Laser Systems

General Scanning, Inc.

The Company

As numerous observers have noted, volatility is not necessarily such a bad thing. The existence of a "momentum" crowd in some instances has created opportunity. By overreacting to earnings announcements, momentum strategies inadvertently create value. When a darling of the momentum players encounters a series of earnings disappointments, shares invariably get kicked in the head. General Scanning <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: GSCN)") else Response.Write("(Nasdaq: GSCN)") end if %> is just such an issue. With a price-to-sales ratio of less than 1.0, trading at a little more than twice its book value and roughly 14 times its 1997 earnings estimates, an investor would think that the company is a slow-growth industry laggard.

General Scanning is a thirty-year old industry leader that has focused upon the development of cost-effective commercial applications for laser technology. A series of factors that slowed revenue growth in 1996 caused a precipitous drop in the company's valuation, cutting the stock price in half. In late August of 1996, General Scanning completed its acquisition of View Engineering for 1.4 million shares of stock in a pooling of interests transaction. Dilution, acquisition expenses, and a higher tax rate all conspired to hurt earnings. Primary earnings per share for the last six months of 1996 totaled $0.25 compared with $0.44 in 1995.

Latest Financials

For the first fiscal quarter ended March 29, 1997, General Scanning's sales totaled $37.7 million, unchanged from total sales in the first quarter of 1996. Laser systems and component sales were $31.4 million. Sales were adversely affected by the continued strengthening of the dollar, which reduces the reported dollar value of the company's sales denominated in currencies other than the dollar. Thermal printer sales increased 4% to $6.6 million from $6.3 million in the comparable period of 1996. Laser systems and components sales, as a percentage of total sales, were 82% in the quarter compared to 83% of total sales in the comparable quarter of 1996. International sales, much of which are denominated in foreign currencies, were approximately 38% and 41% of total sales in the quarters ended March 29, 1997 and March 30, 1996, respectively.

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