<PAGE 1>
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
FORM 10-K
(Mark One) Annual Report / X / (Fee Required) or
Transition Report / / (No Fee Required)
Pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934
For the Fiscal Year Ended April 30, 2000 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 Number)
83 Gerber Road West
South Windsor, CT 06074
------------------------------- -------------------------------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (860) 644-1551
===========================================================================
Securities registered pursuant to Section 12(b) of the Act:
Name of each Exchange
Title of each class on which registered
--------------------------------------- ------------------------------
Common Stock, par value $1.00 per share New York Stock Exchange
At June 30, 2000, 22,011,083 shares of common stock of the registrant were
outstanding. On such date the aggregate market value of the voting stock
held by non-affiliates of the registrant was approximately $221,643,000.
Excluded from this amount is voting stock having an aggregate market value
of approximately $31,485,000 (representing 12.4% of the outstanding voting
stock), which is owned, directly or in trust, by the family of H. Joseph
Gerber, the Company's founder, and by the other members of the Company's
Board of Directors, who are deemed affiliates for purposes of this
computation.
Securities registered pursuant to Section 12(g) of the Act: None
============================================================================
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained,
to the best of the registrant's knowledge, in definitive proxy or
information statements incorporated by reference in Part III of this Form
10-K. X .
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 .
<PAGE 2>
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the documents listed below have been incorporated by
reference into the indicated parts of this report, as specified
in the responses to the item numbers involved.
(1) 2000 Annual Meeting Proxy Statement (Parts I, III, and IV).
<PAGE 3>
GERBER SCIENTIFIC, INC.
Index to Annual Report
on Form 10-K
Year Ended April 30, 2000
PART I PAGE
Item l. Business 4
Item 2. Properties 13
Item 3. Legal Proceedings 14
Item 4. Submission of Matters to a Vote of
Security Holders 14
Executive Officers of the Registrant 14
PART II
Item 5. Market for the Registrant's Common Equity
and Related Stockholder Matters 14
Item 6. Selected Financial Data 15
Item 7. Management's Discussion and Analysis of
Financial Condition and Results of Operations 17
Item 7a. Quantitative and Qualitative Disclosures About
Market Risk 31
Item 8. Financial Statements and Supplementary Data 32
Item 9. Changes in and Disagreements with Auditors
on Accounting and Financial Disclosure 64
PART III
Item 10. Directors and Executive Officers of the
Registrant 64
Item 11. Executive Compensation 66
Item 12. Security Ownership of Certain Beneficial
Owners and Management 66
Item 13. Certain Relationships and Related
Transactions 66
PART IV
Item 14. Exhibits, Financial Statement Schedules, and
Reports on Form 8-K 66
Signatures 70
<PAGE 4>
GERBER SCIENTIFIC, INC.
PART I
ITEM 1. BUSINESS.
Gerber Scientific, Inc., a Connecticut corporation
incorporated in 1948, is a holding company providing corporate
management services and financial resources to its subsidiaries.
As used herein, the term "Company" means Gerber Scientific, Inc.
and, unless the context indicates otherwise, its subsidiaries.
The Company's principal subsidiaries are Gerber Scientific
Products, Inc. (GSP); Spandex PLC (Spandex); Gerber Technology,
Inc. (GT); and Gerber Coburn Optical, Inc. (GC).
Gerber Scientific, Inc. is a leading global supplier of
intelligent manufacturing systems. The Company provides diverse
industries with innovative computer-based systems, equipment,
software, and aftermarket supplies that generate high-quality,
mass-customized products at a competitive cost. As a result, the
Company is a market leader in each of its three operating
segments: Sign Making and Specialty Graphics; Apparel and
Flexible Materials; and Ophthalmic Lens Processing.
The Company's principal manufacturing and administrative
facilities are located in Connecticut. The Company also has
foreign subsidiaries in numerous locations that provide marketing
and field service support for the Company's products.
As of April 30, 2000, the Company had approximately 2,900
regular, full-time employees.
Acquisitions and Divestiture
----------------------------
The Company continually evaluates acquisition opportunities
to strengthen its market leadership positions. Over the last
five years, the Company has completed several acquisitions, which
it believes increases its potential for additional growth. Also,
in 1998, the Company sold its Imaging and Inspection Systems
business to focus on its leadership positions in its other
businesses. A summary of these acquisitions and divestiture
follows.
In 2000, the Company acquired five distribution businesses
included in its Sign Making and Specialty Graphics operating
segment. These businesses were located in Australia, New Zealand,
and Scandinavia. For further discussion of these acquisitions,
see Part II, Item 8, Note 2, "Business Acquisitions" of
the "Notes to Consolidated Financial Statements" appearing on
page 44 of this Form 10-K.
On May 5, 1998, the Company acquired the outstanding capital
stock of Spandex PLC (Spandex) of Bristol, UK. Spandex was the
<PAGE 5>
largest distributor of equipment and related materials to the
sign making industry in Europe. The purchase price was
approximately $173,000,000. In addition, Spandex had
approximately $11,600,000 in outstanding debt that was assumed.
As of March 31, 1998, the Company sold its Imaging and
Inspection Systems product class to the BARCO Group of Belgium
for $25,000,000 in cash. This product class developed,
manufactured, marketed, and serviced interactive imaging and
inspection systems for the electronics and commercial printing
industries.
On February 27, 1998, Gerber Optical, Inc., a wholly owned
subsidiary of the Company, acquired the outstanding stock of
Coburn Optical Industries, Inc. (Coburn) of Muskogee, Oklahoma,
and subsequently merged with Coburn. The company was renamed
Gerber Coburn Optical, Inc. The purchase price, including the
costs of acquisition and the repayment of Coburn's outstanding
debt, was approximately $63,000,000. Coburn is a leading
manufacturer and international distributor of a broad range of
ophthalmic lens processing equipment and related supplies used in
the production of eyeglass lenses. GC has continued to develop,
manufacture, market, and support the Coburn product lines.
On February 12, 1997, the Company's GT subsidiary acquired
the outstanding stock of Cutting Edge Inc. (Cutting Edge) of
Marblehead, Massachusetts, for a total cost of approximately
$7,800,000 and subsequently merged that company into GT. Cutting
Edge manufactures high-performance single layer fabric cutting
systems for the industrial fabric, automotive, furniture,
apparel, and composite materials industries. GT has continued to
develop, manufacture, market, and support the Cutting Edge
product lines.
Operating Segments
------------------
The Company conducts its business through three principal
operating segments. These operating segments, their principal
products and services, and a description of their principal
methods of distribution follows. Other relevant information
regarding the Company's measurement of segment profit or loss and
segment assets, factors used to identify reportable segments, and
the financial information required by Item 1 relating to the
reportable segments are included in Part II, Item 8, Note 17,
"Segment Reporting" of the "Notes to Consolidated Financial
Statements" appearing on page 57 of this Form 10-K.
SIGN MAKING AND SPECIALTY GRAPHICS
GSP and Spandex comprise the Company's Sign Making and
Specialty Graphics operating segment.
GSP is a world leader in the development and manufacture of
computerized sign making and specialty graphics systems,
software, materials, and accessories. Digital design, printing,
<PAGE 6>
and production products are integrated to provide customers with
comprehensive engineered solutions for color printing and
dimensional signage. GSP also develops and supplies quality
state-of-the-art aftermarket materials to maximize equipment
performance and output.
GSP produces a full range of color digital imaging systems,
automated lettering systems, software, plotters, and routers for
the design and production of signs and graphic arts on adhesive-
backed vinyls and other materials. The company's color digital
imaging systems create continuous length, durable, professional-
quality text and graphics, including complicated halftones,
multiple colors, and process four color images directly on sign
vinyl. GSP's aftermarket supplies include a wide variety of
adhesive-backed vinyls, translucent vinyl films, color foil
cartridges, reflective sheeting, masking film, sandblast stencil,
heat transfer flock, and specialty and screenprinting films.
The end market for GSP's products includes sign shops and
graphic arts professionals. GSP distributes its products to
independent distributors for resale by them to the end market,
except for sales to the Company's wholly-owned subsidiary
Spandex, which sells directly to end users. The acquisition of
Spandex added to the Company the leading global distributor of
high-performance software, equipment, and related materials and
components to the sign making and specialty graphics industry.
The largest company of its kind in the world, Spandex is
responsible for the sales, marketing, and support of GSP's sign
making software, systems, and accessories in Europe, Canada,
Australia, and New Zealand. In addition to GSP products, Spandex
offers a broad inventory of specialty sign making materials.
These include self-adhesive vinyl, banner materials, specialist
sign making films, application tapes, and sign blanks and
substrates, as well as extruded aluminum sign systems and plastic
components. Additionally, a subsidiary of Spandex produces self-
adhesive vinyl films for the sign and allied industries and
labels films for the packaging markets.
APPAREL AND FLEXIBLE MATERIALS
GT comprises the Company's Apparel and Flexible Materials
operating segment. GT is a world leader in advanced computer-
aided design and manufacturing systems for producing industrial,
commercial, and retail sewn goods. GT produces computer-aided
design, pattern-making, and marker-making systems; computer-
controlled material spreading and cutting systems; and several
related hardware and software systems. GT also provides
maintenance services for a substantial portion of the systems it
produces. These integrated hardware and software systems
significantly improve the efficiency of information data
management, product and pattern design, grading and marker
making, fabric spreading and cutting, and material handling
processes. They also are used to manufacture products formed by
flexible materials, such as luggage, toys, marine products, and
composites.
<PAGE 7>
GT's computer-aided design, pattern-making, and marker-
making (nesting) systems automate the design, pattern-making,
pattern-grading (sizing), and marker-making functions. This
improves the efficiency of material usage in the apparel,
furniture, luggage, automotive, aerospace, sheet metal,
composites, and other industries. Among the software products GT
produces is a product data management system that provides a
powerful tool for developing product specifications, controlling
and managing data, and documenting the product development
process, along with production and quality requirements. GT's
material spreading systems enhance cutting room efficiency by
automating the preparation of multiple layers of material for the
cutting table. GT's computer-controlled cutting systems
accurately cut parts out of single and multiple layers of
flexible materials, such as textiles, leathers, vinyls, plastics,
fiberglass, and advanced composite materials, quickly,
efficiently, and with more precision than the traditional methods
of hand cutting or die cutting.
The market for GT's products include the apparel, aerospace,
automotive, furniture, and other industries. GT products are
sold through its worldwide distribution network and through
independent sales representatives and agents.
OPHTHALMIC LENS PROCESSING
GC comprises the Company's Ophthalmic Lens Processing
operating segment. The company's equipment, software, systems,
and accessories are utilized in all aspects of surfacing and
coating prescription eyewear lenses, and in the machining of
eyeglass lens blanks to fit patient frames. GC also provides
maintenance services for a substantial portion of the systems it
produces. As a world leader in ophthalmic lens processing
systems, GC develops, manufactures, and distributes a wide range
of fully integrated, computer-based laboratory production
solutions to ophthalmic professionals around the world.
GC's production solutions replace a set of related manual
tasks with computer-controlled automation, reducing operator
skill levels required and increasing productivity. The company's
product offerings include the components required to process an
entire prescription, including computerized frame tracing, lens
blocking, surface generating, and lens edging. The individual
systems can be used with other manufacturing equipment or can be
combined in a complete system managed by the company's processing
software.
The markets for GC's products include independent wholesale
eyeglass processing laboratories, "super-optical" retail stores
with on-site processing facilities, retail chains with central
processing laboratories, and independent ophthalmologists,
optometrists, and opticians. GC products are sold through its
direct worldwide distribution network.
<PAGE 8>
The Coburn acquisition in February 1998 broadened the
Company's product markets to include manufacturers of both
plastic and glass lenses. Also gained through Coburn was a
significant consumables and spare parts business, a direct
worldwide distribution network, which extended the Company's
geographic reach, and an established field service organization.
The consumable and spare parts business includes lens polishing
pads, tinting chemicals, coatings, and miscellaneous tools.
Other Matters Relating to the Corporation's Business as a Whole
---------------------------------------------------------------
RESEARCH AND DEVELOPMENT
The Company continues to emphasize technological development
with research and development programs designed to create new
software and hardware products, improve existing products, and
modify products to meet specific customer needs. The Company's
research and development expenses for the years ended April 30,
2000, 1999, and 1998 were $33,022,000, $31,468,000, and
$31,810,000, respectively, and were charged to income as
incurred. The Company's Sign Making and Specialty Graphics
operating segment also received and expended approximately
$56,000 and $213,000 for the years ended April 30, 1999 and
1998, respectively, for customer-funded research and development
projects.
MARKETING
Most of the Company's product sales are to end users and are
sold through the Company's direct sales force in the United
States, subsidiaries in Europe, Canada, Mexico, Morocco,
Australia, New Zealand, Singapore, Hong Kong, and China, and
independent sales representatives and agents in various parts of
the world. The Company's Sign Making and Specialty Graphics
systems are sold principally to independent distributors for
resale by them, except for sales to Spandex, which are resold by
Spandex directly to end users. Domestic sales personnel are
located in a number of cities, including Hartford, New York,
Atlanta, Chicago, Dallas, Los Angeles, and Miami. The Company
has foreign subsidiaries that provide marketing and field service
support for the Company's products. These are located in
Austria, Belgium, the Czech Republic, Finland, France, Germany,
Holland, Hungary, Italy, Portugal, Slovakia, Spain, Sweden,
Switzerland, the United Kingdom, Canada, Mexico, Morocco,
Australia, China, Hong Kong, New Zealand, and Singapore. The
Company's foreign subsidiaries act both as sales representatives
on a commission basis and as distributors, depending upon the
product and the territory involved.
RAW MATERIALS
The Company purchases materials, such as computers, computer
peripherals, electronic parts, hardware, and aftermarket supplies
from numerous suppliers. Many of these materials are
<PAGE 9>
incorporated directly into the Company's manufactured products,
while others require additional processing. In some cases the
Company uses only one source of supply for certain materials, but
to date the Company has not experienced significant difficulties
in obtaining timely deliveries. Increased demand for these
materials or future unavailability could result in production
delays that might adversely affect the Company's business. The
Company believes that, if required, it could develop alternative
sources of supply for the materials that it uses. In the near
term, the Company does not foresee the unavailability of
materials, components, or supplies that would have any material
adverse effect on its overall business, or on any of its
operating segments.
PATENTS AND TRADEMARKS
The Company owns and has applications pending for a large
number of patents in the United States and other countries, which
expire from time to time, and cover many of its products and
systems. While the Company considers that such patents and
patent applications as a group are important to its operations,
it does not consider that any patent or group of them related to
a specific product or system is of such importance that the loss
or expiration thereof would have a materially adverse effect on
its overall business or the segments thereof.
The Company believes that its success depends, to a
significant extent, on the innovative skills, technical
competence, and marketing abilities of its personnel.
The Company also has registered trademarks for a number of
its products. Trademarks do not expire when continued in use and
properly protected.
SEASONALITY
No segment of the Company's business is subject to
significant seasonal fluctuation. Sales of aftermarket supplies
in the Sign Making and Specialty Graphics operating segment can
be affected by the weather in the winter months (the Company's
third quarter) as many of these supplies are used for production
of outdoor signage.
WORKING CAPITAL
The Company's business generally does not require unusually
large amounts of working capital. The Company receives advance
payments on customer orders for some of its products. The
Company also sells certain of its products through leasing
programs that are financed by third-party financial institutions.
These leases are generally for three- to five-year terms. The
Company has recourse obligations for leases that are financed
under these leasing programs and these obligations are secured
and collateralized by the underlying equipment.
<PAGE 10>
CUSTOMERS
The Company's customers are primarily end-users, except in
the Sign Making and Specialty Graphics segment, for which the
Company's customers in the U.S. are independent distributors.
Spandex, an acquisition that is included in this segment, sells
directly to end users in other geographic markets. No single
customer accounted for 10 percent or more of the Company's
consolidated revenue in 2000, 1999, or 1998. Customer purchases
of capital goods often vary from year to year, and it is normal
for the Company's customer base to change accordingly. The
Company believes that the loss of any single customer or small
group of customers would not have a materially adverse impact on
the Company's overall business or segments thereof.
BACKLOG
The Company's backlog of orders considered firm was
approximately $45,200,000 at April 30, 2000, compared with
$50,800,000 at April 30, 1999. Substantially all the backlog at
April 30, 2000, is scheduled for delivery in 2001. The Company
records as backlog firm orders from customers for delivery
at specified dates.
The Company's backlog at April 30, 2000 and 1999 by
operating segment follows (in thousands):
Operating Segment: 4/30/00 4/30/99
---------------------------------- ------- -------
Sign Making and Specialty Graphics $ 4,500 $ 6,100
Apparel and Flexible Materials 34,900 41,400
Ophthalmic Lens Processing 5,800 3,300
------- -------
Total $45,200 $50,800
======= =======
COMPETITION
The Company competes in a variety of markets and with a
variety of other companies. In the markets the Company serves,
the principal competitive factors are product performance, price,
customer support, and company reputation.
The Company holds the predominant market position in the
marketplace for computer-controlled sign making and specialty
graphics systems. The Company pioneered the development of these
technologies. While there has been an increase in the number of
companies marketing competing products, the Company believes that
none have been able to match the combined product, marketing,
selling/distribution channels, and support strength of the
Company.
<PAGE 11>
The Company believes that it is the largest worldwide
supplier to the apparel and flexible materials industries of
computer-controlled material cutting systems and pattern-making,
grading, and nesting systems. There is worldwide competition in
these markets, and certain competing companies have become
significant suppliers. Certain of these competitors have
marketed cutting equipment in the past that infringed the
Company's patents, and the Company has received favorable
settlements from such competitors.
The Company is the largest worldwide supplier of ophthalmic
manufacturing systems used in the manufacture of eyeglass lenses.
The Company believes that its leadership in technology and
ability to make strategic alliances and acquisitions has enabled
it to become the major supplier of computerized surface blocking
systems, lens generating systems, and lens edging and polishing
systems.
The Company could be adversely affected if it were unable to
respond with competitive products, in a timely manner, to pricing
changes or significant new product announcements affecting its
product lines.
OTHER RISK FACTORS
The Company's businesses and operations worldwide can be
affected by changes in economic, industrial, political, and
international conditions, including changes in interest rates
(which can affect demand for capital equipment as well as the
Company's financing costs); changes in legislation and in
government regulations (including regulations relating to capital
contributions, currency conversion, and repatriation of
earnings); changes in technology; and changes in currency
exchange rates. The Company's export sales have generally been
made in U.S. dollars, except for certain products and territories
(principally in Western Europe), where the Company has made sales
in local currencies. The Company has a program to hedge certain
local currency sales through the use of forward foreign currency
exchange contracts.
The Company was party to approximately $9,400,000 in forward
exchange contracts at April 30, 2000 providing for the delivery
by the Company of various foreign currencies in exchange for
others over the succeeding months. The counterparties to these
contracts were major international commercial banks. The Company
continually monitors its open forward exchange contract position
and does not anticipate nonperformance by the counterparties.
To hedge the variability in future cash flows attributable
to interest rate fluctuations associated with a portion of the
U.S. dollar borrowings under its multi-currency revolving credit
facility, the Company entered into a four-year interest rate swap
contract. The notional amount of this swap contract at April 30,
<PAGE 12>
2000 was $54,000,000, and this will decrease ratably to
$32,000,000 over the remainder of the contract's term (January
2003). The market value of this swap contract was approximately
$2,000,000 at April 30, 2000.
Management believes that the diversification of the
Company's businesses across multiple industries and
geographically throughout the world has helped, and should
continue to help, limit the effect of adverse conditions in any
one industry or the economy of any country or region on the
consolidated results of the Company. There can be no assurance,
however, that the effect of adverse conditions in one or more
industries or regions will be limited or offset in the future.
A discussion of the Company's efforts to modify computer
systems for the transition to the Year 2000 is included in
Management's Discussion and Analysis of Financial Condition and
Results of Operations under the heading "Year 2000" on page 29 of
this Form 10-K.
A discussion of the impact on the Company of the
introduction of the "euro" as a common currency of the member
countries of the European Economic and Monetary Union is included
in Management's Discussion and Analysis of Financial Condition
and Results of Operations under the heading "Euro Conversion" on
page 29 of this Form 10-K.
Cautionary Note Concerning Factors That May Affect Future Results
-----------------------------------------------------------------
This report contains statements which, to the extent they
are not statements of historical or present fact, constitute
"forward-looking statements" under the securities laws. From
time to time, oral or written forward-looking statements may also
be included in other materials released to the public. These
forward-looking statements are intended to provide management's
current expectations or plans for the future operating and
financial performance of the Company, based on assumptions
currently believed to be valid. Forward-looking statements can
be identified by the use of words such as "believe," "expect,"
"plans," "strategy," "prospects," "estimate," "project,"
"anticipate," and other words of similar meaning in connection
with a discussion of future operating or financial performance.
These include, among others, statements relating to:
- future earnings and other measurements of financial
performance,
- future cash flow and uses of cash,
- the effect of economic downturns or growth in particular
regions,
- the effect of changes in the level of activity in particular
industries or markets,
- the scope or nature of acquisition activity,
- prospective product developments and new business
<PAGE 13>
opportunities,
- cost reduction efforts,
- the outcome of contingencies,
- the impact of Year 2000 conversion efforts, and
- the transition to the use of the euro as a currency.
All forward-looking statements involve risks and
uncertainties that may cause actual results to differ materially
from those expressed or implied in the forward-looking
statements. For additional information identifying factors that
may cause actual results to vary materially from those stated in
the forward-looking statements, see the Company's reports on
Forms 10-K, 10-Q, and 8-K filed with the Securities and Exchange
Commission from time to time. The Company's Annual Report on
Form 10-K for fiscal 2000 includes important information as to
risk factors in the "Business" section under the headings
"Operating Segments" and "Other Matters Relating to the
Corporation's Business as a Whole."
ITEM 2. PROPERTIES.
The Company's principal operations are conducted in the
following facilities:
Square
Type of Facility Location Footage
-------------------- ----------------- ---------
Manufacturing/office (O) South Windsor, CT 412,000
(3 sites)
Manufacturing/office (O) Tolland, CT 252,000
Manufacturing/office (O) Manchester, CT 118,000
Manufacturing/office (O) Muskogee, OK 157,000
Manufacturing/office (O) Lancaster, England 55,000
Manufacturing/office (L) Ikast, Denmark 64,000
Manufacturing/office (L) Marblehead, MA 32,000
Service/office (O) Richardson, TX 68,000
Warehouse/sales and service
office (O) Bristol, England 120,000
Warehouses/sales and
service offices (O) Various 94,000
Warehouses/sales and
service offices (L) Various 581,000
-----------------------
(O) Company-owned
(L) Leased
Two of the three sites the Company owns in South Windsor,
Connecticut, totaling 166,000 square feet, are currently
unoccupied and are not being used in operations. The Company has
listed these facilities for sale. In addition, the Company plans
to consolidate the operations of the service/office facility in
Richardson, Texas into its Tolland, Connecticut facility and sell
the Texas facility.
<PAGE 14>
Management believes that the Company's remaining facilities,
which are utilized primarily on a single-shift basis with
overtime, are well maintained and are adequate to meet the
Company's immediate requirements.
The Company's leases for warehouse and sales and service
office space are generally on short-term bases. Rentals for
leased facilities aggregated $4,311,000 in the fiscal year ended
April 30, 2000.
The Company owns substantially all of the machinery and
equipment used in its operations and leases the remainder. In
the fiscal year ended April 30, 2000, the aggregate rental under
such leases was $2,294,000. The Company fully utilizes such
machinery and equipment.
ITEM 3. LEGAL PROCEEDINGS.
Various lawsuits, claims, and governmental proceedings are
pending against the Company. Management of the Company believes
that the ultimate resolution of these matters will not have a
materially adverse effect on the Company's consolidated financial
position or the results of its operations.
Other relevant information regarding legal proceedings is
included in Part II, Item 8, Note 10, "Litigation Award," of the
"Notes to Consolidated Financial Statements" appearing on page 47
of this Form 10-K.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
No matters were submitted to a vote of the security holders
during the fourth quarter of the Company's fiscal year ended
April 30, 2000.
EXECUTIVE OFFICERS OF THE REGISTRANT.
Included in Part III, Item 10, "Directors and Executive
Officers of the Registrant," appearing on page 64 of this Form
10-K.
PART II
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED
STOCKHOLDER MATTERS.
The Company's common stock is listed on the New York Stock
Exchange under the symbol "GRB." Shareholders of record totaled
1,370 at April 30, 2000. The other information required by
Item 5 is included in Part II, Item 8, Note 21, "Quarterly
Results (Unaudited)" of the "Notes to Consolidated Financial
Statements" appearing on page 63 of this Form 10-K.
<PAGE 15>
ITEM 6. SELECTED FINANCIAL DATA.
For years ended April 30
----------------------------------------------
In thousands except
per share amounts 2000 1999 1998 1997 1996
------------------- -------- -------- -------- -------- --------
Sales and service
revenue $610,726 $594,618 $430,480 $380,917 $359,120
Net earnings before
non-recurring
special charge 1 25,875 29,580 23,685 16,009 19,868
Per common share
Basic 1.17 1.31 1.04 .69 .85
Diluted 1.16 1.29 1.02 .69 .84
Net earnings 2-4 25,875 29,580 7,385 16,009 19,868
Per common share
Basic 1.17 1.31 .32 .69 .85
Diluted 1.16 1.29 .32 .69 .84
Cash dividends per
common share .32 .32 .32 .32 .32
Total assets 572,836 542,260 338,767 325,215 312,988
Long-term debt 194,892 173,338 6,953 7,145 7,338
Shareholders'equity $256,912 $243,331 $230,914 $248,021 $239,298
Weighted-average
common shares
outstanding
Basic 22,140 22,590 22,800 23,250 23,463
Diluted 22,390 23,011 23,331 23,365 23,689
See "Summary of Significant Accounting Policies and Notes to
Consolidated Financial Statements" appearing on pages 41 through
64 of the Company's fiscal year 2000 Annual Report to
Shareholders for a description of any acquisitions or sales of
businesses materially affecting the comparability of the
information reflected in the "Selected Financial Data" required
by Item 6.
1 Fiscal year 1998 excludes a non-recurring special charge of
$16,300,000 ($.70 diluted earnings per share) from the write-
down of certain assets on the sale of the Company's Gerber
Systems unit. Gerber Systems represented the Company's
Imaging and Inspection Systems product class.
<PAGE 16>
2 Net earnings for the year ended April 30, 1998 included the non-
recurring special charge discussed in Note 1 above and a
gain of approximately $1,000,000 ($.04 diluted earnings per
share) from the final settlement of the Company's UK patent
litigation with Lectra Systemes S.A. of France.
3 Net earnings for the year ended April 30, 1997 included a gain
of $1,032,000 ($.04 diluted earnings per share) from life
insurance benefits the Company received upon the death of
Mr. H. Joseph Gerber.
4 Net earnings for the year ended April 30, 2000 included
$6,200,000 ($.18 diluted earnings per share) in excess costs
on initial production of certain new products in the
Company's Sign Making and Specialty Graphics operating
segment.
<PAGE 17>
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS.
For years ended April 30, 2000, 1999, and 1998
------------------------------------------------------------------
RESULTS OF OPERATIONS
Changes in the Consolidated Entity
----------------------------------
During fiscal 2000, the Company purchased five distribution
businesses included in its Sign Making and Specialty Graphics
operating segment. Accordingly, these acquisitions were included
in the Company's consolidated balance sheet at April 30, 2000, and
in the Company's results from operations and cash flows since
their respective acquisition dates.
In May 1998, the Company acquired the outstanding capital
stock of Spandex PLC (Spandex). Accordingly, Spandex was
included in the Company's consolidated balance sheets at April
30, 2000 and 1999, and in the Company's results from operations
and cash flows for the twelve-month periods ended April 30, 2000
and 1999.
In February 1998, the Company acquired the outstanding stock
of Coburn Optical Industries, Inc. (Coburn). Coburn was included
in the Company's consolidated balance sheets at April 30, 2000,
1999 and 1998, and in the Company's results from operations and
cash flows for the twelve-month periods ended April 30, 2000 and
1999, and the two months ended April 30, 1998.
In March 1998, the Company sold its Gerber Systems unit,
which comprised the Company's Imaging and Inspection Systems
product class. As a result, the Company's April 30, 1998 balance
sheet, and the fiscal years 2000 and 1999 results of operations
and cash flows, did not include any Gerber Systems activity.
Revenue - 2000 vs. 1999
-----------------------
Consolidated revenue in 2000 was $610.7 million, an increase
of $16.1 million or 2.7 percent from $594.6 million in 1999. The
increase in 2000 reflected both higher product sales and service
revenue. Each of the Company's operating segments experienced
sales growth in 2000, except for the anticipated decline in
revenue in the Company's Ophthalmic Lens Processing segment.
The 2000 increase reflected higher revenue from the
distributor business acquisitions in the Sign Making and
Specialty Graphics operating segment. These acquisitions, which
had annualized sales of approximately $25 million, added
incremental revenue of $13.5 million for the periods included in
the April 30, 2000 results of operations. The sale of certain
distribution operations in this segment in last year's second
quarter was an offsetting factor ($2.5 million in sales in 1999).
<PAGE 18>
Adjusting for the acquisitions and divestiture, combined
sales and service revenue was slightly higher in 2000 than in
1999, despite significantly weaker European currencies. Lower
translation rates depressed year-to-year sales by $17.3 million.
The Sign Making and Specialty Graphics operating segment,
adjusted for the acquisitions and divestiture and relatively
weaker foreign currencies, grew $17.0 million (6.2 percent) this
year, largely reflecting the on-going strength of the European
economy. After adjusting for the impact of the weaker foreign
currencies, sales and service revenue was higher in the Apparel
and Flexible Materials operating segment. This was largely the
result of a rebound in international markets for this segment's
automated cutting equipment products. Sales of products
introduced during the year (a new single-ply cutting system and a
leather cutting system) added to the sales increase. Overall
sales were also bolstered this year by the Company's new
marketing initiative in the packaging industry. This business
added $2.3 million to combined sales and service revenue, and was
included in the Sign Making and Specialty Graphics operating
segment. The anticipated lower shipments of Ophthalmic Lens
Processing equipment ($7.0 million) and some disruption in this
year's first quarter from the implementation of an enterprise
resource planning (ERP) system in the Apparel and Flexible
Materials operating segment were offsets to the sales gains.
Service revenue increased $4.7 million (9.6 percent) in
2000. The largest increase came from the Apparel and Flexible
Materials operating segment, and was partly the result of
incentives used to enhance that segment's service business.
On a geographic basis, sales gains were realized in 2000 in
international markets, particularly in Pacific and Far East
countries ($20.0 million higher), Latin America ($4.0 million
higher), and Africa and the Middle East ($8.6 million higher).
These gains were reflected principally in the Apparel and
Flexible Materials operating segment and also as a result of
business acquisitions. Fiscal 2000 sales to North American and
European customers were $5.4 million and $11.1 million lower than
the prior year, respectively. The North American sales decline
was mostly due to the anticipated lower shipments of ophthalmic
lens processing equipment. In Europe, the weakness of the
currencies had a financial statement translation effect on
revenue and caused price competitiveness issues, and these
factors led to the lower sales.
Revenue - 1999 vs. 1998
-----------------------
Consolidated revenue in 1999 was $594.6 million, an increase
of $164.1 million or 38.1 percent from $430.5 million in 1998.
The increase in 1999 reflected both higher product sales and
service revenue. Each of the Company's operating segments
experienced sales growth in 1999, except for the Company's
Apparel and Flexible Materials segment.
<PAGE 19>
The higher revenue reflected the acquisitions of Spandex and
Coburn (incremental increases of $155.0 million and $50.7
million, respectively, for the twelve-month period ended April
30, 1999, net of intercompany eliminations). The sale of the
Company's Imaging and Inspection Systems product class in fiscal
1998's fourth quarter was an offsetting factor ($37.4 million in
sales in fiscal year 1998).
Adjusting for the acquisitions and divestiture, combined
sales and service revenue was lower in 1999 than in 1998. The
decrease in revenue in the Apparel and Flexible Materials
operating segment was caused predominately by lower sales as a
result of economic weakness in certain international markets,
particularly Southeast Asia, Turkey, and Brazil. Strong sales
into Mexico was an offsetting factor for this segment.
The Company also experienced weakness in its Ophthalmic Lens
Processing operating segment in the second half of 1999. This
was caused by softness in end sales of prescription optical
lenses, consolidation in both the retail and wholesale segments
of the industry, and, to a lesser extent, the economic weakness
in Brazil. The Company's management took actions to reduce costs
in the Optical Lens Manufacturing business to account for the
lower volume, which included reducing the workforce and other
initiatives.
Combined sales and service revenue for the Sign Making and
Specialty Graphics operating segment was slightly higher in 1999
than in 1998. Sales of the Company's aftermarket supplies
increased in 1999, notably the demand for consumables for the
GERBER EDGE, a digital imaging system for color printing directly
onto sign vinyl.
Service revenue increased $8.6 million (21.3 percent) in
1999, after adjusting for the elimination of service revenue
from the sale of the Imaging and Inspection Systems product
class. This increase was caused principally by management
initiatives to grow the Company's service business and also by
the acquisitions of Spandex and Coburn.
On a geographic basis, sales gains were realized in 1999 in
the North American, Latin American, and European markets.
Acquisitions were a major factor - the gains came predominantly
from Spandex' sales in Europe and Canada, and Coburn's sales in
North America, Latin America, and Europe. After adjusting for the
business acquisitions and divestiture, sales to European and
Latin American customers were higher, due to an increase in
demand for the Company's Apparel and Flexible Materials systems.
These increases were somewhat offset by lower sales of Apparel
and Flexible Materials systems in certain depressed international
markets, including Southeast Asia and Turkey.
<PAGE 20>
Revenue - 1998 vs. 1997
---------------------------
Consolidated revenue in 1998 was $430.5 million, an increase
of $49.6 million or 13 percent from $380.9 million in 1997. The
increase in 1998 reflected higher product sales and a slight
increase in service revenue. Each of the Company's operating
segments experienced sales growth in 1998, except for the
Company's Imaging and Inspection Systems product class, which was
sold in March 1998. Consolidated revenue was also bolstered by
acquisitions in 1998. Gerber Technology's (GT) Cutting Edge, an
acquisition in the fourth quarter of 1997, and Coburn Optical
Industries, Inc., an acquisition in the fourth quarter of 1998,
incrementally added $16.5 million and $12.5 million to 1998
sales.
The largest increase in product sales occurred in the
Company's Apparel and Flexible Materials operating segment.
Significant increases within this operating segment came from
GERBERcutter fabric cutting systems and fabric spreading systems.
Also contributing were higher sales of related software products,
including a product data management system.
Product sales also increased in 1998 from sales of the
Company's lens edge finishing systems to optical retail
chains and wholesale optical laboratories. The Company
benefited from higher demand for its complete lab system
in these markets. Sales were also generated from the Company's
strategic distribution alliance with a major, vertically
integrated lens manufacturer.
Higher sales of the Company's aftermarket supplies for the
Sign Making and Specialty Graphics operating segment also
contributed to the 1998 sales increase.
On a geographic basis, sales gains were realized in 1998 in
each of the Company's major geographic markets - U.S., Europe,
the Far East, and other international. Most notably, export sales to
European customers improved significantly, which was caused by
the continuation of a stronger shipment trend that began in the
second half of 1997.
Gross Margins
-------------
The overall gross profit margin in 2000 was 39.6 percent,
which was lower than the prior year margin of 41.3 percent. Gross
profit margins on product sales were lower, while service margins
were higher. The decrease in product gross profit margins (38.9
percent in 2000 compared with 41.4 percent in 1999) occurred
primarily in the Sign Making and Specialty Graphics and Apparel
and Flexible Materials operating segments.
<PAGE 21>
The continued deterioration of European currency valuations
was a significant cause of the margin erosion in both of these
segments, reducing gross profit margins by approximately $4.0
million. Management anticipates this margin pressure will
persist, absent a rebound in European currency values. Also
reducing the overall gross profit margin were excess costs of
$6.2 million on initial production of certain new products in the
Company's Sign Making and Specialty Graphics operating segment.
Service gross profit margins were higher in 2000 than in
1999. The increase was realized primarily in the Apparel and
Flexible Materials operating segment, and was caused by the
service revenue increases noted above.
The overall gross profit margin in 1999 was 41.3 percent,
which was lower than the 1998 margin of 44.8 percent. Gross
profit margins on product sales were lower, while service margins
were higher. The decrease in product gross profit margins (41.4
percent in 1999 compared with 45.9 percent in 1998) was related
primarily to the inclusion of Spandex in the Company's financial
statements in 1999. As a distributor, Spandex historically had
gross profit margins substantially lower than the Company's.
However, Spandex' historical operating margins were
incrementally higher than the Company's recent operating margins,
owing in part to the absence of spending on research and
development. Also reducing the comparative product gross profit
margins in 1999 was the inclusion of Coburn. A larger percentage
of Coburn's product mix has historically come from sales of
aftermarket products (e.g., consumables), which generally have
gross profit margins lower than equipment sales. Compared with
1998, lower margins were also earned by the Company's Apparel and
Flexible Materials segment in 1999, caused in part by price
discounting on sales of cutting and marker-making systems to the
apparel industry, and in part by the weakening European
currencies that occurred later in the year. This discounting
pressure intensified in 2000 with the continued decline in the
currencies, and management anticipates it will continue in 2001.
Service gross profit margins were higher in 1999 than in
1998. The increase was caused primarily by the elimination in
1999 of the low service margins of the Company's Imaging and
Inspection Systems product class, which was included in 1998's
results.
The overall gross profit margin in 1998 was 44.8 percent
compared with 44.2 percent in 1997. This increase reflected
higher margins on product sales, which were partially offset by
lower service margins. Favorable volume effects from higher
shipments of fabric cutting systems, especially in North American
markets, was a primary reason for the improvement. This was
partially offset by weaker margins in the Imaging and Inspection
Systems products, as well as service.
<PAGE 22>
Selling, General & Administrative Expenses
-------------------------------------------
Selling, general and administrative (SG&A) expenses,
including goodwill amortization, were $160.3 million (26.3
percent of revenue) in 2000. This compared with $158.9 million
(26.7 percent of revenue) in 1999 and $129.8 million (30.2
percent of revenue) in 1998.
Dollar increases in 2000 came from higher marketing expenses
related to new product introductions and from including the SG&A
expenses of the acquisitions. Depreciation of capitalized costs
associated with the implementation of a new enterprise resource
planning (ERP) system also contributed to the increase in SG&A
expenses. These increases were partially offset by cost
reduction actions taken in 1999 to resize the Ophthalmic Lens
Processing operating segment.
The Spandex and Coburn acquisitions were the principal
reasons for the dollar increase in 1999 SG&A over 1998. In
addition, the amortization of the Spandex and Coburn acquisition
goodwill ($5.6 million and $1.9 million, respectively)
contributed to the increase in 1999. The elimination of the SG&A
associated with the Imaging and Inspection Systems product class
was an offsetting factor.
Research and Development (R&D) Expenses
---------------------------------------
The Company has historically committed significant resources
to research and the development of new products, and strives to
maintain a leading position in automation technology in the
various markets it serves.
In 2000, the Company continued this commitment. R&D expense
of $33.0 million was $1.6 million higher than in 1999, and was
attributable to new products introduced in each of the Company's
operating segments in 2000. By operating segment, the overall
increases included the development of new sign making plotters,
wide-format digital imaging systems, software, and a new die tool
routing system for packaging industry applications in the Sign
Making and Specialty Graphics segment ($1.6 million); new
automated cutting systems and plotters in the Apparel and
Flexible Materials segment ($2.0 million); and lens surface
generation and finishing systems in the Ophthalmic Lens
Processing segment. Cost reductions implemented in this segment
as a result of prior year industry softness offset R&D spending
for new product development and resulted in a $1.0 million
overall decrease. The ratio of R&D to revenue of 5.4 percent in
2000 was roughly the same as 1999's ratio of 5.3 percent.
<PAGE 23>
R&D expense of $31.5 million in 1999 was substantially
unchanged from 1998. However, the ratio of R&D to revenue
declined to 5.3 percent in 1999 from 7.4 percent in 1998. The
lower 1999 ratio was caused by growth in the revenue base from
the Spandex acquisition without commensurate R&D expense. Spandex
is predominantly a distribution company and does not incur R&D
expenses. In addition to the incremental expenses of Coburn, R&D
increases in 1999 were also related to the development of new sign
making plotters and output devices ($0.8 million) and automated
cutting systems ($1.8 million). These increases were offset by
the elimination of the Company's Imaging and Inspection System
product class.
Non-Recurring Special Charge
----------------------------
In the fourth quarter of fiscal 1998, the Company recorded a
$25 million pre-tax charge related to the write-down of certain
assets of the Company's Gerber Systems unit. Gerber Systems
comprised the Company's Imaging and Inspection Systems product
class, which was sold to the BARCO Group of Belgium as of
March 31, 1998 for $25 million in cash. The special charge
reflected the write-down of inventory, accounts receivable, and
other items, and amounted to approximately $16.3 million after
taxes or $.70 per share on a diluted basis.
Interest Expense
----------------
Interest expense in 2000 amounted to $10.6 million and was
$0.9 million lower than interest expense in 1999 of $11.5
million. The decrease in interest expense was the result of
lower average interest rates in this year's first half compared
with the prior year. Interest expense increased sequentially in
the latter half of 2000 as a result of higher debt levels and
rising short-term interest rates. Most of the Company's
borrowings were against a $235 million multi-currency revolving
credit facility. The interest rate on these borrowings is based
on the London Interbank Offered Rate (LIBOR) for the relevant
currency and term, plus a margin based on the relationship of the
Company's consolidated total debt to EBITDA (earnings before
interest, taxes, depreciation, and amortization). In addition to
the credit facility, the Company's debt obligations included
Industrial Revenue Bonds with short-term variable tax-exempt
interest rates in each of the years 2000, 1999, and 1998.
Other Income
------------
Other income in 1998 included a gain of approximately $1.6
million from the final settlement of the Company's UK patent
litigation with Lectra Systemes S.A. of France, which related to
computer-controlled cutting equipment.
<PAGE 24>
Taxes
-----
The statutory U.S. Federal income tax rate was 35 percent
for each of the years 2000, 1999, and 1998, while the effective
income tax provision rates were 33.6 percent, 35.8 percent, and
25.3 percent, respectively. Offsetting the statutory U.S.
Federal income tax rate in each year were benefits from research
and development tax credits (reinstated through legislation in
1997) and tax savings derived from the Company's Foreign Sales
Corporation (FSC). Tax reduction strategies involving dividend
repatriation from the Company's wholly-owned foreign subsidiaries
in 2000 and tax-exempt interest income from the Company's
municipal bond investments in 1998 also reduced the tax rates in
those respective years.
The higher tax rates in 2000 and 1999 were primarily the
result of the goodwill amortization related to the acquisitions
of Spandex and Coburn, which is not deductible for Federal and
state income tax purposes. The fiscal 1998 tax rate was also
impacted by the reduction in pre-tax income from the special
charge in that year.
Net Earnings
------------
Net earnings were $25.9 million, or $1.16 on a diluted per
share basis for 2000. In 1999, net earnings were $29.6 million,
or $1.29 diluted earnings per share. The principal factors that
led to the lower earnings in 2000 were the lower exchange value
of European currencies and the excess costs related to the
introduction of new products in the Sign Making and Specialty
Graphics segment. In 1998, net earnings were $23.7 million, or
$1.02 diluted earnings per share, before the non-recurring special
charge. The special charge of approximately $16.3 million, or
$.70 diluted earnings per share, reduced net earnings to $7.4
million, or $.32 diluted earnings per share in 1998.
Reporting
---------
In June 1998, the Financial Accounting Standards Board
(FASB) issued Statement No. 133, "Accounting for Derivative
Instruments and Hedging Activities" (SFAS 133). The Statement
establishes accounting and reporting standards requiring that
derivative instruments be recorded in the balance sheet as either
an asset or liability measured at fair value, and that changes in
fair value be recognized currently in earnings, unless specific
hedge accounting criteria are met. In June 1999, the FASB issued
Statement No. 137, "Accounting for Derivative Instruments and
Hedging Activities - Deferral of the Effective Date of FASB
Statement No. 133," which delays the required adoption of SFAS
133 to the Company's fiscal year 2002. The timing of adoption
<PAGE 25>
and the effect of SFAS 133 on the Company's financial position or
results of operations have not yet been determined.
FINANCIAL CONDITION
Liquidity
---------
The Company's short-term liquidity at April 30, 2000 was
substantially the same as the preceding year-end and adequate for
the Company's requirements. Cash and short-term cash investments
totaled $23.0 million at April 30, 2000 compared with $26.5
million at April 30, 1999. Net working capital was $139.5
million at April 30, 2000 compared with $109.7 million at
April 30, 1999. The $29.8 million increase in net working
capital was caused partly by the record fourth quarter shipments
in 2000 and also by the delayed introduction of certain new
products in the Sign Making and Specialty Graphics segment.
Working capital associated with the Sign Making and Specialty
Graphics business acquisitions also contributed to the increase.
The working capital ratio at April 30, 2000 was 2.2 to 1 compared
with 1.9 to 1 at April 30, 1999.
Cash Flows
----------
Cash provided by operations is a principal source of funds
to finance working capital needs and capital expenditures.
Operating activities provided $27.1 million in cash in 2000. Cash
in 2000 was generated by earnings and the non-cash charges for
depreciation and amortization. The higher accounts receivable
and inventory balances noted above were a significant offset.
Cash generated from operations was also reduced by lower accounts
payable and accrued liabilities balances due largely to the
timing of vendor payments. Reduction of inventory and receivable
balances represent a significant cash flow generation opportunity
for the Company.
The principal non-operating uses of cash in 2000 were for
the additions to property, plant, and equipment of $22.3 million,
and the business acquisitions in the Sign Making and Specialty
Graphics operating segment of $14.7 million. The Company
anticipates that capital expenditures for fiscal 2001 will be in
the range of $18-$20 million, and expects to fund these with cash
on hand and cash from operations.
Another significant non-operating use of cash in 2000 was
for the Company's common stock repurchase program. In November
1998, the Board of Directors authorized a stock repurchase
program for up to 3,000,000 shares, or approximately 13 percent,
of the Company's then-issued and outstanding common stock. In
the year ended April 30, 2000, the Company repurchased 286,600
shares under the new authorization. The cost of these shares was
$4.7 million. At April 30, 2000, 1,976,200 shares remained
<PAGE 26>
available for repurchase under the authorization. Other non-
operating uses of cash in 2000 included payment of dividends of
$7.1 million.
The Company's total long-term debt at April 30, 2000 was
$194.9 million, which was higher than the April 30, 1999 balance
of $173.5 million. Net debt (total debt less cash and
investments) was $171.9 million at April 30, 2000 versus $147.0
million at April 30, 1999, as cash was required in 2000 for
acquisition funding, additions to property, plant, and equipment,
and to finance the growth in working capital. The ratio of net
debt to total capital increased to 40.1 percent at April 30, 2000
from 37.7 percent at April 30, 1999.
Operating activities provided $65.3 million in cash in 1999.
Cash in 1999 was generated by earnings and the non-cash charges
for depreciation and amortization and lower inventory balances.
Cash generated from operations was slightly offset by lower
accounts payable and accrued liabilities balances due largely to
the timing of vendor payments.
The principal non-operating use of cash in 1999 was for the
purchase of Spandex for $187.6 million, which included the
repayment of its outstanding debt. The financing for the
acquisition was provided primarily by a $235 million multi-
currency revolving credit facility the Company entered into with
a group of major U.S. and international commercial banks.
Another significant non-operating use of cash in 1999 was
for the repurchase of the Company's common stock. In the year
ended April 30, 1999, the Company repurchased 868,400 shares at a
cost of $16.8 million. Other non-operating uses of cash in 1999
were additions to property, plant, and equipment of $22.6 million
and payment of dividends of $7.2 million.
The Company's total debt at April 30, 1999 was $173.5
million, which increased substantially from the April 30, 1998
balance of $7.5 million as a result of the acquisition of
Spandex. Strong cash flow generation in 1999 enabled the Company
to reduce its total debt outstanding at April 30, 1999 from a
peak of $189.1 million immediately after the Spandex acquisition.
Net debt was $147 million at April 30, 1999 versus a net cash
position of $19.5 million at April 30, 1998. The ratio of net
debt to total capital was 37.7 percent at April 30, 1999.
Operating activities provided $58.6 million in cash in 1998.
Cash generated by earnings and by the non-cash charges against
earnings for depreciation, amortization, and the special charge
on the sale of the Imaging and Inspection Systems product class
was somewhat offset by growth in inventories. The growth in
inventories related to a significantly higher volume of business
in the 1998 fourth quarter. Significant operating cash flow was
also generated in 1998 from increases in accounts payable, which
were related primarily to improved management of vendor payment
<PAGE 27>
cycles.
Significant non-operating uses of cash in 1998 were $61.5
million for the acquisition of Coburn and repayment of its debt;
purchase of treasury stock of $16.4 million; additions to
property, plant and equipment of $15.9 million; and dividends on
common stock of $7.3 million. Significant non-operating sources
of cash included $36.6 million in proceeds from maturities and
the sale of the Company's longer-term investment portfolio of
municipal securities, and $26.7 million in proceeds from the sale
of the Imaging and Inspection Systems product class, including
the sale of a facility.
Debt
----
In May 1998, the Company obtained a five-year $235 million
multi-currency revolving credit facility from a group of major
U.S. and international commercial banks. The purpose of the
facility was to finance the acquisition of the capital stock of
Spandex and the refinancing of its debt, and for other general
corporate purposes. Borrowings against this facility were $188.9
million at April 30, 2000 and $165.2 million at April 30, 1999.
The interest rate on borrowings under this facility is variable
and is based on LIBOR (London Interbank Offered Rate) plus an
applicable margin, which ranges from 1/4 percent to 5/8 percent
based on the relationship of the Company's consolidated total
debt to EBITDA (earnings before interest, taxes, depreciation,
and amortization). The weighted average interest rate on the
borrowings drawn against this facility was 6.2 percent as of
April 30, 2000 and 5.0 percent as of April 30, 1999. This credit
line also has a facility fee, which ranges from 1/8 to 1/4
percent of the credit line.
Covenants in the credit facility require the Company to
maintain certain levels of net worth, certain ratios of total
debt to EBITDA, and a minimum fixed charge coverage amount, as
defined therein. At April 30, 2000, the Company was in
compliance with these covenants. Under the most restrictive of
these covenants, approximately $171.4 million of retained
earnings was not available for dividend payments at April 30,
2000.
In addition to the $235 million revolving credit facility,
the Company has a $15 million multi-currency line of credit from
a major European commercial bank. This line of credit is
available in various sub-limits to certain of the Company's
European subsidiaries, and repayment is guaranteed by the parent
Company. There were no borrowings against this line of credit at
April 30, 2000. Borrowings under this line of credit bear
interest at 1/4 percent above LIBOR for the relevant currency and
term with a commitment fee of 1/8 percent of the unused amount.
<PAGE 28>
At April 30, 2000 and 1999, the Company's long-term debt
also included tax-exempt Industrial Revenue Bonds amounting to
$6.0 million and $7.0 million, respectively, at those dates. The
weighted average interest rate on this debt was 4.9 percent at
April 30, 2000 and 4.1 percent at April 30, 1999. The Company's
ratio of total debt to total capitalization was 43.1 percent at
April 30, 2000 compared with 41.6 percent at April 30, 1999.
Forward Exchange Contracts
--------------------------
As of April 30, 2000, the Company was party to approximately
$9.4 million in forward exchange contracts providing for the
delivery by the Company of various currencies in exchange for
others over the succeeding eleven months. The counterparties to
the forward exchange contracts were major international
commercial banks. The Company continually monitors its open
forward exchange contract position, and does not anticipate
non-performance by the counterparties. In management's opinion,
these financial instruments do not represent a material off-
balance sheet risk in relation to the consolidated financial
statements. Based upon market prices at April 30, 2000 for
future deliveries of the various currencies, the hedging loss
deferred at that date amounted to approximately $1 million.
Interest Rate Swap
------------------
In April 1999, the Company entered into an interest rate
swap contract with a major international commercial bank. The
contract fixed the LIBOR interest rate on an initial notional
amount of $62 million that reduces ratably to $32 million over a
four-year term. The Company designated this swap as a hedge of
its exposure to variability in future cash flows attributable to
the LIBOR plus applicable margin interest payments due on a
portion of the U.S. dollar denominated borrowings under its multi-
currency revolving credit facility. The interest differential
paid or received under this contract will be recognized as an
adjustment to the effective interest expense of the underlying
borrowing hedged. The market value of this contract at April 30,
2000 was approximately $2 million.
Lease Financing Arrangements
----------------------------
The Company has an agreement with a major financial services
institution to provide lease financing to purchasers of the
Company's equipment. The present value of the lease receivables
financed under this agreement amounted to approximately $62.2
million at April 30, 2000 and $59.7 million at April 30, 1999.
The underlying equipment collateralizes the lease receivables. In
the event of default by the lessee, the Company has liability to
the financial services institution under recourse provisions.
<PAGE 29>
The Company's liability for uncollected amounts financed in
excess of the estimated resale value of the equipment is limited
to the extent of loss pools. These loss pools are established as
percentages of each associated group of transactions financed in
a calendar year and range from five to ten percent of the amount
financed. Management believes the allowance it has established
for losses under the recourse provisions is adequate to cover
the Company's obligations.
YEAR 2000
As disclosed in the Company's Annual Report on Form 10-K for
the year ended April 30, 1999, the Company had developed plans to
address the possible business risks related to the impact of the
Year 2000 on its computer systems. The Company's preparations
for the Year 2000 resulted in a successful transition into the
new millennium, whereby the Company has not experienced any
significant Year 2000 related disruptions to its business,
including information systems, products, and supply chain. The
Company is also not aware of any significant Year 2000 related
disruptions affecting its customers and suppliers. Although the
Company does not anticipate any significant impact due to Year
2000 exposures, it will continue to monitor critical systems,
suppliers, and customers through the Year 2000. However, the
Company can provide no assurance that all supplier and customer
Year 2000 compliance plans were successfully completed in a
timely manner. Costs incurred to achieve Year 2000 readiness
were not material and were charged to expense as incurred.
EURO CONVERSION
On January 1, 1999, the European Economic and Monetary Union
(EMU) entered a three-year transition phase during which a common
currency, the "euro," was introduced in participating countries.
The euro is currently being used for wholesale financial
transactions and it will replace the legacy currencies that will
be withdrawn between January 1, 2002 and July 1, 2002. The
Company is in the process of identifying and ensuring that all
euro conversion compliance issues are addressed. The Company has
identified certain issues and developed implementation plans
associated with the conversion, including technical adaptation of
information technology systems, foreign currency considerations,
and long-term competitive implications of the conversions. These
implementation plans are expected to be completed within a
timetable that is consistent with the transition phases of the
euro.
Based on its evaluation to date, management believes
the introduction of the euro, including the total costs for the
conversion, will not have a material adverse impact on the
Company's financial position, results of operations, or cash
flows. However, uncertainty exists as to the effects the euro
will have on the marketplace, and there is no guarantee that all
<PAGE 30>
issues will be foreseen and corrected or that third parties will
address the conversion successfully.
FORWARD-LOOKING STATEMENTS
This report contains statements which, to the extent they
are not statements of historical or present fact, constitute
"forward-looking statements" under the securities laws. From
time to time, oral or written forward-looking statements may also
be included in other materials released to the public. These
forward-looking statements are intended to provide management's
current expectations or plans for the future operating and
financial performance of the Company, based on assumptions
currently believed to be valid. Forward-looking statements can
be identified by the use of words such as "believe," "expect,"
"plans," "strategy," "prospects," "estimate," "project,"
"anticipate," and other words of similar meaning in connection
with a discussion of future operating or financial performance.
These include, among others, statements relating to:
- future earnings and other measurements of financial
performance,
- future cash flow and uses of cash,
- the effect of economic downturns or growth in particular
regions,
- the effect of changes in the level of activity in particular
industries or markets,
- the scope or nature of acquisition activity,
- prospective product developments and new business
opportunities,
- cost reduction efforts,
- the outcome of contingencies,
- the impact of Year 2000 conversion efforts, and
- the transition to the use of the euro as a currency.
All forward-looking statements involve risks and
uncertainties that may cause actual results to differ materially
from those expressed or implied in the forward-looking
statements. For additional information identifying factors that
may cause actual results to vary materially from those stated in
the forward-looking statements, see the Company's reports on
Forms 10-K, 10-Q, and 8-K filed with the Securities and Exchange
Commission from time to time. Form 10-K for fiscal 2000 includes
important information as to risk factors in the "Business"
section under the headings "Operating Segments" and "Other
Matters Relating to the Corporation's Business as a Whole."
<PAGE 31>
ITEM 7a. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.
See discussion under the headings "Forward Exchange
Contracts" and "Interest Rate Swap" on page 28 and Note 4 and
Note 18 on pages 45 and 61, respectively, of the Company's fiscal
year 2000 Annual Report to Shareholders for information
concerning market risk sensitive instruments. Such information is
incorporated by reference in this Form 10-K.
<PAGE 32>
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.
CONSOLIDATED STATEMENTS OF EARNINGS
For years ended April 30
--------------------------------
In thousands except per share
amounts 2000 1999 1998
----------------------------- -------- -------- --------
Revenue:
Product sales $556,985 $545,598 $383,926
Service 53,741 49,020 46,554
-------- -------- --------
610,726 594,618 430,480
-------- -------- --------
Costs and Expenses:
Cost of product sales 340,143 319,688 207,880
Cost of service 28,719 29,113 29,605
Selling, general and
administrative expenses 151,701 150,221 128,307
Research and development
expenses 33,022 31,468 31,810
Goodwill amortization 8,639 8,699 1,495
Non-recurring special charge -- -- 25,000
(Note 16) -------- -------- --------
562,224 539,189 424,097
-------- -------- --------
Operating income 48,502 55,429 6,383
Other income 1,090 2,152 4,169
Interest expense (10,617) (11,501) (667)
-------- -------- --------
Earnings before income taxes 38,975 46,080 9,885
Provision for income taxes 13,100 16,500 2,500
-------- -------- --------
Net Earnings $ 25,875 $ 29,580 $ 7,385
======== ======== ========
Net Earnings Per Common Share:
Basic $ 1.17 $ 1.31 $ .32
======== ======== ========
Diluted $ 1.16 $ 1.29 $ .32
======== ======== ========
See summary of significant accounting policies and notes to
consolidated financial statements.
<PAGE 33-34>
CONSOLIDATED BALANCE SHEETS
April 30
-------------------
In thousands except per share amounts 2000 1999
--------------------------------------- -------- --------
Assets
Current Assets:
Cash and short-term cash investments $ 22,954 $ 26,523
Accounts receivable 121,494 103,118
Inventories 86,472 72,367
Prepaid expenses 21,042 23,690
-------- --------
251,962 225,698
-------- --------
Property, Plant and Equipment 165,341 152,374
Less accumulated depreciation 66,121 61,789
-------- --------
99,220 90,585
-------- --------
Intangible Assets 245,797 238,777
Less accumulated amortization 27,419 18,018
-------- --------
218,378 220,759
-------- --------
Other Assets 3,276 5,218
-------- --------
$572,836 $542,260
======== ========
Liabilities and Shareholders' Equity
Current Liabilities:
Notes payable $ -- $ --
Current maturities of long-term debt -- 193
Accounts payable 58,043 48,374
Accrued compensation and benefits 16,646 18,982
Other accrued liabilities 26,689 35,854
Deferred revenue 8,436 6,874
Advances on sales contracts 2,610 5,721
-------- --------
112,424 115,998
-------- --------
Noncurrent Liabilities:
Deferred income taxes 8,608 9,593
Long-term debt 194,892 173,338
-------- --------
203,500 182,931
-------- --------
Contingencies and Commitments (Notes 4, 10,
and 18)
Shareholders' Equity:
Preferred stock, no par value; authorized
10,000,000 shares; no shares issued -- --
Common stock, $1 par value; authorized
65,000,000 shares; issued 22,779,651
and 22,858,699 shares 22,780 22,859
Paid-in capital 43,615 40,255
Retained earnings 210,749 195,871
Treasury stock, at cost (797,444 shares in
2000 and 800,000 shares in 1999) (16,397) (16,450)
Unamortized value of restricted stock
grants (557) (417)
Accumulated other comprehensive income
(loss) (3,278) 1,213
-------- --------
256,912 243,331
-------- --------
$572,836 $542,260
======== ========
See summary of significant accounting policies and notes to
consolidated financial statements.
<PAGE 35-36>
<TABLE>
CONSOLIDATED STATEMENTS OF CHANGES
IN SHAREHOLDERS' EQUITY
<CAPTION>
Unamort.
Value Accum.
Common of Other
Stock, Paid- Restric. Comp.
In thousands except $1 Par in Retained Treasury Stock Inc./
per share amounts Value Capital Earnings Stock Grants (Loss) Total
------------------- ------ ------- -------- -------- ------- ------ ---------
<S> <C> <C> <C> <C> <C> <C> <C>
April 30, 1997 $23,307 $36,100 $187,880 $ -- $ -- $ 734 $248,021
Net earnings -- -- 7,385 -- -- -- 7,385
Foreign currency
translation
adjustment -- -- -- -- -- (2,567) (2,567)
------
Comprehensive income 4,818
Dividends ($.32 per
share) -- -- (7,284) -- -- -- (7,284)
Options exercised and
related tax benefit 129 1,654 -- -- -- -- 1,783
Common stock issued
for directors'fees 1 25 -- -- -- -- 26
Purchase of
treasury stock -- -- -- (16,450) -- -- (16,450)
------ ------ ------- ------- ------- ------ -------
April 30, 1998 23,437 37,779 187,981 (16,450) -- (1,833) 230,914
Net earnings -- -- 29,580 -- -- -- 29,580
Foreign currency
translation
adjustment -- -- -- -- -- 3,046 3,046
------
Comprehensive income 32,626
Dividends ($.32 per
share) -- -- (7,244) -- -- -- (7,244)
Options exercised and
related tax benefit 264 3,333 -- -- -- -- 3,597
Common stock issued
for directors' fees 4 104 -- -- -- -- 108
Purchase and
retirement of
common stock (869) (1,503) (14,446) -- -- -- (16,818)
Restricted stock
grants and
cancellations,
net of amortization 23 542 -- -- (417) -- 148
------ ------ ------- -------- ------- ------ --------
April 30, 1999 22,859 40,255 195,871 (16,450) (417) 1,213 243,331
Net earnings -- -- 25,875 -- -- -- 25,875
Foreign currency
translation
adjustment -- -- -- -- -- (4,491) (4,491)
------
Comprehensive income 21,384
Dividends ($.32 per
share) -- -- (7,089) -- -- -- (7,089)
Options exercised and
related tax benefit 183 3,362 (18) -- -- -- 3,527
Common stock issued
for directors' fees 6 115 -- -- -- -- 121
Treasury stock issued
for directors' fees -- -- -- 53 -- -- 53
Purchase and
retirement of
common stock (287) (533) (3,881) -- -- -- (4,701)
Restricted stock
grants and
cancellations, net
of amortization 19 416 (9) -- (140) -- 286
------ ------ ------- ------- ------- ------ --------
April 30, 2000 $22,780 $43,615 $210,749 $(16,397) $ (557) $(3,278) $256,912
======= ======= ======== ======== ======= ======= ========
See summary of significant accounting policies and notes to
consolidated financial statements.
</TABLE>
<PAGE 37-38>
CONSOLIDATED STATEMENTS OF CASH FLOWS
For years ended April 30
------------------------------
In thousands 2000 1999 1998
------------------------------ -------- -------- -------
Cash Provided by (Used for)
Operating Activities:
Net earnings $ 25,875 $ 29,580 $ 7,385
Adjustments to reconcile net
earnings to cash provided
by operating activities:
Depreciation and
amortization 25,622 24,220 13,572
Deferred income taxes (1,613) (824) (3,687)
Non-recurring special
charge -- -- 25,000
Other noncash items 460 256 26
Changes in operating
accounts, net of effects
of business acquisitions:
Receivables (13,980) (809) 664
Inventories (8,463) 15,559 (5,502)
Prepaid expenses 6,044 (656) (407)
Accounts payable and
accrued expenses (6,855) (2,069) 21,564
-------- -------- -------
Provided by Operating
Activities 27,090 65,257 58,615
-------- -------- -------
Investing Activities:
Additions to property, plant
and equipment (22,313) (22,619) (15,935)
Business acquisitions (14,744) (175,952) (61,546)
Sale of product class -- -- 26,678
Maturities and sales of long-
term debt securities -- -- 36,571
Intangible and other assets (189) (3,330) (1,908)
Other, net (4,491) (484) (2,567)
-------- -------- -------
(Used for)Investing
Activities (41,737) (202,385) (18,707)
-------- -------- -------
Financing Activities:
Purchase of common stock (4,701) (16,818) (16,450)
Additions of long-term debt 74,566 217,095 --
Repayments of long-term debt (53,205) (47,223) (192)
Net short-term financing (1,798) (11,963) 326
Debt issue costs -- (800) (587)
Proceeds from issuance of
stock 3,305 3,597 1,783
Dividends on common stock (7,089) (7,244) (7,284)
-------- -------- -------
Provided by (Used for)
Financing Activities 11,078 136,644 (22,404)
-------- -------- -------
Increase (Decrease) in Cash and
Short-Term Cash Investments (3,569) (484) 17,504
Cash and Short-Term Cash
Investments, Beginning of Year 26,523 27,007 9,503
-------- -------- -------
Cash and Short-Term Cash
Investments, End of Year $ 22,954 $ 26,523 $27,007
======== ======== =======
See summary of significant accounting policies and notes to
consolidated financial statements.
<PAGE 39>
Report of Management Gerber Scientific, Inc.
------------------------------------------------------------------
To the Shareholders of Gerber Scientific, Inc.
The financial statements of Gerber Scientific, Inc. included in
this Annual Report have been prepared by the Company's
management, who are responsible for the integrity and objectivity
of the data presented. The financial statements have been
prepared in conformity with generally accepted accounting
principles appropriate in the circumstances and include amounts
based on management's best estimates and judgments. Financial
information elsewhere in this Annual Report is consistent with
the financial statements.
Management maintains a system of internal accounting controls and
procedures, supported by a program of internal auditing. This
system is intended to provide reasonable assurance, in relation
to reasonable cost, that transactions are executed in accordance
with management's authorization and are recorded properly and
accurately, that accountability for assets is maintained, and
that the financial records are reliable for preparing financial
statements.
The financial statements have been audited by KPMG LLP,
independent auditors, in accordance with generally accepted
auditing standards. Their role is to assess the accounting
principles used and the estimates made by management and to form
an independent opinion as to the fairness with which the
financial statements present the financial condition of the
Company, the results of its operations, and its cash flows in
accordance with generally accepted accounting principles. They
obtain and maintain an understanding of the Company's accounting
policies and controls and conduct such tests and related
procedures as they consider necessary to arrive at an opinion on
the fairness of the financial statements.
The Board of Directors has appointed an Audit and Finance
Committee composed of outside directors who are not employees of
the Company. The Audit and Finance Committee meets periodically
with representatives of management, the internal auditors, and
the independent auditors for the purpose of monitoring their
activities to ensure that each is properly discharging its
responsibilities. The Audit and Finance Committee reports to the
Board of Directors on its activities and findings.
<PAGE 40>
Independent Auditors' Report KPMG LLP
------------------------------------------------------------------
To the Board of Directors and Shareholders of Gerber Scientific,
Inc.
We have audited the accompanying consolidated balance sheets of
Gerber Scientific, Inc. and subsidiaries as of April 30, 2000 and
1999 and the related consolidated statements of earnings, changes
in shareholders' equity, and cash flows for each of the years in
the three-year period ended April 30, 2000. These consolidated
financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these
consolidated financial statements based on our audits.
We conducted our audits in accordance with generally accepted
auditing standards. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether
the financial statements are free of material misstatement. An
audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An
audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating
the overall financial statement presentation. We believe that
our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to
above present fairly, in all material respects, the financial
position of Gerber Scientific, Inc. and subsidiaries as of
April 30, 2000 and 1999 and the results of their operations and
their cash flows for each of the years in the three-year period
ended April 30, 2000 in conformity with generally accepted
accounting principles.
/s/KPMG LLP
Hartford, Connecticut
May 24, 2000
<PAGE 41>
Summary of Significant Accounting
Policies and Notes to
Consolidated Financial Statements
-----------------------------------------------------------------
NOTE 1. ACCOUNTING POLICIES
Basis of Consolidation
----------------------
The consolidated financial statements include the accounts of the
Company and its subsidiaries. Intercompany accounts and
transactions are eliminated.
Foreign Currency Translation
----------------------------
Assets and liabilities of foreign subsidiaries are translated to
U.S. dollars at year-end exchange rates, and related revenue and
expenses are translated at average exchange rates during the
year. Translation adjustments and gains and losses on
intercompany foreign currency balances of a long-term investment
nature are deferred and accumulated in a separate component of
shareholders' equity, as are gains and losses on foreign currency
denominated balances that are designated as, and are effective
as, economic hedges of a net investment in a foreign entity.
Transaction gains and losses are included in earnings.
Hedging Activity
----------------
The Company uses derivative instruments, including swaps and
forward contracts, to manage certain foreign currency and
interest rate exposures. Derivative instruments are viewed by the
Company as risk management tools and are not used for trading or
speculative purposes. Derivatives used for hedging purposes must
be designated as, and effective as, a hedge of the identified
risk exposure at the inception of the contract. Accordingly,
changes in the market value of the derivative contract must be
highly correlated with changes in the market value of the
underlying hedged item at inception and over the life of the
contract.
Gains and losses from instruments that are hedges of variability
of cash flows are deferred and recognized when the associated
hedged transaction occurs. Gains and losses from instruments
that are effective hedges of variability of cash flows are
reported in earnings, and offset the effects of gains and losses
from the associated hedged transactions. Gains and losses on the
excess of hedge amounts over the related hedged commitment would
be recognized in earnings. Cash flows from derivative
instruments designated as hedges are classified consistent with
the items being hedged.
Derivative instruments designated but no longer effective as a
hedge would be reported at market value, and the related gains and
losses would be recognized in earnings.
Revenue Recognition
-------------------
Product sales are recognized upon shipment. In fiscal years prior
to 1999, sales under certain production contracts were recognized
on the percentage-of-completion method of accounting.
Anticipated losses on these contracts, if any, were provided for
<PAGE 42>
when determined. Service revenue is recognized ratably over the
contractual period or as services are performed. Royalties are
accounted for as other income as received. Software revenue is
recognized when earned in compliance with American Institute of
Certified Public Accountants' Statements of Position 97-2 and
98-4, "Software Revenue Recognition." Revenue from packaged
product sales is recorded when related products are shipped.
Maintenance and subscription revenue is recognized ratably over
the contract period.
Cash and Short-Term Cash Investments
------------------------------------
Cash and short-term cash investments include cash on hand, demand
deposits, and short-term cash investments which are highly liquid
in nature and have original maturities of three months or less.
Short-term cash investments are stated at cost plus accrued
interest, which approximates market value.
Inventories
-----------
Inventories are stated at the lower of cost or market. Inventory
costs of raw materials and purchased parts have been determined
primarily by the average cost method (which approximates first-
in, first-out or FIFO). Work in process inventory includes
materials, direct labor, and manufacturing overhead costs, less
the portion of such costs allocated to products delivered.
Property, Plant, Equipment, and Depreciation
--------------------------------------------
Property, plant and equipment are stated on the basis of cost.
Major improvements and betterments to existing plant and
equipment are capitalized. Expenditures for maintenance and
repairs that do not extend the life of the applicable asset are
charged to expense as incurred. The cost and related accumulated
depreciation of properties sold or otherwise disposed of are
removed from the accounts, and any gain or loss is included in
other income.
Depreciation is provided generally on a straight-line basis.
Estimated useful lives used for calculating depreciation are 45
years for buildings and 3 to 10 years for machinery, tools, and
other equipment.
In fiscal 1999, the Company began capitalizing certain costs of
enterprise resource planning (ERP) software obtained and
developed for internal use. The amount capitalized as of April
30, 2000 and 1999, was $10,000,000 and $6,400,000, respectively.
If such costs were capitalized in prior years, the effect would
not have been material. Software assets are depreciated over
periods ranging from 5 to 10 years. Accumulated depreciation of
capitalized software was $900,000 and $300,000 as of April 30,
2000 and 1999, respectively.
<PAGE 43>
Goodwill and Other Long-Lived Assets
------------------------------------
The excess of acquisition cost over the fair values of the net
assets of businesses acquired (goodwill) is included in
intangible assets, and is amortized over periods ranging from 20
to 25 years on a straight-line basis. Impairment of goodwill, if
any, is measured periodically on the basis of whether anticipated
undiscounted operating cash flows generated by the acquired
business will recover the recorded net goodwill balances over the
remaining amortization period.
Long-lived assets include patents, which are stated at cost and
amortized on a straight-line basis over the life of the patent.
Patents and other long-lived assets are reviewed for possible
impairment whenever events or changes in circumstances indicate
their carrying value may not be recoverable. If the carrying
amount of an asset exceeds the sum of its undiscounted expected
future cash flows, the asset's carrying value is written down to
its fair value.
Earnings Per Share
------------------
Basic and diluted earnings per share are calculated in accordance
with Statement of Financial Accounting Standards No. 128,
"Earnings Per Share." All earnings per share amounts have been
presented, and where appropriate restated, to conform with the
requirements of Statement No. 128.
Use of Estimates
----------------
The preparation of the Company's financial statements in
conformity with generally accepted accounting principles requires
management to make estimates and assumptions that affect the
amounts reported in the financial statements and the related
disclosures. Actual results could differ from those estimates.
Reclassifications
-----------------
Certain reclassifications have been made to the prior year
amounts to conform with current year presentation.
New Accounting Standards
------------------------
In June 1998, the Financial Accounting Standards Board (FASB)
issued Statement No. 133, "Accounting for Derivative Instruments
and Hedging Activities" (SFAS 133). The Statement establishes
accounting and reporting standards requiring that derivative
instruments be recorded in the balance sheet as either an asset
or liability measured at fair value and that changes in fair
value be recognized currently in earnings, unless specific hedge
accounting criteria are met. In June 1999, the FASB issued
Statement No. 137, "Accounting for Derivative Instruments and
Hedging Activities - Deferral of the Effective Date of FASB
Statement No. 133," which delays the required adoption of SFAS
133 to the Company's fiscal year 2002. The timing of adoption
and the effect of SFAS 133 on the Company's financial position or
results of operations have not yet been determined.
<PAGE 44>
NOTE 2. BUSINESS ACQUISITIONS
In fiscal 2000, the Company purchased five distribution
businesses included in its Sign Making and Specialty Graphics
operating segment. The cost of the acquisitions totaled
$14,700,000 and they were made utilizing cash on hand and the
Company's multi-currency revolving credit facility. These
acquisitions added $13,500,000 of external sales and $300,000 of
net earnings to the Company's consolidated statement of earnings
in 2000. On an annualized basis, these businesses would have had
sales of approximately $25,000,000 and earnings that would not
have impacted the Company's consolidated statement of earnings
significantly. The acquisitions included the Graphi-cal Group
(Australia) in September 1999, R&D Marketing Aktiebolag (Sweden)
in November 1999, SD Trading OY (Finland) in January 2000, and
Technograf Group (Australia) and Lars Lindqvist Trading AB
(Sweden) in February 2000.
On May 5, 1998, the Company acquired the outstanding capital
stock of Spandex PLC (Spandex) of Bristol, UK. Spandex was the
largest distributor of equipment and related materials to the
sign making industry in Europe. The purchase price was
approximately $173,000,000. In addition, Spandex had
approximately $11,600,000 in outstanding bank debt that was
assumed. The acquisition of the stock and refinancing of the
assumed debt was accomplished through a syndicated bank credit
facility (see Note 12).
On February 27, 1998, Gerber Coburn Optical, Inc. (GC), a wholly
owned subsidiary of the Company and formerly known as Gerber
Optical, Inc., acquired the outstanding stock of Coburn Optical
Industries, Inc. (Coburn) of Muskogee, Oklahoma, and subsequently
merged with Coburn. The purchase price, including the repayment
of Coburn's outstanding debt, was approximately $63,000,000.
Coburn was a leading manufacturer and international distributor
of a broad range of ophthalmic lens processing equipment and
related supplies used in the production of eyeglass lenses. GC
has continued to develop, manufacture, market, and support the
Coburn product lines.
Each acquisition was accounted for as a purchase, and the results
of operations of the acquired companies have been included in the
Company's consolidated statements of earnings from the respective
dates of acquisition. The acquisition costs were allocated to
the assets and liabilities acquired based upon their fair values.
The excess of acquisition costs over the fair values of the net
assets acquired was included in intangible assets as goodwill and
is being amortized on straight-line bases ranging from 20 to 25
years from the date of acquisition.
The following pro forma combined results of operations for the
year ended April 30, 1998 has been prepared as if the
acquisitions of Spandex and Coburn occurred at the beginning of
the 1998 fiscal year and gives effect to estimated purchase
accounting and other adjustments resulting from the acquisitions.
The pro forma financial information is not necessarily indicative
<PAGE 45>
of the results of operations that would have been achieved had
the acquisitions of Spandex and Coburn actually been effective as
of the beginning of the 1998 fiscal year or of future results of
the combined companies.
(Unaudited)
-----------
In thousands (except per share amounts) 1998
--------------------------------------- ---------
Sales $641,556
Net earnings 7,368
Net earnings per common share-basic .32
Net earnings per common share-diluted .32
NOTE 3. CASH AND SHORT-TERM CASH INVESTMENTS
Cash and short-term cash investments at the end of each year were
as follows:
In thousands 2000 1999
------------------------- ------- -------
Cash $18,817 $14,989
Money market funds 4,084 10,067
Time deposits 53 1,467
------- -------
$22,954 $26,523
======= =======
The Company's short-term cash investments are in high-quality
instruments placed with major U.S. and international financial
institutions. Due to the relatively short maturity of these
financial instruments, their cost at April 30, 2000 was a
reasonable estimate of their fair value.
NOTE 4. ACCOUNTS RECEIVABLE
The Company sells products and services to customers in a variety
of industries and geographic areas and, accordingly, does not
have significant concentrations of credit risk. The Company
evaluates the creditworthiness of its customers prior to
extending credit and, in some instances, requires bank letters of
credit to support customer obligations. In addition, the
Company's lease receivables and its recourse obligations for
leases that are financed by third parties are secured and
collateralized by the underlying equipment.
NOTE 5. INVENTORIES
The classification of inventories at the end of each year was as
follows:
<PAGE 46>
In thousands 2000 1999
--------------------------------- ------- -------
Raw materials and purchased parts $52,847 $42,097
Work in process 33,625 30,270
------- -------
$86,472 $72,367
======= =======
NOTE 6. INVESTMENTS AND LONG-TERM RECEIVABLES
In February 1998, the Company sold its portfolio of investment-
grade tax-exempt municipal bonds to partially fund the
acquisition of Coburn. The amortized cost of the portfolio was
$14,842,000 at the time of sale, and the Company realized a gain
of $156,000, which was included in other income in 1998.
NOTE 7. PROPERTY, PLANT AND EQUIPMENT
The components of property, plant and equipment at the end of
each year were as follows:
In thousands 2000 1999
------------------------------- -------- --------
Land $ 9,199 $ 9,414
Buildings 68,609 60,822
Machinery, tools, and equipment 84,099 77,660
Construction in progress 3,434 4,478
-------- --------
$165,341 $152,374
======== ========
NOTE 8. INTANGIBLE ASSETS
The components of net intangible assets at April 30, 2000 and
1999 were as follows:
In thousands 2000 1999
----------------------------------------- ------- -------
Goodwill, net of accumulated amortization $193,476 $194,469
Prepaid pension cost 16,313 19,369
Patents, net of accumulated amortization 7,147 6,739
Other 1,442 182
------- -------
$218,378 $220,759
======== ========
NOTE 9. NOTES PAYABLE
The Company had short-term bank lines of credit that totaled
approximately $20,600,000 at April 30, 2000 based upon year-end
foreign exchange rates. As of April 30, 2000, no amounts were
borrowed under these credit lines.
Included in these bank lines was a $15,000,000 multi-currency
line of credit from a major European commercial bank. The multi-
<PAGE 47>
currency line of credit is available in various sub-limits to
certain of the Company's European subsidiaries, and repayment is
guaranteed by the parent Company. Borrowings under this line of
credit bear interest at 1/4 percent above the London Interbank
Offered Rate (LIBOR) for the relevant currency and term with a
commitment fee of 1/8 percent of the unused amount.
NOTE 10. LITIGATION AWARD
As the result of a suit in the UK alleging Lectra Systemes, S.A.
of France and its UK subsidiary (Lectra) infringed certain
Company patents dealing with automated fabric cutting equipment,
the Company received an award. The award was recorded in other
income in the year ended April 30, 1998, and added $1,563,000 to
earnings before income taxes and approximately $1,000,000, or
$.04 per share, to net income in that year.
NOTE 11. INCOME TAXES
The components of the provision for income taxes for the years
ended April 30, 2000, 1999, and 1998 were as follows:
In thousands 2000 1999 1998
--------------------------- ------ ------ ------
Currently payable:
Federal $ 2,900 $ 3,600 $3,600
State and local 400 400 400
Foreign 7,300 7,300 1,300
------- ------- ------
10,600 11,300 5,300
Deferred 2,500 5,200 (2,800)
------- ------- ------
$13,100 $16,500 $2,500
======= ======= ======
Income tax payments totaled $7,949,000, $12,899,000, and
$5,628,000 in the years ended April 30, 2000, 1999, and 1998,
respectively. Reconciliations of the statutory U.S. Federal
income tax rate to the effective income tax rate for each year
were as follows:
2000 1999 1998
------------------------------------- ----- ----- -----
Statutory U.S. federal income tax rate 35.0% 35.0% 35.0%
State income taxes, net of U.S.
federal tax benefit .9 .9 (.4)
Foreign tax rate differences (4.6) (2.1) 3.8
Tax-exempt interest income -- -- (4.6)
Foreign Sales Corporation (3.3) (2.2) (10.9)
Research and development tax credits (2.1) (2.8) (5.2)
Goodwill amortization 7.4 6.4 4.7
Other, net .3 .6 2.9
---- ---- ----
Effective income tax rate 33.6% 35.8% 25.3%
==== ==== ====
<PAGE 48>
The Company's deferred income tax balances related principally to
differing depreciation methods for property, plant, and
equipment, differing book and tax treatment of patent costs, the
timing of employee benefit plan funding versus expense
recognition, differing valuations of inventories, accounts
receivable, and other assets for book and tax purposes, expense
provisions not deductible until paid, and tax operating loss
carryforwards. At April 30, 2000 and 1999, current deferred tax
assets of approximately $6,000,000 and $11,000,000, respectively,
were included in prepaid expenses in the consolidated balance
sheet. Deferred tax assets and deferred tax liabilities as of
April 30, 2000 and 1999 were as follows:
2000 1999
-------------------- ---------------------
Deferred Deferred Deferred Deferred
Tax Tax Tax Tax
In thousands Assets Liabilities Assets Liabilities
------------------ -------- ----------- -------- -----------
Depreciation $ -- $ 2,600 $ -- $ 2,900
Patents -- 2,900 -- 2,700
Employee benefit plans 2,400 7,100 2,000 8,200
Asset valuations 8,300 3,100 9,800 2,000
Provisions for
estimated expenses 5,400 4,600 7,900 4,800
Foreign exchange
gains and losses -- 800 -- 500
Tax carryforwards 4,000 -- 2,900 --
Other -- 800 400 300
------- ------- ------- -------
20,100 21,900 23,000 21,400
Valuation allowance (700) -- (200) --
------- ------- ------- -------
$19,400 $21,900 $22,800 $21,400
======= ======= ======= =======
Consolidated earnings before income taxes included foreign pre-
tax earnings of $22,056,000, $22,698,000, and $4,557,000 for
2000, 1999, and 1998, respectively. At April 30, 2000, the
unremitted earnings of foreign subsidiaries were approximately
$37,000,000. The Company has not provided U.S. income taxes on
the unremitted earnings of foreign subsidiaries because such
earnings are considered to be indefinitely reinvested in those
operations. Foreign tax credits would be available to
substantially reduce or eliminate any amount of additional U.S.
income tax that might be payable on these foreign earnings if
remitted. For income tax reporting purposes, the Company has
foreign net operating loss carryforwards of approximately
$3,000,000 at April 30, 2000. Such carryforwards have various
expiration dates and begin to expire in the 2001 fiscal year.
<PAGE 49>
NOTE 12. LONG-TERM DEBT
The composition of long-term debt at the end of each year was as
follows:
In thousands 2000 1999
--------------------------- -------- --------
Multi-currency revolving
credit facility $188,892 $165,158
Unsecured loan notes -- 1,420
Industrial Revenue Bonds
(net of current maturities
of $-0- and $193,000) 6,000 6,760
-------- --------
$194,892 $173,338
======== ========
The variable interest rate feature of the Company's long-term
debt allows its repricing at current market interest rates and,
accordingly, the carrying amount of debt at April 30, 2000 was a
reasonable estimate of its fair value.
Interest payments totaled $10,627,000, $11,396,000, and $666,000
in the years ended April 30, 2000, 1999, and 1998, respectively.
Multi-Currency Revolving Credit Facility
----------------------------------------
In May 1998, the Company obtained a five-year $235,000,000 multi-
currency revolving credit facility from a group of major U.S. and
international commercial banks. The purpose of the facility was
to finance the acquisition of the capital stock of Spandex and
the refinancing of its debt, and for other general corporate
purposes. The interest rate on borrowings under this facility is
variable and is based on LIBOR plus an applicable margin, which
ranges from 1/4 percent to 5/8 percent based on the relationship
of the Company's consolidated total debt to EBITDA (earnings
before interest, taxes, depreciation, and amortization). The
weighted average interest rate of the borrowings under this
facility as of April 30, 2000 was 6.2 percent. This credit line
also has a facility fee, which ranges from 1/8 to 1/4 percent of
the credit line.
Covenants in the credit facility require the Company to maintain
certain levels of net worth, certain ratios of total debt to
EBITDA, and a minimum fixed charge coverage amount, as defined
therein. At April 30, 2000, the Company was in compliance with
these covenants. Under the most restrictive of these covenants,
approximately $171,400,000 of retained earnings was not available
for dividend payments at April 30, 2000.
Unsecured Loan Notes
--------------------
In May 1998, the Company issued loan notes with a par value of
4,900,000 pounds sterling in connection with the acquisition of
Spandex. The loan notes were an alternative to the cash offer to
the Spandex shareholders and their acceptance allowed deferral of
<PAGE 50>
UK income taxes on tendered shares. The variable interest rate
on these notes was based on LIBOR less one percent and was
adjusted biannually. The remaining balance of these notes was
paid in full in 2000.
Industrial Revenue Bonds
------------------------
The Company has outstanding $6,000,000 of Variable Rate Demand
Industrial Development Bonds (VRDBs). The interest rate payable
on the VRDBs is adjusted weekly to maintain their market value at
par. During 2000 and 1999, the average interest rate on the
VRDBs was 3.4 percent and 3.3 percent, respectively, and at April
30, 2000, the interest rate was 4.9 percent. The VRDBs are
collateralized by certain property, plant and equipment and are
payable in 2014. The Company repaid its other outstanding
Industrial Revenue Bonds in 2000.
The demand feature of the VRDBs is supported by a letter of
credit from a major U.S. commercial bank. The letter of credit
has a provision for automatic extension of an 18-month term and
carries a fee of .65 percent of the face amount. Any advances
under the letter of credit in support of the demand feature would
be repayable over the remaining letter of credit term at the
bank's prime interest rate. The bank providing the letter of
credit was also granted a mortgage and security interest in the
project property. The covenants in the Industrial Revenue Bond
agreement were conformed to the covenants in the multi-currency
revolving credit facility described above.
NOTE 13. PREFERRED STOCK, COMMON STOCK, RESTRICTED STOCK, STOCK
OPTION PLANS, AND INCENTIVE BONUS PLANS
Preferred Stock
---------------
The Company's Certificate of Incorporation authorizes 10,000,000
shares of preferred stock, without par value, issuable in series.
The Board of Directors is authorized to fix and determine the
terms, limitations, and relative rights and preferences of the
preferred stock, including voting rights (if any), the amount of
liquidation preference over the common stock, and to establish
series of preferred stock and fix and determine the various terms
among the series. As of April 30, 2000, no preferred stock had
been issued.
Common Stock
------------
Pursuant to a November 1998 Board of Directors' resolution, the
Company was authorized to purchase up to 3,000,000 shares of its
outstanding common stock over an indeterminate period of time as,
in the opinion of management, market conditions warrant. Under
this authorization, the Company has cumulatively purchased
1,023,800 shares. The reacquired shares have been retired and
under Connecticut law constitute authorized but unissued shares.
As of April 30, 2000, the Company could purchase up to an
additional 1,976,200 shares under the November 1998 Board of
Directors' resolution.
<PAGE 51>
Pursuant to a separate Board of Directors' resolution, the
Company repurchased 800,000 shares of its common stock from the
estate of the Company's founder in the year ended April 30, 1998.
These reacquired shares were accounted for as treasury stock.
When treasury shares are reissued, any difference between the
original repurchase cost and proceeds from reissuance is treated
as an adjustment to paid-in capital.
Restricted Stock
----------------
The Company's 1992 Employee Stock Plan (the 1992 Plan), as
amended by shareholders in September 1998, permits the granting
of restricted stock awards. Restricted stock grants vest one-
third each year for the three-year period following the date of
grant. During the restriction period, restricted stock awards
entitle the holder to all rights of a holder of common shares,
including dividend and voting rights. Unvested shares are
restricted as to disposition and subject to forfeiture under
certain circumstances. The amount of compensation expense
recognized for restricted stock awarded was $286,000 and $148,000
in 2000 and 1999, respectively. Restricted stock award activity
was as follows:
2000 1999
------- ------
Restricted stock awarded (shares) 21,330 22,986
Weighted average market value on date of $22.20 $25.06
grant
Stock Option Plans
------------------
The 1992 Plan also provides for incentive and non-qualified stock
option grants to officers and key employees. Stock options under
the 1992 Plan are for a ten-year term and are granted at the
market price of the common stock on the date of grant.
In 1995, shareholders approved amendments to the 1992 Plan
permitting the grant of performance units in conjunction with
stock option grants. The performance units became payable in cash
in the event certain pre-established performance goals were
attained and the grantee simultaneously exercised related stock
options with the cash award.
In September 1998, shareholders approved further amendments to
the 1992 Plan that disallowed future grants of performance units
and made certain other changes including: increasing the
cumulative number of shares of common stock available for grant
as stock options from 3,000,000 to 5,000,000, limiting the number
of restricted shares that may be granted, and disallowing
"re-pricing" of previously issued options.
The 1992 Non-Employee Director Stock Option Plan (the 1992
Director Plan) provides for non-qualified stock option grants to
eligible members of the Board of Directors who are not also
employees of the Company. Options are granted with a ten-year
term at the market price of the common stock on the date of grant
and are immediately exercisable.
<PAGE 52>
In June 1998, shareholders approved amendments to the 1992
Director Plan that increased the automatic award each May 1 of
options from 1,000 to 3,000, and increased the maximum number of
shares of common stock available for grant as stock options from
75,000 to 175,000 shares.
A summary of the stock option activity under all plans for the
three years ended April 30, 2000 is set forth below:
2000 1999 1998
------------------- ------------------ ------------------
Weighted Weighted Weighted
-Average -Average -Average
Exercise Exercise Exercise
Options Price Options Price Options Price
------------ --------- -------- --------- -------- -------- --------
Outstanding-
beginning
of year 2,456,259 $18.72 2,574,595 $17.23 1,171,170 $14.31
Granted 492,053 18.67 420,604 24.71 1,669,800 18.80
Exercised (172,279) 15.28 (264,450) 14.18 (128,625) 12.11
Cancelled (74,566) 23.03 (274,490) 18.28 (137,750) 16.20
--------- -------- --------- -------- --------- ------
Outstanding-
end of year 2,701,467 $18.81 2,456,259 $18.72 2,574,595 $17.23
========= ======== ========= ======== ========= ======
Exercisable
at end of
year 1,447,170 $17.83 942,142 $16.88 653,795 $14.32
========= ======== ========= ======== ========= ======
Reserved for
future
grants 2,118,101 2,552,777 621,825
========= ========= =========
The exercise prices for options outstanding as of April 30, 2000
ranged from $10.12 to $28.25. The weighted-average remaining
contractual life of options outstanding at April 30, 2000 is 7.1
years. In the event of a change in control of the Company, all
outstanding stock options become immediately exercisable.
The following is a summary of outstanding options under all plans
at April 30, 2000:
<PAGE 53>
Outstanding Options Exercisable Options
-------------------------------- -------------------
Weighted-
Average Weighted- Weighted-
Exercise Remaining Average Average
Price Contractual Exercise Exercise
Range Number Life Price Number Price
------------- --------- ----------- -------- -------- ---------
$10.12-$15.12 196,030 3.8 years $13.20 163,030 $12.95
$15.13-$22.75 2,186,205 7.3 years 18.30 1,167,249 17.73
$22.76-$28.25 319,232 8.2 years 25.76 116,891 25.71
--------- --------- ------ --------- ------
2,701,467 7.1 years $18.81 1,447,170 $17.83
========= ========= ====== ========= ======
The Company applies APB Opinion No. 25, "Accounting for Stock
Issued to Employees," and related interpretations in accounting
for stock options. Accordingly, no compensation cost has been
recognized in the Company's consolidated statement of earnings
for the stock option plans. Had compensation cost for the
Company's stock option plans been determined based on the fair
value at the grant date for awards under those plans, consistent
with the requirements of Statement of Financial Accounting
Standards No. 123, "Accounting for Stock-Based Compensation," the
Company's pro forma net earnings and earnings per share would
have been as follows:
In thousands
(except per share amounts) 2000 1999 1998
------------------------------------ ------- ------- -------
Net earnings
As reported $25,875 $29,580 $7,385
Pro forma 23,074 27,227 5,323
Net earnings per common share-basic
As reported 1.17 1.31 .32
Pro forma 1.04 1.21 .23
Net earnings per common share-diluted
As reported 1.16 1.29 .32
Pro forma 1.03 1.18 .23
To arrive at the pro forma amounts shown above, the fair value of
each stock option grant was estimated on the date of grant using
the Black-Scholes option pricing model with the following
weighted-average assumptions:
<PAGE 54>
2000 1999 1998
------- ------- -------
Risk-free interest rate 6.6% 5.2% 5.7%
Expected life of option 4.75 years 4.50 years 4.50 years
Expected volatility 38% 34% 25%
Expected dividend yield 2% 2% 2%
The weighted-average fair values at date of grant for options
granted during 2000, 1999, and 1998 were $7.09, $7.57, and $4.81,
respectively, and were estimated using the above weighted-average
assumptions.
Incentive Bonus Plans
---------------------
The Management Development and Compensation Committee of the
Board of Directors approved cash profit incentive bonus plans for
each of the years ended April 30, 2000, 1999, and 1998. The plans
covered substantially all employees in the United States and were
based upon performance goals, as defined in the plans, for the
Company's operating subsidiaries and the consolidated group. The
amounts charged to expense under these plans totaled $2,510,000,
$3,167,000, and $3,575,000 for the years ended April 30, 2000,
1999, and 1998, respectively.
NOTE 14. EMPLOYEE BENEFIT PLANS
Pension Plans
-------------
The Company has a noncontributory defined benefit pension plan
covering substantially all employees in the United States. Plan
benefits are based on years of service and an average of an
employee's highest five consecutive years of compensation, as
defined, in the last ten years of service.
The Company's general policy is to fund the Plan's normal cost
plus amounts required to amortize actuarial gains and losses and
prior service costs over periods ranging from 5 to 30 years.
Amounts funded totaled $2,343,000 and $2,800,000 for the years
ended April 30, 1999 and 1998, respectively.
Plan assets were invested in a portfolio consisting primarily of
common stocks, fixed income securities, money market instruments,
and mutual and collective trust funds consisting of these
instruments. Pension arrangements for employees of foreign
subsidiaries were provided generally through defined contribution
plans and through local insurance contracts, the costs of which
were funded currently.
The Company also maintains a non-qualified supplemental pension
plan for employees in the United States. The supplemental pension
plan provides for the pension benefits earned under the Company's
primary pension plan benefit formula that cannot be paid from
such plan because of limitations imposed by income tax
regulations. The Company has established a trust to provide
funding for the benefits payable under the supplemental pension
plan. The trust is irrevocable and assets contributed to the
<PAGE 55>
trust can only be used to pay such benefits, with certain
exceptions. The trust assets were invested in mutual funds whose
portfolios consisted primarily of common stocks, fixed income
securities, and money market instruments.
The following table summarizes the funded status of the pension
plans and the related amounts recognized in the consolidated
balance sheet at April 30, 2000 and 1999:
Qualified Non-qualified
Pension Plan Pension Plan
---------------- ----------------
In thousands 2000 1999 2000 1999
----------------------------- ------- ------- ------- -------
Change in benefit obligation:
Beginning balance $65,108 $57,304 $ 5,474 $ 4,905
Service cost 4,059 4,127 265 210
Interest cost 4,173 3,734 476 259
Actuarial (gain)/loss (14,330) 1,816 852 434
Benefits paid (2,214) (1,873) (410) (334)
------- ------- ------- -------
Ending balance 56,796 65,108 6,657 5,474
------- ------- ------- -------
Change in plan assets:
Beginning balance 73,846 66,793 5,264 4,405
Actual return on plan assets 11,163 6,583 197 793
Employer contributions -- 2,343 400 400
Benefits paid from plan assets (2,215) (1,873) (410) (334)
------- ------- ------- -------
Ending balance 82,794 73,846 5,451 5,264
------- ------- ------- -------
Funded status 25,998 8,738 (1,206) (210)
Unrecognized net actuarial
(gain)/loss (20,032) (1,085) 868 (185)
Unrecognized net transition
liability 279 372 -- --
Unrecognized prior service
cost 8,914 9,901 1,492 1,838
------- ------- ------- -------
Prepaid pension cost $15,159 $17,926 $ 1,154 $ 1,443
======= ======= ======= =======
<PAGE 56>
The following weighted-average assumptions were used in the
accounting for the pension plans:
Qualified Non-qualified
Pension Plan Pension Plan
---------------------- -------------------
2000 1999 1998 2000 1999 1998
----- ----- ----- ----- ----- -----
Discount rate 8.00% 6.75% 7.00% 8.00% 6.75% 7.00%
Expected return on
plan assets 9.00 9.00 9.00 9.00 9.00 9.00
Rate of compensation
increase 4.50 4.50 4.50 4.50 4.50 4.50
The following table summarizes the components of the net periodic
cost of the pension plans for the years ended April 30, 2000,
1999, and 1998:
Qualified Non-qualified
Pension Plan Pension Plan
---------------------- -------------------
In thousands 2000 1999 1998 2000 1999 1998
--------------------- ------ ------ ------ ----- ----- -----
Service cost $4,059 $4,127 $2,487 $ 265 $ 210 $ 216
Interest cost 4,173 3,734 3,482 476 259 315
Expected return on
plan assets (6,546) (6,042) (4,596) (454) (289) (303)
Amortization of prior
service cost 987 987 987 347 347 347
Amortization of
transition
obligation 93 93 93 -- -- --
Amortization of
actuarial gain -- -- -- 55 -- --
------ ------ ------ ----- ----- -----
Net periodic benefit
cost $2,766 $2,899 $2,453 $ 689 $ 527 $ 575
====== ====== ====== ===== ===== =====
401(k) Plan
-----------
Under the Company's 401(k) Maximum Advantage Program, employees
in the United States may contribute a portion of their
compensation to a tax-deferred 401(k) plan. The Company
contributes an amount equal to a specified percentage of each
employee's contribution up to an annual maximum. The Company's
expense for matching contributions under this Plan was
$1,323,000, $973,000, and $692,000 for the years ended April 30,
2000, 1999, and 1998, respectively.
NOTE 15. OTHER INCOME
The components of other income for each year were as follows:
In thousands 2000 1999 1998
----------------------------- ------ ------ ------
Interest income from
investments $1,144 $1,110 $2,223
Royalty income 776 1,383 1,426
Foreign exchange (losses) (1,091) (339) (371)
Patent litigation settlement -- -- 1,563
Other, net 261 (2) (672)
------ ------ ------
$1,090 $2,152 $4,169
====== ====== ======
<PAGE 57>
NOTE 16. NON-RECURRING SPECIAL CHARGE
In the fourth quarter of 1998, the Company recorded a $25,000,000
pre-tax charge related to the write-down of certain assets of the
Company's Gerber Systems unit. Gerber Systems comprised the
Company's Imaging and Inspection Systems product class, which was
sold to the BARCO Group of Belgium as of March 31, 1998 for
$25,000,000 in cash. The special charge reflected the write-down
of inventory, accounts receivable, and other items, and amounted
to $.70 per share on a diluted basis.
NOTE 17. SEGMENT REPORTING
The Company's subsidiaries design, develop, manufacture, market,
and provide service on products classified in three operating
segments. These operating segments are Sign Making and Specialty
Graphics, Apparel and Flexible Materials, and Ophthalmic Lens
Processing, and were determined on the basis of the nature of
management's evaluation of the business units.
The Sign Making and Specialty Graphics segment includes the
manufacture of computer-controlled production systems, software,
and aftermarket supplies sold to a diversified international
customer base. The market is comprised of the sign making and
specialty graphics industries. The Apparel and Flexible
Materials segment includes the manufacture of computer-controlled
production systems and software for product design, marker-making
(nesting), spreading, labeling, cutting, and handling of flexible
materials such as fabrics and composites sold to a diversified
international customer base. The market is comprised of the
apparel, aerospace, automotive, furniture, and other industries.
The Ophthalmic Lens Processing segment includes the manufacture
of computer-controlled production systems and aftermarket
supplies sold to a diversified international customer base. The
market is comprised of the ophthalmic industry.
In addition, the Company had an Imaging and Inspection Systems
product class, which it sold in March 1998. This product class
consisted of interactive imaging and inspection systems for the
electronics and commercial printing industries.
No individual customer accounted for more than 10 percent of
consolidated revenue in fiscal years 2000, 1999, or 1998.
In the first quarter of fiscal year 2000, the Company changed its
measurement of segment profit. In the Company's segment
disclosures on Form 10-K for the year ended April 30, 1999, an
allocation of general corporate expenses was included in the
measure of segment profit. Segment profit is now reported as
earnings before taxes, interest, and the allocation of general
corporate expenses. Segment profit for the years ended April 30,
1999 and 1998 has been restated to reflect this change.
Financial data for the past three fiscal years for the Company's
operating segments are shown in the following tables. The
accounting policies of the segments are identical to those
<PAGE 58>
described in the summary of significant accounting policies. The
effects of intersegment transactions, which are not material in
amount, have been eliminated.
Product
Class
Sold -
Sign Apparel Imaging
Making & & Ophthalmic and
Specialty Flexible Lens Inspection
In thousands Graphics Materials Processing Subtotal Systems Total
---------------- --------- --------- ---------- -------- -------- ------
(As of and for
the year ended
April 30, 2000)
----------------
Revenue $295,412 $221,540 $93,774 $610,726 $ -- $610,726
Segment profit 4 25,909 24,286 6,444 56,639 -- 56,639
Segment assets 1 289,712 114,223 90,348 494,283 -- 494,283
Capital
expenditures 2 9,412 4,077 2,658 16,147 -- 16,147
Depreciation and
amortization 2 11,516 7,808 3,568 22,892 -- 22,892
(As of and for
the year ended
April 30, 1999)
----------------
Revenue $278,466 $215,411 $100,741 $594,618 $ -- $594,618
Segment profit 36,162 25,895 3,634 65,691 -- 65,691
Segment assets 1 259,126 102,960 93,599 455,685 -- 455,685
Capital
expenditures 2 8,832 11,601 1,577 22,010 -- 22,010
Depreciation and
amortization 2 11,106 7,803 3,387 22,296 -- 22,296
(As of and for
the year ended
April 30, 1998)
----------------
Revenue $122,733 $219,081 $ 51,247 $393,061 $ 37,419 $430,480
Segment profit 3 21,011 32,009 3,005 56,025 (37,503) 18,522
Segment assets 1 49,376 108,360 101,269 259,005 -- 259,005
Capital
expenditures 2 2,071 9,743 1,200 13,014 1,116 14,130
Depreciation and
amortization 2 1,868 7,673 1,020 10,561 1,623 12,184
<PAGE 59>
1 Assets exclude $78,553,000, $86,575,000, and $79,762,000 of
corporate amounts in 2000, 1999, and 1998, respectively.
2 Capital expenditures and depreciation and amortization exclude
$6,166,000 and $2,730,000, $609,000 and $1,924,000, and
$1,805,000 and $1,388,000 of corporate amounts in 2000, 1999,
and 1998, respectively.
3 Includes a $25,000,000 loss from the write-down of certain
assets on the sale of the Company's Imaging and Inspection
Systems product class (see Note 16).
4 Includes $6,200,000 for excess costs on initial production of
certain new products from the Company's Sign Making and
Specialty Graphics operating segment (see Note 19).
A reconciliation of the totals reported for the operating
segments to the applicable line item in the consolidated
financial statements was as follows:
<PAGE 60>
In thousands 2000 1999 1998
--------------------------------- -------- -------- --------
Segment profit $56,639 $65,691 $18,522
Corporate expenses, net of other
income (7,047) (8,110) (7,970)
------- ------- -------
Earnings before interest and
taxes 49,592 57,581 10,552
Interest expense (10,617) (11,501) (667)
------- ------- -------
Earnings before income taxes $38,975 $46,080 $ 9,885
======= ======= =======
Revenue and net property, plant and equipment by country where
located were as follows:
United Continental United All
In thousands States Europe Kingdom Other Total
---------------- -------- -------- --------- ------ --------
(As of and for
the year ended
April 30, 2000)
----------------
Revenue 1 $233,762 $ 176,938 $59,413 $140,613 $610,726
Property, plant
and equipment,
net 68,762 9,020 19,157 2,281 99,220
(As of and for
the year ended
April 30, 1999)
----------------
Revenue 1 $241,269 $ 180,631 $66,806 $105,912 $594,618
Property, plant
and equipment,
net 63,493 8,461 17,005 1,626 90,585
(As of and for
the year ended
April 30, 1998)2
----------------
Revenue 1 $230,494 $ 75,705 $ 29,858 $ 94,423 $430,480
Property, plant
and equipment,
net 56,616 1,551 457 1,375 59,999
1 Revenues are attributed to specific countries based on the
destination of the shipment.
<PAGE 61>
2 Geographic information by country for the Imaging and
Inspection Systems product class is not available to the
Company and the cost to develop it would be excessive. The
total amount of net Imaging and Inspection Systems product
class sales to Europe was $6,500,000 for 1998. No amounts
were included for this product class in the United Kingdom
totals in the geographic information presented; all such
amounts were included under the caption "Continental
Europe."
NOTE 18. CONTINGENCIES AND COMMITMENTS
Various lawsuits, claims, and governmental proceedings are
pending against the Company. Management believes that the
ultimate resolution of these matters will not have a materially
adverse effect on the Company's consolidated financial position
or the results of its operations.
The Company occupies space and uses certain equipment under
operating lease arrangements. The Company is not the lessee
under any significant capital leases. Rental expense under lease
arrangements was $6,605,000, $6,200,000, and $4,595,000 for the
years ended April 30, 2000, 1999, and 1998, respectively.
Minimum annual rental commitments at April 30, 2000 under
long-term non-cancelable operating leases were as follows:
Building Machinery
In and Office and
thousands Space Equipment Total
---------- ---------- ---------- ------
2001 $ 3,903 $ 496 $ 4,399
2002 3,077 266 3,343
2003 2,010 127 2,137
2004 1,508 65 1,573
2005 1,152 13 1,165
After 2005 751 -- 751
------ ------ ------
$12,401 $ 967 $13,368
====== ====== ======
As of April 30, 2000, the Company was party to approximately
$9,400,000 in forward exchange contracts providing for the
delivery by the Company of various currencies in exchange for
others over the succeeding eleven months. The counterparties to
the forward exchange contracts were major international
commercial banks. The Company continually monitors its open
forward exchange contract position and does not anticipate
non-performance by the counterparties. In management's opinion,
these financial instruments do not represent a material off-
balance sheet risk in relation to the consolidated financial
statements. Based upon market prices at April 30, 2000 for
future deliveries of the various currencies, the hedging loss
deferred at that date amounted to approximately $966,000.
<PAGE 62>
In April 1999, the Company entered into a four-year interest rate
swap contract with an initial notional amount of $62,000,000 that
decreases ratably to $32,000,000 over the term. The Company
designated this swap as a hedge of its exposure to variability in
future cash flows attributable to the LIBOR, plus applicable
margin interest payments due on the U.S. dollar denominated
portion of its multi-currency revolving credit facility (Note
12). The interest differential paid or received under this
contract will be recognized as an adjustment to the effective
yield of the underlying credit facility hedged. The market value
of this contract was approximately $2,000,000 at April 30, 2000.
The Company has an agreement with a major financial services
institution to provide lease financing to purchasers of the
Company's equipment. The present value of the lease receivables
financed under this agreement amounted to approximately
$62,200,000 at April 30, 2000 and $59,700,000 at April 30, 1999.
The underlying equipment collateralizes the lease receivables.
In the event of default by the lessee, the Company has liability
to the financial services institution under recourse provisions.
The Company's liability for uncollected amounts financed in
excess of the estimated resale value of the equipment is limited
to the extent of loss pools. These loss pools are established as
percentages of each associated group of transactions that are
financed in a calendar year, and range from five to ten percent of
the amount financed. Management believes the allowance it
has established for losses under the recourse provisions is
adequate to cover the Company's obligations.
NOTE 19. FOURTH QUARTER ADJUSTMENTS
In the 2000 fourth quarter, the Company recorded $6,200,000 for
excess costs in the Company's Sign Making and Specialty Graphics
operating segment caused by cost overruns and inefficiencies
realized in the initial production runs of products recently
introduced. The charge was included in the cost of product sales
and amounted to $.18 per diluted share.
NOTE 20. EARNINGS PER SHARE
The following table sets forth the computation of basic and
diluted net earnings per common share:
<PAGE 63>
2000 1999 1998
----------- ----------- ----------
Numerator:
Net earnings $ 25,875,000 $ 29,580,000 $ 7,385,000
============ ============ ===========
Denominators:
Denominator for basic
earnings per share -
weighted-average shares
outstanding 22,140,127 22,590,428 22,800,389
Effect of dilutive
securities:
Stock options 250,101 420,252 530,653
------------ ------------ -----------
Denominator for diluted
earnings per share -
adjusted weighted-
average shares
outstanding 22,390,228 23,010,680 23,331,042
============ ============ ===========
Net earnings per common
share-basic $ 1.17 $ 1.31 $ .32
============ ============ ===========
Net earnings per common
share-diluted $ 1.16 $ 1.29 $ .32
============ ============ ===========
NOTE 21. QUARTERLY RESULTS (UNAUDITED)
The quarterly results of operations, the dividends paid per
share, and the market price range of the Company's common stock
as reported on the New York Stock Exchange for each quarterly
period of the past three fiscal years are set forth below.
In thousands (except First Second Third Fourth
per share amounts) Quarter Quarter Quarter Quarter Year
--------------------- ------- ------- ------- ------- -------
2000
Sales and service
revenue $139,476 $152,853 $155,543 $162,854 $610,726
Gross profit 3 59,550 63,253 63,547 55,514 241,864
Net earnings 3 7,553 8,330 8,274 1,718 25,875
Net earnings per
common share 3
Basic .34 .38 .37 .08 1.17
Diluted .34 .37 .37 .08 1.16
Dividends paid per
share .08 .08 .08 .08 .32
Stock price -High 24 7/8 24 3/8 21 15/16 22 7/16 24 7/8
-Low 18 9/16 18 1/2 18 10 1/4 10 1/4
--------------------------------------------
1999
Sales and service
revenue $153,659 $150,590 $140,799 $149,570 $594,618
Gross profit 63,104 61,988 59,390 61,335 245,817
Net earnings 6,722 7,735 7,045 8,078 29,580
Net earnings per
common share
Basic .30 .34 .31 .36 1.31
Diluted .29 .33 .31 .36 1.29
Dividends paid per
share .08 .08 .08 .08 .32
Stock price -High 29 15/16 28 7/8 26 1/16 20 15/16 29 15/16
-Low 22 5/16 19 19 1/8 17 3/8 17 3/8
--------------------------------------------
<PAGE 64>
1998
Sales and service
revenue $98,961 $106,392 $104,836 $120,291 $430,480
Gross profit 43,056 47,037 48,792 54,110 192,995
Net earnings (loss)
1,2 4,571 5,496 6,215 (8,897) 7,385
Net earnings (loss)
per common share 1,2
Basic 4 .20 .24 .28 (.38) .32
Diluted .19 .24 .27 (.38) .32
Dividends paid per
share .08 .08 .08 .08 .32
Stock price -High 21 3/8 24 1/2 21 15/16 29 1/4 29 1/4
-Low 16 3/8 19 1/16 17 11/16 18 5/16 16 3/8
--------------------------------------------
1 Net earnings for the first quarter of 1998 included a gain of
approximately $1,000,000 after taxes ($.04 per diluted share)
from the final settlement of the Company's UK patent
litigation with Lectra Systemes S.A. of France.
2 Net earnings for the fourth quarter of 1998 included a non-
recurring special charge of approximately $16,300,000 after
taxes ($.70 per diluted share) from the write-down of certain
assets upon the sale of the Company's Gerber Systems unit,
which comprised the Imaging and Inspection Systems product
class.
3 Gross profit and net earnings for the fourth quarter of 2000
included excess costs on new products in the Company's Sign
Making and Specialty Graphics operating segment of
approximately $6,200,000 ($.18 per diluted share).
4 The quarterly earnings per share information was computed
separately for each period. Accordingly, the sum of such
quarterly earnings per share amounts may differ from the
total for the year.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH AUDITORS ON ACCOUNTING
AND FINANCIAL DISCLOSURE.
None.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT.
The information required by Item 10 relating to
identification of directors is incorporated herein by reference
to the information contained under the caption "Election of
Directors" in the Company's 2000 Annual Meeting Proxy Statement,
which will be filed within 120 days of the Company's April 30,
2000 fiscal year-end.
<PAGE 65>
Identification of executive officers appears below. All
officers serve at the pleasure of the Board of Directors. The
following table presents the name and age of each of the
Company's executive officers, their present positions with the
Company and date of initial appointment thereto, and other
positions held during the past five years, including positions
held with other companies and with subsidiaries of the Company.
Present Position
and Date of Other Positions Held
Initial During
Name and Age Appointment Last Five Years
-------------- ----------- ---------------
Michael J. Cheshire Chairman President and Chief
(51) (September 25, Operating Officer;
1998) and Chief President, General Signal
Executive Electrical Group
Officer
(June 1, 1998)
Fredric K. Rosen Senior Vice President, Gerber
(61) President Technology, Inc.
(September 5,
1990)
Shawn M. Harrington Senior Vice President and Chief
(46) President Operating Officer, Gerber
(March 20, 1997) Coburn Optical, Inc.; Vice
President, Finance and
Operations, Gerber
Optical, Inc.
Charles M. Hevenor Senior Vice President, Gerber
(59) President Scientific Products, Inc.;
(May 1, 1998) Executive Vice President
and General Manager,
Gerber Scientific
Products, Inc.; Senior
Vice President, Software
and Systems, Gerber
Scientific Products, Inc.
Richard F. Treacy, Senior Vice None
Jr. (55) President,
General Counsel
and Secretary
(June 1, 1994)
<PAGE 66>
Gary K. Bennett Senior Vice Vice President; Treasurer
(49) President, and Corporate Controller
Finance
(August 19,
1996)
David J. Gerber Vice President, Director, New Business
(39) Business Development and Technology
Development and Strategy; Secretary and
Technology Attorney
Strategy
(March 19, 1998)
Bernard J. Demko Vice President, Vice President, Finance,
(42) Corporate Gerber Technology, Inc.
Controller
(June 1, 1998)
Becket Q. McNab Vice President, Director, Human Resources,
(41) Human Resources Nabisco International
(May 10, 1999)
ITEM 11. EXECUTIVE COMPENSATION.
The information required by Item 11 is incorporated herein
by reference to the information contained under the caption
"Executive Compensation and Transactions" in the Company's 2000
Annual Meeting Proxy Statement, which will be filed within 120
days of the Company's April 30, 2000 fiscal year-end.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL
OWNERS AND MANAGEMENT.
The information required by Item 12 is incorporated herein
by reference to the information contained under the captions
"Voting Rights and Principal Shareholders" and "Election of
Directors" in the Company's 2000 Annual Meeting Proxy Statement,
which will be filed within 120 days of the Company's April 30,
2000 fiscal year-end.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
The information required by Item 13 is incorporated herein
by reference to the information contained under the caption
"Certain Relationships and Related Transactions" in the Company's
2000 Annual Meeting Proxy Statement, which will be filed within
120 days of the Company's April 30, 2000 fiscal year-end.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND
REPORTS ON FORM 8-K.
<PAGE 67>
(a) The following documents are filed as part of this report:
Page
----
1. Financial Statements:
Consolidated Statements of Earnings for the years
ended April 30, 2000, 1999, and 1998 . . . . . . . 32
Consolidated Balance Sheets at April 30, 2000 and
1999 . . . . . . . . . . . . . . . . . . . . . . . 33-34
Consolidated Statements of Changes in Shareholders'
Equity for the years ended April 30, 2000, 1999,
and 1998 . . . . . . . . . . . . . . . . . . . . . 35-36
Consolidated Statements of Cash Flows for the
years ended April 30, 2000, 1999, and 1998 . . . . 37-38
Independent Auditors' Report . . . . . . . . . . . 40
Summary of Significant Accounting Policies and
Notes to Consolidated Financial Statements . . . . 41-64
2. Financial Statement Schedules:
All financial statement schedules are omitted because
they are not applicable or the required information is
shown in the consolidated financial statements or notes
thereto.
3. Exhibits
2.1 Stock Purchase Agreement among Gerber Optical,
Inc., Coburn Optical Industries, Inc. and The
Other Parties Hereto, dated as of February 27,
1998.
2.2 Recommended Cash Offers by Schroders on behalf of
Gerber Scientific, Inc. for Spandex PLC.
3.1 Restated Certificate of Incorporation of the
Company.
3.2 Restated By-laws of the Company.
4.1* Agreement pursuant to S-K Item 601(b) (4) (iii)
(A) to provide to the Commission, upon request,
copies of certain other instruments with respect
to long-term debt where the amount of securities
authorized under each such instrument does not
exceed 10 percent of the total assets of the
Registrant and its subsidiaries on a consolidated
basis.
10.1 Gerber Scientific, Inc. 1982 Employee Stock Plan.
10.2 Gerber Scientific, Inc. 1992 Employee Stock Plan,
As Amended.
10.3 Gerber Scientific, Inc. 1992 Non-Employee Director
Stock Option Plan.
<PAGE 68>
10.4 Gerber Scientific, Inc. and Participating
Subsidiaries Deferred Compensation Plan.
10.5 Gerber Scientific, Inc. and Participating
Subsidiaries Supplemental Pension Benefit Plan.
10.6 Employment Agreement dated as of January 29, 1997
between the Company and Michael J. Cheshire.
10.7 Amendment to the Employment Agreement dated as of
January 29, 1997 between the Company and Michael
J. Cheshire effective June 1, 1998.
10.8 Amendment to the Employment Agreement dated as of
January 29, 1997 between the Company and Michael
J. Cheshire effective June 29, 1999.
10.9 Consulting Agreement between the Company and David
J. Logan commencing August 10, 1999.
10.10 Gerber Scientific, Inc. 1999-2001 Annual Incentive
Bonus Plan.
10.11 $235,000,000 Credit Agreement Dated as of May 15,
1998 between Gerber Scientific, Inc. and the Banks
Listed Herein and Wachovia Bank, N.A.
10.12 Change in Control Agreement, dated July 14, 1999,
between the Company and Michael J. Cheshire.
10.13 Form of Change in Control Agreement, dated July
14, 1999, between the Company and its Senior Vice
Presidents including Fredric K. Rosen, Shawn M.
Harrington, Charles M. Hevenor, Gary K. Bennett,
and Richard F. Treacy, Jr.
10.14 Form of Change of Control Agreement, dated July
14, 1999, between each of the Company's three
domestic subsidiaries and their respective
Presidents including Fredric K. Rosen, Shawn M.
Harrington, and Charles M. Hevenor.
10.15 Change in Control Agreement, dated July 14, 1999,
between the Company and David J. Gerber.
10.16 Severance Policy for Senior Officers of Gerber
Scientific, Inc. and its domestic subsidiaries.
10.17 Gerber Scientific, Inc. 2000-2004 Executive Annual
Incentive Bonus Plan.
21.1* Subsidiaries of the Registrant.
<PAGE 69>
23.1* Consent of Independent Auditors.
27.1* Financial Data Schedule.
(b) No reports on Form 8-K were filed during the last quarter
of fiscal year 2000.
(c) See Item 14(a) 3. above.
(d) See Item 14(a) 2. above.
*Filed herewith.
<PAGE 70-71>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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)
BY: /s/ Gary K. Bennett
--------------------
Date: July 21, 2000 Gary K. Bennett
-------------------- Senior Vice President,
Finance (Principal
Financial and Accounting
Officer)
Pursuant to the requirements of the Securities Exchange Act of
1934, this report has been signed below by the following persons
on behalf of the Registrant and in the capacities and on the
dates indicated:
Date Signature Title
---- ----------- -----
July 21, 2000 /s/ Michael J. Cheshire Chairman, Director,
------------- ----------------------- President and Chief
(Michael J. Cheshire) Executive Officer
(Principal Executive
Officer)
July 21, 2000 /s/ George M. Gentile Director
------------- -----------------------
(George M. Gentile)
July 21, 2000 /s/ W. Jerome Vereen Director
------------- -----------------------
(W. Jerome Vereen)
July 21, 2000 /s/ A. Robert Towbin Director
------------- -----------------------
(A. Robert Towbin)
July 21, 2000 /s/ David J. Gerber Director, Vice President,
------------- ----------------------- Business Development and
(David J. Gerber) Technology Strategy
July 21, 2000 /s/ Edward E. Hood, Jr. Director
------------- -----------------------
(Edward E. Hood, Jr.)
July 21, 2000 /s/ David J. Logan Director
------------- -----------------------
(David J. Logan)
July 21, 2000 /s/ Donald P. Aiken Director
------------- -----------------------
(Donald P. Aiken)
July 21, 2000 /s/ Carole F. St. Mark Director
------------- -----------------------
(Carole F. St. Mark)
July 21, 2000 /s/ Gary K. Bennett Senior Vice President,
------------- ----------------------- Finance
(Gary K. Bennett) (Principal Financial and
Accounting Officer)
<PAGE 72-74>
EXHIBIT INDEX
Exhibit
Index
Number Exhibit Page
------- ------- ----
2.1 Stock Purchase Agreement among Gerber Optical,
Inc., Coburn Optical Industries, Inc. and The
Other Parties Hereto, dated as of February 27,
1998 (incorporated herein by reference to
Exhibit 2 to the Company's Current Report on
Form 8-K dated March 9, 1998).
2.2 Recommended Cash Offers by Schroders on behalf
of Gerber Scientific, Inc. for Spandex PLC
(incorporated herein by reference to Exhibit 2
to the Company's Current Report on Form 8-K
dated May 20, 1998).
3.1 Restated Certificate of Incorporation of the
Company (incorporated herein by reference to
Exhibit 3.1 to the Company's Quarterly Report
on Form 10-Q for the quarter ended January 31,
1999).
3.2 Restated By-laws of the Company (incorporated
herein by reference to Exhibit 3.2 to the
Company's Quarterly Report on Form 10-Q for the
quarter ended January 31, 1999).
4.1* Agreement pursuant to S-K Item 601(b) (4) (iii)
(A) to provide to the Commission, upon request,
copies of certain other instruments with
respect to long-term debt where the amount of
securities authorized under each such
instrument does not exceed 10 percent of the
total assets of the Registrant and its
subsidiaries on a consolidated basis.
10.1 Gerber Scientific, Inc. 1982 Employee Stock
Plan (incorporated herein by reference to the
Company's Registration Statement on Form S-8,
File No. 2-93695 and Post-Effective Amendment
No. 1 to the Registration Statement).
10.2 Gerber Scientific, Inc. 1992 Employee Stock
Plan, as Amended (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,
File No. 1-5865, and by reference to the
Company's Registration Statement on Form S-8,
File No. 1-5865).
10.3 Gerber Scientific, Inc. 1992 Non-Employee
Director Stock Option Plan (incorporated herein
by reference to Exhibit 10.2 to the Company's
Annual Report on Form 10-K for the year ended
April 30, 1999).
10.4 Gerber Scientific, Inc. and Participating
Subsidiaries Deferred Compensation Plan
(incorporated herein by reference to Exhibit
4.2 to the Company's Registration Statement on
Form S-8, File No. 333-42879).
10.5 Gerber Scientific, Inc. and Participating
Subsidiaries Supplemental Pension Benefit Plan
(incorporated herein by reference to Exhibit
10.5 to the Company's Annual Report on Form 10-
K for the year ended April 30, 1999).
10.6 Employment Agreement dated as of January 29,
1997 between the Company and Michael J.
Cheshire (incorporated herein by reference to
Exhibit 10 to the Company's quarterly report on
Form 10-Q for the quarter ended January 31,
1997).
10.7 Amendment to the Employment Agreement dated as
of January 29, 1997 between the Company and
Michael J. Cheshire effective June 1, 1998
(incorporated herein by reference to Exhibit
10.7 to the Company's Annual Report on Form 10-
K for the year ended April 30, 1999).
10.8 Amendment to the Employment Agreement dated as
of January 29, 1997 between the Company and
Michael J. Cheshire effective June 29, 1999
(incorporated herein by reference to Exhibit
10.8 to the Company's Annual Report on Form 10-
K for the year ended April 30, 1999).
10.9 Consulting Agreement between the Company and
David J. Logan commencing August 10, 1999
(incorporated herein by reference to Exhibit
10.6 to the Company's Quarterly Report on Form
10-Q for the quarter ended July 31, 1999).
10.10 Gerber Scientific, Inc. 1999-2001 Annual
Incentive Bonus Plan (incorporated herein by
reference to Appendix A to the Company's
Definitive Proxy Statement filed in connection
with the Annual Meeting of Shareholders held
September 25, 1998, File No. 1-5865).
10.11 $235,000,000 Credit Agreement Dated as of
May 15, 1998 between Gerber Scientific, Inc.
and the Banks Listed Herein and Wachovia Bank,
N.A. (incorporated herein by reference to
Exhibit 10.11 to the Company's Annual Report on
Form 10-K for the year ended April 30, 1999).
10.12 Change in Control Agreement, dated July 14,
1999, between the Company and Michael J.
Cheshire (incorporated herein by reference to
Exhibit 10.1 to the Company's quarterly report
on Form 10-Q for the quarter ended July 31,
1999).
10.13 Form of Change in Control Agreement, dated July
14, 1999, between the Company and its Senior
Vice Presidents including Fredric K. Rosen,
Shawn M. Harrington, Charles M. Hevenor, Gary
K. Bennett, and Richard F. Treacy, Jr.
(incorporated herein by reference to Exhibit
10.2 to the Company's quarterly report on Form
10-Q for the quarter ended July 31, 1999).
10.14 Form of Change of Control Agreement, dated July
14, 1999, between each of the Company's three
domestic subsidiaries and their respective
Presidents including Fredric K. Rosen, Shawn M.
Harrington, and Charles M. Hevenor
(incorporated herein by reference to Exhibit
10.3 to the Company's quarterly report on Form
10-Q for the quarter ended July 31, 1999).
10.15 Change in Control Agreement, dated July 14,
1999, between the Company and David J. Gerber
(incorporated herein by reference to Exhibit
10.4 to the Company's quarterly report on Form
10-Q for the quarter ended July 31, 1999).
10.16 Severance Policy for Senior Officers of Gerber
Scientific, Inc. and its domestic subsidiaries
(incorporated herein by reference to Exhibit
10.5 to the Company's quarterly report on Form
10-Q for the quarter ended July 31, 1999).
10.17 Gerber Scientific, Inc. 2000-2004 Executive
Annual Incentive Bonus Plan (incorporated
herein by reference to Appendix A to the
Company's Definitive Proxy Statement filed in
connection with the Annual Meeting of
Shareholders held September 15, 1999, File No.
1-5865).
21.1* Subsidiaries of the Registrant.
23.1* Consent of Independent Auditors.
27.1* Financial Data Schedule.
*Filed herewith.
