GSI Group Announces Financial Results for the First Quarter 2013

-- First Quarter 2013 Revenue from Continuing Operations of $83 million 
-- First Quarter 2013 Adjusted EBITDA of $11.5 million 
-- First Quarter 2013 Diluted Earnings Per Share from Continuing Operations of 
$0.04 
-- Acquisition of NDS Surgical Imaging completed on January 15, 2013 
-- Divestiture of Semiconductor Systems business completed on May 3, 2013 
BEDFORD, Mass., May 8, 2013 /CNW/ - GSI Group Inc. (NASDAQ: GSIG) (the 
"Company", "we", "our", "GSI"),  a global leader and supplier of precision 
photonics and motion control components and subsystems to the medical, 
industrial, electronics and scientific markets, today reported financial 
results for the first quarter of 2013. Unless otherwise noted, all financial 
results in this press release are GAAP measures for continuing operations. 
(Logo: http://photos.prnewswire.com/prnh/20120305/NE64445LOGO) 
First Quarter 
The reported results from continuing operations exclude the operating results 
of our Semiconductor Systems and Laser Systems business lines, which were 
classified as discontinued operations beginning in the second quarter of 2012. 
"We are pleased to report first quarter financial results that are in the 
upper half of our guidance range," said John Roush, Chief Executive Officer.  
"The Company executed well on all fronts, and delivered profitable growth in a 
decidedly mixed economic climate. With the addition of NDS, the divestiture of 
Semiconductor Systems, and the completion of the 12X12 restructuring plan, we 
have made meaningful progress in our transformation of GSI into a world class 
technology company that can deliver innovative solutions to customers while 
delivering consistently attractive financial returns." 
During the first quarter of 2013, GSI generated revenue of $83.1 million, an 
increase of 27.5% from $65.2 million in the first quarter of 2012.  The NDS 
acquisition accounted for a 28.1% revenue increase year-over-year, while 
changes in foreign exchange rates contributed to a 1.2% decrease in revenue.  
Excluding the impact of the NDS acquisition and changes in foreign exchange 
rates, the Company's revenue increased 0.6% compared to the first quarter of 
2012. 
In the first quarter of 2013, income from operations was $0.9 million, or 1.1% 
of revenue, compared to $2.8 million, or 4.3% of revenue, during the same 
period last year.  Included in the first quarter of 2013 income from 
operations was $2.5 million of amortization of intangibles and inventory fair 
value adjustments and $1.1 million of acquisition charges, both related to the 
NDS acquisition.  Also included in the first quarter of 2013 income from 
operations was approximately $2.0 million of restructuring charges, compared 
to $2.2 million of restructuring charges in the first quarter of 2012. 
Diluted earnings per share ("EPS") from continuing operations was $0.04 in the 
first quarter of 2013, compared to $0.03 in the first quarter of 2012. 
Adjusted EBITDA, a non-GAAP financial measure that includes the adjustments 
noted in the reconciliation below, was $11.5 million in the first quarter of 
2013, compared to $9.9 million in the first quarter of 2012. 
As of March 29, 2013, cash and cash equivalents was $36.3 million, while total 
debt was $103.1 million.  In the first quarter of 2013, GSI borrowed $60 
million under its revolving credit facility to finance the acquisition of NDS. 
 The Company completed the first quarter of 2013 with approximately $66.8 
million of Net Debt, as defined in the non-GAAP reconciliation below. 
Operating cash flow for the first quarter of 2013 was $4.6 million, compared 
to $9.1 million of operating cash flow in the first quarter of 2012. Operating 
cash flows include the cash flows of both continuing and discontinued 
operations.  Cash provided by operating activities for the first quarter of 
2013 was impacted by cash restructuring payments of $1.8 million, 
acquisition-related expenses associated with the NDS acquisition of $1.1 
million, and an increase in accounts receivable of $6.7 million, which was due 
in part to the acquisition of NDS, and in part to lower than expected 
shipments in January as a result of the consolidation of the Company's Bedford 
and Lexington, Massachusetts manufacturing facilities. 
Strategic Update 
Reorganization of Reporting Segments 
As a result of the NDS acquisition and restructuring activities, the Company 
realigned its reportable segments resulting in two segments: Laser Products 
and Precision Technologies.  The segment realignment resulted in our Laser 
Scanners product line being moved to our Laser Products segment and NDS being 
added to our Precision Technologies segment.  The Company's Laser Products 
segment continues to be led by Matthijs Glastra, while our Precision 
Technologies segment is led by Jamie Bader. 
"Our new segment alignment reflects our strategy, the markets we serve, the 
way we manage the Company and the structure of our incentive compensation 
system. We now have all of our activities related to the laser industry in one 
segment, including our laser sources, beam delivery technologies and optics.  
This alignment reflects the customer overlap and operating synergies we have 
in that space," said John Roush.  "Our Precision Technologies segment captures 
the majority of our medical component business, including the NDS acquisition, 
and our precision motion product lines.  There are meaningful opportunities 
for collaboration and synergy across these areas that we intend to pursue," 
added Mr. Roush. 
Growth Platforms 
The Company continued to realize significant progress with its growth 
platforms in the quarter, as demonstrated by the sales performance of certain 
product lines. 
Sales of the Company's Fiber Laser products more than doubled in the first 
quarter of 2013 versus the first quarter of 2012, with a book-to-bill ratio of 
1.8.  Fiber laser sales are expected to be in the range of $10 to 12 million 
for the full year 2013.  The Company's fiber laser product offering includes a 
full range of mid-power products and has been extended into the high-power 
range with offerings up to 3 kW.  The fiber laser product line presently 
operates with gross margins significantly below the Company average.  The 
Company's focus for 2013 is the development of the new fiber laser 
architecture, which has the potential to significantly reduce bill-of-material 
costs and improve profitability across the product range.  This new 
architecture will be deployed in stages over the latter part of 2013 and 2014; 
in partnership with third party manufacturers and suppliers. 
The Company's scanning solutions product platform also delivered significant 
growth, with sales increasing nearly 50% year over year.  In the last year, 
the Company has been awarded solutions programs in numerous application areas 
and has opened applications laboratories in Japan, Europe and the United 
States.  Scanning solutions product sales are expected to be approximately $15 
million in 2013. 
With the acquisition of NDS in January 2013, the Company made significant 
progress against its strategy to focus growth investment in components 
targeted to medical original equipment manufacturers ("OEMs").  NDS is a San 
Jose, California-based business line that designs, manufactures, and markets 
medical grade high definition visualization solutions and imaging informatics 
products for the surgical and radiology end markets.  The acquisition, which 
is now expected to add approximately $75 million to GSI's 2013 revenue, 
provides increased presence and relevancy in the medical component space. 
Restructuring Update 
On April 9, 2013, GSI entered into an agreement for the sale of its 
Semiconductor Systems business to Electro Scientific Industries, Inc. ("ESI") 
for $8.0 million in cash, subject to customary closing conditions. The 
transaction was consummated on Friday, May 3, 2013. 
"The completion of the sale of the Semiconductor Systems business closes out a 
significant phase in our transformation of the Company," said John Roush.  
"Over a year ago, we made the decision to focus on OEM components and 
subsystems technologies and to reduce our emphasis on the microelectronics end 
markets.  The sale of our last remaining systems business to ESI is consistent 
with those priorities, and it provides the best opportunity for that business 
to thrive under the ownership of a new parent company with significant 
presence in the microelectronics market," added Mr. Roush. 
Financial Outlook 
For the second quarter of 2013, the Company expects revenue from continuing 
operations of between $84 million and $86 million. In addition, the Company 
expects Adjusted EBITDA to be in the range of $11 million to $12.5 million for 
the second quarter of 2013. 
Use of Non-GAAP Financial Measures 
In addition to financial measures prepared in accordance with generally 
accepted accounting principles (GAAP), this earnings announcement also 
contains non-GAAP financial measures. The reasons for the use of these 
measures, a reconciliation of these measures to the most directly comparable 
GAAP measures and other information relating to these measures are included 
below following the unaudited condensed consolidated financial statements. 
Safe Harbor and Forward Looking Information 
Certain statements in this release are "forward-looking statements" within the 
meaning of the Private Securities Litigation Reform Act of 1995 and are based 
on current expectations and assumptions that are subject to risks and 
uncertainties. All statements contained in this news release that do not 
relate to matters of historical fact should be considered forward-looking 
statements, and are generally identified by words such as "expect," "intend," 
"anticipate," "estimate," "believe," "future," "could," "estimate," "should," 
"plan," "aim," and other similar expressions. These forward-looking statements 
include, but are not limited to, expectations regarding anticipated financial 
performance; anticipated sales of fiber laser and scanning solutions products; 
plans regarding the development and deployment of a lower cost fiber laser 
product architecture; opportunities for synergies within the Precision Motion 
segment; expected liquidity and capitalization; drivers of revenue growth; 
management's plans and objectives for future operations, expenditures and 
product development; business prospects; expectations regarding recent and 
potential future products; anticipated sales performance; industry trends; 
market conditions; anticipated benefits from acquisitions; the Company's 
ability to leverage its medical original equipment manufacturer ("OEM") sales 
channels and the NDS acquisition; our expectations regarding NDS's revenue, 
customers, markets, and profitability; and other statements that are not 
historical facts. 
These forward-looking statements are neither promises nor guarantees, but 
involve risks and uncertainties that may cause actual results to differ 
materially from those contained in the forward-looking statements. Our actual 
results could differ materially from those anticipated in these 
forward-looking statements for many reasons, including, but not limited to, 
the following: loss of customers, reductions in orders by customers, and 
customer order cancellations; economic and political conditions and the 
effects of these conditions on our customers' businesses and level of business 
activity; our significant dependence upon our customers' capital expenditures, 
which are subject to cyclical market fluctuations; our dependence upon our 
ability to respond to fluctuations in product demand; our ability to 
continually innovate; delays in our delivery of new products; our reliance 
upon third party distribution channels subject to credit, business 
concentration and business failure risks beyond our control; fluctuations in 
our quarterly results, and our failure to meet or exceed our expected 
financial performance; customer order timing and other similar factors beyond 
our control; our dependence on one customer in our medical components market; 
disruptions or breaches in security of our information technology systems; 
changes in interest rates, credit ratings or foreign currency exchange rates; 
risk associated with our operations in foreign countries; disruptions to our 
manufacturing operations as a result of natural disasters; our increased use 
of outsourcing in foreign countries; our failure to comply with local import 
and export regulations in the jurisdictions in which we operate; our history 
of operating losses and our ability to sustain our profitability; our exposure 
to the credit risk of some of our customers and in weakened markets; 
violations of our intellectual property rights and our ability to protect our 
intellectual property against infringement by third parties; risk of losing 
our competitive advantage; our ability to make divestitures that provide 
business benefits; our failure to successfully integrate recent and future 
acquisitions into our business; our ability to attract and retain key 
personnel; our restructuring and realignment activities and disruptions to our 
operations as a result of consolidation of our operations; product defects or 
problems integrating our products with other vendors' products; disruptions in 
the supply of or defects in raw materials, certain key components or other 
goods from our suppliers; production difficulties and product delivery delays 
or disruptions; our failure to comply with various federal, state and foreign 
regulations; changes in governmental regulation of our business or products; 
our failure to implement new information technology systems and software 
successfully; our failure to realize the full value of our intangible assets; 
our ability to utilize our net operating loss carryforwards and other tax 
attributes; fluctuations in our effective tax rates; being subject to U.S. 
federal income taxation even though we are a non-U.S. corporation; any need 
for additional capital to adequately respond to business challenges or 
opportunities and repay or refinance our existing indebtedness, which may not 
be available on acceptable terms or at all; volatility in the market price for 
our common shares; our dependence on significant cash flow to service our 
indebtedness and fund our operations; our ability to access cash and other 
assets of our subsidiaries; the influence over our business of certain 
significant shareholders; provisions of our articles of incorporation may 
delay or prevent a change in control; our significant existing indebtedness 
may limit our ability to engage in certain activities; and our failure to 
maintain appropriate internal controls in the future. 
Other important risk factors that could affect the outcome of the events set 
forth in these statements and that could affect the Company's operating 
results and financial condition are discussed in Item 1A of our Annual Report 
on Form 10-K for the fiscal year ended December 31, 2012, our subsequent 
filings with the Securities and Exchange Commission ("SEC"), and in our future 
filings with the Securities and Exchange Commission. Such statements are based 
on the Company's management's beliefs and assumptions and on information 
currently available to the Company's management. The Company disclaims any 
obligation to update any forward-looking statements as a result of 
developments occurring after the date of this document except as required by 
law. 
Conference Call Information 
The Company will host a conference call at 5:00 p.m. EDT on Wednesday, May 8, 
2013 to discuss these results. John A. Roush, Chief Executive Officer, and 
Robert Buckley, Chief Financial Officer, will host the conference call. 
To access the call, please dial (877) 482-5124 prior to the scheduled 
conference call time.  The conference ID number is 9407 1031. 
A playback of this conference call will be available beginning 6:00 p.m. EDT, 
Wednesday, May 8, 2013. The playback phone number is (855) 859-2056 or (404) 
537-3406 and the code number is 9407 1031. The playback will remain available 
until 8:00 p.m. EDT, Wednesday, May 29, 2013. 
A replay of the audio webcast will be available four hours after the 
conclusion of the call on the Investor Relations section of the Company's web 
site at www.gsig.com. 
About GSI 
GSI Group Inc. designs, develops, manufactures and sells precision photonics 
and motion control components and sub-systems for applications demanding 
extremely high levels of performance. Our technology is targeted primarily at 
Original Equipment Manufacturers for incorporation into products and systems 
for a wide range of applications in major markets including: medical, 
industrial, electronics and scientific. GSI Group Inc.'s common shares are 
listed on NASDAQ (GSIG). 
More information about GSI is available on the Company's website at 
www.gsig.com. For additional information, please contact GSI Group Inc. 
Investor Relations at (781) 266-5137 or InvestorRelations@gsig.com. 
GSI GROUP INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands of U.S. dollars or shares, except per share amounts)
(Unaudited) 


                                                 Three Months Ended
                                                 March 29,   March 30,
                                                 2013        2012



Sales                                            $ 83,114    $ 65,186

Cost of sales                                    49,951      37,505

Gross profit                                     33,163      27,681

Operating expenses:

Research and development and engineering         6,621       5,773

Selling, general and administrative              20,240      16,208

Amortization of purchased intangible assets      2,236       662

Restructuring costs and other                    3,117       2,217

Total operating expenses                         32,214      24,860



Income from operations                           949         2,821

Interest expense, net                            (895)       (809)

Foreign exchange transaction gains (losses),     1,196       (892)
net

Other income (expenses), net                     369         187

Income from continuing operations before income  1,619       1,307
taxes

Income tax provision                             150         230

Income from continuing operations                1,469       1,077

Income from discontinued operations, net of tax  649         322

Consolidated net income                          2,118       1,399

Less: Net income attributable to noncontrolling  (36)        (18)
interest

Net income attributable to GSI Group Inc.        $ 2,082     $ 1,381



Earnings per common share from continuing
operations:

Basic                                            $ 0.04      $ 0.03

Diluted                                          $ 0.04      $ 0.03



Earnings per common share from discontinued
operations:

Basic                                            $ 0.02      $ 0.01

Diluted                                          $ 0.02      $ 0.01



Earnings per common share attributable to GSI
Group Inc.:

Basic                                            $ 0.06      $ 0.04

Diluted                                          $ 0.06      $ 0.04



Weighted average common shares outstanding       33,983      33,679
– basic

Weighted average common shares outstanding       34,271      33,878
– diluted


GSI GROUP INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands of U.S. dollars)
(Unaudited) 


                                                March 29,  December 31,
                                                           2012
                                                2013

ASSETS

Current Assets

Cash and cash equivalents                       $ 36,337   $ 65,788

Accounts receivable, net                        57,285     42,652

Inventories                                     64,902     52,801

Prepaid expenses and other current assets       29,676     29,609

Assets of discontinued operations               18,283     17,618

Total current assets                            206,483    208,468

Property, plant and equipment, net              33,645     32,338

Intangible assets, net                          73,490     40,020

Goodwill                                        73,271     44,578

Other assets                                    13,429     12,056

Total assets                                    $ 400,318  $ 337,460



LIABILITIES AND STOCKHOLDERS' EQUITY

Current Liabilities

Current portion of long-term debt               $ 7,500    $ 7,500

Accounts payable                                25,195     18,824

Accrued expenses and other current liabilities  28,007     22,997

Liabilities of discontinued operations          4,716      5,605

Total current liabilities                       65,418     54,926

Long-term debt                                  95,625     42,500

Other long-term liabilities                     12,791     11,828

Total liabilities                               173,834    109,254

Stockholders' Equity

Total GSI Group Inc. stockholders' equity       226,051    227,809

Noncontrolling interest                         433        397

Total stockholders' equity                      226,484    228,206

Total liabilities and stockholders' equity      $ 400,318  $ 337,460


GSI GROUP INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands of U.S. dollars)
(Unaudited) 


                                                Three Months Ended
                                                March 29,   March 30,
                                                2013        2012

Cash flows from operating activities:

Consolidated net income                         $ 2,118     $ 1,399

Adjustments to reconcile net income to net cash
provided by
operating activities:

Depreciation and amortization                   5,482       3,800

Share-based compensation                        1,544       1,282

Deferred income taxes                           (974)       —

Non-cash restructuring charges                  (241)       1,318

Earnings from equity investment                 (361)       (177)

Other non-cash items                            880         253

Changes in operating assets and liabilities:

Accounts receivable                             (6,697)     (846)

Inventories                                     1,177       (273)

Deferred revenue                                (682)       (2,238)

Other operating assets and liabilities          2,362       4,569

Cash provided by operating activities           4,608       9,087



Cash flows from investing activities:

Purchases of property, plant and equipment      (1,715)     (1,398)

Cash paid for business acquisition              (82,653)    —

Net cash used in investing activities           (84,368)    (1,398)



Cash flows from financing activities:

Repayments of debt                              (6,875)     (12,500)

Proceeds from term loan and revolving credit    60,000      —
facility

Other financing activities                      (1,017)     (228)

Net cash provided by (used in) financing        52,108      (12,728)
activities



Effect of exchange rate on cash and cash        (1,799)     562
equivalents



Decrease in cash and cash equivalents           (29,451)    (4,477)

Cash and cash equivalents, beginning of period  65,788      54,835

Cash and cash equivalents, end of period        $ 36,337    $ 50,358

Reconciliation of GAAP to Non-GAAP Financial Measures
(In thousands of U.S. dollars)
(Unaudited)
    Adjusted EBITDA (non-GAAP):                      Three Months Ended
                                                 March 29,   March 30,
                                                 2013        2012

Net income attributable to GSI Group Inc.        $ 2,082     $ 1,381
(GAAP)

Interest expense, net                            895         809

Income tax provision                             150         230

Depreciation and amortization                    5,457       3,609

Share-based compensation                         1,544       1,282

Restructuring and other costs                    3,117       2,217

Acquisition fair value adjustments               504         —

Income from discontinued operations, net of tax  (649)       (322)

Other, net                                       (1,565)     705

Adjusted EBITDA (Non-GAAP)                       $ 11,535    $ 9,911

The Company defines Adjusted EBITDA, a non-GAAP financial measure, as the net 
income attributable to GSI Group Inc. before deducting interest expense, net, 
income taxes, depreciation, amortization, non-cash share-based compensation, 
restructuring and other costs, acquisition fair value adjustments, income from 
discontinued operations, net of tax, and other non-operating income/expense 
items, including foreign exchange gains/losses and earnings from equity 
investment.  Restructuring and other non-recurring costs primarily relate to 
the Company's 12x12 restructuring and NDS restructuring programs and 
acquisition related costs.

Management believes Adjusted EBITDA provides meaningful supplementary 
information regarding the Company's operating results because it excludes 
amounts that management does not consider as part of operating results when 
assessing and measuring the operational and financial performance of the 
Company. Management believes Adjusted EBITDA allows viewing of operating 
trends and performing analytical comparisons.  Adjusted EBITDA is also used by 
management to evaluate operating performance, communicate financial results to 
the Board of Directors, benchmark results against historical performance and 
the performance of peers, evaluate investment opportunities including 
acquisitions and discontinued operations, and determine the bonus payments for 
senior management and employees.  Accordingly, the Company believes this 
non-GAAP measure provides greater transparency and insight into management's 
method of analysis.

In evaluating Adjusted EBITDA, you should be aware that in the future the 
Company may incur expenses that are the same as, or similar to, some of the 
adjustments in this presentation. The presentation of Adjusted EBITDA should 
not be construed as an inference that future results will be unaffected by 
unusual or non-recurring items.

Net Debt (non-GAAP):             March 29,   December 31,
                                 2013        2012



Debt (GAAP)                      $ 103,125   $ 50,000

Less: cash and cash equivalents  (36,337)    (65,788)

Net Debt (Non-GAAP)              $ 66,788    $ (15,788)

The Company defines Net Debt, a non-GAAP financial measure, as its total debt 
less its cash and cash equivalents. Management uses Net Debt to monitor the 
Company's outstanding debt obligations that could not be satisfied by its cash 
and cash equivalents on hand.


GSI Group Inc.            Investor Relations Contact: Robert J. Buckley (781) 
266-5137 
http://www.gsig.com 
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SOURCE: GSI Group Inc. 
To view this news release in HTML formatting, please use the following URL: 
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CO: GSI Group Inc.
ST: Massachusetts
NI: CPR ELE ELE ERN CONF EST ERN  
-0- May/08/2013 20:07 GMT
 
 
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