Business News

Gerber Scientific, Inc. Reports Second Quarter Fiscal 2009 Results

Friday 05. December 2008 - Gerber Scientific, Inc. (NYSE:GRB) today reported revenue and earnings results for its fiscal second quarter ended October 31, 2008.

Second Quarter Performance Highlights
— Revenue of $153.8 million, down 4.3% from $160.7 million a year ago in
Q2 (down 3.4% on a constant currency basis);
— Q2 revenue included $2.4 million in revenue from acquired companies;
— Q2 results include severance charges of $1 million related to cost
reduction initiatives; earlier reported cost reduction actions
combined with further actions in October are expected to result in
fiscal year 2009 savings of $6 million, net of severance charges, and
annualized savings of approximately $10 million;
— SG&A expenses were down $2.2 million in Q2 from the same quarter a
year ago, or 6.4%, primarily due to the cost reductions initiated
early in the second quarter and the elimination of incentive
compensation expense for the quarter;
— Operating margin increased to 3.5% of sales in Q2 from 3.2% in the
second quarter of fiscal 2008, reflecting cost reductions and lower
R&D expense;
— Cash flows from operations, less capital expenditures, swings $13.6
million from the second quarter a year ago to positive cash flows of
$5.2 million in the second quarter;
— Q2 net income up $3.6 million compared with Q2 last year to $6.1
million; current quarter included a non-recurring tax benefit of $3.4
million, or $0.14 per diluted share, associated with an international
business restructuring that provided a tax benefit;
— Diluted EPS of $0.26 per share, compared with $0.11 per share for the
prior year second quarter;
— Virtek Vision acquisition completed in Q2 was immediately accretive to
consolidated results.



“Through decisive yet difficult actions, we have been able to reduce our spending to meet the challenging market conditions, while continuing to invest in areas where we see promising growth opportunities,” said Marc T. Giles, Gerber Scientific President and Chief Executive Officer. “Essentially, despite a 4 percent decline in revenue from last year’s second quarter, earnings per share were consistent with the comparable prior year period, after excluding the tax benefit from the reversal of certain international valuation reserves in the current year period. We made good progress in swiftly reducing SG&A expenditures to moderate the impact of lower sales volume, as evidenced by the 6 percent decline in SG&A.”

“We continued to see growing acceptance for our new wide-format UV inkjet printer, the Solara ion(TM), at the trade shows we attended and we shipped 117 units, including 20 units to internal distributors during the quarter. We also completed two acquisitions during the quarter that expand our technological capabilities and geographic reach — which will benefit us greatly as the economic environment improves. During the second quarter, an unfavorable sales mix of lower margin business, primarily the result of weak sales of our high margin software, resulted in a reduction in our gross margin. Fundamentally though, our business model and our balance sheet remain healthy and we believe we have taken the right actions to combat the weak market conditions.”

Outlook

Due to the uncertainty and turmoil in the global economy and financial markets, the Company has experienced delays in orders from its customers and overall weaker demand. As a result, the Company is revising its previously issued guidance. The Company now expects fiscal 2009 sales will be in the range of $600 to $620 million, compared with the previous estimate in the range of $660 to $690 million and fiscal 2009 diluted earnings per share in the range of $0.50 to $0.65, compared with the previous estimate in the range of $0.72 to $0.82 per diluted share.

“We will continue to prudently manage all aspects of our business to weather the current economic downturn,” said Mr. Giles. “We are reviewing and identifying further opportunities to reduce both our spending and cost structure and expect to complete headcount reductions in the third quarter that will drive down spending by an additional $2 to $2.5 million for the balance of fiscal 2009, net of severance costs. At the same time, we are sensitive to making sure that we are ready to move when our markets rebound. We are confident of our long term growth prospects; however, we are cautious in our near term view given the uncertainty in the economy overall and in our markets specifically. With a solid portfolio of new products and key investments in the areas where we see the best growth opportunities, we have positioned the Company to rebound quickly when the recovery begins.”