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RofinSinar Technologies Inc. (RSTI) filed Annual Report for the period ended 2011-09-30.
Rofinsinar Technologies Inc. has a market cap of $572.04 million; its shares were traded at around $20.09 with a P/E ratio of 9.75 and P/S ratio of 0.96. Rofinsinar Technologies Inc. had an annual average earning growth of 5.3% over the past 10 years.
This is the annual revenues and earnings per share of RSTI over the last 10 years. For detailed 10-year financial data and charts, go to 10-Year Financials of RSTI.
Highlight of Business Operations:
Fiscal Year 2011 Compared to Fiscal Year 2010 Net Sales – Record net sales of $597.8 million represents an increase of $174.2 million, or 41%, compared to fiscal year 2010. Net sales increased $143.4 million, or 42%, in Europe/Asia and $30.8 million, or 39%, in North America, compared to fiscal year 2010. Net sales of laser products for macro applications increased by 37% to $237.5 million, compared to fiscal year 2010, primarily due to the higher demand for lower and higher power CO2 lasers from OEM-customers in the machine tool and automotive industries. Net sales of lasers for marking and micro applications increased by 46% to $302.3 million compared to fiscal year 2010, primarily due to higher demand from the electronics and medical device industries. Revenues for the component business increased by 31% to $58.0 million compared to fiscal year 2010, primarily due to higher sales related to fibers and fiber optics. The U.S. dollar fluctuated against foreign currencies, which had a favorable effect on net sales of $14.7 million. Gross Profit – The Company s gross profit of $232.1 million increased by $65.8 million, or 40%, compared to fiscal year 2010. As a percentage of sales, gross profit remained at 39%. The unchanged percentage margin in fiscal year 2011 was primarily the result of the existing product mix. Gross profit was favorably affected by $5.3 million in fiscal year 2011 due to the fluctuation of the U.S. dollar against foreign currencies. Selling, General and Administrative Expenses – Selling, general and administrative expenses increased by $17.6 million, or 20%, to $107.5 million, compared to fiscal year 2010, primarily as a result of our increased selling and marketing activities, higher commissions related to a higher business level and additional expenses from our newly acquired Swiss subsidiary (LASAG). As a percentage of net sales, selling, general and administrative expenses decreased to 18%. Selling, general and administrative expenses were unfavorably affected by $2.6 million due to the fluctuation of the U.S. dollar against foreign currencies in fiscal year 2011. Research and Development – The Company s net expenses for research and development amounted to $38.3 million, which represents an increase of $8.2 million, or 27%, primarily due to significant R&D activities related to the extension of the fiber laser product portfolio, lower R&D grants compared to fiscal year 2010, and additional expenses from the newly acquired Swiss subsidiary. Gross research and development expenses for fiscal years 2011 and 2010, were $40.6 million and $32.7 million, respectively, and were reduced by government grants of $2.3 million and $2.6 million during the respective periods. The Company will continue to apply for, and expects to continue receiving, government grants for research and development, especially in Europe. Research and development expenses were unfavorably affected by $1.0 million due to the fluctuation of the U.S. dollar against foreign currencies in fiscal year 2011. Other Income – Net other income of $3.5 million fiscal year 2011 represents an increase of $1.5 million compared to fiscal year 2010. The increase in net other income is primarily attributable to higher net exchange gains of $1.9 million compared to $1.5 million in fiscal year 2010, net interest income of $0.1 million compared to net interest expense of $0.4 million in fiscal year 2010 and $ 0.6 million in higher net miscellaneous income, mainly related to cancellation fees. Income Tax Expense – Income tax expense of $26.1 million in fiscal year 2011 and $15.4 million in fiscal year 2010, represent effective tax rates of 29.9% and 33.6% for the respective periods. The lower effective income tax rate in fiscal year 2011 is mainly due to improved pre-tax income in locations with lower effective income tax rates and the realization of certain net operating losses from the newly acquired Swiss subsidiary. Income tax expense, a significant portion of which is incurred in foreign currencies, was unfavorably affected by $0.7 million due to the weakening of the U.S. dollar against foreign currencies. Net Income Attributable to RSTI – As a result of the foregoing factors, the Company s net income attributable to RSTI of $60.0 million ($2.06 per diluted share, based on 29.1 million weighted average diluted common shares outstanding) in fiscal year 2011 increased by $30.2 million compared to fiscal year 2010 s net income attributable to RSTI of $29.8 million ($1.02 per diluted share, based on 29.2 million weighted average diluted common shares outstanding). Net income attributable to RSTI was favorably affected by $1.0 million in fiscal 2011 due to the fluctuation of the U.S. dollar against foreign currencies. 39 Fiscal Year 2010 Compared to Fiscal Year 2009 Net Sales – Net sales of $423.6 million represents an increase of $74.0 million, or 21%, over the prior year. Net sales increased $65.3 million, or 23%, in Europe/Asia and $8.7 million, or 12%, in North America, compared to the prior year. The U.S. dollar fluctuated against foreign currencies, which had a favorable effect on net sales of $1.4 million. Net sales of laser products for macro applications increased by 23% to $172.9 million, primarily due to the higher demand for our lower and higher power CO2 lasers from OEM-customers in the machine tool industry. Net sales of lasers for marking and micro applications increased by 23% to $206.5 million compared to fiscal year 2009, mainly due to the higher demand for our lasers for micro and marking applications principally from the semiconductor and electronics industries. Revenues for the component business increased by 8% to $44.2 million, primarily due to higher sales related to fiber optics. Gross Profit – The Company s gross profit of $166.3 million increased by $34.2 million, or 26%, over the prior year. As a percentage of sales, gross profit increased to 39%. The increased percentage margin in fiscal year 2010 was primarily a result of better fixed cost absorption, a favorable product mix, and an increase in our service and spare parts business. Gross profit was favorably affected by $1.2 million in fiscal year 2010 due to the fluctuation of the U.S. dollar against foreign currencies. Selling, General and Administrative Expenses – Selling, general and administrative expenses increased by $1.0 million, or 1%, to $89.9 million, compared to fiscal year 2009 primarily as a result of our increased selling and marketing activities, mainly in Asia and higher commissions related to our higher revenues. Fiscal year 2009 included one-time costs related to headcount reductions of $1.8 million. As a percentage of net sales, selling, general and administrative expenses decreased to 21%. Selling, general and administrative expenses were unfavorably affected by $0.4 million due to the fluctuation of the U.S. dollar against foreign currencies in fiscal year 2010. Research and Development – The Company s net expenses for research and development amounted to $30.1 million, which represents a decrease of $1.4 million, or 4%, primarily due to higher R&D grants compared to fiscal year 2009 where, additionally, one-time costs for headcount reduction of $0.5 million were included. Gross research and development expenses for fiscal years 2010 and 2009 were $32.7 million and $33.5million, respectively, and were reduced by $2.6 million and $2.0 million of government grants during the respective periods. The Company will continue to apply for, and expects to continue receiving, government grants towards research and development, especially in Europe. Research and development expenses were not materially affected by the fluctuation of the U.S. dollar against foreign currencies in fiscal year 2010. Other Income – Net other income of $1.9 million fiscal year 2010 represents a decrease of $4.7 million compared to the prior year. Mainly as a result of additional short-term borrowings to finance our share buyback program, net interest expense increased to $0.4 million in fiscal year 2010, compared to $0.3 million in fiscal year 2009. The interest expense is offset by $1.5 million of foreign currency gains in fiscal 2010 compared to $4.2 million in fiscal 2009 and lower other miscellaneous income of $ 0.8 million compared to $2.7 million in fical 2009 which included $2.0 million compensation for the cancellation of orders received in fiscal year 2008. Income Tax Expense – Income tax expense of $15.4 million in fiscal year 2010 and $5.2 million in fiscal year 2009, represent effective tax rates of 33.6% and 35.4% for the respective periods. The lower effective income tax rate in fiscal year 2010 is mainly due to an improved business in locations with lower marginal income tax rates which contributed to a normalized effective tax rate during fiscal year 2010. Income tax expense, a significant portion of which is incurred in foreign currencies, was not materially affected by the weakening of the U.S. dollar against foreign currencies. Net Income Attributable to RSTI – As a result of the foregoing factors, the Company s net income attributable to RSTI of $29.8 million ($1.02 per diluted share, based on 29.2 million weighted average common shares outstanding) in fiscal year 2010 increased by $20.6 million over the prior year s net income attributable to RSTI of $9.2 million ($0.31 per diluted share, based on 29.2 million weighted average common shares outstanding). Net income attributable to RSTI was favorably affected by $0.8 million in fiscal 2010 due to the fluctuation of the U.S. dollar against foreign currencies. 40 LIQUIDITY AND CAPITAL RESOURCES Fiscal Year 2011 The Company s primary sources of liquidity at September 30, 2011, were cash and cash equivalents of $127.4 million, short-term investments of $3.0 million, short-term credit lines of $72.7 million, and long-term credit lines of $16.4 million. As of September 30, 2011, $6.5 million was outstanding under the short-term lines of credit and $10.3 million was used for bank guarantees under these lines of credit, leaving $55.9 million available for borrowing under short-term lines of credit. In addition, the Company maintained credit lines specific to bank guarantees for $6.3 million, of which $0.3 million was used. Therefore, $61.9 million was unused and available under our short-term and bank guarantee lines of credit, in aggregate, at September 30, 2011. At September 30, 2011, the entire amount of our long-term lines of credit was fully drawn. The Company is subject to financial covenants under some of these facilities and lines of credit, which could restrict the Company from drawing money under them. At September 30, 2011, the Company was in compliance with these covenants. Cash and cash equivalents increased by $16.8 million during fiscal year 2011. Approximately $50.0 million in cash and cash equivalents were provided by operating activities, primarily as the result of the increased net income and other non-cash items, principally depreciation and amortization and the increase in accrued liabilities and pension obligations, and income tax payable. Operating cash flow was negatively affected by the increase in accounts receivable and inventories, mainly as a result of the fast business growth experienced during fiscal year 2011. Net cash used in investing activities totaled $28.5 million for fiscal year 2011, and was primarily related to various additions to property and equipment ($21.8 million), business acquisitions ($11.2 million) and purchase of short-term investments ($8.6 million), partially offset by proceeds from the sale of short-term investments ($12.6 million). Net cash used in financing activities totaled $4.7 million and was primarily related to the stock buyback program ($8.8 million) and loan repayments of $9.5 million, partly offset by $6.3 million in borrowings from banks and $7.2 million generated through issuance of new shares from the exercise of stock options. The Company expects that its capital expenditures will be approximately $28.5 million in fiscal year 2012. Management believes that cash flows from operations, along with existing cash and cash equivalents and availability under the credit facilities and lines of credit, will provide adequate resources to meet the Company s capital requirements and operational needs on both a current and a long-term basis. Fiscal Year 2010 The Company s primary sources of liquidity at September 30, 2010, were cash and cash equivalents of $110.6 million, short-term investments of $5.7 million, short-term credit lines of $76.7 million and long-term credit lines of $16.6 million. As of September 30, 2010, $4.1 million was outstanding under the short-term lines of credit and $3.3 million was used for bank guarantees under these lines of credit. $16.6 million was outstanding from the long-term credit lines. Additionally, the Company maintained credit lines specific to bank guarantees for $13.2 million, of which $2.2 million was used. Therefore, $11.0 million was unused and available under these lines of credit. The Company is subject to financial covenants under some of these facilities and lines of credit, which could restrict the Company from drawing money under them. At September 30, 2010, the Company was in compliance with these covenants. Cash and cash equivalents decreased by $5.5 million during fiscal year 2010. Approximately $36.8 million in cash and cash equivalents were provided by operating activities, primarily as the result of the increased net income and other non-cash items, principally depreciation and amortization and the increase in accrued liabilities and pension obligations, accounts payable and income tax payable. Operating cash flow was negatively affected by the increase in accounts receivable and inventories, mainly as a result of the fast business growth experienced during the second half of fiscal year 2010. 41Net Sales – Record net sales of $597.8 million represents an increase of $174.2 million, or 41%, compared to fiscal year 2010. Net sales increased $143.4 million, or 42%, in Europe/Asia and $30.8 million, or 39%, in North America, compared to fiscal year 2010. Net sales of laser products for macro applications increased by 37% to $237.5 million, compared to fiscal year 2010, primarily due to the higher demand for lower and higher power CO2 lasers from OEM-customers in the machine tool and automotive industries. Net sales of lasers for marking and micro applications increased by 46% to $302.3 million compared to fiscal year 2010, primarily due to higher demand from the electronics and medical device industries. Revenues for the component business increased by 31% to $58.0 million compared to fiscal year 2010, primarily due to higher sales related to fibers and fiber optics. The U.S. dollar fluctuated against foreign currencies, which had a favorable effect on net sales of $14.7 million.
Fiscal Year 2010 Compared to Fiscal Year 2009 Net Sales – Net sales of $423.6 million represents an increase of $74.0 million, or 21%, over the prior year. Net sales increased $65.3 million, or 23%, in Europe/Asia and $8.7 million, or 12%, in North America, compared to the prior year. The U.S. dollar fluctuated against foreign currencies, which had a favorable effect on net sales of $1.4 million. Net sales of laser products for macro applications increased by 23% to $172.9 million, primarily due to the higher demand for our lower and higher power CO2 lasers from OEM-customers in the machine tool industry. Net sales of lasers for marking and micro applications increased by 23% to $206.5 million compared to fiscal year 2009, mainly due to the higher demand for our lasers for micro and marking applications principally from the semiconductor and electronics industries. Revenues for the component business increased by 8% to $44.2 million, primarily due to higher sales related to fiber optics. Gross Profit – The Company s gross profit of $166.3 million increased by $34.2 million, or 26%, over the prior year. As a percentage of sales, gross profit increased to 39%. The increased percentage margin in fiscal year 2010 was primarily a result of better fixed cost absorption, a favorable product mix, and an increase in our service and spare parts business. Gross profit was favorably affected by $1.2 million in fiscal year 2010 due to the fluctuation of the U.S. dollar against foreign currencies. Selling, General and Administrative Expenses – Selling, general and administrative expenses increased by $1.0 million, or 1%, to $89.9 million, compared to fiscal year 2009 primarily as a result of our increased selling and marketing activities, mainly in Asia and higher commissions related to our higher revenues. Fiscal year 2009 included one-time costs related to headcount reductions of $1.8 million. As a percentage of net sales, selling, general and administrative expenses decreased to 21%. Selling, general and administrative expenses were unfavorably affected by $0.4 million due to the fluctuation of the U.S. dollar against foreign currencies in fiscal year 2010. Research and Development – The Company s net expenses for research and development amounted to $30.1 million, which represents a decrease of $1.4 million, or 4%, primarily due to higher R&D grants compared to fiscal year 2009 where, additionally, one-time costs for headcount reduction of $0.5 million were included. Gross research and development expenses for fiscal years 2010 and 2009 were $32.7 million and $33.5million, respectively, and were reduced by $2.6 million and $2.0 million of government grants during the respective periods. The Company will continue to apply for, and expects to continue receiving, government grants towards research and development, especially in Europe. Research and development expenses were not materially affected by the fluctuation of the U.S. dollar against foreign currencies in fiscal year 2010. Other Income – Net other income of $1.9 million fiscal year 2010 represents a decrease of $4.7 million compared to the prior year. Mainly as a result of additional short-term borrowings to finance our share buyback program, net interest expense increased to $0.4 million in fiscal year 2010, compared to $0.3 million in fiscal year 2009. The interest expense is offset by $1.5 million of foreign currency gains in fiscal 2010 compared to $4.2 million in fiscal 2009 and lower other miscellaneous income of $ 0.8 million compared to $2.7 million in fical 2009 which included $2.0 million compensation for the cancellation of orders received in fiscal year 2008. Income Tax Expense – Income tax expense of $15.4 million in fiscal year 2010 and $5.2 million in fiscal year 2009, represent effective tax rates of 33.6% and 35.4% for the respective periods. The lower effective income tax rate in fiscal year 2010 is mainly due to an improved business in locations with lower marginal income tax rates which contributed to a normalized effective tax rate during fiscal year 2010. Income tax expense, a significant portion of which is incurred in foreign currencies, was not materially affected by the weakening of the U.S. dollar against foreign currencies. Net Income Attributable to RSTI – As a result of the foregoing factors, the Company s net income attributable to RSTI of $29.8 million ($1.02 per diluted share, based on 29.2 million weighted average common shares outstanding) in fiscal year 2010 increased by $20.6 million over the prior year s net income attributable to RSTI of $9.2 million ($0.31 per diluted share, based on 29.2 million weighted average common shares outstanding). Net income attributable to RSTI was favorably affected by $0.8 million in fiscal 2010 due to the fluctuation of the U.S. dollar against foreign currencies. 40
Net Sales – Net sales of $423.6 million represents an increase of $74.0 million, or 21%, over the prior year. Net sales increased $65.3 million, or 23%, in Europe/Asia and $8.7 million, or 12%, in North America, compared to the prior year. The U.S. dollar fluctuated against foreign currencies, which had a favorable effect on net sales of $1.4 million. Net sales of laser products for macro applications increased by 23% to $172.9 million, primarily due to the higher demand for our lower and higher power CO2 lasers from OEM-customers in the machine tool industry. Net sales of lasers for marking and micro applications increased by 23% to $206.5 million compared to fiscal year 2009, mainly due to the higher demand for our lasers for micro and marking applications principally from the semiconductor and electronics industries. Revenues for the component business increased by 8% to $44.2 million, primarily due to higher sales related to fiber optics.
Between fiscal year 2009 and 2010, the average exchange rate for the Euro weakened against the U.S. dollar by approximately 0.3%. The impact of fluctuations in exchanges rates of foreign currencies against the U.S. dollar was to increase net sales and gross profit by $1.4 million and $1.2 million, respectively, because approximately 64% of fiscal year 2010 sales were denominated in other currencies, primarily the Euro. These exchange rate fluctuations had the effect of increasing operating expense by $0.4 million, thereby increasing income from operations by $0.8 million. Between fiscal year 2009 and 2008, the average exchange rate for the Euro weakened against the U.S. dollar by approximately 10.5%. The impact of this weakening was to decrease net sales and gross profit by $28.5 million and $8.7 million, respectively, because approximately 72% of sales were denominated in other currencies, primarily the Euro. This weakening of the Euro had the effect of decreasing operating expenses by $29.5 million, thereby increasing income from operations only by $1.0 million. CRITICAL ACCOUNTING POLICIES The Company s significant accounting policies are also described in Note 1 of the consolidated financial statements. Certain of the accounting policies require the application of significant judgment by management in selecting appropriate assumptions for calculating financial estimates. By their nature, these judgments are subject to an inherent degree of uncertainty. Allowance for Doubtful Accounts The Company records allowances for uncollectible customer accounts receivable based on historical experience. Additionally, an allowance is made based on an assessment of specific customers financial condition and liquidity. If the financial condition of the Company s customers were to deteriorate, additional allowances may be required. No individual customer represents more than 10% of total accounts receivable. Any increase in allowance will impact operating income during a given period. Inventory Valuation Inventories are stated at the lower of cost or market, after provisions for excess and obsolete inventory salable at prices below cost. Provisions for slow moving and obsolete inventories are provided based on current assessments about historical experience and future product demand and production requirements for the next twelve months. These factors are impacted by market conditions, technology changes, and changes in strategic direction, and require estimates and management judgment that may include elements that are uncertain. The Company evaluates the adequacy of these provisions quarterly. Although the Company strives to achieve a balance between market demands and risk of inventory excess or obsolescence, it is possible that, should conditions change, additional provisions may be needed. Any changes in provisions will impact operating income during a given period. Warranty Reserves The Company provides reserves for the estimated costs of product warranties when revenue is recognized. The Company relies upon historical experience, expectations of future conditions, and its service data to estimate its warranty reserve. The Company continuously monitors this data to ensure that the reserve is sufficient. Warranty costs have historically been within our expectations. To the extent we experience increased warranty claim activity or increased costs associated with servicing those claims (such costs may include material, labor, and travel costs), revisions to the estimated warranty liability would be required. Increases in reserves will impact operating income during the period. 44
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