Gerber Scientific, Inc. Reports Fiscal 2010 Second Quarter Results
(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.
