchased through the Company's share repurchase program $ 1.4 $ 5.0 $ 11.0 $ 12.7 $ 11.0
Shares repurchased through the Company's share repurchase program 82,115 372,739 750,000 936,049 750,000
Average shares outstanding – Diluted 62,512,551 62,276,212 63,746,042 62,604,672 63,869,784

Webcast Information

The Company will host a conference call at 9:00 a.m. Eastern Time on Tuesday, April 28, 2015 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/nd39cc6. 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 considered to be non-GAAP financial measures. 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 and adjusted non-GAAP earnings per share measure the earnings of the Company, excluding non-recurring or unusual items that are considered by management to be outside of the Company's standard operations. There are limitations associated with the use of non-GAAP financial measures, including that such measures may not be entirely comparable to similarly titled measures used by other companies, due to potential differences among calculation methodologies. Thus, there can be no assurance that items excluded from the non-GAAP financial measures will not occur in the future, or that there could be cash costs associated with items excluded from 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 develops innovative products for diversified applications in the industrial, optical communications, military, life sciences, semiconductor equipment, and consumer markets. Headquartered in Saxonburg, Pennsylvania, with research and development, manufacturing, sales, service, and distribution facilities worldwide, the Company produces a wide variety of application-specific photonic and electronic materials and components, and deploys them in various forms including integrated with advanced software to enable our customers' success.

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 in this release 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, 2014; (iii) the purchasing patterns of 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; (vi) the Company's ability to assimilate recently acquired businesses, and risks, costs and uncertainties associated with such acquisitions; and/or (vii) 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
March 31,
2015
December 31,
2014
March 31,
2014
Revenues
Net sales:
Domestic $ 68,233 $ 68,695 $ 54,424
International 114,476 108,041 119,131
Total Revenues 182,709 176,736 173,555
Costs, Expenses & Other Expense (Income)
Cost of goods sold 116,984 113,718 118,865
Internal research and development 12,874 12,845 12,099
Selling, general and administrative 35,192 33,642 33,848
Interest expense 844 1,038 1,412
Other expense (income), net 1,534 (9,295) (1,694)
Total Costs, Expenses, & Other Expense (Income) 167,428 151,948 164,530
Earnings Before Income Taxes 15,281 24,788 9,025
Income Taxes 773 2,692 494
Net Earnings $ 14,508 $ 22,096 $ 8,531
Diluted Earnings Per Share:
Consolidated $ 0.23 $ 0.35 $ 0.13
Basic Earnings Per Share:
Consolidated $ 0.24 $ 0.36 $ 0.14
Average Shares Outstanding - Diluted 62,513 62,276 63,746
Average Shares Outstanding - Basic 61,082 61,129 62,355
II-VI Incorporated and Subsidiaries
Condensed Consolidated Statements of Earnings (Unaudited)
($000 except per share data)
Nine Months Ended
March 31,
2015
March 31,
2014
Revenues
Net sales:
Domestic $ 198,909 $ 178,683
International 346,369 316,657
Total Revenues 545,278 495,340
Costs, Expenses & Other Expense (Income)
Cost of goods sold 348,676 330,945
Internal research and development 38,662 31,201
Selling, general and administrative 104,354 101,412
Interest expense 3,086 3,064
Other expense (income), net (6,079) (2,766)
Total Costs, Expenses, & Other Expense (Income) 488,699 463,856
Earnings from Continuing Operations Before Income Taxes 56,579 31,484
Income Taxes 7,673 5,823
Earnings from Continuing Operations 48,906 25,661
Earnings from Discontinued Operation, net of income taxes -- 133
Net Earnings $ 48,906 $ 25,794
Diluted Earnings Per Share:
Continuing operations $ 0.78 $ 0.40
Discontinued operation $ -- $ --
Consolidated $ 0.78 $ 0.40
Basic Earnings Per Share:
Continuing operations $ 0.80 $ 0.41
Discontinued operation $ -- $ --
Consolidated $ 0.80 $ 0.41
Average Shares Outstanding - Diluted 62,605 63,870
Average Shares Outstanding - Basic 61,319 62,426
II-VI Incorporated and Subsidiaries
Condensed Consolidated Balance Sheets (Unaudited)
($000)
March 31,
2015
June 30,
2014
Assets
Current Assets
Cash and cash equivalents $ 154,703 $ 174,660
Accounts receivable 134,982 136,723
Inventories 164,401 165,873
Deferred income taxes 12,193 11,118
Prepaid and refundable income taxes 7,139 4,440
Prepaid and other current assets 15,429 12,917
Total Current Assets 488,847 505,731
Property, plant & equipment, net 202,073 208,939
Goodwill 195,634 196,145
Other intangible assets, net 125,399 136,404
Investment 12,296 11,589
Deferred income taxes 5,170 4,038
Other assets 8,849 9,080
Total Assets $ 1,038,268 $ 1,071,926
Liabilities and Shareholders' Equity
Current Liabilities
Current portion of long-term debt $ 20,000 $ 20,000
Accounts payable 40,960 45,767
Accruals and other current liabilities 69,339 69,298
Total Current Liabilities 130,299 135,065
Long-term debt 168,002 221,960
Deferred income taxes 7,464 7,440
Other liabilities 21,641 32,418
Total Liabilities 327,406 396,883
Total Shareholders' Equity 710,862 675,043
Total Liabilities and Shareholders' Equity $ 1,038,268 $ 1,071,926
II-VI Incorporated and Subsidiaries
Condensed Consolidated Statements of Cash Flows (Unaudited)
($000)
Nine Months Ended
March 31,
2015 2014
Cash Flows from Operating Activities
Net cash provided by:
Continuing operations $ 85,703 $ 67,408
Discontinued operation -- 1,197
Net cash provided by operating activities 85,703 68,605
Cash Flows from Investing Activities
Additions to property, plant and equipment (40,163) (20,767)
Purchases of businesses, net of cash acquired -- (177,676)
Other investing activities 64 226
Net cash used in investing activities (40,099) (198,217)
Cash Flows from Financing Activities
Proceeds from borrowings 3,000 183,000
Payments on borrowings (56,500) (34,000)
Purchases of treasury stock (12,729) (10,957)
Payment of redeemable non-controlling interest -- (8,789)
Payments on earn-out arrangements (2,350) (2,200)
Proceeds from exercises of stock options 4,058 3,613
Other financing activities (610) (1,375)
Net cash (used in) provided by financing activities (65,131) 129,292
Effect of exchange rate changes on cash and cash equivalents (430) 578
Net (decrease) increase in cash and cash equivalents (19,957) 258
Cash and Cash Equivalents at Beginning of Period 174,660 185,433
Cash and Cash Equivalents at End of Period $ 154,703 $ 185,691
Table 7
II-VI Incorporated and Subsidiaries
Reconciliation of Selected Non-GAAP Financial Measurements
($ Millions, except per share amounts)
Reconciliation of Reported Earnings to Non-GAAP Earnings
(Unaudited)
Three Months Ended
Mar 31,
2015
Dec 31,
2014
Mar 31,
2014
Reported Earnings $ 14.5 $ 22.1 $ 8.5
Subtract:
Settlement agreement -- (7.7) --
Income tax impact on unusual items -- 0.6 --
Adjusted Non-GAAP Earnings $ 14.5 $ 15.0 $ 8.5
Per share data:
Reported Earnings:
Earnings - Diluted Earnings Per Share: $ 0.23 $ 0.35 $ 0.13
Earnings - Basic Earnings Per Share: $ 0.24 $ 0.36 $ 0.14
Per share, After-Tax Impact of Special Items on:
Earnings - Diluted Earnings Per Share: $ -- $ (0.11) $ --
Earnings - Basic Earnings Per Share: $ -- $ (0.12) $ --
Adjusted Non-GAAP Earnings:
Adjusted Non-GAAP Earnings - Diluted Earnings Per Share: $ 0.23 $ 0.24 $ 0.13
Adjusted Non-GAAP Earnings - Basic Earnings Per Share: $ 0.24 $ 0.25 $ 0.14
Table 8
II-VI Incorporated and Subsidiaries
Reconciliation of Selected Non-GAAP Financial Measurements
($ Millions, except per share amounts)
Reconciliation of Reported Earnings to Non-GAAP Earnings
(Unaudited)
Nine Months Ended
Mar 31,
2015
Mar 31,
2014
Reported Earnings $ 48.9 $ 25.7
Subtract:
Settlement agreement (7.7) --
Income tax impact on unusual items 0.6 --
Adjusted Non-GAAP Earnings from Continuing Operations $ 41.8 $ 25.7
Per share data:
Reported Earnings:
Earnings - Diluted Earnings Per Share: $ 0.78 $ 0.40
Earnings - Basic Earnings Per Share: $ 0.80 $ 0.41
Per share, After-Tax Impact of Special Items on:
Earnings - Diluted Earnings Per Share: $ (0.11) $ --
Earnings - Basic Earnings Per Share: $ (0.12) $ --
Adjusted Non-GAAP Earnings:
Adjusted Non-GAAP Earnings - Diluted Earnings Per Share: $ 0.67 $ 0.40
Adjusted Non-GAAP Earnings - Basic Earnings Per Share: $ 0.68 $ 0.41

CONTACT: II-VI Incorporated Mary Jane Raymond, Chief Financial Officer (724) 352-4455Source:II-VI Incorporated