Good afternoon. My name is Salina, and I will be your conference operator today. At this time, I would like to welcome everyone to the GSI Group 2014 Q3 Earnings Conference Call. All lines have been placed on mute to prevent any background noise. After the speakers’ remarks, there will be a question-and-answer session. (Operator Instructions) Thank you. I will now turn today’s conference call over to Robert Buckley. You may begin.

Thank you. Good afternoon and welcome to GSI Group’s third quarter 2014 earnings conference call. I am Robert Buckley, Chief Financial Officer of GSI Group. If you have not received a copy of our earnings press release, you may obtain one from the Investor Relations section of our website at www.gsig.com. Please note, this call is being webcast live and will be archived on our website. Before we begin, we need to remind everyone of the Safe Harbor for forward-looking statements that we have outlined in our earnings press release issued earlier this afternoon and also those in our SEC filings. We may make some comments today both in our prepared remarks and our responses to questions that may include forward-looking statements. These involve inherent assumptions with known and unknown risks and other factors that could cause our future results to differ materially from our current expectations. Any forward-looking statements made today represent our views only as of today. We disclaim any obligation to update forward-looking statements in the future even if our estimates change. So, you should not rely on any of today’s forward-looking statements as representing our views as of any date after today. During this call, we will be referring to certain non-GAAP financial measures. A reconciliation of such non-GAAP financial measures to the most directly comparable GAAP measures is available as an attachment to our earnings press release. To the extent that we use non-GAAP financial measures during this call that are not reconciled to GAAP measures in the earnings press release, we will provide reconciliations promptly on the Investor Relations section of our website. I am now pleased to introduce Chief Executive Officer of GSI Group, John Roush.

Thank you, Robert. Good afternoon, everybody and welcome to our call. So, I am pleased to report we had good performance in the third quarter. The company executed very well across our portfolio and delivered profitability and cash flow that exceeded our own expectations. Robert will comment on the numbers in more detail, but Q3 revenue came in at $95 million, with GAAP EPS at $0.15 and non-GAAP EPS at $0.2. Q3 adjusted EBITDA was $15.4 million, up $1.8 million versus last year and at the top end of the guidance range that we have provided. Net debt was $68.3 million at quarter end. So, on our Q2 call in August, we have discussed the fact that our increased number of new product launches combined with our rollout of lean manufacturing had impacted our gross margins. I am pleased to report that our operational teams put a really tremendous effort in resources into addressing these issues and we are able to increase Q3 gross margins by 2 full percentage points versus Q2. Though we are still not ultimately where we want to be, this was a big success for us and gives us increased confidence in our ability to drive attractive profitability in the future. Our cash flow and working capital management were quite strong in the quarter, which enabled us to improve our balance sheet. In fact, we exited Q3 with our net debt lower than what we had projected for year end. The JADAK acquisition has continued to perform well with the integration process now essentially complete. The business has exceeded our financial expectations and again delivered strong growth with sales increasing high single-digits versus what JADAK did a year ago prior to our ownership. The JADAK management team is proving to be highly capable and they are…

Thank you, John. On July 15, we closed the sale of the scientific laser business for $6.5 million in cash net of net working capital adjustments. In accordance with the purchase and sale agreement, $1.5 million of the sale proceeds will be held in escrow until January 2016. The company has recorded the $1.5 million in escrow and other long-term assets on the balance sheet. The net inflow was recorded as cash flow from investing activities of discontinued operations in the third quarter. This transaction represents an important strategic divestiture of our non-core business and a great step forward in the execution of our strategic initiatives. On September 24, we received a payment of $5.4 million, the full remaining amount held in escrow account established upon the closing of the acquisition of the NDS Surgical Imaging business in January of 2013. The payment or escrow recovery resulted from our claims that the sellers of NDS breached certain terms of the January 15, 2013 purchase agreement for the acquisition of NDS. The escrow recovery was recorded as a reduction in the goodwill as the $5.4 million payment was clearly and directly related to the acquisition price, which is now at $75.4 million. In addition, the cash received was recorded as cash inflow from investing activities of continuing operations in the third quarter. During the third quarter of 2014, GSI generated revenue of $94.7 million, an increase of 18.5% from $79.9 million in the third quarter of 2013. All three of the company’s operating segments demonstrated year-over-year revenue growth in the quarter. Sales of laser products for the third quarter increased 2.4% to $45.8 million compared to $44.7 million one year ago. We experienced solid growth in both our CO2 and fiber laser technologies as a consequence of new customer wins and…

(Operator Instructions) The first question comes from the line of Lee Jagoda with CJS Securities.

Hi, good afternoon.

Hi, Lee. Hi.

John, could you provide a little more detail regarding NDS specifically in the quarter and within NDS radiology with, the rest of my questions sort of around whether the issues you're seeing are more company specific or macro?

Yes. I would say the radiology business it’s a combination of both. I mean we do have gaps in the product line, right, and some of that relates to the fact that it's a relatively small business and so you can only spent so much R&D and if you’re trying to do three or four new products you got to do a more in a serial fashion instead of parallel. So, some of that is company specific. But we definitely saw what I would characterize is more macro because some of the things where we are being told we are going to be the supplier of the displays but it's being pushed out in time because the customer doesn't have the budget or they’re diverting the budget. So, I think it’s a blend of the two. The surgical business is definitely in I would say a stronger position than radiology just, it's a marketplace where there's more technology differentiation, more integration of the display in an overall surgical system in an OR environment, in an integrated OR environment. As you have more ways to kind of create value for the customer in that area, so I just think it’s not under the same amount of pressure. Of course, we did have that dual sourcing event that happened, but I mean, we are sort of more or less passed that, and I think surgical is holding up better.

So then looking at India specifically for Q4, what are your assumptions for that business in your guidance?

That’s similar to Q3.

Okay. And then one last, go ahead, one last question….

Yes, I was going to repeat what John said. I would say it’s similar to Q3 in that. But given that Q4 generally has some seasonality uptick associated with it, there will be a little bit down – it will be down further on a percentage basis.

And then one last question and then I'll hop back in queue. The Q4 gross margin would imply a sequential decline of anywhere between 100 basis points to 150 basis points. What's causing that if we are through sort of the heavy lifting on the lean, other than just new products rolling out?

You are – let me make sure I understand the question. You're projecting our Q4 gross margin to decline sequentially?

Versus Q3, on an adjusted basis?

I would say, you made a mistake somewhere.

Okay.

I think the guidance would somewhat suggest that the gross margins would be roughly the same to a little bit higher.

Okay. I guess we can follow offline.

I mean, there is definitely no – I mean, variably lean and all that is always mixed, right? When you are trying to project $94 million, $95 million, $96 million of revenue and there is always a few million that can swing you on a mix basis. But in terms of the actual progress in the factories, we're not projecting that we're launching a new product that’s going to cause a hit in gross marketing. We are not projecting that, some lean cells are going to get implemented in Q4. They are going to take us backwards, there is something, because they – we’re extending off of what we've been doing in Q3. And we weren’t even sure that we would turn the corner in Q3, the way we did, but we got a nice sort of result there that yields kind of came back, up in areas where they were challenged in Q1, Q2, and they've stayed there so far. The lean cells are getting more volume running across them, so the operators and the teams are more experienced with it. So it’s not as if we see any backsliding on any of that.

Okay, that’s actually very helpful. Thank you.

Okay.

The next question comes from the line of Jim Richiutti of Needham & Company. Jim Richiutti - Needham & Company: Thanks. I just want to do.

Hi, Jim. Jim Richiutti - Needham & Company: Good afternoon.. I just wanted to follow up to on the medical technology business. It sounds like excluding JADAK the business was down around 10% year-over-year. Is that in the ballpark?

No, that’s in – we had said it was down, that's not far off. Jim Richiutti - Needham & Company: Yes. And John you had one customer that had to shut down, which was not connected to you guys, but nonetheless you are affected by that. So ex that, is the business just kind of down mid single digits?

Yes, I don’t know that we kind of the math on that. I mean that was about $0.5 million impact in the quarter. Jim Richiutti - Needham & Company: Yes.

That subsequently didn’t go out the door, just because we were slowed down – we were completely stopped for a portion of time.

It’s actually some confusing signals out of that customer, because they slowed us down, then they stopped, and then they started back up, and then they backed off to start up, it’s been – we all know exactly what’s going on, because it doesn't have to do with our product, but it was about $0.5 million, and it was across a couple of different products. Jim Richiutti - Needham & Company: Okay. And JADAK as you look out in the Q4, it sounds like you feel they have seen – you are seeing pretty good momentum in that business is that fair to say?

We are. I think the JADAK business has been doing well since we have acquired business, some of our other medical technologies are doing, as John mentioned are doing fairly well. They are one of the premier businesses is up similarly. I think some of the challenges did seem to lie within the NDS business. Jim Richiutti - Needham & Company: Okay. And then just to switch gears for a second. You called out a little bit of macro related impact I guess in Europe, and then I wasn’t sure if you said China, but I wonder if you could elaborate on that, is that more so in the laser products area, although it seems like you had a reasonably good quarter, and precision motion was also up. So, I wonder if you could talk a little bit about what you are seeing?

Sure. I mean, one of the most obviously place we saw that is in the via hole drilling, and that shows up for us in a couple of different places, because on the mechanical side of via hole drilling and that’s the spindle, out of, that’s the Westwind branded product and that was definitely a bit challenging for us. The other place that shows up is we're doing scanning, the beam delivery for laser via hole drilling. So, it's, some of the same and some different OEMs, but ultimately comes back to the same kind of dynamic and we saw both of those be down versus year ago levels. And I would say that’s the biggest most obvious place you can see it. A lot of where we were strong say in the lasers, with this coding and marking, that's pretty good and that’s, that’s not really what I’d call heavy industry, a lot of that’s food and beverage, pharmaceutical packaging. 3D printing is another area that has been strong for us. It's not a huge part of the base, but it's trending up nicely. So, there were some mix in there, it’s not all negative. But when you look macro wise I mean you definitely saw that particularly coming out of Asia that was slowing down and the biggest piece of that was that via hole drilling. Jim Richiutti - Needham & Company: Okay. And that business still looks a little soft looking out to Q4?

Yes. I don’t see a bounce off of that. Now having said that, some customers are signaling 2015 could be pretty positive. Jim Richiutti - Needham & Company: Got it. Wasn't quite clear, was the book-to-bill for the quarter below one?

Yes. It was a little below, but I mean what we see is every time we trend a little above, it corrects back to one, we trend below, it corrects back to one. We have now a few weeks into Q4 and we have the order forecast and I think we're going to end the quarter and the year and it’s going to be one, but it was slightly below in Q3. Jim Richiutti - Needham & Company: Okay. And I sounds like you’re satisfied that you’re back on the right track with gross margins trending in the right direction. And I know you not give guidance for 2015, but should we see the benefits of lean continuing to work in favor of higher margins assuming the top line is at a reasonable level?

Yes, I mean that’s obviously why we're driving it. I mean we had some growing pains with that. I think we're working our way through those and we are more confident, now we can extend that to more areas, set up more sales. I would say it’s not just lean, now it’s also the supply chain stuff, which is, it's a little bit different, it’s trying to leverage the procurement and the capabilities across the whole 150 million of direct material that we buy which is in the past been handled very locally and we're trying to global leverage on that. But it’s a combination of those two things, I think does help us gross margin wise as we head into next year. And we're seeing that now in the back half, so we have a lot more confidence now than we did say 90 days ago that we got that at least heading in the right direction. What we don't do is kind of make it all a lot from what we had planned for this year. I mean we’ve got in now trending back, but we’re not sort of on plan for the full year gross margin; I think we will see benefit heading into next year. Jim Richiutti - Needham & Company: Got it. Okay, thanks very much.

Thank you.

Next question comes from Keith Maher with Singular Research.

Hello. I had a question about just your acquisition strategy just in terms of the kind of acquisitions you're looking for and what you are willing to pay in terms of the valuation multiple?

Yes. I’ll let maybe Robert comment on our criteria financially and other stuff. But we’re typically looking for added capabilities either within our medical strategy or in some of the industrial applications that we then have a lot of growth runway. A lot of that ends up being product technology extensions off of what we do know, types of components or subsystems that are adjacent to what we are supplying, now they are used with our products, so they are very similar in nature. So, we can just have a broader offering. It’s particularly a big deal in medical; we’re really pursuing this cross-selling and trying to show OEMs, a broad capability, so we get in on the ground floor of their R&D efforts. So more content, more product types help us there. In the industrial it’s probably the same but it's a little bit more application-specific so you can say in robotics or in 3D printing, additive manufacturing, some of these areas, is there more content we get, can get. So, we think about acquisitions that way, is being adjacent to stuff we’re supplying or things that make us more relevant to the customers we are working with. A lot of this is – its stuff that it’s manageable bolt-on size for us. There are some bigger transactions in there, but a typical app – thing we are looking at is probably $30 million or less in revenue, it depends. There are some that are larger. But most of the time it’s something that we have identified through our own research, our own business teams, our own relationships that we have even the dialogue we have with customers. And we will identify a target and then we are cultivating that. And that can take a long time to cultivate some of this. So we are working on quite a few things trying to get a few of them close to where they can be actionable. But right now we have some that are pretty far downfield, so we are encouraged about that. But Rob you want to just comment on how we think about it?

We don’t necessarily think about it in the traditional sense, I think what you are trying to get a feel for is what’s the multiple of probably EBITDA that we are willing to pay? I can answer to that kind of broadly that we generally look at stuff that’s in the 7% to 10%, 7 times or 10 times range. If you go back and look at the JADAK acquisition, which is very indicative of what we are looking at today with attractive assets that are growing well with nice profitability, we paid roughly 9 times EBITDA for that transaction on a reported basis and eight times when considering the tax attributes which were fairly significant. Generally speaking we would try to get an ROIC of at least 10% by year two and we look for cash on cash returns that are at or above our – that for the overall company. As we spend a lot more time looking at the cash returns of businesses than any sort of GAAP kind of returns and that’s largely on the basis that we are trying to create some value for our shareholders.

Okay. Great, that was very helpful. And should we think about I mean in terms of the primary uses of cash it’s going to be these acquisitions and then in paying down the debt is that kind of the two focus areas for you?

That’s been the operating plan for the last two years. We do have an authorization of $10 million to purchase stock if we think it’s an attractive thing to do and that’s all comes down to what you are trading at. But to-date we see a lot of opportunity on the acquisition side. And then paying down of that debt allows us to go out there and action transactions relatively quickly and that’s an important attribute to have when you are a buyer.

Okay. And in terms of your international exposure, I was looking into 10-Q but I didn’t see that, I mean what percent of sales is international?

So that’s a very difficult question to answer and I will tell you why. Generally speaking when you look at our geographical breakout that we have put it into the 10-K that’s telling you what factories we are shipping to and that’s not what I would deem as our exposure. And what I mean by that is that we can be selling product to a Philips factory in China, about 100% of that product to be coming back into the U.S. And so economic factors or capital – hospital capital spending factors in the U.S. would be influencing our China sales in that particular case much more so than any sort of capital spending in China or any sort of manufacturing sentiment in China and so it’s a very difficult thing to kind of get at, I would say, generally speaking the nature of most of our products, given that they are Precision engineered component trade, they generally sell for a higher price or going to higher-end applications and those higher-end applications in most cases are being installed in some place in the U.S. or in Europe as it pertains to our medical products and to a lesser extent industrial being a lot more evenly mixed.

The thing that you can notice and then what – the upshot of what Robert just said is we don’t track the GDP trends in a lot of the regions, right. But what we do find is that we will track to the things like indices of industrial activity. So if you look at the PMIs which are not measuring GDP, they are measuring industrial activity in a region, we will track to that a little bit more. If the factories in China are procuring stuff they might be building products that are going to ship back to the U.S. But if those factories are ramping up in China that’s going to lead to some business for us, so the PMIs are a good proxy for how our industrial business will behave. They are not good measures of hospital capital spending even in the U.S., never mind globally, it’s not – especially in real-time hard to get. But we would track with hospital CapEx at some level. Although we do see this whole issue that the hospital CapEx gets spend on IT significantly and that's diverting it away from clinical and diagnostic technologies, which is what we need the capital dollars to go to.

Okay, great. Thanks a lot. I appreciate it. That was all I had.

Thank you.

(Operator Instructions) The next question comes from the line of Stefan Mykytiuk from ACK Asset Management.

Hey, good evening Robert, John. How are you?

Fine.

So a couple of questions, I guess first off the – when you talked about the hospital CapEx and being pushed out for to do their deadline to satisfy the electronic medical records requirements. Do you have pretty good visibility that those sales are actually just kind of pushed into 2015, as opposed to you got to go fight for them in the future again?

I mean, you never can say for sure, but these are programs we've been told that we basically are getting the business. So do I have it written in stone that I’m getting that? No, but I mean, these are in the cases that we referred to, these are processes – sort of procurement processes on radiology displays where we have been told that it’s our business. But so I do expect it to be there in 2015. Is it definitely Q1? I can't say for sure.

Now…

So, in other words you, oh, sorry, go ahead.

Well, the other thing I was going to say is, John mentioned the OCT applications and the OCT applications, our products that are already embedded into the OCT instrumentation. And so, to the degree that that market is spending in OCT equipment is going up and down, we flow exactly with that. We're in all the major OEMs that supply OCT equipment. And so as a consequence of that, we have been flowing with that. To the degree that’s down that’s more representative of hospitals not spending their CapEx dollars on OCT equipment and that can be same – that same analogy can be applied to patient monitoring and other areas, we're already embedded into the device itself. And so any sort of fluctuations in our revenue is more indicative of fluctuations of demand of our customers’ products. You go back and look at some of the major OEM customers out there and medical companies that have reported earnings, they all are somewhat saying the same thing that, well hospital CapEx were seeing signs of recovery. There has been a diversion into IT spend and lower dollar value items or lower smaller equipment type of purchases have been delayed, not stopped, delayed. And what you'll likely seen and this has happened now for two years in a row, is that, there will be a pickup at some point in time, because you can’t keep buying IT equipment.

We talked to all the major customers that we serve the OEMs to get planning volumes, right? Because as we start to do the annual planning process and map out what are our labor and material requirements, most of the customers are actually telling us they expect good conditions next year. I mean, we are not really hearing that we expect things to be worse in two quarters than they are right now. We haven't kind of picked up on any of that.

Okay, terrific. And then, I know you touched on it earlier when Lee asked the question about gross margins on a sequential basis, but where – now that you're getting through the lean and it's great that you've shown that you can get through these on a kind of a segment or product line by product line basis. What are your goals for gross margins in the future? And I know in the past I think you’ve talked about greater than 50% flow through on incremental revenues, is that – is that good bogie for, I’m not calling it for 2015. But just at some point in the future that you get there?

Well, I think, at some point when John was talking, he was talking about like kind of a medium-term ambition for the company of being in the $500 million to 20% EBITDA type of range. One of the ways you get to the 20% EBITDA is that you start getting a gross margin that’s closer to anywhere between up 45% and 50%.

I think mid-to-high 40s is really where we like to be. I’m not sure in the end, our business model and all the areas we want to serve is going to sustain 50% plus, but we think mid-to-high 40s is a level we can definitely attain and stay there.

We have some businesses that obviously track higher than that, and some businesses that track a little less, and so the aggregate that average comes out in that range.

Right. And you get there Q2 next year. Okay, alright. Maybe just moving to some of the sequential increases, SG&A and R&D, is that kind of staffing up ahead of some of the new product and cross-selling opportunities next year or what’s driving that?

Yes, well part of that is. From an R&D side, I think that our R&D spend needs to be higher than where it is. I think there is some opportunity as we wanted to focus before we started spending a little bit of money there and wanted to make sure that we knew exactly what programs we wanted to spend those dollars on and that we knew what the returns of ours associated with those. So, that’s one of the reasons why it’s picking up a little bit is that we have identified a number of really good opportunities for the businesses to start investing and we could see some big application opportunities down the road. On the selling and marketing, I think that portion of that is certainly us getting more into the cross-selling effort, a portion of that is just beefing up our selling effort around our medical technologies products. And then I think that’s necessary in order to make that business more competitive, more sustainable and it will help you get forward on a quicker basis.

Okay. And I missed a little bit of what you said on the acquisitions, it’s encouraging to sound like – that it sounds like you have a couple of things teed up or are these things that you have just been sourcing over time and the like some of the past deals just – you are just trying to – it’s meeting of the minds in terms of when someone is willing to part with their baby or the exact price that they want for it?

Yes, I mean, it’s all of the above. Most things, we don’t start conversations and then 3 months later do a deal. That’s really not our model. A lot of these things are going to be dialogues that go on for a year or more. And it’s not only about the deal itself and what valuation and a lot of it is – are these business teams compatible? Are most relevant teams and activities that line up as an adjacency to the acquisition? Did those teams work well together? Can it be – can we jointly approach customers? Can we put this together? Do we think about the business the same way? I mean, one of the reasons why JADAK got done frankly is when we took our team, I went up to Syracuse and met their team and we sat in a room and talked about our business and their business and what we are trying to do in medical and how we think about it. We were on the same page with how we think about how to capture and support OEM programs in medical. It was very compatible philosophies and we saw what they were doing in their factory even though it’s a relatively small business, $50 million type of private company. We walked into that factory and said they run it as well or better as what we do. They share those values, lot of ex-Honeywell people in that operation. So, I think we felt like hey, this can be a GSI business and work well. We are always looking at those factors too. Sometimes, we walk into a private company and we can see there is a philosophical gap here. It’s not going to work. We will keep margins at 10% operating margins or something and continually pass savings through the customers and they don’t understand margin expansion or they just have a culture that’s not compatible with lean or something. So, a lot of it is that. And when we get things further along, it’s saying those factors line up pretty well. It’s also saying that we are not far apart on value. That’s always been a little bit of a struggle. When you have a macro environment that’s been choppy and growth isn’t there in a business, is the growth not there, because the market has been choppy or is it because it’s fundamentally something that can’t grow up.

Alright. So, you are trying to buy growing businesses like JADAK?

That’s greatly proposed.

Okay. And are most of the acquisitions or the things that are near-term in the medical arena?

There is a mix. One of the things, there is not that many targets that we run across that are pure plays in medical. It still happens we found a couple in action those – but a lot of them are blends, where they look like us. They have 30%, 40%, 50% of their stuff is medical and then some – so, if it’s the non-medical piece, if there is one, we got to look and say does that look attractive to us or not.

Alright. But the key is that they are value-added technologies?

Yes, right.

Okay. And just lastly, Robert, when I think you said for the year you expect operating cash flow of $40 million or more and we are at $33 million for the year, is there anything with working capital in Q4 where some of that will reverse or because it would seem like on $14 million of EBITDA and less million in change of CapEx and some interest and taxes, that you could do almost another 10 million or so of free cash in Q4 and less some working capital goes the other way on you?

We’re – we roll up to around $34 million, we get to $40 million of operating cash and I said approximately $40 million of operating cash you just got asked fixed (ph) in there, is it possible to get then, it’s certainly is. There are some cash payments that, that’s been made in the fourth quarter. So, I was just trying to factor it and be somewhat conservative and ensure that things are on the right track. We are, just as a reminder, we just blew through our $70 million net debt level and so we continue to go down further from that. So, I don’t want to go overly optimistic.

Okay, alright. I am not trying to diminish what you’ve achieved, because it’s certainly impressive. And as you roll lean through the rest of the organization, is there still more working capital to come out of the business again over time?

Well what you will see, really at the end of the day at this point in time, our payables and our receivables we feel pretty good about. Our receivables are now going to ebb and flow with any sort of shipment linearity that we have in the quarter. And so if orders come in a little, if a, comes in late, that’s a significant size or orders in general coming a little late, that would have an impact on our DSOs to the degree that we take a product out the door as quickly as we can, that will have an impact on our DSOs.

The one dynamic along those lines, we do see it, I kind of alluded to this. But it’s the behavior we see from a lot of customers, there’s probably a little more prevalent on the industrial side than the medical side is everybody wanting to operate on a shorter lead time with less forward order coverage and take less risk on parts inventory. Everybody just seems to be worried that there’s going to be sudden downdrafts and they don't want to be stuck with parts. So, there is definitely a push to order as late as possible and still get their parts. And so we don't have this business is not operating with as much backlog coverage as it used to. The good news is lean what you’d be able to do that right, you take the slack out of your own delivery lead times you can fulfill against shorter order lead times and still get the revenue, but it makes the planning and the working capital management, it can be challenging, right, because you're sitting there saying, do I build against demand that I don't yet have firmed up. And so as orders can come later in the period and then it’s harder to turn them into a cash receipt within a period.

I think coming down where does the opportunity lie from a lot of lean manufacturing efforts and a lot of the productivity programs and that’s going to be around inventory and why? I know we turn inventory around 3.5 times, that is a, that’s a very good number when comparing us to say the traditional laser companies, traditional manufacturing, small manufacturing companies, but that's pretty pathetic in our view. And so it’s something that we are going to be really be concentrating on. What you don’t want to do and you had to always be careful about is that you could drive that, drive big improvements in that and have material impacts on your profitability in the form of not having inventory on hand or which causes over time run rates will run higher or causing some material shortages that could have an impact on sales. So, you got to do with the right way and so we’ve always been reluctant to pull the trigger on that too aggressively and making sure that let’s get the lean program underway and let’s get some stability into that and then we’ll start getting the improvement naturally in our inventory turns.

Got it. Okay, thanks very much.

Thanks.

(Operator Instructions) And there are no further questions at this time.

Okay. So, let’s go ahead and wrap up. I'd like to say that our Q3 was a success for GSI and that we made strong progress in that one area that was our biggest challenges here and that's gross margin. We’re able to stabilize and improve the yields on to new products, the growing new products we made; a lot of progress with lean. The sales we set up in Q1 and Q2 started to really achieve what I call stability in full rate in Q3. And we do get really the first meaningful savings out of our supply chain initiatives that we’re undertaking. As Robert said in his section, we’ll finish 2014 in the range of $364 million to $367 million of sales, pretty consistent with the original range of $360 million to $370 million. Full year profitability is coming in a bit lower than what we had originally targeted because of the gross margin issues, but we are pretty confident, Q3 encouraged us and we are confident now we are driving towards the profitability goal we have medium-term. Again, that would be that 20% adjusted EBITDA target. The business lines are making good progress. They have all mapped out their future growth strategies and are securing design wins to support that. There are some resources we need to invest cash of that as Robert commented. Capital expenditure trends have not been particularly favorable for us for the last few months, but we view that as the short-term dynamic. So, I mentioned most of the customers are sending pretty positive signals about 2015. Medical cross-selling is sort of seeing a lot of attractive opportunities are already in our revenue funnel and certainly will help growth next year and beyond. So, overall, we are making pretty strong progress as an organization. The improved execution in profitability and cash generation we saw in Q3, they are encouraging and we are confident in our upgraded management team. They are all extremely committed to delivering on our strategy. So, having clear plans and capable people on task, I am confident we will achieve the results we are looking for. I appreciate your interest in GSI and your participation in today’s call. And Robert and I look forward to joining all of you in a few months on the fourth quarter earnings call. So, with that, we will go ahead and adjourn. Thank you very much.

Thank you. This will conclude today’s conference call. You may now disconnect your lines.