<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 April 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 May 1, 1995 was 10,766,713 shares.
<PAGE>
COHERENT, INC.
INDEX
Page No.
--------
PART I. FINANCIAL INFORMATION:
Consolidated Condensed Statements of Income --
Three months and six months ended April 1, 1995
and April 2, 1994 3
Consolidated Condensed Balance Sheets --
April 1, 1995 and October 1, 1994 4
Consolidated Condensed Statements of Cash Flows --
Six months ended April 1, 1995 and April 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 SIX
MONTHS ENDED MONTHS ENDED
------------ ------------
APRIL 1, April 2, APRIL 1, April 2,
1995 1994 1995 1994
- - -----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
NET SALES $ 66,456 $ 55,215 $125,039 $102,241
COST OF SALES 33,902 27,892 62,747 51,983
- - -----------------------------------------------------------------------------------------------------------
GROSS PROFIT 32,554 27,323 62,292 50,258
- - -----------------------------------------------------------------------------------------------------------
OPERATING EXPENSES:
Research and development 7,428 6,430 14,096 11,950
Selling, general and administrative 19,275 16,052 36,846 30,873
- - -----------------------------------------------------------------------------------------------------------
TOTAL OPERATING EXPENSES 26,703 22,482 50,942 42,823
- - -----------------------------------------------------------------------------------------------------------
INCOME FROM OPERATIONS 5,851 4,841 11,350 7,435
OTHER INCOME (EXPENSE):
Interest and dividend income 608 538 1,166 997
Interest expense (349) (427) (663) (879)
Foreign exchange gain (loss) 866 91 771 (149)
Other - net 305 (45) 363 78
- - -----------------------------------------------------------------------------------------------------------
TOTAL OTHER INCOME, NET 1,430 157 1,637 47
- - -----------------------------------------------------------------------------------------------------------
INCOME BEFORE INCOME TAXES 7,281 4,998 12,987 7,482
PROVISION FOR INCOME TAXES 2,892 2,042 5,112 3,097
- - -----------------------------------------------------------------------------------------------------------
NET INCOME $ 4,389 $ 2,956 $ 7,875 $ 4,385
- - -----------------------------------------------------------------------------------------------------------
- - -----------------------------------------------------------------------------------------------------------
NET INCOME PER COMMON AND
COMMON EQUIVALENT SHARE $.40 $.29 $.73 $.43
- - -----------------------------------------------------------------------------------------------------------
- - -----------------------------------------------------------------------------------------------------------
AVERAGE COMMON AND COMMON
EQUIVALENT SHARES OUTSTANDING 11,034 10,289 10,854 10,274
- - -----------------------------------------------------------------------------------------------------------
- - -----------------------------------------------------------------------------------------------------------
</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>
APRIL 1, October 1,
1995 1994
- - --------------------------------------------------------------------------------------------
<S> <C> <C>
ASSETS
CURRENT ASSETS:
Cash and equivalents $ 8,356 $ 27,239
Short-term investments 27,854 16,534
Accounts receivable - net of allowances of
$2,243 in 1995 and $2,384 in 1994 54,405 49,074
Inventories 49,770 38,829
Prepaid expenses and other assets 9,558 11,066
Deferred tax assets 13,392 13,527
- - --------------------------------------------------------------------------------------------
TOTAL CURRENT ASSETS 163,335 156,269
- - --------------------------------------------------------------------------------------------
PROPERTY AND EQUIPMENT 86,467 82,569
ACCUMULATED DEPRECIATION AND AMORTIZATION (42,998) (39,362)
- - --------------------------------------------------------------------------------------------
Property and equipment - net 43,469 43,207
- - --------------------------------------------------------------------------------------------
GOODWILL - net of accumulated amortization of
$3,811 in 1995 and $3,497 in 1994 4,650 4,964
OTHER ASSETS 14,575 6,540
- - --------------------------------------------------------------------------------------------
$226,029 $210,980
- - --------------------------------------------------------------------------------------------
- - --------------------------------------------------------------------------------------------
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Short-term borrowings $ 6,226 $ 4,361
Current portion of long-term obligations 4,534 4,708
Accounts payable 11,046 8,012
Income taxes payable 2,439 3,809
Other current liabilities 42,562 37,669
- - --------------------------------------------------------------------------------------------
TOTAL CURRENT LIABILITIES 66,807 58,559
- - --------------------------------------------------------------------------------------------
LONG-TERM OBLIGATIONS 6,765 8,865
OTHER LONG-TERM LIABILITIES 6,078 6,003
MINORITY INTEREST IN SUBSIDIARIES 1,471 4,089
STOCKHOLDERS' EQUITY:
Common stock, par value $.01
Authorized - 50,000 shares
Outstanding - 10,600 in 1995 and 10,338 in 1994 105 103
Additional paid-in capital 71,639 68,646
Unrealized gain on short-term investments 77
Notes receivable from stock sales (1,557) (1,981)
Retained earnings 72,032 64,157
Accumulated translation adjustment 2,612 2,539
- - --------------------------------------------------------------------------------------------
TOTAL STOCKHOLDERS' EQUITY 144,908 133,464
- - --------------------------------------------------------------------------------------------
$226,029 $210,980
- - --------------------------------------------------------------------------------------------
- - --------------------------------------------------------------------------------------------
</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>
SIX
MONTHS ENDED
------------
APRIL 1, April 2,
1995 1994
- - --------------------------------------------------------------------------------------------
<S> <C> <C>
INCREASE (DECREASE) IN CASH AND EQUIVALENTS
OPERATING ACTIVITIES:
Net income $ 7,875 $ 4,385
Adjustments to reconcile to net cash
provided by (used for) operating activities:
Purchases of short-term investments (49,532) (32,662)
Proceeds from sales of short-term investments 38,300 27,481
Changes in assets and liabilities 2,949 6,120
Other adjustments (5,979) (2,865)
- - --------------------------------------------------------------------------------------------
NET CASH PROVIDED BY (USED FOR) OPERATING ACTIVITIES (6,387) 2,459
- - --------------------------------------------------------------------------------------------
INVESTING ACTIVITIES:
Purchases of property and equipment - net (2,749) (6,829)
Purchase of Amoco assets (4,520)
Purchase of asset held for investment (4,312)
Purchase of Vinten Electro-Optics Ltd. (1,500)
Other - net (430) (100)
- - --------------------------------------------------------------------------------------------
NET CASH USED FOR INVESTING ACTIVITIES (12,011) (8,429)
- - --------------------------------------------------------------------------------------------
FINANCING ACTIVITIES:
Long-term debt borrowings 2 8,720
Long-term debt repayments (2,044) (4,858)
Notes payable borrowings 4,008 3,038
Notes payable repayments (2,649) (3,938)
Repayments of capital lease obligations (302) (273)
Sales of shares under employee benefit plans 3,230 1,570
- - --------------------------------------------------------------------------------------------
NET CASH PROVIDED BY FINANCING ACTIVITIES 2,245 4,259
- - --------------------------------------------------------------------------------------------
EFFECT OF EXCHANGE RATE CHANGES
ON CASH AND EQUIVALENTS (2,730) 312
- - --------------------------------------------------------------------------------------------
Net decrease in cash and equivalents (18,883) (1,399)
Cash and equivalents beginning of period 27,239 27,923
- - --------------------------------------------------------------------------------------------
CASH AND EQUIVALENTS END OF PERIOD $ 8,356 $ 26,524
- - --------------------------------------------------------------------------------------------
- - --------------------------------------------------------------------------------------------
NONCASH INVESTING AND FINANCING ACTIVITIES:
Note payable for minority interest dividend $ 1,918
- - --------------------------------------------------------------------------------------------
- - --------------------------------------------------------------------------------------------
</TABLE>
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's
intentions are to refurbish 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 property, patents and licenses 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. Balance Sheet Detail:
Inventories are stated at the lower of cost (first-in, first-out) or
market. Inventories are as follows:
<TABLE>
<CAPTION>
April 1, October 1,
1995 1994
------------------------------------------------------------------------
(IN THOUSANDS)
<S> <C> <C>
Purchased parts and assemblies $15,607 $12,020
Work-in-process 16,687 14,714
Finished goods 17,476 12,095
------------------------------------------------------------------------
Net inventories $49,770 $38,829
------------------------------------------------------------------------
------------------------------------------------------------------------
Prepaid expenses and other assets consists of the following:
<CAPTION>
April 1, October 1,
1995 1994
------------------------------------------------------------------------
(IN THOUSANDS)
<S> <C> <C>
Prepaid income taxes $ 2,558 $ 4,686
Prepaid expenses and other 4,285 3,553
Note receivable from Transfer
Technology Group plc 2,715 2,827
------------------------------------------------------------------------
Prepaid expenses and other assets $ 9,558 $11,066
------------------------------------------------------------------------
------------------------------------------------------------------------
6
<PAGE>
Other assets consist of the following:
<CAPTION>
April 1, October 1,
1995 1994
------------------------------------------------------------------------
(IN THOUSANDS)
<S> <C> <C>
Asset held for sale $ 1,544 $ 1,544
Asset held for investment (Note 3) 4,632 216
Intangibles and other assets 8,399 4,780
------------------------------------------------------------------------
Other assets $14,575 $ 6,540
------------------------------------------------------------------------
------------------------------------------------------------------------
Other current liabilities consist of the following:
<CAPTION>
April 1, October 1,
1995 1994
------------------------------------------------------------------------
(IN THOUSANDS)
<S> <C> <C>
Accrued payroll and benefits $12,624 $12,407
Accrued expenses and other 10,267 9,854
Deferred service income 7,975 7,359
Reserve for warranty 6,171 5,418
Customer deposits 3,981 788
Environmental remediation costs 1,018 1,344
Discontinued operations 526 499
------------------------------------------------------------------------
Other current liabilities $42,562 $37,669
------------------------------------------------------------------------
------------------------------------------------------------------------
Other long-term liabilities consist of the following:
<CAPTION>
April 1, October 1,
1995 1994
------------------------------------------------------------------------
(IN THOUSANDS)
<S> <C> <C>
Environmental remediation costs $ 2,149 $ 2,573
Deferred tax liabilities 2,362 1,952
Deferred income 1,567 1,478
------------------------------------------------------------------------
Other long-term liabilities $ 6,078 $ 6,003
------------------------------------------------------------------------
------------------------------------------------------------------------
</TABLE>
6. 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.
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.
7
<PAGE>
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 April 1, 1995 for remaining costs associated with the above
environmental matters is $1.7 million which has been previously accrued.
This amount consists of total estimated probable costs of $3.2 million
($1.0 million included in other current liabilities and $2.2 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.
7. 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,
they 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 additional orders fail to materialize
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 six months of fiscal 1995 and
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 by approximately $3.1
million and $4.7 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 six months ended April
1, 1995 was $4.4 million ($.40 per common share) and $7.9 million ($.73 per
common share), respectively, compared to $3.0 million ($.29 per common share)
and $4.4 million ($.43 per common share), in the corresponding prior year
periods. Pretax income increased $2.3 million (46%) for the current quarter
and increased $5.5 million (74%) for the six months ended April 1, 1995 compared
to the same prior year periods. The primary factors contributing to these
increases were higher sales volumes, lower operating expenses as a percentage of
sales, higher other income, net and a lower effective tax rate. The effective
tax rate for the six months ended April 1, 1995 decreased to 39% compared to 41%
for the same prior year period due to a change in the distribution of earnings
and losses in different tax jurisdictions at different tax rates.
9
<PAGE>
NET SALES AND GROSS PROFITS
CONSOLIDATED
The Company's sales for the second quarter and six months ended April 1,
1995, increased $11.2 million (20%) and $22.8 million (22%), respectively, from
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; however, the devaluation of the U.S. dollar against the German
deutschemark, British pound and Japanese yen for the current periods compared to
the same periods last year, caused international sales to increase approximately
$3.l million and $4.7 million, respectively. International sales for the
second quarter and six months ended April 1, 1995 were 56% and 53%,
respectively, of total consolidated sales.
The gross profit rate remained at 49% for the current quarter compared to
the same prior year period but increased to 50% for the six months ended April
1, 1995 compared to 49% for the same prior year period. The year-to-date
increase was primarily due to efficiencies associated with the higher sales
volumes and Medical segment sales that were denominated in Japanese yen and in
certain European currencies while most of the related cost of sales was
denominated in U.S. dollars. These positive factors were partially offset by
the impact of lower margins associated with the sale of larger systems in the
Electro-Optical segment, with a high percentage of value added content from
subcontractors.
ELECTRO-OPTICAL
Electro-Optical net sales increased $5.5 million (17%) and $9.3 million
(15%) for the second quarter and six months ended April 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 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 decreased to 49% during the current quarter from 50%
for the same period last year and remained at 50% for the six months ended
April 1, 1995 compared to the same period one
year ago. The current quarter decrease resulted primarily from the sale of some
larger systems with lower margins and from inefficiencies due to the
manufacturing facility enhancements at Lambda Physik GmbH.
MEDICAL
Medical net sales increased $5.7 million (25%) and $13.5 million (33%) for
the second quarter and six months ended April 1, 1995, respectively, compared to
the corresponding prior year periods. The increases resulted primarily from
increased shipments of the Ultrapulse for Derm/Cosmetic applications and the
introduction of the Versapulse Select dual wavelength laser for surgical
applications and the Novus Omni 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 remained at 50% for the current quarter compared to
the same period last year but increased to 50% from 48% for the six months ended
April 1, 1995 compared to the same period last year. The year-to-date increase
resulted primarily from efficiencies associated with 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 decreased variances due to the 1994 high
unfavorable start-up costs for the Versapulse Select. These
10
<PAGE>
positive factors were partially offset by the impact of pricing pressures in the
European market.
OPERATING EXPENSES
<TABLE>
<CAPTION>
Second Quarter First Half
1995 1994 1995 1994
-------------------------------------------
(IN THOUSANDS)
<S> <C> <C> <C> <C>
Research & development $ 7,428 $ 6,430 $ 14,096 $ 11,950
Selling, general & administrative 19,275 16,052 36,846 30,873
- - --------------------------------------------------------------------------------------
Total operating expenses $ 26,703 $ 22,482 $ 50,942 $ 42,823
- - --------------------------------------------------------------------------------------
- - --------------------------------------------------------------------------------------
</TABLE>
Total operating expenses increased $4.2 million (19%) and $8.1 million
(19%) for the current quarter and six months ended April 1, 1995, respectively,
compared to the same periods a year ago, however, decreased as a percentage of
sales to 40% and 41%, respectively, for the current quarter and year-to-date,
compared to 41% and 42%, respectively, for the corresponding prior year periods.
Research and development (R&D) expenses increased $1.0 million (16%) for
the current quarter and increased $2.1 million (18%) year-to-date, compared to
the same periods a year ago. For both periods, R&D expenses decreased as a
percentage of sales to 11% from 12% in the prior year. Most of the spending
increases occurred in the Medical business segment due to higher costs
associated with more products in development and to an increased number of
products in clinical trials.
Selling, general and administration (SG&A) expenses increased $3.2 million
(20%) and $6.0 million (19%) for the current quarter and year-to-date,
respectively, compared to the same period a year ago. However, as a percentage
of sales, SG&A expense remained at 29% for the current quarter and decreased to
29% from 30%, one year ago. The increases occured in both business segments
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 increased facilities costs. 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 $1.3 million during the current quarter and
increased $1.6 million for the six months ended April 1, 1995, compared to the
same periods last year. The current quarter and year-to-date increases were
primarily due to the current quarter $0.8 million higher foreign exchange gains
and the current 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 six months ended April 1, 1995 was
39% compared to 41% for the same quarter a year ago. The Company's fiscal 1994
and 1995 effective tax rates differ from the statutory rates primarily because
of state taxes and differing tax rates incurred by foreign subsidiaries. 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 $36.2 million. Additional sources of liquidity are
the Company's multi-currency line of credit and bank credit facilities
11
<PAGE>
totaling $21.0 million. As of April 1, 1995, the Company had $18.3 million
unused and available under these credit facilities.
CHANGES IN FINANCIAL CONDITION
Cash and equivalents decreased by $18.9 million (69%) year-to-date.
Operations and changes in exchange rates used $9.1 million; short-term
investments increased $11.3 million. Investing activities used $12.0 million;
$2.7 million was used to acquire property and equipment (net of proceeds from
dispositions of property and equipment); $4.3 million was used to acquire assets
held for investment; $4.5 million was used to purchase Amoco assets. Financing
activities provided $2.2 million; sales of shares under employee benefit plans
(including tax benefits), net, generated $3.2 million, partially offset by
increased repayments on borrowings, net, of $1.0 million.
Net inventories increased $10.9 million (28%) 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 assets increased $8.0 million (123%) from October 1, 1994 primarily
due to the purchase of the former Porter Drive facility in the Stanford
Industrial Park and the purchase of certain property, patents and licenses from
Amoco.
Other current liabilities increased $4.9 million (13%) from October 1,
1994 primarily due to prepayments made by customers at the Company's German
subsidiaries.
Minority interest in subsidiaries decreased $2.6 million (64%) from
October 1, 1994 due to the dividend of retained earnings from Lambda Physik GmbH
to Coherent GmbH and due to a change in accounting for an investment from the
consolidation method to the equity method as a result of a decrease in the
Company's ownership percentage.
12
<PAGE>
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
On March 23, 1995, the Annual Meeting of Shareholders of Coherent,
Inc. was held in Santa Clara, California.
The following individuals were elected to the Board of Directors of
Coherent, Inc.:
James L. Hobart Charles W. Cantoni
Henry E. Gauthier Frank P. Carrubba
Jerry E. Robertson Thomas Sloan Nelsen
Other matters voted upon at the meeting and the number of affirmative
and negative votes cast with respect to each such matter were as
follows:
<TABLE>
<CAPTION>
Affirmative Negative
Votes Votes
----------------------------------------
<S> <C> <C>
1. Proposal to amend the Company's Certificate 3,796,378 3,096,268
of Incorporation and Bylaws to organize the
board of directors into three classes each with
three year staggered terms (5,260,551 affirm-
ative votes required to approve).
2. Proposal to approve a new form of indemni- 8,406,917 814,985
fication agreements to be entered into between
the Company and its officers and directors.
3. Ratification of the appointment of Deloitte 9,367,865 34,507
& Touche LLP as independent public
accountants for the 1995 fiscal year.
</TABLE>
IITEM 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 and 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: May 8, 1995 By: /s/ ROBERT J. QUILLINAN
--------------------------------------------
Robert J. Quillinan
Vice President and Chief Financial Officer
14
<TABLE> <S> <C>
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