November 21, 1995
Securities & Exchange Commission
Judiciary Plaza
450 Fifth Street, N.W.
Washington, D.C. 20549
Re: Gerber Scientific, Inc.
Commission File No. 1-5865
Gentlemen:
Pursuant to regulations of the Securities and Exchange
Commission, submitted herewith for filing on behalf of Gerber
Scientific, Inc. (the "Company") is the Company's Form 10-Q for
the quarter ended October 31, 1995.
This filing is being effected by direct transmission to the
Commission's EDGAR System.
Very truly yours,
/s/ George M. Gentile
George M. Gentile
Senior Vice President, Finance
<PAGE>1
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(MARK ONE) QUARTERLY REPORT / X / OR TRANSITION REPORT / /
PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the quarter ended
October 31, 1995 Commission File No. 1-5865
GERBER SCIENTIFIC, INC.
-------------------------------------------------------
(Exact name of Registrant as specified in its charter)
CONNECTICUT 06-0640743
------------------------------- -------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
83 Gerber Road West, South Windsor, Connecticut 06074
-------------------------------------------------- ----------
(Address of principal executive offices) (Zip Code)
Registrant's Telephone Number, including area code (860) 644-1551
--------------
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange
Act of 1934 during the preceding 12 months (or for such shorter period
that the registrant was required to file such reports) and (2) has been
subject to such filing requirements for the past 90 days.
Yes / X / . No / / .
At October 31, 1995, 23,511,845 shares of common stock of the Registrant
were outstanding.
<PAGE>2
GERBER SCIENTIFIC, INC.
AND SUBSIDIARIES
CONTENTS OF QUARTERLY REPORT ON FORM 10-Q
Quarter ended October 31, 1995
PAGE
----
Part I - Financial Information
Item 1. Consolidated Financial Statements:
Statement of Earnings for the three months 2
ended October 31, 1995 and 1994
Statement of Earnings for the six months 3
ended October 31, 1995 and 1994
Balance Sheet at October 31, 1995 and 4
April 30, 1995
Statement of Cash Flows for the six months 5
ended October 31, 1995 and 1994
Notes to Financial Statements 6
Independent Accountants' Report 8
Item 2. Management's Discussion and Analysis of 9
Financial Condition and Results of Operations
Part II - Other Information
Item 4. Submission of Matters to a Vote 12
of Security Holders
Item 6. Exhibits and Reports on Form 8-K 12
Signature 13
Exhibit Index
-1-
<PAGE>3
GERBER SCIENTIFIC, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF EARNINGS
------------------------------------------------------------------------
In Thousands
(except per share amounts)
------------------------------------------------------------------------
Three Months Ended October 31, 1995 1994
------------------------------------------------------------------------
Revenue:
Product sales $ 78,699 $ 63,047
Service 11,459 9,897
--------- ---------
90,158 72,944
--------- ---------
Costs and Expenses:
Cost of product sales 41,727 34,140
Cost of service 7,539 6,542
Selling, general and administrative 27,950 21,750
Research and development expenses 6,055 6,454
--------- ---------
83,271 68,886
--------- ---------
Operating income 6,887 4,058
Other income 939 1,685
Interest expense (93) (90)
--------- ---------
Earnings before income taxes 7,733 5,653
Provision for income taxes 2,200 1,600
--------- ---------
Net earnings $ 5,533 $ 4,053
========= =========
Net earnings per common share $ .23 $ .17
========= =========
Dividends paid per common share $ .08 $ .08
========= =========
Average common shares outstanding 23,912 24,012
========= =========
See Accompanying Notes
-2-
<PAGE>4
GERBER SCIENTIFIC, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF EARNINGS
------------------------------------------------------------------------
In Thousands
(except per share amounts)
------------------------------------------------------------------------
Six Months Ended October 31, 1995 1994
------------------------------------------------------------------------
Revenue:
Product sales $ 155,772 $ 123,916
Service 22,577 19,061
--------- ---------
178,349 142,977
--------- ---------
Costs and Expenses:
Cost of product sales 83,522 68,269
Cost of service 14,959 12,653
Selling, general and administrative 55,726 42,499
Research and development expenses 12,132 11,934
--------- ---------
166,339 135,355
--------- ---------
Operating income 12,010 7,622
Other income 2,313 2,836
Interest expense (197) (204)
--------- ---------
Earnings before income taxes 14,126 10,254
Provision for income taxes 4,100 3,100
--------- ---------
Net earnings $ 10,026 $ 7,154
========= =========
Net earnings per common share $ .42 $ .30
========= =========
Dividends paid per common share $ .16 $ .14
========= =========
Average common shares outstanding 23,954 24,018
========= =========
See Accompanying Notes
-3-
<PAGE>5
GERBER SCIENTIFIC, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
In Thousands
------------------------------------------------------------------------
October 31, April 30,
1995 1995
------------------------------------------------------------------------
ASSETS
Current Assets:
Cash and short-term cash investments $ 6,519 $ 10,208
Accounts receivable 68,354 62,900
Inventories 64,657 59,496
Prepaid expenses 11,276 14,310
---------- ----------
150,806 146,914
---------- ----------
Investments and long-term
receivables 68,495 84,152
---------- ----------
Property, plant and equipment 105,199 100,217
Less accumulated depreciation 50,928 49,081
---------- ----------
54,271 51,136
---------- ----------
Intangible assets 48,404 48,094
Less accumulated amortization 8,932 8,435
---------- ----------
39,472 39,659
---------- ----------
Other assets 3,178 2,567
---------- ----------
$ 316,222 $ 324,428
========== ==========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities:
Notes payable $ -- $ --
Current maturities of long-term debt 193 193
Accounts payable 12,833 19,179
Accrued compensation and benefits 11,009 10,935
Other accrued liabilities 22,244 25,050
Deferred revenue and litigation award 9,867 9,318
Advances on sales contracts 3,502 3,722
---------- ----------
59,648 68,397
---------- ----------
Noncurrent Liabilities:
Deferred income taxes 8,897 9,541
Long-term debt 7,435 7,531
Other 1,657 1,657
---------- ----------
17,989 18,729
---------- ----------
Contingencies and Commitments
Shareholders' Equity:
Preferred stock, no par value; authorized
10,000,000 shares; no shares issued -- --
Common stock, $1.00 par value; authorized
65,000,000 shares; issued and outstanding
23,511,845 and 23,757,780 shares 23,512 23,758
Paid-in capital 34,931 34,885
Retained earnings 178,330 176,621
Cumulative translation component 1,812 2,038
---------- ----------
238,585 237,302
---------- ----------
$ 316,222 $ 324,428
========== ==========
See Accompanying Notes
-4-
<PAGE>6
GERBER SCIENTIFIC, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CASH FLOWS
In Thousands
--------------------------------------------------------------------------
Six Months Ended October 31, 1995 1994
--------------------------------------------------------------------------
CASH PROVIDED BY (USED FOR):
Operating Activities
Net earnings $ 10,026 $ 7,154
Adjustments to reconcile net earnings to
cash provided by operating activities:
Depreciation and amortization 5,248 4,900
Deferred income taxes (644) 2,038
Changes in operating accounts, net of
effects from business acquisitions:
Accounts receivable (4,980) (3,916)
Long-term receivables (60) 43
Inventories (4,950) 1,149
Prepaid expenses 3,034 (2,435)
Accounts payable and accrued expenses (8,749) 4,649
-------- --------
Provided by (Used for) Operating Activities (1,075) 13,582
-------- --------
Financing Activities
Purchase of common stock (5,274) (1,370)
Repayments of long-term debt (96) (597)
Net short-term financing -- (2,471)
Exercise of stock options 559 235
Dividends on common stock (3,802) (3,338)
-------- --------
(Used for) Financing Activities (8,613) (7,541)
-------- --------
Investing Activities
Long-term debt securities 15,258 (1,116)
Business acquisitions (486) (8,706)
Additions to property, plant and equipment (7,461) (4,230)
Intangible and other assets (1,071) (924)
Other long-term investments (241) 740
-------- --------
Provided by (Used for) Investing Activities 5,999 (14,236)
-------- --------
(Decrease) in Cash and Short-Term
Cash Investments (3,689) (8,195)
Cash and Short-Term Cash Investments,
Beginning of Period 10,208 15,605
-------- --------
Cash and Short-Term Cash Investments,
End of Period $ 6,519 $ 7,410
======== ========
See Accompanying Notes
-5-
<PAGE>7
GERBER SCIENTIFIC, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1
The consolidated balance sheet at October 31, 1995, the
consolidated statements of earnings for the three- and six-month
periods ended October 31, 1995 and 1994, and the consolidated
statement of cash flows for the six-month periods ended October 31,
1995 and 1994 are unaudited but, in the opinion of the Company,
include all adjustments, consisting only of normal recurring
accruals, necessary for a fair statement of the results for the
interim periods. The results of operations for the six-month
period ended October 31, 1995 are not necessarily indicative of the
results to be expected for the full fiscal year.
NOTE 2
The classification of inventories was as follows (in thousands):
October 31, 1995 April 30, 1995
---------------- --------------
Raw materials and
purchased parts $ 53,495 $ 48,000
Work in process 11,162 11,496
-------- --------
$ 64,657 $ 59,496
======== ========
NOTE 3
Net earnings per common share were calculated on the basis of the
weighted average number of shares of common stock and common stock
equivalents outstanding during each period.
-6-
<PAGE>8
GERBER SCIENTIFIC, INC. AND SUBSIDIARIES
With respect to the unaudited consolidated financial statements of
Gerber Scientific, Inc. at October 31, 1995 and for the three- and
six-month periods ended October 31, 1995 and 1994, KPMG Peat
Marwick LLP has made a review (based on procedures adopted by the
American Institute of Certified Public Accountants) and not an
audit, as set forth in their separate report dated November 20,
1995 appearing on page 8. That report does not express an opinion
on the interim unaudited consolidated financial information. KPMG
Peat Marwick LLP has not carried out any significant or additional
audit tests beyond those which would have been necessary if their
report had not been included. Accordingly, such report is not a
"report" or "part of the Registration Statement" within the meaning
of Sections 7 and 11 of the Securities Act of 1933 and the
liability provisions of Section 11 of such Act do not apply.
-7-
<PAGE>9
INDEPENDENT ACCOUNTANTS' REPORT
To the Board of Directors and Shareholders of
Gerber Scientific, Inc.
We have made a review of the consolidated statements of earnings
of Gerber Scientific, Inc. and subsidiaries for the three- and
six-month periods ended October 31, 1995 and 1994, the
consolidated statement of cash flows for the six-month periods
ended October 31, 1995 and 1994, and the consolidated balance
sheet as of October 31, 1995 in accordance with standards
established by the American Institute of Certified Public
Accountants. We have previously audited, in accordance with
generally accepted auditing standards, and expressed our
unqualified opinion dated May 24, 1995 on the consolidated
financial statements for the year ended April 30, 1995 (not
presented herein). The aforementioned financial statements are
the responsibility of the Company's management.
A review of interim financial information consists principally of
applying analytical review procedures to financial data and
making inquiries of persons responsible for financial and
accounting matters. It is substantially less in scope than an
examination in accordance with generally accepted auditing
standards, the objective of which is the expression of an opinion
regarding the financial statements taken as a whole.
Accordingly, we do not express such an opinion.
Based on our review, we are not aware of any material
modifications that should be made to the accompanying
consolidated statements of earnings for the three- and six-month
periods ended October 31, 1995 and 1994, the consolidated
statement of cash flows for the six-month periods ended October
31, 1995 and 1994, or the consolidated balance sheet as of
October 31, 1995 for them to be in conformity with generally
accepted accounting principles. Also, in our opinion the
information in the accompanying consolidated balance sheet as of
April 30, 1995 is fairly presented, in all material respects, in
relation to the consolidated balance sheet from which it has been
derived.
KPMG PEAT MARWICK LLP
Hartford, Connecticut
November 20, 1995
-8-
<PAGE>10
GERBER SCIENTIFIC, INC. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
FINANCIAL CONDITION
At October 31, 1995 the Company's ratio of current assets to
current liabilities was 2.5 to 1 compared with 2.1 to 1 at April
30, 1995. Net working capital at October 31, 1995 was $91.2
million, an increase of $12.6 million from the beginning of the
current fiscal year. The Company's cash and short-term
investments totalled $6.5 million at October 31, 1995, which was
lower than at the end of the preceding fiscal year but adequate
for the Company's requirements. In addition, the Company's
portfolio of longer-term debt securities, primarily tax-exempt
municipal bonds, totalled $67.4 million at October 31, 1995.
Operating activities required $1.1 million in cash for the six-
month period ended October 31, 1995 compared with $13.6 million
provided by operating activities for the same period last year.
Cash generated by earnings and depreciation and amortization was
offset by growth in accounts receivable and inventories related
to the higher volume of business, and by a reduction in accounts
payable related to the timing of vendor payments.
The principal non-operating uses of cash were additions to
property, plant, and equipment ($7.5 million), open market
purchases of the Company's common stock ($5.3 million), and
payment of dividends on common stock ($3.8 million).
The Company does not expect to sustain the same rate of capital
expenditures for the second half of the current fiscal year and
now anticipates that annual capital expenditures will be in the
range of $10-11 million.
In the first six months of the current year, the Company has
purchased 305,000 shares of its common stock in the open market
at an average price of $17.31 per share. Under current Board
authorization, the Company may purchase up to 1,139,700
additional shares as, in the opinion of management, market
conditions may warrant.
The Company's total debt at October 31, 1995 was $7.6 million
compared with $7.7 million at April 30, 1995. The ratio of total
debt to shareholders' equity also declined slightly to 3.2
percent at October 31, 1995. The Company believes its low ratio
of debt-to-equity is an important indicator of its ability to
borrow funds should needs arise.
-9-
<PAGE>11
In the first quarter of the current fiscal year, the Company
entered into a formal line of credit agreement with a major U.S.
commercial bank providing for up to $22 million in borrowings by
the Company. Any borrowings under this line of credit would be
for terms up to six months in length and bear interest at 1/4
percent above the London Interbank Offered Rate (LIBOR). The
line of credit has a commitment fee of 1/8 percent of the unused
amount. At October 31, 1995 no amounts were borrowed against
this line of credit.
RESULTS OF OPERATIONS
Combined sales and service revenue for the second quarter and six
months ended October 31, 1995 increased $17.2 million and $35.4
million, respectively, from the same periods of last year. These
represented increases of 24 percent and 25 percent, respectively.
The increases came from both higher product sales and service
revenue. Product sales were higher as a result of increased
shipments of the Gerber EDGE (TM), an imaging device used to
print four-color process images and other special effects
directly on signmaking vinyl. Related to this increase were
higher sales of aftermarket supplies. Product sales were also
higher due to increased shipments of newer model GERBERcutter (R)
fabric cutting systems, fabric spreading systems, and marker-
making systems for the apparel and related industries. In
geographic terms, most significant year-to-year growth has
occurred in the Company's European markets with smaller gains in
U.S. and other international markets.
Gross profit margins on product sales were higher in this year's
second quarter and first six months than in the same periods of
last year. Service gross profit margins also improved slightly
in the current year. The lower product gross profit margin last
year reflected start-up costs on the first production runs of the
new GERBERcutter series. The product margin improvement in the
current year also reflected the favorable impact of the higher
sales volume.
Selling, general, and administrative expenses were higher in this
year's second quarter and first six months primarily due to
growth in marketing expenses. These higher expenses resulted
from the higher sales volume and from advertising campaigns and
exhibition expenses associated with the promotion of certain new
products. As a percentage of revenue, SG&A expenses increased to
31.0 percent and 31.2 percent in this year's second quarter and
first six months compared with 29.8 percent and 29.7 percent in
the corresponding periods of the prior year.
The Company continued to commit significant resources to research
and the development of new products. R&D expenses of $6.1
million in this year's second quarter and $12.1 million in the
first six months were roughly equivalent to the prior year
periods but represented lower percentages of revenue this year
due to sales growth of the corresponding revenue.
-10-
<PAGE>12
Interest expense for this year's second quarter and first six
months was substantially unchanged from the same periods last
year. Other income in this year's second quarter and first six
months was lower than last year due to a decrease in interest
income as a result of a lower invested cash position and also
lower royalty income.
The provision rate for income taxes was 29.0 percent for the
first six months of this year compared with 30.2 percent in the
same period last year. The effective income tax rate continued
to be lower than the 35 percent statutory U.S. Federal tax rate
primarily due to tax-exempt interest income.
As a result of the aforementioned, net earnings increased 37
percent in this year's second quarter to $5.5 million or $.23 per
share from $4.1 million or $.17 per share in last year's second
quarter. For the first six months, net earnings this year
increased 40 percent to $10.0 million or $.42 per share compared
with $7.2 million or $.30 per share in the prior year.
-11-
<PAGE>13
PART II - OTHER INFORMATION
Item 4. Submission of Matters to a Vote of Security Holders
At the Registrant's Annual Meeting of Shareholders held on
October 13, 1995, the shareholders voted on two matters. The
first matter involved the election of Directors. The
shareholders elected George M. Gentile and David J. Gerber as
Directors to serve for terms expiring at the 1998 annual meeting.
The terms of office of the other Directors, H. Joseph Gerber,
Stanley Simon, A. Robert Towbin, Edward E. Hood, Jr., and W.
Jerome Vereen, continued after the meeting.
Votes cast in the election of Directors were as follows:
Votes Votes
For Against
---------- -------
George M. Gentile 21,828,171 266,251
David J. Gerber 21,821,246 273,176
The second matter voted on by shareholders involved the approval
of the 1992 Employee Stock Plan, as amended and restated as of
April 30, 1995, as set forth in the Proxy Statement dated August
28, 1995.
Votes cast were as follows:
Votes For 15,856,945
Votes Against 4,852,739
Abstained 158,966
Not Voted 1,225,772
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
(11) Statement regarding computation of per share
earnings.
(15) Letter regarding unaudited interim financial
information.
(27) Financial Data Schdule
(b) Reports on Form 8-K
No Form 8-K was filed during the quarter for which this
report is filed.
-12-
<PAGE>14
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of
1934, the Registrant has duly caused this report to be signed
on its behalf by the undersigned, thereunto duly authorized.
GERBER SCIENTIFIC, INC.
-----------------------
(Registrant)
Date: 11/21/95 By: /s/ George M. Gentile
-------------- --------------------------------
Senior Vice President, Finance
and Principal Accounting Officer
-13-
<PAGE>15
EXHIBIT INDEX
-------------
Exhibit Index
Number Exhibit Page
------------- ------- ----
10 Gerber Scientific, Inc. 1992 Employee
Stock Plan, as Amended and Restated
as of April 28, 1995 (incorporated
herein by reference to the Company's
Proxy Statement dated August 28,
1995 filed in connection with the
annual meeting of shareholders held
October 13, 1995).
11 Statement Regarding Computation
of Per Share Earnings.*
15 Letter Regarding Unaudited Interim
Financial Information.*
27 Financial Data Schdule*
*Filed herewith.
<PAGE>16
<TABLE>
<CAPTION>
EXHIBIT NO. 11
GERBER SCIENTIFIC, INC. AND SUBSIDIARIES
COMPUTATION OF PER SHARE EARNINGS
Three Months Six Months
Ended Ended
October 31 October 31
--------------------------- ---------------------------
1995 1994 1995 1994
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
Net earnings $ 5,533,000 $ 4,053,000 $ 10,026,000 $ 7,154,000
============ ============ ============ ============
Weighted average shares of
common stock outstanding
during the period 23,617,533 23,837,539 23,692,944 23,837,520
Common stock equivalents:
Common stock attributable
to stock options (treasury
stock method) 294,262 174,823 261,296 180,900
------------ ------------ ------------ ------------
Average common shares
outstanding 23,911,795 24,012,362 23,954,240 24,018,420
============ ============ ============ ============
Net earnings per common share $ .23 $ .17 $ .42 $ .30
============ ============ ============ ============
</TABLE>
<PAGE>17
EXHIBIT NO. 15
To the Board of Directors and Shareholders of
Gerber Scientific, Inc.
Re: Registration Statements on Form S-8,
File No. 2-93695 and No. 33-58668
Registration Statement on Form S-3,
File No. 33-58670
With respect to the subject Registration Statements, we
acknowledge our awareness of the use therein of our report dated
November 20, 1995 related to our review of interim financial
information.
Pursuant to Rule 436(c) under the Securities Act, such reports
are not considered a part of a Registration Statement prepared or
certified by an accountant or a report prepared or certified by
an accountant within the meaning of Sections 7 and 11 of the Act.
Very truly yours,
KPMG PEAT MARWICK LLP
Hartford, Connecticut
November 20, 1995
<PAGE>18
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the
Consolidated Balance Sheet and Statement of Earnings of Gerber Scientific, Inc.
as of and the the six month period ended October 31, 1995 and is qualified in
its entirety by reference to such financial statements.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> APR-30-1996
<PERIOD-END> OCT-31-1995
<CASH> 6,519
<SECURITIES> 0
<RECEIVABLES> 68,354
<ALLOWANCES> 0
<INVENTORY> 64,657
<CURRENT-ASSETS> 150,806
<PP&E> 105,199
<DEPRECIATION> 50,928
<TOTAL-ASSETS> 316,222
<CURRENT-LIABILITIES> 59,648
<BONDS> 0
<COMMON> 23,512
0
0
<OTHER-SE> 215,073
<TOTAL-LIABILITY-AND-EQUITY> 316,222
<SALES> 178,349
<TOTAL-REVENUES> 178,349
<CGS> 98,481
<TOTAL-COSTS> 166,339
<OTHER-EXPENSES> (2,313)
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 197
<INCOME-PRETAX> 14,126
<INCOME-TAX> 4,100
<INCOME-CONTINUING> 4,100
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 4,100
<EPS-PRIMARY> .42
<EPS-DILUTED> .42
</TABLE>
