November 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 October 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
<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 end
October 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 (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, 1996, 23,231,600 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, 1996
PAGE
----
Part I - Financial Information
Item 1. Consolidated Financial Statements:
Statement of Earnings for the three months 2
ended October 31, 1996 and 1995
Statement of Earnings for the six months 3
ended October 31, 1996 and 1995
Balance Sheet at October 31, 1996 and 4
April 30, 1996
Statement of Cash Flows for the six months 5
ended October 31, 1996 and 1995
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, 1996 1995
------------------------------------------------------------------------
Revenue:
Product sales $ 83,348 $ 78,699
Service 11,603 11,459
--------- ---------
94,951 90,158
--------- ---------
Costs and Expenses:
Cost of product sales 45,017 41,727
Cost of service 7,405 7,539
Selling, general and administrative 30,380 27,950
Research and development expenses 7,433 6,055
--------- ---------
90,235 83,271
--------- ---------
Operating income 4,716 6,887
Other income 2,302 939
Interest expense (83) (93)
--------- ---------
Earnings before income taxes 6,935 7,733
Provision for income taxes 1,800 2,200
--------- ---------
Net earnings $ 5,135 $ 5,533
========= =========
Net earnings per common share $ .22 $ .23
========= =========
Dividends paid per common share $ .08 $ .08
========= =========
Average common shares outstanding 23,327 23,912
========= =========
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, 1996 1995
------------------------------------------------------------------------
Revenue:
Product sales $ 157,878 $ 155,772
Service 22,881 22,577
--------- ---------
180,759 178,349
--------- ---------
Costs and Expenses:
Cost of product sales 87,202 83,522
Cost of service 14,362 14,959
Selling, general and administrative 58,975 55,726
Research and development expenses 14,209 12,132
--------- ---------
174,748 166,339
--------- ---------
Operating income 6,011 12,010
Other income 3,300 2,313
Interest expense (173) (197)
--------- ---------
Earnings before income taxes 9,138 14,126
Provision for income taxes 2,400 4,100
--------- ---------
Net earnings $ 6,738 $ 10,026
========= =========
Net earnings per common share $ .29 $ .42
========= =========
Dividends paid per common share $ .16 $ .16
========= =========
Average common shares outstanding 23,350 23,954
========= =========
See Accompanying Notes
-3-
<PAGE>5
GERBER SCIENTIFIC, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
In Thousands
------------------------------------------------------------------------
October 31, April 30,
1996 1996
------------------------------------------------------------------------
ASSETS
Current Assets:
Cash and short-term cash investments $ 7,282 $ 8,704
Accounts receivable 83,786 74,035
Inventories 63,481 63,196
Prepaid expenses 13,372 12,021
---------- ----------
167,921 157,956
---------- ----------
Investments and long-term
receivables 52,875 59,594
---------- ----------
Property, plant and equipment 110,638 109,430
Less accumulated depreciation 54,510 54,692
---------- ----------
56,128 54,738
---------- ----------
Intangible assets 49,050 48,576
Less accumulated amortization 10,073 9,327
---------- ----------
38,977 39,249
---------- ----------
Other assets 1,252 1,451
---------- ----------
$ 317,153 $ 312,988
========== ==========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities:
Notes payable $ -- $ --
Current maturities of long-term debt 193 193
Accounts payable 14,609 12,895
Accrued compensation and benefits 11,983 13,673
Other accrued liabilities 17,279 18,351
Deferred revenue and litigation award 8,865 8,512
Advances on sales contracts 2,725 2,672
---------- ----------
55,654 56,296
---------- ----------
Noncurrent Liabilities:
Deferred income taxes 11,219 10,056
Long-term debt 7,242 7,338
---------- ----------
18,461 17,394
---------- ----------<PAGE>
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
23,231,600 and 23,198,725 shares 23,232 23,199
Paid-in capital 35,460 35,218
Retained earnings 182,332 179,307
Cumulative translation component 2,014 1,574
---------- ----------
243,038 239,298
---------- ----------
$ 317,153 $ 312,988
========== ==========
See Accompanying Notes
-4-
<PAGE>6
GERBER SCIENTIFIC, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CASH FLOWS
In Thousands
--------------------------------------------------------------------------
Six Months Ended October 31, 1996 1995
--------------------------------------------------------------------------
CASH PROVIDED BY (USED FOR):
Operating Activities
Net earnings $ 6,738 $ 10,026
Adjustments to reconcile net earnings to
cash provided by operating activities:
Depreciation and amortization 5,894 5,248
Deferred income taxes 1,163 (644)
Changes in operating accounts, net of
effects from business acquisitions:
Receivables (10,933) (5,040)
Inventories (285) (4,950)
Prepaid expenses (1,351) 3,034
Accounts payable and accrued expenses (642) (8,749)
-------- --------
Provided by (Used for) Operating Activities 584 (1,075)
-------- --------
Financing Activities
Purchase of common stock -- (5,274)
Repayments of long-term debt (96) (96)
Exercise of stock options 275 559
Dividends on common stock (3,713) (3,802)
-------- --------
(Used for) Financing Activities (3,534) (8,613)
-------- --------
Investing Activities
Long-term debt securities 7,268 15,258
Business acquisitions -- (486)
Additions to property, plant and equipment (6,440) (7,461)
Intangible and other assets (373) (1,071)
Other long-term investments 1,073 (241)
-------- --------
Provided by Investing Activities 1,528 5,999
-------- --------
(Decrease) in Cash and Short-Term
Cash Investments (1,422) (3,689)
Cash and Short-Term Cash Investments,
Beginning of Period 8,704 10,208
-------- --------
Cash and Short-Term Cash Investments,
End of Period $ 7,282 $ 6,519
======== ========
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, 1996, the
consolidated statements of earnings for the three- and six-month
periods ended October 31, 1996 and 1995, and the consolidated
statement of cash flows for the six-month periods ended October 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 six-month
period ended October 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):
October 31, 1996 April 30, 1996
---------------- --------------
Raw materials and
purchased parts $ 51,518 $ 51,493
Work in process 11,963 11,703
-------- --------
$ 63,481 $ 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.
NOTE 4
Included in this year's second quarter and six months ended October
31, 1996 was a gain of $1,032,000 ($.04 per share) resulting from
life insurance benefits the Company received upon the death of Mr.
H. Joseph Gerber, the Company's former Chairman and President.
Life insurance benefits are tax-exempt, and as a result, the income
tax provision rates were comparatively lower in the three- and six-
month periods ended October 31, 1996.
-6-
<PAGE>8
GERBER SCIENTIFIC, INC. AND SUBSIDIARIES
With respect to the unaudited consolidated financial statements of
Gerber Scientific, Inc. at October 31, 1996 and for the three- and
six-month periods ended October 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 November 20,
1996 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, 1996 and 1995, the
consolidated statement of cash flows for the six-month periods
ended October 31, 1996 and 1995, and the consolidated balance
sheet as of October 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 for the three- and six-month
periods ended October 31, 1996 and 1995, the consolidated
statement of cash flows for the six-month periods ended October
31, 1996 and 1995, or the consolidated balance sheet as of
October 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
November 20, 1996
-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, 1996 the Company's ratio of current assets to
current liabilities was 3.0 to 1 compared with 2.8 to 1 at April
30, 1996. Net working capital at October 31, 1996 was $112.3
million, an increase of $10.6 million from the beginning of the
current fiscal year. The Company's cash and short-term
investments totaled $7.3 million at October 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
portfolio of longer-term debt securities, primarily tax-exempt
municipal bonds, totaled $51.6 million at October 31, 1996,
compared with $58.9 million at April 30, 1996.
Operating activities provided $.6 million in cash for the six-
month period ended October 31, 1996 compared with $1.1 million
used by operating activities for the same period last year. Cash
generated by earnings and depreciation and amortization in the
current year was substantially offset by higher receivable
balances. The growth in receivables was related to the higher
sales volume of business and also to extended payment terms for
certain sales of computer-to-plate imaging systems for the
printing industry.
The principal non-operating uses of cash for the six-month period
ended October 31, 1996 were additions to property, plant, and
equipment of $6.4 million and the payment of dividends on common
stock of $3.7 million. The Company anticipates that capital
expenditures for the current fiscal year will be in the range of
$12 to $13 million and expects to fund these with cash on hand
and cash from operations.
The Company's total debt at October 31, 1996 was $7.4 million,
down slightly from April 30, 1996. The ratio of total debt to
shareholders' equity was 3.1 percent at October 31, 1996, which
was 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.
-9-
<PAGE>11
RESULTS OF OPERATIONS
Combined sales and service revenue for the three- and six-month
periods ended October 31, 1996 increased by 5.3 percent and 1.4
percent, respectively, from the same periods of last year. The
increases came from both higher product sales and service
revenue. Product sales rose because of increased shipments of
computer-to-plate imaging systems for the printing industry.
Sales were also higher in the Company's line of ophthalmic
manufacturing systems for the production of eyeglass lenses and
in digital imaging and routing systems for the signmaking
industry. These increases were partially offset by a decline in
sales of automated fabric cutting and spreading systems for the
apparel and related industries.
The consolidated gross profit margins in this year's second
quarter and first six months were slightly lower than the prior
year at 44.8 and 43.8 percent, respectively, compared with 45.4
and 44.8 percent for the same periods last year. The lower
margins occurred in product sales and resulted from lower sales
of automated fabric cutting systems and competitive price
discounting on these products, particularly in European markets.
Selling, general, and administrative expenses in this year's
second quarter and first six months increased $2.4 million and
$3.3 million, respectively, from the same periods last year. On
a percentage of sales basis, S,G & A increased 1 percentage point
and 1.4 percentage points from the prior year levels to 32
percent and 32.6 percent of total revenue for the three- and six-
month periods ended October 31, 1996, respectively. These
increases were the result of advertising campaigns, exhibition
costs, and post sales expenses associated with the promotion of
certain new products, particularly for computer-to-plate imaging
systems for the printing industry.
The Company continued to commit significant resources to research
and the development of new products. R&D expense of $7.4 million
in this year's second quarter and $14.2 million in the first six
months represented 7.8 and 7.9 percent of revenue in these
periods, respectively. These percentages were higher than the
prior year comparative levels of 6.7 and 6.8 percent,
respectively. This higher level of expenditure in the current
year reflected, in part, the development efforts aimed at
broadening the Company's line of computer-to-plate imaging
systems for the commercial printing industry.
Interest expense for this year's second quarter and first six
months ended October 31, 1996 was slightly lower than in the same
periods last year as a result of lower debt levels. Other income
in this year's second quarter and first six months was higher
than last year because of a gain of $1 million ($.04 per share)
from life insurance benefits received upon the death of Mr. H.
Joseph Gerber, the Company's former Chairman and President. This
gain was partially offset by lower interest income resulting from
a smaller investment portfolio of tax-exempt municipal bonds.
-10-
<PAGE>12
The provision rate for income taxes for the second quarter and
six months ended October 31, 1996 was reduced as a result of the
tax-exempt life insurance benefits noted above. Without this
item, the tax provision rate would have been approximately 30
percent for this year's second quarter and first six months,
compared with approximately 29 percent in the same periods last
year. 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, the tax benefits of the Company's
foreign sales corporation, and, in the current year, the tax-
exempt life insurance benefits.
As a result of the above, net earnings decreased in this year's
second quarter to $5.1 million or $.22 per share from $5.5
million or $.23 per share in last year's second quarter. For the
first six months, net earnings this year decreased to $6.7
million or $.29 per share compared with $10.0 million or $.42 per
share in the prior 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, 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>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
September 27, 1996, the shareholders voted on one matter
regarding the election of Directors. The shareholders elected A.
Robert Towbin and David J. Logan as Directors to serve for terms
expiring at the 1999 annual meeting. The terms of office of the
other Directors, George M. Gentile, Stanley Simon, Edward E.
Hood, Jr., W. Jerome Vereen, and David J. Gerber continued after
the meeting.
Votes cast in the election of Directors were as follows:
Votes Votes
For Against
------------ ---------
A. Robert Towbin 21,394,656 193,623
David J. Logan 21,404,118 184,161
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 Schedule.
(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: November 22, 1996 By:/s/ Gary K. Bennett
------------------- ------------------------------
Senior Vice President, Finance
and Principal Accounting Officer
-13-
<PAGE>15
EXHIBIT INDEX
-------------
Exhibit Index
Number Exhibit Page
------------- ------- ----
11 Statement Regarding Computation 17
of Per Share Earnings.*
15 Letter Regarding Unaudited Interim 18
Financial Information.*
27 Financial Data Schedule 19
*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
--------------------------- ---------------------------
1996 1995 1996 1995
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
Net earnings $ 5,135,000 $ 5,533,000 $ 6,738,000 $ 10,026,000
============ ============ ============ ============
Weighted average shares of
common stock outstanding
during the period 23,231,530 23,617,533 23,220,984 23,692,944
Common stock equivalents:
Common stock attributable
to stock options (treasury
stock method) 95,580 294,262 129,042 261,296
------------ ------------ ------------ ------------
Average common shares
outstanding 23,327,110 23,911,795 23,350,026 23,954,240
============ ============ ============ ============
Net earnings per common share $ .22 $ .23 $ .29 $ .42
============ ============ ============ ============
</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, 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
November 20, 1996
<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 Scinetific, Inc.
as of and for the six-month period ended October 31, 1996 and is qualified in
its entirety by reference to such financail statements.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> APR-30-1997
<PERIOD-END> OCT-31-1996
<CASH> 7,282
<SECURITIES> 0
<RECEIVABLES> 83,786
<ALLOWANCES> 0
<INVENTORY> 63,481
<CURRENT-ASSETS> 167,921
<PP&E> 110,638
<DEPRECIATION> 54,510
<TOTAL-ASSETS> 317,153
<CURRENT-LIABILITIES> 55,654
<BONDS> 0
0
0
<COMMON> 23,232
<OTHER-SE> 219,806
<TOTAL-LIABILITY-AND-EQUITY> 317,153
<SALES> 180,759
<TOTAL-REVENUES> 180,759
<CGS> 101,564
<TOTAL-COSTS> 174,748
<OTHER-EXPENSES> (3,300)
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 173
<INCOME-PRETAX> 9,138
<INCOME-TAX> 2,400
<INCOME-CONTINUING> 6,738
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 6,738
<EPS-PRIMARY> .29
<EPS-DILUTED> .29
</TABLE>
