August 22, 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 July 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
July 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 (203) 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 July 31, 1995, 23,767,120 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 July 31, 1995
PAGE
----
Part I - Financial Information
Item 1. Consolidated Financial Statements:
Statement of Earnings for the three months
ended July 31, 1995 and 1994 2
Balance Sheet at July 31, 1995 and April 30, 1995 3
Statement of Cash Flows for the three months
ended July 31, 1995 and 1994 4
Notes to Financial Statements 5
Independent Auditors' Report 7
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations 8
Part II - Other Information
Item 6. Exhibits and Reports on Form 8-K 11
Signature 12
Exhibit Index
<PAGE>3
GERBER SCIENTIFIC, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF EARNINGS
In Thousands
(except per share amounts)
------------------------------------------------------------------------
Three Months Ended July 31, 1995 1994
------------------------------------------------------------------------
Revenue:
Product sales $ 77,073 $ 60,869
Service 11,118 9,164
--------- ---------
88,191 70,033
--------- ---------
Costs and Expenses:
Cost of product sales 41,795 34,129
Cost of service 7,420 6,111
Selling, general and administrative 27,776 20,749
Research and development expenses 6,077 5,480
--------- ---------
83,068 66,469
--------- ---------
Operating income 5,123 3,564
Other income 1,374 1,151
Interest expense (104) (114)
--------- ---------
Earnings before income taxes 6,393 4,601
Provision for income taxes 1,900 1,500
--------- ---------
Net earnings $ 4,493 $ 3,101
========= =========
Net earnings per common share $ .19 $ .13
========= =========
Dividends paid per common share $ .08 $ .06
========= =========
Average common shares outstanding 23,997 24,025
========= =========
See Accompanying Notes
-2-
<PAGE>4
GERBER SCIENTIFIC, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
In Thousands
------------------------------------------------------------------------
July 31, April 30,
1995 1995
------------------------------------------------------------------------
ASSETS
Current Assets:
Cash and short-term cash investments $ 5,704 $ 10,208
Accounts receivable 66,197 62,900
Inventories 61,802 59,496
Prepaid expenses 11,562 14,310
---------- ----------
145,265 146,914
---------- ----------
Investments and long-term
receivables 79,338 84,152
---------- ----------
Property, plant and equipment 104,049 100,217
Less accumulated depreciation 51,238 49,081
---------- ----------
52,811 51,136
---------- ----------
Intangible assets 48,237 48,094
Less accumulated amortization 8,651 8,435
---------- ----------
39,586 39,659
---------- ----------
Other assets 2,948 2,567
---------- ----------
$ 319,948 $ 324,428
========== ==========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities:
Notes payable $ -- $ --
Current maturities of long-term debt 193 193
Accounts payable 13,534 19,179
Accrued compensation and benefits 9,390 10,935
Other accrued liabilities 24,654 25,050
Deferred revenue and litigation award 9,533 9,318
Advances on sales contracts 4,114 3,722
---------- ----------
61,418 68,397
---------- ----------
Noncurrent Liabilities:
Deferred income taxes 9,152 9,541
Long-term debt 7,483 7,531
Other 1,657 1,657
---------- ----------
18,292 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
23,767,120 and 23,757,780 shares 23,767 23,758
Paid-in capital 35,149 34,885
Retained earnings 178,824 176,621
Cumulative translation component 2,498 2,038
---------- ----------
240,238 237,302
---------- ----------
$ 319,948 $ 324,428
========== ==========
See Accompanying Notes
-3-
<PAGE>5
GERBER SCIENTIFIC, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CASH FLOWS
In Thousands
------------------------------------------------------------------------
Three Months Ended July 31, 1995 1994
------------------------------------------------------------------------
CASH PROVIDED BY (USED FOR):
Operating Activities
Net earnings $ 4,493 $ 3,101
Adjustments to reconcile net earnings to
cash provided by operating activities:
Depreciation and amortization 2,607 2,279
Deferred income taxes (389) 1,116
Changes in operating accounts, net of
effects from business aquisitions:
Accounts receivable (3,258) (1,835)
Long-term receivables (231) 9
Inventories (2,095) 4,020
Prepaid expenses 2,748 39
Accounts payable and accrued expenses (6,704) (126)
-------- ---------
Provided by (Used for) Operating Activities (2,829) 8,603
-------- ---------
Financing Activities
Purchase of common stock (459) --
Repayments of long-term debt (48) (48)
Net short-term financing -- (1,110)
Exercise of stock options 342 158
Dividends on common stock (1,900) (1,430)
-------- ---------
(Used for) Financing Activities (2,065) (2,430)
-------- ---------
Investing Activities
Long-term debt securities 5,014 (493)
Business acquisitions (486) (876)
Additions to property, plant and equipment (3,843) (1,536)
Intangible and other assets (747) (426)
Other long-term investments 452 (322)
-------- ---------
Provided by (Used for) Investing Activities 390 (3,653)
-------- ---------
Increase (Decrease) in Cash and Short-Term
Cash Investments (4,504) 2,520
Cash and Short-Term Cash Investments,
Beginning of Period 10,208 15,605
-------- ---------
Cash and Short-Term Cash Investments,
End of Period $ 5,704 $ 18,125
======== =========
See Accompanying Notes
-4-
<PAGE>6
GERBER SCIENTIFIC, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1
The consolidated balance sheet at July 31, 1995 and the
consolidated statements of earnings and cash flows for the three-
month periods ended July 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 three-month period ended July 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):
July 31, 1995 April 30, 1995
------------- --------------
Raw materials and
purchased parts $ 49,789 $ 48,000
Work in process 12,013 11,496
-------- --------
$ 61,802 $ 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.
-5-
<PAGE>7
GERBER SCIENTIFIC, INC. AND SUBSIDIARIES
With respect to the unaudited consolidated financial
statements of Gerber Scientific, Inc. at July 31, 1995
and for the three-month periods ended July 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 August 21, 1995 appearing on
page 7. 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.
-6-
<PAGE>8
INDEPENDENT AUDITORS' REPORT
To the Board of Directors and Shareholders of
Gerber Scientific, Inc.
We have made a review of the consolidated statements of earnings
and cash flows of Gerber Scientific, Inc. and subsidiaries for
the three-month periods ended July 31, 1995 and 1994 and the
consolidated balance sheet as of July 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 and cash flows for the
three-month periods ended July 31, 1995 and 1994, or the
consolidated balance sheet as of July 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.
/s/ KPMG PEAT MARWICK LLP
KPMG PEAT MARWICK LLP
Hartford, Connecticut
August 21, 1995
-7-
<PAGE>9
GERBER SCIENTIFIC, INC. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
FINANCIAL CONDITION
At July 31, 1995 the Company's ratio of current assets to current
liabilities was 2.4 to 1 compared with 2.1 to 1 at April 30,
1995. Net working capital at July 31, 1995 was $83.8 million, an
increase of $5.3 million from the beginning of the current fiscal
year. The Company's cash and short-term investments totalled
$5.7 million at July 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 $77.7 million at July 31, 1995.
Operating activities required $2.8 million in cash during the
first quarter of the current year. Cash generated by earnings
and depreciation and amortization was offset by growth in
accounts receivable and inventories, and by a reduction in
accounts payable related to the timing of vendor payments.
The principal non-operating uses of cash were for additions to
property, plant, and equipment of $3.8 million and payment of
dividends of $1.9 million. The Company does not expect to sustain
the first quarter rate of capital expenditures for the remainder
of the current fiscal year and anticipates that annual
expenditures will be in the range of $8 million.
The Company's total debt at July 31, 1995 was $7.7 million, down
slightly from April 30, 1995. The ratio of total debt to
shareholders' equity also declined slightly to 3.2 percent at
July 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.
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 July 31, 1995 no amounts were borrowed against this
line of credit.
-8-
<PAGE>10
RESULTS OF OPERATIONS
Combined sales and service revenue for the three months ended
July 31, 1995 increased $18.2 million, or 26 percent, from the
first quarter of last year. The increase reflected both higher
product sales and service revenue. Product sales were higher
primarily as a result of increased shipments of newer-model
GERBERcutter(R) fabric cutting systems and marker-making systems
for the apparel and related industries. Product sales were also
enhanced by increased shipments of the Gerber EDGE (TM), an
imaging device used in the signmaking industry to print four-
color process images and other special effects directly on vinyl.
Related to this increase were higher sales of aftermarket
supplies.
The operations of Microdynamics, which was acquired in the second
quarter of last year, added approximately $3.2 million to this
year's first quarter product sales and $1.4 million to service
revenue. Microdynamics was a leading supplier of computer-aided
design (CAD), graphic design, and product management systems to
the apparel, footwear, and sewn goods industries.
Gross profit margins on product sales and service revenue were
45.7 percent and 33.3 percent, respectively, in this year's first
quarter compared with 43.9 percent and 33.3 percent,
respectively, in last year's first quarter. The lower product
margin last year reflected start-up costs on initial 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. The improvement in service
gross profit margins resulted from the acquisition of the
Microdynamics' service business.
Selling, general, and administrative expenses in this year's
first quarter were 31.5 percent of the associated revenue
compared with 29.6 percent in last year's first quarter. The
increase in this ratio reflected primarily growth in marketing
expenses. These higher expenses resulted from advertising
campaigns and exhibition expenses associated with the promotion
of certain new products and also the additional expenses from the
acquisition of Microdynamics.
The Company continued to commit significant resources to research
and the development of new products. R&D expense of $6.1 million
in this year's first quarter represented 6.9 percent of revenue
compared with $5.5 million last year, or 7.8 percent of the prior
year's revenue.
Interest expense for this year's first quarter was substantially
unchanged from the same period of last year. Other income in
this year's first quarter was $.2 million higher than last year
and reflected both higher royalty income and interest income.
-9-
<PAGE>11
The provision rate for income taxes was 29.7 percent in the first
quarter of this year, compared with 32.6 percent in last year's
first quarter. The effective income tax rate continued to be
lower than the 35 percent statutory U.S. Federal tax rate
primarily because of tax-exempt interest income.
As a result of the aforementioned, net earnings increased in this
year's first quarter to $4.5 million from $3.1 million last year.
Earnings per share were $.19 in this year's first quarter
compared with $.13 per share last year.
-10-
<PAGE>12
PART II - OTHER INFORMATION
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.
(b) Reports on Form 8-K
No Form 8-K was filed during the quarter for which this
report is filed.
-11-
<PAGE>13
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: August 22, 1995 By: /s/ George M. Gentile
----------------- ------------------------------
George M. Gentile
Senior Vice President, Finance,
and Principal Financial Officer
-12-
<PAGE>14
EXHIBIT INDEX
Exhibit Index
Number Exhibit Page
------------- ------- ----
11 Statement Regarding Computation
of Per Share Earnings.* 16
15 Letter Regarding Unaudited Interim
Financial Information.* 17
27 Financial Data Schedule.* 18
*Filed herewith.
-13-
<PAGE>15
EXHIBIT NO. 11
GERBER SCIENTIFIC, INC. AND SUBSIDIARIES
COMPUTATION OF PER SHARE EARNINGS
Three Months Ended July 31, 1995 1994
---------------------------------------------------------------------
Net earnings $ 4,493,000 $ 3,101,000
=========== ===========
Weighted average shares of common
stock outstanding during the
period 23,769,152 23,837,567
Common stock equivalents:
Common stock attributable to
stock options (treasury stock
method) 228,330 186,977
----------- -----------
Average common shares outstanding 23,997,482 24,024,544
=========== ===========
Net earnings per common share $ .19 $ .13
=========== ===========
Note: Net earnings per common share as calculated above is presented
on a primary and fully diluted basis.
<PAGE>16
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
August 21, 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,
/s/ KPMG PEAT MARWICK LLP
KPMG PEAT MARWICK LLP
Hartford, Connecticut
August 21, 1995
<PAGE>17
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the
Consolidated Balance Sheet and Consolidated Statement of Earnings of Gerber
Scientific, Inc. as of and for the three months ended July 31, 1995 and is
qualified in its entirety by reference to such financial statements.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> APR-30-1996
<PERIOD-END> JUL-31-1995
<CASH> 5,704
<SECURITIES> 0
<RECEIVABLES> 66,197
<ALLOWANCES> 0
<INVENTORY> 61,802
<CURRENT-ASSETS> 145,265
<PP&E> 104,049
<DEPRECIATION> 51,238
<TOTAL-ASSETS> 319,948
<CURRENT-LIABILITIES> 61,418
<BONDS> 0
<COMMON> 23,767
0
0
<OTHER-SE> 216,471
<TOTAL-LIABILITY-AND-EQUITY> 319,948
<SALES> 88,191
<TOTAL-REVENUES> 88,191
<CGS> 49,215
<TOTAL-COSTS> 83,068
<OTHER-EXPENSES> (1,374)
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 104
<INCOME-PRETAX> 6,393
<INCOME-TAX> 1,900
<INCOME-CONTINUING> 4,493
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 4,493
<EPS-PRIMARY> .19
<EPS-DILUTED> .19
</TABLE>
