II-VI Incorporated Reports Fiscal 2016 Second Quarter Earnings; Book to Bill Ratio for the Quarter was 1.08; Return on Sales Was 9.9% on Revenue Growth of 8.3% to $192M

  • Year to date FY16 cash flows from operations increased 26% over the prior fiscal year
  • Q2 FY16 adjusted diluted EPS of $0.30 increased 25% compared to Q2 FY15


PITTSBURGH, Jan. 26, 2016 (GLOBE NEWSWIRE) -- II-VI Incorporated (Nasdaq:IIVI) ("II-VI" or the "Company") today reported results for its second fiscal quarter ended December 31, 2015.

Francis J. Kramer, Chairman and Chief Executive Officer said, “It was a busy quarter for our Company. We delivered solid operating results and, as recently announced, we executed definitive agreements to acquire two companies. Our Photonics segment significantly increased revenues and earnings, and its bookings were the catalyst for the Company’s book to bill ratio of 1.08. Our cash flow from operations increased 26% over the same period last year and we have utilized this cash to pay down debt and make strategic capital investments. Despite sluggishness in China and in our industrial markets, we are very encouraged about the prospects ahead for all of our business segments.”

Table 1
$ Millions, except per share amounts and %
(Unaudited)
Three Months Ended Six Months Ended
Dec 31, Sept 30, Dec 31, Dec 31, Dec 31,
2015 2015 2014 2015 2014
Bookings (1) $207.7 $187.2 $186.8 $394.9 $368.5
Revenues $191.5 $189.2 $176.8 $380.7 $362.6
Operating income $21.7 $21.8 $16.5 $43.5 $35.9
Net earnings $19.0 $17.2 $22.1 $36.2 $34.4
Adjusted Net Earnings (2) $19.0 $17.2 $15.0 $36.2 $27.3
Diluted earnings per share $0.30 $0.27 $0.35 $0.58 $0.55
Adjusted diluted earnings per share (2) $0.30 $0.27 $0.24 $0.58 $0.44
Other Selected Financial Metrics
Gross margin 37.3% 37.6% 35.7% 37.4% 36.1%
Operating margin 11.3% 11.5% 9.3% 11.4% 9.9%
EBITDA margin (3) 19.1% 19.1% 21.9% 19.1% 19.3%
Adjusted EBITDA margin (2) (3) 19.1% 19.1% 17.6% 19.1% 17.2%
Return on sales 9.9% 9.1% 12.5% 9.5% 9.5%
Adjusted return on sales (3) 9.9% 9.1% 8.5% 9.5% 7.5%
(1) Bookings are orders the Company expects to convert to revenues within the next twelve months.
(2) Adjusted items exclude a one-time settlement of $7.1 million, or $0.11 per share, received in 2014 related to certain payment obligations from the prior year.
See Tables 7 and 8 for Reconciliation of Reported Earnings to Non-GAAP Earnings.
(3) EBITDA is defined as earnings before interest, income taxes, depreciation and amortization.


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 third fiscal quarter ending March 31, 2016, the Company currently forecasts revenues to range from $185 million to $195 million and diluted earnings per share to range from $0.25-$0.29 at prevailing exchange rates and before any effects of any acquisitions. The Company will update its guidance when the transactions close. Comparable results for the quarter ended March 31, 2015 were revenues of $182.7 million and diluted earnings per share of $0.23. 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 Information

Operating income is defined as earnings 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 Six Months Ended
Dec 31, Sept 30, Dec 31, Dec 31, Dec 31,
2015 2015 2014 2015 2014
Bookings:
II-VI Laser Solutions $66.4 $69.1 $67.5 $135.5 $137.5
II-VI Photonics 97.5 65.2 66.1 162.7 132.4
II-VI Performance Products 43.8 52.9 53.2 96.7 98.6
Total Bookings $207.7 $187.2 $186.8 $394.9 $368.5
Revenues:
II-VI Laser Solutions $70.2 $71.6 $67.7 $141.8 $140.5
II-VI Photonics 74.3 71.9 60.9 146.2 124.5
II-VI Performance Products 47.0 45.7 48.2 92.7 97.6
Total Revenues $191.5 $189.2 $176.8 $380.7 $362.6
Operating Income:
II-VI Laser Solutions $11.2 $12.2 $12.2 $23.4 $25.1
II-VI Photonics 7.4 6.3 0.4 13.7 2.5
II-VI Performance Products 3.1 3.3 3.9 6.4 8.3
Total Operating Income $21.7 $21.8 $16.5 $43.5 $35.9
Operating Margin:
II-VI Laser Solutions 16.0% 17.0% 18.0% 16.5% 17.9%
II-VI Photonics 10.0% 8.8% 0.7% 9.4% 2.0%
II-VI Performance Products 6.6% 7.2% 8.1% 6.9% 8.5%
Total Operating Margin 11.3% 11.5% 9.3% 11.4% 9.9%


Table 3 is a reconciliation of Operating Income reported in this press release to reported Net Earnings.

Table 3
Reconciliation of Operating Income to Net Earnings
$ Millions
(Unaudited) Three Months Ended Six Months Ended
Dec 31, Sept 30, Dec 31, Dec 31, Dec 31,
2015 2015 2014 2015 2014
Operating income $21.7 $21.8 $16.5 $43.5 $35.9
Interest expense 0.6 0.6 1.0 1.2 2.2
Other expense (income), net (1.1) (1.0) (9.3) (2.1) (7.6)
Income taxes 3.2 5.0 2.7 8.2 6.9
Net Earnings $19.0 $17.2 $22.1 $36.2 $34.4


Table 4 is a reconciliation of Operating Income reported in this press release to reported EBITDA.

Table 4
Reconciliation of Operating Income to EBITDA
$ Millions
(Unaudited) Three Months Ended Six Months Ended
Dec 31, Sept 30, Dec 31, Dec 31, Dec 31,
2015 2015 2014 2015 2014
Operating income $21.7 $21.8 $16.5 $43.5 $35.9
Depreciation and amortization 13.8 13.3 13.0 27.1 26.6
Other income (expense) 1.1 1.0 9.3 2.1 7.6
Settlement Agreement - - (7.7) - (7.7)
Adjusted EBITDA $36.6 $36.1 $31.1 $72.7 $62.4


Table 5 is a reconciliation of EBITDA reported in this press release to reported Net Earnings.

Table 5
Reconciliation of EBITDA to Net Earnings
$ Millions
(Unaudited) Three Months Ended Six Months Ended
Dec 31, Sept 30, Dec 31, Dec 31, Dec 31,
2015 2015 2014 2015 2014
Adjusted EBITDA $36.6 $36.1 $31.1 $72.7 $62.4
Settlement Agreement - - 7.7 - 7.7
EBITDA 36.6 36.1 38.8 72.7 70.1
Interest expense 0.6 0.6 1.0 1.2 2.2
Depreciation and amortization 13.8 13.3 13.0 27.1 26.6
Income taxes 3.2 5.0 2.7 8.2 6.9
Net Earnings $19.0 $17.2 $22.1 $36.2 $34.4


Table 6 is a table of other selected financial information.

Table 6
Other Selected Financial Information
$ Millions, except share information
(Unaudited) Three Months Ended Six Months Ended
Dec 31, Sept 30, Dec 31, Dec 31, Dec 31,
2015 2015 2014 2015 2014
Cash paid for capital expenditures $9.8 $9.4 $10.1 $19.2 $31.6
Net payments on indebtedness $16.0 $13.5 $24.0 $29.5 $29.0
Share-based compensation expense, pre-tax $2.9 $4.0 $2.4 $6.9 $6.0
Cash paid for shares repurchased through the Company’s share repurchase program $0.4 $5.9 $5.0 $6.3 $11.3
Shares repurchased through the Company’s share repurchase program 25,200 355,338 372,739 380,538 853,934
Average diluted shares outstanding 62,672,510 62,728,932 62,276,212 62,700,722 62,532,431


Webcast Information

The Company will host a conference call at 9:00 a.m. Eastern Time on Tuesday, January 26, 2016 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/zgm6gmy. 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. EBITDA is an adjusted non-GAAP financial measurement that is considered by management to be useful in measuring the profitability between companies within the industry by reflecting operating results of the Company excluding non-operating factors. 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 relating to future events and expectations that are based on certain assumptions and contingencies. 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, 2015; (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
December 31, September 30, December 31,
2015 2015 2014
Revenues
Net sales:
Domestic $74,177 $70,751 $68,695
International 117,257 118,456 108,041
Total Revenues 191,434 189,207 176,736
Costs, Expenses & Other Expense (Income)
Cost of goods sold 120,090 118,018 113,718
Internal research and development 12,155 13,151 12,845
Selling, general and administrative 37,408 36,310 33,642
Interest expense 597 649 1,038
Other expense (income), net (994) (1,057) (9,295)
Total Costs, Expenses, & Other Expense (Income) 169,256 167,071 151,948
Earnings Before Income Taxes 22,178 22,136 24,788
Income Taxes 3,187 4,922 2,692
Net Earnings $18,991 $17,214 $22,096
Diluted Earnings Per Share: $0.30 $0.27 $0.35
Basic Earnings Per Share: $0.31 $0.28 $0.36
Average Shares Outstanding - Diluted 62,673 62,729 62,276
Average Shares Outstanding - Basic 61,165 61,223 61,129


II-VI Incorporated and Subsidiaries
Condensed Consolidated Statements of Earnings (Unaudited)
($000 except per share data)
Six Months Ended
December 31, December 31,
2015 2014
Revenues
Net sales:
Domestic $144,928 $130,676
International 235,713 231,893
Total Revenues 380,641 362,569
Costs, Expenses & Other Expense (Income)
Cost of goods sold 238,108 231,692
Internal research and development 25,306 25,788
Selling, general and administrative 73,718 69,162
Interest expense 1,246 2,242
Other expense (income), net (2,051) (7,613)
Total Costs, Expenses, & Other Expense (Income) 336,327 321,271
Earnings Before Income Taxes 44,314 41,298
Income Taxes 8,109 6,900
Net Earnings $36,205 $34,398
Diluted Earnings Per Share: $0.58 $0.55
Basic Earnings Per Share: $0.59 $0.56
Average Shares Outstanding - Diluted 62,701 62,532
Average Shares Outstanding - Basic 61,194 61,319


II-VI Incorporated and Subsidiaries
Condensed Consolidated Balance Sheets (Unaudited)
($000)
December 31, June 30,
2015 2015
Assets
Current Assets
Cash and cash equivalents $177,084 $173,634
Accounts receivable 128,260 140,772
Inventories 167,928 164,388
Deferred income taxes - 13,260
Prepaid and refundable income taxes 8,355 6,881
Prepaid and other current assets 13,999 14,033
Total Current Assets 495,626 512,968
Property, plant & equipment, net 200,563 203,812
Goodwill 193,874 195,894
Other intangible assets, net 115,939 122,462
Investment 12,343 11,914
Deferred income taxes 16,099 2,210
Other assets 9,001 8,904
Total Assets $1,043,445 $1,058,164
Liabilities and Shareholders Equity
Current Liabilities
Current portion of long-term debt $20,000 $20,000
Accounts payable 38,824 45,275
Accruals and other current liabilities 72,069 73,881
Total Current Liabilities 130,893 139,156
Long-term debt 126,491 155,957
Deferred income taxes 6,303 7,105
Other liabilities 27,732 26,865
Total Liabilities 291,419 329,083
Total Shareholders’ Equity 752,026 729,081
Total Liabilities and Shareholders Equity $1,043,445 $1,058,164


II-VI Incorporated and Subsidiaries
Condensed Consolidated Statements of Cash Flows (Unaudited)
($000)
Six Months Ended
December 31,
2015 2014
Cash Flows from Operating Activities
Net cash provided by operating activities $62,300 $49,444
Cash Flows from Investing Activities
Additions to property, plant and equipment (19,156) (31,609)
Proceeds from the sale of plant, property and equipment 39 101
Net cash used in investing activities (19,117) (31,508)
Cash Flows from Financing Activities
Proceeds from borrowings 4,000 3,000
Payments on borrowings (33,500) (32,000)
Purchases of treasury stock (6,284) (11,301)
Proceeds from exercises of stock options 1,794 2,042
Other financing activities (1,861) (894)
Net cash used in financing activities (35,851) (39,153)
Effect of exchange rate changes on cash and cash equivalents (3,882) 1,506
Net increase (decrease) in cash and cash equivalents 3,450 (19,711)
Cash and Cash Equivalents at Beginning of Period 173,634 174,660
Cash and Cash Equivalents at End of Period $177,084 $154,949


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
Dec 31, Sept 30, Dec 31,
2015 2015 2014
Reported Earnings $19.0 $17.2 $22.1
Subtract:
Settlement agreement - - (7.7)
Income tax impact on unusual items - - 0.6
Adjusted Non-GAAP Earnings $19.0 $17.2 $15.0
Per share data:
Reported Earnings:
Earnings - Diluted Earnings Per Share: $0.30 $0.27 $0.35
Earnings - Basic Earnings Per Share: $0.31 $0.28 $0.36
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: $0.30 $0.27 $0.24
Adjusted Non-GAAP Earnings - Basic Earnings Per Share: $0.31 $0.28 $0.25


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)
Six Months Ended
Dec 31, Dec 31,
2015 2014
Reported Earnings $36.2 $34.4
Subtract:
Settlement agreement - (7.7)
Income tax impact on unusual items - 0.6
Adjusted Non-GAAP Earnings $36.2 $27.3
Per share data:
Reported Earnings:
Earnings - Diluted Earnings Per Share: $0.58 $0.55
Earnings - Basic Earnings Per Share: $0.59 $0.56
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: $0.58 $0.44
Adjusted Non-GAAP Earnings - Basic Earnings Per Share: $0.59 $0.45




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

Source:II-VI Incorporated