Business News

Gerber Scientific, Inc. Reports Improved Year-over-Year Fiscal 2011 First Quarter Results

Friday 27. August 2010 - Gerber Scientific, Inc. (NYSE:GRB) today reported revenue and earnings results for its fiscal 2011 first quarter ended July 31, 2010.

Summary of Results from Continuing Operations for FY 2011 First Quarter versus FY 2010 First Quarter

— Reported revenue increased 8.2% to $118.3 million from $109.4 million
driven by volume improvements and $0.6 million of license revenue.
Unfavorable foreign currency impacts decreased revenue by
approximately $3.4 million, or 3.2%;
— Gross profit was $36.0 million or 30.4% of sales versus $31.9 million
or 29.1% of sales. Gross profit and margin in the current quarter
benefitted from improved sales volume and sales mix and were moderated
by $0.7 million of unfavorable foreign currency impacts;
— Selling, general and administrative (SG&A) expenses were $28.3
million, or 23.9% of sales, compared with $23.8 million, or 21.8% of
sales. The increase in SG&A was primarily due to the restoration of
approximately $2.0 million in wage reductions and other temporary
savings related to labor costs that were in place during the prior
year first quarter. In addition, commissions and marketing expenses
increased by $1.4 million due principally to higher commissions, which
reflected the higher sales volume and an increase in sales from
channels with higher commission levels. Current quarter SG&A also
included an $0.8 million accrual for incentive compensation under the
Company’s 2011 incentive compensation plan and $0.5 million of
expenses from an acquisition completed after the fiscal 2010 first
quarter. These increases were partially offset by $0.6 million in
exchange rate fluctuations;
— Operating income was $2.8 million compared with $3.6 million. Current
quarter operating income was negatively impacted by $0.5 million of
restructuring and other expenses. On a currency adjusted basis,
operating income was $2.9 million;
— Income from continuing operations was $1.6 million, or $0.06 per
diluted share, and included the net benefit of $0.7 million
principally from unrealized foreign exchange gains related to cross
border loans, compared to $1.3 million, or $0.05 per diluted share,
which included a loss of $0.7 million principally from unrealized
foreign exchange related to cross border loans. Net income for the
current quarter was $1.5 million, or $0.06 per diluted share, compared
with $0.5 million, or $0.02 per diluted share;
— Net cash flows from operations, less capital expenditures, decreased
$6.1 million to $7.2 million, from $13.3 million in the prior year,
due principally to higher accounts receivable collections in the
fiscal 2010 first quarter;
— Total outstanding debt was reduced by $7.0 million to $38.0 million.



“We were very encouraged by the Company’s performance this past quarter and remain cautiously optimistic that the recovery is underway in our markets,” said Marc Giles, Gerber Scientific President and Chief Executive Officer. “Similar to last quarter, we posted solid improvement in our key financial metrics – on a currency neutral basis, revenue was up 11.4% and gross profit was up $4.8 million, reflecting increased demand across nearly every product category and operating segment. In addition to the top line improvement, our continued focus on manufacturing cost reductions and working capital management is paying off and, as a result, our currency neutral gross profit margin was up 100 basis points and we generated $7.2 million of net operating cash flow. This performance allowed us to reduce our outstanding debt by $7 million during the quarter – and brings our total debt reduction in the past 15 months, despite the challenging operating conditions, to $35.5 million – or down nearly 50%.”

Outlook and Guidance

“Looking ahead, we expect to continue to benefit from the improving market conditions we’ve experienced over the last two quarters, as well as from our operational initiatives,” said Mr. Giles. “Orders in our fiscal first quarter and order backlog at the end of the quarter remain strong. We are seeing significantly increased demand from several of our key geographic and market segments. At our Gerber Technology business unit, orders and sales are up significantly. Revenue from China, which is an important growth market for us, was up 62% at GT and 70% companywide from a year ago in the first quarter. Our new Yunique PLM software business continued to gain market momentum as we signed four new customers this past quarter, bringing total new customers to 11 since our November acquisition.”

“In our Sign Making and Specialty Graphics segment we are seeing noticeable growth in aftermarket product sales. While capital equipment financing remains an issue for many of our customers, we are seeing some slight improvement in new equipment demand, and market reception for our new Gerber CAT UV printer, which was introduced this past quarter, was positive. Our Ophthalmic Lens Processing segment is reporting significantly higher unit sales of lens finishing systems, finally indicating recovery in its markets, and is readying for the fall season when they will attend two important trade shows. Moreover, it is quite encouraging that Gerber Coburn’s retail customers are reporting positive comparable store sales after a difficult two years.”

Giles concluded, “While we are seeing continued improvement in the markets we serve, macroeconomic developments remain uncertain and, as a result, we will manage our expenses and investments carefully. We continue to pursue permanent structural cost reduction opportunities, and have identified and are executing a number of actions that will benefit us throughout the year, especially in the last half of fiscal 2011. This, combined with a continuation of the favorable growth trends exhibited thus far in the fiscal year, should allow us to deliver sustainable, year-over-year revenue and operating profit improvement excluding the effects of restructuring charges.”