February 22, 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 January 31, 1996.
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
January 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 January 31, 1996, 23,150,245 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 January 31, 1996
PAGE
Part I - Financial Information
Item 1. Consolidated Financial Statements:
Statement of Earnings for the three months
ended January 31, 1996 and 1995 1
Statement of Earnings for the nine months
ended January 31, 1996 and 1995 2
Balance Sheet at January 31, 1996 and
April 30, 1995 3
Statement of Cash Flows for the nine months
ended January 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 6. Exhibits and Reports on Form 8-K 12
Signature 13
Exhibit Index
<PAGE>3
GERBER SCIENTIFIC, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF EARNINGS
------------------------------------------------------------------------
In Thousands
(except per share amounts)
------------------------------------------------------------------------
Three Months Ended January 31, 1996 1995
------------------------------------------------------------------------
Revenue:
Product sales $ 75,522 $ 71,599
Service 11,362 11,211
--------- ---------
86,884 82,810
--------- ---------
Costs and Expenses:
Cost of product sales 40,707 38,036
Cost of service 7,281 7,036
Selling, general and administrative 26,374 25,648
Research and development expenses 6,790 7,145
--------- ---------
81,152 77,865
Operating income 5,732 4,945
Other income 1,558 1,625
Interest expense (139) (91)
--------- ---------
Earnings before income taxes 7,151 6,479
Provision for income taxes 2,000 1,700
--------- ---------
Net earnings $ 5,151 $ 4,779
========= =========
Net earnings per common share $ .22 $ .20
========= =========
Dividends paid per common share $ .08 $ .08
========= =========
Average common shares outstanding 23,516 23,853
========= =========
See Accompanying Notes
1
<PAGE>4
GERBER SCIENTIFIC, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF EARNINGS
------------------------------------------------------------------------
In Thousands
(except per share amounts)
------------------------------------------------------------------------
Nine Months Ended January 31, 1996 1995
------------------------------------------------------------------------
Revenue:
Product sales $ 231,294 $ 195,515
Service 33,939 30,272
--------- ---------
265,233 225,787
--------- ---------
Costs and Expenses:
Cost of product sales 124,229 106,305
Cost of service 22,240 19,689
Selling, general and administrative 82,100 68,147
Research and development expenses 18,922 19,079
--------- ---------
247,491 213,220
Operating income 17,742 12,567
Other income 3,871 4,461
Interest expense (336) (295)
--------- ---------
Earnings before income taxes 21,277 16,733
Provision for income taxes 6,100 4,800
--------- ---------
Net earnings $ 15,177 $ 11,933
========= =========
Net earnings per common share $ .64 $ .50
========= =========
Dividends paid per common share $ .24 $ .22
========= =========
Average common shares outstanding 23,808 23,963
========= =========
See Accompanying Notes
2
<PAGE>5
GERBER SCIENTIFIC, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
------------------------------------------------------------------------
In Thousands
------------------------------------------------------------------------
January 31, April 30,
1996 1995
------------------------------------------------------------------------
ASSETS
Current Assets:
Cash and short-term cash investments $ 4,997 $ 10,208
Accounts receivable 65,668 62,900
Inventories 67,071 59,496
Prepaid expenses 13,964 14,310
---------- ----------
151,700 146,914
---------- ----------
Investments and long-term
receivables 61,367 84,152
---------- ----------
Property, plant and equipment 107,536 100,217
Less accumulated depreciation 52,942 49,081
---------- ----------
54,594 51,136
---------- ----------
Intangible assets 48,478 48,094
Less accumulated amortization 9,327 8,435
---------- ----------
39,151 39,659
---------- ----------
Other assets 3,495 2,567
---------- ----------
$ 310,307 $ 324,428
========== ==========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities:
Notes payable $ -- $ --
Current maturities of long-term debt 193 193
Accounts payable 10,709 19,179
Accrued compensation and benefits 10,354 10,935
Other accrued liabilities 21,805 25,050
Deferred revenue and litigation award 10,396 9,318
Advances on sales contracts 2,854 3,722
---------- ----------
56,311 68,397
---------- ----------
Noncurrent Liabilities:
Deferred income taxes 10,071 9,541
Long-term debt 7,387 7,531
Other 1,657 1,657
---------- ----------
19,115 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
23,150,245 and 23,757,780 shares 23,150 23,758
Paid-in capital 34,527 34,885
Retained earnings 176,468 176,621
Cumulative translation component 736 2,038
---------- ----------
234,881 237,302
---------- ----------
$ 310,307 $ 324,428
========== ==========
See Accompanying Notes
3
<PAGE>6
GERBER SCIENTIFIC, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CASH FLOWS
-----------------------------------------------------------------------
In Thousands
Nine Months Ended January 31, 1996 1995
-----------------------------------------------------------------------
CASH PROVIDED BY (USED FOR):
Operating Activities
Net earnings $ 15,177 $ 11,933
Adjustments to reconcile net earnings to
cash provided by operating activities:
Depreciation and amortization 7,979 7,742
Deferred income taxes 530 2,762
Changes in operating accounts, net of
effects from business acquisitions:
Accounts receivable (2,653) (5,360)
Long-term receivables (79) (460)
Inventories (7,364) 2,689
Prepaid expenses 346 (3,623)
Accounts payable and accrued expenses (11,811) 3,007
--------- ---------
Provided by Operating Activities 2,125 18,690
--------- ---------
Financing Activities
Purchase of common stock (11,334) (1,370)
Repayments of long-term debt (144) (645)
Net short-term financing -- (2,755)
Exercise of stock options 723 254
Dividends on common stock (5,685) (5,238)
--------- ---------
(Used for) Financing Activities (16,440) (9,754)
--------- ---------
Investing Activities
Long-term debt securities 22,781 (1,644)
Business acquisitions (486) (9,000)
Additions to property, plant and equipment (10,099) (7,871)
Intangible and other assets (1,758) (1,833)
Other long-term investments (1,334) 900
--------- ---------
Provided by (Used for) Investing Activities 9,104 (19,448)
--------- ---------
(Decrease) in Cash and
Short-Term Cash Investments (5,211) (10,512)
Cash and Short-Term Cash Investments,
Beginning of Period 10,208 15,605
--------- ---------
Cash and Short-Term Cash Investments,
End of Period $ 4,997 $ 5,093
========= =========
See Accompanying Notes
4
<PAGE>7
GERBER SCIENTIFIC, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 1
The consolidated balance sheet at January 31, 1996, the consolidated
statements of earnings for the three- and nine-month periods ended
January 31, 1996 and 1995, and the consolidated statement of cash
flows for the nine-month periods ended January 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 nine-month period ended January 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):
January 31, 1996 April 30, 1995
---------------- --------------
Raw materials and
purchased parts $ 54,219 $ 48,000
Work in process 12,852 11,496
--------- ---------
$ 67,071 $ 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>8
GERBER SCIENTIFIC, INC. AND SUBSIDIARIES
With respect to the unaudited consolidated financial
statements of Gerber Scientific, Inc. and subsidiaries at
January 31, 1996 and for the three- and nine-month
periods ended January 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 February 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>9
INDEPENDENT ACCOUNTANTS' REPORT
To the Board of Directors and Shareholders of
Gerber Scientific, Inc.
We have made a review of the consolidated statement of earnings
of Gerber Scientific, Inc. and subsidiaries for the three-month
and nine-month periods ended January 31, 1996 and 1995, the
consolidated statement of cash flows for the nine-month periods
ended January 31, 1996 and 1995, and the consolidated balance
sheet as of January 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 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 statement of earnings for the three-month and nine-
month periods ended January 31, 1996 and 1995, the consolidated
statement of cash flows for the nine-month periods ended January
31, 1996 and 1995, or the consolidated balance sheet as of
January 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, 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
Hartford, Connecticut
February 20, 1996
7
<PAGE>10
GERBER SCIENTIFIC, INC. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
FINANCIAL CONDITION
At January 31, 1996,the Company's ratio of current assets to
current liabilities was 2.7 to 1, compared with 2.1 to 1 at
April 30, 1995. Net working capital increased $16.9 million from
the beginning of the current fiscal year to $95.4 million at
January 31, 1996.
The Company's cash and short-term investments totalled $5 million
at January 31, 1996, which was lower than at the beginning of the
fiscal year but adequate for the Company's requirements. The
Company also has a portfolio of longer-term debt securities,
primarily tax-exempt municipal bonds, which totalled $59.9 million
at January 31, 1996. This longer-term portfolio has declined from
$82.7 million at the beginning of the current fiscal year. The
primary reasons for the declines in both the short-term and
longer-term cash positions are discussed below.
Operating activities provided $2.1 million in cash in the first
nine months of the current fiscal year. Cash generated by
earnings and the non-cash charges for depreciation and
amortization was substantially offset by growth in accounts
receivable and inventories related to the higher volume of
business, and by a reduction in accounts payable related primarily
to the timing of vendor payments.
The principal non-operating use of cash in the first nine months
of the current year was for open market purchases of the Company's
common stock. In the first nine months, the Company purchased
681,200 shares of common stock at a total cost of $11.3 million,
or an average price of $16.65 per share. The funds for these stock
purchases came primarily from maturities of investments in the
Company's longer-term investment portfolio. Under the current
Board authorization, the Company may purchase up to 763,000
additional shares as, in the opinion of management, market
conditions may warrant.
The other significant non-operating uses of cash in the first nine
months of the year were for additions to property, plant, and
equipment ($10.1 million) and for dividends on common stock ($5.7
million). The Company expects fiscal year 1996 capital
expenditures will be in the range of $11-$12 million and expects
to continue to fund these additions with cash on hand, cash
generated by operations, and maturities from the long-term
investment portfolio.
The Company's total debt at January 31, 1996 was $7.6 million
compared with $7.7 million at the beginning of the fiscal year.
The ratio of total debt to shareholders' equity also declined
slightly over this period to 3.2 percent at January 31, 1996. The
Company believes that its low debt-to-equity ratio is an important
indicator of its ability to borrow funds should needs arise.
8
<PAGE>11
In the first quarter of the current 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 short-term borrowings by
the Company. Borrowings under this line of credit can 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.
During the third quarter, the Company borrowed $3 million under
this line of credit to purchase its common stock and repaid the
borrowing with maturities from its investment portfolio. At
January 31, 1996, no amounts were borrowed under this line of
credit.
RESULTS OF OPERATIONS
For the third quarter and nine months ended January 31, 1996,
combined sales and service revenue increased $4.1 million and
$39.4 million, respectively, from the comparable periods of the
prior year. These represented 4.9 percent and 17.5 percent
increases, respectively. Both product sales and service revenue
were higher in this year's third quarter and first nine months.
The growth in product sales in the third quarter resulted
primarily from increased shipments of the Company's computerized
signmaking equipment, including the Gerber EDGE (TM), an imaging
system that prints four-color process images and other special
effects directly on signmaking vinyl. The Company also recorded
higher sales of plotters which are used to cut signmaking vinyl.
Related to these increases were higher sales of aftermarket
signmaking supplies.
In the first nine months of the current year, sales of computer-
controlled cutting and marker-making systems for the apparel and
related industries were also higher than in the prior year.
However, in the third quarter ended January 31, 1996, year-to-year
sales in this product class were lower as the Company experienced
a substantial drop in order entry from the U.S. apparel industry.
Management anticipates this downturn will continue in the fourth
quarter and believes this condition reflects the current weakness
in the domestic retail industry, which in turn is causing apparel
manufacturers to reduce their orders for new production equipment.
Gross profit margins on product sales were 46.1 percent in this
year's third quarter compared with 46.9 percent in the same period
last year. Product margins in this year's third quarter were
pressured by competitive price discounting on computer-controlled
cutting and marker-making systems and by lower sales volume in
this product class. Price competition was especially intense in
European markets, where the Company's principal competitors are
headquartered. The lower margins on these products more than
offset the favorable impact on margins from the higher volume in
signmaking systems. On a nine month basis, gross profit margins
on product sales were 46.3 percent compared with 45.6 percent last
year. The improvement in year-to-date product margins reflected
the favorable impact of higher sales volume. Service gross
margins were lower in both the third quarter and nine months of
the current year due to less-than-anticipated revenue growth in
North American service for cutting and marker-making systems.
9
<PAGE>12
Selling, general, and administrative expenses were higher in this
year's third quarter and first nine months due primarily to higher
marketing and other expenses associated with the growth in sales.
As a percentage of revenue, SG&A expenses declined to 30.3 percent
in this year's third quarter from 31 percent in the same period
last year. For the first nine months, SG&A expenses were 31
percent of revenue this year compared with 30.2 percent in the
corresponding period last year.
The Company continued to commit significant resources to research
and the development of new products. For the third quarter and
first nine months of the current year, R&D expenses of $6.8
million and $18.9 million, respectively, were slightly below the
levels of the prior year. On a sequential basis, R&D spending
accelerated in this year's third quarter compared with the first
two quarters of the year, and management expects this higher
expenditure rate will continue for the near term. Among its on-
going R&D projects, the Company expects to continue to incur
significant expenses in developing new computer-to-plate systems
for the commercial printing industry.
Interest expense for this year's third quarter and first nine
months was higher than in the same periods of last year. During
this year's third quarter the Company incurred interest expense on
short-terms borrowings to fund common stock purchases. These
borrowings were repaid during the quarter using proceeds from
maturing municipal bond investments. Other income in this year's
third quarter and first nine months was lower than last year.
This decrease was due primarily to lower interest income as a
result of the reduction in the longer-term investment portfolio.
The provision rate for income taxes was 28.7 percent for the first
nine months of this year, the same provision rate as in the first
nine months of last year. The effective income tax rate continued
to be lower than the 35 percent statutory U.S. Federal tax rate
primarily as a result of tax-exempt interest income and the tax
benefits derived from the Company's Foreign Sales Corporation.
As a result of the aforementioned, net earnings for this year's
third quarter ended January 31, 1996 were $5.2 million or $.22 per
share compared with $4.8 million or $.20 in last year's third
quarter. The percentage increase in earnings per share was higher
than the percentage increase in net earnings as a result of the
Company's stock purchase program, which reduced shares
outstanding. For the nine months ended January 31, 1996 net
earnings totalled $15.2 million or $.64 per share compared with
$11.9 million or $.50 per share in the same period last year.
In a press release issued February 21, 1996, the Company noted
that it expected to report higher sales and earnings for the
fiscal year ending April 30, 1996 than in the prior year.
However, the Company also noted that fourth quarter earnings in
the current year will be lower than last year as a result of the
continued investment in the
10
<PAGE>13
computer-to-plate business and the reduced demand for apparel
automation systems. The Company estimated that earnings per share
for the fourth quarter of this year will be in the range of $.16
to $.21 per share compared with $.26 in earnings per share
reported in last year's fourth quarter.
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.
11
<PAGE>14
PART II - OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
(10.1) Gerber Scientific, Inc. 1992 Employee Stock Plan as
amended and restated as of April 28, 1995
(incorporated herein by reference to Exhibit A to
the Company's Proxy Statement filed in connection
with the Annual Meeting of Shareholders held October
13, 1995).
(10.2) Gerber Scientific, Inc. Profit and Growth Incentive
Bonus Plan for the fiscal year ending April 30,
1996.
(10.3) Consulting Agreement dated September 5, 1995 between
the Company and Stanley Simon & Associates.
(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.
12
<PAGE>15
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)
Dated: February 21, 1996 By: /s/ George M. Gentile
------------------- -------------------------------
Senior Vice President, Finance
and Principal Financial Officer
13
<PAGE>16
EXHIBIT INDEX
Exhibit Index
Number Exhibit Page
------------- ------- ----
10.1 Gerber Scientific, Inc.
1992 Employee Stock Plan
as amended and restated as
of April 28, 1995 (incorporated
herein by reference to Exhibit A
to the Company's Proxy Statement
filed in connection with the
Annual Meeting of Shareholders
held October 13, 1995)
10.2 Gerber Scientific, Inc. Profit 17
and Growth Incentive Bonus Plan
for the fiscal year ending
April 30, 1996*
10.3 Consulting Agreement dated 26
September 15, 1995 between
the Company and
Stanley Simon & Associates*
11 Statement Regarding Computation 27
of Per Share Earnings*
15 Letter Regarding Unaudited Interim 28
Financial Information*
27 Financial Data Schedule* 29
*Filed herewith
<PAGE>17
EXHIBIT NO. 10.2
CONFIDENTIAL
GERBER SCIENTIFIC, INC.
PROFIT AND GROWTH INCENTIVE BONUS PLAN
FISCAL YEAR ENDING APRIL 30, 1996
The Profit and Growth Incentive Bonus Plan (the "Plan") for each
of Gerber Scientific, Inc.'s subsidiaries, Gerber Scientific
Products, Inc. ("GSP"), Gerber Garment Technology, Inc. ("GGT"),
Gerber Systems Corporation ("GSC"), and Gerber Optical, Inc.
("GOI"), for the fiscal year ending April 30, 1996 will be based
on each subsidiary's individual performance. The profit and
growth incentive bonus for Gerber Scientific, Inc. ("Corporate")
will be based on the Company's consolidated performance.
PURPOSE OF THE PLAN
The purpose of the Plan is to reward certain domestic (U.S.)
executives, key management, and other employees by providing a
cash bonus based upon the adjusted pre-tax profits and the
improvement in adjusted pre-tax, pre-interest profits of their
subsidiary or Corporate, as applicable. This bonus is intended
as an incentive to increase shareholder value through sustained
and improved earnings.
The Plan is specifically for the fiscal year ending April 30,
1996, as approved by the Board of Directors of Gerber Scientific,
<PAGE>18
Inc. Bonus plans for future years and their criteria are
subject to the approval of the Board of Directors of Gerber
Scientific, Inc. It is the Board's present intention that
interest income (intercompany or otherwise) be eventually
eliminated from the adjusted pre-tax profits on which the bonus
pools are calculated for the "All Other Employees" category.
Accordingly, the Plan for the fiscal year ending April 30, 1996,
eliminates one-half of such interest income from adjusted pre-tax
profits. The Board contemplates that three-quarters of such
interest income would be eliminated from adjusted pre-tax profits
in the Plan for fiscal year 1997 and all of such interest income
would be eliminated in the fiscal year 1998 Plan.
DETERMINATION OF THE BONUS POOLS
The bonus pool at each participating subsidiary company will be
computed as follows:
(a) For Subsidiary presidents and key management, the sum
of the following:
- 1 percent of the consolidated adjusted pre-tax,
pre-bonus profit of the subsidiary for the year
ending April 30, 1996, plus
- 3 percent of the improvement in consolidated
adjusted pre-tax, pre-bonus, pre-interest profit
for the year ending April 30, 1996 over 70 percent
of the highest such amount reported in the three
fiscal years ending April 30, 1995 (or, in the
case of losses in each of these years, 100 percent
of the smallest of the losses in such three year
period).
<PAGE.19
(b) For All Other Employees:
- 1.50 percent of the consolidated adjusted pre-tax,
pre-bonus profit of the subsidiary for the year
ending April 30, 1996. Such profit will be
adjusted to exclude one-half of any interest
income (intercompany or otherwise) and the
equivalent income tax savings from any tax-exempt
interest income.
The bonus pool at Corporate will be computed as follows:
(a) For Corporate officers and key management, the sum of
the following:
- .75 percent of the consolidated adjusted pre-tax,
pre-bonus profit for the year ending April 30,
1996, plus
- 2.25 percent of the improvement in consolidated
adjusted pre-tax, pre-bonus, pre-interest profit
for the year ending April 30, 1996 over 70 percent
of the highest such amount reported in the three
fiscal years ending April 30, 1995.
(b) For All Other Employees:
- .25 percent of the consolidated adjusted pre-tax,
pre-bonus profit for the year ending April 30,
1996. Such profit will be adjusted to exclude
one-half of any interest income (intercompany or
otherwise) and the equivalent income tax savings
from any tax-exempt interest income.
Consolidated pre-tax profit is defined for participating
subsidiary companies as those subsidiary consolidated profits
before income taxes which are included in the consolidated
<PAGE>20
financial statements of Gerber Scientific, Inc. for the fiscal
year ending April 30, 1996, as certified by the Company's
independent public accountants. Consolidated pre-tax profit is
defined for Corporate as the profits before income taxes in the
consolidated financial statements of Gerber Scientific, Inc. for
the fiscal year ending April 30, 1996, as certified by the
Company's independent public accountants.
In addition to the adjustments for interest income described
above, such consolidated pre-tax profits will be further adjusted
for bonus computation purposes as follows: (1) to exclude the
effects of all Foreign Sales Corporation (FSC) activity; (2) to
exclude the effects of any material changes in accounting
principles which are subject to Corporate management's
discretion; (3) to include the equivalent income tax savings from
investments in tax-exempt municipal securities; (4) to exclude
the effects of outside legal costs expensed during the current
fiscal year for lawsuits alleging infringement of Company-owned
patents for which Corporate has given written approval; for bonus
computation purposes, these outside legal costs will be amortized
as a charge against consolidated pre-tax profit on a straight
line basis over the following 60 months; (5) to exclude the
effects of any settlement amounts or court awards for damages
resulting from a patent infringement lawsuit; for bonus
computation purposes, these amounts will first be offset against
the amount of current year patent infringement legal costs
amortized during the year, and second, as an offset against the
cumulative unamortized amount of patent infringement legal costs
<PAGE>21
as of the end of such fiscal year; and (6) if the settlement or
court award amounts exceed the cumulative unamortized amount of
patent infringement legal costs, such excess, for bonus
computation purposes, will be amortized on a straight line basis
over three years, beginning in the year the settlement or court
award amounts are received, as an increase to consolidated pre-
tax profits.
DETERMINATION OF INDIVIDUAL BONUS AMOUNTS
The bonus pools for Corporate officers and key management, and
for Subsidiary presidents and key management, will be allocated
between them based upon the relative target bonus potential for
the year so as to yield bonus percentages in a 50/30 ratio (e.g.,
50 percent for Subsidiary presidents and 30 percent for key
management). Management has the discretion to add a third
category of other key employees with a 20 percent (or less)
target bonus potential. The total bonus pool would remain the
same in this situation and would be allocated among the
categories based on the relative target bonus potential for the
year so as to yield bonus percentages in the appropriate ratio
(e.g., 50 percent for Corporate officers or Subsidiary
presidents, 30 percent for key management, and 20 percent [or
less] for other key employees).
The portion of the respective bonus pools allocated to each
category will be divided by the sum of the actual regular wages
paid during the year to the eligible employees in that category
so as to yield a percentage. This percentage is then multiplied
<PAGE>22
by each individual's regular wages paid to compute the applicable
bonus amount. Regular wages paid is defined as base pay,
including holiday pay, vacation pay, and sick time pay, but
excluding vacation paid in lieu of time off, overtime pay (except
for adjustments as may be appropriate to assure compliance with
the Fair Labor Standards Act), and any bonus pay.
The maximum bonus percentage computed cannot exceed 150 percent
of the targeted bonus potential (e.g., 75 percent of regular
wages paid for Corporate officers and Subsidiary presidents whose
targeted bonus potential is 50 percent, 45 percent of regular
wages paid for key management whose targeted bonus potential is
30 percent, etc.). The maximum bonus percentage computed for all
other employees cannot exceed 10 percent of regular wages paid to
all other eligible employees.
<PAGE>23
ELIGIBILITY FOR THE PLAN
All full time employees of Corporate and the participating
domestic subsidiary companies (GSP, GGT, GSC, and GOI) who are on
the active permanent payroll on April 30, 1996 are eligible to
participate in the Plan of their respective company.
Specifically excluded from participating in the Plan are:
employees of foreign (i.e., non-U.S.) subsidiaries and branches
of Corporate or the domestic subsidiary companies; employees who
participate in other forms of cash incentive compensation plans
(e.g., salesmen on commission); and employees under any form of
collectively bargained wage or benefit contract.
Eligible employees who as of April 30, 1996 have been employed
continuously for a full year receive a full share (regular wages
paid, as defined, during the Plan's year multiplied by the
applicable bonus percentage, as computed). Eligible employees
who as of April 30, 1996 have been employed continuously for more
than six months but less than one full year receive one-half
share (regular wages paid during the Plan's year multiplied by
one-half the applicable bonus percentage). Eligible employees
who as of April 30, 1996 have been employed for less than six
months receive no share.
Eligible employees who transfer between participating companies
will participate pro-rata in the Plan of each company where they
were employed during the Plan year. Their bonus is based on the
respective regular wages paid and applicable bonus percentage at
each company where they were employed.
<PAGE>24
Employees who are laid-off during the Plan year but recalled to a
participating company within the period of recall rights and
prior to the end of the Plan year will be considered to have had
no break in service for purposes of determining bonus share.
Employees who were laid-off prior to the beginning of the Plan
year and are recalled to a participating company within the
period of recall rights and prior to the end of the Plan year
will be considered to have been employed as of the first day of
the Plan year for purposes of determining bonus share. An
approved leave of absence will not be considered a break in
service for purposes of determining bonus share.
DISTRIBUTION OF THE PROFIT AND GROWTH INCENTIVE BONUS
The profit and growth incentive bonus for each participating
company will be paid in cash to eligible employees as a
percentage of their regular wages paid during the Plan year,
based upon their period of employment (see "Eligibility for the
Plan"). It is expected that any cash distribution will be made
on or before July 15, 1996.
<PAGE>25
EXHIBIT NO. 10.3
September 5, 1995
Mr. Stanley Simon
Stanley Simon and Associates
70 Pine Street
New York, NY 10270
USA
Re: Retainer of Stanley Simon and Associates as Management
Consultant
Dear Stanley:
This letter is to memorialize our agreement concerning the
retainer of Stanley Simon and Associates (SS&A) as a management
consultant to Gerber Scientific, Inc. (GSI). As you are well
aware, GSI's senior management, including myself, have often
turned to you for advice and related services on management
issues as they have arisen. Although the appointment of SS&A
originally was made pursuant to a resolution of the Board of
Directors which has since been superseded, we seek to continue to
retain SS&A as a management consultant.
As we have agreed, SS&A will continue to provide management
consulting services to GSI apart from the services to be provided
by yourself by virtue of your membership on the Board of
Directors of GSI and its committees. The appointment of SS&A as a
management consultant will be effective as of February 21, 1995
and will continue for a term of one year from that date. The term
may be renewed annually by mutual written consent of SS&A and
GSI.
The compensation payable to SS&A will be a fixed annual rate of
Ten thousand dollars ($10,000), payable monthly, plus reasonable
out-of-pocket travel and other expenses incurred by SS&A with
respect to consulting services performed hereunder. As an
independent contractor, SS&A continues to be responsible for all
other expenses, applicable taxes, and insurance.
Please note that this letter is being sent in duplicate. To
indicate your agreement with the terms of this letter, please
countersign both copies and return one to my attention.
Sincerely,
/s/ George M. Gentile
Senior Vice President, Finance
/s/ Stanley Simon
STANLEY SIMON & ASSOCIATES<PAGE>
<PAGE>26
<TABLE>
<CAPTION>
EXHIBIT NO. 11
GERBER SCIENTIFIC, INC. AND SUBSIDIARIES
COMPUTATION OF PER SHARE EARNINGS
Three Months Nine Months
Ended Ended
January 31 January 31
--------------------------- ---------------------------
1996 1995 1996 1995
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
Net earnings $ 5,151,000 $ 4,779,000 $ 15,177,000 $ 11,933,000
============ ============ ============ ============
Weighted average shares of
common stock outstanding
during the period 23,294,950 23,751,749 23,559,975 23,809,037
Common stock equivalents:
Common stock attributable
to stock options (treasury
stock method) 221,007 100,951 247,867 154,250
------------ ------------ ------------ ------------
Average common shares
outstanding 23,515,957 23,852,700 23,807,842 23,963,287
============ ============ ============ ============
Net earnings per common share $ .22 $ .20 $ .64 $ .50
============ ============ ============ ============
</TABLE>
<PAGE>27
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
February 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
February 20, 1996
<PAGE>28
<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 nine-month period ended January 31, 1996 and is qualified in
its entirety by reference to such financial statemments.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> APR-30-1996
<PERIOD-END> JAN-31-1996
<CASH> 4,997
<SECURITIES> 0
<RECEIVABLES> 65,668
<ALLOWANCES> 0
<INVENTORY> 67,071
<CURRENT-ASSETS> 151,700
<PP&E> 107,536
<DEPRECIATION> 52,942
<TOTAL-ASSETS> 310,307
<CURRENT-LIABILITIES> 56,311
<BONDS> 0
0
0
<COMMON> 23,150
<OTHER-SE> 211,731
<TOTAL-LIABILITY-AND-EQUITY> 310,307
<SALES> 86,884
<TOTAL-REVENUES> 86,884
<CGS> 47,988
<TOTAL-COSTS> 81,152
<OTHER-EXPENSES> (1,558)
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 139
<INCOME-PRETAX> 7,151
<INCOME-TAX> 2,000
<INCOME-CONTINUING> 5,151
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 5,151
<EPS-PRIMARY> .22
<EPS-DILUTED> .22
</TABLE>
