Exhibit 99.1
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CONTACT:
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Tim Mammen
Chief Financial Officer
IPG Photonics Corporation
(508) 373-1100
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David Calusdian
Executive Vice President
Sharon Merrill Associates, Inc.
(617) 542-5300 |
IPG PHOTONICS REPORTS FINANCIAL RESULTS FOR SECOND QUARTER OF 2009
Weak Pulsed Laser Sales for Materials Processing Drive Year-over-Year Decline in Revenues and a Net Loss;
High Power Laser Sales Remain Resilient
OXFORD, Mass. — August 4, 2009 — IPG Photonics Corporation (Nasdaq: IPGP), the world leader in
high-power fiber lasers and amplifiers, today reported financial results for the second quarter of
2009 ended June 30, 2009.
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Three Months Ended |
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Six Months Ended |
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June 30, |
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June 30, |
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| (In millions, except per share data) |
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2009 |
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2008 |
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% Change |
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2009 |
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2008 |
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% Change |
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Revenue |
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$ |
40.4 |
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|
$ |
56.0 |
|
|
|
-28 |
% |
|
$ |
85.8 |
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$ |
108.9 |
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-21 |
% |
Gross margin |
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29.1 |
% |
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48.1 |
% |
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32.2 |
% |
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47.2 |
% |
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Operating (loss) income |
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$ |
(1.3 |
) |
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$ |
12.8 |
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|
|
-110 |
% |
|
$ |
0.7 |
|
|
$ |
25.3 |
|
|
|
-97 |
% |
Operating margin |
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|
-3.2 |
% |
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22.8 |
% |
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0.9 |
% |
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23.3 |
% |
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Net (loss) income attributable to IPG Photonics Corporation |
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$ |
(1.2 |
) |
|
$ |
8.6 |
|
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|
-114 |
% |
|
$ |
— |
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$ |
16.7 |
|
|
|
-100 |
% |
Earnings per diluted share |
|
$ |
(0.03 |
) |
|
$ |
0.19 |
|
|
|
-116 |
% |
|
$ |
— |
|
|
$ |
0.36 |
|
|
|
-100 |
% |
Comments on the Second Quarter
“We reported top- and bottom-line financial results for the second quarter of 2009, in line with
our release two weeks ago,” said Dr. Valentin Gapontsev, IPG Photonics’ Chief Executive Officer.
“Second-quarter revenue continued to be affected by the global economic downturn, which resulted in
lower prices for certain products due to both the macro-economic environment and increased
competition. The materials processing market is especially weak in Europe and Asia, which had a
significant effect on our sales this quarter. High power laser sales were up slightly
year-over-year for both the second quarter and the first half of 2009.”
“The year-over-year decline in our earnings was the result of changes in product sales mix, lower
absorption of fixed costs due to a lower level of sales, a reduction in the level of inventory
during the period, and increased R&D expenses which exceeded the cost reductions we achieved,” said
Gapontsev. “We estimate that we achieved $1.5 million of manufacturing and general and
administrative cost reductions in the second quarter of 2009 as compared to the level of expenses
at the end of 2008. Also, we increased R&D spending in the quarter to best position the company
to capitalize on growth opportunities when our markets rebound.”
“Despite a tough economic environment, we believe demand for our high power lasers for a variety of
material processing applications remained resilient primarily due to market share gains,” Gapontsev
said. “High power laser markets represent a substantially larger market opportunity with fewer
competitors than the pulsed laser markets. In addition to high power lasers, three of our smaller
markets showed some stability during the second
quarter. The Telecommunications, Medical and Advanced Applications markets each reported
year-over-year growth.”
“Looking at our performance geographically, North America was least affected by the global economic
downturn, declining 8% year-over-year,” Gapontsev said. “European sales were down approximately
33% year-over-year, primarily due to slower sales of marking, solar and printing applications.
Sales in Asia and Australia decreased by 30% compared to the second quarter of 2008. Sales in Japan
and China were weak primarily due to lower pulsed laser sales, while we had moderate growth in
South Korea.”
“Our balance sheet remains strong with approximately $78 million cash and cash equivalents on hand
at the end of the quarter,” said Gapontsev. “We also generated positive cash flow from operations
in the quarter totaling $5.9 million. Some of the increase in cash flow was due to a reduction in
inventory, which was down by $3.1 million, excluding write-downs. We reduced capital expenditures
to $3.0 million in the quarter and are on track to limit our total capital expenditures in 2009 to
less than $15.0 million.”
Gross margin was 29.1% in the second quarter of 2009 compared with 48.1% in the same quarter in
2008. Operating loss was $1.3 million in the second quarter of 2009 compared with operating income
of $12.8 million for the same period in 2008, due primarily to the factors mentioned previously
and, to a lesser extent, a write-down of slow moving inventory. Operating expenses including
foreign exchange gains and losses for the second quarter of 2009 were $13.1 million, or 32.3% of
revenue, compared with $14.2 million, or 25.3% of revenue, in the second quarter of 2008.
For the first six months of 2009, gross margin was 32.2% compared with 47.2% in 2008. Operating
income was $0.7 million in the first six months of 2009 compared with $25.3 million for the first
six months of 2008. Operating expenses, including foreign exchange gains and losses, for the first
six months of 2009 were $26.9 million, or 31.3% of revenue, compared with $26.0 million, or 23.9%
of revenue, in the same period of 2008.
Cash and cash equivalents were $78.1 million on June 30, 2009, compared with $51.3 million on
December 31, 2008. For the first six months of 2009, cash provided by operating activities was
$23.8 million and cash used in investing activities totaled $7.8 million.
Business Outlook and Financial Guidance
“We expect that the weakness in the Materials Processing market and pricing pressures may limit a
meaningful improvement in our revenues and net income for the remainder of 2009,” said Gapontsev.
“At the same time, we are encouraged by the growth in high-power sales, positive signs in the
Medical, Telecommunications and Advanced Applications markets and the performance of our new
products, such as our green lasers, new high-energy pulsed lasers, long-pulsed lasers aimed at
replacing lamp-pumped YAG lasers, and our new 100 Watt fiber-coupled laser diodes, the most
powerful high brightness single-emitter based laser diode. While visibility for the third quarter
of 2009 is better than at the beginning of the second quarter, it remains limited for the remainder
of the year. We are hopeful for the beginnings of a recovery in the second half of 2009.”
“During the second half of the year, we will continue to take actions to ensure that we are an even
stronger company when our markets rebound,” said Gapontsev. “We will maintain our focus on
controlling costs and reducing inventories in order to maximize cash flow and achieve profitability
for 2009. Also, we are proceeding aggressively with our product development strategy to secure our
technological superiority and market leadership position for the long term.”
For the third quarter of 2009, IPG Photonics expects revenues in the range of $39 million to $44
million. The Company anticipates earnings per diluted share in the range of $(0.02) to $0.03 based
on 46,518,000 common shares, which includes 45,431,000 basic common shares outstanding and
1,087,000 potentially dilutive options at June 30, 2009. 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, August 4, 2009 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) 407-5790
or (201) 689-8328. Interested parties that are unable to listen to the live call may access an
archived version of the webcast 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 applications. 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,
those relating to a slight recovery in the second half of 2009, weakness in the Materials
Processing market and pricing pressures, positive signs in the Medical, Telecommunications and
Advanced Applications markets, taking actions to ensure that the Company is stronger, control of
costs, reduction of inventories, achieving profitability for 2009, maintaining technology
superiority and market leadership, and the Company’s revenue and EPS guidance for the third quarter
of 2009. 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;
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 12, 2009) 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
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Three Months Ended June 30, |
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Six Months Ended June 30, |
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2009 |
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2008 |
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2009 |
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2008 |
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(in thousands, except per share data) |
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NET SALES |
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$ |
40,385 |
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$ |
55,994 |
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$ |
85,793 |
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$ |
108,870 |
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COST OF SALES |
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28,613 |
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29,047 |
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58,160 |
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57,523 |
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GROSS PROFIT |
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11,772 |
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|
26,947 |
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27,633 |
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|
51,347 |
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OPERATING EXPENSES: |
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Sales and marketing |
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3,880 |
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3,703 |
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7,069 |
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|
6,850 |
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Research and development |
|
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4,734 |
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|
|
4,447 |
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|
|
8,876 |
|
|
|
7,321 |
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General and administrative |
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|
4,944 |
|
|
|
5,765 |
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|
9,934 |
|
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|
12,177 |
|
(Gain)/loss on foreign exchange |
|
|
(500 |
) |
|
|
259 |
|
|
|
1,015 |
|
|
|
(314 |
) |
|
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|
|
|
|
|
|
|
|
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Total operating expenses |
|
|
13,058 |
|
|
|
14,174 |
|
|
|
26,894 |
|
|
|
26,034 |
|
|
|
|
|
|
|
|
|
|
|
|
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|
OPERATING (LOSS) INCOME |
|
|
(1,286 |
) |
|
|
12,773 |
|
|
|
739 |
|
|
|
25,313 |
|
|
|
|
|
|
|
|
|
|
|
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OTHER (EXPENSE) INCOME, Net: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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Interest (expense), net |
|
|
(367 |
) |
|
|
(183 |
) |
|
|
(757 |
) |
|
|
(278 |
) |
Other (expense) income, net |
|
|
(36 |
) |
|
|
489 |
|
|
|
(184 |
) |
|
|
536 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total other (expense) income |
|
|
(403 |
) |
|
|
306 |
|
|
|
(941 |
) |
|
|
258 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(LOSS) INCOME BEFORE BENEFIT FROM
(PROVISION FOR) INCOME TAXES |
|
|
(1,689 |
) |
|
|
13,079 |
|
|
|
(202 |
) |
|
|
25,571 |
|
BENEFIT FROM (PROVISION FOR) INCOME TAXES |
|
|
524 |
|
|
|
(4,058 |
) |
|
|
63 |
|
|
|
(8,055 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
NET (LOSS) INCOME |
|
|
(1,165 |
) |
|
|
9,021 |
|
|
|
(139 |
) |
|
|
17,516 |
|
LESS: NET INCOME (LOSS) ATTRIBUTABLE TO
NONCONTROLLING INTERESTS |
|
|
64 |
|
|
|
469 |
|
|
|
(181 |
) |
|
|
815 |
|
|
|
|
|
|
|
|
|
|
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NET (LOSS) INCOME ATTRIBUTABLE TO IPG
PHOTONICS CORPORATION |
|
$ |
(1,229 |
) |
|
$ |
8,552 |
|
|
$ |
42 |
|
|
$ |
16,701 |
|
|
|
|
|
|
|
|
|
|
|
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NET (LOSS) INCOME ATTRIBUTABLE TO IPG
PHOTONICS CORPORATION PER SHARE: |
|
|
|
|
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|
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|
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|
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|
Basic |
|
$ |
(0.03 |
) |
|
$ |
0.19 |
|
|
$ |
0.00 |
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|
$ |
0.38 |
|
Diluted |
|
$ |
(0.03 |
) |
|
$ |
0.19 |
|
|
$ |
0.00 |
|
|
$ |
0.36 |
|
WEIGHTED AVERAGE SHARES OUTSTANDING: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic |
|
|
45,431 |
|
|
|
44,355 |
|
|
|
45,263 |
|
|
|
44,225 |
|
Diluted |
|
|
45,431 |
|
|
|
46,132 |
|
|
|
46,336 |
|
|
|
46,087 |
|
IPG PHOTONICS CORPORATION
CONSOLIDATED BALANCE SHEETS
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|
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June 30, |
|
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December 31, |
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| |
|
2009 |
|
|
2008 |
|
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|
(in thousands) |
|
ASSETS |
|
|
|
|
|
|
|
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CURRENT ASSETS: |
|
|
|
|
|
|
|
|
Cash and cash equivalents |
|
$ |
78,068 |
|
|
$ |
51,283 |
|
Accounts receivable, net |
|
|
32,006 |
|
|
|
41,842 |
|
Inventories, net |
|
|
62,085 |
|
|
|
72,555 |
|
Income taxes receivable |
|
|
1,995 |
|
|
|
1,968 |
|
Prepaid expenses and other current assets |
|
|
6,138 |
|
|
|
7,200 |
|
Deferred income taxes |
|
|
9,539 |
|
|
|
6,175 |
|
|
|
|
|
|
|
|
Total current assets |
|
|
189,831 |
|
|
|
181,023 |
|
DEFERRED INCOME TAXES |
|
|
3,008 |
|
|
|
2,400 |
|
PROPERTY, PLANT, AND EQUIPMENT, Net |
|
|
115,258 |
|
|
|
114,492 |
|
OTHER ASSETS |
|
|
15,004 |
|
|
|
15,303 |
|
|
|
|
|
|
|
|
TOTAL |
|
$ |
323,101 |
|
|
$ |
313,218 |
|
|
|
|
|
|
|
|
LIABILITIES AND STOCKHOLDERS’ EQUITY |
|
|
|
|
|
|
|
|
CURRENT LIABILITIES: |
|
|
|
|
|
|
|
|
Revolving line-of-credit facilities |
|
$ |
31,401 |
|
|
$ |
19,769 |
|
Current portion of long-term debt |
|
|
1,333 |
|
|
|
1,333 |
|
Accounts payable |
|
|
6,065 |
|
|
|
7,739 |
|
Accrued expenses and other liabilities |
|
|
18,929 |
|
|
|
17,988 |
|
Deferred income taxes |
|
|
343 |
|
|
|
1,690 |
|
Income taxes payable |
|
|
1,653 |
|
|
|
507 |
|
|
|
|
|
|
|
|
Total current liabilities |
|
|
59,724 |
|
|
|
49,026 |
|
|
|
|
|
|
|
|
DEFERRED INCOME TAXES AND OTHER LONG-TERM LIABILITIES |
|
|
1,819 |
|
|
|
2,896 |
|
|
|
|
|
|
|
|
LONG-TERM DEBT |
|
|
17,334 |
|
|
|
17,997 |
|
|
|
|
|
|
|
|
COMMITMENTS AND CONTINGENCIES |
|
|
|
|
|
|
|
|
STOCKHOLDERS’ EQUITY: |
|
|
|
|
|
|
|
|
Common stock |
|
|
5 |
|
|
|
4 |
|
Additional paid-in capital |
|
|
289,242 |
|
|
|
283,217 |
|
Accumulated deficit |
|
|
(53,801 |
) |
|
|
(53,843 |
) |
Accumulated other comprehensive income |
|
|
8,683 |
|
|
|
8,794 |
|
|
|
|
|
|
|
|
Total IPG Photonics Corporation stockholders’ equity |
|
|
244,129 |
|
|
|
238,172 |
|
Noncontrolling interests |
|
|
95 |
|
|
|
5,127 |
|
|
|
|
|
|
|
|
Total equity |
|
|
244,224 |
|
|
|
243,299 |
|
|
|
|
|
|
|
|
TOTAL |
|
$ |
323,101 |
|
|
$ |
313,218 |
|
|
|
|
|
|
|
|
IPG PHOTONICS CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
| |
|
|
|
|
|
|
|
|
| |
|
Six Months Ended June 30, |
| |
|
2009 |
|
|
2008 |
|
CASH FLOWS FROM OPERATING ACTIVITIES: |
|
|
|
|
|
|
|
|
Net (loss) income |
|
$ |
(139 |
) |
|
$ |
17,516 |
|
Adjustments to reconcile net (loss) income to net cash provided by operating activities: |
|
|
|
|
|
|
|
|
Depreciation and amortization |
|
|
9,043 |
|
|
|
7,525 |
|
Provisions for inventory, warranty & bad debt |
|
|
6,152 |
|
|
|
3,489 |
|
Other |
|
|
(3,499 |
) |
|
|
(2,448 |
) |
Changes in assets and liabilities that provided (used) cash: |
|
|
|
|
|
|
|
|
Accounts receivable/payable |
|
|
7,862 |
|
|
|
(3,315 |
) |
Inventories |
|
|
1,686 |
|
|
|
(15,751 |
) |
Other |
|
|
2,695 |
|
|
|
4,632 |
|
|
|
|
|
|
|
|
Net cash provided by operating activities |
|
|
23,800 |
|
|
|
11,648 |
|
CASH FLOWS FROM INVESTING ACTIVITIES: |
|
|
|
|
|
|
|
|
Purchases of property, plant and equipment |
|
|
(7,726 |
) |
|
|
(20,325 |
) |
Other |
|
|
(54 |
) |
|
|
5,586 |
|
|
|
|
|
|
|
|
Net cash used in investing activities |
|
|
(7,780 |
) |
|
|
(14,739 |
) |
CASH FLOWS FROM FINANCING ACTIVITIES: |
|
|
|
|
|
|
|
|
Line-of-credit facilities |
|
|
11,786 |
|
|
|
8,086 |
|
Long-term borrowings |
|
|
(677 |
) |
|
|
544 |
|
Purchase of noncontrolling interests |
|
|
(508 |
) |
|
|
— |
|
Exercise of employee stock options and related tax benefit from exercise |
|
|
477 |
|
|
|
1,365 |
|
|
|
|
|
|
|
|
Net cash provided by financing activities |
|
|
11,078 |
|
|
|
9,995 |
|
|
|
|
|
|
|
|
EFFECT OF CHANGES IN EXCHANGE RATES ON CASH AND CASH EQUIVALENTS |
|
|
(313 |
) |
|
|
50 |
|
|
|
|
|
|
|
|
NET INCREASE IN CASH AND CASH EQUIVALENTS |
|
|
26,785 |
|
|
|
6,954 |
|
CASH AND CASH EQUIVALENTS — Beginning of period |
|
|
51,283 |
|
|
|
37,972 |
|
|
|
|
|
|
|
|
CASH AND CASH EQUIVALENTS — End of period |
|
$ |
78,068 |
|
|
$ |
44,926 |
|
|
|
|
|
|
|
|
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION: |
|
|
|
|
|
|
|
|
Cash paid for interest |
|
$ |
794 |
|
|
$ |
849 |
|
Income taxes paid |
|
$ |
5,059 |
|
|
$ |
5,026 |
|
Non-cash transactions: |
|
|
|
|
|
|
|
|
Additions to property, plant and equipment included in accounts payable |
|
$ |
360 |
|
|
$ |
1,243 |
|
Inventory contributed as investment in affiliates |
|
$ |
237 |
|
|
$ |
— |
|
Purchase of noncontrolling interests in exchange for Common Stock |
|
$ |
3,027 |
|
|
$ |
— |
|