Business News

Gerber Scientific, Inc. Reports Third Quarter Fiscal 2009 Results

Friday 06. March 2009 - Company Also Completes Amendment to Senior Credit Agreement

Gerber Scientific, Inc. (NYSE:GRB) today reported revenue and earnings results for its fiscal third quarter ended January 31, 2009.

Third Quarter Performance Highlights
— Revenues fell 21.0% to $120.1 million from $152.0 million in the
year-ago quarter. Core business was down 28.9% including the effects
of currency fluctuations which decreased revenue 7.7%, while
acquisitions completed in this current fiscal year increased reported
revenues by 7.9%;
— Operating loss and margin were essentially breakeven compared with
$6.3 million of operating income and a margin of 4.1% in the year-ago
quarter. Operating results in the current quarter reflect the impact
from lower sales volume, partially offset by the benefit of cost
reductions and the additional operating profit from the recently
completed acquisitions. Current quarter operating results also
included severance charges of $1.3 million related to cost reduction
initiatives. Year-to-date workforce reduction actions are expected to
yield $10.9 million in savings for the fiscal year 2009, excluding
$2.5 million of severance charges associated with the actions, or
$16.8 million on an annualized basis.
— Net income per diluted share fell to a net loss of $0.09 per share
compared with net income of $0.13 per diluted share in the year-ago
quarter. Third quarter results included a non-cash charge of $2.3
million, or $0.06 per diluted share, for an other-than-temporary
impairment of investments held in a rabbi trust for a supplemental
non-qualified pension plan. This charge was taken in conjunction with
the Company’s impairment testing as required under SFAS No. 115, and
resulted from the impact of the substantial deterioration in the U.S.
financial markets in the fourth quarter of calendar year 2008;
— Cash flows from operations, less capital expenditures, totaled $1.8
million in the current quarter versus a net cash usage, after capital
expenditures, of $2.4 million in the year-ago third quarter.



“We saw a continued, significant slowdown in sales due to the pervasively weak global economic conditions,” said Marc Giles, Gerber Scientific President and Chief Executive Officer. “Our team, however, has responded swiftly to the downturn and we continued to make solid progress in the quarter to reduce expenses to weather the impact of lower sales volume. Despite a 21 percent sales decline, we posted increases in both our gross profit margin and operating cash flow as a result of strong contributions from our recent acquisitions, realized benefits from cost savings initiatives and effective working capital management.”

“Notwithstanding the weak overall demand, we were pleased to see continued interest in our new wide-format UV inkjet printer, the Solara ion(TM), with shipments of 53 units in the quarter, as well as several orders for new products in our ophthalmic lens business. Equally as important, our recent acquisitions are producing results better than originally anticipated.”

Credit Agreement Amendment

The Company also reported that it had successfully completed an amendment to its revolving credit facility on March 4, 2009 with several banks and other financial institutions and lenders specified in the agreement and RBS Citizens, N.A., in its capacity as administrative agent for the lenders. The amendment, which the Company initiated, provides additional flexibility by, among other things, modifying several financial covenants to make them generally less restrictive. In addition, the Company requested a reduction in the size of the facility from $125 million to $100 million to minimize the commitment fees on unneeded borrowing capacity.

The Company agreed to a reduction of one year in the term of the facility and an increase in the interest rates and commitment fees applicable to borrowings. The Company expects to incur between $1.3 million and $1.7 million of financing costs in connection with the credit agreement amendment, including professional and advisory fees, which will be capitalized and amortized over the remaining life of the agreement through January 31, 2012.

“We are pleased to have successfully completed this amendment during such difficult economic times,” said Marc Giles. “While in compliance with our credit facility covenants at quarter end, we felt it was prudent to increase our financial flexibility to continue to navigate the Company through the global recession — particularly during our fiscal 2009 fourth quarter and fiscal 2010, but also in the event of a protracted downturn.” Mike Elia, Gerber Scientific Executive Vice President and Chief Financial Officer added, “As we stated before, we have no near term plans for further acquisitions; thus, we are comfortable reducing the size of our facility and believe the current availability under the amended agreement, plus our operating cash flow, will be sufficient to meet our foreseeable cash requirements.”

Outlook

The Company continues to expect delays in orders from its customers and overall weaker demand due to the global recession and customers limited access to credit. As a result, the Company is revising its previously issued guidance for fiscal year 2009 to sales in the range of $550 to $570 million, down from its previous guidance of $600 to $620 million, and diluted earnings per share in the range of $0.20 to $0.30, also down from its previous guidance of $0.50 to $0.65.

Mr. Giles further commented, “With the lack of visibility and the reduced availability of credit our customers are experiencing, they are, like most businesses, delaying orders and limiting capital expenditures, as evidenced by our weak order backlog going into the fourth quarter. While we are heading into a seasonally stronger volume quarter and expect to fully realize the benefit of recent cost cutting initiatives, current indicators lead us to believe that our top line will not show substantial improvement in the fourth quarter. As such, we will diligently monitor and manage our costs and working capital and continue to make the necessary decisions that will allow us to withstand this protracted downturn, yet not diminish our ability to respond when our end markets improve. The fundamentals of our business and our long term outlook remain strong. As a technology innovator and leader in our respective markets, we should be one of the first to benefit when the economy rebounds.”