News Article
Thailand flooding slices II-VI financial guidance
The flooding of the company's manufacturing facilities at its Chokchai campus in Pathum Thani means the company may never again manufacture at the Chokchai location
II-VI Incorporated has provided an update on the impact of the Thailand flooding and revised guidance for the second fiscal quarter ending December 31, 2011 and the fiscal year ending June 30, 2012.
As the Company originally reported in its October 25, 2011 earnings release, on October 24, 2011, Fabrinet, a company that manufactures certain products for the Company (specifically for the Company’s recently acquired Aegis Lightwave, Inc. subsidiary (Aegis)), and manufactures products for certain of the Company’s customers using II-VI products, reported that flood waters had infiltrated the manufacturing facilities at its Chokchai campus in Pathum Thani, Thailand.
Subsequent information released by Fabrinet indicated that production at the Chokchai location will not recommence during the quarter ending December 31, 2011, and likely for significantly longer, and Fabrinet acknowledged that it may never again manufacture at the Chokchai location.
Since then, II-VI has completed its initial assessment of the damages and the impact from the Thailand flooding on its results of operations for the second fiscal quarter ending December 31, 2011 and the fiscal year 2012 full year projected results. The Company has implemented recovery plans for production that was impacted by the Thailand flooding.
II-VI currently estimates that it will record in its second fiscal quarter ending December 31, 2011 an after-tax impairment charge for Aegis’ damaged machinery, equipment and inventory that were located at the Chokchai location. It will also take into account recovery related expenses totalling between $0.5 million and $1.0 million or approximately $0.01 to $0.02 per share diluted, before the consideration of any insurance recoveries which may be available to the Company.
The Company’s revised outlook incorporates the expected loss of revenues on Aegis products, the additional costs required for alternative manufacturing and assessing flood damages, and the write-off of damaged machinery, equipment and inventory.
In addition to the Aegis events, the Company’s Pacific Rare Specialty Metals & Chemicals, Inc. (PRM) tellurium inventory has experienced a significant decline in the market price of that minor metal during the current fiscal quarter believed to be driven by volatility in the global photovoltaic market.
If this decline in pricing for tellurium continues until December 31, 2011, it is expected to result in an after-tax write down of PRM’s tellurium inventory of approximately $1.8 million to $2.2 million or approximately $0.03 per share diluted. Revenue and profit forecasts for PRM have been updated and are included in the Company’s revised outlook for the quarter ending December 31, 2011 and the fiscal year ending June 30, 2012.
Outlook
For the second fiscal quarter ending December 31, 2011, the Company currently forecasts revenues to range from $127 million to $129 million and earnings per share to range from $0.17 to $0.19. For the fiscal year ending June 30, 2012, the Company currently expects revenues to range from $550 million to $560 million and earnings per share to range from $1.05 to $1.10.
II-VI Incorporated is a vertically-integrated manufacturing company that creates and markets products for diversified markets including industrial manufacturing, military and aerospace, high-power electronics and telecommunications, and thermoelectronics applications. Headquartered in Saxonburg, Pennsylvania, the Company produces numerous crystalline compounds including zinc selenide for infrared laser optics, silicon carbide for high-power electronic and microwave applications, and bismuth telluride for thermoelectric coolers.
