IPG Photonics Corp. (IPGP) filed Quarterly Report for the period ended 2009-09-30.
IPG PHOTONICS is the world leader in high-power fiber lasers and amplifiers. IPG pioneered the development and commercialization of optical fiber-based lasers for use in a wide range of applications such as materials processing advanced applications 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. Ipg Photonics Corp. has a market cap of $690.6 million; its shares were traded at around $15.17 with a P/E ratio of 35.3 and P/S ratio of 3.
Highlight of Business Operations:
Net sales. Net sales decreased by $16.2 million, or 26.1%, to $45.8 million for the three months ended September 30, 2009 from $62.0 million for the three months ended September 30, 2008. This decrease was attributable to lower sales of fiber lasers in materials processing applications, where net sales decreased by $16.0 million or 31.4% and communications applications, where net sales decreased by $2.3 million or 53.6%. These decreases were partially offset by the increases in advanced applications, where net sales increased by $1.7 million, or 33.4%, and medical applications, where net sales increased by $0.4 million or 24.0%. The decrease in materials processing sales resulted from lower sales of high and medium power lasers and pulsed lasers used in welding, marking, engraving and drilling applications. The decrease in communications applications sales resulted primarily from decreased sales of amplifiers, particularly in Russia. The increase in sales of advanced applications was due to higher sales of high power lasers used in government and defense research and pulsed and low power lasers used for sensing and optical pumping applications. The increase in medical is due to the increased demand from our established customer in the US and new OEM customers.
Cost of sales and gross margin. Cost of sales decreased by $3.5 million, or 10.8%, to $29.1 million for the three months ended September 30, 2009 from $32.6 million for the three months ended September 30, 2008. Our gross margin decreased to 36.5% for the three months ended September 30, 2009 from 47.4% for the three months ended September 30, 2008. The decrease in gross margin was the result of less favorable absorption of our fixed manufacturing costs due to a decline in sales volume, less favorable product mix due to lower sales of medium power lasers and reduction of inventory as well as lower sales prices due to pricing pressure caused by the industry-wide reduction in demand. These cost of sales increases were partially offset by a reduction in manufacturing expenses in the period primarily related to reduced salaries and benefits expense and other manufacturing overhead. Expenses related to inventory reserves and other valuation adjustments decreased by $0.4 million to $1.3 million or 2.8% of sales for the three months ended September 30, 2009 as compared to $1.7 million or 2.7% of sales for the three months ended September 30, 2008.
Net sales. Net sales decreased by $39.3 million, or 23.0%, to $131.6 million for the nine months ended September 30, 2009 from $170.9 million for the nine months ended September 30, 2008. This decrease was attributable to lower sales of fiber lasers in materials processing applications, where net sales decreased by $42.3 million or 29.8% and a decrease in communications applications, where net sales decreased by $2.3 million or 23.6%. These decreases were partially offset by the increases sales of advanced applications, where net sales increased by $3.7 million or 23.0% and in medical applications, where net sales increased by $1.7 million, or 57.0%. The decrease in materials processing applications resulted from substantially decreased sales of pulsed lasers and medium-power lasers used in marking, engraving and drilling applications. The decrease in communications applications sales resulted primarily from decreased sales of amplifiers, particularly in Russia. The increase in sales of advanced applications was due to higher sales of high power lasers used in government and defense research and pulsed and low power lasers used for sensing and optical pumping applications. The increase in medical is due to the increased demand from our established customer in the US and new OEM customers.
Cost of sales and gross margin. Cost of sales decreased by $2.9 million, or 3.2%, to $87.2 million for the nine months ended September 30, 2009 from $90.1 million for the nine months ended September 30, 2008. Our gross margin decreased to 33.7% for the nine months ended September 30, 2009 from 47.3% for the nine months ended September 30, 2008. The decrease in gross margin was the result of less favorable absorption of our fixed manufacturing costs due to a decline in sales volume, less favorable product mix due to lower sales of medium power lasers, a reduction in inventory, increases in charges related to inventory write-downs and lower prices due to pricing pressure caused by the industry-wide reduction in demand. These cost of sales increases were offset partially by a reduction in manufacturing expenses in the period, primarily, related to reduced salaries and benefits expense and other manufacturing supplies. Expenses related to inventory reserves and other valuation adjustments increased by $2.3 million to $5.6 million, or 4.3%, of sales for the nine months ended September 30, 2009 as compared to $3.3 million, or 1.9%, of sales for the nine months ended September 30, 2008.
Our principal sources of liquidity as of September 30, 2009 consisted of cash and cash equivalents of $76.3 million, unused credit lines and overdraft facilities of $47.6 million and working capital (excluding cash) of $61.5 million. This compares to cash and cash equivalents of $51.3 million, unused overdraft facilities of $40.9 million and working capital (excluding cash) of $80.7 million as of December 31, 2008. The increase in cash and cash equivalents of $25.0 million from December 31, 2008 relates primarily to cash provided by operating activities during the nine months ended September 30, 2009 of $37.7 million, partially offset by capital expenditures of $9.6 million, net repayments of our credit lines of $4.4 million and the acquisition of non-controlling interests totaling $0.5 million.
Financing activities. Net cash used by financing activities was $3.8 million in the nine months ended September 30, 2009 as compared to cash provided by financing activities of $5.6 million in the nine months ended September 30, 2008. The cash used by financing activities in 2009 was primarily related to the net repayments of $4.4 million from the use of our credit lines and by cash used to purchase non-controlling interests of $0.5 million, partially offset by $2.1 million of exercise of employee stock options and related tax benefits. The cash provided by financing activities in 2008 was primarily related to the net proceeds of $4.4 million from the use of our credit lines.
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