EXHIBIT 99.1
II-VI Incorporated Reports Fiscal 2015 First Quarter Earnings; EPS Increases 33% on Revenue Growth of 24% from the Year-Ago Quarter
- Operating income increased 44% compared to Q1 FY14
- Net earnings increased 27% compared to Q1 FY14
PITTSBURGH, Oct. 28, 2014 (GLOBE NEWSWIRE) -- II-VI Incorporated (Nasdaq:IIVI) ("II-VI" or the "Company") today reported results for its first fiscal quarter ended September 30, 2014.
Francis J. Kramer, President and Chief Executive Officer said, "This quarter was a good step forward. Our results were driven by improvements from most of the product portfolio, including fiber, direct diode and CO2 laser components. We expect to deliver improving results during the coming quarters as we continue identifying synergies, consolidating businesses, and decreasing costs to address end market challenges."
Below is a summary of the Company's key operating performance metrics.
| | $ Millions, except per share amounts, % and basis points ("bps") |
| | (Unaudited) |
| | | | | | |
| | Three Months Ended | % Increase (Decrease) from |
| | Sept 30, | June 30, | Sept 30, | June 30, | Sept 30, |
| | 2014 | 2014 | 2013 | 2014 | 2013 |
| | | | | | |
| Bookings | $181.7 | $193.3 | $142.5 | (6%) | 28% |
| Revenues | $185.8 | $187.9 | $150.0 | (1%) | 24% |
| Net Earnings | $12.3 | $12.7 | $9.7 | (3%) | 27% |
| Diluted earnings per share | $0.20 | $0.20 | $0.15 | - | 33% |
| | | | | | |
| Other Selected Financial Metrics | | | | | |
| Gross margin | 36.5% | 33.2% | 37.5% | 330 bps | (100 bps) |
| Operating margin | 10.4% | 7.8% | 9.0% | 260 bps | 140 bps |
| EBITDA margin | 16.8% | 15.6% | 16.8% | 120 bps | 0 bps |
| Return on sales | 6.6% | 6.7% | 6.5% | (10 bps) | 10 bps |
Bookings are orders we expect to convert to revenues within the next twelve months.
As discussed below under "Use of Non-GAAP Financial Measures," the Company is presenting 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, 2014, the Company currently forecasts revenues from continuing operations to range from $172 million to $180 million and earnings per share from continuing operations to range from $0.15 to $0.18 per share-diluted. Comparable results for the quarter ended December 31, 2013 were revenues from continuing operations of $171.8 million and earnings per share from continuing operations of $0.12. 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 has realigned from five to three reporting segments and now 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 earnings before income taxes, interest expense and other expense or income, net.
| Segment Bookings, Revenues and Operating Income |
| $ Millions, except % |
| (Unaudited) | Three Months Ended | % Increase (Decrease) from |
| | Sept 30, | June 30, | Sept 30, | June 30, | Sept 30, |
| | 2014 | 2014 | 2013 | 2014 | 2013 |
| | | | | | |
| Bookings: | | | | | |
| II-VI Laser Solutions | $70.0 | $82.0 | $51.6 | (15%) | 36% |
| II-VI Photonics | 66.3 | 64.1 | 40.6 | 3% | 63% |
| II-VI Performance Products | 45.4 | 47.2 | 50.3 | (4%) | (10%) |
| Total Bookings | $181.7 | $193.3 | $142.5 | (6%) | 28% |
| | | | | | |
| Revenues: | | | | | |
| II-VI Laser Solutions | $72.8 | $71.5 | $55.9 | 2% | 30% |
| II-VI Photonics | 63.6 | 61.2 | 42.0 | 4% | 51% |
| II-VI Performance Products | 49.4 | 55.2 | 52.1 | (11%) | (5%) |
| Total Revenues | $185.8 | $187.9 | $150.0 | (1%) | 24% |
| | | | | | |
| Operating Income (Loss): | | | | | |
| II-VI Laser Solutions | $12.9 | $8.0 | $8.9 | 61% | 45% |
| II-VI Photonics | 2.1 | (0.9) | 0.8 | 333% | 163% |
| II-VI Performance Products | 4.4 | 7.6 | 3.8 | (42%) | 16% |
| Total Operating Income | $19.4 | $14.7 | $13.5 | 32% | 44% |
Below is a reconciliation of Operating Income reported in this press release to reported Net Earnings.
| Reconciliation of Operating Income to Net Earnings |
| $ Millions |
| (Unaudited) | Three Months Ended |
| | Sept 30, | June 30, | Sept 30, |
| | 2014 | 2014 | 2013 |
| | | | |
| Operating Income | $ 19.4 | $ 14.7 | $ 13.5 |
| Interest expense | 1.2 | 1.4 | 0.5 |
| Other expense (income), net | 1.7 | (0.9) | 0.1 |
| Income taxes | 4.2 | 1.5 | 3.2 |
| Net Earnings | $ 12.3 | $ 12.7 | $ 9.7 |
EBITDA is defined as earnings before interest, income taxes, depreciation and amortization.
Below is a reconciliation of Operating Income reported in this press release to EBITDA.
| Reconciliation of Operating Income to EBITDA |
| $ Millions |
| (Unaudited) | Three Months Ended |
| | Sept 30, | June 30, | Sept 30, |
| | 2014 | 2014 | 2013 |
| | | | |
| Operating income | $ 19.4 | $ 14.7 | $ 13.5 |
| Depreciation and amortization | 13.6 | 13.7 | 11.8 |
| Other (expense) income | (1.7) | 0.9 | (0.1) |
| EBITDA | $ 31.3 | $ 29.3 | $ 25.2 |
Below is a reconciliation of EBITDA reported in this press release to reported Net Earnings.
| Reconciliation of EBITDA to Net Earnings |
| $ Millions | | | |
| (Unaudited) | Three Months Ended |
| | Sept 30, | June 30, | Sept 30, |
| | 2014 | 2014 | 2013 |
| | | | |
| EBITDA | $ 31.3 | $ 29.3 | $ 25.2 |
| Interest expense | 1.2 | 1.4 | 0.5 |
| Depreciation and amortization | 13.6 | 13.7 | 11.8 |
| Income taxes | 4.2 | 1.5 | 3.2 |
| Net Earnings | $ 12.3 | $ 12.7 | $ 9.7 |
Below is a table of other selected financial information.
| Other Selected Financial Information |
| $ Millions, except share information |
| (Unaudited) | Three Months Ended |
| | Sept 30, | June 30, | Sept 30, |
| | 2014 | 2014 | 2013 |
| | | | |
| Cash paid for capital expenditures | $ 21.5 | $ 8.4 | $ 6.6 |
| Net borrowings (payments) on indebtedness | $ (5.0) | $ (21.0) | $ 97.0 |
| Share-based compensation expense, pre-tax | $ 3.6 | $ 2.6 | $ 4.1 |
| Cash paid for shares repurchased through the Company's share repurchase programs | $ 5.1 | $ 8.0 | $ -- |
| Shares repurchased through the Company's share repurchase programs | 481,195 | 583,355 | -- |
| Average diluted shares outstanding | 62,788,650 | 63,114,932 | 63,946,744 |
Discontinued Operations
The Company's subsidiary Pacific Rare Specialty Metals & Chemicals, Inc. ("PRM"), a business in the Company's Performance Products segment, discontinued its tellurium product line during the second fiscal quarter ended December 31, 2013. Results for all periods presented reflect the presentation of the tellurium product line as a discontinued operation.
Webcast Information
The Company will host a conference call at 9:00 a.m. Eastern Time on Tuesday, October 28, 2014 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/ovx9xqx. 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 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 from 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, | June 30, | September 30, |
| | 2014 | 2014 | 2013 |
| Revenues | | | |
| Net sales: | | | |
| Domestic | $ 61,981 | $ 61,851 | $ 63,690 |
| International | 123,852 | 126,070 | 86,330 |
| Total Revenues | 185,833 | 187,921 | 150,020 |
| | | | |
| Costs, Expenses & Other Expense (Income) | | | |
| Cost of goods sold | 117,974 | 125,600 | 93,709 |
| Internal research and development | 12,943 | 11,322 | 7,747 |
| Selling, general and administrative | 35,520 | 36,295 | 35,093 |
| Interest expense | 1,204 | 1,415 | 483 |
| Other expense (income), net | 1,682 | (868) | 53 |
| Total Costs, Expenses, and Other Expense (Income) | 169,323 | 173,764 | 137,085 |
| | | | |
| Earnings from Continuing Operations Before Income Taxes | 16,510 | 14,157 | 12,935 |
| | | | |
| Income Taxes | 4,208 | 1,502 | 3,243 |
| | | | |
| Earnings from Continuing Operations | 12,302 | 12,655 | 9,692 |
| | | | |
| Earnings from Discontinued Operation, net of income taxes | -- | -- | 2 |
| | | | |
| Net Earnings | $ 12,302 | $ 12,655 | $ 9,694 |
| | | | |
| Diluted Earnings Per Share: | | | |
| Continuing operations | $ 0.20 | $ 0.20 | $ 0.15 |
| Discontinued operation | $ -- | $ -- | $ -- |
| Consolidated | $ 0.20 | $ 0.20 | $ 0.15 |
| | | | |
| Basic Earnings Per Share: | | | |
| Continuing operations | $ 0.20 | $ 0.21 | $ 0.16 |
| Discontinued operation | $ -- | $ -- | $ -- |
| Consolidated | $ 0.20 | $ 0.21 | $ 0.16 |
| | | | |
| Average Shares Outstanding - Diluted | 62,789 | 63,115 | 63,947 |
| Average Shares Outstanding - Basic | 61,508 | 61,695 | 62,379 |
| |
| |
| II-VI Incorporated and Subsidiaries |
| Condensed Consolidated Balance Sheets (Unaudited) |
| ($000) |
| |
| | September 30, | June 30, |
| | 2014 | 2014 |
| Assets | | |
| Current Assets | | |
| Cash and cash equivalents | $ 145,415 | $ 174,660 |
| Accounts receivable | 162,341 | 136,723 |
| Inventories | 163,421 | 165,873 |
| Deferred income taxes | 11,482 | 11,118 |
| Prepaid and refundable income taxes | 5,607 | 4,440 |
| Prepaid and other current assets | 14,664 | 12,917 |
| Total Current Assets | 502,930 | 505,731 |
| Property, plant & equipment, net | 207,303 | 208,939 |
| Goodwill | 196,023 | 196,145 |
| Other intangible assets, net | 133,405 | 136,404 |
| Investment | 11,857 | 11,589 |
| Deferred income taxes | 1,321 | 4,038 |
| Other assets | 9,246 | 9,080 |
| Total Assets | $ 1,062,085 | $ 1,071,926 |
| | | |
| Liabilities and Shareholders' Equity | | |
| Current Liabilities | | |
| Current portion of long-term debt | $ 20,000 | $ 20,000 |
| Accounts payable | 48,017 | 45,767 |
| Accruals and other current liabilities | 67,199 | 69,298 |
| Total Current Liabilities | 135,216 | 135,065 |
| Long-term debt | 216,733 | 221,960 |
| Deferred income taxes | 7,017 | 7,440 |
| Other liabilities | 21,278 | 32,418 |
| Total Liabilities | 380,244 | 396,883 |
| Total Shareholders' Equity | 681,841 | 675,043 |
| Total Liabilities and Shareholders' Equity | $ 1,062,085 | $ 1,071,926 |
| |
| |
| II-VI Incorporated and Subsidiaries |
| Condensed Consolidated Statements of Cash Flows (Unaudited) |
| ($000) |
| | |
| | Three Months Ended |
| | September 30, |
| | 2014 | 2013 |
| Cash Flows from Operating Activities | | |
| Net cash provided by (used in): | | |
| Continuing operations | $ 856 | $ 24,114 |
| Discontinued operation | -- | 273 |
| Net cash provided by operating activities | 856 | 24,387 |
| | | |
| Cash Flows from Investing Activities | | |
| Additions to property, plant and equipment | (21,530) | (6,573) |
| Payment of option to acquire business | -- | (5,000) |
| Purchases of business, net of cash acquired | -- | (90,601) |
| Net cash used in investing activities: | | |
| Continuing operations | (21,530) | (102,174) |
| Discontinued operation | -- | -- |
| Net cash used in investing activities | (21,530) | (102,174) |
| | | |
| Cash Flows from Financing Activities | | |
| Proceeds from borrowings | -- | 103,000 |
| Payments on borrowings | (5,000) | (6,000) |
| Purchases of treasury stock | (5,093) | -- |
| Payment of redeemable non-controlling interest | -- | (8,789) |
| Payments on earn-out arrangement | -- | (2,200) |
| Proceeds from exercises of stock options | 1,504 | 2,498 |
| Other | (1,248) | (1,307) |
| Net cash provided by financing activities | (9,837) | 87,202 |
| | | |
| Effect of exchange rate changes on cash and cash equivalents | 1,266 | 359 |
| | | |
| Net (decrease) increase in cash and cash equivalents | (29,245) | 9,774 |
| | | |
| Cash and Cash Equivalents at Beginning of Period | 174,660 | 185,433 |
| Cash and Cash Equivalents at End of Period | $ 145,415 | $ 195,207 |
| |
| |
| II-VI Incorporated and Subsidiaries |
| Reconciliation of Selected Non-GAAP Financial Measurements |
| ($ Millions, except per share amounts) |
| | | | |
| Reconciliation of Reported Earnings from Continuing Operations to Non-GAAP Earnings from Continuing Operations |
| (Unaudited) | | | |
| | | | |
| | Three Months Ended |
| | Sept 30, | June 30, | Sept 30, |
| | 2014 | 2014 | 2013 |
| | | | |
| Reported Earnings from Continuing Operations | $ 12.3 | $ 12.7 | $ 9.7 |
| | | | |
| Add back: | | | |
| Acquisitions transaction expenses | -- | -- | 3.5 |
| Write-down of selenium inventory | -- | -- | 0.7 |
| | | | |
| Income tax impact on unusual items | -- | -- | (0.2) |
| | | | |
| Adjusted Non-GAAP Earnings from Continuing Operations | $ 12.3 | $ 12.7 | $ 13.7 |
| | | | |
| Per share data: | | | |
| Earnings from Continuing Operations: | | | |
| Earnings from Continuing Operations Diluted Earnings Per Share: | $ 0.20 | $ 0.20 | $ 0.15 |
| Earnings from Continuing Operations Basic Earnings Per Share: | $ 0.20 | $ 0.21 | $ 0.16 |
| | | | |
| Per share, After-Tax Impact of Special Items on: | | | |
| Earnings from Continuing Operations Diluted Earnings Per Share: | $ -- | $ -- | $ 0.06 |
| Earnings from Continuing Operations Basic Earnings Per Share: | $ -- | $ -- | $ 0.06 |
| | | | |
| Adjusted Non-GAAP Earnings from Continuing Operations: | | | |
| Adjusted Non-GAAP Earnings from Continuing Operations Diluted Earnings Per Share: | $ 0.20 | $ 0.20 | $ 0.21 |
| Adjusted Non-GAAP Earnings from Continuing Operations Basic Earnings Per Share | $ 0.20 | $ 0.21 | $ 0.22 |
CONTACT: II-VI Incorporated
Mary Jane Raymond, Chief Financial Officer
(724) 352-4455