Home News Gerber Scientific, Inc. Reports Fiscal 2010 Second Quarter Results

Gerber Scientific, Inc. Reports Fiscal 2010 Second Quarter Results

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(SOUTH WINDSOR, CONN., DECEMBER 07, 2009) Gerber Scientific, Inc. today reported revenue and earnings results for its fiscal 2010 second quarter ended October 31, 2009. In accordance with U.S. generally accepted accounting principles, FOBA Technology + Services GmbH (“FOBA”), ND Graphics (both sold in September 2009) and Spandex Poland (closed in October 2009) have been reflected as discontinued operations for all periods reported.

Summary of Results from Continuing Operations for FY 2010 Second Quarter versus FY 2009 Second Quarter

• Reported revenue declined 15.7% to $120.2 million from $142.6 million. Core business was down 17.7% including the effects of currency fluctuations, which increased revenue by $1.1 million, or 0.7%, while acquisitions completed after the fiscal 2009 first quarter added incremental revenue of $2.5 million, or 1.8%;
• Gross profit was $35.2 million or 29.3% of sales versus $41.4 million or 29.0% of sales. Gross profit and margin reflected the adverse impact of significantly lower sales volume and the resulting impact of lower manufacturing cost absorption, as well as a less favorable sales mix, partially offset by cost reductions. In addition, gross profit and margin in the current quarter benefited from $1.3 million of patent license revenue and the favorable contribution from acquisitions;
• Selling, general and administrative (SG&A) expenses declined $2.3 million to $27.8 million, or 23.1% of sales, compared with $30.2 million, or 21.2% of sales, due to expense reduction initiatives. R&D spending was down $1.2 million to $4.5 million;
• Operating income was $2.9 million, or a 2.4% operating margin, compared with $5.6 million of operating income and an operating margin of 3.9%, reflecting the impact of significantly lower gross profit moderated by cost savings measures;
• Income from continuing operations was $1.9 million or $0.08 per diluted share, compared with $6.4 million or $0.26 per diluted share. Net income was $0.5 million or $0.02 per diluted share, compared with $6.1 million or $0.25 per diluted share. Net income in the current and prior year second quarters included non-recurring tax benefits of $0.7 million, or $0.03 per diluted share, and $3.4 million, or $0.14 per diluted share, respectively;
• Net cash flows from operations, less capital expenditures, totaled $0.4 million compared with $5.2 million, due principally to the lower net income in the current quarter;
• Total outstanding debt was reduced by $9.5 million in the current quarter. Total debt has been reduced by $22.5 million since the Company’s April 30, 2009 fiscal year end.
“Despite weak market conditions and difficult year-over-year comparisons, revenue from continuing operations on a sequential basis appears to have stabilized, which gives us further conviction that our markets have bottomed,” said Marc Giles, Gerber Scientific President and Chief Executive Officer. “Equally important, order activity strengthened in the quarter and was up roughly ten percent from the fiscal 2009 fourth quarter with gains across all business segments. We also continued to tightly manage controllable expenses, which resulted in an eight percent, or $2.3 million, decline in SG&A expenses from a year ago – which was on top of a $2.3 million decline last year in the second quarter, when we initiated our aggressive cost cutting actions.”

Mr. Giles added, “We continued to make important progress in the execution of our business strategy by completing the sales of our non-core FOBA and ND Graphics business units, which generated net proceeds of approximately $13.0 million and allowed us to reduce our debt by an additional $9.5 million in the quarter. Year to date, we’ve reduced outstanding debt by $22.5 million and we also successfully amended our credit agreement in November to further increase our flexibility under the facility. As a result of the increased flexibility, we were able to complete the acquisition of Yunique Solutions Inc. last week, a product lifecycle management (PLM) software solutions developer that expands and advances Gerber’s technology platform and capabilities in the fashion industry. Plus, we were able to cease the non-profitable aftermarket operations of a small facility in Poland during the quarter and are continuing to aggressively seek opportunities to lower our cost structure even further.”

Outlook and Guidance

“With the improved quote and order activity during the quarter, we are more optimistic that we are beginning to see a rebound in our markets,” said Mr. Giles. “We’ve seen several encouraging signs in recent weeks including increased quote and order activity overall for systems and aftermarket products, and especially from China, which is an important growth market for us. Several of our business units have also reported increased attendance and a higher level of interest for our new products at recent trade shows. However, we will remain cautious in the near term, especially due to the seasonality of our business, and will continue to tightly manage expenses and limit R&D to sustaining projects until we are more confident that the recovery is fully underway and sustainable. However, when the economy and our markets rebound, we are confident that we will be able to leverage our improved cost structure to deliver higher earnings.”

Quarterly Conference Call

Gerber Scientific’s quarterly earnings conference is scheduled for today at 10:00 a.m. ET. Please dial 719-325-4834 and provide the operator with confirmation code 1420745 to participate in the call in a listen only mode. The Company will also provide a live webcast of the call which may be accessed through the Company’s website (www.gerberscientific.com). A webcast replay of the call will also be available for ninety days, as well as a conference call transcription, which will be available three business days after the conference call, on the Company’s website under the Investor Relations tab.

About Gerber Scientific, Inc.

Gerber Scientific, Inc. (http://www.gerberscientific.com) is a leading international supplier of sophisticated automated manufacturing systems for the sign making, specialty graphics and packaging, apparel and flexible materials, and ophthalmic lens processing industries. Headquartered in South Windsor, Connecticut, the Company operates through four primary businesses: Gerber Scientific Products, Spandex, Gerber Technology and Gerber Coburn.

Cautionary Note Concerning Factors That May Affect Future Results

This news release contains “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. Statements contained in this news release regarding the Company’s expected financial condition, results of operations, cash flows, product launches and cost reductions are forward-looking statements that involve risks and uncertainties. For information identifying other important economic, political, regulatory, legal, technological, competitive and other uncertainties, readers are referred to the Company’s filings with the Securities and Exchange Commission, including but not limited to, the information included in Gerber Scientific’s Annual Report on Form 10-K for the fiscal year ended April 30, 2009 under the headings “Business,” “Risk Factors” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations – Cautionary Note Concerning Factors That May Influence Future Results,” as well as information included in subsequently filed Quarterly Reports on Form 10-Q and Current Reports on Form 8-K, which outline certain important risks regarding the Company’s forward-looking statements. These risks include, but are not limited to, delays in the Company’s new product development and commercialization, intense competition in markets for each of the Company’s operating segments, rapid technological advances, availability and cost of raw materials, continued adverse economic and credit market conditions, volatility in foreign currency exchange rates and fluctuations in interest rates. Actual future results or events may differ materially from these forward-looking statements. The Company expressly disclaims any obligation to update any of these forward-looking statements, except as required by law.

GERBER SCIENTIFIC, INC.
SUMMARY OF OPERATIONS
(Unaudited)
For the Fiscal Quarters        For the Six Months
Ended October 31,            Ended October 31,
———————–        ——————-

In thousands, except
per share data          2009           2008            2009       2008
—-           —-            —-       —-

Revenue:
Product sales   $103,546       $123,760        $197,310   $252,950
Service sales     16,614         18,793          33,438     37,768
——         ——          ——     ——
120,160        142,553         230,748    290,718

Cost of Sales:
Cost of products
sold             74,646         88,811         143,430    183,624
Cost of services
sold             10,294         12,337          20,071     25,345
——         ——          ——     ——
84,940        101,148         163,501    208,969

Gross profit           35,220         41,405          67,247     81,749

Selling, general and
administrative
expenses              27,817         30,155          51,967     62,718
Research and
development            4,532          5,698           8,960     11,931
—–          —–           —–     ——

Operating income        2,871          5,552           6,320      7,100

Other income
(expense), net          (394)          (412)         (1,399)      (537)
Interest expense         (918)          (748)         (1,860)    (1,287)
—-           —-          ——     ——

Income from continuing
operations before
income taxes           1,559          4,392           3,061      5,276

Income tax benefit       (374)        (1,973)            (15)    (1,813)
—-         ——             —     ——

Income from continuing
operations             1,933          6,365           3,076      7,089

Loss from discontinued
operations,
net of tax            (1,474)          (271)         (2,103)      (314)
——           —-          ——       —-

Net income               $459         $6,094            $973     $6,775
—         ——             —     ——

Basic earnings (loss)
per common share:
Continuing
operations        $0.08          $0.27           $0.12      $0.30
Discontinued
operations        (0.06)         (0.02)          (0.08)     (0.02)
—–          —–           —–      —–

Basic earnings per
common share           $0.02          $0.25           $0.04      $0.28
—–          —–           —–      —–

Diluted earnings (loss)
per common share:
Continuing
operations        $0.08          $0.26           $0.12      $0.29
Discontinued
operations        (0.06)         (0.01)          (0.08)     (0.01)
—–          —–           —–      —–

Diluted earnings per
common share           $0.02          $0.25           $0.04      $0.28
—–          —–           —–      —–

Weighted average
shares outstanding:
Basic             24,907         23,965          24,759     23,865
Diluted           24,956         24,087          24,782     24,047
——         ——          ——     ——

GERBER SCIENTIFIC, INC.
SUMMARY SEGMENT INFORMATION
(Unaudited)

 For the Fiscal Quarters    For the Six Months
Ended October 31,        Ended October 31,
———————–    ——————
In thousands              2009         2008          2009       2008
—-         —-          —-       —-

Sign Making and
Specialty Graphics:
Gerber Scientific
Products            $13,375      $18,954       $24,262    $33,519
Spandex               55,689       62,581       108,827    131,692
——       ——       ——-    ——-

Sign Making and
Specialty Graphics     69,064       81,535       133,089    165,211
Apparel and Flexible
Materials              37,094       45,382        72,154     94,331
Ophthalmic Lens
Processing             14,002       15,636        25,505     31,176
——       ——        ——     ——

 Consolidated
revenue       $120,160     $142,553      $230,748   $290,718
——–     ——–      ——–   ——–

Sign Making and
Specialty
Graphics:
Gerber Scientific
Products            $(1,240)        $150       $(2,462)   $(1,215)
Spandex                3,492        2,675         6,525      6,128
—–        —–         —–      —–
Sign Making and
Specialty Graphics      2,252        2,825         4,063      4,913
Apparel and
Flexible Materials      3,298        4,929         7,457      8,595
Ophthalmic Lens
Processing              1,625        1,773         2,320      1,888
—–        —–         —–      —–
Segment
operating
income            7,175        9,527        13,840     15,396
Corporate operating
expenses               (4,304)      (3,975)       (7,520)    (8,296)
——       ——        ——     ——
Consolidated
operating
income          $2,871       $5,552        $6,320     $7,100
——       ——        ——     ——

GERBER SCIENTIFIC, INC.
SELECTED FINANCIAL DATA – REVENUE BY PRODUCT TYPE
(Unaudited)

 For the Fiscal Quarters     For the Six Months
Ended October 31,         Ended October 31,
———————–     ——————
In thousands              2009         2008          2009       2008
—-         —-          —-       —-
Equipment and software
revenue               $29,880      $43,611       $55,729    $84,983
Aftermarket supplies
revenue                73,666       80,149       141,581    167,967
Service revenue         16,614       18,793        33,438     37,768
——       ——        ——     ——
Consolidated
revenue       $120,160     $142,553      $230,748   $290,718
——–     ——–      ——–   ——–

GERBER SCIENTIFIC, INC.
SELECTED FINANCIAL DATA – KEY OPERATING RATIOS
(Unaudited)

 For the Fiscal Quarters        For the Six Months
Ended October 31,            Ended October 31,
—————–             —————–
2009            2008           2009         2008
—-            —-           —-         —-
Gross margin           29.3%           29.0%          29.1%        28.1%
Operating margin        2.4%            3.9%           2.7%         2.4%
—             —            —          —

GERBER SCIENTIFIC, INC.
SELECTED FINANCIAL DATA – FINANCIAL POSITION
(Unaudited)
October 31,     April 30,
In thousands, except ratio data                  2009          2009
—-          —-

Cash and cash equivalents                     $14,443       $10,313
Working capital                               $87,808       $92,839
Total debt                                    $51,000       $73,500
Net debt (total debt less cash and
cash equivalents)                            $36,557       $63,187
Shareholders’ equity                         $166,815      $148,302
Total capital (net debt plus shareholders’
equity)                                     $203,372      $211,489
Current ratio                                  1.96:1        2.02:1
Net debt-to-total capital ratio                  18.0%         29.9%
——-       ——-

GERBER SCIENTIFIC, INC.
SELECTED FINANCIAL DATA – CASH FLOWS
Unaudited)

 For the Fiscal Quarters        For the Six Months
Ended October 31,           Ended October 31,
———————–        ——————
In thousands             2009           2008          2009           2008
—-           —-          —-           —-

Net cash provided by
operating activities  $1,281         $7,915       $15,754         $2,941
Net cash provided by
(used for) investing
activities           $10,603       $(32,226)       $8,499       $(38,081)
Net cash (used for)
provided by financing
activities           $(9,638)       $29,725      $(22,050)       $41,637
Depreciation and
amortization          $2,508         $2,419        $5,144         $4,826
Capital expenditures     $832         $2,715        $1,992         $4,921
——        ——-       ——-        ——-

GERBER SCIENTIFIC, INC.
SELECTED FINANCIAL DATA – ORDERS BY GEOGRAPHIC LOCATION
(Unaudited)

 For the Fiscal Quarters       For the Six Months
Ended October 31,           Ended October 31,
———————–       ——————
In thousands           2009            2008         2009         2008
—-            —-         —-         —-
North America       $36,623         $37,608      $68,298      $81,582
Europe               57,248          70,584      113,432      150,740
Rest of world        26,472          18,575       49,738       48,271
——          ——       ——       ——
Consolidated
orders     $120,343        $126,767     $231,468     $280,593
——–        ——–     ——–     ——–

SOURCE: Gerber Scientific, Inc.

Ben Hanson Ben Hanson is one of WhichPLM’s top contributors. Ben has worked for magazines, newspapers, local government agencies, multi-million pound conservation projects, museums and creative publications before his eventual migration to the Retail, Footwear and Apparel industry.Having previously served as WhichPLM’s Editor, Ben knows the WhichPLM style, and has been responsible for many of our on-the-ground reports and interviews over the last few years. With a background in literature, marketing and communications, Ben has more than a decade’s worth of experience, and is now viewed as one of the industry’s best-known writers.

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