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IPG Photonics Reports Record Revenue Achieved in Third Quarter 2013

Materials Processing Applications Increase 19% Over Prior Year

OXFORD, Mass.--(BUSINESS WIRE)-- IPG Photonics Corporation (NASDAQ: IPGP) today reported financial results for the third quarter ended September 30, 2013.

       

Three Months Ended
September 30,

Nine Months Ended
September 30,

(In millions, except per share data) 2013   2012 % Change 2013   2012 % Change
Revenue $ 172.2 $ 156.4 10 % $ 482.2 $ 417.5 15 %
Gross margin 53.9 % 55.0 % 53.6 % 55.0 %
Operating income $ 59.8 $ 60.0 % $ 169.3 $ 161.6 5 %
Operating margin 34.7 % 38.4 % 35.1 % 38.7 %
Net income attributable to IPG Photonics Corporation $ 42.3 $ 42.4 % $ 119.2 $ 110.1 8 %
Earnings per diluted share $ 0.81 $ 0.81 % $ 2.28 $ 2.16 6 %
 

Management Comments

"Record revenue in the third quarter of 2013 was driven by a 19% increase in sales for materials processing applications, which account for 95% of our business," said Dr. Valentin Gapontsev, IPG Photonics' Chief Executive Officer. "We saw particularly strong demand for high-power lasers within materials processing. Gross margins of 53.9% were within our target range. EPS was flat with the year ago quarter and reflects the peak of our current investment cycle expanding manufacturing capacity, R&D and sales and marketing, which we believe will drive future revenue and earnings growth.

"Total revenue growth of 10% over last year came from increased demand in high-power lasers for cutting and welding applications, and in our mid-power and QCW product lines. However, the increases were offset by declines in pulsed laser sales for consumer electronic applications, which were strong last year, and declines in other applications.

"Geographically, Asia was our strongest performing region, with a 40% increase in sales primarily due to growth in Chinese and Turkish sales, which increased by 57% and more than 100%, respectively. These increases were tempered by lower sales in Europe and North America.

"During the third quarter, IPG generated $36.7 million in cash from operations and used $14.1 million to finance capital expenditures. We ended the quarter with $398.4 million in cash and cash equivalents.

Business Outlook and Financial Guidance

"While we expect fourth-quarter revenue to be seasonally weaker in certain areas and have reflected this in our guidance, we continue to believe that IPG still has a significant opportunity of profitable growth ahead for existing and new applications and product line expansion. As the technology pioneer and industry leader, we intend to continue to capitalize on the market we have created for reliable, flexible, high-performing and cost-effective fiber laser sources, while expanding our product line to capitalize on profitable new opportunities," concluded Dr. Gapontsev.

IPG Photonics expects revenue in the range of $155 million to $170 million for the fourth quarter of 2013. The Company anticipates earnings per diluted share in the range of $0.68 to $0.82 based on 52,367,000 diluted common shares, which includes 51,495,000 basic common shares outstanding and 872,000 potentially dilutive options at September 30, 2013.

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, 2013 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 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, expected seasonal weakness, a significant runway of profitable growth for existing and new applications, capitalizing on the market the Company has created, expanding its product line, capitalizing on profitable new opportunities for IPG, and guidance for the fourth quarter of 2013. 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 downturns in the markets IPG serves; uncertainties and adverse changes in the general economic conditions of markets; 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; high levels of fixed costs from IPG's vertical integration; the appropriateness of the Company's manufacturing capacity for the level of demand; competitive factors, including declining average selling prices; the effect of acquisitions and investments; inventory write-downs; foreign currency fluctuations; intellectual property infringement claims and litigation; interruption in supply of key components; manufacturing risks; building and expanding field service and support operations; inability to manage risks associated with international customers and operations; 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 28, 2013) 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,

2013   2012 2013   2012
(in thousands, except per share data)
NET SALES $ 172,152 $ 156,379 $ 482,175 $ 417,498
COST OF SALES 79,339   70,420   223,799   187,945  
GROSS PROFIT 92,813   85,959   258,376   229,553  
OPERATING EXPENSES:
Sales and marketing 6,801 5,785 19,514 16,771
Research and development 11,501 7,762 30,782 22,131
General and administrative 13,175 10,609 37,814 29,294
Loss (gain) on foreign exchange 1,563   1,796   972   (272 )
Total operating expenses 33,040   25,952   89,082   67,924  
OPERATING INCOME 59,773   60,007   169,294   161,629  
OTHER INCOME (EXPENSE), NET:
Interest income (expense), net 63 55 (25 ) 541
Other income (expense), net 218   205   49   (981 )
Total other income (expense) 281   260   24   (440 )
INCOME BEFORE PROVISION FOR INCOME TAXES 60,054 60,267 169,318 161,189
PROVISION FOR INCOME TAXES (17,716 ) (17,832 ) (50,133 ) (48,357 )
NET INCOME 42,338 42,435 119,185 112,832
LESS: NET INCOME ATTRIBUTABLE TO NONCONTROLLING INTERESTS       2,740  
NET INCOME ATTRIBUTABLE TO IPG PHOTONICS CORPORATION $ 42,338   $ 42,435   $ 119,185   $ 110,092  
NET INCOME ATTRIBUTABLE TO IPG PHOTONICS CORPORATION PER SHARE:
Basic $ 0.82 $ 0.83 $ 2.32 $ 2.20
Diluted $ 0.81 $ 0.81 $ 2.28 $ 2.16
WEIGHTED AVERAGE SHARES OUTSTANDING:
Basic 51,495 51,090 51,474 50,204
Diluted 52,367 52,102 52,346 51,281
 
 

IPG PHOTONICS CORPORATION

SUPPLEMENTAL SCHEDULE OF STOCK-BASED COMPENSATION

         

Three Months Ended September 30,

Nine Months Ended September 30,
(In thousands) 2013   2012 2013   2012
Cost of sales $ 842 $ 563 $ 2,324 $ 1,590
Sales and marketing 327 289 928 827
Research and development 512 334 1,377 976
General and administrative 1,450   973   3,975   2,965  
Total stock-based compensation 3,131 2,159 8,604 6,358
Tax benefit recognized (996 ) (655 ) (2,772 ) (1,938 )
Net stock-based compensation $ 2,135   $ 1,504   $ 5,832   $ 4,420  
 
 

IPG PHOTONICS CORPORATION

SUPPLEMENTAL SCHEDULE OF ACQUISITION RELATED COSTS IN COST OF SALES

         
Three Months Ended September 30, Nine Months Ended September 30,
(In thousands) 2013   2012 2013   2012
Cost of sales
Step-up of inventory (1) $ 456 $ $ 1,318 $
Amortization of intangible assets (2) 179   360   541   1,024
Total acquisition related costs $ 635   $ 360   $ 1,859   $ 1,024
 

(1) Amount relates to Microsystems step-up adjustment on inventory sold during the period

(2) Amount relates to intangible amortization expense during periods presented including amortization of acquired patents

 
 

IPG PHOTONICS CORPORATION

CONSOLIDATED BALANCE SHEETS

         
September 30, December 31,
2013 2012

(In thousands, except share and per
share data)

ASSETS
CURRENT ASSETS:
Cash and cash equivalents $ 398,355 $ 384,053
Accounts receivable, net 120,640 96,630
Inventories 171,268 139,618
Prepaid income taxes and income taxes receivable 17,326 13,071
Prepaid expenses and other current assets 30,072 18,639
Deferred income taxes, net 11,547   12,948  
Total current assets 749,208 664,959
DEFERRED INCOME TAXES, NET 6,100 2,107
GOODWILL 455 2,898
INTANGIBLE ASSETS, NET 10,131 7,510
PROPERTY, PLANT AND EQUIPMENT, NET 236,507 210,563
OTHER ASSETS 7,395   7,461  
TOTAL $ 1,009,796   $ 895,498  
LIABILITIES AND EQUITY
CURRENT LIABILITIES:
Revolving line-of-credit facilities $ 1,547 $ 2,442
Current portion of long-term debt 1,333 1,505
Accounts payable 14,293 17,783
Accrued expenses and other liabilities 59,553 51,451
Deferred income taxes, net 2,050 9,831
Income taxes payable 27,031   42,443  
Total current liabilities 105,807 125,455
DEFERRED INCOME TAXES AND OTHER LONG-TERM LIABILITIES 16,635 13,102
LONG-TERM DEBT, NET OF CURRENT PORTION 11,667   14,014  
Total liabilities 134,109 152,571
COMMITMENTS AND CONTINGENCIES
IPG PHOTONICS CORPORATION STOCKHOLDERS' EQUITY:
Common stock, $0.0001 par value, 175,000,000 shares authorized; 51,604,568 shares issued and outstanding at September 30, 2013; 51,359,247 shares issued and outstanding at December 31, 2012 5 5
Additional paid-in capital 526,481 511,039
Retained earnings 354,162 234,977
Accumulated other comprehensive loss (4,961 ) (3,094 )
Total IPG Photonics Corporation stockholders' equity 875,687   742,927  
TOTAL $ 1,009,796   $ 895,498  
 
 

IPG PHOTONICS CORPORATION

CONSOLIDATED STATEMENTS OF CASH FLOWS

       
Nine Months Ended September 30,
2013   2012
(In thousands)
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 119,185 $ 112,832
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization 23,414 19,168
Provisions for inventory, warranty & bad debt 18,203 14,762
Other 2,354 10,585
Changes in assets and liabilities that (used) provided cash:
Accounts receivable/payable (28,950 ) (34,344 )
Inventories (43,705 ) (17,050 )
Other (29,540 ) 10,552  
Net cash provided by operating activities 60,961   116,505  
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of property, plant and equipment (48,333 ) (51,715 )
Proceeds from sales of property, plant and equipment 202
Proceeds from short-term investments 25,452
Acquisition of businesses (5,555 ) (11,596 )
Other 442   (313 )
Net cash used in investing activities (53,244 ) (38,172 )
CASH FLOWS FROM FINANCING ACTIVITIES:
Line-of-credit facilities (895 ) (1,958 )
Principal payments on long-term borrowings (2,519 ) (1,848 )
Purchase of noncontrolling interests (700 )
Purchase of redeemable noncontrolling interests (55,400 )
Tax benefits from exercise of employee stock options 3,610 3,870
Exercise of employee stock options and issuances under employee stock purchase plan 3,228 4,275
Proceeds from follow-on public offering, net of offering expenses   167,963  
Net cash provided by financing activities 3,424   116,202  
EFFECT OF CHANGES IN EXCHANGE RATES ON CASH AND CASH EQUIVALENTS 3,161   (2,200 )
NET INCREASE IN CASH AND CASH EQUIVALENTS 14,302 192,335
CASH AND CASH EQUIVALENTS — Beginning of period 384,053   180,234  
CASH AND CASH EQUIVALENTS — End of period $ 398,355   $ 372,569  
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Cash paid for interest $ 190   $ 553  
Cash paid for income taxes $ 74,107   $ 20,967  

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

Source: IPG Photonics Corporation

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