GERBER SCIENTIFIC, INC. 
By TOLLAND, Conn., March 3, 2011 /PRNewswire/ -- Gerber Scientific, Inc. (NYSE: GRB) today reported revenue and operating results for its fiscal 2011 third quarter ended January 31, 2011.
Summary of Results from Continuing Operations for FY 2011 Third Quarter versus FY 2010 Third Quarter
-- Reported revenue increased 12.8% to $112.0 million, or up 14.7% on a
constant currency basis;
-- Gross profit increased $7.3 million to $37.1 million, reflecting higher
volume and an improvement in gross margin from 30.0% to 33.1%. The gross
margin expansion reflects a higher mix of Apparel and Industrial sales,
lower warranty expenses and higher seasonal supplier rebates in the Sign
Making and Specialty Graphics segment, as well as the benefit of $2.8
million in cost reductions in the Apparel and Industrial segment;
-- Selling, general and administrative (SG&A) expenses were $29.9 million,
or 26.7% of sales, compared with $25.3 million, or 25.5% of sales.
Approximately $0.8 million of cost reductions were offset by the
restoration of temporary wage reductions and incentive compensation
totaling $2.4 million and an increase of $1.0 million in commissions due
to volume and channel mix;
-- Excluding restructuring and other expenses, operating income was up $2.4
million to $3.1 million. Restructuring and other expenses fell from $1.5
million to $0.6 million and reported operating income increased to $2.5
million versus an operating loss of $0.7 million;
-- Income from continuing operations was $1.1 million, or $0.04 per diluted
share, versus a loss of $1.3 million, or $0.05 per diluted share,
reflecting the benefit of lower interest expense. Net income was $1.7
million, or $0.07 per diluted share, compared with a net loss of $0.8
million, or $0.03 per diluted share;
-- Due primarily to an increase in inventory levels, excluding discontinued
operations, the Company used $3.1 million in cash flow from operations,
including capital expenditures, compared to cash generation of $2.5
million in the prior year;
-- Total outstanding debt was $20 million, down from $45 million at the
Company's fiscal year end of April 30, 2010, due principally to the
application of the proceeds from the Gerber Coburn sale.
"This was a solid performance quarter for Gerber, with revenue gains across all product segments and geographic regions," said Marc Giles, Gerber Scientific President and Chief Executive Officer. "Market demand remained strong in the Apparel and Industrial segment with 17% sales growth overall, and 22% growth from our key strategic markets in Greater China. Across the company, China revenue, including exports, was up a strong 68% in the third quarter. Spandex, our aftermarket distribution business, posted 10% year-over-year currency-neutral revenue growth and reported sales gains across almost every region that it serves.
Equally important, we made substantial progress on the strategic front. First, we divested Gerber Coburn, which allowed us to refocus our efforts on higher growth segments. Second, we reduced our debt by another $15 million during the quarter, cutting our outstanding debt by 56% since our fiscal year end. And, finally, we continued to make progress in the execution of our cost reduction initiatives. In fact, year to date we have realized $6.3 million in cost reductions against our full year 2011 target of $7.2 million and have already completed $8.1 million in reductions against next year's target of $14.9 million."
Outlook and Guidance
"With the strong performance posted this past quarter and a more stable outlook, we are revising upward our annual revenue guidance for fiscal 2011 from a range of $435 million to $440 million to a range of $450 million to $455 million," said Mr. Giles. "In addition, with the strong order backlog at quarter end and greater certainty regarding our cost reduction initiatives, we are now confident in providing revenue and operating earnings guidance for fiscal 2012. For fiscal 2012 we are forecasting annual revenue growth between 3% and 5% and operating margins, excluding restructuring and other charges, to range between 5% and 7%. This forecast is in line with our stated objective of achieving and sustaining a 10% operating margin by fiscal 2013."
Subsequent Events
The Company reported that it completed a facilities rationalization project in February 2011, in which the Company's corporate offices in South Windsor, CT were relocated and consolidated with certain of its other operations located in Tolland, CT. As part of the transaction, the Company completed a non-cash exchange of its owned facility in Tolland, CT for a leased facility in South Windsor, CT, under the same terms and conditions of the lease. The Company now owns the South Windsor, CT facility and will potentially be able to monetize this under-utilized facility. The South Windsor, CT facility will be recorded as an asset and a financing liability will be established on the Company's balance sheet of approximately $8.9 million as of February 2011.
The Company also reported that it completed an amendment to its current revolving credit facility that provides for a lower interest rate grid and extends the maturity from January 31, 2012 to March 1, 2016. The amount of the commitment increased to $75 million from $60 million and the financial covenants targets were eased to allow for the facilities rationalization project, among other items.
Quarterly Conference Call
Gerber Scientific's quarterly earnings conference is scheduled for today at 10:00 a.m. ET. Please dial 719.457.2664 and provide the operator with confirmation code 2098517 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, packaging, apparel and industrial industries. Headquartered in Tolland, Connecticut, the Company operates through three primary businesses: Gerber Scientific Products, Spandex and Gerber Technology.
Forward-looking Statements
Any statements in this news release not relating to historical matters are "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. The forward-looking statements contained in this news release involve risks and uncertainties regarding the Company's expected financial condition, results of operations and cash flows. 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, 2010, which outlines certain important risks regarding the Company's forward-looking statements, as well as information included in subsequently filed Quarterly Reports on Form 10-Q and Current Reports on Form 8-K. 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, 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 forward-looking statements contained in this release are made as of the date of this release and 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
Ended January
31,
---------------
In thousands, except per
share data 2011 2010
------------------------ ---- ----
Revenue:
Product sales $97,578 $84,931
Service sales 14,376 14,290
------------- ------ ------
111,954 99,221
Cost of Sales:
Cost of products sold 65,557 60,666
Cost of services sold 9,302 8,792
---------------------
74,859 69,458
Gross profit 37,095 29,763
Selling, general and
administrative expenses 29,907 25,288
Research and development 4,070 3,717
Restructuring and other
expenses 642 1,472
----------------------- --- -----
Operating income (loss) 2,476 (714)
Other income (expense),
net (376) (33)
Interest expense (444) (1,048)
----------------------- ---- ------
Income (Loss) from
continuing operations 1,656 (1,795)
before income taxes
Income tax expense
(benefit) 530 (502)
------------------ --- ----
Income (Loss) from
continuing operations 1,126 (1,293)
Income (Loss) from
discontinued operations,
net of tax 602 484
------------------------- --- ---
Net income (loss) $1,728 $(809)
----------------- ------ -----
Basic earnings (loss) per
common share:
Continuing operations $0.04 $(0.05)
Discontinued operations 0.02 0.02
----------------------- ---- ----
Basic earnings (loss) per
common share(1) $0.07 $(0.03)
------------------------- ----- ------
Diluted earnings (loss)
per common share:
Continuing operations $0.04 $(0.05)
Discontinued operations 0.02 0.02
----------------------- ---- ----
Diluted earnings (loss)
per common share(1) $0.07 $(0.03)
----------------------- ----- ------
Weighted average shares
outstanding:
Basic 25,136 25,195
Diluted 25,223 25,195
For the Nine
Months
------------
Ended January
31,
--------------
In thousands, except per
share data 2011 2010
------------------------ ---- ----
Revenue:
Product sales $292,437 $259,346
Service sales 43,385 44,097
------------- ------ ------
335,822 303,443
Cost of Sales:
Cost of products sold 203,407 189,002
Cost of services sold 28,023 25,939
---------------------
231,430 214,941
Gross profit 104,392 88,502
Selling, general and
administrative expenses 84,405 73,863
Research and development 11,653 10,909
Restructuring and other
expenses 2,977 2,014
----------------------- ----- -----
Operating income (loss) 5,357 1,716
Other income (expense),
net (278) (1,308)
Interest expense (1,274) (2,256)
---------------- ------ ------
Income (Loss) from
continuing operations 3,805 (1,848)
before income taxes
Income tax expense
(benefit) 1,204 (1,323)
------------------ ----- ------
Income (Loss) from
continuing operations 2,601 (525)
Income (Loss) from
discontinued operations,
net of tax (15,456) 689
------------------------- ------- ---
Net income (loss) $(12,855) $164
----------------- -------- ---
Basic earnings (loss) per
common share:
Continuing operations $0.10 $(0.02)
Discontinued operations (0.62) 0.03
----------------------- ----- ----
Basic earnings (loss) per
common share(1) $(0.51) $0.01
------------------------- ------ -----
Diluted earnings (loss)
per common share:
Continuing operations $0.10 $(0.02)
Discontinued operations (0.61) 0.03
----------------------- ----- ----
Diluted earnings (loss)
per common share(1) $(0.51) $0.01
----------------------- ------ -----
Weighted average shares
outstanding:
Basic 25,131 24,904
Diluted 25,197 24,904
1 Basic and diluted earnings (loss) per share is based on actual
calculated values and totals may not sum due to rounding.
GERBER SCIENTIFIC, INC.
SUMMARY SEGMENT INFORMATION
(Unaudited)
For the Fiscal
Quarters Ended
January 31,
--------------
In thousands 2011 2010
------------ ---- ----
Sign Making and
Specialty Graphics:
Gerber Scientific
Products $8,703 $7,014
Spandex 53,548 49,785
------- ------ ------
Sign Making and
Specialty Graphics 62,251 56,799
Apparel and Industrial 49,703 42,610
Intersegment revenue
elimination --- (188)
-------------------- --- ----
Consolidated revenue $111,954 $99,221
-------------------- -------- -------
Sign Making and
Specialty Graphics:
Gerber Scientific
Products $(727) $(2,112)
Spandex 4,126 2,727
------- ----- -----
Sign Making and
Specialty Graphics 3,399 615
Apparel and Industrial 6,338 4,712
Unallocated (492) (646)
----------- ---- ----
Segment operating income 9,245 4,681
Corporate operating
expenses (2,203) (2,176)
Corporate unallocated
company-wide expenses (4,566) (3,219)
--------------------- ------ ------
Consolidated operating
income (loss) $2,476 $(714)
---------------------- ------ -----
For the Nine
Months
------------
Ended January
31,
--------------
In thousands 2011 2010
------------ ---- ----
Sign Making and Specialty
Graphics:
Gerber Scientific
Products $29,266 $27,157
Spandex 164,291 157,591
------- ------- -------
Sign Making and Specialty
Graphics 193,557 184,748
Apparel and Industrial 142,275 119,667
Intersegment revenue
elimination (10) (972)
-------------------- --- ----
Consolidated revenue $335,822 $303,443
-------------------- -------- --------
Sign Making and Specialty
Graphics:
Gerber Scientific
Products $(3,120) $(3,990)
Spandex 13,128 9,230
------- ------ -----
Sign Making and Specialty
Graphics 10,008 5,240
Apparel and Industrial 14,972 13,481
Unallocated (1,935) (1,981)
----------- ------ ------
Segment operating income 23,045 16,740
Corporate operating
expenses (6,527) (6,910)
Corporate unallocated
company-wide expenses (11,161) (8,114)
---------------------- ------- ------
Consolidated operating
income (loss) $5,357 $1,716
---------------------- ------ ------
Unallocated segment expenses included overhead costs remaining after the sale of Gerber Coburn. Corporate unallocated company-wide expenses included insurance costs, pension, stock-based compensation, bonus costs and other expenses.
GERBER SCIENTIFIC, INC.
SELECTED FINANCIAL DATA - REVENUE BY PRODUCT TYPE
(Unaudited)
For the
Fiscal
Quarters For the
Ended Nine
January 31, Months
----------- -------
Ended
January
31,
--------
In thousands 2011 2010 2011 2010
------------ ---- ---- ---- ----
Equipment and
software
revenue $35,462 $27,437 $97,147 $75,270
Aftermarket
supplies
revenue 62,116 57,494 195,290 184,076
Service revenue 14,376 14,290 43,385 44,097
--------------- ------ ------ ------ ------
Consolidated
revenue $111,954 $99,221 $335,822 $303,443
------------ -------- ------- -------- --------
GERBER SCIENTIFIC, INC.
SELECTED FINANCIAL DATA - KEY OPERATING RATIOS
(Unaudited)
For the Fiscal For the
Quarters Ended Nine
January 31, Months
-------------- -------
Ended
January
31,
--------
2011 2010 2011 2010
---- ---- ---- ----
Gross
margin 33.1% 30.0% 31.1% 29.2%
Operating
margin 2.2% (0.7)% 1.6% 0.6%
---------- --- ----- --- ---
GERBER SCIENTIFIC, INC.
SELECTED FINANCIAL DATA - FINANCIAL POSITION
(Unaudited)
January
31, April
2011 30,
-------- -----
In thousands, except
ratio data 2010
-------------------- ----
Cash and cash
equivalents $11,206 $11,305
Working capital $64,999 $76,549
Total debt $20,000 $45,000
Net debt (total debt
less cash and cash
equivalents) $8,794 $33,695
Shareholders' equity $150,825 $158,206
Total capital (net debt
plus shareholders'
equity) $159,619 $191,901
Current ratio 1.78:1 1.85:1
Net debt-to-total
capital ratio 5.5% 17.6%
GERBER SCIENTIFIC, INC.
SELECTED FINANCIAL DATA - CASH FLOWS
(Unaudited)
-----------
For the Fiscal
Quarters Ended
January 31,
--------------
In thousands 2011 2010
------------ ---- ----
Net cash (used for)
provided by
operating activities $(1,988) $3,724
Net cash provided by
(used for) investing
activities $18,119 $(3,200)
Net cash used for
financing activities $(15,089) $(6,206)
Depreciation and
amortization $1,784 $2,106
Capital expenditures $1,116 $1,239
For the Nine
Months
------------
Ended January 31,
-----------------
In thousands 2011 2010
------------ ---- ----
Net cash (used for)
provided by operating
activities $11,795 $19,478
Net cash provided by
(used for) investing
activities $15,747 $5,299
Net cash used for
financing activities $(26,308) $(28,256)
Depreciation and
amortization $5,838 $7,250
Capital expenditures $3,622 $3,231
GERBER SCIENTIFIC, INC.
SELECTED FINANCIAL DATA - REVENUE BY GEOGRAPHIC LOCATION
(Unaudited)
For the Fiscal
Quarters Ended
January 31,
--------------
In thousands 2011 2010
------------ ---- ----
North America $32,104 $30,124
Europe 54,575 47,974
Rest of world 25,275 21,123
------------- ------ ------
Consolidated
revenue $111,954 $99,221
------------ -------- -------
For the Nine Months
-------------------
Ended January 31,
-----------------
In thousands 2011 2010
------------ ---- ----
North America $90,963 $76,750
Europe 162,124 158,121
Rest of world 82,735 68,572
------------- ------ ------
Consolidated
revenue $335,822 $303,443
------------ -------- --------
SOURCE Gerber Scientific, Inc.
