GSLI Gsi Lumonics Inc. (MM)

GSI Lumonics Announces Third Quarter 2004 Financial Results BILLERICA, Mass. Oct. 28 /PRNewswire-FirstCall/ -- GSI Lumonics Inc., (NASDAQ:GSLINASDAQ:andNASDAQ:TSX:NASDAQ:GSI), a major supplier of precision motion components, lasers and laser systems, today announced financial results for the third quarter ended October 1, 2004. (All data are expressed in U.S. GAAP and in U.S. dollars.) Third Quarter Results -- Sales were $90.7 million for the third quarter of 2004, compared to $44.9 million for the same period in 2003; a 102% increase. -- Net income was $12.1 million in the quarter, or $0.29 per diluted share, compared to $0.6 million, or $0.01 per diluted share, for the same period last year. -- Bookings were $67.2 million for the quarter, an increase of 34% over the same period in 2003. (74% of the increase or $12.6 million is attributed to Westwind and MicroE acquisitions). Bookings declined $18.0 million or 21% from prior quarter level of $85.2 million. (exclusive of $8.5 million of MicroE backlog acquired in prior quarter.) -- Backlog was $77.7 million at the end of the third quarter, compared to $47.6 million for the same period in 2003. ($24.4 million of the increase is attributable to Westwind and MicroE.) -- Gross margin for the quarter was 40.9% of sales, compared to 37.1% for the same period last year. -- Operating income for the quarter was 14.7% of sales, compared to 1.5% for the same period last year. -- Cash flow from operations was $8.2 million for the third quarter, as compared to $7.8 million for the same quarter in 2003. -- Cash, cash equivalents and marketable securities totaled $80.1 million as of October 1, 2004. Geographically, sales for the third quarter of 2004 were as follows: approximately 41% in the Americas, 45% in Asia-Pacific, including Japan, and 14% in Europe. Operating expenses for the third quarter of 2004 were $23.8 million compared to $15.9 million for the same period last year. This increase is mostly attributed to the Westwind and MicroE acquisitions. The expected annualized tax rate for the fiscal year 2004 is expected to be 10.9%. The tax rate for the third quarter of 12.3% reflects an adjustment to year-to-year date tax expense to the expected annualized rate for fiscal year 2004. This rate is significantly below our statutory rate, which is in the 35-40% range, and anticipates utilization of deferred tax assets at U.S. operations that were written down last year. "Our third quarter results reflect the favorable impact of our acquisitions and a solid performance in our laser system segment," stated Charles Winston, GSI Lumonics President and Chief Executive Officer. "At the same time, we are seeing a softening in demand as we go forward." Business Segment Reporting Laser Systems Revenues in the Laser Systems segment were $40.9 million in the third quarter of 2004, compared to $20.0 million in the same period last year, reflecting strong shipments for all product lines. Gross margins at 43.8% as compared to 36.2% over the same period last year improved as a result of higher volumes, firmer pricing and cost reductions. These factors combined to generate an $11.9 million operating income for this segment, as compared to $2.7 million in the same period last year. Components Revenues of $42.1 million represented an increase of $24.1 million over the same period last year. This increase was from the Westwind and MicroE acquisitions. Gross margin was 37.3% compared to 35.5% in the same period last year. Operating income for this segment, that was net of a charge of $0.5 million related to severance expense incurred in the quarter, was $7.2 million versus $3.5 million in the same period last year. Lasers Revenues of $11.7 million were up $3.2 million over the same period last year. Gross margins were 31.6% as compared to 36.9% for last year. The Lasers segment reported an operating income of $0.7 million versus $0.5 million for the same period last year. The favorable effect of the higher revenue was offset by lower margin percentage and higher operating expenses. Financial Condition At October 1, 2004, cash, cash equivalents, and marketable investments totaled $80.1 million, compared to $72.1 million at July 2, 2004 and $106.7 million at December 31, 2003. Amortization for MicroE acquisition was $0.8 million reflecting the first full quarter of amortization. The Company continues to operate debt-free. Inventory turns were 3.6 for the quarter compared to 3.4 for the last quarter. Days sales outstanding in receivables remained at 63 at the end of the quarter which is down slightly from the last quarter. Following the announcement, GSI Lumonics will host a conference call for investors at 5:00 p.m. Eastern Time. To participate, call 800-591-6942 (within the US and Canada) and 617-614-4909 (for international callers) no earlier than 4:50 p.m. Eastern Time and no later than 4:55 p.m. Eastern Time and identify yourself to the operator with the participant code of 56523792. A replay of the call will be available one hour after the call ends to midnight, November 12, 2004 by dialing 888-286-8010 (within the US and Canada) or 617-801-6888 (for international callers). The access code is 91395934. The conference call also will be broadcast live over the Internet in listen-only mode. For live webcasting, go to: http://phx.corporate-ir.net/phoenix.zhtml?c=75037&p=IROL- eventDetails&EventId=952325 at least 15 minutes prior to the call in order to register, download and install any necessary software. The call will be archived on the above web site until midnight, November 12, 2004. GSI Lumonics supplies precision motion control components, lasers and laser-based advanced manufacturing systems to the global medical, semiconductor, electronics, and industrial markets. GSI Lumonics' common shares are listed on Nasdaq (GSLI) and The Toronto Stock Exchange (GSI). Certain statements in this news release may constitute forward-looking statements within the meaning of the United States Private Securities Litigation Reform Act of 1995, Section 27A of the United States Securities Act of 1933 and Section 21E of the United States Securities Exchange Act of 1934. These forward-looking statements may relate to anticipated financial performance, management's plans and objectives for future operations, business prospects, outcome of regulatory proceedings, market conditions, tax issues and other matters. 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 "anticipate," "believe," "estimate," "expect," "intend," "plan," "objective" and other similar expressions. Readers should not place undue reliance on the forward- looking statements contained in this news release. Such statements are based on management's beliefs and assumptions and on information currently available to management and are subject to risks, uncertainties and changes in condition, significance, value and effect. Other risks include the fact that the Company's sales have been and are expected to continue to be dependent upon customer capital equipment expenditures, which are, in turn, affected by business cycles in the markets served by those customers. Other factors include volatility in the semiconductor industry, the risk of order delays and cancellations, the risk of delays by customers in introducing their new products and market acceptance of products incorporating subsystems supplied by the Company, similar risks to the Company of delays in its new products, our ability to continue to reduce costs and capital expenditures, our ability to focus R&D investment and integrate acquisitions and other risks detailed in reports and documents filed by the Company with the United States Securities and Exchange Commission and with securities regulatory authorities in Canada. Such risks, uncertainties and changes in condition, significance, value and effect, many of which are beyond the Company's control, could cause the Company's actual results and other future events to differ materially from those anticipated. The Company does not, however, assume any obligation to update these forward-looking statements to reflect actual results, changes in assumptions or changes in other factors affecting such forward-looking statements. For more information contact: Investor Relations, 613-224-4868, Ann Dempsey, (ext. 2#) GSI LUMONICS INC. CONSOLIDATED BALANCE SHEETS (Unaudited) (U.S. GAAP and in thousands of U.S. dollars, except share amounts) October 1, December 31, 2004 2003 ASSETS Current Cash and cash equivalents $63,220 $64,035 Short-term investments 10,974 39,562 Accounts receivable, less allowance of $3,313 (December 31, 2003 - $4,465) 63,191 53,040 Income taxes receivable - 4,839 Inventories 59,852 43,916 Deferred tax assets 13,633 5,507 Other current assets 9,520 8,048 Total current assets 220,390 218,947 Property, plant and equipment, net of accumulated depreciation of $26,199 (December 31, 2003 - $22,305) 49,380 52,982 Deferred tax assets 10,969 8,521 Other assets 2,589 2,297 Long-term investments 6,636 3,743 Intangible assets, net of amortization of $26,246 (December 31, 2003 - $21,924) 52,082 23,985 Goodwill 31,094 - $373,140 $310,475 LIABILITIES AND STOCKHOLDERS' EQUITY Current Accounts payable $23,586 $18,218 Income taxes payable 754 - Accrued compensation and benefits 13,056 7,424 Other accrued expenses 22,126 18,451 Total current liabilities 59,522 44,093 Deferred compensation 2,151 2,162 Deferred tax liability 13,315 1,879 Other liability 28 - Accrued minimum pension liability 1,578 1,553 Total liabilities 76,594 49,687 Commitments and contingencies Stockholders' equity Common shares, no par value; Authorized shares: unlimited; Issued and outstanding: 41,215,471 (December 31, 2003 - 40,927,499) 307,482 305,512 Additional paid-in capital 2,714 2,800 Accumulated deficit (10,564) (43,440) Accumulated other comprehensive loss (3,086) (4,084) Total stockholders' equity 296,546 260,788 $373,140 $310,475 GSI LUMONICS INC. CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited) (U.S. GAAP and in thousands of U.S. dollars, except share amounts) Three Months Ended Nine Months Ended October 1, September 26, October 1, September 26, 2003 2004 2004 2003 Sales $90,671 $44,881 $250,061 $130,682 Cost of goods sold 53,573 28,237 147,705 83,659 Gross profit 37,098 16,644 102,356 47,023 Operating expenses: Research and development 6,562 3,123 17,323 9,955 Selling, general and administrative 15,627 11,195 43,639 36,234 Amortization of purchased intangibles 1,614 1,408 4,324 4,055 Acquired in-process research and development - - 430 - Restructuring - 264 - 2,451 Other - - - 841 Total operating expenses 23,803 15,990 65,716 53,536 Income (loss) from operations 13,295 654 36,640 (6,513) Other income 119 - 104 64 Interest income 269 293 659 1,601 Interest expense (120) - (175) (129) Foreign exchange transaction gains (losses) 267 (75) (339) 629 Income (loss) before income taxes 13,830 872 36,889 (4,348) Income tax provision 1,707 322 4,013 322 Net income (loss) $12,123 $550 $32,876 $(4,670) Net income (loss) per common share: Basic $0.29 $0.01 $0.80 $(0.11) Diluted $0.29 $0.01 $0.78 $(0.11) Weighted average common shares outstanding (000's) 41,209 40,857 41,071 40,817 Weighted average common shares outstanding for diluted net income (loss) per common share (000's) 42,084 41,343 42,159 40,817 GSI LUMONICS INC. CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited) (U.S. GAAP and in thousands of U.S. dollars, except share amounts) Three Months Ended Nine Months Ended October 1, September 26, October 1, September 26, 2004 2003 2004 2003 Cash flows from operating activities: Net income (loss) $12,123 $550 $32,876 $(4,670) Adjustments to reconcile net income (loss) to net cash provided by operating activities: Loss on disposal of assets - - - 421 Loss on sale of investments - - 15 - Translation gain on liquidation of subsidiary (119) - (119) - Acquired in-process research and development - - 430 - Depreciation and amortization 3,161 2,536 9,762 7,464 Unrealized loss on derivatives - 166 - 179 Stock-based compensation (205) - (86) - Deferred income taxes (6,986) - (12,676) - Changes in current assets and liabilities: Accounts receivable (3,914) 988 (5,912) (3,752) Inventories (2,969) 1,923 (13,865) 6,537 Other current assets (740) (336) (1,461) (1,029) Accounts payable, accruals and taxes payable 7,863 1,970 18,343 2,784 Cash provided by operating activities 8,214 7,797 27,307 7,934 Cash flows from investing activities: Acquisitions of businesses - 601 (54,744) (8,952) Purchase of leased buildings - - - (18,925) Sale of assets - - - 847 Other additions to property, plant and equipment (520) (910) (1,386) (1,814) Proceeds from the sale and maturities of investments 10,119 20,562 73,224 162,890 Purchases of investments (7,990) (41,651) (47,426) (154,055) (Increase) decrease in other assets (27) 209 (180) 358 Cash provided by (used in) investing activities 1,582 (21,189) (30,512) (19,651) Cash flows from financing activities: Repayment of other long-term liability (2) - (2) - Issue of share capital from the exercise of stock options and employee share purchase plan 332 393 1,969 507 Cash provided by financing activities 330 393 1,967 507 Effect of exchange rates on cash and cash equivalents (98) 1,298 423 1,626 Increase (decrease) in cash and cash equivalents 10,028 (11,701) (815) (9,584) Cash and cash equivalents, beginning of period 53,192 85,750 64,035 83,633 Cash and cash equivalents, end of period $63,220 $74,049 $63,220 $74,049 GSI LUMONICS INC. Consolidated Analysis By Segment (unaudited) (thousands of U.S. dollars) Three months endedNine months ended October 1, September 26, October 1, September 26, Sales: 2004 2003 2004 2003 Components $42,060 $17,992 $117,270 $52,258 Laser Group 11,711 8,470 35,335 24,112 Laser Systems 40,879 19,987 111,246 56,902 Intersegment sales elimination (3,979) (1,568) (13,790) (2,590) Total $90,671 $44,881 $250,061 $130,682 Gross profit %: Components 37.3% 35.5% 37.2% 39.8% Laser Group 31.6 36.9 30.4 33.8 Laser Systems 43.8 36.2 44.2 33.0 Intersegment sales elimination 5.3 7.0 8.2 26.5 Total 40.9% 37.1% 40.9% 36.0% Segment income (loss) from operations: Components $7,170 $3,450 $22,375 $11,916 Laser Group 698 507 1,793 118 Laser Systems 11,850 2,729 31,196 2,902 Total by segment 19,718 6,686 55,364 14,936 Unallocated amounts: Corporate expenses 4,810 4,360 13,970 14,102 Amortization of purchased intangibles 1,613 1,408 4,324 4,055 Acquired in-process research and development - - 430 - Restructuring and other - 264 - 3,292 Income (loss) from operations $13,295 $654 $36,640 $(6,513) GSI LUMONICS INC. Consolidated Sales Analysis By Geographic Region (unaudited) (millions of U.S. dollars) Three months ended October 1, 2004 September 26, 2003 Sales % of Sales % of Total Total North America $36.6 40% $19.5 43% Latin and South America 0.5 1 - - Europe (EMEA) 12.6 14 8.6 19 Japan 19.7 22 7.9 18 Asia-Pacific, other 21.3 23 8.9 20 Total $90.7 100% $44.9 100% Nine months ended October 1, 2004 September 26, 2003 Sales % of Sales % of Total Total North America $117.2 47% $68.3 52% Latin and South America 1.1 - 0.7 1 Europe (EMEA) 38.1 15 19.6 15 Japan 44.6 18 25.0 19 Asia-Pacific, other 49.1 20 17.1 13 Total $250.1 100% $130.7 100% DATASOURCE: GSI Lumonics CONTACT: Investor Relations, Ann Dempsey of GSI Lumonics, +1-613-224-4868, ext. 2 Company News On-Call: http://www.prnewswire.com/comp/107189.html

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