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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
----------------------
FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the Quarterly Period Ended June 27, 2003
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Commission File Number 333-43089
THE GSI GROUP, INC.
(Exact name of registrant as specified in its charter)
DELAWARE 37-0856587
(State or other jurisdiction (I.R.S. Employer
of incorporation or organization) Identification No.)
1004 E. ILLINOIS STREET, ASSUMPTION, ILLINOIS 62510
(Address of principal executive offices) (Zip Code)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes [X] No [ ]
Indicate by check mark whether the registrant is an accelerated filer: Yes
[ ] No [X]
Indicate the number of shares outstanding of each of the registrant's
classes of common stock, as of the latest practicable date. Common stock, par
value $0.01 per share, 1,775,000 shares outstanding as of August 6, 2003.
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1
TABLE OF CONTENTS
PAGE
----
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
Balance Sheets 3
Statements of Operations 4
Statements of Cash Flows 5
Notes to Financial Statements 6
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 17
Item 3. Quantitative and Qualitative Disclosure About Market Risk 20
Item 4. Controls and Procedures 20
PART II - OTHER INFORMATION
Item 1. Legal Proceedings 21
Item 2. Changes in Securities and Use of Proceeds *
Item 3. Defaults Upon Senior Securities *
Item 4. Submission of Matters to a Vote of Security Holders *
Item 5. Other Information *
Item 6. Exhibits and Reports on Form 8-K 21
* No response to this item is included herein for the reason that it is
inapplicable.
2
PART I - FINANCIAL INFORMATION
ITEM 1 - FINANCIAL STATEMENTS
THE GSI GROUP, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
(UNAUDITED)
JUNE 27, DECEMBER 31,
ASSETS 2003 2002
- ------------------------------------------------------------------------- ---------- --------------
Current Assets:
Cash and cash equivalents . . . . . . . . . . . . . . . . . . . . . . . $ 2,023 $ 2,936
Accounts receivable, net. . . . . . . . . . . . . . . . . . . . . . . . 31,708 23,274
Inventories, net. . . . . . . . . . . . . . . . . . . . . . . . . . . . 67,708 63,893
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6,120 7,366
---------- --------------
Total current assets. . . . . . . . . . . . . . . . . . . . . . . . 107,559 97,469
---------- --------------
Property, Plant and Equipment, net. . . . . . . . . . . . . . . . . . . . 36,666 38,705
---------- --------------
Other Assets:
Goodwill and other intangible assets, net . . . . . . . . . . . . . . . 12,728 12,975
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,166 2,858
---------- --------------
Total other assets. . . . . . . . . . . . . . . . . . . . . . . . . 14,894 15,833
---------- --------------
Total assets. . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 159,119 $ 152,007
========== ==============
LIABILITIES AND STOCKHOLDERS' DEFICIT
- -------------------------------------------------------------------------
Current Liabilities:
Accounts payable. . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 18,402 $ 11,063
Other accrued expenses. . . . . . . . . . . . . . . . . . . . . . . . . 7,440 8,472
Customer deposits . . . . . . . . . . . . . . . . . . . . . . . . . . . 5,492 7,159
Current maturities of long-term debt. . . . . . . . . . . . . . . . . . 3,496 3,404
---------- --------------
Total current liabilities . . . . . . . . . . . . . . . . . . . . . 34,830 30,098
---------- --------------
Long-Term Debt, less current maturities . . . . . . . . . . . . . . . . . 143,959 139,735
---------- --------------
Deferred Income Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . 229 474
---------- --------------
Commitments and Contingencies
Stockholders' Deficit:
Common stock, $.01 par value, voting (authorized 6,900,000 shares;
issued 6,633,652 shares; outstanding 1,575,000 shares). . . . . . . . 16 16
Common stock, $.01 par value, nonvoting (authorized 1,100,000 shares;
issued 1,059,316 shares; outstanding 200,000 shares). . . . . . . . . 2 2
Paid-in capital . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,006 3,006
Accumulated other comprehensive loss (cumulative currency translation
adjustment). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (11,996) (14,336)
Retained earnings . . . . . . . . . . . . . . . . . . . . . . . . . . . 16,032 19,971
Treasury stock, at cost, voting (5,058,652 shares). . . . . . . . . . . (26,950) (26,950)
Treasury stock, at cost, nonvoting (859,316 shares) . . . . . . . . . . (9) (9)
---------- --------------
Total stockholders' deficit . . . . . . . . . . . . . . . . . . . . (19,899) (18,300)
---------- --------------
Total liabilities and stockholders' deficit . . . . . . . . . . . . $ 159,119 $ 152,007
========== ==============
The accompanying notes to condensed consolidated financial statements are an
integral part of these statements.
3
THE GSI GROUP, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
(UNAUDITED)
THREE FISCAL MONTHS ENDED SIX FISCAL MONTHS ENDED
------------------------- -----------------------
JUNE 27, JUNE 28, JUNE 27, JUNE 28,
2003 2002 2003 2002
----------- ----------- ----------- -----------
Sales $ 65,653 $ 65,901 $ 109,963 $ 118,829
Cost of sales 52,632 51,043 87,762 92,293
----------- ----------- ----------- -----------
Gross profit. . . . . . . . . . . . . . . 13,021 14,858 22,201 26,536
Selling, general and administrative expenses. 8,955 9,110 17,550 17,922
Amortization expense. . . . . . . . . . . . . 312 311 623 623
----------- ----------- ----------- -----------
Total operating expenses. . . . . . . . . . 9,267 9,421 18,173 18,545
----------- ----------- ----------- -----------
Operating income. . . . . . . . . . . . . . . 3,754 5,437 4,028 7,991
Other expense:
Interest expense. . . . . . . . . . . . . . (3,161) (3,330) (6,175) (6,484)
Other, net. . . . . . . . . . . . . . . . . (812) (376) (645) (702)
----------- ----------- ----------- -----------
Income (loss) before income tax expense . (219) 1,731 (2,792) 805
----------- ----------- ----------- -----------
Income tax expense. . . . . . . . . . . . . . 51 126 188 135
----------- ----------- ----------- -----------
Net income (loss) . . . . . . . . . . . . $ (270) $ 1,605 $ (2,980) $ 670
----------- ----------- ----------- -----------
Basic and diluted income (loss) per share . . $ (0.15) $ 0.90 $ (1.68) $ 0.38
----------- ----------- ----------- -----------
Weighted average common shares outstanding. . 1,775,000 1,775,000 1,775,000 1,775,000
=========== =========== =========== ===========
The accompanying notes to condensed consolidated financial statements are an
integral part of these statements.
4
THE GSI GROUP, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
(UNAUDITED)
SIX FISCAL MONTHS ENDED
-------------------------
JUNE 27, JUNE 28,
2003 2002
------------------- ----------
Cash Flows From Operating Activities:
Depreciation and amortization expense . . . . . . . . . . . . . . 3,323 3,694
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (9,181) (12,525)
------------------------- ----------
Net cash flows used by operating activities . . . . . . . (5,858) (8,831)
------------------------- ----------
Cash Flows From Investing Activities:
Capital expenditures. . . . . . . . . . . . . . . . . . . . . . . (961) (3,707)
Proceeds from sale of fixed assets. . . . . . . . . . . . . . . . 683 1,253
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 503 152
------------------------- ----------
Net cash flows provided by (used in) investing activities 225 (2,302)
------------------------- ----------
Cash Flows From Financing Activities:
Proceeds from shareholder loan. . . . . . . . . . . . . . . . . 1,141 418
Payments on shareholder loan. . . . . . . . . . . . . . . . . . (936) (291)
Payments on long-term debt. . . . . . . . . . . . . . . . . . . . (1,375) (3,127)
Net borrowings under line of credit agreement . . . . . . . . . . 5,403 16,900
Dividends . . . . . . . . . . . . . . . . . . . . . . . . . . . (959) (1,909)
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,304 (915)
------------------------- ----------
Net cash flows provided by financing activities . . . . . 4,578 11,076
------------------------- ----------
Effect of Exchange Rate Changes on Cash . . . . . . . . . . . . . . 142 (221)
Decrease In Cash and Cash Equivalents . . . . . . . . . . . . . . . $ (913) $ (278)
Cash and Cash Equivalents, beginning of period. . . . . . . . . . . 2,936 2,828
------------------------- ----------
Cash and Cash Equivalents, end of period. . . . . . . . . . . . . . $ 2,023 $ 2,550
========================= ==========
The accompanying notes to condensed consolidated financial statements are an
integral part of these statements.
5
THE GSI GROUP, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The financial statements have been prepared by The GSI Group, Inc.
(the "Company"), without audit, pursuant to the rules and regulations of the
Securities and Exchange Commission. Certain information and footnote
disclosures normally included in financial statements prepared in accordance
with accounting principles generally accepted in the United States of America
have been condensed or omitted pursuant to such rules and regulations, although
the Company believes that the disclosures are adequate to make the information
not misleading. These financial statements should be read in conjunction with
the financial statements and related notes contained in the Company's December
31, 2002 Form 10-K as filed with the Securities and Exchange Commission. Other
than as indicated herein, there have been no significant changes from the data
presented in said 10-K.
In the opinion of management, the financial statements contain all
adjustments necessary to present fairly the financial position of the Company as
of June 27, 2003 and the results of operations for the six months ended June 27,
2003 and cash flows for the six months ended June 27, 2003. Certain prior year
amounts have been reclassified to be consistent with the current year
presentation.
The results of operations for the six-month period ended June 27, 2003 are
not necessarily indicative of the operating results for the full year.
2. COMPREHENSIVE LOSS
The components of comprehensive loss for the periods presented are as
follows (in thousands):
June 27, June 28,
2003 2002
---------- ----------
Net income (loss) . . . . . . . . . . . . . $ (2,980) $ 670
Cumulative currency translation adjustment. 2,340 (2,136)
Comprehensive loss. . . . . . . . . . . . $ (640) $ (1,466)
========== ==========
3. NEW ACCOUNTING PRONOUNCEMENTS
During 2002, the Financial Accounting Standards Board issued Statement No.
146, "Accounting for Costs Associated with Exit or Disposal Activities." This
statement provides financial accounting and reporting standards for costs
associated with exit or disposal activities. This statement requires that a
liability for a cost associated with an exit or disposal activity is recognized
when the liability is incurred and establishes that fair value is the objective
for initial measurement of the liability. The Company has determined that the
adoption of Statement No. 146 will have no impact on the Company's financial
condition and results of operation.
In November 2002, the Financial Accounting Standards Board issued FASB
Interpretation No. 45, "Guarantor's Accounting and Disclosure Requirements for
Guarantees, Including Indirect Guarantees of Indebtedness of Others." This
interpretation addresses the disclosures to be made by a guarantor in its
interim and annual financial statements about its obligations under guarantees.
This interpretation also clarifies the requirements related to the recognition
of a liability by a guarantor at the inception of a guarantee for the
obligations the guarantor has undertaken in issuing that guarantee. The Company
has determined FASB Interpretation No. 45 has no impact on the Company's
financial condition and results of operation at this time.
In January 2003, the Financial Accounting Standards Board issued FASB
Interpretation No. 46, "Consolidation of Variable Interest Entities." This
interpretation clarifies the application of Accounting Research Bulletin No. 51,
"Consolidated Financial Statements," to certain entities in which equity
investors do not have the characteristics of a controlling financial interest or
do not have sufficient equity at risk for the entity to finance its activities
without additional subordinated financial support from other parties. The
Company has determined FASB Interpretation No. 46 will have no impact on the
Company's financial condition and results of operation.
6
In April 2003, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 149 (SFAS 149), "Amendment of Statement 133
on Derivative Instruments and Hedging Activities." SFAS 149 amends SFAS 133 to
provide clarification on the financial accounting and reporting for derivative
instruments and hedging activities and requires similar accounting treatment for
contracts with comparable characteristics. The Company has determined that SFAS
149 has no impact on the Company's financial condition and results of
operations.
In May 2003, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 150 (SFAS 150), "Accounting for Certain
Financial Instruments with Characteristics of both Liabilities and Equity."
SFAS 150 addresses financial accounting and reporting for certain financial
instruments with characteristics of both liabilities and equity. This statement
requires that an issuer classify a financial instrument that is within its scope
as a liability (or an asset in some circumstances) because that financial
instrument embodies an obligation of the issuer. The Company has determined
that SFAS 150 has no impact on the Company's financial condition and results of
operations.
4. DETAIL OF CERTAIN ASSETS
JUNE 27, DECEMBER 31,
2003 2002
--------- -------------
(IN THOUSANDS)
Inventories
Raw materials. . $ 16,408 $ 16,834
Work-in-process. 24,700 19,236
Finished goods . 26,600 27,823
--------- -------------
Total . . . $ 67,708 $ 63,893
========= =============
5. SUPPLEMENTAL CASH FLOW INFORMATION
The Company paid approximately $6.0 million and $5.9 million in interest
during the six months ended June 27, 2003 and June 28, 2002, respectively. The
Company paid no income taxes during the first six months of 2003 and 2002.
6. LONG-TERM DEBT
The indenture governing the Company's senior subordinated notes contains
certain restrictive covenants. The more significant of the covenants restrict
the ability of the Company to dispose of assets, incur additional indebtedness,
pay dividends or make distributions and other payments affecting subsidiaries.
The Company was in compliance with the covenants under the indenture as of June
27, 2003.
On April 30, 2003, LaSalle Bank National Association and the Company
amended the existing credit facility (the "Credit Facility") to provide for
revolving loans up to a maximum of $47.0 million (limited based on a borrowing
base which includes accounts receivable and inventory), as well as changes in
certain covenants. The Credit Facility requires the Company to maintain
quarterly EBITDA and fixed charge coverage ratio covenants, as well as an annual
senior debt to EBITDA ratio, tangible net worth and certain levels of capital
expenditures. The Company was in compliance with all covenants under the Credit
Facility as of June 27, 2003. In addition, the Credit Facility provides for a
$5.0 million borrowing base over-advance from May 1, 2003 through and including
September 30, 2003. The Credit Facility expires on July 25, 2004. Availability
under the Credit Facility as of June 27, 2003 was $6.0 million.
7
7. COMMITMENTS AND CONTINGENCIES
Sales of agricultural equipment are seasonal, with farmers traditionally
purchasing grain storage bins and grain drying and handling equipment in the
summer and fall in conjunction with the harvesting season, and swine and poultry
producers purchasing equipment during prime construction periods in the spring,
summer and fall. The Company's sales and net income have historically been
lower during the first and fourth fiscal quarters as compared to the second and
third quarters.
The Company has a contract with the Syrian government and one with the
Yemen Company for Industrial Development to manufacture and supervise the
assembly of grain handling systems. Other current assets and other assets
include $2.8 million of retainage withheld until completion of the projects and
the meeting of certain performance criteria.
The Company has an operating lease agreement that requires the Company to
maintain a certain senior debt to EBITDA ratio, tangible net worth and certain
levels of capital expenditures and EBITDA. The Company was in compliance with
these covenants under the operating lease agreement as of June 27, 2003.
Certain lease agreements are collateralized by a letter of credit of $1.5
million that expires on October 15, 2003.
8. BUSINESS SEGMENT
The Company has no separately reportable segments in accordance with
Statement of Financial Accounting Standard ("SFAS") No. 131, "Disclosure About
Segments of an Enterprise and Related Information." Under the enterprise wide
disclosure requirements of SFAS 131, the Company reports sales by each product
line. Amounts for the first quarters of 2003 and 2002 are as shown in the table
below (in thousands).
JUNE 27, JUNE 28,
2003 2002
--------- ---------
Grain product line . $ 66,285 $ 65,288
Swine product line . 19,045 26,076
Poultry product line 24,633 27,465
--------- ---------
Sales . . . . . $ 109,963 $ 118,829
========= =========
For the first six months of 2003 and 2002, sales in Brazil were $7.3
million and $10.5 million, respectively. Long-lived assets in Brazil were $2.4
million at June 27, 2003.
9. GUARANTOR SUBSIDIARIES
The Company's payment obligation under the senior subordinated notes are
fully and unconditionally guaranteed on a joint and several basis by David
Manufacturing Company, GSI/Cumberland de Mexico S. de R.L. de C.V., The GSI
Group (Europe) Ltd., The GSI Group (Africa) (Pty) Ltd., GSI Group (Asia) Sdn.
Bhd., Agromarau Industria e Comercio Ltda., The GSI Group (Shanghai) Ltd., and
The GSI Group (Canada) Inc. (the "Guarantor Subsidiaries"). The Guarantor
Subsidiaries are direct wholly owned subsidiaries of the Company. The
obligations of the Guarantor Subsidiaries under their guarantees are
subordinated to such subsidiaries' obligations under their guarantee of the
Credit Facility.
Presented below is unaudited condensed consolidating financial information
for The GSI Group, Inc. ("Parent Company") and the Guarantor Subsidiaries. In
the Company's opinion, separate financial statements and other disclosures
concerning the Guarantor Subsidiaries would not provide additional information
that is material to investors.
Investments in subsidiaries are accounted for by the Parent Company using
the equity method of accounting. Earnings of subsidiaries are, therefore,
reflected in the Parent Company's investments in and advances to/from
subsidiaries' accounts and earnings. The elimination entries eliminate
investments in subsidiaries and intercompany balances and transactions.
8
9. GUARANTOR SUBSIDIARIES (CONTINUED)
SUPPLEMENTAL CONDENSED CONSOLIDATING BALANCE SHEET
JUNE 27, 2003
(IN THOUSANDS)
Parent Guarantor
Company Subsidiaries Eliminations Consolidated
--------- -------------- -------------- --------------
ASSETS
Current assets:
Cash and cash equivalents . . . . . . . . . . . . $ 166 $ 1,857 $ -- $ 2,023
Accounts receivable, net. . . . . . . . . . . . . 27,894 8,179 (4,365) 31,708
Inventories, net. . . . . . . . . . . . . . . . . 54,887 12,821 -- 67,708
Other current assets. . . . . . . . . . . . . . . 4,425 1,695 -- 6,120
--------- -------------- -------------- --------------
Total current assets . . . . . . . . . . . . . . . . 87,372 24,552 (4,365) 107,559
Property, plant and equipment, net . . . . . . . . . 29,406 7,260 -- 36,666
Goodwill and other intangible assets, net. . . . . . 2,903 9,825 -- 12,728
Investment in and advances to/from subsidiaries. . . 42,844 (3,150) (39,694) --
Other long-term assets . . . . . . . . . . . . . . . 2,158 8 -- 2,166
--------- -------------- -------------- --------------
Total assets . . . . . . . . . . . . . . . . . . . . $164,683 $ 38,495 $ (44,059) $ 159,119
========= ============== ============== ==============
LIABILITIES AND STOCKHOLDERS' EQUITY(DEFICIT)
Current liabilities:
Current portion of long-term debt . . . . . . . . $ 3,496 $ -- $ -- $ 3,496
Accounts payable. . . . . . . . . . . . . . . . . 14,812 7,955 (4,365) 18,402
Accrued liabilities . . . . . . . . . . . . . . . 10,990 1,942 -- 12,932
--------- -------------- -------------- --------------
Total current liabilities. . . . . . . . . . . . . . 29,298 9,897 (4,365) 34,830
Long-term debt . . . . . . . . . . . . . . . . . . . 143,288 9,560 (8,889) 143,959
Other long-term liabilities. . . . . . . . . . . . . -- 229 -- 229
--------- -------------- -------------- --------------
Total liabilities. . . . . . . . . . . . . . . . . . 172,586 19,686 (13,254) 179,018
Stockholders' equity (deficit):
Common stock. . . . . . . . . . . . . . . . . . . 18 23,022 (23,022) 18
Additional paid-in capital. . . . . . . . . . . . 3,006 505 (505) 3,006
Accumulated other comprehensive loss. . . . . . . -- (11,996) -- (11,996)
Retained earnings . . . . . . . . . . . . . . . . 16,032 7,278 (7,278) 16,032
Treasury stock, at cost . . . . . . . . . . . . . (26,959) -- -- (26,959)
--------- -------------- -------------- --------------
Total stockholders' equity (deficit) . . . . . . . . (7,903) 18,809 (30,805) (19,899)
--------- -------------- -------------- --------------
Total liabilities and stockholders' equity (deficit) $164,683 $ 38,495 $ (44,059) $ 159,119
========= ============== ============== ==============
9
9. GUARANTOR SUBSIDIARIES (CONTINUED)
SUPPLEMENTAL CONDENSED CONSOLIDATING BALANCE SHEET
JUNE 28, 2002
(IN THOUSANDS)
Parent Guarantor
Company Subsidiaries Eliminations Consolidated
--------- -------------- -------------- --------------
ASSETS
Current assets:
Cash and cash equivalents . . . . . . . . . . . . $ 100 $ 2,450 $ -- $ 2,550
Accounts receivable, net. . . . . . . . . . . . . 38,178 9,859 (7,409) 40,628
Inventories, net. . . . . . . . . . . . . . . . . 55,070 18,421 (201) 73,290
Other current assets. . . . . . . . . . . . . . . 5,415 1,935 -- 7,350
--------- -------------- -------------- --------------
Total current assets . . . . . . . . . . . . . . . . 98,763 32,665 (7,610) 123,818
Property, plant and equipment, net . . . . . . . . . 33,657 6,985 -- 40,642
Goodwill and other intangible assets, net. . . . . . 2,980 11,015 -- 13,995
Investment in and advances to/from subsidiaries. . . 45,437 (6,005) (39,432) --
Other long-term assets . . . . . . . . . . . . . . . 2,820 67 -- 2,887
--------- -------------- -------------- --------------
Total assets . . . . . . . . . . . . . . . . . . . . $183,657 $ 44,727 $ (47,042) $ 181,342
========= ============== ============== ==============
LIABILITIES AND STOCKHOLDERS' EQUITY(DEFICIT)
Current liabilities:
Current portion of long-term debt . . . . . . . . $ 2,761 $ 24 $ -- $ 2,785
Accounts payable. . . . . . . . . . . . . . . . . 23,698 10,261 (7,409) 26,550
Accrued liabilities . . . . . . . . . . . . . . . 16,667 2,350 (11) 19,006
--------- -------------- -------------- --------------
Total current liabilities. . . . . . . . . . . . . . 43,126 12,635 (7,420) 48,341
Long-term debt . . . . . . . . . . . . . . . . . . . 146,329 12,386 (8,599) 150,116
Other long-term liabilities. . . . . . . . . . . . . (174) 1,035 -- 861
--------- -------------- -------------- --------------
Total liabilities. . . . . . . . . . . . . . . . . . 189,281 26,056 (16,019) 199,318
Stockholders' equity (deficit):
Common stock. . . . . . . . . . . . . . . . . . . 18 23,539 (23,539) 18
Additional paid-in capital. . . . . . . . . . . . 3,006 305 (305) 3,006
Accumulated other comprehensive loss. . . . . . . -- (12,352) -- (12,352)
Retained earnings (deficit) . . . . . . . . . . . 18,311 7,179 (7,179) 18,311
Treasury stock, at cost . . . . . . . . . . . . . (26,959) -- -- (26,959)
--------- -------------- -------------- --------------
Total stockholders' equity (deficit) . . . . . . . . (5,624) 18,671 (31,023) (17,976)
--------- -------------- -------------- --------------
Total liabilities and stockholders' equity (deficit) $183,657 $ 44,727 $ (47,042) $ 181,342
========= ============== ============== ==============
10
9. GUARANTOR SUBSIDIARIES (CONTINUED)
SUPPLEMENTAL CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS
THREE FISCAL MONTHS ENDED JUNE 27, 2003
(IN THOUSANDS)
Parent Guarantor
Company Subsidiaries Eliminations Consolidated
--------- -------------- -------------- --------------
Sales. . . . . . . . . . . . . . . . . . . . . $ 56,375 $ 11,169 $ (1,891) $ 65,653
Cost of sales. . . . . . . . . . . . . . . . . 45,466 9,010 (1,844) 52,632
--------- -------------- -------------- --------------
Gross profit . . . . . . . . . . . . . . . . . 10,909 2,159 (47) 13,021
Selling, general and administrative expenses . 6,347 2,920 -- 9,267
--------- -------------- -------------- --------------
Operating income (loss). . . . . . . . . . . . 4,562 (761) (47) 3,754
Interest expense . . . . . . . . . . . . . . . (3,148) (13) -- (3,161)
Other expense. . . . . . . . . . . . . . . . . (309) (503) -- (812)
--------- -------------- -------------- --------------
(Loss) income before income taxes. . . . . . . 1,105 (1,277) (47) (219)
Provision for income taxes . . . . . . . . . . 3 48 -- 51
--------- -------------- -------------- --------------
(Loss) income before equity in income of
Consolidated subsidiaries. . . . . . . . . . . 1,102 (1,325) (47) (270)
Equity in income of consolidated subsidiaries. (1,325) -- 1,325 --
--------- -------------- -------------- --------------
Net loss . . . . . . . . . . . . . . . . . . . $ (223) $ (1,325) $ 1,278 $ (270)
========= ============== ============== ==============
11
9. GUARANTOR SUBSIDIARIES (CONTINUED)
SUPPLEMENTAL CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS
THREE FISCAL MONTHS ENDED JUNE 28, 2002
(IN THOUSANDS)
Parent Guarantor
Company Subsidiaries Eliminations Consolidated
--------- -------------- -------------- --------------
Sales . . . . . . . . . . . . . . . . . . . . $ 61,329 $ 13,193 $ (8,621) $ 65,901
Cost of sales . . . . . . . . . . . . . . . . 50,702 9,395 (9,054) 51,043
--------- -------------- -------------- --------------
Gross profit. . . . . . . . . . . . . . . . . 10,627 3,798 433 14,858
Selling, general and administrative expenses. 6,419 3,002 -- 9,421
--------- -------------- -------------- --------------
Operating income. . . . . . . . . . . . . . . 4,208 796 433 5,437
Interest expense. . . . . . . . . . . . . . . (3,312) (18) -- (3,330)
Other expense . . . . . . . . . . . . . . . . (104) (272) -- (376)
--------- -------------- -------------- --------------
Income before income taxes. . . . . . . . . . 792 506 433 1,731
Provision for income taxes. . . . . . . . . . (23) 149 -- 126
--------- -------------- -------------- --------------
Income before equity in income of
Consolidated subsidiaries . . . . . . . . . . 815 357 433 1,605
Equity in income of consolidated subsidiaries 357 -- (357) --
--------- -------------- -------------- --------------
Net income. . . . . . . . . . . . . . . . . . $ 1,172 $ 357 $ 76 $ 1,605
========= ============== ============== ==============
12
9. GUARANTOR SUBSIDIARIES (CONTINUED)
SUPPLEMENTAL CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS
SIX FISCAL MONTHS ENDED JUNE 27, 2003
(IN THOUSANDS)
Parent Guarantor
Company Subsidiaries Eliminations Consolidated
--------- -------------- -------------- --------------
Sales. . . . . . . . . . . . . . . . . . . . . $ 95,549 $ 20,376 $ (5,962) $ 109,963
Cost of sales. . . . . . . . . . . . . . . . . 77,801 15,828 (5,867) 87,762
--------- -------------- -------------- --------------
Gross profit . . . . . . . . . . . . . . . . . 17,748 4,548 (95) 22,201
Selling, general and administrative expenses . 12,283 5,890 -- 18,173
--------- -------------- -------------- --------------
Operating income (loss). . . . . . . . . . . . 5,465 (1,342) (95) 4,028
Interest expense . . . . . . . . . . . . . . . (6,153) (22) -- (6,175)
Other expense. . . . . . . . . . . . . . . . . (471) (174) -- (645)
--------- -------------- -------------- --------------
Loss before income taxes . . . . . . . . . . . (1,159) (1,538) (95) (2,792)
Provision for income taxes . . . . . . . . . . 3 185 -- 188
--------- -------------- -------------- --------------
Loss before equity in income of
Consolidated subsidiaries. . . . . . . . . . . (1,162) (1,723) (95) (2,980)
Equity in income of consolidated subsidiaries. (1,723) -- 1,723 --
--------- -------------- -------------- --------------
Net loss . . . . . . . . . . . . . . . . . . . $ (2,885) $ (1,723) $ 1,628 $ (2,980)
========= ============== ============== ==============
13
9. GUARANTOR SUBSIDIARIES (CONTINUED)
SUPPLEMENTAL CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS
SIX FISCAL MONTHS ENDED JUNE 28, 2002
(IN THOUSANDS)
Parent Guarantor
Company Subsidiaries Eliminations Consolidated
--------- -------------- -------------- --------------
Sales . . . . . . . . . . . . . . . . . . . . $108,443 $ 25,367 $ (14,981) $ 118,829
Cost of sales . . . . . . . . . . . . . . . . 89,021 18,383 (15,111) 92,293
--------- -------------- -------------- --------------
Gross profit. . . . . . . . . . . . . . . . . 19,422 6,984 130 26,536
Selling, general and administrative expenses. 12,812 5,733 -- 18,545
--------- -------------- -------------- --------------
Operating income. . . . . . . . . . . . . . . 6,610 1,251 130 7,991
Interest expense. . . . . . . . . . . . . . . (6,450) (34) -- (6,484)
Other expense . . . . . . . . . . . . . . . . (244) (458) -- (702)
--------- -------------- -------------- --------------
(Loss) income before income taxes . . . . . . (84) 759 130 805
Provision for income taxes. . . . . . . . . . (17) 152 -- 135
--------- -------------- -------------- --------------
(Loss) income before equity in income of
Consolidated subsidiaries . . . . . . . . . . (67) 607 130 670
Equity in income of consolidated subsidiaries 607 -- (607) --
--------- -------------- -------------- --------------
Net income. . . . . . . . . . . . . . . . . . $ 540 $ 607 $ (477) $ 670
========= ============== ============== ==============
14
9. GUARANTOR SUBSIDIARIES (CONTINUED)
SUPPLEMENTAL CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
SIX FISCAL MONTHS ENDED JUNE 27, 2003
(IN THOUSANDS)
Parent Guarantor
Company Subsidiaries Eliminations Consolidated
--------- -------------- ------------- --------------
Cash flows used in operating activities. . . . . . . . . . . $ (5,732) $ (126) $ -- $ (5,858)
--------- -------------- ------------- --------------
Cash flows from investing activities:
Capital expenditures and proceeds from sales of fixed assets 174 (1,135) -- (961)
Other. . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,570 (384) -- 1,186
--------- -------------- ------------- --------------
Net cash provided by (used in) investing activities. . . . . 1,744 (1,519) -- 225
--------- -------------- ------------- --------------
Cash flows from financing activities:
Net borrowings (payments) on debt. . . . . . . . . . . . . . 5,258 (1,025) -- 4,233
Other. . . . . . . . . . . . . . . . . . . . . . . . . . . . (1,309) 1,654 -- 345
--------- -------------- ------------- --------------
Net cash provided by financing activities. . . . . . . . . . 3,949 629 -- 4,578
--------- -------------- ------------- --------------
Effect of exchange rate changes on cash. . . . . . . . . . . -- 142 -- 142
Change in cash and cash equivalents. . . . . . . . . . . . . (39) (874) -- (913)
Cash and cash equivalents, beginning of period . . . . . . . 205 2,731 -- 2,936
--------- -------------- ------------- --------------
Cash and cash equivalents, end of period . . . . . . . . . . $ 166 $ 1,857 -- $ 2,023
========= ============== ============= ==============
15
9. GUARANTOR SUBSIDIARIES (CONTINUED)
SUPPLEMENTAL CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
SIX FISCAL MONTHS ENDED JUNE 28, 2002
(IN THOUSANDS)
Parent Guarantor
Company Subsidiaries Eliminations Consolidated
--------- -------------- ------------- --------------
Cash flows used in operating activities. . . . . . . . . . . $ (8,355) $ (476) $ -- $ (8,831)
--------- -------------- ------------- --------------
Cash flows from investing activities:
Capital expenditures and proceeds from sales of fixed assets (3,428) (279) -- (3,707)
Other. . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,385 20 -- 1,405
--------- -------------- ------------- --------------
Net cash used in investing activities. . . . . . . . . . . . (2,043) (259) -- (2,302)
--------- -------------- ------------- --------------
Cash flows from financing activities:
Net borrowings on debt . . . . . . . . . . . . . . . . . . . 10,763 3,137 -- 13,900
Other. . . . . . . . . . . . . . . . . . . . . . . . . . . . (1,747) (1,077) -- (2,824)
--------- -------------- ------------- --------------
Net cash provided by financing activities. . . . . . . . . . 9,016 2,060 -- 11,076
--------- -------------- ------------- --------------
Effect of exchange rate changes on cash. . . . . . . . . . . -- (221) -- (221)
Change in cash and cash equivalents. . . . . . . . . . . . . (1,382) 1,104 -- (278)
Cash and cash equivalents, beginning of period . . . . . . . 1,482 1,346 -- 2,828
--------- -------------- ------------- --------------
Cash and cash equivalents, end of period . . . . . . . . . . $ 100 $ 2,450 -- $ 2,550
========= ============== ============= ==============
16
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS.
The following discussion of the financial condition and results of
operations of the Company should be read in conjunction with the Consolidated
Financial Statements and the notes included in Item 1 hereof.
GENERAL
The Company is a leading manufacturer and supplier of agricultural
equipment and services worldwide. The Company's grain, swine and poultry
products are used by producers and purchasers of grain, and by producers of
swine and poultry. Fluctuations in grain and feed prices directly impact sales
of the Company's grain equipment. Because the primary cost of producing swine
and poultry is the cost of the feed grain consumed by animals, fluctuations in
the supply and cost of grain to users of the Company's products in the past has
impacted sales of the Company's swine and poultry equipment. The Company
believes, however, that its diversified product offerings mitigate some of the
effects of fluctuations in the price of grain since the demand for grain
storage, drying and handling equipment tends to increase during periods of
higher grain prices, which somewhat offsets the reduction in demand during such
periods for the Company's products by producers of swine and poultry.
Sales of agricultural equipment are seasonal, with farmers traditionally
purchasing grain storage bins and grain drying and handling equipment in the
summer and fall in conjunction with the harvesting season, and swine and poultry
producers purchasing equipment during prime construction periods in the spring,
summer and fall. The Company's net sales and net income have historically been
lower during the first and fourth fiscal quarters as compared to the second and
third quarters.
Although the Company's sales are primarily denominated in U.S. dollars and
are not generally affected by currency fluctuations (except for the Company's
Brazilian operations), the production costs, profit margins and competitive
position of the Company are affected by the strength of the U.S. dollar relative
to the strength of the currencies in countries where its products are sold.
The Company's international sales have historically comprised a significant
portion of net sales. In the first six months of 2003 and 2002, the Company's
international sales accounted for 26% and 28% of net sales, respectively.
International operations generally are subject to various risks that are not
present in domestic operations, including restrictions on dividends,
restrictions on repatriation of funds, unexpected changes in tariffs and other
trade barriers, difficulties in staffing and managing foreign operations,
political instability, fluctuations in currency exchange rates, reduced
protection for intellectual property rights in some countries, seasonal
reductions in business activity and potentially adverse tax consequences, any of
which could adversely impact the Company's international operations.
The primary raw materials used by the Company to manufacture its products
are steel and polymers. Fluctuations in the prices and availability of vendors
for steel and, to a lesser extent, polymer materials can impact the Company's
cost of sales.
The Company currently operates as a subchapter S corporation and,
accordingly, is not subject to federal income taxation for the periods for which
financial information has been presented herein. Because the Company's
stockholders are subject to tax liabilities based on their pro rata shares of
the Company's income, the Company's policy is to make periodic distributions to
its stockholders in amounts equal to such tax liabilities.
RESULTS OF OPERATIONS
Three Months Ended June 27, 2003 Compared to Three Months Ended June 28, 2002
Sales decreased 0.4% or $0.2 million to $65.7 million in the second quarter
of 2003 compared to $65.9 million in the second quarter of 2002. This decrease
was driven by decreased demand for the Company's swine and poultry products,
offset by increased demand for the Company's grain products.
Gross profit decreased to $13.0 million in the second quarter of 2003 or
19.8% of sales from $14.9 million or 22.5% of sales in the same period of 2002.
The decrease in gross profit was primarily the result of increased material
costs the Company was not able to pass along to its customers.
17
Operating expenses decreased 1.6% or $0.1 million to $9.3 million in the
second quarter of 2003 from $9.4 million in the same period of 2002. This
decrease was primarily the result of cost cutting measures.
Operating income decreased 31.0% to $3.8 million in the second quarter of
2003 from $5.4 million in the second quarter of 2002. This decrease was
attributable to the decrease in gross profit.
Interest expense decreased $0.1 million in the second quarter of 2003 as
compared to the second quarter of 2002 due to lower borrowing costs.
Net loss increased $1.9 million to a loss of $0.3 million for the second
quarter of 2003 from a gain of $1.6 million in the same period of 2002.
Six Months Ended June 27, 2003 Compared to Six Months Ended June 28, 2002
Sales decreased 7.5% or $8.8 million to $110.0 million in the first six
months of 2003 compared to $118.8 million in the first six months of 2002. This
decrease was driven by decreased demand for the Company's swine and poultry
products, offset by increased demand for the Company's grain products.
Gross profit decreased to $22.2 million in the first six months of 2003 or
20.2% of sales from $26.5 million or 22.3% of sales in the same period of 2002.
This decrease was a result of decreased sales. The decrease in gross profit as
a percent of sales was primarily the result of costs associated with re-tooling
facilities to a cellular manufacturing approach and increased material costs.
Operating expenses decreased 2.0% or $0.3 million to $18.2 million in the
First six months of 2003 from $18.5 million in the same period of 2002. This
decrease was primarily the result of cost cutting measures.
Operating income decreased 49.6% to $4.0 million in the first six months of
2003 from $8.0 million in the first six months of 2002. This decrease was
attributable to the decrease in gross profit.
Interest expense decreased $0.3 million in the first six months of 2003 as
compared to the first six months of 2002 due to lower borrowing costs.
Net loss increased $3.7 million to a loss of $3.0 million for the first six
months of 2003 from a gain of $0.7 million in the same period of 2002.
LIQUIDITY AND CAPITAL RESOURCES
The Company has historically funded capital expenditures, working capital
requirements, debt service, stockholder dividends and stock repurchases from
cash flow from its operations, augmented by borrowings made under various credit
agreements and the sale of the Company's 10 % senior subordinated notes.
As of June 27, 2003, the Company had $72.7 million of working capital, an
increase of $5.4 million from working capital as of December 31, 2002. The
increase in working capital was primarily due to increases in accounts
receivable and inventory of $12.2 million, partially offset by increases in
accounts payable of $7.3 million.
Operating activities used $5.8 million and $8.8 million in cash flow in the
first six months of 2003 and 2002, respectively. This $3.0 million increase in
cash flow was primarily the result of a decrease in inventory and accounts
receivable of $17.3 million, partially offset by an increase in accounts
payable, accrued expenses, and net loss of $12.6 million compared to the first
six months of 2002.
Investing activities provided $0.2 million and used $2.3 million in cash
flow in the first six months of 2003 and 2002, respectively. The cash was used
primarily for machinery and equipment purchases. The $2.5 million increase in
cash provided in investing activities was primarily a result of less capital
expenditure in 2003 compared to 2002.
Financing activities provided $4.6 million and $11.1 million in cash flow
in the first six months of 2003 and 2002, respectively. The cash was provided
from borrowings under the Credit Facility.
18
The Company believes that existing cash, cash flow from operations and
available borrowings under the Credit Facility will be sufficient to support its
working capital, capital expenditures and debt service requirements for the
foreseeable future.
INFLATION
The Company believes that inflation has not had a material effect on its
results of operations or financial condition during recent periods.
CRITICAL ACCOUNTING POLICIES
There are no material changes to the critical accounting policies since
December 31, 2002.
FORWARD-LOOKING STATEMENTS
Certain statements contained in this report are "forward-looking
statements" within the meaning of Section 27A of the Securities Act of 1933, as
amended, and Section 21E of the Securities Exchange Act of 1934, as amended.
Forward-looking statements are statements other than historical information or
statements of current condition. Some forward-looking statements may be
identified by the use of terms such as "believes," "anticipates," "intends," or
"expects." Forward-looking statements are subject to risks, uncertainties and
other factors that could cause actual results to differ materially from future
results expressed or implied by such statements, and such statements should not
be regarded as a representation the stated objectives will be achieved.
19
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
The Company is subject to market risk associated with adverse changes in
interest rates and foreign currency exchange rates. The Company does not hold
any market risk sensitive instruments for trading purposes. At June 27, 2003,
principal exposed to interest rate risk was limited to $47.2 million in variable
rate debt. The Company measures its interest rate risk by estimating the net
amount by which potential future net earnings would be impacted by hypothetical
changes in market interest rates related to all interest rate sensitive assets
and liabilities. A 1% change in interest rates would have a $0.5 million impact
on the Company's results of operations.
At June 27, 2003, approximately 15.5% of sales were derived from
international operations with exposure to foreign currency exchange rate risk.
The Company mitigates its foreign currency exchange rate risk principally by
establishing local production facilities in the markets it serves and by
invoicing customers in the same currency as the source of the products. The
Company also monitors its foreign currency exposure in each country and
implements strategies to respond to changing economic and political
environments. The Company's exposure to foreign currency exchange rate risk
relates primarily to the financial position and the results of operations of its
Brazilian subsidiary. The Company's exposure to such exchange rate risk as it
relates to the Company's financial position and results of operations would be
adversely impacted by further devaluation of the Brazilian Real per U.S. dollar.
These amounts are difficult to accurately estimate due to factors such as the
inherent fluctuation of inter-company account balances, balance sheet accounts
and the existing economic uncertainty and future economic conditions in the
international marketplace.
ITEM 4. CONTROLS AND PROCEDURES
Based on an evaluation of the Company's disclosure controls and procedures
performed by the Company's management within 90 days of the filing date of this
annual report, the Company's Chief Executive Officer and Chief Financial Officer
believe that the Company has appropriate disclosure controls and procedures to
ensure that information required to be disclosed by the Company in its periodic
reports is recorded, processed, summarized and reported within the time periods
specified in the rules and forms of the Securities Exchange Commission.
Since the date of such evaluation, there have been no significant changes
in the Company's internal controls or in other factors that could significantly
affect these controls, including any corrective actions with regard to
significant deficiencies and material weaknesses.
20
PART II
OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS.
There are no legal proceedings pending against the Company, which, in the
opinion of management, would have a material adverse affect on the Company's
business, financial position or results of operations.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
(a) EXHIBITS:
A list of the exhibits included as part of this Form 10-Q is set
forth in the Index to Exhibits that immediately precedes such exhibits, which is
incorporated herein by reference.
(b) REPORTS ON FORM 8-K:
The Company did not file any Current Reports on Form 8-K during its
fiscal quarter ended June 27, 2003.
21
SIGNATURES
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES EXCHANGE ACT OF 1934, THE
REGISTRANT HAS DULY CAUSED THIS REPORT TO BE SIGNED ON ITS BEHALF BY THE
UNDERSIGNED THEREUNTO DULY AUTHORIZED.
The GSI Group, Inc.
By: /s/ Russell C. Mello
-----------------------
Chief Financial Officer,
Secretary and Treasurer (Authorized
Signatory and Principal Financial
Officer)
DATE: AUGUST 6, 2003
22
CERTIFICATIONS
I, Craig Sloan, certify that:
1. I have reviewed this quarterly report on Form 10-Q of The GSI Group, Inc.;
2. Based on my knowledge, this quarterly report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to make
the statements made, in light of the circumstances under which such statements
were made, not misleading with respect to the period covered by this quarterly
report;
3. Based on my knowledge, the financial statements, and other financial
information included in this quarterly report, fairly present in all material
respects the financial condition, results of operations and cash flows of the
registrant as of, and for, the periods presented in this quarterly report;
4. The registrant's other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined in
Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have:
a) designed such disclosure controls and procedures to ensure that material
information relating to the registrant, including its consolidated subsidiaries,
is made known to us by others within those entities, particularly during the
period in which this quarterly report is being prepared;
b) evaluated the effectiveness of the registrant's disclosure controls and
procedures as of a date within 90 days prior to the filing date of this
quarterly report (the "Evaluation Date"); and
c) presented in this quarterly report our conclusions about the effectiveness of
the disclosure controls and procedures based on our evaluation as of the
Evaluation Date;
5. The registrant's other certifying officers and I have disclosed, based on
our most recent evaluation, to the registrant's auditors and the audit committee
of registrant's board of directors (or persons performing the equivalent
function):
a) all significant deficiencies in the design or operation of internal controls
which could adversely affect the registrant's ability to record, process,
summarize and report financial data and have identified for the registrant's
auditors any material weaknesses in internal controls; and
b) any fraud, whether or not material, that involves management or other
employees who have a significant role in the registrant's internal controls; and
6. The registrant's other certifying officers and I have indicated in this
quarterly report whether or not there were significant changes in internal
controls or in other factors that could significantly affect internal controls
subsequent to the date of our most recent evaluation, including any corrective
actions with regard to significant deficiencies and material weaknesses.
Date: August 6, 2003
/s/ Craig Sloan
-----------------
Chief Executive Officer
23
I, Russell C. Mello, certify that:
1. I have reviewed this quarterly report on Form 10-Q of The GSI Group, Inc.;
2. Based on my knowledge, this quarterly report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to make
the statements made, in light of the circumstances under which such statements
were made, not misleading with respect to the period covered by this quarterly
report;
3. Based on my knowledge, the financial statements, and other financial
information included in this quarterly report, fairly present in all material
respects the financial condition, results of operations and cash flows of the
registrant as of, and for, the periods presented in this quarterly report;
4. The registrant's other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined in
Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have:
a) designed such disclosure controls and procedures to ensure that material
information relating to the registrant, including its consolidated subsidiaries,
is made known to us by others within those entities, particularly during the
period in which this quarterly report is being prepared;
b) evaluated the effectiveness of the registrant's disclosure controls and
procedures as of a date within 90 days prior to the filing date of this
quarterly report (the "Evaluation Date"); and
c) presented in this quarterly report our conclusions about the effectiveness of
the disclosure controls and procedures based on our evaluation as of the
Evaluation Date;
5. The registrant's other certifying officers and I have disclosed, based on
our most recent evaluation, to the registrant's auditors and the audit committee
of registrant's board of directors (or persons performing the equivalent
function):
a) all significant deficiencies in the design or operation of internal controls
which could adversely affect the registrant's ability to record, process,
summarize and report financial data and have identified for the registrant's
auditors any material weaknesses in internal controls; and
b) any fraud, whether or not material, that involves management or other
employees who have a significant role in the registrant's internal controls; and
6. The registrant's other certifying officers and I have indicated in this
quarterly report whether or not there were significant changes in internal
controls or in other factors that could significantly affect internal controls
subsequent to the date of our most recent evaluation, including any corrective
actions with regard to significant deficiencies and material weaknesses.
Date: August 6, 2003
/s/ Russell C. Mello
-----------------------
Chief Financial Officer,
Secretary and Treasurer
24
INDEX TO EXHIBITS
EXHIBIT
NO. DOCUMENT DESCRIPTION
- ------- -------------------------------------------------------------------------------------------------------------------------
3.1* Amended and Restated Articles of Incorporation of The GSI Group, Inc., as amended as of October 23, 1997.
3.2* By-Laws of The GSI Group, Inc, as amended.
10.1** Waiver and Third Amendment to the July 25, 2001 Fifth Amended and Restated Loan and Security Agreement, dated
April 30, 2003, between The GSI Group, Inc., as borrower, and LaSalle National Bank, as lender.
99.1 Certification of Chief Executive Officer and Chief Financial Officer.
____________
* Incorporated by reference from the Company's Registration Statement of
Form S-4 (Reg. No. 333-43089) filed with the Commission pursuant to the
Securities Act of 1933, as amended.
** Previously filed with the March 28, 2003 10Q filed with the Commission on
May 7, 2003.
25