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IPG Photonics Continues to Deliver Record Results for Third Quarter of 2012

Revenues Grow by 21% and Net Income Increases 29%

High-Power and Pulsed Laser Sales for Materials Processing Applications Drive Growth

Company Generates $38 Million in Cash from Operations

OXFORD, Mass.--(BUSINESS WIRE)-- IPG Photonics Corporation (NASDAQ: IPGP) today reported financial results for the third quarter ended September 30, 2012.

  Three Months Ended     Nine Months Ended  

September 30,

September 30,

(In millions, except per share data)

2012

 

2011

% Change

2012

 

2011

% Change

 
Revenue $ 156.4 $ 129.1 21% $ 417.5 $ 351.0 19%
 
Gross margin 55.0% 54.6% 55.0% 54.4%
 
Operating income $ 60.0 $ 49.2 22% $ 161.6 $ 129.5 25%
 
Operating margin 38.4% 38.1% 38.7% 36.9%
 
Net income attributable to IPG Photonics Corporation $ 42.4 $ 32.9 29% $ 110.1 $ 86.7 27%
 
Earnings per diluted share $ 0.81 $ 0.66 23% $ 2.16 $ 1.77 22%
 

Management Comments

"IPG's performance momentum continued into the third quarter by delivering record results on the top and bottom lines," said Dr. Valentin Gapontsev, IPG Photonics' Chief Executive Officer. "Revenues grew by more than 21% over the prior year and net income increased by 29%."

"Materials processing sales increased by 21%, driven primarily by high-power laser sales for automotive and general manufacturing applications," said Dr. Gapontsev. "High-power laser sales increased 16%, while pulsed laser sales grew by 51% driven by increased demand for consumer electronics applications. Medium-power laser sales grew by 11%, primarily due to demand for thin metal cutting and welding in micro-processing applications."

"Strength in the U.S. and Europe for cutting and welding applications in automotive and general manufacturing, as well as marking and engraving in consumer electronics, were the primary drivers of our record revenue performance. In addition, advanced applications revenue benefited from sales of several high-power and brightness lasers," said Dr. Gapontsev. "Our growth in Europe was partially offset by lower demand in Russia. In Asia, we continued to expand our business in Turkey, while Japan and China both showed moderate growth."

"During the third quarter, IPG generated $38 million in cash from operations," said Dr. Gapontsev. "A portion of that cash was used to fund the acquisition of JP Sercel Associates, Inc., which we expect to strengthen our product portfolio and accelerate IPG's penetration into the fine-processing markets. We maintained a strong balance sheet, ending the quarter with $372.6 million in cash and cash equivalents."

Business Outlook and Financial Guidance

"We expect to report strong year-over-year growth in the fourth quarter as we continue to capitalize on the fundamentals that are driving our business," said Dr. Gapontsev. "At the same time, we will face challenges in the fourth quarter, including historical seasonality in some markets and macro-economic pressures in a few key geographies. As a result of these factors, our book-to-bill ratio was less than one in Q3. Looking ahead, we remain confident that the fundamentals of our business and competitive position are strong and we expect to continue to displace incumbent technologies and add OEM customers as our lasers are qualified for more applications."

IPG Photonics expects revenue in the range of $140 million to $150 million for the fourth quarter of 2012. The Company anticipates earnings per diluted share in the range of $0.65 to $0.75 based on 52,102,000 diluted common shares, which includes 51,090,000 basic common shares outstanding and 1,012,000 potentially dilutive options at September 30, 2012.

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, October 31, 2012 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) 270-2148 or (412) 902-6510. Interested parties that are unable to listen to the live call may access an archived version of the webcast, which will be available for approximately 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 diverse applications, primarily materials processing. 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, strengthening the Company's product portfolio, accelerating its penetration into the fine-processing market, reporting strong year-over-year growth in the fourth quarter, continuing to capitalize on the fundamentals that are driving the Company's business, that the fundamentals of its business and competitive position are strong, continued displacement of incumbent technologies and adding OEM customers as IPG's lasers are qualified for more applications, and revenue and earnings per share expectations for the fourth quarter of 2012. 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 February 27, 2012) 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 INCOME
                 
Three Months Ended September 30,     Nine Months Ended September 30,
2012 2011 2012 2011
(in thousands, except per share data)
NET SALES $ 156,379 $ 129,064 $ 417,498 $ 350,958
COST OF SALES   70,420     58,605     187,945     160,127  
GROSS PROFIT   85,959     70,459     229,553     190,831  
OPERATING EXPENSES:
Sales and marketing 5,785 5,656 16,771 16,451
Research and development 7,762 6,501 22,131 18,842
General and administrative 10,609 10,997 29,294 27,499
Loss (gain) on foreign exchange   1,796     (1,927 )   (272 )   (1,413 )
Total operating expenses   25,952     21,227     67,924     61,379  
OPERATING INCOME   60,007     49,232     161,629     129,452  
OTHER INCOME (EXPENSE), Net:
Interest income (expense), net 55 (209 ) 541 (585 )
Other income (expense), net   205     145     (981 )   (465 )
Total other income (expense)   260     (64 )   (440 )   (1,050 )
INCOME BEFORE PROVISION FOR INCOME TAXES 60,267 49,168 161,189 128,402
PROVISION FOR INCOME TAXES   (17,832 )   (14,899 )   (48,357 )   (39,248 )
NET INCOME 42,435 34,269 112,832 89,154

LESS: NET INCOME ATTRIBUTABLE TO NONCONTROLLING INTERESTS

  -     1,400     2,740     2,481  

NET INCOME ATTRIBUTABLE TO IPG PHOTONICS CORPORATION

$ 42,435   $ 32,869   $ 110,092   $ 86,673  

NET INCOME ATTRIBUTABLE TO IPG PHOTONICS CORPORATION PER SHARE:

Basic $ 0.83 $ 0.68 $ 2.20 $ 1.82
Diluted $ 0.81 $ 0.66 $ 2.16 $ 1.77
WEIGHTED AVERAGE SHARES OUTSTANDING:
Basic 51,090 47,483 50,204 47,298
Diluted 52,102 48,747 51,281 48,684
 
 
IPG PHOTONICS CORPORATION
SUPPLEMENTAL SCHEDULE OF STOCK-BASED COMPENSATION
       
Three Months Ended Nine Months Ended

September 30,

September 30,

(In thousands)

2012

2011

2012

2011

 
Cost of sales $ 563 $ 419 $ 1,590 $ 1,303
Sales and marketing 289 311 827 1,206
Research and development 334 252 976 789
General and administrative   973     897     2,965     2,882  
 
Total stock-based compensation 2,159 1,879 6,358 6,180
Tax benefit recognized   (655 )   (575 )   (1,938 )   (1,982 )
 
Net stock-based compensation $ 1,504 $ 1,304 $ 4,420 $ 4,198
 
 
IPG PHOTONICS CORPORATION
CONSOLIDATED BALANCE SHEETS
         
September 30,   December 31,
  2012     2011  
(In thousands, except share and per share data)
ASSETS
CURRENT ASSETS:
Cash and cash equivalents $ 372,569 $ 180,234
Short-term investments - 25,451
Accounts receivable, net 110,649 75,755
Inventories, net 135,121 116,978
Prepaid income taxes and income taxes receivable 13,968 13,285
Prepaid expenses and other current assets 18,296 11,855
Deferred income taxes, net   10,503     10,899  
Total current assets 661,106 434,457
DEFERRED INCOME TAXES, NET 4,419 4,830
GOODWILL 3,113 -
INTANGIBLE ASSETS, NET 7,875 6,157
PROPERTY, PLANT AND EQUIPMENT, NET 195,153 155,202
OTHER ASSETS   6,719     7,486  
TOTAL $ 878,385   $ 608,132  
 
LIABILITIES AND EQUITY
CURRENT LIABILITIES:
Revolving line-of-credit facilities $ 4,900 $ 7,057
Current portion of long-term debt 1,572 1,613
Accounts payable 14,291 11,122
Accrued expenses and other liabilities 55,733 47,285
Deferred income taxes, net 7,181 5,405
Income taxes payable   37,604     21,230  
Total current liabilities 121,281 93,712
OTHER LONG-TERM LIABILITIES 13,191 8,961
LONG-TERM DEBT, NET OF CURRENT PORTION   14,341     15,726  
Total liabilities 148,813 118,399
REDEEMABLE NONCONTROLLING INTERESTS - 46,123
IPG PHOTONICS CORPORATION STOCKHOLDERS' EQUITY:
Common stock, $0.0001 par value, 175,000,000 shares authorized; 51,270,197 shares issued and outstanding at September 30, 2012; 47,616,115 shares issued and outstanding at December 31, 2011 5 5
Additional paid-in capital 506,854 332,585
Retained earnings 233,418 122,833
Accumulated other comprehensive loss   (10,705 )   (12,100 )
Total IPG Photonics Corporation stockholders' equity 729,572 443,323
NONCONTROLLING INTERESTS   -     287  
Total equity   729,572     443,610  
TOTAL $ 878,385   $ 608,132  
 
 
IPG PHOTONICS CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
         

Nine Months Ended September 30,

  2012     2011  
(In thousands)
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 112,832 $ 89,154
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization 19,168 18,182
Provisions for inventory, warranty & bad debt 14,762 11,859
Other 10,585 7,110
Changes in assets and liabilities that provided (used) cash:
Accounts receivable/payable (34,344 ) (20,746 )
Inventories (17,050 ) (52,261 )
Other   10,552     2,697  
Net cash provided by operating activities   116,505     55,995  
 
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of property, plant and equipment (51,715 ) (34,750 )
Proceeds from short-term investments 25,452 -
Acquisition of businesses, net of cash acquired (11,596 ) (450 )
Other   (313 )   189  
Net cash used in investing activities   (38,172 )   (35,011 )
 
CASH FLOWS FROM FINANCING ACTIVITIES:
Line-of-credit facilities (1,958 ) 585
Principal payments on long-term borrowings (1,848 ) (1,046 )
Purchase of noncontrolling interests (700 ) -
(Purchase) sale of redeemable noncontrolling interests (55,400 ) 19,973
Exercise of employee stock options and issuances under employee stock purchase plan 8,145 12,001
Proceeds from follow-on public offering, net of offering expenses   167,963     -  
Net cash provided by financing activities   116,202     31,513  
 
EFFECT OF CHANGES IN EXCHANGE RATES ON CASH AND CASH EQUIVALENTS   (2,200 )   (3,771 )
NET INCREASE IN CASH AND CASH EQUIVALENTS 192,335 48,726
CASH AND CASH EQUIVALENTS — Beginning of period   180,234     147,860  
CASH AND CASH EQUIVALENTS — End of period $ 372,569   $ 196,586  
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Cash paid for interest $ 553   $ 809  
Cash paid for income taxes $ 20,967   $ 19,465  

IPG Photonics Corporation
Tim Mammen, 508-373-1100
Chief Financial Officer
or
Sharon Merrill
Dennis Walsh, 617-542-5300
Senior Consultant

Source: IPG Photonics Corporation

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