II-IV Incorporated (IIVI)
Q2 2013 Earnings Call
January 22, 2012 9:00 am ET
Francis Kramer – President, Chief Executive Officer
Craig Creaturo – Chief Financial Officer, Treasurer
Avinash Kant – D.A. Davidson & Co.
Jim Ricchiuti – Needham & Co.
Mark Douglass – Longbow Research
Dave Kang – B. Riley Caris
Jiwon Lee – Sidoti & Co.
Previous Statements by IIVI
» II-VI's CEO Discusses F1Q2013 Results - Earnings Call Transcript
» II-VI Management Discusses Q4 2012 Results - Earnings Call Transcript
» II-VI F2Q08 (Qtr End 12/31/08) Earnings Call Transcript
Now I’ll turn the conference over to your host, Chief Financial Officer and Treasurer, Craig Creaturo. Please begin.
Thank you, Tyrone, and good morning everyone. I am Craig Creaturo, Chief Financial Officer and Treasure of II-IV Incorporated. Thank you for participating in the second quarter fiscal year 2013 II-IV Incorporated investor teleconference. As a reminder, this teleconference is being recorded on Tuesday, January 22, 2013.
The forward-looking statements we may make during this teleconference speak as of today and we do not undertake any obligation to update these statements to reflect events or circumstances occurring after today.
Thank you, Craig. I am Francis Kramer, President and CEO of II-IV Incorporated. As I noted in the press release, our quarter came to an anti-climatic close when we experienced lower sales activity during the last few weeks of the quarter than what we’d anticipated. In spite of this, we can say II-IV had one of its most active quarters ever. It was a quarter in which we completed three acquisitions and each will be a new part of a different business segment within II-IV. Also during the quarter, we significantly expanded our credit facility and settled a contractual obligation that we had been working on since the Thailand flood in October of 2011.
I’ll now turn my attention to a review of each of our business segments. During the second quarter in infrared optics, which includes HIGHYAG, we had bookings of $44.6 million, up 2% compared to the second quarter of FY12. There was a significant shift in the composition of our bookings. Japan bookings were $4.5 million for the quarter, down $2 million year-over-year. This was offset by increased bookings in Germany, Taiwan, Korea and North America. North America bookings increased 4% year-over-year, however was down 16% from the first quarter of fiscal year ’13. We feel this is a result of a decrease in laser utilization driven by the holidays in November and December combined with the business cautiousness over the fiscal cliff, sequestration, and worldwide economic concerns.
For our IR optics business in the U.S., orders and shipments from domestic OEMs decreased 15% quarter-over-quarter. This was a result of timing of blanket orders from both high and low-power OEMs and softer demand for replacement parts from our high-power OEM customers. After-market bookings declined 16% quarter-over-quarter as a result of the declining machine utilization rates. The outlook for the third quarter and fourth quarter depends on the near-term economic impact of recent government policy decisions and consumer consumption, which drives laser utilization.
European bookings for the second quarter were down 2% compared to the first quarter while the European aftermarket was up 4% quarter-over-quarter, reflecting our increased efforts to expand our support into this region. Our diamond optical windows for the EUV photolithography systems business continued to grow as projected during the quarter.
Asia bookings were down 5% quarter-over-quarter, driven mainly by the softening of the Japanese economy. Both the low and high-power Japanese OEMs have slowed production rates compared to the first quarter. Japan bookings were down 4% from the first quarter of FY13. China bookings were down in the second quarter but indications point toward some recovery during the third quarter. Bookings finished down 26% from the first quarter but up 12% year-over-year. The sales of variable radius mirrors, the aftermarket sales and penetrating the glass tube laser suppliers continues to show positive results.
At HIGHYAG, bookings of 4.7 million for the second quarter were down 30% quarter-over-quarter and year-over-year. We continued to ship from our backlog, which was reduced by 3.9 million in fiscal year ’13. Although we have seen a softening in the bookings, we continue to see growth in 1 micron welding, beam delivery, and 1 micron laser cutting. In order to take advantage of these opportunities, we continue to add manufacturing capacity and increase our staff to serve these markets.
Now moving to the near infrared optics segment, bookings during the second quarter compared to the same quarter last year were up 19% to $35.7 million while segment revenues were up 14% to 37 million. The bookings increase was attributable to increased demand for Photop’s green laser devices along with one month of bookings relating to the acquisition of the assets of Oclaro’s Santa Rosa thin film operation and the Oclaro Interleaver product line that we acquired in December. We are excited to have purchased these assets and to supply Oclaro and other customers solidly as we take over these operations.
The revenue increase was driven by improvements across most of the Photop and Aegis product lines, although the telecom component business did experience a softening during the end of the quarter. Compared to the first quarter of fiscal year ’13, near-IR bookings were up sequentially 2%. Near-IR revenues were down 9% from the first quarter of FY13 due to a softening in the telecom component business. We are pleased with the segment earnings improvement from the near-IR, which is up 115% from the December quarter compared to last year, driven by higher sales volume, better operational execution, and recovery from the Thailand flooding.