<PAGE>
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
--------------------
FORM 10-Q
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended July 1, 1995
or
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from _________ to ___________
Commission File Number: 0-5255
COHERENT, INC.
(Exact name of registrant as specified in its charter)
DELAWARE 94-1622541
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
5100 PATRICK HENRY DRIVE, SANTA CLARA, CALIFORNIA 95054
(Address of principal executive offices) (Zip Code)
(408) 764-4000
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes X No
----- -----
APPLICABLE ONLY TO ISSUERS INVOLVED
IN BANKRUPTCY PROCEEDINGS DURING
THE PRECEDING FIVE YEARS:
Indicate by check mark whether the registrant has filed all documents and
reports required to be filed by Sections 12, 13, or 15(d) of the Securities
Exchange Act of 1934 subsequent to the distribution of securities under a plan
confirmed by a court. Yes No
----- -----
APPLICABLE ONLY TO CORPORATE ISSUES:
The number of shares outstanding of registrant's common stock, par value $.01
per share, at August 2, 1995 was 10,805,528 shares.
<PAGE>
COHERENT, INC.
INDEX
Page No.
--------
PART I. FINANCIAL INFORMATION
Consolidated Condensed Statements of Income --
Three months and nine months ended July 1, 1995
and July 2, 1994 3
Consolidated Condensed Balance Sheets --
July 1, 1995 and October 1, 1994 4
Consolidated Condensed Statements of Cash Flows --
Nine months ended July 1, 1995 and July 2, 1994 5
Notes to Consolidated Condensed Financial Statements 6
Management's Discussion and Analysis of Financial
Condition and Results of Operations 9
PART II. OTHER INFORMATION 13
SIGNATURES 14
2
<PAGE>
PART I. FINANCIAL INFORMATION
COHERENT, INC. AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF INCOME
(UNAUDITED; IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
THREE NINE
MONTHS ENDED MONTHS ENDED
------------- ------------
JULY 1, JULY 2, JULY 1, JULY 2,
1995 1994 1995 1994
--------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
NET SALES $76,247 $55,257 $201,286 $157,498
COST OF SALES 38,106 28,538 100,853 80,521
--------------------------------------------------------------------------------------------------------------------------------
GROSS PROFIT 38,141 26,719 100,433 76,977
--------------------------------------------------------------------------------------------------------------------------------
OPERATING EXPENSES:
Research and development 7,894 6,101 21,990 18,051
Selling, general and administrative 22,092 16,336 58,938 47,209
--------------------------------------------------------------------------------------------------------------------------------
TOTAL OPERATING EXPENSES 29,986 22,437 80,928 65,260
--------------------------------------------------------------------------------------------------------------------------------
INCOME FROM OPERATIONS 8,155 4,282 19,505 11,717
OTHER INCOME (EXPENSE):
Interest and dividend income 605 519 1,771 1,516
Interest expense (280) (450) (943) (1,329)
Foreign exchange gain (loss) (110) 212 661 63
Other - net 69 (57) 432 21
--------------------------------------------------------------------------------------------------------------------------------
TOTAL OTHER INCOME, NET 284 224 1,921 271
--------------------------------------------------------------------------------------------------------------------------------
INCOME BEFORE INCOME TAXES 8,439 4,506 21,426 11,988
PROVISION FOR INCOME TAXES 3,322 1,610 8,434 4,707
--------------------------------------------------------------------------------------------------------------------------------
NET INCOME $ 5,117 $ 2,896 $ 12,992 $ 7,281
--------------------------------------------------------------------------------------------------------------------------------
--------------------------------------------------------------------------------------------------------------------------------
NET INCOME PER COMMON AND
COMMON EQUIVALENT SHARE $ .46 $ .28 $ 1.19 $ .71
--------------------------------------------------------------------------------------------------------------------------------
--------------------------------------------------------------------------------------------------------------------------------
AVERAGE COMMON AND COMMON
EQUIVALENT SHARES OUTSTANDING 11,176 10,377 10,961 10,308
--------------------------------------------------------------------------------------------------------------------------------
--------------------------------------------------------------------------------------------------------------------------------
</TABLE>
SEE ACCOMPANYING NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS.
3
<PAGE>
COHERENT, INC. AND SUBSIDIARIES
CONSOLIDATED CONDENSED BALANCE SHEETS
(UNAUDITED; IN THOUSANDS, EXCEPT PAR VALUE PER SHARE)
<TABLE>
<CAPTION>
JULY 1, OCTOBER 1,
1995 1994
-----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
ASSETS
CURRENT ASSETS:
Cash and equivalents $ 21,018 $ 27,239
Short-term investments 16,887 16,534
Accounts receivable -- net of allowances of
$2,496 in 1995 and $2,384 in 1994 60,727 49,074
Inventories 50,948 38,829
Prepaid expenses and other assets 9,895 11,066
Deferred tax assets 15,628 13,527
--------------------------------------------------------------------------------------------------------------------------------
TOTAL CURRENT ASSETS 175,103 156,269
--------------------------------------------------------------------------------------------------------------------------------
PROPERTY AND EQUIPMENT 89,706 82,569
ACCUMULATED DEPRECIATION AND AMORTIZATION (45,168) (39,362)
--------------------------------------------------------------------------------------------------------------------------------
Property and equipment - net 44,538 43,207
--------------------------------------------------------------------------------------------------------------------------------
GOODWILL -- net of accumulated amortization of
$3,967 in 1995 and $3,497 in 1994 9,612 4,964
OTHER ASSETS 15,848 7,326
--------------------------------------------------------------------------------------------------------------------------------
$245,101 $211,766
--------------------------------------------------------------------------------------------------------------------------------
--------------------------------------------------------------------------------------------------------------------------------
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Short-term borrowings $ 9,740 $ 4,361
Current portion of long-term obligations 4,993 4,708
Accounts payable 9,663 8,012
Income taxes payable 5,508 3,809
Other current liabilities 44,819 37,669
--------------------------------------------------------------------------------------------------------------------------------
TOTAL CURRENT LIABILITIES 74,723 58,559
--------------------------------------------------------------------------------------------------------------------------------
LONG-TERM OBLIGATIONS 7,685 8,865
OTHER LONG-TERM LIABILITIES 9,420 6,789
MINORITY INTEREST IN SUBSIDIARIES 1,604 4,089
STOCKHOLDERS' EQUITY:
Common stock, par value $.01
Authorized -- 50,000 shares
Outstanding -- 10,729 in 1995 and 10,338 in 1994 106 103
Additional paid-in capital 73,249 68,646
Unrealized gain on short-term investments 51
Notes receivable from stock sales (1,518) (1,981)
Retained earnings 77,149 64,157
Accumulated translation adjustment 2,632 2,539
--------------------------------------------------------------------------------------------------------------------------------
TOTAL STOCKHOLDERS' EQUITY 151,669 133,464
--------------------------------------------------------------------------------------------------------------------------------
$245,101 $211,766
--------------------------------------------------------------------------------------------------------------------------------
--------------------------------------------------------------------------------------------------------------------------------
</TABLE>
SEE ACCOMPANYING NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS.
4
<PAGE>
COHERENT, INC. AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
(UNAUDITED; IN THOUSANDS)
<TABLE>
<CAPTION>
NINE
MONTHS ENDED
------------------------------------
JULY 1, JULY 2,
1995 1994
-----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
INCREASE (DECREASE) IN CASH AND EQUIVALENTS
OPERATING ACTIVITIES:
Net income $12,992 $ 7,281
Adjustments to reconcile to net cash
provided by operating activities:
Purchases of short-term investments (55,053) (50,997)
Proceeds from sales of short-term investments 54,700 40,584
Changes in assets and liabilities 2,471 8,253
Other adjustments (6,960) (2,398)
-----------------------------------------------------------------------------------------------------------------------------------
Net Cash Provided by Operating Activities 8,150 2,723
-----------------------------------------------------------------------------------------------------------------------------------
INVESTING ACTIVITIES:
Purchases of property and equipment -- net (5,349) (7,998)
Purchase of Amoco assets (4,520)
Purchase of asset held for investment (4,312)
Purchase of Adlas assets (333)
Purchase of Vinten Electro-Optics Ltd. (1,500)
Other -- net 626 (885)
-----------------------------------------------------------------------------------------------------------------------------------
Net Cash Used for Investing Activities (13,888) (10,383)
-----------------------------------------------------------------------------------------------------------------------------------
FINANCING ACTIVITIES:
Long-term debt borrowings 161 8,825
Long-term debt repayments (4,854) (6,377)
Notes payable borrowings 5,536 4,799
Notes payable repayments (3,064) (5,880)
Repayments of capital lease obligations (547) (416)
Sales of shares under employee benefit plans 4,774 2,338
-----------------------------------------------------------------------------------------------------------------------------------
Net Cash Provided by Financing Activities 2,006 3,289
-----------------------------------------------------------------------------------------------------------------------------------
EFFECT OF EXCHANGE RATE CHANGES
ON CASH AND EQUIVALENTS (2,489) 212
-----------------------------------------------------------------------------------------------------------------------------------
Net decrease in cash and equivalents (6,221) (4,159)
Cash and equivalents beginning of period 27,239 27,923
-----------------------------------------------------------------------------------------------------------------------------------
CASH AND EQUIVALENTS END OF PERIOD $21,018 $23,764
-----------------------------------------------------------------------------------------------------------------------------------
-----------------------------------------------------------------------------------------------------------------------------------
NONCASH INVESTING AND FINANCING ACTIVITIES:
Note payable for minority interest dividend $ 1,937
-------
-------
Purchase of Adlas assets:
Purchase obligation due $ 5,782
Cash paid 958
-------
Net assets acquired, including intangibles and goodwill $ 6,740
-----------------------------------------------------------------------------------------------------------------------------------
-----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
SEE ACCOMPANYING NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS.
5
<PAGE>
COHERENT, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
(UNAUDITED)
1. The accompanying consolidated condensed financial statements have been
prepared in conformity with generally accepted accounting principles,
consistent with those reflected in the Company's annual report to
stockholders for the year ended October 1, 1994. All adjustments necessary
for a fair presentation have been made which comprise only normal recurring
adjustments; however, interim results of operations are not necessarily
indicative of results to be expected for the year.
2. Net income per share is based upon the weighted average number of common
shares outstanding during the period including dilutive common stock
equivalents and shares issuable under the Productivity Incentive Plan.
Common stock equivalents represent outstanding stock options and shares
subscribed under the Employee Stock Purchase Plan.
No dividends were paid in fiscal 1995 or 1994.
3. In December 1994, the Company purchased its former Porter Drive facility in
the Stanford Industrial Park for $4.3 million in cash. The Company is
refurbishing the building for future resale or lease.
4. Effective March 24, 1995, Coherent and ATX Telecom Systems Inc. (Amoco)
entered into an "Asset Purchase and Sale Agreement" whereby Coherent
purchased certain assets and licensed certain patents relating to Amoco's
diode pumped solid state technology for $4.5 million in cash. The
intangibles related to this purchase are being amortized primarily over a
ten-year period.
5. Effective June 30, 1995, the Company acquired the business and net assets
of Adlas GmbH and Adlas KG, located in Lubeck, Germany, for approximately
$6.7 million. The acquisition has been accounted for as a purchase and,
accordingly, the Company has recorded approximately $5.1 million and $0.5
million for goodwill and deferred compensation respectively which are being
amortized over 10 and 3 years, respectively. Adlas is a leading
manufacturer of DPSS lasers used in commercial applications such as
semiconductor inspection, reprographics, material processing and analytical
instrumentation.
6. Balance Sheet Detail:
Inventories are stated at the lower of cost (first-in, first-out) or
market. Inventories are as follows:
<TABLE>
<CAPTION>
July 1, October 1,
1995 1994
--------------------------------------------------------------------------------
(IN THOUSANDS)
<S> <C> <C>
Purchased parts and assemblies $15,471 $12,020
Work-in-process 17,837 14,714
Finished goods 17,640 12,095
--------------------------------------------------------------------------------
Net inventories $50,948 $38,829
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
</TABLE>
6
<PAGE>
Prepaid expenses and other assets consists of the following:
<TABLE>
<CAPTION>
July 1, October 1,
1995 1994
-------------------------------------------------------------------------------
(IN THOUSANDS)
<S> <C> <C>
Prepaid income taxes $ 2,962 $ 4,686
Prepaid expenses and other 4,175 3,553
Note receivable from Transfer
Technology Group plc 2,758 2,827
-------------------------------------------------------------------------------
Prepaid expenses and other assets $ 9,895 $11,066
-------------------------------------------------------------------------------
-------------------------------------------------------------------------------
</TABLE>
Other assets consist of the following:
<TABLE>
<CAPTION>
July 1, October 1,
1995 1994
-------------------------------------------------------------------------------
(IN THOUSANDS)
<S> <C> <C>
Asset held for sale $ 1,544
Asset held for investment (Note 3) $ 6,259 216
Intangibles and other assets 9,589 5,566
-------------------------------------------------------------------------------
Other assets $15,848 $ 7,326
-------------------------------------------------------------------------------
-------------------------------------------------------------------------------
</TABLE>
Other current liabilities consist of the following:
<TABLE>
<CAPTION>
July 1, October 1,
1995 1994
-------------------------------------------------------------------------------
(IN THOUSANDS)
<S> <C> <C>
Accrued payroll and benefits $13,089 $12,407
Accrued expenses and other 11,744 11,697
Deferred service income 8,071 7,359
Reserve for warranty 6,763 5,418
Customer deposits 5,152 788
-------------------------------------------------------------------------------
Other current liabilities $44,819 $37,669
-------------------------------------------------------------------------------
-------------------------------------------------------------------------------
</TABLE>
Other long-term liabilities consist of the following:
<TABLE>
<CAPTION>
July 1, October 1,
1995 1994
-------------------------------------------------------------------------------
(IN THOUSANDS)
<S> <C> <C>
Deferred tax liabilities $ 3,906 $ 1,952
Environmental remediation costs 2,954 2,573
Deferred income and other 2,560 2,264
-------------------------------------------------------------------------------
Other long-term liabilities $ 9,420 $ 6,789
-------------------------------------------------------------------------------
-------------------------------------------------------------------------------
</TABLE>
7. Certain claims and lawsuits arising in the ordinary course of business have
been filed or are pending against the Company. In the opinion of
management, all such matters have been adequately provided for, are without
merit, or are of such kind that if disposed of unfavorably, would not have
a material adverse effect on the Company's consolidated financial position
or results of operations.
7
<PAGE>
The Company, along with several other companies, has been named as a party
to a remedial action order issued by the California Department of Toxic
Substance Control relating to soil and groundwater contamination at and in
the vicinity of the Stanford Industrial Park in Palo Alto, California,
where the Porter Drive facility is located. The responding parties to the
Regional Order (including the Company) have completed Remedial
Investigation, Feasibility Study and Remedial Action Plan Reports, which
were approved by the State of California. The responding parties have
installed four remedial systems and have reached agreement with responding
parties on final cost sharing.
The Company was also named, along with other parties, to a remedial action
order for the Porter Drive facility site itself in the Stanford Industrial
Park. The State of California has approved the Remedial Investigation
Report, Feasibility Study Report, Remedial Action Plan Report and Final
Remedial Action Report prepared by the Company for this site. Construction
of the Final Remedial Action structures is complete and system start-up is
projected for May 1995. The Company has been operating interim remedial
systems at the site to remove subsurface chemicals since April 1992.
Management believes that the Company's probable, nondiscounted net
liability at July 1, 1995 for remaining costs associated with the above
environmental matters is $1.9 million which has been previously accrued.
This amount consists of total estimated probable costs of $3.4 million
($0.4 million included in accrued expenses and $3.0 million included in
other long-term liabilities) reduced by estimated minimum probable
recoveries of $1.5 million included in other assets from other parties
named to the order. Based on currently available information, the Company
believes that costs in excess of amounts accrued, if any, relating to the
investigation and remedial action which may be required by the agencies of
the State of California, will not have a material adverse effect on the
consolidated financial position or results of operations of the Company.
8. Certain prior year amounts have been reclassified to conform with the
current quarter presentation.
8
<PAGE>
COHERENT, INC. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
GENERAL
The Company operates in a technologically advanced, dynamic and highly
competitive environment. The Company's future operating results are and will
continue to be subject to quarterly variations based on a variety of factors,
many of which are beyond the Company's control, including fluctuations in
customer orders and foreign currency exchange rates, among others. While the
Company attempts to identify and respond to these conditions in a timely manner,
such conditions represent significant risks to the Company's performance. In
particular, the Company has experienced in recent quarters significant increases
in orders, sales and profits which it believes has contributed to the increase
in its stock price over this period. However, if the level of orders diminishes
during the next, or any future, quarter, or if for any reason the Company's
shipments are disrupted (particularly near a quarter end when the Company
typically ships a significant portion of its sales), it would have a material
adverse effect on sales and earnings, and a corresponding adverse effect on the
market price of the Company's stock.
Similarly, the Company conducts a significant portion of its business
internationally. International sales accounted for more than 50% of the
Company's sales for fiscal 1994 and for the first nine months of fiscal 1995.
The Company expects that international sales will continue to account for a
significant portion of its net sales in the future. The Company's international
sales occur through its international subsidiaries, some of which also perform
research, development, manufacturing and service functions, and from exports
from its U.S. operations. As a result of the Company's international sales and
operations, it is subject to the risks of conducting business internationally,
including fluctuations in foreign exchange rates, which could affect the sales
price in local currencies of the Company's products in foreign markets as well
as the Company's local costs and expenses of its foreign operations. The
Company uses forward exchange and currency swap contracts, and other risk
management techniques, to hedge its exposure to currency fluctuations relating
to its intercompany transactions and certain firm foreign currency commitments;
however, its international subsidiaries remain exposed to the economic risks of
foreign currency fluctuations. For example, as discussed below under "Results
of Operations", the weakening of the U.S. dollar against certain major European
and Japanese currencies had the effect of increasing sales for the current
quarter and nine months ended July 1, 1995 by approximately $3.7 million and
$8.2 million, respectively, compared to the corresponding prior year periods.
This impact is partially offset by increased local costs and expenses resulting
from translating such items into U.S. dollars. There can be no assurance that
such factors will not adversely impact the Company's operations in the future or
require the Company to modify its current business practices.
RESULTS OF OPERATIONS
CONSOLIDATED SUMMARY
The Company's net income for the current quarter and nine months ended July
1, 1995 was $5.1 million ($.46 per common share) and $13.0 million ($1.19 per
common share), respectively, compared to $2.9 million ($.28 per common share)
and $7.3 million ($.71 per common share), in the corresponding prior year
periods. Pretax income increased $3.9 million (87%) for the current quarter
and increased $9.4 million (79%) for the nine months ended July 1, 1995,
compared to the same prior year periods. The primary factors contributing to
these increases were higher sales volumes and lower operating expenses as a
percentage of sales for both periods as well as higher other income, net for the
nine months ended July 1, 1995 compared to the same prior year period. The
effective tax rate for the nine months ended July 1, 1995 remained at 39%
compared to the same period one year ago.
9
<PAGE>
NET SALES AND GROSS PROFITS
CONSOLIDATED
The Company's sales for the third quarter and nine months ended July 1,
1995, increased $21.0 million (38%) and $43.8 million (28%), respectively,
compared to the same periods a year ago. During the current quarter and year-
to-date, international and domestic sales increased in both the Medical and
Electro-Optical business segments. The sales increases were primarily due to
higher sales volumes. In addition, the devaluation of the U.S. dollar against
the German deutschemark, British pound and Japanese yen in the current periods
compared to the same periods last year, caused international sales to increase
approximately $3.7 million and $8.2 million, respectively. International sales
for the third quarter and nine months ended July 1, 1995 were 51% and 52%,
respectively, of total consolidated sales.
The gross profit rate increased to 50% both for the current quarter and
nine months ended July 1, 1995, compared to 48% and 49%, respectively, for the
same prior year periods. The increases were primarily associated with higher
volumes of Medical segment sales of higher margin products in certain
territories that experience higher gross profits. The improved gross profits
were also due in part to the translation of the weak dollar against the German
deutschemark, British pound and Japanese yen for the current periods compared to
the same periods last year.
ELECTRO-OPTICAL
Electro-Optical net sales increased $11.2 million (36%) and $20.5 million
(22%) for the third quarter and nine months ended July 1, 1995, respectively,
compared to the corresponding prior year periods. The sales increases were
primarily due to higher shipments in all three operating groups which management
believes is a reflection of the continued strong market acceptance of products
introduced in the last eighteen months. The sales increases were also partially
due to the currency translation of sales denominated in strong foreign
currencies relative to the U.S. dollar, compared to the same periods a year ago.
The gross profit rate remained at 49% during the current quarter and the
nine months ended July 1, 1995, compared to the same periods one year ago.
MEDICAL
Medical net sales increased $9.8 million (41%) and $23.3 million (36%) for
the third quarter and nine months ended July 1, 1995, respectively, compared to
the corresponding prior year periods. The increases resulted primarily from
increased shipments of the UltraPulse-Registered Trademark- CO(2) laser for
Derm/Cosmetic applications and the introduction of the VersaPulse-Registered
Trademark- Select-TM- dual wavelength laser for surgical applications and the
Novus-Registered Trademark- Omni-TM- for ophthalmic applications. The sales
increases were also partially due to the currency translation of sales
denominated in strong foreign currencies relative to the U.S. dollar compared to
the same periods last year.
The gross profit rate increased to 52% and 51% during the current quarter
and nine months ended July 1, 1995, respectively, compared to 48% for the same
periods last year. The year-to-date increase resulted primarily from the higher
sales volumes, increased sales of higher margin products, the impact of sales
denominated in strong foreign currencies while most of the related cost of sales
was denominated in U.S. dollars and higher sales volumes in territories where
the Medical segment experiences higher margins.
10
<PAGE>
OPERATING EXPENSES
<TABLE>
<CAPTION>
Third Quarter First Three Quarters
1995 1994 1995 1994
----------------------------------------
(IN THOUSANDS)
<S> <C> <C> <C> <C>
Research & development $ 7,894 $ 6,101 $21,990 $18,051
Selling, general & administrative 22,092 16,336 58,938 47,209
-------------------------------------------------------------------------------
Total operating expenses $29,986 $22,437 $80,928 $65,260
-------------------------------------------------------------------------------
-------------------------------------------------------------------------------
</TABLE>
Total operating expenses increased $7.5 million (34%) and $15.7 million
(24%) for the current quarter and nine months ended July 1, 1995, respectively,
compared to the same periods a year ago, however, decreased as a percentage of
sales to 39% and 40%, respectively, for the current quarter and year-to-date,
compared to 41% for the corresponding prior year periods.
Research and development (R&D) expenses increased $1.8 million (29%) for
the current quarter and increased $3.9 million (22%) year-to-date, compared to
the same periods a year ago. R&D expenses decreased as a percentage of sales
from 11% to 10% for the current quarter and remained at 11% for the nine months
ended July 1, 1995 compared to a year ago. Most of the spending increases
occurred in the Medical business segment due to higher costs associated with an
increase in the number of products in development and a corresponding increase
in headcount.
Selling, general and administration (SG&A) expenses increased $5.8 million
(35%) and $11.7 million (25%) for the current quarter and year-to-date,
respectively, compared to the same periods a year ago. However, for both
periods, SG&A expenses as a percentage of sales decreased to 29% from 30% in the
prior year. Both business segments experienced dollar increases with a higher
concentration in the Medical business segment due to higher sales and marketing
expenses. These expenses increased due to the higher sales volumes, additional
headcount and related cost increases. Such costs were also higher in both
segments due to the translation of costs denominated in strong foreign
currencies relative to the U.S. dollar compared to the same periods a year ago.
OTHER INCOME (EXPENSE)
Other income, net, increased $0.1 million during the current quarter and
increased $1.7 million for the nine months ended July 1, 1995, compared to the
same periods last year. The year-to-date increase was primarily due to the
second quarter $0.8 million higher foreign exchange gains and the second quarter
gain of $0.4 million on the sale of the Company's investment in Palomar stock.
The higher foreign exchange gains relate to the significant strengthening of the
major Asian and European currencies against the U.S. dollar.
INCOME TAXES
The Company's effective tax rate for the nine months ended July 1, 1995
remained at 39% compared to the same period a year ago. The Company's fiscal
1995 and 1994 effective tax rates differ from the statutory rates because of
applicable state taxes, available tax credits and differing tax rates at foreign
locations. The effective tax rate is based on projected annual results by
taxing jurisdiction and can change should the Company not achieve these
projected results.
FINANCIAL CONDITION
LIQUIDITY AND CAPITAL RESOURCES
The Company's primary sources of liquidity are cash and equivalents and
short-term investments of $37.9 million. Additional sources of liquidity are
the Company's multi-currency line of credit and bank credit facilities totaling
$24.8 million. As of July 1, 1995, the Company had $22.7
11
<PAGE>
million unused and available under these credit facilities.
CHANGES IN FINANCIAL CONDITION
Cash and equivalents decreased by $6.2 million (23%) year-to-date.
Operations and changes in exchange rates generated $5.7 million. Investing
activities used $13.9 million including $5.3 million used to acquire property
and equipment (net of proceeds from dispositions of property and equipment),
$4.5 million used to purchase Amoco assets and $4.3 million used to acquire
assets held for investment. Financing activities provided $2.0 million
including sales of shares under employee benefit plans (including tax benefits),
net, which generated $4.8 million, partially offset by increased repayments on
borrowings, net, of $2.8 million.
Net accounts receivable increased $11.7 million (24%) from October 1, 1994
primarily due to increased sales volumes in both the Medical and Electro-Optical
business segments.
Net inventories increased $12.1 million (31%) from October 1, 1994
primarily due to increased demonstration inventory due to new product
introductions in the Medical business segment and increased sales volumes and
bookings in both the Medical and Electro-Optical business segments.
Other current liabilities increased $10.9 million (29%) from October 1,
1994 primarily due to prepayments made by customers at the Company's German
subsidiaries, the purchase of Adlas and increases in sales taxes payable due to
the timing of payments and the increased sales volumes.
Minority interest in subsidiaries decreased $2.5 million (61%) from October
1, 1994 primarily due to a dividend of Lambda Physik GmbH retained earnings.
12
<PAGE>
COHERENT, INC.
PART II. OTHER INFORMATION
ITEM 1. Material developments in connection with legal proceedings.
N/A
ITEM 2. Material modification of rights of registrant's securities.
N/A
ITEM 3. Defaults on senior securities.
N/A
ITEM 4. Submission of Matters to a Vote of Security Holders
N/A
ITEM 5. Other.
N/A
ITEM 6. Exhibits and Reports on Form 8-K.
Exhibit 27 "Financial Data Schedules" included herewith.
13
<PAGE>
COHERENT, INC.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this Report to be signed on its behalf by the
undersigned, thereunto duly authorized.
COHERENT, INC.
(Registrant)
Date: August 7, 1995 By: ROBERT J. QUILLINAN
--------------------------
Robert J. Quillinan
Vice President and Chief Financial Officer
14
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> SEP-30-1995
<PERIOD-START> OCT-02-1994
<PERIOD-END> JUL-01-1995
<CASH> 21,018
<SECURITIES> 16,887
<RECEIVABLES> 68,832
<ALLOWANCES> 3,634
<INVENTORY> 50,948
<CURRENT-ASSETS> 175,103
<PP&E> 89,706
<DEPRECIATION> 45,168
<TOTAL-ASSETS> 245,101
<CURRENT-LIABILITIES> 74,723
<BONDS> 7,685
<COMMON> 106
0
0
<OTHER-SE> 151,563
<TOTAL-LIABILITY-AND-EQUITY> 245,101
<SALES> 201,286
<TOTAL-REVENUES> 201,286
<CGS> 100,853
<TOTAL-COSTS> 100,853
<OTHER-EXPENSES> 80,928
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<INTEREST-EXPENSE> 943
<INCOME-PRETAX> 21,426
<INCOME-TAX> 8,434
<INCOME-CONTINUING> 12,992
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 12,992
<EPS-PRIMARY> 1.19
<EPS-DILUTED> 1.18
</TABLE>
