<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 December 27, 1997
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 January 30, 1998 was 11,588,913 shares.
<PAGE>
COHERENT, INC.
INDEX
Page No.
PART I. FINANCIAL INFORMATION:
Consolidated Condensed Statements of Operations --
Three months ended December 27, 1997 and December 28, 1996 3
Consolidated Condensed Balance Sheets --
December 27, 1997 and September 27, 1997 4
Consolidated Condensed Statements of Cash Flows --
Three months ended December 27, 1997 and December 28, 1996 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 OPERATIONS
(UNAUDITED; IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
THREE
MONTHS ENDED
------------
DECEMBER 27, December 28,
1997 1996
- - ----------------------------------------------------------------------------
<S> <C> <C>
NET SALES $101,369 $93,893
COST OF SALES 48,919 44,843
- - ----------------------------------------------------------------------------
GROSS PROFIT 52,450 49,050
- - ----------------------------------------------------------------------------
OPERATING EXPENSES:
Research and development 10,428 8,725
Purchased in-process technology 9,315
Selling, general and administrative 29,935 27,183
- - ----------------------------------------------------------------------------
TOTAL OPERATING EXPENSES 40,363 45,223
- - ----------------------------------------------------------------------------
INCOME FROM OPERATIONS 12,087 3,827
- - ----------------------------------------------------------------------------
OTHER INCOME (EXPENSE):
Interest and dividend income 322 355
Interest expense (318) (258)
Foreign exchange loss (345) (132)
Minority interest in subsidiaries (294) (371)
Other - net 293 705
- - ----------------------------------------------------------------------------
TOTAL OTHER INCOME (EXPENSE), NET (342) 299
- - ----------------------------------------------------------------------------
INCOME BEFORE INCOME TAXES 11,745 4,126
PROVISION FOR INCOME TAXES 4,235 4,658
- - ----------------------------------------------------------------------------
NET INCOME (LOSS) $ 7,510 $ (532)
- - ----------------------------------------------------------------------------
- - ----------------------------------------------------------------------------
NET INCOME (LOSS) PER SHARE:
BASIC $ .65 $ (0.05)
DILUTED $ .64 $ (0.05)
- - ----------------------------------------------------------------------------
- - ----------------------------------------------------------------------------
SHARES USED IN COMPUTATION:
BASIC 11,540 11,247
DILUTED 11,799 11,247
- - ----------------------------------------------------------------------------
- - ----------------------------------------------------------------------------
</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>
DECEMBER 27, September 27,
1997 1997
- - -----------------------------------------------------------------------------------
<S> <C> <C>
ASSETS
CURRENT ASSETS:
Cash and equivalents $ 14,571 $ 21,455
Short-term investments 16,769 10,182
Accounts receivable - net of allowances of
$3,484 in 1998 and $3,499 in 1997 94,800 95,844
Inventories 93,673 86,446
Prepaid expenses and other assets 17,059 18,971
Deferred tax assets 22,876 22,267
- - -----------------------------------------------------------------------------------
TOTAL CURRENT ASSETS 259,748 255,165
- - -----------------------------------------------------------------------------------
PROPERTY AND EQUIPMENT 132,110 128,532
ACCUMULATED DEPRECIATION AND AMORTIZATION (59,117) (56,708)
- - -----------------------------------------------------------------------------------
Property and equipment - net 72,993 71,824
- - -----------------------------------------------------------------------------------
GOODWILL - net of accumulated amortization of
$5,011 in 1998 and $7,199 in 1997 12,522 13,372
OTHER ASSETS 24,358 21,289
- - -----------------------------------------------------------------------------------
$369,621 $361,650
- - -----------------------------------------------------------------------------------
- - -----------------------------------------------------------------------------------
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Short-term borrowings $ 19,162 $ 19,235
Current portion of long-term obligations 2,620 3,629
Accounts payable 14,815 18,039
Income taxes payable 10,486 9,286
Other current liabilities 54,388 52,288
- - -----------------------------------------------------------------------------------
TOTAL CURRENT LIABILITIES 101,471 102,477
- - -----------------------------------------------------------------------------------
LONG-TERM OBLIGATIONS 9,687 9,665
OTHER LONG-TERM LIABILITIES 12,346 13,927
MINORITY INTEREST IN SUBSIDIARIES 4,658 4,348
STOCKHOLDERS' EQUITY:
Common stock, par value $.01
Authorized - 50,000 shares
Outstanding 11,584 in 1998 and
11,463 in 1997 115 114
Additional paid-in capital 94,285 90,864
Unrealized loss on marketable investments (185)
Notes receivable from stock sales (98) (98)
Retained earnings 147,596 140,086
Accumulated translation adjustment (254) 267
- - -----------------------------------------------------------------------------------
TOTAL STOCKHOLDERS' EQUITY 241,459 231,233
- - -----------------------------------------------------------------------------------
$369,621 $361,650
- - -----------------------------------------------------------------------------------
- - -----------------------------------------------------------------------------------
</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>
THREE
MONTHS ENDED
------------
DECEMBER 27, December 28,
1997 1996
- - -----------------------------------------------------------------------------------------
<S> <C> <C>
INCREASE (DECREASE) IN CASH AND EQUIVALENTS
OPERATING ACTIVITIES:
Net income (loss) $ 7,510 $ (532)
Adjustments to reconcile to net cash
provided by (used for) operating activities:
Write-off of purchased in-process technology 9,315
Purchases of short-term investments (41,188) (13,034)
Proceeds from sales of short-term investments 34,601 26,000
Changes in assets and liabilities (6,709) (11,090)
Other adjustments 4,172 4,917
- - -----------------------------------------------------------------------------------------
NET CASH PROVIDED BY (USED FOR) OPERATING ACTIVITIES (1,614) 15,576
- - -----------------------------------------------------------------------------------------
INVESTING ACTIVITIES:
Purchases of property and equipment - net (4,098) (8,955)
Acquisition of distribution rights (3,320)
Acquisition of businesses
net of cash acquired (5,200)
Other - net 105 (193)
- - -----------------------------------------------------------------------------------------
NET CASH USED FOR INVESTING ACTIVITIES (7,313) (14,348)
- - -----------------------------------------------------------------------------------------
FINANCING ACTIVITIES:
Long-term debt repayments, net (1,002) (863)
Notes payable borrowings 9,088 5,619
Notes payable repayments (8,595) (2,672)
Sales of shares under employee stock plans 2,613 1,632
- - -----------------------------------------------------------------------------------------
NET CASH PROVIDED BY FINANCING ACTIVITIES 2,104 3,716
- - -----------------------------------------------------------------------------------------
EFFECT OF EXCHANGE RATE CHANGES
ON CASH AND EQUIVALENTS (61) 165
- - -----------------------------------------------------------------------------------------
Net increase (decrease) in cash
and equivalents (6,884) 5,109
Cash and equivalents beginning of period 21,455 9,214
- - -----------------------------------------------------------------------------------------
CASH AND EQUIVALENTS END OF PERIOD $14,571 $ 14,323
- - -----------------------------------------------------------------------------------------
- - -----------------------------------------------------------------------------------------
</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 September 27, 1997. 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. In June 1997, the Financial Accounting Standards Board adopted Statements
of Financial Accounting Standards No. 130 (Reporting Comprehensive
Income), which requires that an enterprise report, by major components
and as a single total, the change in its net assets during the period
from nonowner sources; and No. 131 (Disclosures about Segments of an
Enterprise and Related Information), which establishes annual and interim
reporting standards for an enterprise's business segments and related
disclosures about its products, services, geographic areas, and major
customers. Adoption of these statements will not impact the Company's
consolidated financial position, results of operations or cash flows.
Both statements are effective for fiscal years beginning after December
15, 1997, with earlier application permitted.
In February 1997, the Financial Accounting Standards Board issued SFAS
No. 128, "Earnings Per Share," which was adopted by the Company in the
first quarter of fiscal 1998. Upon adoption of SFAS No. 128, the Company
is presenting basic earnings per share and diluted earnings per share.
Basic earnings per share is computed based on the weighted average number
of shares outstanding during the period. Diluted earnings per share is
computed based on the weighted average number of shares outstanding
during the period increased by the effect of dilutive stock options and
stock purchase contracts, using the treasury stock method, and shares
issuable under the Productivity Incentive Plan.
The following table presents information necessary to calculate basic and
diluted earnings per common and common equivalent share:
<TABLE>
<CAPTION>
Three Months Ended
December 27, December 28,
1997 1996
---------------------------
<S> <C> <C>
Weighted average shares outstanding - Basic 11,540,000 11,247,000
Dilutive share equivalents 259,000
---------- -----------
Weighted average shares and equivalents -
Diluted 11,799,000 11,247,000
---------- ----------
---------- ----------
Net income (loss) for basic and diluted
earnings per share computation $7,510,000 $ (532,000)
---------- ----------
---------- ----------
</TABLE>
Share equivalents are not included in the diluted shares computation for
the first quarter of fiscal 1997 as their inclusion would have an
anti-dilutive effect on loss per share.
No dividends were paid in fiscal 1998 or 1997.
6
<PAGE>
3. Balance Sheet Detail:
Inventories are stated at the lower of cost (first-in, first-out) or
market. Inventories are as follows:
<TABLE>
<CAPTION>
December 27, September 27,
1997 1997
--------------------------------------------------------------------------
(IN THOUSANDS)
<S> <C> <C>
Purchased parts and assemblies $28,278 $25,756
Work-in-process 29,847 28,917
Finished goods 35,548 31,773
--------------------------------------------------------------------------
Net inventories $93,673 $86,446
--------------------------------------------------------------------------
--------------------------------------------------------------------------
</TABLE>
Prepaid expenses and other assets consist of the following:
<TABLE>
<CAPTION>
December 27, September 27,
1997 1997
--------------------------------------------------------------------------
(IN THOUSANDS)
<S> <C> <C>
Prepaid income taxes $ 6,833 $10,731
Prepaid expenses and other 10,226 8,240
--------------------------------------------------------------------------
Prepaid expenses and other assets $17,059 $18,971
--------------------------------------------------------------------------
--------------------------------------------------------------------------
</TABLE>
Other assets consist of the following:
<TABLE>
<CAPTION>
December 27, September 27,
1997 1997
--------------------------------------------------------------------------
(IN THOUSANDS)
<S> <C> <C>
Assets held for investment $ 1,392 $ 1,411
Intangibles and other assets 22,966 19,878
--------------------------------------------------------------------------
Other assets $24,358 $21,289
--------------------------------------------------------------------------
--------------------------------------------------------------------------
</TABLE>
Other current liabilities consist of the following:
<TABLE>
<CAPTION>
December 27, September 27,
1997 1997
--------------------------------------------------------------------------
(IN THOUSANDS)
<S> <C> <C>
Accrued payroll and benefits $17,454 $18,814
Accrued expenses and other 13,445 14,648
Deferred income 8,736 9,193
Reserve for warranty 7,918 7,498
Cash overdrafts 3,452
Customer deposits 3,383 2,135
--------------------------------------------------------------------------
Other current liabilities $54,388 $52,288
--------------------------------------------------------------------------
--------------------------------------------------------------------------
</TABLE>
Other long-term liabilities consist of the following:
<TABLE>
<CAPTION>
December 27, September 27,
1997 1997
--------------------------------------------------------------------------
(IN THOUSANDS)
<S> <C> <C>
Deferred income and other $ 9,609 $ 9,017
Deferred tax liabilities 1,401 3,574
Environmental remediation costs 1,336 1,336
--------------------------------------------------------------------------
Other long-term liabilities $12,346 $13,927
--------------------------------------------------------------------------
--------------------------------------------------------------------------
</TABLE>
7
<PAGE>
4. Certain claims and lawsuits 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, was 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 Company's former headquarters facility is located. The
responding parties to the Regional Order (including the Company) have
completed the investigations and have installed all required remedial
systems. The responding parties have agreed upon 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 Stanford
Industrial Park. The Company has completed the investigations and has
installed all required remedial systems. The Company has been operating
remedial systems at the site to remove subsurface chemicals since April
1992. During fiscal 1997, the Company settled with the prior tenant and
neighboring companies, on allocation of the cost of investigating and
remediating the site at 3210 Porter Drive and the bordering site at 3300
Hillview Avenue.
Management believes that the Company's probable, nondiscounted net
liability at December 27, 1997 for remaining costs associated with the
above environmental matters is $0.3 million which has been previously
accrued. This amount consists of total estimated probable costs of $1.5
million ($0.2 million included in other current liabilities and $1.3
million included in other long-term liabilities) reduced by estimated
minimum probable recoveries of $1.2 million included in other assets from
other parties named to the order.
5. The Board of Directors has declared a 2-for-1 stock split of its common
stock. Stockholders of record on February 17, 1998 will be entitled to
one additional share of common stock for each one share of the Company's
common stock held on that date. The new shares resulting from the 2-for-1
split will be mailed from the Company's transfer agent, BankBoston, N.A.,
on or about March 2, 1998 to holders of record as of February 17, 1998.
On February 3, 1998, the Company has approximately 11.6 million shares of
Common Stock outstanding. After the stock split, the Company will have
about 23.2 million shares of common stock outstanding. Technically, the
stock split will be effected in the form of a dividend which will be paid
in newly issued common stock in accordance with Delaware corporate law.
8
<PAGE>
COHERENT, INC. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
GENERAL
The statements in this document that relate to future plans, events or
performance are forward-looking statements that involve risks and
uncertainties, including risks associated with uncertainties related to
currency translations, contract cancellations, manufacturing risks,
competitive factors, uncertainties pertaining to customer orders, demand for
products and services, development of markets for the Company's products and
services and other risks identified in the Company's SEC filings. Actual
results, events and performance may differ materially. Readers are cautioned
not to place undue reliance on these forward-looking statements, which speak
only as of the date hereof. The Company undertakes no obligation to release
publicly the result of any revisions to these forward-looking statements that
may be made to reflect events or circumstances after the date hereof or to
reflect the occurrence of unanticipated events. For a discussion of these
risks and uncertainties, refer to the Company's annual report on Form 10-K
for the fiscal year ended September 27, 1997 under the heading "Risk Factors"
in Part I, Item 1. Business.
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. Accordingly, 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 55% of the Company's
sales for fiscal 1997 and were 54% of total sales for the current quarter.
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, the
Company's international sales and operations are 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. 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.
Coherent, Inc., a Delaware corporation, (herein referred to as
"Coherent" or "Company") is a leading designer, manufacturer and supplier of
electro-optical systems and medical instruments utilizing laser, precision
optic and microelectronic technologies. The Company integrates these
technologies into a wide variety of products and systems designed to meet the
productivity and performance needs of its customers. Major markets include
the scientific research community, medical institutions, clinics and private
practices, and commercial and OEM (original equipment manufacturer)
applications ranging from semiconductor processing and disk mastering to
light shows and entertainment. Coherent also produces and sells optical and
laser components to other laser system manufacturers.
9
<PAGE>
The word "laser" is the acronym for "light amplification by stimulated
emission of radiation." The emitted radiation oscillates within an optical
resonator and is amplified by an active media, resulting in a monochromatic
beam of light which is narrow, highly coherent and thus can be focused to a
small spot with a high degree of precision.
Since inception in 1966, the Company has grown through a combination of
internal expansion, joint ventures and strategic acquisitions of companies
with related technologies and products. Coherent is a technical leader in
every market it serves. Driven by new product application innovations,
Coherent has approximately 189 U.S. patents in force, and over the past
several years has committed approximately 10 % of annual revenues to research
and development efforts.
Committed to quality and customer satisfaction, Coherent designs and
produces many of its own components to retain quality control. Coherent
provides customers with around-the-clock technical expertise and quality that
is ISO 9000 certified at its principal manufacturing sites.
Coherent is focused on laser product innovations. Leveraging its
competitive strengths in laser technology development, new product
applications, engineering R&D and manufacturing expertise, Coherent is
dedicated to customer satisfaction, quality and service. Coherent's mission
is to continue its tradition of providing medical, scientific and commercial
customers with cost effective laser products that provide performance
breakthroughs and application innovations.
RESULTS OF OPERATIONS
CONSOLIDATED SUMMARY
During the first quarter ended December 27, 1997, the Company recorded
net income of $7.5 million ($0.64 per share) compared to proforma net income
of $8.5 million ($0.73 per share) (excluding the $9.0 million after-tax
write-off of purchased in-process technology) for the same quarter one year
ago. During the first quarter of fiscal 1997, the Company recorded the
after-tax write-off resulting from the acquisitions of Tutcore OY Ltd. of
Tampere, Finland and Micracor, Inc. of Acton, Massachusetts. The decrease in
current quarter net income over the prior year proforma net income was
primarily attributable to higher research and development spending and higher
sales and marketing expenses. Actual net loss for the prior year quarter was
$0.5 million ($0.05 per share).
NET SALES AND GROSS PROFITS
CONSOLIDATED
The Company's sales for the first fiscal quarter of 1998 increased $7.5
million (8%) to $101.4 million from $93.9 million one year ago. Domestic
sales increased $7.4 million while international sales increased $0.1
million. The strengthening of the U.S. dollar against major foreign
currencies during the current fiscal quarter compared to the same quarter
last year caused reported international sales to be $4.9 million lower this
quarter. Currently, reported international sales represent 54% of total
outside sales.
The gross profit rate remained at 52% of sales.
ELECTRO-OPTICAL
Electro-Optical net sales increased $6.5 million (12%) to $59.0 million
from $52.5 million one year ago. Domestic sales increased $3.5 million (17%)
while international sales increased $3.0 million (9%). Sales increased
primarily due to broader market acceptance of products introduced within the
last two years. Sales also increased in part due to the Auburn Group's
fiscal 1997 third quarter acquisition of Ealing Electro-Optics in Watford,
England. Additionally, the strengthening of the U.S. dollar against major
foreign currencies in the current quarter compared to the same quarter last
year caused international sales to be $3.5 million lower this quarter.
The gross profit rate decreased to 50% from 51% one year ago. This
decrease was primarily the result of the impact of foreign currency
translation due to the strengthening of the U.S. dollar against major foreign
currencies in the current quarter compared to the same period last year.
10
<PAGE>
MEDICAL
Medical net sales increased $1.0 million (2%) to $42.4 million from
$41.4 million one year ago. Domestic sales increased by $3.8 million (21%)
while international sales decreased $2.8 million (12%). The increase in
domestic sales over the prior year resulted primarily from increased sales
volumes of aesthetic products. The international sales decrease resulted
primarily from $2.5 million (10%) lower sales in the Pacific region. The
strengthening of the U.S. dollar against major foreign currencies in the
current fiscal quarter compared to the same quarter last year caused
international sales to be lower by $1.4 million.
The gross profit rate remained at 54% of sales. Higher gross profits in
the aesthetic products were fully offset by the impact of foreign currency
translation due to the stronger U.S. dollar against foreign currencies
compared to the same quarter last year.
OPERATING EXPENSES
<TABLE>
<CAPTION>
First Quarter
1998 1997
-----------------------------
(IN THOUSANDS)
<S> <C> <C>
Research & development $10,428 $ 8,725
Purchased in-process technology 9,315
Selling, general & administrative 29,935 27,183
- - ----------------------------------------------------------------------
Total operating expenses $40,363 $45,223
- - ----------------------------------------------------------------------
- - ----------------------------------------------------------------------
</TABLE>
Total operating expenses decreased by $4.8 million (11%) to $40.4
million from $45.2 million one year ago. Exclusive of the write-off of
purchased in-process technology in the first quarter of fiscal 1997,
operating expenses increased by $4.5 million (12%). As a percentage of
sales, operating expenses increased to 40% compared to 38% one year ago
(exclusive of the aforementioned write-off).
Research and development expenses (exclusive of the aforementioned
write-off) increased $1.7 million (10%) to $10.4 million compared to $ 8.7
million one year ago and increased to 10% of sales from 9% one year ago. The
increase is due to increased spending for new projects.
Sales, marketing and service expenses increased $3.4 million (18%) to
$22.0 million from $18.6 million one year ago. As a percentage of sales,
sales, marketing and service expenses increased to 22% from 20% one year ago.
These expenses increased in both business segments primarily due to recent
business acquisitions, increased costs associated with higher headcount and
higher costs associated with the Asia Pacific region.
Administrative expenses decreased $0.6 million (7%) to $8.0 million from
$8.6 million one year ago and as a percentage of sales decreased to 8% from
9% one year ago. These expenses decreased due to lower bonus and worker's
compensation reserves.
OTHER INCOME (EXPENSE)
Other income, net, decreased to net expense of $0.3 million compared to
net income of $0.3 million in the same quarter last year. Other income
decreased $0.4 million due primarily to the Q1/97 rental income on the former
headquarters facility (sold in May 1997) and to a $0.2 million higher foreign
exchange loss.
INCOME TAXES
The Company's effective tax rate for the current quarter was 36%
compared to the proforma effective tax rate of 37% for the same quarter last
year. The Company's proforma effective tax rate for the same quarter last
year excludes the $9.3 million write-off of purchased in-process technology.
The
11
<PAGE>
Company's effective tax rate for the quarter decreased as a result of
increases in foreign tax credit utilization, foreign sales corporation
benefit and changes in income by taxing jurisdiction.
FINANCIAL CONDITION
LIQUIDITY AND CAPITAL RESOURCES
The Company's primary sources of liquidity are cash, cash equivalents
and short-term investments of $31.3 million. Additional sources of liquidity
are the Company's multi-currency line of credit and bank credit facilities
totaling $56.4 million. As of December 27, 1997, the Company had $38.3
million unused and available under these credit facilities.
CHANGES IN FINANCIAL CONDITION
Cash and cash equivalents decreased $6.9 million (32%) from September
27, 1997. Operations and changes in exchange rates used $1.7 million,
including $6.6 million used to purchase short-term investments. Investing
activities used $7.3 million, including $4.1 million used to acquire property
and equipment, net and $3.3 million used to acquire distribution rights,
partially offset by other, net which provided $0.1 million. Financing
activities provided $2.1 million with $2.6 million provided from the sale of
shares under employee stock plans partially offset by debt repayments, net of
$0.5 million.
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 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: February 10, 1998 By: Robert J. Quillinan
----------------------------
Robert J. Quillinan
Executive Vice President and Chief
Financial Officer
14
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> SEP-26-1998
<PERIOD-END> DEC-27-1997
<CASH> 14,571
<SECURITIES> 16,769
<RECEIVABLES> 98,406
<ALLOWANCES> 3,606
<INVENTORY> 93,673
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0
0
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<EPS-PRIMARY> .64
<EPS-DILUTED> .64
</TABLE>
