RSTI

Rofin-Sinar Technologies, Inc. (RSTI)

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Rofin-Sinar Technologies Inc. (RSTI)

F2Q 2013 Earnings Conference Call

May 2, 2013 11:00 ET

Executives

Günther Braun - Chief Executive Officer

Ingrid Mittelstädt - Chief Financial Officer

Analysts

Patrick Newton - Stifel

Mark Douglas - Longbow Research

Mark Miller - Noble Financial

Sean Laughlin - Piper Jaffray

Jiwan Lee - Sidoti & Company

Presentation

Operator

Welcome to Rofin-Sinar’s Second Quarter 2013 Results Conference Call. Today’s call is hosted by Mr. Günther Braun, Chief Executive Officer, and Ms. Ingrid Mittelstädt, Chief Financial Officer. Following management’s comments, you will have the opportunity to ask questions. Please go ahead.

Günther Braun - Chief Executive Officer

Thank you. Good morning or good afternoon to everyone. I am here in Plymouth, Michigan, together with Ingrid, Ingrid Mittelstädt, our CFO. I hope you all got the press release containing our second quarter 2013 results. We will give you some comments about our business and performance and then we will open it up for questions. Now, before we start, I would like to make the usual statement about the information you are getting in this conference call.

Safe Harbor statement, our discussions may include predictions, estimates or other information that maybe considered forward-looking. While these forward-looking statements represent our best current judgments on what the future holds, they are subject to risks and uncertainties that could cause actual results to differ materially. Throughout our discussion, we will attempt to discuss important factors relating to our business that may affect our predictions. You may also want to review our last 10-Q and 10-K filings for a more complete disclosure of financial risks. The company disclaims any obligation to update any forward-looking statements.

Okay. Now, let’s start with our overview, the quarter was somewhat special this time. We had a reasonable good start. Our internal sales forecast for the quarter was more in the direction of $140 million than $130 million, but at the end of the day, the financial results came in at the lower end of our guidance. Reason for that is revenue recognition, and slip shipments into Q3. We experienced towards the end of the quarter some delays in shipments due to some application issues means customer has changed material and the application was much perfect, but also delays in revenue recognition for inventory at customer sites, we cannot play in one specific industry or customer, it was widespread which is pretty unusual.

Highlights this time was our macro business during the second quarter, we experienced significantly higher sales in our macro product lines mainly driven by the machine tool industry while our micro-marketing business declined as expected triggered by weaker sales to the electronics and semiconductor industries. On a geographical basis, North American and Asian order entry softened compared to the second quarter last year while European order entry reached its highest level since the third quarter of 2011. We expect a stable environment for laser material processing even when global business conditions are taken into consideration.

Now, let me continue with the standard review of our performance in the period, in the March 31, 2013. As you have seen from our press release, we have reached sales in the second quarter of $131.1 million, which is $1.7 million or 1% higher than in the comparable quarter of fiscal 2012, but approximately 8% lower compared to our first quarter fiscal year 2013. And as I already mentioned towards the end of the quarter, projected plan sales slipped into Q3, but also this revenue recognition for inventory was already at customer site.

Sales in our micro-marketing business mainly reflect the very solid solar business. Of course, the slow semi business reasonable I would say medical device business and electronics business in comparison to last year’s second quarter. Net sales decreased by 5% to $59.1 million or 45% of total sales. If you remember first quarter, this part was 54% of first quarter sales. Then sales in our macro business increased 9% comparing to the second quarter and reached $55.6 million. Macro business contributed 42% to quarterly sales and the major change came from the machine tool industry $4.3 million more and automotive business where we still maintained a solid share in volume business this year with one suppliers. Our component businesses increased 2% and reached $16.4 million representing 13% of quarterly sales, again a good quarter for laser diodes and fiber-related components.

Now coming to the breakdown of our quarterly laser sales by industry, automotive 10% versus 5% last year’s second quarter and again question mark is still Europe for the next quarters. Machine tool industry 42%, a big jump from the first quarter compared to 40% in the last year’s second quarter. Then semiconductor electronics 23% versus 21% in fiscal year 2012 and others reached 25% versus 34% in fiscal 2012.

During the second quarter we shipped a total of 1260 lasers versus 912 lasers which is approximately 38% more or 348 lasers compared to last year’s second quarter. We shipped 522 units versus 440 units of macro applications and we shipped 735 lasers versus 472 lasers for marking and micro applications.

Now let me hand it over to Ingrid, who will further comment on the financials.

Ingrid Mittelstädt - Chief Financial Officer

Thanks Günther. Good morning and good afternoon to everyone. As Günther already mentioned during the second quarter we achieved revenues of $131.1 million that represent an increase of 1.3% compared to the second quarter of fiscal year 2012. The impact of the strong U.S. dollar reduced our quarterly sales by approximately $1.2 million. Compared to the second quarter of last fiscal year the gross profit decreased from 37.7% to 35.7% of total sales in the reporting quarter mainly due to an unfavorable product mix and lower service and spare parts business. On a sequential basis, gross profits slightly increased 0.4% of total sales to 35.7%.

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