Coherent Inc. (COHR)
F4 Q09 (Qtr End 10/03/2009) Earnings Call
November 5, 2009 4:30 pm ET
John Ambroseo - President and CEO
Helene Simonet - EVP and CFO
Larry Solow - CJS Securities
Mark Douglas - Longbow Research
Ajit Pai - Thomas Weisel Partners
Jiwon Lee - Sidoti & Co.
Previous Statements by COHR
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I would now like to introduce Ms. Helene Simonet, Executive Vice President and Chief Financial Officer. You may begin your conference.
Thank you. Good afternoon and welcome to our Coherent’s fourth quarter conference call. On today’s call I will provide financial information and John Ambroseo, our President and CEO will provide a business overview. As a reminder any guidance and any statements in today’s conference call pertaining to future guidance, plans, events, or performance are forward-looking statements that involve risks and uncertainties and actual results may differ significantly. We encourage you to refer to the risk disclosure described in the company’s on Form 10-K, 10-Q and 8-K as applicable and as filed from time-to-time by the company.
The full text of today’s prepared remarks, which will include references to historical bookings and sales by markets will be posted on the Coherent Investor Relation’s website. A replay of the webcast will be made available for approximately 90 days following the call.
Let me first summarize the key highlights of the quarter. Orders grew 50.5% sequentially to $133.4 million resulting in a book-to-bill ratio of 1.24. Revenues of $107.6 million grew 9.3% sequentially and exceeded our expectations and our guidance.
During the quarter, we generated $20.5 million cash flow from operations resulting in ending cash balance of $243.6 million representing an increase of $21.7 million compared to last quarter.
We continued to execute according to our plans and are on track with respect to our footprint consolidation program. We exited three locations during the quarter. We closed the St. Louis Missouri facility, vacated the lease facility in the San Jose, California and consolidated sales efforts in Japan.
We entered the current fiscal year with annual run-rate savings from these footprint programs of approximately $8 million. Once we exit Finland beginning fiscal 2011, annual savings will step up to approximately $14 million which is the high end of the promised benefits.
Our headcount at the end of the fourth quarter stood at 1,712 which reflect a reduction of approximately 24% from the headcount at the time we initiated the footprint cost improvement program. About 45% of the reductions are the result of the footprint program, the remaining 55% is the result of headcount reductions in response to the change in the economic environment.
On October 14th we completed the acquisition of certain assets of StockerYale Inc and John will discuss this in more detail during his business overview.
Excluding integration cost, the acquired businesses will approach breakeven in the third quarter and should be accretive in the fourth quarter of fiscal 2010 upon completion of the consolidation and integration of the acquired units into the Coherent structure.
With respect to the fourth quarter earnings, we reported a pro forma loss of $0.04 per share, compared to a pro forma loss of $0.09 per share in the previous quarter. The GAAP to pro forma pre-tax reconciliation items includes $1.7 million of restructuring cost, primarily from the footprint consolidation effort, $1.3 million stock-related compensation expenses, a $1.1 million valuation allowance against deferred tax assets and $0.2 million litigation charges.
Net sales for the fourth quarter increased 9.3% sequentially and declined 24.2% from the same quarter ago. The sequential growth was primarily the result of higher service revenues from increased capacity utilization and some signs of improvement in the low-power materials processing, flat panel display and medical markets.
The company sales by significant market application are as follows, scientific and government programs, $29.6 million; microelectronics, $36.1 million; material processing $15.1 million; OEM components and instrumentation, $26.8 million; for a total of $107.6 million.
The fourth quarter gross profit was $37.5 million or 34.9 of sales. On a pro-forma basis excluding $0.8 million restructuring and compensation charges pro-forma gross profit was 35.6%. The sequential decline of 140 basis points from 37% last quarter was primarily due to burning of more expensive inventory, partially offset by the benefits of higher volume and restructuring.
Pro-forma operating expenses are $42.2 million excluding $2.3 million for restructuring and stock compensation charges decreased $0.8 million from the previous quarter. This sequential decline is net of incremental spending from higher sales and net of increased R&D spending to qualify the new Sunnyvale facility.
Our cash and cash equivalents balance for the quarter was approximately $244 million representing a year-over-year increase of $25.5 million despite the cash demand from the footprint consolidation programs.
Restructuring and litigation cash outflows this fiscal year, amounted to approximately $18 million and in addition we invested about $9.5 million in building and equipment improvement in support of the consolidation efforts. We are in particular very pleased with our inventory reduction efforts during this tough economic environment. Inventory balances declined $23 million compared to the end of fiscal 2008.