Coherent, Inc. Reports Fourth Quarter Results

Business Wire, Oct 28, 1998

SANTA CLARA, Calif.--(BW HealthWire)--Oct. 28, 1998--Coherent, Inc. (Nasdaq:COHR) today announced the financial results for its fourth quarter and year ended September 26, 1998. Sales and net income for the fourth quarter were $104.6 million and $6.2 million ($.26 per diluted share), respectively. Net income included a $2.7 million ($.11 per diluted share) non-recurring tax benefit. Sales increased by $6.1 million (6.2%) and net income (exclusive of the non-recurring tax benefit) increased by $5.2 million compared to the third quarter. Sales increased by $0.8 million (0.8%) and net income, exclusive of the aforementioned tax benefit, decreased by $3.1 million compared to the fourth quarter last year.

Sales for the fiscal year were $410.4 million, a 5% increase from last year. Net income, exclusive of the $2.7 million tax benefit, was $16.1 million, a 54% decrease from last year's income, excluding the $9.0 million write-off of purchased in-process technology. Comparative sales were adversely impacted by more than $12 million as a result of changes in the relative strength of the U.S. dollar against major foreign currencies.

Net income for the year was negatively impacted by (i) poor performance in the Coherent Medical Group during the second half of the year; (ii) continued investments by Lambda Physik, the Company's subsidiary, in DUV lithography systems for the next generation of semiconductor equipment; (iii) continued investments by the Company's Auburn Group to establish a catalog distribution system; and (iv) a decrease in the gross profit rate due to lower sales of higher margin medical products and the impact of the strengthening of the U.S. dollar against major foreign currencies. Gross profit rates for the fourth quarter and fiscal year were 45.9% and 48.2% compared to 50.9% and 52.6% for the corresponding prior year periods.

Orders for the fourth quarter were $97.7 million, a 5% increase from the fourth quarter last year and a 2% decrease from the third quarter. This order rate was achieved despite a much lower net order rate within our medical segment that was primarily attributable to a general clean-up of backlog as part of our broad based reorganization efforts within the group. For the year, orders were $422.8 million, a 4% increase from last year. Orders for the year were adversely impacted by $13 million as a result of the strengthening of the U.S. dollar against major foreign currencies.

Bernard Couillaud, Coherent's president and chief executive officer, said, "While I am pleased that we were able to quickly recover from the $0.07 per share loss of last quarter, I do not believe that this past year's financial results are indicative of our business or prospects. The reorganizational efforts are continuing within the Coherent Medical Group and I am satisfied that the process we have started is in the best interest of our shareholders, customers and employees. We managed to reduce the loss in Coherent Medical Group from $9 million in the third quarter to approximately $1 million in the fourth quarter. I expect that the Group will return to profitability and I remain confident that we will successfully conclude our search for a new Medical Group president within the current quarter."

Summarized financial information on an actual basis and on a proforma basis excluding the prior fiscal year write-off of purchased in-process technology is as follows:

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                             Three Months Ended   Twelve Months Ended
                            Sept. 26,  Sept. 27,  Sept. 26,  Sept. 27,
                              1998       1997       1998       1997
                              (In thousands, except per share data)

Actual Results:
Sales                       $104,647   $103,825   $410,449   $391,038
Gross profit                  48,028     52,891    197,865    205,502
Income before income taxes     5,146     10,572     23,705     46,794
Net income                  $  6,190   $  6,604   $ 18,811   $ 26,292
                            ========   ========   ========   ========

 Proforma Results excluding
  the $9.3 million ($9.0
  million, after tax) 1997
  purchased in-process
  technology write-off:
Sales                       $104,647   $103,825   $410,449   $391,038
Gross profit                  48,028     52,891    197,865    205,502
Income before income taxes     5,146     10,572     23,705     56,109
Net income                  $  6,190   $  6,604   $ 18,811   $ 35,292
                            ========   ========   ========   ========

Earnings Per Share (Basic):
Before purchased in-process
 technology write-off       $   0.26   $   0.29   $   0.80   $   1.56
Purchased in-process
 technology, after tax                                          (0.40)
Net income                  $   0.26   $   0.29   $   0.80   $   1.16
                            ========   ========   ========   ========

Shares outstanding used
 in computation               23,718     22,866     23,374     22,664

Earnings Per Share (Diluted):
Before purchased in-process
 technology write-off and
 tax benefit                $   0.15   $   0.28   $   0.79   $   1.50
Purchased in-process
 technology, after tax                                          (0.38)
Net income                  $   0.26   $   0.28   $   0.79   $   1.12
                            ========   ========   ========   ========

Shares outstanding used
 in computation               23,872     23,756     23,749     23,480


                    COHERENT, INC. AND SUBSIDIARIES
                 CONSOLIDATED CONDENSED BALANCE SHEETS

                                     September 26,     September 27,
                                         1998              1997
ASSETS
CURRENT ASSETS:
  Cash and short-term investments      $ 32,898          $ 31,637
  Accounts receivable, net               86,822            95,844
  Inventories                           103,541            86,446
  Prepaid expenses and other assets      49,513            41,238
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TOTAL CURRENT ASSETS                    272,774           255,165
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PROPERTY AND EQUIPMENT, NET              82,857            71,824
OTHER ASSETS                             35,130            34,661
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TOTAL ASSETS                           $390,761          $361,650
=================================================================

LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
  Short-term borrowings                $ 11,645          $ 19,235
  Current portion of long-term
   obligations                              788             3,629
  Accounts payable                       17,851            18,039
  Other current liabilities              68,763            61,574
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TOTAL CURRENT LIABILITIES                99,047           102,477
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LONG-TERM OBLIGATIONS                    12,828             9,665
OTHER LONG-TERM LIABILITIES              16,263            18,275

TOTAL STOCKHOLDERS' EQUITY              262,623           231,233
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TOTAL LIABILITIES AND
 STOCKHOLDER'S EQUITY                  $390,761          $361,650
=================================================================