IPG Photonics Corporation (NASDAQ: IPGP) today reported
financial results for the third quarter of fiscal 2010 ended
September 30, 2010.
Three Months Ended Nine
Months Ended
September
30,
September
30,
(In millions, except per share data)
2010
2009
%
Change
2010
2009
%
Change
Revenue $ 79.8 $ 45.8 74 % $ 198.3 $ 131.6 51 % Gross
margin 50.0 % 36.5 % 45.9 % 33.7 % Operating income $ 20.5 $
3.6 $ 41.6 $ 4.4 Operating margin 25.7 % 8.0 % 21.0 % 3.3 %
Net income attributable to IPG Photonics Corporation $ 13.2
$ 2.3 $ 26.9 $ 2.3 Earnings per diluted share $ 0.28 $ 0.05
$ 0.57 $ 0.05
Comments on the Third Quarter
“IPG continued its strong growth momentum in the third quarter
with record revenues,” said Dr. Valentin Gapontsev, IPG Photonics’
Chief Executive Officer. “For the third quarter of 2010, IPG
reported revenues which grew by 74% year-over-year and 19%
sequentially. We achieved earnings per share of $0.28 compared with
$0.05 in the third quarter of 2009 and $0.22 in the second quarter
of 2010. We also demonstrated the strength of our business model,
as gross margins increased to 50.0% compared with 36.5% in the
third quarter of 2009 and 45.3% in the second quarter of 2010. Our
operating results for the third quarter included a loss of $2.1
million, or approximately $0.03 per diluted share, relating to
foreign exchange losses.”
“An 88% increase in pulsed laser sales, the best selling product
in the quarter, was driven by strong demand for marking/engraving,
and an 83% increase in high-power laser sales, the second-best
selling product line in the quarter, benefited from the increase in
the cutting OEMs and welding demand,” said Gapontsev.
“Telecommunication sales increased by 160% year-over-year, and 144%
sequentially, due to demand in Russia and the U.S. We had a
year-over-year decline for medical sales, which was primarily
related to lower sales to our large U.S. medical OEM customer.
Sales for advanced applications, which tend to be more uneven, were
down 18% year-over-year due to strong European sales in the third
quarter of 2009. Geographically, we experienced robust growth in
all major regions as the general economic climate improved.”
“IPG generated $6.2 million in cash from operations and ended
the quarter with $96.6 million in cash,” said Gapontsev. “Capital
expenditures for the third quarter totaled $5.1 million and we
continue to expect the total amount spent on capital expenditures
and acquisitions to be approximately $25 million for the year.”
Partnership with RUSNANO and Sale of Minority
Interest
IPG also announced today the sale of a 12.5% ownership in its
Russia-based subsidiary, NTO IRE-Polus (NTO) to the Russian
Corporation of Nanotechnologies (RUSNANO) for $25 million. RUSNANO
was established in 2007 to invest in nanotechnology development,
including projects in solar energy, nanostructured materials,
medicine and biotech, mechanical engineering and metal working,
optoelectronics and infrastructure. Under the terms of the
agreement, RUSNANO will have options to purchase up to an
additional 12.5% of NTO for an additional $25 million over the next
five years if certain sales targets at NTO are achieved. IPG will
maintain majority ownership and control of NTO and has a call
option after three years to buy back the minority stake at a
predetermined value. RUSNANO has a put option after five years to
sell its minority stake to IPG at a predetermined value.
“This partnership with RUSNANO enables IPG to more strategically
address a large and growing market in Russia for fiber optic
telecom equipment and laser systems and to increase industrial
laser sales in that territory,” said Gapontsev. “With the proceeds
from the transaction, we will be able to make strategic R&D and
capital expenditure investments in NTO, and develop our sales
infrastructure in the Russian market. In addition, a partnership
with RUSNANO will significantly expand the number of
telecommunications, industrial and other important commercial
relationships we have in Russia, ultimately driving growth by
increasing our portfolio of customers.”
Business Outlook and Financial Guidance
“We anticipate that the sales momentum we have experienced
during the first nine months of 2010 will continue through the end
of the year,” said Gapontsev. “As we enter the last quarter of the
year, we will continue to focus on maintaining the high quality of
our products while we increase the penetration of our fiber lasers
in existing and new applications, expanding our OEM and customer
base, and further extend our leadership position in the markets we
serve. As sales of our lasers continue to increase, we expect to
benefit from the leverage in our business model.”
IPG Photonics expects revenues in the range of $80 million to
$86 million for the fourth quarter of 2010. The Company anticipates
earnings per diluted share in the range of $0.30 to $0.35 based on
47,700,000 common shares, which includes 46,533,000 basic common
shares outstanding and 1,167,000 potentially dilutive options at
September 30, 2010.
As discussed in more detail below, actual results may differ
from this guidance due to various factors including but not limited
to product demand, competition and general economic conditions.
This guidance is subject to the risks outlined in the Company’s
reports with the SEC, and assumes that exchange rates remain at
present levels.
Conference Call Reminder
The Company will hold a conference call to review its financial
results and business highlights today, November 1, 2010 at 10:00
a.m. ET. The conference call will be webcast live and can be
accessed on the “Investors” section of the Company’s website at
www.ipgphotonics.com. The conference
call also can be accessed by dialing (877) 709-8155 or (201)
689-8881. Interested parties that are unable to listen to the live
call may access an archived version of the webcast, which will be
available for one year on IPG’s website.
About IPG Photonics Corporation
IPG Photonics Corporation is the world leader in high-power
fiber lasers and amplifiers. Founded in 1990, IPG pioneered the
development and commercialization of optical fiber-based lasers for
use in a wide range of applications such as materials processing,
advanced, telecommunications and medical. Fiber lasers have
revolutionized the industry by delivering superior performance,
reliability and usability at a lower total cost of ownership
compared with conventional lasers, allowing end users to increase
productivity and decrease operating costs. IPG has its headquarters
in Oxford, Massachusetts, and has additional plants and offices
throughout the world. For more information, please visit
www.ipgphotonics.com.
Safe Harbor Statement
Information and statements provided by the Company and its
employees, including statements in this press release, that relate
to future plans, events or performance are forward-looking
statements. These statements involve risks and uncertainties. Any
statements in this press release that are not statements of
historical fact are forward-looking statements, including, but not
limited to, our expectations relating to: total spending of $25
million in 2010 for capital expenditures and acquisitions; the
partnership with RUSNANO enabling IPG to more strategically address
a large and growing market in Russia for fiber optic
telecommunications equipment and laser systems and increasing
industrial laser sales in that territory; IPG making strategic
R&D and capital expenditure investments in NTO with the
proceeds from the RUSNANO transaction; expanding the number of
telecommunications, industrial and other important commercial
relationships in Russia and driving growth by increasing our
portfolio of customers; sales momentum continuing through the end
of the year; continuing focus on maintaining the high quality of
our products and increasing the penetration of fiber lasers in
existing and new applications; expanding our OEM and customer base;
further extending our leadership position in the markets we serve;
continuing to increase sales and benefitting from the leverage in
our business model; and revenue and earnings per share expectations
for the fourth quarter of 2010. Factors that could cause actual
results to differ materially include risks and uncertainties,
including risks associated with the strength or weakness of the
business conditions in industries and geographic markets that the
Company serves, particularly the effect of economic downturns;
reduction in customer capital expenditures; potential order
cancellations and push-outs and financial and credit market issues;
the Company’s ability to penetrate new applications for fiber
lasers and increase market share; the rate of acceptance and
penetration of IPG’s products; effective management of growth;
level of fixed costs from its vertical integration; intellectual
property infringement claims and litigation; interruption in supply
of key components, including from transportation disruptions from
natural and man-made events; manufacturing risks; inventory
write-downs; foreign currency fluctuations; competitive factors,
including declining average selling prices; building and expanding
field service and support operations; 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. Readers are encouraged to
refer to the risk factors described in the Company's Annual Report
on Form 10-K (filed with the SEC on March 15, 2010) and its
periodic reports filed with the SEC, as applicable. Actual results,
events and performance may differ materially. Readers are cautioned
not to rely on the forward-looking statements, which speak only as
of the date hereof. The Company undertakes no obligation to update
the forward-looking statements that may be made to reflect events
or circumstances after the date hereof or to reflect the occurrence
of unanticipated events.
IPG PHOTONICS CORPORATION CONSOLIDATED STATEMENTS OF
OPERATIONS
Three Months Ended
September 30, Nine Months Ended September
30, 2010 2009 2010 2009 (in
thousands, except per share data) NET SALES $ 79,809 $ 45,808 $
198,271 $ 131,601 COST OF SALES 39,878 29,085
107,332 87,245 GROSS PROFIT
39,931 16,723 90,939
44,356 OPERATING EXPENSES: Sales and marketing 4,527
3,788 13,797 10,857 Research and development 4,981 4,569 13,868
13,445 General and administrative 7,800 4,758 22,012 14,692 Loss
(gain) on foreign exchange 2,078 (40 )
(325 ) 975
Total operating expenses
19,386 13,075 49,352
39,969 OPERATING INCOME 20,545
3,648 41,587 4,387 OTHER
EXPENSE, Net: Interest expense, net (350 ) (266 ) (749 ) (1,023 )
Other expense, net (322 ) (75 ) (414 )
(259 ) Total other expense (672 ) (341 )
(1,163 ) (1,282 ) INCOME BEFORE PROVISION FOR INCOME TAXES
19,873 3,307 40,424 3,105 PROVISION FOR INCOME TAXES (6,558
) (1,041 ) (13,340 ) (978 ) NET INCOME 13,315
2,266 27,084 2,127
LESS: NET INCOME (LOSS) ATTRIBUTABLETO
NONCONTROLLING INTERESTS
89 11 155 (170 )
NET INCOME ATTRIBUTABLE TO IPG
PHOTONICSCORPORATION
$ 13,226 $ 2,255 $ 26,929 $ 2,297
NET INCOME ATTRIBUTABLE TO IPG
PHOTONICSCORPORATION PER SHARE:
Basic $ 0.28 $ 0.05 $ 0.58 $ 0.05 Diluted $ 0.28 $ 0.05 $ 0.57 $
0.05 WEIGHTED AVERAGE SHARES OUTSTANDING: Basic 46,533 45,573
46,285 45,368 Diluted 47,700 46,695 47,410 46,457
IPG PHOTONICS
CORPORATION CONSOLIDATED BALANCE SHEETS
September 30, December
31, 2010 2009 (In thousands, except share and
per share data) ASSETS CURRENT ASSETS: Cash and
cash equivalents $ 96,630 $ 82,920 Accounts receivable, net 53,720
30,356 Inventories, net 64,898 52,869 Income taxes receivable 5,199
2,558 Prepaid expenses and other current assets 10,792 4,653
Deferred income taxes 7,824 7,558
Total current assets
239,063 180,914 DEFERRED INCOME TAXES 6,017 4,313 PROPERTY, PLANT,
AND EQUIPMENT, Net 111,847 111,453 OTHER ASSETS 16,499
15,956 TOTAL $ 373,426 $ 312,636
LIABILITIES AND STOCKHOLDERS’ EQUITY CURRENT
LIABILITIES: Revolving line-of-credit facilities $ 4,634 $ 6,007
Current portion of long-term debt 1,333 1,333 Accounts payable
10,663 5,620 Accrued expenses and other liabilities 41,726 21,189
Deferred income taxes 2,167 503 Income taxes payable 10,025
2,179 Total current liabilities 70,548
36,831 DEFERRED INCOME TAXES AND OTHER
LONG-TERM LIABILITIES 1,594 2,567
LONG-TERM DEBT 16,382 16,667
COMMITMENTS AND CONTINGENCIES IPG PHOTONICS CORPORATION
STOCKHOLDERS’ EQUITY:
Common stock, $0.0001 par value,
175,000,000 shares authorized;46,739,912 shares issued and
outstanding at September 30, 2010; 46,076,472shares issued and
outstanding at December 31, 2009
5 5 Additional paid-in capital 302,384 293,743 Accumulated deficit
(21,495 ) (48,424 ) Accumulated other comprehensive income
3,712 11,106 Total IPG Photonics Corporation
stockholders’ equity 284,606 256,430 NONCONTROLLING INTERESTS
296 141 Total equity 284,902
256,571 TOTAL $ 373,426 $ 312,636
IPG PHOTONICS CORPORATION CONSOLIDATED STATEMENTS
OF CASH FLOWS Nine
Months Ended September 30, 2010 2009 (In
thousands) CASH FLOWS FROM OPERATING ACTIVITIES: Net
income $ 27,084 $ 2,127 Adjustments to reconcile net income to net
cash provided by operating activities: Depreciation and
amortization 16,098 14,024 Provisions for inventory, warranty &
bad debt 8,037 8,635 Other 772 (5,079 ) Changes in assets and
liabilities that provided (used) cash: Accounts receivable/payable
(20,985 ) 9,249 Inventories (17,931 ) 2,844 Other 16,531
5,892 Net cash provided by operating
activities 29,606 37,692
CASH FLOWS FROM INVESTING
ACTIVITIES: Purchases of property, plant and equipment (13,842
) (9,580 ) Acquisition of businesses, net of cash acquired (4,108 )
- Other 107 58 Net cash used in
investing activities (17,843 ) (9,522 )
CASH FLOWS FROM
FINANCING ACTIVITIES: Line-of-credit facilities (1,482 ) (4,386
) Long-term borrowings (1,008 ) (1,011 ) Purchase of noncontrolling
interests - (508 ) Exercise of employee stock options and related
tax benefit from exercise 6,164 2,121 Other (36 ) (61
) Net cash provided by (used in) financing activities 3,638
(3,845 ) EFFECT OF CHANGES IN EXCHANGE RATES
ON CASH AND CASH EQUIVALENTS (1,691 ) 701 NET
INCREASE IN CASH AND CASH EQUIVALENTS 13,710 25,026 CASH AND CASH
EQUIVALENTS — Beginning of period 82,920
51,283 CASH AND CASH EQUIVALENTS — End of period $ 96,630
$ 76,309 SUPPLEMENTAL DISCLOSURES OF CASH FLOW
INFORMATION: Cash paid for interest $ 757 $ 1,163
Income taxes paid $ 6,363 $ 4,595
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