<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 3, 1999
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 July 28, 1999 was 24,061,836 shares.
<PAGE>
COHERENT, INC.
INDEX
<TABLE>
<CAPTION>
Page No.
--------
<S> <C> <C>
PART I. FINANCIAL INFORMATION:
Condensed Consolidated Statements of Income (Loss) --
Three months and nine months ended July 3, 1999 and June 27, 1998 3
Condensed Consolidated Balance Sheets --
July 3, 1999 and September 26, 1998 4
Condensed Consolidated Statements of Cash Flows --
Three months and nine months ended July 3, 1999 and June 27, 1998 5
Notes to Condensed Consolidated Financial Statements 6
Management's Discussion and Analysis of Financial
Condition and Results of Operations 11
PART II. OTHER INFORMATION 18
SIGNATURES 19
</TABLE>
2
<PAGE>
PART I. FINANCIAL INFORMATION
COHERENT, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF INCOME (LOSS)
(UNAUDITED; IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
THREE NINE
MONTHS ENDED MONTHS ENDED
------------- ------------
JULY 3, June 27, JULY 3, June 27,
1999 1998 1999 1998
- -------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
NET SALES $115,051 $98,552 $337,219 $305,802
COST OF SALES 60,306 53,861 177,266 155,965
-------- ------- -------- ---------
GROSS PROFIT 54,745 44,691 159,953 149,837
-------- ------- -------- ---------
OPERATING EXPENSES:
Research and development 11,917 11,598 33,611 33,634
In-process research and development 16,000 16,000
Selling, general and administrative 32,553 34,931 99,601 93,348
Intangibles amortization 1,413 1,173 3,625 3,458
-------- ------- -------- ---------
TOTAL OPERATING EXPENSES 61,883 47,702 152,837 130,440
-------- ------- -------- ---------
INCOME (LOSS) FROM OPERATIONS (7,138) (3,011) 7,116 19,397
-------- ------- -------- ---------
OTHER INCOME (EXPENSE):
Interest and dividend income 651 199 2,057 810
Interest expense (1,428) (298) (2,296) (867)
Foreign exchange loss (60) (280) (63) (708)
OTHER - NET 94 (108) (734) (73)
-------- ------- -------- ---------
TOTAL OTHER INCOME (EXPENSE), NET (743) (487) (1,036) (838)
-------- ------- -------- ---------
INCOME (LOSS) BEFORE INCOME TAXES (7,881) (3,498) 6,080 18,559
PROVISION (BENEFIT) FOR INCOME TAXES (2,817) (1,771) 1,498 5,938
-------- ------- -------- ---------
NET INCOME (LOSS) $ (5,064) $ (1,727) $ 4,582 $ 12,621
- --------------------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------------------
NET INCOME (LOSS) PER SHARE:
BASIC $ (.21) $ (.07) $ .19 $ .54
DILUTED $ (.21) $ (.07) $ .19 $ .53
- --------------------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------------------
SHARES USED IN COMPUTATION:
BASIC 24,018 23,487 23,914 23,259
DILUTED 24,018 23,487 24,451 23,800
- --------------------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------------------
</TABLE>
SEE ACCOMPANYING NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
3
<PAGE>
COHERENT, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(UNAUDITED; IN THOUSANDS, EXCEPT PAR VALUE PER SHARE)
<TABLE>
<CAPTION>
JULY 3, September 26,
1999 1998
- -----------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
ASSETS
CURRENT ASSETS:
Cash and equivalents $ 37,786 $ 15,944
Short-term investments 26,111 16,954
Accounts receivable - net of allowances of
$5,288 in 1999 and $4,817 in 1998 87,078 86,822
Inventories 102,847 103,541
Prepaid expenses and other assets 28,177 22,895
Deferred tax assets 32,894 26,618
- -----------------------------------------------------------------------------------------------------------------------
TOTAL CURRENT ASSETS 314,893 272,774
- -----------------------------------------------------------------------------------------------------------------------
PROPERTY AND EQUIPMENT 159,341 147,775
ACCUMULATED DEPRECIATION AND AMORTIZATION (72,773) (64,918)
- -----------------------------------------------------------------------------------------------------------------------
Property and equipment - net 86,568 82,857
- -----------------------------------------------------------------------------------------------------------------------
GOODWILL - net of accumulated amortization of
$8,475 in 1999 and $6,912 in 1998 40,387 11,595
OTHER ASSETS 42,870 23,535
- -----------------------------------------------------------------------------------------------------------------------
$484,718 $390,761
- -----------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Short-term borrowings $ 14,535 $ 11,645
Current portion of long-term obligations 7,533 788
Accounts payable 17,361 17,851
Income taxes payable 5,643 9,160
Other current liabilities 68,951 59,603
- -----------------------------------------------------------------------------------------------------------------------
TOTAL CURRENT LIABILITIES 114,023 99,047
- -----------------------------------------------------------------------------------------------------------------------
LONG-TERM OBLIGATIONS 75,824 12,828
OTHER LONG-TERM LIABILITIES 23,687 12,599
MINORITY INTEREST IN SUBSIDIARIES 4,512 3,664
STOCKHOLDERS' EQUITY:
Common stock, par value $.01
Authorized - 100,000 shares
Outstanding 24,062 in 1999 and 23,736 in 1998 239 236
Additional paid-in capital 105,380 102,469
Notes receivable from stock sales (464) (310)
Accumulated other comprehensive income (loss) (1,962) 1,331
Retained earnings 163,479 158,897
- -----------------------------------------------------------------------------------------------------------------------
TOTAL STOCKHOLDERS' EQUITY 266,672 262,623
- -----------------------------------------------------------------------------------------------------------------------
$484,718 $390,761
- -----------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------
</TABLE>
SEE ACCOMPANYING NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS.
4
<PAGE>
COHERENT, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED; IN THOUSANDS)
<TABLE>
<CAPTION>
NINE
MONTHS ENDED
-------------
JULY 3, June 27,
1999 1998
- -------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
INCREASE (DECREASE) IN CASH AND EQUIVALENTS
OPERATING ACTIVITIES:
Net income $ 4,582 $ 12,621
Adjustments to reconcile net income to net cash provided by operating
activities:
Write-off of in-process research and development 16,000
Purchases of short-term investments (85,857) (107,901)
Proceeds from sales of short-term investments 76,700 112,171
Changes in assets and liabilities (2,330) (21,949)
Depreciation and amortization 10,375 9,183
Intangibles amortization 3,625 3,458
Other adjustments 1,229 1,089
- -----------------------------------------------------------------------------------------------------------------------
NET CASH PROVIDED BY OPERATING ACTIVITIES 24,324 8,672
- -----------------------------------------------------------------------------------------------------------------------
INVESTING ACTIVITIES:
Purchases of property and equipment, net (15,524) (15,367)
Acquisition of Star, net of cash acquired (64,012)
Acquisition of distribution rights (3,320)
Other - net 1,154 (1,022)
- -----------------------------------------------------------------------------------------------------------------------
NET CASH USED FOR INVESTING ACTIVITIES (78,382) (19,709)
- -----------------------------------------------------------------------------------------------------------------------
FINANCING ACTIVITIES:
Long-term debt borrowings 71,679 2,333
Long-term debt repayments (1,009) (1,191)
Short-term borrowings 15,399 15,220
Short-term repayments (12,553) (21,111)
Sales of shares under employee stock plans 2,348 6,682
- -----------------------------------------------------------------------------------------------------------------------
NET CASH PROVIDED BY FINANCING ACTIVITIES 75,864 1,933
- -----------------------------------------------------------------------------------------------------------------------
EFFECT OF EXCHANGE RATE CHANGES
ON CASH AND EQUIVALENTS 36 630
- -----------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in cash and equivalents 21,842 (8,474)
Cash and equivalents, beginning of period 15,944 21,455
- ----------------------------------------------- ------------ -------------
CASH AND EQUIVALENTS, END OF PERIOD $37,786 $12,981
- ----------------------------------- ------------ -------------
- ----------------------------------- ------------ -------------
NONCASH INVESTING AND FINANCING ACTIVITIES:
Repayment of long-term debt by issuance of shares $ 2,875
- ------------------------------------------------------- -------------
- ------------------------------------------------------- -------------
</TABLE>
SEE ACCOMPANYING NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS.
5
<PAGE>
COHERENT, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
1. The accompanying condensed consolidated 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 26, 1998. 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.
Certain prior period amounts have been reclassified to conform with
the current period presentation. Such reclassification had no impact
on net income or retained earnings for any period presented.
The Company's fiscal year 1999 includes 53 weeks.
2. In June 1998, the Financial Accounting Standards Board issued
Statement of Financial Accounting Standards (SFAS) No. 133,
"Accounting for Derivative Instruments and Hedging Activities." This
statement requires companies to record derivatives on the balance
sheet as assets or liabilities, measured at fair value. Gains or
losses resulting from changes in the value of those derivatives
would be accounted for depending on the use of the derivative and
whether it qualifies for hedge accounting. In May 1999, SFAS 133 was
amended to defer its effective date. SFAS 133 will be effective for
the Company's fiscal year 2001. Management believes that this
statement will not have a significant impact on the Company's
financial position or results of operations.
In June 1997, the Financial Accounting Standards Board adopted SFAS.
No. 131 "Disclosures about Segments of an Enterprise and Related
Information". This statement requires that financial information be
reported on the basis used internally for evaluating segment
performance and deciding how to allocate resources to segments. SFAS
131 will be effective for the Company's fiscal year 1999 and
requires restatement of all previously reported information for
comparative purposes. Management of the Company is evaluating the
effects of this change on its reporting segments.
3. In April 1999, the Company acquired all outstanding shares of Star
Medical Technologies, Inc. (Star) for approximately $67.0 million
(consisting of $65.0 million in cash, $1.7 million of unamortized
distribution rights and $0.3 million of acquisition costs) from
Palomar Medical Technologies, Inc. and from certain Star employees.
Star, based in Pleasanton, California, manufactures LightSheer-TM-
laser diode systems, which have received FDA approval for hair
removal and the treatment of leg veins. The acquisition was treated
as a purchase and, accordingly, the acquired assets and liabilities
were recorded at their fair market values at the date of acquisition.
The aggregate purchase price of $67.0 million (including acquisition
costs) has been allocated to the assets and in-process research and
development acquired. The total purchase price was allocated among
the assets acquired (including acquired in-process research and
development) as follows (in thousands):
Purchase price allocation:
<TABLE>
<S> <C>
Tangible assets $11,214
In-process research and development 16,000
Intangible assets:
Goodwill 30,868
Existing technology 19,200
Workforce 1,700
Liabilities assumed (10,841)
</TABLE>
6
<PAGE>
<TABLE>
<S> <C>
Deferred tax liabilities (1,170)
-------
Total $66,971
=======
</TABLE>
The goodwill is being amortized over its estimated useful life of 15
years. The existing technology and workforce assets are being
amortized over their estimated useful lives of 7 and 3 years,
respectively.
The purchase price allocation and intangible valuation was based on
management's estimates of the after-tax net cash flows and gave
explicit consideration to the Securities and Exchange Commission's
views on purchased in-process research and development as set forth
in its September 9, 1998 letter to the American Institute of
Certified Public Accountants. Specifically, the valuation gave
consideration to the following: (i) the employment of a fair market
value premise excluding any Coherent-specific considerations which
could result in estimates of investment value for the subject
assets; (ii) comprehensive due diligence concerning all potential
intangible assets including trademarks/trade names, patents,
copyrights, noncompete agreements, assembled workforce, customer
relationships and sales channel; (iii) the value of existing
technology was specifically addressed, with a view toward ensuring
the relative allocations to existing technology and in-process
research and development were consistent with the relative
contributions of each to the final product; and (iv) the allocation
to in-process research and development was based on a calculation
that considered only the efforts completed as of the transaction
date, and only the cash flow associated with said completed efforts
for one generation of the products currently in process.
As indicated above, the Company recorded a one-time charge of
$16,000,000 ($10,734,000 net of tax) in the third quarter of 1999
for purchased in-process research and development related to five
development projects. The charge related to the portion of these
products, excluding existing technology, that had not reached
technological feasibility, had no alternative future use and for
which successful development was uncertain. Management's conclusion
that the in-process development effort had no alternative future use
was reached in consultation with the engineering personnel from both
the Company and Star.
The first of these projects is a new product in the LightSheer
family that results in a 50% increase in power and twice the
coverage by incorporating a new heat exchanger, thermoelectric
cooling system, sapphire tip and software. At the time of
acquisition, the development was 86% complete and the estimated cost
to complete was $0.2 million. The Company began shipping the product
in May 1999. The second of these projects is a next generation
LightSheer product that incorporates a new microprocessor and
touch-screen as well as redesigns the packaging to improve
serviceability. At the time of acquisition, the development was 78%
complete and the estimated cost to complete was $0.5 million. The
Company began shipping the product in July 1999. The third of these
projects is new product in the LightSheer family that will result in
increased coverage and will require a new clinical trial. At the
time of acquisition, the development was 72% complete and the
estimated cost to complete was $0.6 million. Management expects that
the product will become available for sale in fiscal 2000. The
fourth project is a new application of the semiconductor diode array
technology, originally developed for hair removal, in a laser-based
diagnostic system. At the time of acquisition, the development was
58% complete and the estimated cost to complete was $1.0 million.
Management expects that the product will become available for sale
in fiscal 2001. The fifth development project is an ensemble of
diode array products. At the time of acquisition, the development
was 54% complete and the estimated cost to complete was $1.4
million. Management expects that the product will become available
for sale in fiscal 2001, however, no assurances can be given as to
the availability, if any.
Coherent will begin to benefit from the acquired research and
development of these products once they begin shipping. Failure to
reach successful completion of these projects could result in
impairment of the associated capitalized intangible assets and could
require the Company to accelerate the time period over which the
intangibles are being amortized, which could have a material adverse
effect on the Company's business, financial condition, or results of
operation.
7
<PAGE>
Significant assumptions used to determine the value of in-process
research and development included several factors, including the
following: (i) forecast of net cash flows that were expected to
result from the development effort using projections prepared by the
Company's and Star's management; (ii) percentage complete for the
projects estimated by considering a number of factors, including the
costs invested to date relative to total cost of the development
effort and the amount of progress completed as of the acquisition
date, on a technological basis, relative to the overall
technological achievements required to achieve the functionality of
the eventual product. The technological issues were addressed by
engineering representatives from both the Company and Star, and when
estimating the value of the technology, the projected financial
results of the acquired assets were estimated on a stand-alone basis
without any consideration to potential synergic benefits or
"investment value" related to the acquisition. Accordingly, separate
projected cash flows were prepared for both the existing as well as
the in-process projects. These projected results were based on the
number of units sold times average selling price less the associated
costs. After preparing the estimated cash flows from the products
being developed, a portion of these cash flows were attributed to
the existing technology, which was embodied in the in-process
product lines and enabled a quicker and more cost-effective
development of these products. When estimating the value of the
existing and in-process technologies, discount rates of 15% and 30%
were used, respectively. The discount rates considered both the
status and risks associated with the respective cash flows at the
acquisition date.
In May 1999, the Company issued $70 million of Senior Notes in a
private bond placement to finance the acquisition of Star. $44
million of the notes are due in annual installments from May 2000
through May 2006, at an interest rate of 6.7%, and $26 million of
the notes are due in annual installments from May 2004 through May
2006, at an interest rate of 6.91%.
4. The components of comprehensive income (loss), net of tax, are as
follows:
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
July 3, June 27, July 3, June 27,
1999 1998 1999 1998
--------- -------- --------- --------
(IN THOUSANDS)
<S> <C> <C> <C> <C>
Net income (loss) $(5,064) $(1,727) $4,582 $12,621
Translation adjustment (1,400) 271 (3,293) (740)
Change in unrealized gain on investment 38 - (147)
--------- -------- ------- --------
Total comprehensive income (loss) $(6,464) $(1,418) $1,289 $11,734
--------- -------- ------- --------
--------- -------- ------- --------
</TABLE>
Accumulated other comprehensive income at July 3, 1999 and September
26, 1998 is comprised of accumulated translation adjustments of
$(1,962,000) and $1,331,000, respectively.
5. 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 nd diluted earnings per common and common equivalent share:
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
July 3, June 27, July 3, June 27,
1999 1998 1999 1998
--------- -------- --------- --------
(IN THOUSANDS)
<S> <C> <C> <C> <C>
Weighted average shares outstanding - Basic 24,018 23,487 23,914 23,259
</TABLE>
8
<PAGE>
<TABLE>
<S> <C> <C> <C> <C>
Common stock equivalents 321 509
Employee stock purchase plan equivalents 216 32
-------- -------- ------- --------
Weighted average shares and equivalents -
Diluted 24,018 23,487 24,451 23,800
-------- -------- ------- --------
-------- -------- ------- --------
Net income for basic and diluted
earnings per share computation $(5,064) $(1,727) $4,582 $12,621
-------- -------- ------- --------
-------- -------- ------- --------
</TABLE>
The dilutive share equivalents calculation excludes 1,570,000 and
451,000 anti-dilutive weighted shares for the three months ended
July 3, 1999 and June 27, 1998, respectively, and 1,896,000 and
373,000 anti-dilutive weighted shares have been excluded from the
dilutive share equivalents calculation for the nine months ended
July 3, 1999 and June 27, 1998, respectively.
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 3, September 26,
1999 1998
- -----------------------------------------------------------------------------------------------------------------------
(IN THOUSANDS)
<S> <C> <C>
Purchased parts and assemblies $ 28,417 $ 30,421
Work-in-process 30,956 33,684
Finished goods 43,474 39,436
- -----------------------------------------------------------------------------------------------------------------------
Net inventories $102,847 $103,541
- -----------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------
</TABLE>
Prepaid expenses and other assets consist of the following:
<TABLE>
<CAPTION>
July 3, September 26,
1999 1998
- -----------------------------------------------------------------------------------------------------------------------
(IN THOUSANDS)
<S> <C> <C>
Prepaid income taxes $15,855 $10,275
PREPAID EXPENSES AND OTHER 12,322 12,620
--------- -----------
Prepaid expenses and other assets $28,177 $22,895
- -----------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------
</TABLE>
Other assets consist of the following:
<TABLE>
<CAPTION>
July 3, September 26,
1999 1998
- -----------------------------------------------------------------------------------------------------------------------
(IN THOUSANDS)
<S> <C> <C>
Intangible assets $25,576 $ 8,607
Other assets 16,024 13,421
ASSETS HELD FOR INVESTMENT 1,270 1,507
- -----------------------------------------------------------------------------------------------------------------------
Other assets $42,870 $23,535
- -----------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------
</TABLE>
Other current liabilities consist of the following:
9
<PAGE>
<TABLE>
July 3, September 26,
1999 1998
- -----------------------------------------------------------------------------------------------------------------------
(IN THOUSANDS)
<S> <C> <C>
Accrued payroll and benefits $22,459 $20,803
Accrued expenses and other 21,491 14,495
Reserve for warranty 13,272 10,938
Deferred income 8,663 10,517
Customer deposits 3,066 2,850
- -----------------------------------------------------------------------------------------------------------------------
Other current liabilities $68,951 $59,603
- -----------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------
</TABLE>
Other long-term liabilities consist of the following:
<TABLE>
<CAPTION>
July 3, September 26,
1999 1998
- -----------------------------------------------------------------------------------------------------------------------
(IN THOUSANDS)
<S> <C> <C>
Deferred compensation $10,743 $ 8,200
Deferred tax liabilities 7,404 48
Deferred income and other 4,371 3,082
Environmental remediation costs 1,169 1,269
- -----------------------------------------------------------------------------------------------------------------------
Other long-term liabilities $23,687 $12,599
- ------------------------------------ ------- -------
- ------------------------------------ ------- -------
</TABLE>
7. 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 Remedial Investigation and
Feasibility 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
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. 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 July 3, 1999 for remaining costs associated with
the above environmental matters is $1.0 million which has been
previously accrued. This amount consists of total estimated probable
costs of $1.3 million ($0.1 million included in other current
liabilities and $1.2 million included in other long-term
liabilities) reduced by estimated minimum probable recoveries of
$0.3 million included in other assets from other parties named to
the order.
10
<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 26, 1998 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 could 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 1998 and were 54% and 57% of total sales for the
current quarter and nine months ended July 3, 1999, respectively. The Company
expects that international sales will continue to account for a significant
portion of its net sales in the future. A significant amount of these 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, currency swap contracts, currency options
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.
The word "laser" is the acronym for "light amplification by
stimulated emission of radiation." The
11
<PAGE>
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 220 U.S. patents in force, and over the past
several years has committed approximately 10% to 11% 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
and OEM customers with cost effective laser products that provide performance
breakthroughs and application innovations.
RESULTS OF OPERATIONS
CONSOLIDATED SUMMARY
The Company's net income for the nine months ended July 3, 1999 was
$4.6 million ($0.19 per diluted share), which includes the third quarter
$10.7 million ($0.45 per diluted share) after tax write-off of purchased
in-process research and development resulting from the acquisition of Star
Medical Technologies, Inc. of Pleasanton, California. The Company's proforma
net income (exclusive of this write-off) for the current quarter and nine
months ended July 3, 1999 was $5.7 million ($0.24 per diluted share) and
$15.3 million ($0.63 per diluted share), respectively, compared to a loss of
$1.7 million ($0.07 per diluted share) and income of $12.6 million ($0.53 per
diluted share), in the corresponding prior year periods. Proforma net income
increased $7.4 million and $2.7 million for the current quarter and
year-to-date, respectively, compared to the prior year corresponding periods.
The increases in proforma net income were primarily attributable to increases
in sales volumes and lower SG&A expenses relative to sales volumes.
With more than half of the Company's revenues outside of the United
States, international sales were favorably impacted by $1.2 million and $4.2
million in the current quarter and nine months ended July 3, respectively,
compared to the same periods last year, due to the weakening of the U.S.
dollar against major foreign currencies.
NET SALES AND GROSS PROFITS
<TABLE>
<CAPTION>
THREE NINE
MONTHS ENDED MONTHS ENDED
------------ ------------
JULY 3, June 27, JULY 3, June 27,
1999 1998 1999 1998
-------- -------- -------- --------
(IN THOUSANDS)
<S> <C> <C> <C> <C>
NET SALES
CONSOLIDATED:
Domestic $ 52,518 $ 43,434 $143,890 $137,210
International 62,533 55,118 193,329 168,592
-------- -------- -------- --------
Total $115,051 $ 98,552 $337,219 $305,802
======== ======== ======== ========
ELECTRO-OPTICAL:
Domestic $ 30,659 $ 27,132 $ 84,880 $ 77,312
</TABLE>
12
<PAGE>
<TABLE>
<S> <C> <C> <C> <C>
International 43,909 38,358 135,904 109,293
------ ------ ------- -------
Total $ 74,568 $ 65,490 $220,784 $186,605
======== ========= ========= ========
MEDICAL:
Domestic $ 21,859 $ 16,302 $ 59,010 $ 59,898
International 18,624 16,760 57,425 59,299
------ ------- ------ ------
Total $ 40,483 $ 33,062 $116,435 $119,197
======== ========= ======== ========
</TABLE>
CONSOLIDATED
The Company's sales for the current fiscal quarter and nine months ended July
3, 1999 increased $16.5 million (17%) and $31.4 million (10%), respectively,
from the same periods a year ago. During the current quarter, international
sales increased $7.4 million (13%) to 54% of total outside sales, and
domestic sales increased $9.1 million (21%). Year to date, international
sales increased $24.7 million (15%) to 57% of total outside sales while
domestic sales increased $6.7 million (5%).
The gross margin rate increased to 48% for the current quarter from 45% for
the same period last year and decreased to 47% for the nine months ended July
3, 1999 compared to 49% for the same period one year ago. The improvement in
the current quarter's margin resulted primarily from lower warranty and other
production costs and higher sales volumes. The deterioration in the
year-to-date margin resulted primarily from lower margins within our optics
and photonics (including catalog) business located in Auburn, California,
resulting from an increase in inventory reserves reflecting changes in the
business.
ELECTRO-OPTICAL
Electro-Optical net sales increased $9.1 million (14%) and $34.2
million (18%) for the third quarter and nine months ended July 3, 1999,
respectively, compared to the corresponding prior year periods. International
sales increased $5.6 million (14%) while domestic sales increased $3.5
million (13%) during the current quarter. Year to date, international sales
increased $26.6 million (24%) while domestic sales increased $7.6 million
(10%). Sales increased primarily due to higher sales volumes in commercial
solid state products (including diode lasers) and in industrial systems as
well as the impact of the weakening of the U.S. dollar against major foreign
currencies in the current quarter and nine months, which favorably impacted
international sales by $0.5 million and $2.9 million, respectively.
The gross margin rate increased to 48% from 47% in the current quarter
compared to the same quarter one year ago but decreased to 47% from 49% for
the nine months ended July 3, 1999, compared to the same period one year ago.
The improvement in the current quarter's margin resulted primarily from lower
warranty and other production costs and higher sales volumes. The decreases
in year-to-date gross margin were primarily attributable to lower margins
within our optics and photonics business located in Auburn, California,
resulting from changes in the business including inventory obsolescence costs
associated with changes in the business.
MEDICAL
Medical net sales increased $7.4 million (22%) for the third
quarter ended July 3, 1999, but decreased $2.8 million (2%) for the nine
months ended July 3, 1999, compared to the corresponding prior year periods.
Domestic sales increased $5.5 million (34%) and international sales increased
$1.9 million (11%) during the current quarter. Year to date, domestic sales
decreased $0.9 million (1%) while international sales decreased $1.9 million
(3%). Current quarter sales increased primarily due to the acquisition of
Star Medical, where we now recognize the full sales value of LightSheer-TM-
hair removal shipments instead of only the commission revenue. The
year-to-date decrease in sales resulted primarily from lower average selling
prices and fewer unit sales of non-hair removal Aesthetic products and to the
expiration of our agreement to distribute opthalmic refractive systems for a
German manufacturer. These decreases were partially offset by increased
revenue from LightSheer-TM- and the weakening of the U.S. dollar against
major foreign currencies in the current quarter and nine months; such
weakening dollar favorably impacted international sales by $.7 million and
$1.4 million, respectively.
13
<PAGE>
The gross margin rate increased to 48% from 41% in the current quarter
compared to the same quarter one year ago and remained at 49% for the nine
months ended July 3, 1999, compared to the same period one year ago. The
current quarter increase in gross margin was primarily attributable to lower
warranty and production costs and increased sales volume.
OPERATING EXPENSES
<TABLE>
<CAPTION>
Three Months Ended Nine months Ended
July 3, June 27, July 3, June 27,
1999 1998 1999 1998
------- -------- ------- --------
(IN THOUSANDS)
<S> <C> <C> <C> <C>
Research & development $11,917 $11,598 $33,611 $33,634
In-process research and development 16,000 16,000
Selling, general & administrative 32,553 34,931 99,601 93,348
Intangibles amortization 1,413 1,173 3,625 3,458
-------- -------- -------- ------
Total operating expenses $61,883 $47,702 $152,837 $130,440
=======================================================================================================================
</TABLE>
Total operating expenses increased $14.2 million (30%) and $22.4
million (17%) for the current quarter and nine months ended July 3, 1999,
respectively, compared to the same periods a year ago. As a percentage of
sales, operating expenses increased to 54% for the current quarter from 48% a
year ago and increased to 45% for the current year-to-date from 43% for the
same period a year ago. Exclusive of the third quarter write-off of purchased
in-process research and development, current quarter operating expenses
decreased $1.8 million (4%) from the same prior year period and as a
percentage of sales decreased to 40% from 48%. Exclusive of the third quarter
write-off of purchased in-process research and development, current
year-to-date operating expenses increased $6.4 million (5%) from the same
prior year period but as a percentage of sales decreased to 41% from 43%.
Research and development (R&D) expenses increased $0.3 million (3%) during
the third quarter compared to the same period last year, and as a percentage
of sales, decreased to 10% from 12%. Year to date, R&D expenses remained
flat, but as a percentage of sales decreased to 10% from 11%.
Sales, marketing and service expense increased $2.3 million (11%) for the
current quarter, but decreased as a percentage of sales from 21% to 20%
compared to the same period last year. Year to date, such expenses increased
$3.2 million (5%), but decreased as a percentage of sales from 21% to 20%
compared to the same period last year. The dollar increases are primarily due
to increased in headcount in the Electro-Optical segment to support increased
sales volumes.
Administration expenses decreased $4.7 million (33%) during the third quarter
compared to the same period last year, and as a percentage of sales,
decreased to 8% from 14%. Year to date, administration expenses increased
$3.1 million (10%) from the same prior year period but as a percentage of
sales remained at 10%. The current quarter decrease results primarily from
the non-recurrence of several prior year third quarter charges, decreased
legal expenses and the recovery of a receivable which had previously been
fully reserved. The third quarter prior year non-recurring charges included
restructuring costs of $2.9 million related to personnel actions in the
medical segment, closure of the Tucson, Arizona facility and the relocation
of the Medical segment to a new facility. The year-to-date increase results
primarily from increased investments in information technology, outside
consulting costs and increased payroll related costs offset partially by the
non-recurrence of the prior charges noted previously.
Intangibles amortization increased primarily due to the acquisition of Star.
14
<PAGE>
OTHER INCOME (EXPENSE)
Other expense, net increased $0.3 million to net expense of $0.7
million during the current quarter and increased $0.2 million to net expense
of $1.0 million for the nine months ended July 3, 1999, compared to the
corresponding prior year periods.
INCOME TAXES
The Company's proforma effective tax rate (excluding the $10.7
million write-off of purchased in-process research and development) for the
current quarter was 30%. The Company's proforma effective tax rate for the
nine months ended July 3, 1999 was 31% compared to 32% for the same prior
year period. The Company's proforma effective tax rate decreased as a result
of increased FSC benefits and changes in income by taxing jurisdiction.
YEAR 2000 COMPLIANCE
As is true for most companies, the Year 2000 computer issue creates
a risk for Coherent. If systems do not correctly recognize date information
when the year changes to 2000, there could be an adverse impact on the
Company's operations. The risk for Coherent exists in four areas: (i)
information technology used by the Company to run its business, (ii) systems
used by the Company's suppliers, (iii) potential warranty or other claims
from Coherent's customers, and (iv) the potential for reduced spending by
customers for Coherent's products as a result of significant spending on Year
2000 issues and related adverse effects of such issues on the customer's
business. The Company is currently evaluating its exposure in all of these
areas.
Coherent conducted a comprehensive inventory and evaluation of its
internal systems, equipment and facilities, which was completed March 15,
1999. The Company has a number of projects underway to replace or upgrade
systems, equipment and facilities that are already known not to be Year 2000
ready and expects to be substantially complete with these projects by October
1, 1999. At this time, the Company has not determined a most reasonably
likely worst case scenario if its Year 2000 remediation efforts are
unsuccessful. The Company has determined that upgrades and replacements to
its primary systems will allow the Company to transition into the new
millenium with little or no disruption. For the Year 2000 issues identified
to date, the cost of upgrade or replacement has been less than $0.7 million
through July 3, 1999. The Company currently has budgeted an additional $0.4
million through December 31, 1999 for system upgrades and replacements which
it expects to capitalize. The cost of the upgrades or replacements in the
future is not expected to materially affect the Company's operating results
and will be funded by working capital generated by operations. If
implementation of replacement systems is delayed, or if significant new
issues are identified, the Company's results of operation or financial
condition could be adversely affected. However, the Company believes that it
will be able to complete its Year 2000 readiness program and make any
necessary system modifications prior to any adverse consequences.
Coherent is also in the process of contacting its critical suppliers
to determine that the suppliers' operations and the products and services
they provide are Year 2000 ready and expects to complete this process by
October 1, 1999 for all critical suppliers. Where practical, Coherent will
attempt to mitigate its risks with respect to the failure of suppliers to be
Year 2000 ready. In the event that suppliers are not Year 2000 compliant, the
Company may seek alternative sources of supplies. However, such failures
remain a possibility and could have an adverse impact on the Company's
results of operations or financial condition.
The Company believes the large majority of its current products are
Year 2000 compliant; however, since all customer situations cannot be
anticipated, particularly those involving third party products, Coherent may
see an increase in warranty and other claims as a result of the Year 2000
15
<PAGE>
transition. While litigation regarding Year 2000 compliance issues is
expected to escalate, the Company does not believe that the impact of
customer claims would materially affect the Company's results of operations
or financial condition.
Year 2000 readiness is an issue for virtually all businesses, whose
systems and applications may require significant hardware and software
upgrades or modifications. Companies owning and operating such systems may
plan to devote a substantial portion of their information systems' spending
to fund such upgrades and modifications and divert spending away from the
purchase of Coherent products and services. Such changes in customers'
spending patterns could have an adverse impact on the Company's sales, but
the impact on operating results and financial condition is not known at this
time.
EURO CONVERSION
As with many multinational companies operating in Europe, beginning
in January 1999, Coherent was affected by the conversion of eleven European
currencies into a common currency, the euro. Based on its assessment, the
Company does not believe the conversion will have a material impact on the
competitiveness of its products or increase the likelihood of contract
cancellations in Europe, where there already exists substantial price
transparency. The Company also believes its current accounting systems will
accommodate the euro conversion with minimal intervention and does not expect
to experience material adverse tax consequences as a result of the
conversion. The convergence of currencies into the euro has simplified the
Company's currency risk management process, including its use of derivatives
to manage that risk. The cost of addressing the euro conversion is not
expected to be material and will be charged to operations as incurred. The
Company will continue to assess the impact of the introduction of the euro
currency over the transition period as well as the period subsequent to the
transition period, as applicable.
ASIA-PACIFIC RISK
Recent economic trends, particularly in the Asia-Pacific
marketplace, have caused a heightened awareness of the impact this portion of
the world's economy can have on the overall economy. As the Asia-Pacific
market currently represents almost one-third of the worlds buying power and
approximately 25 to 30% of Coherent's sales are to this region, changes in
this area's economic growth rate may impact suppliers of product into that
market. While the actual magnitude of the business at risk is unknown, it is
likely that in the near term capital spending in this market will decrease
and thus, Coherent's ability to maintain or grow sales in this region may be
negatively impacted.
FINANCIAL CONDITION
LIQUIDITY AND CAPITAL RESOURCES
The Company's primary sources of liquidity are cash, cash
equivalents and short-term investments of $63.9 million. Additional sources
of liquidity are the Company's multi-currency line of credit and bank credit
facilities totaling $57.5 million. As of July 3, 1999, the Company had $41.4
million unused and available under these credit facilities.
During the first quarter of fiscal 1997, the Company signed a lease for
216,000 square feet of office, research and development and manufacturing space
for its Medical Group headquarters in Santa Clara, California. The lease expires
in December 2001. The Company has an option to purchase the property for $24
million, or at the end of the lease arrange for the sale of the property to a
third party with the Company retaining an obligation to the owner for the
difference between the sale price, if less than $24 million, and $24 million,
subject to certain provisions of the lease. If the Company does not purchase the
property or arrange for its sale as discussed above, the Company would be
obligated for an additional lease payment of approximately $21.5 million. The
Company occupied the building in July 1998 and
16
<PAGE>
commenced lease payments at that time. The lease requires the Company to
maintain specified financial covenants, all of which the Company was in
compliance with as of July 3, 1999.
CHANGES IN FINANCIAL CONDITION
Cash and cash equivalents increased $21.8 million (137%) from
September 26, 1998. Operations and changes in exchange rates provided $24.3
million, including $9.2 million used to purchase short-term investments.
Investing activities used $78.4 million, including $15.5 million used to
acquire property and equipment, net, $64.0 million used to acquire Star and
other, net provided $1.1 million. Financing activities provided $75.9 million
with net debt borrowings of $73.6 million and $2.3 million from the sale of
shares under employee stock plans.
Net goodwill increased $28.8 million (248%) and other assets
increased $19.3 million (82%) from September 26, 1998 primarily due to the
acquisition of Star.
Long-term obligations, including current portion, increased $69.7
million (512%) from September 26, 1998 primarily due to borrowings made for
the acquisition of Star.
Other long-term liabilities increased $11.1 million (88%) from
September 26, 1998 primarily due to increases in deferred tax liabilities as
a result of the acquisition of Star and increases in deferred compensation.
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
INTEREST RATE SENSITIVITY
The Company maintains a short-term investment portfolio consisting
mainly of income securities with an average maturity of less than one year.
These trading securities are subject to interest rate risk and will fall in
value if market interest rates increase. If market interest rates were to
increase immediately and uniformly by 10 percent from levels at July 3, 1999
the fair value of the portfolio would decline by an immaterial amount. The
Company has the ability to generally hold its fixed income investments until
maturity and therefore the Company would not expect its operating results or
cash flows to be affected to any significant degree by the effect of a sudden
change in market interest rates on its securities portfolio.
The Company has fixed rate long-term debt of approximately $78.3
million, and a hypothetical 10 percent decrease in interest rates would not
have a material impact on the fair market value of this debt. The Company
does not hedge any interest rate exposures.
FOREIGN CURRENCY EXCHANGE RISK
The Company has foreign subsidiaries which sell and manufacture the
Company's products in various global markets. As a result, the Company's
earnings and cash flows are exposed to fluctuations in foreign currency
exchange rates. The Company attempts to limit these exposures through
operational strategies and financial market instruments. The Company utilizes
hedge instruments, primarily forward contracts with maturities of twelve
months or less, to manage its exposure associated with firm intercompany and
third-party transactions and net asset and liability positions denominated in
non-functional currencies. The Company does not use derivative financial
instruments for trading purposes.
The Company had $24 million of short-term forward exchange
contracts, denominated in major foreign currencies, which approximated the
fair value of such contracts and their underlying transactions at July 3,
1999. Gains and losses related to these instruments July 3, 1999 were not
material. Looking forward, the Company does not anticipate any material
adverse effect on its consolidated financial position, results of operations,
or cash flows resulting from the use of these instruments. There can be no
assurance that these strategies will be effective or that transaction losses
can be minimized or forecasted accurately.
17
<PAGE>
The following table provides information about the Company's foreign
exchange forward contracts at July 3, 1999. The table presents the value of
the contracts in U.S. dollars at the contract exchange rate as of the
contract maturity date. Due to the short-term nature of these contracts, the
fair value approximates the weighted average contractual foreign currency
exchange rate value of the contracts at July 3, 1999.
Forward contracts to sell (buy) foreign currencies for U.S. dollars:
<TABLE>
<CAPTION>
(in thousands, except contract rates)
Mature LESS THAN 1 Year
-----------------------
Average U.S.
Contract Notional Fair
Rate Amount Value
-------- --------- -------
<S> <C> <C> <C>
Japanese Yen 112.626 $ 7,991 $ 7,438
Euro 1.095 10,582 9,901
French Franc 5.019 1,100 862
German Deutschemark 1.267 469 311
British Pound Sterling 1.615 1,881 1,839
Hong Kong Dollar 7.780 1,093 1,096
Swedish Krone 8.470 1,157 1,154
Danish Krone 6.966 474 455
Norwegian Kroner 7.955 390 393
Canadian Dollar 1.511 182 188
</TABLE>
COHERENT, INC.
PART II. OTHER INFORMATION
<TABLE>
<S> <S>
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.
The Company filed a report on Form 8-K on May 4, 1999 relating to
its purchase of Star Medical Technologies, Inc.
Exhibit 27 "Financial Data Schedules" included herewith.
</TABLE>
18
<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: August 12, 1999 By: ROBERT J. QUILLINAN
-------------------
Robert J. Quillinan
Executive Vice President and Chief Financial
Officer
19
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> OCT-02-1999
<PERIOD-START> SEP-27-1998
<PERIOD-END> JUL-03-1999
<CASH> 37,786
<SECURITIES> 26,111
<RECEIVABLES> 92,366
<ALLOWANCES> 5,288
<INVENTORY> 102,847
<CURRENT-ASSETS> 314,893
<PP&E> 159,341
<DEPRECIATION> 72,773
<TOTAL-ASSETS> 484,718
<CURRENT-LIABILITIES> 114,023
<BONDS> 75,824
0
0
<COMMON> 239
<OTHER-SE> 266,433
<TOTAL-LIABILITY-AND-EQUITY> 484,718
<SALES> 337,219
<TOTAL-REVENUES> 337,219
<CGS> 177,266
<TOTAL-COSTS> 177,266
<OTHER-EXPENSES> 152,837
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 2,296
<INCOME-PRETAX> 6,080
<INCOME-TAX> 1,498
<INCOME-CONTINUING> 4,582
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 4,582
<EPS-BASIC> .19
<EPS-DILUTED> .19
</TABLE>
