Business News

Gerber Scientific, Inc. Reports Fiscal 2010 Second Quarter Results

Tuesday 08. December 2009 - Gerber Scientific, Inc. (NYSE:GRB) today reported revenue and earnings results for its fiscal 2010 second quarter ended October 31, 2009. In accordance with U.S. generally accepted accounting principles, FOBA Technology + Services GmbH ("FOBA"), ND Graphics (both sold in September 2009) and Spandex Poland (closed in October 2009) have been reflected as discontinued operations for all periods reported.

Summary of Results from Continuing Operations for FY 2010 Second Quarter versus FY 2009 Second Quarter

— Reported revenue declined 15.7% to $120.2 million from $142.6 million.
Core business was down 17.7% including the effects of currency
fluctuations, which increased revenue by $1.1 million, or 0.7%, while
acquisitions completed after the fiscal 2009 first quarter added
incremental revenue of $2.5 million, or 1.8%;
— Gross profit was $35.2 million or 29.3% of sales versus $41.4 million
or 29.0% of sales. Gross profit and margin reflected the adverse
impact of significantly lower sales volume and the resulting impact of
lower manufacturing cost absorption, as well as a less favorable sales
mix, partially offset by cost reductions. In addition, gross profit
and margin in the current quarter benefited from $1.3 million of
patent license revenue and the favorable contribution from
acquisitions;
— Selling, general and administrative (SG&A) expenses declined $2.3
million to $27.8 million, or 23.1% of sales, compared with $30.2
million, or 21.2% of sales, due to expense reduction initiatives. R&D
spending was down $1.2 million to $4.5 million;
— Operating income was $2.9 million, or a 2.4% operating margin,
compared with $5.6 million of operating income and an operating margin
of 3.9%, reflecting the impact of significantly lower gross profit
moderated by cost savings measures;
— Income from continuing operations was $1.9 million or $0.08 per
diluted share, compared with $6.4 million or $0.26 per diluted share.
Net income was $0.5 million or $0.02 per diluted share, compared with
$6.1 million or $0.25 per diluted share. Net income in the current and
prior year second quarters included non-recurring tax benefits of $0.7
million, or $0.03 per diluted share, and $3.4 million, or $0.14 per
diluted share, respectively;
— Net cash flows from operations, less capital expenditures, totaled
$0.4 million compared with $5.2 million, due principally to the lower
net income in the current quarter;
— Total outstanding debt was reduced by $9.5 million in the current
quarter. Total debt has been reduced by $22.5 million since the
Company’s April 30, 2009 fiscal year end.



“Despite weak market conditions and difficult year-over-year comparisons, revenue from continuing operations on a sequential basis appears to have stabilized, which gives us further conviction that our markets have bottomed,” said Marc Giles, Gerber Scientific President and Chief Executive Officer. “Equally important, order activity strengthened in the quarter and was up roughly ten percent from the fiscal 2009 fourth quarter with gains across all business segments. We also continued to tightly manage controllable expenses, which resulted in an eight percent, or $2.3 million, decline in SG&A expenses from a year ago – which was on top of a $2.3 million decline last year in the second quarter, when we initiated our aggressive cost cutting actions.”

Mr. Giles added, “We continued to make important progress in the execution of our business strategy by completing the sales of our non-core FOBA and ND Graphics business units, which generated net proceeds of approximately $13.0 million and allowed us to reduce our debt by an additional $9.5 million in the quarter. Year to date, we’ve reduced outstanding debt by $22.5 million and we also successfully amended our credit agreement in November to further increase our flexibility under the facility. As a result of the increased flexibility, we were able to complete the acquisition of Yunique Solutions Inc. last week, a product lifecycle management (PLM) software solutions developer that expands and advances Gerber’s technology platform and capabilities in the fashion industry. Plus, we were able to cease the non-profitable aftermarket operations of a small facility in Poland during the quarter and are continuing to aggressively seek opportunities to lower our cost structure even further.”

Outlook and Guidance

“With the improved quote and order activity during the quarter, we are more optimistic that we are beginning to see a rebound in our markets,” said Mr. Giles. “We’ve seen several encouraging signs in recent weeks including increased quote and order activity overall for systems and aftermarket products, and especially from China, which is an important growth market for us. Several of our business units have also reported increased attendance and a higher level of interest for our new products at recent trade shows. However, we will remain cautious in the near term, especially due to the seasonality of our business, and will continue to tightly manage expenses and limit R&D to sustaining projects until we are more confident that the recovery is fully underway and sustainable. However, when the economy and our markets rebound, we are confident that we will be able to leverage our improved cost structure to deliver higher earnings.”