II-VI Incorporated Reports Fiscal 2016 First Quarter Earnings;

  • FY16 Cash Flows From Operations Surpassed $22 Million in the First Quarter
  • FY16 Diluted EPS of $0.27 Increased 35% Compared to First Quarter FY15

PITTSBURGH, Oct. 27, 2015 (GLOBE NEWSWIRE) — II-VI Incorporated (Nasdaq:IIVI) (“II-VI” or the “Company”) today reported results for its first fiscal quarter ended September 30, 2015.

Francis J. Kramer, Chairman and Chief Executive Officer said, “We started our new fiscal year with a very good first quarter. Component sales into the optical communications market led the growth in margins, and all businesses contributed to our earnings growth. We had one of our best fiscal year starts in generating cash flow from operations. We continued to pay down debt and are now in a net cash position. We think this performance lays a solid foundation for progress this year.”

Table 1
$ Millions, except per share amounts and %
(Unaudited)
           
  Three Months Ended % Increase
(Decrease) from
           
  Sept 30,
2015
June 30,
2015
Sept 30,
2014
June 30,
2015
Sept 30,
2014
           
Bookings (1) $ 187.2 $ 197.5 $ 181.7 (5%) 3%
Revenues $ 189.2 $ 196.7 $ 185.8 (4%) 2%
Operating income $ 21.8 $ 23.2 $ 19.4 (6%) 12%
Net earnings $ 17.2 $ 17.1 $ 12.3 1% 40%
Diluted earnings per share $ 0.27 $ 0.27 $ 0.20 0% 35%
           
Other Selected Financial Metrics          
Gross margin 37.6% 38.1% 36.5% (50 bps) 110 bps
Operating margin 11.5% 11.8% 10.4% (30 bps) 110 bps
EBITDA margin (2) 19.1% 18.9% 16.8% 20 bps 230 bps
Return on sales 9.1% 8.7% 6.6% 40 bps 250 bps
           
(1)  Bookings are orders the Company expects to convert to revenues within the next twelve months.
(2)  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 second fiscal quarter ending December 31, 2015, the Company currently forecasts revenues to range from $180 million to $192 million and diluted earnings per share to range from $0.21-$0.26 at prevailing exchange rates. Comparable results for the quarter ended December 31, 2014 were revenues of $176.8 million and $0.35 diluted earnings per share including $0.11 per share on a one time settlement related to certain payment obligations. 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 % Increase (Decrease)
from
           
  Sept 30,
2015
June 30,
2015
Sept 30,
2014
June 30,
2015
Sept 30,
2014
           
Bookings:          
II-VI Laser Solutions $ 69.1 $ 74.5 $ 70.0 (7%) (1%)
II-VI Photonics 65.2 78.5 66.3 (17%) (2%)
II-VI Performance Products 52.9 44.5 45.4 19% 17%
Total Bookings $ 187.2 $ 197.5 $ 181.7 (5%) 3%
           
Revenues:          
II-VI Laser Solutions $ 71.6 $ 74.1 $ 72.8 (3%) (2%)
II-VI Photonics 71.9 72.0 63.6 0% 13%
II-VI Performance Products 45.7 50.6 49.4 (10%) (7%)
Total Revenues $ 189.2 $ 196.7 $ 185.8 (4%) 2%
           
Operating Income:          
II-VI Laser Solutions $ 12.2 $ 15.8 $ 12.9 (23%) (5%)
II-VI Photonics 6.3 4.1 2.1 54% 200%
II-VI Performance Products 3.3 3.3 4.4 0% (25%)
Total Operating Income $ 21.8 $ 23.2 $ 19.4 (6%) 12%
           
Operating Margin:          
II-VI Laser Solutions 17.0% 21.3% 17.7% (430 bps) (70 bps)
II-VI Photonics 8.8% 5.7% 3.3% 310 bps 550 bps
II-VI Performance Products 7.2% 6.5% 8.9% 70 bps (170 bps)
Total Operating Margin 11.5% 11.8% 10.4% (30 bps) 110 bps

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
       
  Sept 30,
2015
June 30,
2015
Sept 30,
2014
       
Operating income $ 21.8 $ 23.2 $ 19.4
Interest expense 0.6 0.8 1.2
Other expense (income), net (1.0) (0.1) 1.7
Income taxes 5.0 5.4 4.2
Net Earnings $ 17.2 $ 17.1 $ 12.3

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
       
  Sept 30,
2015
June 30,
2015
Sept 30,
2014
       
Operating income $ 21.8 $ 23.2 $ 19.4
Depreciation and amortization 13.3 13.9 13.6
Other income (expense) 1.0 0.1 (1.7)
EBITDA $ 36.1 $ 37.2 $ 31.3

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
       
  Sept 30,
2015
June 30,
2015
Sept 30,
2014
       
EBITDA $ 36.1 $ 37.2 $ 31.3
Interest expense 0.6 0.8 1.2
Depreciation and amortization 13.3 13.9 13.6
Income taxes 5.0 5.4 4.2
Net Earnings $ 17.2 $ 17.1 $ 12.3

Table 6 is a table of other selected financial information.

Other Selected Financial Information from Continuing Operations      
$ Millions, except share information      
(Unaudited) Three Months Ended
       
  Sept 30,
2015
June 30,
2015
Sept 30,
2014
       
Cash paid for capital expenditures  $ 9.4  $ 12.1  $ 21.5
Net payments on indebtedness  $ (13.5)  $ (12.0)  $ (5.0)
Share-based compensation expense, pre-tax  $ 4.0  $ 2.8  $ 3.6
Cash paid for shares repurchased through the Company’s share repurchase program  $ 5.9 $ —  $ 5.1
Shares repurchased through the Company’s share repurchase program 355,338 481,195
Average diluted shares outstanding 62,728,932 62,767,763 62,788,650

Webcast Information

The Company will host a conference call at 9:00 a.m. Eastern Time on Tuesday, October 27, 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/porlzd9. 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. 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
  September 30,
2015
June 30,
2015
September 30,
2014
Revenues      
Net sales:      
Domestic  $ 70,751  $ 75,233  $ 61,981
International 118,456 121,450 123,852
Total Revenues 189,207 196,683 185,833
       
       
Costs, Expenses & Other Expense (Income)      
Cost of goods sold 118,018 121,687 117,974
Internal research and development 13,151 12,598 12,943
Selling, general and administrative 36,310 39,185 35,520
Interest expense 649 777 1,204
Other expense (income), net (1,057) (97) 1,682
Total Costs, Expenses, & Other Expense (Income) 167,071 174,150 169,323
       
Earnings Before Income Taxes 22,136 22,533 16,510
       
Income Taxes 4,922 5,464 4,208
       
Net Earnings  $ 17,214  $ 17,069  $ 12,302
       
       
Diluted Earnings Per Share:  $ 0.27  $ 0.27  $ 0.20
       
Basic Earnings Per Share:  $ 0.28  $ 0.28  $ 0.20
       
Average Shares Outstanding – Diluted 62,729 62,768 62,789
Average Shares Outstanding – Basic 61,223 61,154 61,508
     
II-VI Incorporated and Subsidiaries    
Condensed Consolidated Balance Sheets (Unaudited)    
($000)    
     
  September 30,
2015
June 30,
2015
Assets    
Current Assets    
Cash and cash equivalents  $ 163,779  $ 173,634
Accounts receivable 133,305 140,772
Inventories 167,266 164,388
Deferred income taxes 13,141 13,260
Prepaid and refundable income taxes 7,532 6,881
Prepaid and other current assets 12,130 14,033
Total Current Assets 497,153 512,968
Property, plant & equipment, net 201,001 203,812
Goodwill 194,594 195,894
Other intangible assets, net 119,097 122,462
Investment 12,178 11,914
Deferred income taxes 1,013 2,210
Other assets 8,990 8,904
Total Assets  $ 1,034,026  $ 1,058,164
     
Liabilities and Shareholders’ Equity    
Current Liabilities    
Current portion of long-term debt  $ 20,000  $ 20,000
Accounts payable 39,357 45,275
Accruals and other current liabilities 65,441 73,881
Total Current Liabilities 124,798 139,156
Long-term debt 142,493 155,957
Deferred income taxes 5,565 7,105
Other liabilities 26,409 26,865
Total Liabilities 299,265 329,083
Total Shareholders’ Equity 734,761 729,081
Total Liabilities and Shareholders’ Equity  $ 1,034,026  $ 1,058,164
     
II-VI Incorporated and Subsidiaries    
Condensed Consolidated Statements of Cash Flows (Unaudited)    
($000)    
     
  Three Months Ended
September 30,
  2015 2014
Cash Flows from Operating Activities    
Net cash provided by operating activities $ 22,179 $ 856
     
Cash Flows from Investing Activities    
Additions to property, plant and equipment (9,424) (21,530)
Other investing activities 25
Net cash used in investing activities (9,399) (21,530)
     
Cash Flows from Financing Activities    
Proceeds from borrowings 4,000
Payments on borrowings (17,500) (5,000)
Purchases of treasury stock (5,884) (5,093)
Proceeds from exercises of stock options 766 1,504
Other financing activities (1,650) (1,248)
Net cash used in financing activities (20,268) (9,837)
     
Effect of exchange rate changes on cash and cash equivalents (2,367) 1,266
     
Net decrease in cash and cash equivalents (9,855) (29,245)
     
Cash and Cash Equivalents at Beginning of Period 173,634 174,660
Cash and Cash Equivalents at End of Period  $ 163,779  $ 145,415
CONTACT: II-VI Incorporated
         Mary Jane Raymond, Chief Financial Officer
         (724) 352-4455