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II-VI Inc. (IIVI)
F3Q08 Earnings Call
April 22, 2008 9:00 am ET
Francis Kramer - President and CEO
Craig Creaturo - Chief Financial Officer and Treasurer
Chris McDonald - Kennedy Capital
Dave Kang - Roth Capital
Jiwon Lee - Sidoti & Company
Ian Fleischer - FBR Capital Management
Avinash Kant - Broadpoint Capital
Previous Statements by IIVI
» II-VI F2Q08 (Qtr End 12/31/08) Earnings Call Transcript
» II-VI Incorporated F1Q09 (Qtr End 09/30/08) Earnings Call Transcript
» II-VI Incorporated F4Q08 (Qtr End 06/30/08) Earnings Call Transcript
Thank you Nicole and good morning everyone. I am Craig Creaturo, Chief Financial Officer and Treasurer of II-VI Incorporated. Welcome to the third quarter fiscal year 2008, II-VI Incorporated investor teleconference.
As a reminder, this teleconference is being recorded on Tuesday, April 22, 2008. 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-VI Incorporated. I am very pleased to report record revenues and record bookings for the quarter ended March 31, 2008. Our bookings from continuing operations increased 44% compared to the third quarter of the last fiscal year and reached a record $93.7 million. Contributions toward these records occurred in the majority of our business segments. The Compound Semiconductor Group or CSG experienced 63% higher bookings as compared to last year’s third quarter.
The just completed quarter was a very strong one for Marlow Industries. Bookings were up 58% year-over-year driven by strong demand in the industrial, defense and medical segments. The Q3 bookings included the largest single industrial order in the history of the Marlow division. In addition to these large increases, we continue to see a gradual increase in telecom demand. Revenues for the quarter were up 22% in the third quarter of FY08 versus the third quarter FY07 for Marlow. This was the result of increased sales in the defense, space and photonics, industrial and medical markets.
We expected that industrial revenues driven by new applications will continue to increase during the fourth quarter. We further expanded our Vietnam manufacturing capacity to accommodate the increased demand in industrial products. Our largest medical customer’s next generation product was delayed during the just completed quarter due to customer program issues, but it is now expected to start in production during the fourth quarter.
The Wide Bandgap Materials business for the Compound Semiconductor Group continues strong shipments of semi-insulating silicon carbide substrates to RFIC applications market in North America. Progress continues to be made in wafer qualification and several potential customers in Asia with full qualification at one large customer expected by June. During the quarter, we passed a major hurdle with one large Japanese customer by successfully completing a qualification system and manufacturing process audit at our New Jersey facility.
To address crystal growth capacity challenges, we have finalized installation and qualification of several newly constructed growth furnaces, increasing our capacity 30% to date this fiscal year. On the technical front our government partners have completed one stage of evaluation of our 100 mm semi insulating wafers and report results on par with our more mature three inch wafer product offering.
We have the polishing tools in place in our New Jersey facility to lower cost of 100 mm fabrication and polishing processes and are on track to ship 100 mm semi insulating wafers to commercial customers in this fiscal year. We have historically included in the compound semi conductor group, our eV products division, but our decision to sell this business has convinced the income statement results of eV into a single line item.
II-VI has made significant investments in capital equipment, research and development and operations in this division over the last 15 years. This has enabled eV products to be the world leader in the radiation sensor business based on cadmium zinc telluride or CCT crystals. Our decision to sell this business was made after careful consideration of several factors most notably being; one, creating sustained II-VI share holder value; and two creating a path to unlocking the value of the technology that was developed at eV products over a long period of time.
Following my comments Craig will make some general remarks on the financials of eV as well as how our financials will look now that we have made the decision to divest of this business. During the quarter our VLOC near-infrared business continued to meet or exceed the required schedule for deliveries of UV filter assemblies to our primary customer. This has been a very successfully program. Based on our best information and the interactions with our customer, our current forecast expects that the delivery rate on the UV filter business will reduce in the first quarter FY ’09 tri rate that is slightly below that we experienced in fiscal year ’07. Over the next few months we will determine the running rate needed by our customer and we will adjust our production plans accordingly.
We have included this excepted slowdown in business in our initial guidance for fiscal year 2009 that was included in today’s press release. In our VLOC near-infrared business we continue to see increased demand for optics used in medical and cosmetic laser applications. We have been able to address this higher demand with our low cost capacity in our Vietnam facility. Example of this was our ability to quickly ramp capacity to meet a 40% demand increase or windows used in Lasic eye surgery.