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II-VI Incorporated Reports Fiscal 2019 Fourth Quarter and Full Year Results

II-VI Intends to Refile SAMR Application to Allow Time to Complete Review

  • Record quarterly revenues increased 6% sequentially, and 13% year-over- year
  • Cash flows from operations of $178.5 million result in second consecutive record
  • ­­­­­­­­­­­­­­­­GAAP EPS of $0.43 and non-GAAP EPS of $0.67 exceeds expectations
  • Year-over-year revenues increase 18%, with a 21% increase in GAAP EPS

PITTSBURGH, Aug. 13, 2019 (GLOBE NEWSWIRE) -- II-VI Incorporated (IIVI) ("II-VI" or the "Company") today reported results for its fiscal 2019 fourth quarter and fiscal year ended June 30, 2019 and provided an update on the approval process for the Finisar acquisition.

“We completed our fiscal year 2019 by delivering another strong operating performance driven by record quarterly and full year revenues. Growth was led by our key accounts in the Photonics segment from the optical communications markets, with increasing demand for products driven by broad-based deployments and the continued acceleration of the 5G infrastructure build-out around the world. Sales in Performance Products were fueled by silicon carbide substrates for the electrification of vehicles, the deployment of green energy infrastructure and the sustained build-out of wireless base stations. Our Aerospace and Defense business continued to experience strong demand from customers for our products including those associated with High Energy Lasers under development,” said Dr. Vincent D. (Chuck) Mattera, Jr., Chief Executive Officer. “Our intense focus on cost and cash flow helped drive bottom line improvement and record cash flow from operations.”

Dr. Mattera continued, “Regarding the pending acquisition of Finisar, we have been engaged in an active dialogue with SAMR throughout this whole process. Given the broad and deep footprint in China of both companies and the approaching end of Phase III, we plan to refile our application, but expect the process to continue in parallel without impact from the re-filing. The new expectation is for a closure in the fall timeframe.”

                                                           
Table 1                                                          
$ in Millions, except per share amounts, basis points and %  
(Unaudited)                                                          
      Three Months Ended         Year Ended  
                                                           
    June 30,       March 31,       June 30,       June 30,       June 30,  
    2019       2019       2018       2019       2018  
                                                           
Revenues   $   362.7       $   342.4       $   321.1       $   1,362.4       $   1,158.8  
                                                           
Operating income (1)   $   40.7       $   31.2       $   40.0       $   148.7       $   136.8  
Adjusted operating income (2)   $   56.9       $   47.4       $   48.0       $   209.7       $   173.1  
                                                           
Net earnings   $   28.0       $   24.6       $   27.2       $   107.5       $   88.0  
Adjusted net earnings (2)   $   43.8       $   40.6       $   33.7       $   167.6       $   132.0  
                                                           
Diluted earnings per share   $   0.43       $   0.38       $   0.42       $   1.63       $   1.35  
Adjusted diluted earnings per share (2)   $   0.67       $   0.62       $   0.52       $   2.54       $   2.03  
                                                           
Other Selected Financial Metrics                                                          
Book to Bill (3)       0.91           1.05           1.03           1.02           1.04  
Gross margin       38.2 %         37.2 %         40.1 %         38.3 %         39.9 %
Operating margin       11.2 %         9.1 %         12.5 %         10.9 %         11.8 %
Adjusted operating margin (2)       15.7 %         13.8 %         14.9 %         15.4 %         14.9 %
Return on sales       7.7 %         7.2 %         8.5 %         7.9 %         7.6 %
Adjusted return on sales (2)       12.1 %         11.9 %         10.5 %         12.3 %         11.4 %

(1)  Operating income is defined as earnings before income taxes, interest expense and other expense or income, net.
(2)  All adjusted amounts exclude certain non-GAAP adjustments for share-based compensation, acquired amortization expense, certain one-time transaction expense and the impact of the Tax Cuts and Jobs Act. See Table 4 for Reconciliation of Adjusted Operating Income to Operating Income and Net Earnings. See Tables 8 and 9 for Reconciliation of Reported Net Earnings to Adjusted Net Earnings.
(3)  Book to Bill is calculated by dividing orders the Company expects to convert to revenue within the next twelve months by revenues recognized during the period.


Outlook

The outlook for the first fiscal quarter ending September 30, 2019 is revenues of $320 million to $345 million and earnings per diluted share of $0.33 to $0.43 including $0.06 per share of transaction costs for our transactions and collaborations previously announced. On an adjusted basis, earnings per diluted share is estimated at $0.55 to $0.65, which includes $0.09 for share-based compensation, $0.07 for amortization expense, and $0.06 for transaction costs. These amounts are all at prevailing exchange rates.

Comparable results for the quarter ended September 30, 2018 were revenues of $314.4 million and diluted earnings per share of $0.40. The $0.40 of diluted earnings per share included $0.08 for share-based compensation, $0.05 for amortization expense, and $0.03 for transaction costs. On an adjusted basis, diluted earnings per share was $0.56. 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.

                                                           
Table 2                                                          
Segment Book to Bill, Revenues, Operating Income & Margins, and Adjusted Operating Income & Margins                                      
$ Millions, except % and Book to Bill                          
(Unaudited)                                                          
      Three Months Ended         Year Ended  
                                                           
    June 30,       March 31,       June 30,       June 30,       June 30,  
    2019       2019       2018       2019       2018  
                                                           
Book to Bill:                                                          
II-VI Laser Solutions       0.89           0.84           0.95           0.92           1.05  
II-VI Photonics       0.96           1.17           1.17           1.06           1.01  
II-VI Performance Products       0.85           1.05           0.91           1.08           1.09  
II-VI Consolidated       0.91           1.05           1.03           1.02           1.04  
                                                           
Revenues:                                                          
II-VI Laser Solutions   $   87.4       $   97.4       $   108.4       $   396.6       $   405.9  
II-VI Photonics       177.5           166.5           133.2           638.8           486.5  
II-VI Performance Products       97.8           78.5           79.5           327.0           266.4  
II-VI Consolidated   $   362.7       $   342.4       $   321.1       $   1,362.4       $   1,158.8  
                                                           
Operating Income:                                                          
II-VI Laser Solutions   $   9.7       $   6.0       $   16.4       $   40.2       $   40.1  
II-VI Photonics       22.2           20.7           13.5           81.9           63.2  
II-VI Performance Products       13.4           8.4           10.1           42.2           33.5  
Transaction expenses related to the merger       (4.6 )         (3.9 )         -           (15.6 )         -  
II-VI Consolidated   $   40.7       $   31.2       $   40.0       $   148.7       $   136.8  
                                                           
Adjusted Operating Income:                                                          
II-VI Laser Solutions   $   11.7       $   8.8       $   18.4       $   49.3       $   49.9  
II-VI Photonics       28.2           27.0           17.8           106.6           83.2  
II-VI Performance Products       17.0           11.6           11.8           53.8           40.0  
II-VI Consolidated   $   56.9       $   47.4       $   48.0       $   209.7       $   173.1  
                                                           
Operating Margin:                                                          
II-VI Laser Solutions       11.1 %         6.2 %         15.1 %         10.1 %         9.9 %
II-VI Photonics       12.5 %         12.4 %         10.1 %         12.8 %         13.0 %
II-VI Performance Products       13.7 %         10.7 %         12.7 %         12.9 %         12.6 %
II-VI Consolidated       11.2 %         9.1 %         12.5 %         10.9 %         11.8 %
                                                           
Adjusted Operating Margin:                                                          
Adjusted II-VI Laser Solutions       13.4 %         9.0 %         17.0 %         12.4 %         12.3 %
Adjusted II-VI Photonics       15.9 %         16.2 %         13.4 %         16.7 %         17.1 %
Adjusted II-VI Performance Products       17.4 %         14.8 %         14.8 %         16.5 %         15.0 %
II-VI Consolidated       15.7 %         13.8 %         14.9 %         15.4 %         14.9 %
 


Table 3 is a reconciliation of Segment Adjusted Operating Income reported in this press release to Segment reported Operating Income

Table 3                                                          
$ Millions                                                          
(Unaudited)                                                          
      Three Months Ended         Year Ended  
                                                           
    June 30,       March 31,       June 30,       June 30,       June 30,  
    2019       2019       2018       2019       2018  
Adjusted II-VI Laser Solutions Operating Income   $   11.7       $   8.8       $   18.4       $   49.3       $   49.9  
Stock Compensation       (1.4 )         (2.3 )         (1.4 )         (7.0 )         (5.7 )
Amortization       (0.6 )         (0.5 )         (0.6 )         (2.1 )         (2.1 )
Acquired businesses one-time expenses       -           -           -           -           (2.0 )
II-VI Laser Solutions Operating Income   $   9.7       $   6.0       $   16.4       $   40.2       $   40.1  
                                       
Adjusted II-VI Photonics Operating Income   $   28.2       $   27.0       $   17.8       $   106.6       $   83.2  
Stock Compensation       (3.6 )         (3.8 )         (2.1 )         (12.0 )         (10.5 )
Amortization       (2.4 )         (2.5 )         (2.2 )         (9.3 )         (9.5 )
Acquired businesses one-time expenses       -           -           -           (3.4 )         -  
II-VI Photonics Operating Income   $   22.2       $   20.7       $   13.5       $   81.9       $   63.2  
                                                           
Adjusted II-VI Performance Products Operating Income   $   17.0       $   11.6       $   11.8       $   53.8       $   40.0  
Stock Compensation       (1.8 )         (1.8 )         (0.9 )         (6.0 )         (3.5 )
Amortization       (1.6 )         (1.2 )         (0.8 )         (5.2 )         (3.0 )
Acquired businesses one-time expenses       (0.2 )         (0.2 )         -           (0.4 )         -  
II-VI Performance Products Operating Income   $   13.4       $   8.4       $   10.1       $   42.2       $   33.5  
                                                           
Transaction expenses related to pending merger       (4.6 )         (3.9 )         -           (15.6 )         -  
Total Operating Income   $   40.7       $   31.2       $   40.0       $   148.7       $   136.8  
                                                           
Adjusted Operating Income   $   56.9       $   47.4       $   48.0       $   209.7       $   173.1  
 


Table 4 is a reconciliation of Adjusted Operating Income reported in this press release to Net Earnings.

Table 4                                                          
$ Millions                                                          
(Unaudited)     Three Months Ended         Year Ended  
                                                           
    June 30,       March 31,       June 30,       June 30,       June 30,  
    2019       2019       2018       2019       2018  
                                                           
Adjusted operating income   $   56.9       $   47.4       $   48.0       $   209.7       $   173.1  
Amortization       4.6           4.2           3.6           16.6           14.6  
Stock based compensation       6.8           7.9           4.4           25.0           19.7  
Acquired businesses one-time expenses       0.2           0.2           -           3.8           2.0  
Transaction expenses related to pending merger       4.6           3.9           -           15.6           -  
Operating income   $   40.7       $   31.2       $   40.0       $   148.7       $   136.8  
Interest expense       5.6           5.7           5.0           22.4           18.4  
Other expense (income), net       0.4           (1.5 )         0.8           (2.5 )         (3.8 )
Income tax expense       6.7           2.4           7.0           21.3           34.2  
Net Earnings   $   28.0       $   24.6       $   27.2       $   107.5       $   88.0  
 


Table 5 is a reconciliation of Operating Income reported in this press release to Adjusted EBITDA.

...
Table 5                                                          
$ Millions                                                          
(Unaudited)     Three Months Ended         Year Ended  
                                                           
    June 30,       March 31,       June 30,       June 30,       June 30,  
    2019       2019       2018       2019       2018  
                                                           
Operating income   $   40.7       $   31.2       $   40.0       $   148.7       $   136.8  
Depreciation and amortization       24.8           23.1           22.7           92.4