August 21, 1996
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, 1996.
This filing is being effected by direct transmission to the
Commission's EDGAR System.
Very truly yours,
/s/ Gary K. Bennett
Senior Vice President, Finance
and Principal Financial Officer
<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, 1996 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, 1996, 23,228,100 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, 1996
PAGE
----
Part I - Financial Information
Item 1. Consolidated Financial Statements:
Statement of Earnings for the three months
ended July 31, 1996 and 1995 2
Balance Sheet at July 31, 1996 and April 30, 1996 3
Statement of Cash Flows for the three months
ended July 31, 1996 and 1995 4
Notes to Financial Statements 5
Independent Accountants' Report 7
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations 8
Part II - Other Information
Item 5. Other Information 11
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, 1996 1995
------------------------------------------------------------------------
Revenue:
Product sales $ 74,530 $ 77,073
Service 11,278 11,118
--------- ---------
85,808 88,191
--------- ---------
Costs and Expenses:
Cost of product sales 42,185 41,795
Cost of service 6,957 7,420
Selling, general and administrative 28,595 27,776
Research and development expenses 6,776 6,077
--------- ---------
84,513 83,068
--------- ---------
Operating income 1,295 5,123
Other income 998 1,374
Interest expense (90) (104)
--------- ---------
Earnings before income taxes 2,203 6,393
Provision for income taxes 600 1,900
--------- ---------
Net earnings $ 1,603 $ 4,493
========= =========
Net earnings per common share $ .07 $ .19
========= =========
Dividends paid per common share $ .08 $ .08
========= =========
Average common shares outstanding 23,373 23,997
========= =========
See Accompanying Notes
-2-
<PAGE>4
GERBER SCIENTIFIC, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
In Thousands
------------------------------------------------------------------------
July 31, April 30,
1996 1996
------------------------------------------------------------------------
ASSETS
Current Assets:
Cash and short-term cash investments $ 6,779 $ 8,704
Accounts receivable 75,515 74,035
Inventories 64,173 63,196
Prepaid expenses 13,560 12,021
---------- ----------
160,027 157,956
---------- ----------
Investments and long-term
receivables 52,807 59,594
---------- ----------
Property, plant and equipment 108,707 109,430
Less accumulated depreciation 53,295 54,692
---------- ----------
55,412 54,738
---------- ----------
Intangible assets 48,759 48,576
Less accumulated amortization 9,748 9,327
---------- ----------
39,011 39,249
---------- ----------
Other assets 1,202 1,451
---------- ----------
$ 308,459 $ 312,988
========== ==========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities:
Notes payable $ -- $ --
Current maturities of long-term debt 193 193
Accounts payable 12,565 12,895
Accrued compensation and benefits 10,771 13,673
Other accrued liabilities 15,970 18,351
Deferred revenue and litigation award 9,104 8,512
Advances on sales contracts 2,145 2,672
---------- ----------
50,748 56,296
---------- ----------
Noncurrent Liabilities:
Deferred income taxes 10,961 10,056
Long-term debt 7,290 7,338
---------- ----------
18,251 17,394
---------- ----------
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
23,228,100 and 23,198,725 shares 23,228 23,199
Paid-in capital 35,432 35,218
Retained earnings 179,055 179,307
Cumulative translation component 1,745 1,574
---------- ----------
239,460 239,298
---------- ----------
$ 308,459 $ 312,988
========== ==========
See Accompanying Notes
-3-
<PAGE>5
GERBER SCIENTIFIC, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CASH FLOWS
In Thousands
------------------------------------------------------------------------
Three Months Ended July 31, 1996 1995
------------------------------------------------------------------------
CASH PROVIDED BY (USED FOR):
Operating Activities
Net earnings $ 1,603 $ 4,493
Adjustments to reconcile net earnings to
cash provided by operating activities:
Depreciation and amortization 2,931 2,607
Deferred income taxes 905 (389)
Changes in operating accounts, net of
effects from business acquisitions:
Receivables (1,483) (3,489)
Inventories (977) (2,095)
Prepaid expenses (1,539) 2,748
Accounts payable and accrued expenses (5,548) (6,704)
-------- ---------
(Used for) Operating Activities (4,108) (2,829)
-------- ---------
Financing Activities
Purchase of common stock -- (459)
Repayments of long-term debt (48) (48)
Exercise of stock options 243 342
Dividends on common stock (1,855) (1,900)
-------- ---------
(Used for) Financing Activities (1,660) (2,065)
-------- ---------
Investing Activities
Long-term debt securities 6,796 5,014
Additions to property, plant and equipment (3,180) (3,843)
Business acquisitions -- (486)
Intangible and other assets 62 (747)
Other long-term investments 165 452
-------- ---------
Provided by Investing Activities 3,843 390
-------- ---------
(Decrease) in Cash and Short-Term
Cash Investments (1,925) (4,504)
Cash and Short-Term Cash Investments,
Beginning of Period 8,704 10,208
-------- ---------
Cash and Short-Term Cash Investments,
End of Period $ 6,779 $ 5,704
======== =========
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, 1996 and the
consolidated statements of earnings and cash flows for the three-
month periods ended July 31, 1996 and 1995 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, 1996 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, 1996 April 30, 1996
------------- --------------
Raw materials and
purchased parts $ 57,164 $ 51,493
Work in process 7,009 11,703
-------- --------
$ 64,173 $ 63,196
======== ========
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, 1996
and for the three-month periods ended July 31, 1996 and
1995, 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 20, 1996 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 ACCOUNTANTS' 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, 1996 and 1995 and the
consolidated balance sheet as of July 31, 1996 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 23, 1996 on the
consolidated financial statements for the year ended April 30,
1996 (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, 1996 and 1995, or the
consolidated balance sheet as of July 31, 1996 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, 1996 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
Hartford, Connecticut
August 20, 1996
-7-
<PAGE>9
GERBER SCIENTIFIC, INC. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
FINANCIAL CONDITION
The Company's ratio of current assets to current liabilities was
3.2 to 1 at July 31, 1996 compared with 2.8 to 1 at April 30,
1996. Net working capital at July 31, 1996 was $109.3 million,
an increase of $7.6 million from the beginning of the current
fiscal year. The Company's cash and short-term investments
totalled $6.8 million at July 31, 1996, which was lower than at
the end of the preceding fiscal year but adequate for the
Company's requirements. In addition, the Company's investment
portfolio of longer-term debt securities, primarily tax-exempt
municipal bonds, totalled $52.1 million at July 31, 1996 compared
with $58.9 million at April 30, 1996.
Operating activities used $4.1 million in cash during the first
quarter of the current year. Cash generated by earnings and
depreciation and amortization was used in part to finance growth
in accounts receivable and inventories. Other significant uses
of cash for operating purposes in the first quarter included $3.1
million in pension plan funding and $1.9 million for payment of
bonuses accrued for the prior fiscal year under the Company's
profit incentive bonus plan.
The principal non-operating uses of cash in the first quarter
ended July 31, 1996 were additions to property, plant, and
equipment of $3.2 million and payment of dividends of $1.9
million. The Company anticipates that capital expenditures for
the current fiscal year will be in the range of $12 million, and
expects to fund these with cash on hand and cash from operations.
The Company's total debt at July 31, 1996 was $7.5 million, down
slightly from April 30, 1996. The ratio of total debt to
shareholders' equity was 3.1 percent at July 31, 1996, unchanged
from April 30, 1996. The Company believes its low ratio of debt-
to-equity is an important indicator of its ability to borrow
funds should needs arise.
-8-
<PAGE>10
RESULTS OF OPERATIONS
Combined sales and service revenue for the three months ended
July 31, 1996 decreased $2.4 million, or 3 percent, from the
first quarter of last year. The decrease reflected lower product
sales and slightly higher service revenue. Product sales
declined primarily as a result of lower shipments of
GERBERcutter(R) fabric cutting systems for the apparel and
related industries. In this year's first quarter, the Company
experienced relative weakness in demand for these systems from
European markets. Product sales were also affected by a
changeover to a new model GERBER EDGE (R), an imaging device used
in the signmaking industry to print four-color process images and
other special effects directly on vinyl.
The consolidated gross profit margin in this year's first quarter
was 42.7 percent compared with 44.2 percent in the same period
last year. Gross profit margins on product sales and service
revenue were 43.4 percent and 38.3 percent, respectively, in this
year's first quarter compared with 45.8 percent and 33.3 percent,
respectively, in last year's first quarter. The lower product
margin this year reflected the lower GERBERcutter sales volume
and start-up costs on initial production runs of the new GERBER
EDGE. The improvement in service gross profit margins resulted,
in part, from the utilization of service personnel on a product
retrofit program.
Selling, general, and administrative expenses in this year's
first quarter were 33.3 percent of revenue compared with 31.5
percent in last year's first quarter. The increase in this ratio
reflected a 3 percent year-to-year increase in these expenses
combined with the drop in product sales volume. The higher
expenses resulted primarily from advertising campaigns,
exhibition costs, and post-sales expenses associated with the
promotion of certain new products, particularly in the computer-
to-plate systems business.
The Company continued to commit significant resources to research
and the development of new products. R&D expense of $6.8 million
in this year's first quarter represented 7.9 percent of revenue
for the quarter compared with $6.1 million in R&D expense last
year, or 6.9 percent of the prior year's revenue. The pace of
R&D spending accelerated in the second half of the prior fiscal
year and management expects this higher expenditure rate will
continue for the near term. These higher expenditures reflect
development efforts aimed at broadening the Company's computer-
to-plate systems product line for the commercial printing and
graphic arts industries.
Interest expense for this year's first quarter was slightly lower
than in the same period of last year, as debt levels were reduced
modestly. Other income in this year's first quarter was $.4
million lower than last year and reflected lower interest income
resulting from a smaller investment portfolio of tax-exempt
municipal bonds.
-9-
<PAGE>11
The provision rate for income taxes was 27.2 percent in the first
quarter of this year, compared with 29.7 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 and the tax
benefits of the Company's Foreign Sales Corporation.
As a result of the aforementioned, net earnings decreased in this
year's first quarter to $1.6 million from $4.5 million last year.
Earnings per share were $.07 in this year's first quarter
compared with $.19 per share last year.
FORWARD LOOKING STATEMENTS
This report includes forward-looking statements that describe the
Company's business prospects. Readers should keep in mind
factors that could have an adverse impact on those prospects.
These include political, economic, or other conditions, such as
recessionary or expansive trends, inflation rates, currency
exchange rates, taxes and regulations and laws affecting the
business, as well as product competition, pricing, the degree of
acceptance of new products to the marketplace, and the difficulty
of forecasting sales at various times in various markets.
-10-
<PAGE>12
PART II - OTHER INFORMATION
Item 5. Other Information
On August 2, 1996, the Company issued a press release
reporting the appointment of Mr. George M. Gentile as
President, acting Chief Executive Officer, and Chief
Operating Officer of the Company. Mr. Gentile's
appointment was on the recommendation of Mr. H. Joseph
Gerber, the then Chairman and Chief Executive Officer of
the Company, and was due to Mr. Gerber's continuing
illness. Mr. Gentile had been the Company's Senior Vice
President, Finance and Chief Financial Officer, and has
been a Director since 1989.
On August 8, 1996, the Company issued a press release
reporting the death of Mr. H. Joseph Gerber.
On August 19, 1996, the Company's Board of Directors
appointed Mr. Gentile as Chairman and Chief Executive
Officer of the Company. The Board also appointed Mr.
Gary K. Bennett, previously Vice President, Treasurer
and Controller of the Company, as Senior Vice President,
Finance and Chief Financial Officer.
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.
-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 21, 1996 By: /s/ Gary K. Bennett
----------------- ------------------------------
Gary K. Bennett
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 Schdule.* 18
*Filed herewith.
-13-
<PAGE>15
EXHIBIT NO. 11
GERBER SCIENTIFIC, INC. AND SUBSIDIARIES
COMPUTATION OF PER SHARE EARNINGS
Three Months Ended July 31, 1996 1995
---------------------------------------------------------------------
Net earnings $ 1,603,000 $ 4,493,000
=========== ===========
Weighted average shares of common
stock outstanding during the
period 23,210,514 23,769,152
Common stock equivalents:
Common stock attributable to
stock options (treasury stock
method) 162,504 228,330
----------- -----------
Average common shares outstanding 23,373,018 23,997,482
=========== ===========
Net earnings per common share $ .07 $ .19
=========== ===========
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 20, 1996 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
Hartford, Connecticut
August 20, 1996
<PAGE>17
<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 for the three-month period ended July 31, 1996 and is qualified in its
entirety by reference to such financial statements
</LEGEND>
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> APR-30-1997
<PERIOD-END> JUL-31-1996
<CASH> 6,779
<SECURITIES> 0
<RECEIVABLES> 75,515
<ALLOWANCES> 0
<INVENTORY> 64,173
<CURRENT-ASSETS> 160,027
<PP&E> 108,707
<DEPRECIATION> 53,295
<TOTAL-ASSETS> 308,459
<CURRENT-LIABILITIES> 50,748
<BONDS> 0
0
0
<COMMON> 23,228
<OTHER-SE> 216,232
<TOTAL-LIABILITY-AND-EQUITY> 308,459
<SALES> 85,808
<TOTAL-REVENUES> 85,808
<CGS> 49,142
<TOTAL-COSTS> 84,513
<OTHER-EXPENSES> (998)
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 90
<INCOME-PRETAX> 2,203
<INCOME-TAX> 600
<INCOME-CONTINUING> 1,603
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,603
<EPS-PRIMARY> .07
<EPS-DILUTED> .07
</TABLE>
