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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, 1999 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 New York Stock Exchange
share
At June 30, 1999, 22,157,568 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 $429,354,000.
Excluded from this amount is voting stock having an aggregate market value
of approximately $59,497,000 (representing 12.2% 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.______.
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 / /.
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) 1999 Annual Meeting Proxy Statement (Parts I, III, and IV)
GERBER SCIENTIFIC, INC.
Index to Annual Report
on Form 10-K
Year Ended April 30, 1999
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 33
Item 8. Financial Statements and Supplementary Data 34
Item 9. Changes in and Disagreements with Auditors
on Accounting and Financial Disclosure 66
PART III
Item 10. Directors and Executive Officers of the
Registrant 66
Item 11. Executive Compensation 68
Item 12. Security Ownership of Certain Beneficial
Owners and Management 68
Item 13. Certain Relationships and Related
Transactions 68
PART IV
Item 14. Exhibits, Financial Statement Schedules, and
Reports on Form 8-K 68
Signatures 71
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 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 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, 1999, the Company had approximately 2,700
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 five acquisitions, which it
believes increase its potential for additional growth. Last
year, the Company also 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.
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 million. In addition, Spandex had
approximately $11.6 million 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 million in cash plus contingent future royalties. 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 million. 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 $7.8
million 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.
On September 1, 1994, GT acquired the outstanding stock of
Microdynamics, Inc., (Microdynamics) of Dallas, Texas and
subsequently merged that company into GT. The Microdynamics
purchase price was approximately $8.5 million. Microdynamics was
a leading supplier of computer-aided design, graphic design, and
product management systems for the apparel, footwear, and other
sewn goods industries. GT has continued to develop, manufacture,
market, and support the Microdynamics product lines.
On March 1, 1994, GT purchased the business and certain
assets and liabilities of Niebuhr Maskinfabrik A/S (Niebuhr) of
Ikast, Denmark, for a total cost of approximately $1 million.
Niebuhr manufactures and markets computer-automated fabric
spreading equipment used in the apparel and related industries.
The acquisition was accomplished through a newly formed Danish
subsidiary of GT known as Gerber Technology A/S, which has
continued to manufacture, market, and support Niebuhr equipment.
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 59 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,
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 and Canada.
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.
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. 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 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. GC also provides maintenance services for a
substantial portion of the systems it produces and sells.
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 opthalmologists,
optometrists, and opticians. GC products are sold through
its direct worldwide distribution network.
The Coburn acquisition in February 1998 broadened the
Company's product markets to include the 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,
1999, 1998, and 1997 were $31,468,000, $31,810,000, and
$30,415,000, respectively. The Company's sign making and
specialty graphics operating segment also received and expended
approximately $56,000, $213,000, and $736,000 for the years ended
April 30, 1999, 1998, and 1997, 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, Australia, New
Zealand, Singapore, 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 Belgium, Germany,
Holland, Italy, France, Portugal, the United Kingdom, Sweden,
Canada, Mexico, Australia, New Zealand, Singapore, Hungary,
Slovakia, Spain, Switzerland, Austria, the Czech Republic, and
China. 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 sheet metal from
numerous suppliers. Many of these materials are 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 business or 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 the Company's
aftermarket supplies for its sign making and specialty graphics
operating segment can be affected by the weather in the winter
months. These aftermarket supplies are used primarily 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.
CUSTOMERS
The Company's customers are primarily end-users, except in
the sign making and graphic arts segment, for which the Company's
customers are predominantly independent distributors. Spandex,
an acquisition that is included in this segment, sells directly
to end users. No single customer accounted for 10 percent or
more of the Company's consolidated revenue in 1999, 1998, or
1997. 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 business or segments thereof.
BACKLOG
The Company's backlog of orders considered firm was
approximately $50,800,000 at April 30, 1999, compared with
$51,700,000 at April 30, 1998. Substantially all the backlog at
April 30, 1999, is scheduled for delivery in fiscal 2000. The
Company records as backlog firm orders from customers for
delivery at specified dates. Historically, the Company has
experienced few cancellations of orders.
The Company's backlog for the years ended April 30, 1999 and
1998 were attributed to the Company's reportable segments as
follows (in thousands):
Reportable Segment: 4/30/99 4/30/98
---------------------------------- ------- -------
Sign Making and Specialty Graphics $ 6,100 $ 6,200
Apparel and Flexible Materials 41,400 38,800
Ophthalmic Lens Processing 3,300 6,700
------- -------
Total $50,800 $51,700
======= =======
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, holding several key related patents. 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, and
selling/distribution strength of the Company.
The Company believes that it is the largest worldwide
supplier to the apparel and flexible materials industries of
computer-controlled limp 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 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, three-axis lens generating systems, and three-axis lens
edging 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 is subject to the usual risks involved in
international sales, which include unfavorable economic or
political conditions in foreign countries, restrictive trade
policies imposed by foreign governments, restrictions on the
transfer of funds, and foreign currency exchange rate
fluctuations. 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.
To hedge the effect of unfavorable foreign currency
fluctuations, the Company was party to approximately $10 million
in forward exchange contracts at April 30, 1999 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.
Management currently 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 potential exposure to the Company
arising from the need to modify computer systems for the
transition to the Year 2000, and the steps being taken by the
Company to address these matters, is included in Management's
Discussion and Analysis of Financial Condition and Results of
Operations under the heading "Year 2000" on page 30 of this Form
10-K.
A discussion of the potential 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 31 of this Form 10-K.
Cautionary Note Concerning Factors That May Affect Future Results
- -----------------------------------------------------------------
This report on Form 10-K 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:
- - 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 anticipated uses of cash,
- - the scope or nature of acquisition activity,
- - prospective product developments,
- - 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 year 1999 includes important information as to
risk factors in the "Business" section under the headings
"Operating Segment" 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 144,000
Manufacturing/office (O) Lancaster, 55,000
England
Manufacturing/office (L) Ikast, Denmark 64,000
Manufacturing/office (L) Marblehead, MA 32,000
Service/office (O) Richardson, TX 68,000
Warehouses/sales and
service offices (O) Bristol, England 120,000
Warehouses/sales and
service offices (O) Various 94,000
Warehouses/sales and
service offices (L) Various 414,000
- -----------------------
(O) Company-owned
(L) Leased
Management believes that the Company's present 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 $3,967,000 in the fiscal year ended
April 30, 1999.
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, 1999, the aggregate rental under
such leases was $2,233,000. 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 49
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, 1999.
EXECUTIVE OFFICERS OF THE REGISTRANT.
Included in Part III, Item 10, "Directors and Executive
Officers of the Registrant," appearing on page 66 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
1,430 at April 30, 1999. The other information required by
Item 5 is included in Part II, Item 8, Note 20, "Quarterly
Results (Unaudited)" of the "Notes to Consolidated Financial
Statements" appearing on page 65 of this Form 10-K.
ITEM 6. SELECTED FINANCIAL DATA.
For years ended April 30
----------------------------------------------
In thousands except
per share amounts 1999 1998 1997 1996 1995
- ------------------- -------- -------- -------- -------- --------
Sales and service
revenue $594,618 $430,480 $380,917 $359,120 $322,708
Net earnings before
non-recurring
special charge 1 29,580 23,685 16,009 19,868 18,111
Per common share
Basic 1.31 1.04 .69 .85 .76
Diluted 1.29 1.02 .69 .84 .76
Net earnings 2-3 29,580 7,385 16,009 19,868 18,111
Per common share
Basic 1.31 .32 .69 .85 .76
Diluted 1.29 .32 .69 .84 .76
Cash dividends per
common share .32 .32 .32 .32 .30
Total assets 542,260 338,767 325,215 312,988 324,428
Long-term debt 173,338 6,953 7,145 7,338 7,531
Shareholders' equity $243,331 $230,914 $248,021 $239,298 $237,302
Weighted average
common shares
outstanding
Basic 22,590 22,800 23,250 23,463 23,796
Diluted 23,011 23,331 23,365 23,689 23,950
See "Summary of Significant Policies and Notes to Consolidated Financial
Statements" appearing on pages 43 through 66 of the Company's fiscal year
1999 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.
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.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS.
For years ended April 30, 1999, 1998, and 1997
- ------------------------------------------------------------------
RESULTS OF OPERATIONS
In May 1998, the Company acquired the outstanding capital
stock of Spandex PLC (Spandex). Accordingly, Spandex was
included in the Company's consolidated balance sheet at April 30,
1999 and in the Company's results from operations and cash flows
for the twelve-month period ended April 30, 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 sheet at April 30, 1999 and
1998 and in the Company's results from operations and cash flows
for the twelve-month period ended April 30, 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 year 1999 consolidated financial statements
do not include any Gerber Systems activity.
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.
The increases reflected higher revenue from 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 last year'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 this year compared with last
year. The decrease in revenue in the apparel and flexible
materials operating segment in the year was caused predominately
by lower sales of the Company's automated cutting equipment in
certain international markets (particularly Turkey, Southeast
Asia, 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 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 resize the
optical lens manufacturing business to account for the lower
volume, which included reducing employee headcount and other
initiatives. These actions are intended to eliminate
approximately $8 million from costs and expenses in the next
fiscal year.
Combined sales and service revenue for the sign making and
specialty graphics operating segment was slightly higher this
year compared with last year. Sales of the Company's
aftermarket supplies increased in 1999 compared with 1998,
especially in the sign making and specialty graphics segment.
Demand for consumables for the GERBER EDGE, a digital imaging
system for color printing directly on sign vinyl, was the
principal factor.
Service revenue increased $8.6 million (21.3 percent) in
1999, after adjusting for the elimination of the service revenue
from the imaging and inspection systems product class. This
increase was caused principally by growth in the Company's
service operations, 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 - Spandex's sales to Canada and
Europe added $12.7 million and $130.1 million, respectively, and
Coburn's sales to North America, Latin America, and Europe added
$30.1 million, $3.9 million, and $8.8 million, respectively.
After adjusting for the business acquisitions and divestiture,
sales to European and Latin American customers were $9.5 million
and $9.3 million higher, respectively, 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 international markets,
including Southeast Asia and Turkey. In 1999, sales to Pacific
and Far East customers were $11.5 million lower than 1998, and
sales to Middle Eastern customers were $6.9 million lower than
1998.
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 [registered
trademark], 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 that provides a
powerful tool for developing product specifications, controlling
and managing data, and documenting the product development
process, production, and quality requirements.
Product sales also increased in 1998 from sales of the
Company's lens edge finishing systems to both the optical retail
chains and the wholesale optical laboratories. The Company
benefited from higher demand in these markets for its complete
lab system. Another developing market was independent eyewear
practitioners (ophthalmologists, optometrists, and opticians).
Sales to this market, as well as sales to the wholesale optical
laboratories, were 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. GERBER EDGE consumables
were the principal cause.
The revenue decrease in the imaging and inspection systems
product class in 1998 was caused by lower shipments of computer-
to-plate imaging systems for the commercial printing industry and
the inclusion of less than a full year's results (eleven months)
in the Company's consolidated results of operations. This was
partially offset by higher shipments of OEM-supplied equipment
for the electronics industry.
On a geographic basis, sales gains were realized in 1998 in
each of the Company's major geographic markets - U.S., Europe,
Far East, and other international. Most notably, export sales to
European customers improved significantly, up $7.7 million from
the previous year to $76.1 million. This increase was the
continuation of a stronger shipment trend that began in the
second half of fiscal 1997. In total, export sales from the
United States in 1998 were $165.6 million, 11.1 percent higher
than the prior year, and represented 38.5 percent of total
revenue compared with 39 percent in both 1997 and 1996.
Revenue - 1997 vs. 1996
- -----------------------
Consolidated revenue in 1997 was $380.9 million, an increase
of $21.8 million or 6.1 percent from $359.1 million in 1996. The
increase in 1997 reflected higher product sales and a slight
increase in service revenue. Each of the Company's operating
segments experienced sales growth in 1997, except for the
Company's apparel and flexible materials operating segment. The
decrease in this segment was caused by relative weakness in
demand from the apparel industry for fabric cutting systems,
which occurred in the first half of the 1997 fiscal year.
The largest increase in product sales occurred in imaging
systems as the Company attempted to penetrate the commercial
printing industry with computer-to-plate digital imaging systems.
Increased sales of the Company's sign making systems and
aftermarket supplies also contributed to the 1997 sales increase.
The sales increase was fueled by the introduction of two new high-
speed sign making routers and strong demand for aftermarket
supplies, especially consumables for the GERBER EDGE.
Product sales gains were also realized in 1997 from sales of
the Company's optical lens manufacturing systems to both the
optical retail chains and the wholesale optical laboratories. In
particular, the opening of new retail stores, as well as the
conversion of existing stores, led to higher demand for the
Company's complete lab system. The Company's initial strategic
distribution alliance with a major, vertically integrated lens
manufacturer contributed to higher sales to the wholesale optical
laboratories.
In the second half of 1997, the Company experienced stronger
demand, especially from the U.S. and certain international
markets, for its products in the apparel and flexible materials
operating segment. Also contributing were higher sales of
related software products, including a product data management
system.
Slightly affecting 1997 comparability was the Company's
acquisition of Cutting Edge, Inc. (Cutting Edge) in February
1997, which added $2.3 million to 1997 fourth quarter and annual
revenue. Cutting Edge manufactures high-performance single layer
fabric cutting systems for the industrial fabric, automotive,
furniture, apparel, and composite materials industries.
Geographically, sales gains were realized in 1997 in each of
the Company's major markets. Export sales to the Far East
improved significantly, up $5.9 million from the previous year to
$42.4 million, as all of the Company's product classes had
increased sales in that market in 1997. Export sales to Latin
America were also up. The increase in Latin American exports was
largely a result of increased demand for the Company's computer-
controlled pre-production, design, manufacturing, spreading and
unit production systems for the apparel and flexible materials
industries. In total, export sales from the United States in 1997
rose $10.4 million, or 7.5 percent, from the previous year and
represented 39 percent of total revenue.
Gross Margins
- -------------
The overall gross profit margin in 1999 was 41.3 percent,
which was lower than the prior year 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 fiscal year 1999. As a distributor, Spandex
historically had gross profit margins substantially lower than
the Company's. However, Spandex's 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.
Service gross profit margins were higher in 1999 than in the
prior year. 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. The gross profit margin on product sales
was 45.9 percent in 1998 compared with 45.2 percent in 1997.
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 higher
sales of OEM-supplied equipment for the electronics industry and
also by price discounting on computer-to-plate imaging systems
for the commercial printing market. Service gross profit margins
decreased in 1998 to 36.4 percent from 37 percent in 1997. The
reduction in service margins was caused by costs in 1998
associated with development of an applications training revenue
stream from the computer-to-plate systems business.
The overall gross profit margin in 1997 was 44.2 percent
compared with 44.8 percent in 1996. This reflected lower margins
on product sales partially offset by higher service margins. The
gross profit margin on product sales was 45.2 percent in 1997
compared with 46.3 percent in 1996. Contributing to the lower
product gross margin in 1997 were higher sales of OEM-supplied
equipment, particularly for the electronics industry, and price
discounting on newly introduced computer-to-plate digital imaging
systems in support of efforts to penetrate the commercial
printing market. Product gross margins were also pressured by
price discounting on sales of cutting and marker-making systems
to the apparel industry, especially in the European market.
Service gross profit margins increased in 1997 to 37 percent from
34.2 percent in 1996. The improvement in service gross profit
margins resulted, in part, from the utilization of service
personnel on a product retrofit program.
Selling, General & Administrative Expenses
- -------------------------------------------
Selling, general and administrative (S, G & A) expenses were
$158.9 million (26.7 percent of revenue) in 1999, which compared
with $129.8 million (30.2 percent of revenue) in 1998 and $120.1
million (31.5 percent of revenue) in 1997. The Spandex and Coburn
acquisitions were the principal reasons for the dollar increase
in 1999 over 1998. The amortization of the Spandex and Coburn
acquisition goodwill ($5.6 million and $1.9 million,
respectively) was also a factor contributing to the overall
dollar increase in 1999. The elimination of the S, G & A
associated with the imaging and inspection systems product class
was an offsetting factor.
The year-to-year S, G & A expense increases in 1998 and 1997
related primarily to the higher sales volumes. Significant
marketing expenses associated with the introduction of computer-
to-plate imaging systems for the commercial printing and graphic
arts industries affected 1998 and 1997 S, G & A expenses.
Increased expenses in 1998 were also caused by higher marketing
expenses associated with major trade shows, the inclusion of the
first full year of Cutting Edge expenses, and the inclusion of
two months of Coburn expenses. Partially offsetting these
increases was the effect of a cost reduction program implemented
at the Company's Gerber Technology subsidiary.
Research and Development 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 1999, the Company continued to commit significant
resources to research and the development of new products,
although the ratio of research and development (R&D) expenses to
revenue declined significantly. R&D expense of $31.5 million in
1999 was roughly the same as the prior year. However, the ratio
of R&D to revenue declined to 5.3 percent this year from 7.4
percent last year. The lower current year 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. Management
anticipates that the lower ratio of R&D expense to revenue
experienced in 1999 will continue. In addition to the
incremental expenses of Coburn, R&D dollar 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.
R&D expenses increased in 1998 although they represented 7.4
percent of revenue in 1998 compared with 8 percent of revenue in
1997. The dollar increase related to increased development of
new computer-controlled sign making and graphic arts systems
($1.7 million), ophthalmic lens manufacturing systems ($1.2
million), and the inclusion of the expenses of Cutting Edge ($0.8
million). Partially offsetting these were decreased development
expenses for interactive imaging and inspection systems ($2.2
million). R&D expenses in 1997 were higher than in 1996 due
largely to the increased development of new interactive imaging
and inspection systems ($1.9 million). Also contributing to
higher R&D levels in 1997 were the development of new sign making
plotters ($1.4 million) and new Windows-based software products
for the Company's optical lens manufacturing systems ($1
million).
Non-Recurring Special Charge
- ----------------------------
In the fourth quarter of fiscal year 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 plus contingent future
royalties. The special charge reflected the write-down of
inventory, accounts receivable, and other items. The special
charge amounted to approximately $16.3 million after taxes or
$.70 per share on a diluted basis.
Interest Expense
- ----------------
In 1999, interest expense increased significantly to $11.5
million from $0.7 million in 1998. This increase was caused by
significantly higher debt balances that financed the acquisition
of Spandex. Most of these borrowings were against a $235 million
multi-currency revolving credit facility. The interest rate on
these borrowings is variable and 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 April 1999, the Company entered into an interest rate
swap contract with an initial notional amount of $62 million that
decreases 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-based
interest payments due on the U.S. dollar denominated portion of
the Company's borrowings. The interest differential paid or
received under this contract will be recognized as an adjustment
to the effective yield of the underlying borrowing hedged. The
combination of the swap and the credit facility pricing results
in a net cash outflow equal to an interest rate range of 5.7
percent to 6.1 percent, depending on the margin on the credit
facility. 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 1999,
1998, and 1997.
In February 1998, the Company borrowed $32.5 million to
finance the acquisition of Coburn. That debt was fully repaid by
April 30, 1998 largely with the proceeds from the Gerber Systems
sale. With the exception of that borrowing, debt levels changed
only slightly in 1998 and 1997, and the changes in the Company's
interest expense reflected primarily the movements in short-term
interest rates.
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.
Other income in 1997 included a gain of approximately $1
million from life insurance benefits the Company received upon
the death of Mr. H. Joseph Gerber, the Company's founder and
former president. Exclusive of these amounts, other income in
1999, 1998, and 1997 came primarily from interest on investments
and royalty income.
Taxes
- -----
The statutory U.S. Federal income tax rate was 35 percent
for 1999, 1998, and 1997 while the effective income tax provision
rates were 35.8 percent, 25.3 percent, and 27.9 percent,
respectively. Offsetting the statutory U.S. Federal income tax
rate were research and development tax credits (reinstated
through legislation in 1997), tax-exempt interest income from the
Company's municipal bond investments (in years 1998 and 1997),
and the tax savings derived from the Company's Foreign Sales
Corporation (FSC). Each of these items impacted the effective
income tax rate to a greater degree in 1998 because of the
reduction in pre-tax income from the non-recurring special
charge.
The higher tax rate in 1999 was 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 year-to-year increase in the provision rate also
reflected the higher marginal income tax rates associated with
higher levels of pre-tax earnings in 1999 and the liquidation of
the Company's investments in tax-exempt municipal securities. The
tax-exempt life insurance benefit noted above reduced the
effective tax rate in 1997.
Net Earnings
- ------------
Net earnings were $29.6 million, or $1.29 on a diluted per
share basis for fiscal 1999. In fiscal 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 1997, the FASB issued two new Statements, SFAS No.
130, "Reporting Comprehensive Income" and SFAS No. 131,
"Disclosures About Segments of an Enterprise and Related
Information." These Statements have been implemented by the
Company and are disclosed in the accompanying financial
statements.
In April 1998, the FASB issued SFAS No. 132, "Employers'
Disclosures About Pensions and Other Postretirement Benefits,"
which is effective for years beginning after December 15, 1997.
The Statement revises the required disclosures for employee
benefit plans, but it does not change the measurement or
recognition of such plans. This Statement has also been
implemented by the Company and is disclosed in the accompanying
financial statements.
In June 1998, the FASB issued Statement No. 133, "Accounting
for Derivative Instruments and Hedging Activities." The Company
expects to adopt the new Statement for the fiscal year beginning
May 1, 2000, which is in accordance with the effective date. The
Statement will require the Company to recognize all derivatives
on the balance sheet at fair value. The Company does not
anticipate that the adoption of this Statement will have a
material impact on its results of operations or financial
position.
FINANCIAL CONDITION
Liquidity
- ---------
The Company's short-term liquidity at April 30, 1999 was
substantially the same as the preceding year end and adequate for
the Company's requirements. Cash and short-term cash investments
totaled $26.5 million at April 30, 1999 compared with $27 million
at April 30, 1998. Working capital levels were also adequate to
meet the operating requirements of the Company. Net working
capital was $109.7 million at April 30, 1999, compared with $94.8
million at April 30, 1998. The $14.9 million increase in net
working capital in 1999 was largely attributable to the Spandex
acquisition. The working capital ratio at April 30, 1999 was 1.9
to 1 compared with 2.0 to 1 at April 30, 1998.
Cash Flows
- ----------
Cash provided by operations is the Company's primary source
of funds to finance operating needs and capital expenditures.
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. The
lower inventory balances were a result of management's on-going
program to improve inventory turnover. 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 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 Company's common stock repurchase program. In November
1998, the Board of Directors authorized a new 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, 1999, the Company repurchased 868,400
shares, of which 737,200 shares were under the new authorization
and 131,200 were under an earlier authorization. The cost of
these shares was $16.8 million, or an average cost of $19.34 per
share. Under the authorization, management of the Company has
discretion to purchase stock as market conditions warrant.
Other non-operating uses of cash in 1999 were repayments of
long-term debt of $47.2 million, additions to property, plant,
and equipment of $22.6 million, and payment of dividends of $7.2
million. The Company anticipates that capital expenditures for
fiscal 2000 will be in the range of $25 million and expects to
fund these with cash on hand and cash from operations.
The Company's total debt at April 30, 1999 was $173.5
million, which was up substantially from the April 30, 1998
balance of $7.5 million and caused by 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 acquisition of Spandex. Net
debt (total debt less cash and investments) 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.
The cash generated by earnings and by the non-cash charges
against earnings for depreciation, amortization, and the special
charge recorded 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 was related primarily to improved management of
vendor payment 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.
Operating activities provided $8.4 million in cash in 1997.
The cash generated by earnings and by depreciation and
amortization was offset substantially by growth in accounts
receivable. The growth in receivables related to a significantly
higher volume of business in the 1997 fourth quarter. Also
affecting the Company's receivables in 1997 were extended payment
terms given on sales of computer-to-plate digital imaging
systems. Significant non-operating uses of cash were $7.4 million
for the acquisition of Cutting Edge and $1.0 million for
repayment of its debt; additions to property, plant and equipment
of $13.1 million; and dividends on common stock of $7.4 million.
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. 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 5/8
percent to 1/4 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 this facility as of April 30, 1999 was 5.0
percent. This credit line also has a facility fee, which ranges
from 1/4 to 1/8 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, 1999, the Company was in
compliance with these covenants. Under the most restrictive of
these covenants, approximately $154 million of retained earnings
was not available for dividend payments at April 30, 1999.
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. Borrowings under this line of credit bear interest at
1/4 percent above the LIBOR for the relevant currency and term
with a commitment fee of 1/8 percent of the unused amount.
At April 30, 1998, the Company's bank lines of credit
included a $190 million bridge loan facility and a $40 million
line of credit from a major U.S. commercial bank. The bridge
loan facility supported the Company's tender offer to purchase
the outstanding stock of Spandex. Both of these credit
instruments were replaced with the $235 million revolving credit
facility.
At April 30, 1999 and 1998, the Company's long-term debt
also consisted of tax-exempt Industrial Revenue Bonds amounting
to $7.0 million and $7.1 million at those dates. Scheduled
maturities of this long-term debt in 2000 amount to $.2 million,
and payment is expected to be made with cash from operations.
With the addition of the borrowings under the $235 million
revolving credit facility in 1999, the Company's ratio of total
debt to total capitalization was 41.6 percent at April 30, 1999
compared with 3 percent at April 30, 1998.
Forward Exchange Contracts
- --------------------------
As of April 30, 1999, the Company was party to approximately
$9.8 million in forward exchange contracts providing for the
delivery by the Company of various currencies in exchange for
others over the succeeding five 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 nonperformance
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, 1999 for future deliveries of the
various currencies, the hedging gain deferred at that date
amounted to approximately $0.4 million.
Interest Rate Swap
- ------------------
In April 1999, the Company entered into an interest rate
swap contract with 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 the U.S. dollar
denominated portion of borrowings under its $235 million multi-
currency revolving credit facility. The interest differential
paid or received under this contract will be recognized as an
adjustment to the effective yield of the underlying borrowing
hedged. The market value of this contract at April 30, 1999 was
approximately $0.1 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 $59.7
million at April 30, 1999 and $42.7 million at April 30, 1998.
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 that the allowance it
has established for losses under the recourse provisions is
adequate to cover the Company's obligations.
YEAR 2000
The Company recognizes the business risks posed by the Year
2000 computer date issue. The Company continues to make this
issue a top business priority and is actively working to control
the associated risks.
Each Gerber Scientific business unit is responsible for
developing and executing comprehensive plans to minimize and, to
the extent possible, eliminate any major business interruption
that could be caused from Year 2000 issues relating to products,
facilities, internal systems, key suppliers, and customers. In
addition, the Company has a Year 2000 Corporate Oversight
Committee that reports to Executive Management and to the Board
of Directors. The Company has completed its Year 2000 awareness,
assessment, and renovation phases and is in the process of
carrying out the validation phase.
Testing of manufactured products, including internally
developed software, has been completed. The results are
available for customers through the Company's web sites.
Fortunately, most of the Company's products do not use dates in
any critical calculations. However, the vast array of products
and services sold by the Company, both today and in the past, may
expose the Company to claims from its customers and third
parties, impair market acceptance of the Company's products or
services, or result in payment of damages. In most cases, the
Company contractually limits or disclaims consequential damages
in the sales contracts. However, no assurance can be given that
the aggregate cost of defending and resolving such claims will
not materially adversely affect the Company's results of
operations.
The Company's critical internal systems have been upgraded
or replaced. The Company is in the process of validating some
third party software packages for Year 2000 compliance.
The Company has also been assessing its Year 2000 risks
related to significant relationships with third parties via on-
going communication with its critical suppliers and customers. As
part of the process, the Company requested written affirmation
from suppliers and customers that they have Year 2000 readiness
programs in place and will be ready when necessary. Responses to
these inquiries have been reviewed. Further analysis, including
site visits, are being conducted as necessary and contingency
plans are being developed as issues arise in this analysis.
Despite these efforts, the Company can provide no assurance that
supplier and customer Year 2000 compliance plans will be
successfully completed in a timely manner.
Year 2000 expenditures were not material, have substantially
been incurred, and were funded through cash from operations. The
schedule for completion and the remaining associated costs are
based on management's estimates, which include assumptions of
future events. There can be no assurance that the Company and
its suppliers and customers will be fully Year 2000 compliant by
January 1, 2000. Such occurrences as loss of revenue, production
delays, lack of third party readiness, and other business
interruptions could adversely impact the Company. Accordingly,
the Company will develop contingency plans to address potential
issues, which include identification of alternate suppliers. The
ultimate effects on the Company or its suppliers or customers of
not being fully Year 2000 compliant is not reasonably estimable.
However, the Company believes its Year 2000 remediation efforts,
together with the diverse nature of its businesses, help reduce
the potential impact of noncompliance to levels that will not
have a material adverse impact on its financial position, results
of operations, or cash flows.
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.
Initially, the euro is 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 that
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
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. 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:
- - 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 anticipated uses of cash,
- - the scope or nature of acquisition activity,
- - prospective product developments,
- - 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.
From time to time, oral or written forward-looking
statements may also be included in other materials released to
the public.
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 1999 includes important information as to
risk factors in the "Business" section under the headings
"Operating Segment" and "Other Matters Relating to the
Corporation's Business as a Whole."
ITEM 7a. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.
See discussion under the headings "Forward Exchange Contracts"
and "Interest Rate Swap" on page 29 and Note 4 and Note 18 on page 47
and 63, respectively, of the Company's fiscal year 1999 Annual Report
to Shareholders for information concerning market risk sensitive
instruments. Such information is incorporated by reference in this
Form 10-K.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.
Consolidated Statements of Earnings
For years ended April 30
--------------------------------
In thousands except per share
amounts 1999 1998 1997
----------------------------- -------- -------- --------
Revenue:
Product sales $545,598 $383,926 $334,990
Service 49,020 46,554 45,927
-------- -------- --------
594,618 430,480 380,917
-------- -------- --------
Costs and Expenses:
Cost of product sales 319,688 207,880 183,472
Cost of service 29,113 29,605 28,930
Selling, general and
administrative expenses 158,920 129,802 120,143
Research and development
expenses 31,468 31,810 30,415
Non-recurring special charge -- 25,000 --
(Note 16) -------- -------- --------
539,189 424,097 362,960
-------- -------- --------
Operating income 55,429 6,383 17,957
Other income 2,152 4,169 4,590
Interest expense (11,501) (667) (338)
-------- -------- --------
Earnings before income taxes 46,080 9,885 22,209
Provision for income taxes 16,500 2,500 6,200
-------- -------- --------
Net Earnings $ 29,580 $ 7,385 $ 16,009
======== ======== ========
Net Earnings Per Common Share:
Basic $ 1.31 $ .32 $ .69
======== ======== ========
Diluted $ 1.29 $ .32 $ .69
======== ======== ========
See summary of significant accounting policies and notes to
consolidated financial statements.
Consolidated Balance Sheets
April 30
-------------------
In thousands except per share amounts 1999 1998
--------------------------------------- -------- --------
Assets
Current Assets:
Cash and short-term cash investments $ 26,523 $ 27,007
Accounts receivable 103,118 79,114
Inventories 72,367 61,111
Prepaid expenses 23,690 18,227
-------- --------
225,698 185,459
-------- --------
Property, Plant and Equipment 152,374 117,334
Less accumulated depreciation 61,789 57,335
-------- --------
90,585 59,999
-------- --------
Intangible Assets 238,777 99,463
Less accumulated amortization 18,018 8,208
-------- --------
220,759 91,255
-------- --------
Other Assets 5,218 2,054
-------- --------
$542,260 $338,767
======== ========
Liabilities and Shareholders' Equity
Current Liabilities:
Notes payable $ -- $ 326
Current maturities of long-term debt 193 193
Accounts payable 48,374 30,462
Accrued compensation and benefits 18,982 17,253
Other accrued liabilities 35,854 30,347
Deferred revenue 6,874 6,619
Advances on sales contracts 5,721 5,498
-------- --------
115,998 90,698
-------- --------
Noncurrent Liabilities:
Deferred income taxes 9,593 10,202
Long-term debt 173,338 6,953
-------- --------
182,931 17,155
-------- --------
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 22,858,699
and 23,436,523 shares 22,859 23,437
Paid-in capital 40,255 37,779
Retained earnings 195,871 187,981
Treasury stock, at cost (800,000 shares) (16,450) (16,450)
Unamortized value of restricted stock
grants (417) --
Accumulated other comprehensive income
(loss) 1,213 (1,833)
-------- --------
243,331 230,914
-------- --------
$542,260 $338,767
======== ========
See summary of significant accounting policies and notes to
consolidated financial statements.
Consolidated Statements of Changes
in Shareholders' Equity
Unamort. Accum.
Common Value of Other
Stock, Restric. Comp.
In thousands except $1 Par Paid-in Retained Treasury Stock Inc./
per share amounts Value Capital Earnings Stock Grants (Loss) Total
- --------------------- -------- ------- -------- -------- -------- ------ --------
April 30, 1996 $23,199 $35,218 $179,307 $ -- $ -- $1,574 $239,298
Net earnings -- -- 16,009 -- -- -- 16,009
Foreign currency
translation
adjustment -- -- -- -- -- (840) (840)
--------
Comprehensive income 15,169
Dividends ($.32 per
share) -- -- (7,436) -- -- -- (7,436)
Exercise of stock
options and related
tax benefit 108 882 -- -- -- -- 990
------- ------- -------- -------- -------- ------ -------
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 ($.32 per
share) -- -- (7,284) -- -- -- (7,284)
Exercise of stock
options and related
tax benefit 129 1,654 -- -- -- -- 1,783
Common stock issued
for directors' fees 1 25 -- -- -- -- 26
Purchase of common
stock -- -- -- (16,450) -- -- (16,450)
------- ------- -------- -------- -------- ------ --------
April 30, 1998 23,437 37,779 187,981 (16,450) -- (1,833) 230,914
Net earnings -- -- 29,580 -- -- -- 29,580
Foreign currency
translation
adjustment -- -- -- -- -- 3,046 3,046
--------
Comprehensive income 32,626
Dividends ($.32 per
share) -- -- (7,244) -- -- -- (7,244)
Exercise of stock
options 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, net of 23 542 -- -- (417) -- 148
amortization
------- ------- -------- -------- -------- ------ --------
April 30, 1999 $22,859 $40,255 $195,871 $(16,450) $ (417) $1,213 $243,331
======= ======= ======== ======== ======== ====== ========
See summary of significant accounting policies and notes to consolidated financial
statements.
Consolidated Statements of Cash Flows
For years ended April 30
------------------------------
In thousands 1999 1998 1997
------------------------------ -------- ------- -------
Cash Provided by (Used for)
Operating Activities:
Net earnings $ 29,580 $ 7,385 $16,009
Adjustments to reconcile net
earnings to cash provided
by operating activities:
Depreciation and
amortization 24,220 13,572 11,752
Deferred income taxes (824) (3,687) 1,137
Non-recurring special
charge -- 25,000 --
Other noncash items 256 26 --
Changes in operating
accounts, net of effects
of business acquisitions:
Receivables (809) 664 (17,320)
Inventories 15,559 (5,502) (826)
Prepaid expenses (656) (407) (1,664)
Accounts payable and
accrued expenses (2,069) 21,564 (729)
-------- ------- -------
Provided by Operating
Activities 65,257 58,615 8,359
-------- ------- -------
Investing Activities:
Additions to property, plant
and equipment (22,619) (15,935) (13,067)
Business acquisitions (175,952) (61,546) (7,384)
Sale of product class -- 26,678 --
Purchases of long-term debt
securities -- -- (1,075)
Maturities and sales of long-
term debt securities -- 36,571 23,376
Intangible and other assets (3,330) (1,908) (1,614)
Other, net (484) (2,567) (207)
-------- ------- -------
Provided by (Used for)
Investing Activities (202,385) (18,707) 29
-------- ------- -------
Financing Activities:
Purchase of common stock (16,818) (16,450) --
Additions of long-term debt 217,095 -- --
Repayments of long-term debt (47,223) (192) (548)
Net short-term financing (11,963) 326 (595)
Debt issue costs (800) (587) --
Exercise of stock options 3,597 1,783 990
Dividends on common stock (7,244) (7,284) (7,436)
-------- ------- -------
Provided by (Used for)
Financing Activities 136,644 (22,404) (7,589)
-------- ------- -------
Increase (Decrease) in Cash and
Short-Term Cash Investments (484) 17,504 799
Cash and Short-Term Cash
Investments, Beginning of Year 27,007 9,503 8,704
-------- ------- -------
Cash and Short-Term Cash
Investments, End of Year $ 26,523 $27,007 $ 9,503
======== ======= =======
See summary of significant accounting policies and notes to
consolidated financial statements.
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. 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.
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, 1999 and
1998 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, 1999. 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, 1999 and 1998 and the results of their operations and
their cash flows for each of the years in the three-year period
ended April 30, 1999 in conformity with generally accepted
accounting principles.
/s/KPMG LLP
Hartford, Connecticut
May 26, 1999
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.
In June 1998, the FASB issued Statement of Financial Accounting
Standards No. 133, "Accounting for Derivative Instruments and
Hedging Activities," which is effective for the fiscal year
beginning May 1, 2000. Management believes adoption of this
standard will not have a material impact on the Company's
financial position, results of operations, or cash flows.
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
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.
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.
LONG-TERM INVESTMENTS
In accordance with the criteria of Statement of Financial
Accounting Standards No. 115, "Accounting for Certain Investments
in Debt and Equity Securities," the Company's investments in long-
term debt securities were stated at amortized cost plus accrued
interest based on the Company's ability and intention to hold
these securities to maturity. In February 1998, the Company
liquidated its portfolio of long-term debt securities to
partially fund the acquisition of Coburn Optical Industries, Inc.
The effect on assets and shareholders' equity of accounting for
these investments as available-for-sale would have been
insignificant in any reported period.
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.
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 to 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.
NEW ACCOUNTING STANDARDS
In June 1998, the FASB issued Statement No. 133, "Accounting for
Derivative Instruments and Hedging Activities." The Company
expects to adopt the new statement for the fiscal year beginning
May 1, 2000. The Statement will require the Company to recognize
all derivatives on the balance sheet at fair value. The Company
does not anticipate that the adoption of this statement will have
a material impact on its results of operations or financial
position.
NOTE 2.BUSINESS ACQUISITIONS
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.
On February 12, 1997, Gerber Technology, Inc. (GT), a wholly
owned subsidiary of the Company and formerly known as Gerber
Garment Technology, Inc., acquired the outstanding stock of
Cutting Edge, Inc. (Cutting Edge) of Marblehead, Massachusetts,
and subsequently merged that company into GT. The purchase price
was approximately $7,800,000. Cutting Edge was a leading supplier
of 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.
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 a straight-line basis over periods ranging
from 20 to 25 years from the date of acquisition.
The following pro forma combined results of operations for the
years ended April 30, 1998 and 1997 have been prepared as if the
Coburn and Spandex acquisitions occurred at the beginning of each
of the respective fiscal years and give effect to estimated
purchase accounting and other adjustments resulting from the
acquisitions. The pro forma information is presented on the
assumption that the acquisition price would have been the same at
the beginning of each period. The pro forma financial information
is not necessarily indicative of the results of operations that
would have been achieved had the acquisitions of Coburn and
Spandex actually been effective as of the beginning of each
fiscal year or of future results of the combined companies.
(Unaudited)
------------------
In thousands (except per share amounts) 1998 1997
- --------------------------------------- -------- --------
Sales $641,556 $587,045
Net earnings 7,368 15,023
Net earnings per common share-basic .32 .65
Net earnings per common share-diluted .32 .64
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 1999 1998
- ------------------------- ------- -------
Cash $14,989 $11,004
Money market funds 10,067 --
Time deposits 1,467 16,003
------- -------
$26,523 $27,007
======= =======
The Company's short-term cash investments are in high-quality
securities placed with major U.S. and international financial
institutions. The Company's investment policies limit the amount
of exposure to any one financial institution. Due to the
relatively short maturity of these financial instruments, their
cost at April 30, 1999 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:
In thousands 1999 1998
- --------------------------------- ------- -------
Raw materials and purchased parts $42,097 $37,329
Work in process 30,270 23,782
------- -------
$72,367 $61,111
======= =======
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 fiscal 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 1999 1998
- ------------------------------- -------- --------
Land $ 9,414 $ 3,888
Buildings 60,822 49,458
Machinery, tools, and equipment 77,660 63,722
Construction in progress 4,478 266
-------- --------
$152,374 $117,334
======== ========
NOTE 8.INTANGIBLE ASSETS
The components of net intangible assets at April 30, 1999 and
1998 were as follows:
In thousands 1999 1998
- ---------------------------------------- ------- -------
Goodwill, net of accumulated
amortization $194,469 $63,920
Prepaid pension cost 19,369 20,053
Patents, net of accumulated amortization 6,739 6,573
Other 182 709
------- -------
$220,759 $91,255
======== =======
NOTE 9.NOTES PAYABLE
The Company had short-term bank lines of credit that totaled
approximately $22,300,000 at April 30, 1999 based upon year-end
foreign exchange rates. As of April 30, 1999, 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-
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 and added $1,563,000 to earnings before income taxes and
approximately $1,000,000, or $.04 per share, to net income in the
year ended April 30, 1998.
NOTE 11.INCOME TAXES
The components of the provision for income taxes for the years
ended April 30, 1999, 1998, and 1997 were as follows:
In thousands 1999 1998 1997
- --------------------------- ------ ------ ------
Currently payable:
Federal $ 3,600 $3,600 $1,400
State and local 400 400 100
Foreign 7,300 1,300 600
------- ------ ------
11,300 5,300 2,100
Deferred 5,200 (2,800) 4,100
------- ------ ------
$16,500 $2,500 $6,200
======= ====== ======
Income tax payments totaled $12,899,000, $5,628,000, and
$3,415,000 in the years ended April 30, 1999, 1998, and 1997,
respectively. Reconciliations of the statutory U.S. Federal
income tax rate to the effective income tax rate for each year
were as follows:
1999 1998 1997
- ------------------------------------- ----- ----- -----
Statutory U.S. federal income tax rate 35.0% 35.0% 35.0%
State income taxes, net of U.S.
federal tax benefit .9 (.4) .7
Foreign tax rate differences (2.1) 3.8 .8
Life insurance benefits -- -- (1.6)
Tax-exempt interest income -- (4.6) (3.4)
Foreign Sales Corporation (2.2) (10.9) (2.2)
Research and development tax credits (2.8) (5.2) (3.2)
Goodwill amortization 6.4 4.7 1.2
Other, net .6 2.9 .6
----- ----- -----
Effective income tax rate 35.8% 25.3% 27.9%
===== ===== =====
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, 1999 and 1998, current deferred tax
assets of approximately $11,000,000 and $9,000,000, respectively,
were included in prepaid expenses in the consolidated balance
sheet. Deferred tax assets and deferred tax liabilities as of
April 30, 1999 and 1998 were as follows:
1999 1998
--------------------- ---------------------
Deferred Deferred Deferred Deferred
Tax Tax Tax Tax
In thousands Assets Liabilities Assets Liabilities
- ------------------ -------- ----------- -------- -----------
Depreciation $ -- $ 2,900 $ -- $ 2,600
Patents -- 2,700 -- 2,600
Employee benefit
plans 2,000 8,200 1,800 8,300
Asset valuations 9,800 2,000 7,500 600
Provisions for
estimated expenses 7,900 4,800 7,500 5,900
Foreign exchange
gains and losses -- 500 -- 600
Tax carryforwards 2,900 -- 3,300 --
Other 400 300 200 200
------- ------- ------- -------
23,000 21,400 20,300 20,800
Valuation allowance (200) -- (700) --
------- ------- ------- -------
$22,800 $21,400 $19,600 $20,800
======= ======= ======= =======
Consolidated earnings before income taxes included foreign pre-
tax earnings of $22,698,000, $4,557,000, and $3,371,000 for 1999,
1998, and 1997, respectively. At April 30, 1999, the unremitted
earnings of foreign subsidiaries were approximately $28,000,000.
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, 1999.
Such carryforwards have various expiration dates and begin to
expire in the 2000 fiscal year.
NOTE 12.LONG-TERM DEBT
The composition of long-term debt at the end of each year was as
follows:
In thousands 1999 1998
--------------------------- -------- -------
Multi-currency revolving
credit facility $165,158 $ --
Unsecured loan notes 1,420 --
Industrial Revenue Bonds
(net of current maturities
of $193,000) 6,760 6,953
-------- ------
$173,338 $6,953
======== ======
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, 1999 was a
reasonable estimate of its fair value.
The aggregate annual maturities of long-term debt for each of the
four years after 2000 total $193,000 annually. Interest payments
totaled $11,396,000, $666,000, and $343,000 in the years ended
April 30, 1999, 1998, and 1997, 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 5/8 percent to 1/4 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, 1999 was 5.0 percent. This credit line
also has a facility fee, which ranges from 1/4 to 1/8 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, 1999, the Company was in compliance with
these covenants. Under the most restrictive of these covenants,
approximately $154,000,000 of retained earnings was not available
for dividend payments at April 30, 1999.
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
UK income taxes on tendered shares. The variable interest rate
on these notes is based on LIBOR less one percent and is adjusted
biannually. The interest rate on the loan notes as of April 30,
1999 was 4.2 percent. The noteholders have the option of
redeeming the loan notes at par plus accrued interest prior to
final maturity, which is September 30, 2003.
Industrial Revenue Bonds
- ------------------------
The Company's Industrial Revenue Bonds are collateralized by
certain property, plant and equipment and are payable to 2014 at
variable interest rates that ranged from 3.9 percent to 5.4
percent at April 30, 1999. Included therein are $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 1999 and 1998, the average
interest rate on the VRDBs was 3.3 percent and 3.7 percent,
respectively. The remaining Industrial Revenue Bonds bear
interest at 70 percent of the U.S. prime rate.
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
agreements 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, 1999, 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
737,200 shares. Under a prior authorization, the Company also
purchased 131,200 shares in fiscal year 1999. The reacquired
shares have been retired and under Connecticut law constitute
authorized but unissued shares. As of April 30, 1999, the Company
could purchase up to an additional 2,262,800 shares under the
November 1998 Board of Directors' resolution.
Pursuant to a separate Board of Directors' resolution, the
Company purchased 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.
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 granted in fiscal
1999 vests 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
$148,000 in fiscal 1999. Restricted stock award activity is as
follows:
1999
-----------
Restricted stock awarded (shares) 22,986
Weighted average market value on date of grant $25.06
Stock Option Plans
- ------------------
The Company's 1992 Employee Stock Plan (the 1992 Plan) provides
for incentive and nonqualified 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 become payable in cash
in the event certain pre-established performance goals are
attained and the grantee simultaneously exercises related stock
options with the cash award.
In September 1998, shareholders approved 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 nonqualified 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.
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, 1999 is set forth below:
1999 1998 1997
------------------- ------------------ ------------------
Weighted Weighted Weighted
-Average -Average -Average
Exercise Exercise Exercise
Options Price Options Price Options Price
- ------------ --------- -------- -------- -------- -------- --------
Outstanding-
beginning
of year 2,574,595 $17.23 1,171,170 $14.31 1,208,970 $13.67
Granted 420,604 24.71 1,669,800 18.80 138,000 15.01
Exercised (264,450) 14.18 (128,625) 12.11 (108,175) 7.80
Cancelled (274,490) 18.28 (137,750) 16.20 (67,625) 14.80
--------- -------- --------- ------ --------- ------
Outstanding-
end of year 2,456,259 $18.72 2,574,595 $17.23 1,171,170 $14.31
========= ======== ========= ====== ========= ======
Exercisable
at end of
year 942,142 $16.88 653,795 $14.32 491,045 $12.69
========= ======== ========= ====== ========= ======
Reserved for
future
grants 2,552,777 621,825 2,153,875
========= ========= =========
The exercise prices for options outstanding as of April 30, 1999
ranged from $7.25 to $28.25. The weighted-average remaining
contractual life of options outstanding at April 30, 1999 is 7.7
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, 1999:
Outstanding Options Exercisable Options
-------------------------------- -------------------
Weighted-
Average Weighted- Weighted-
Exercise Remaining Average Average
Price Contractual Exercise Exercise
Range Number Life Price Number Price
- ------------- --------- ----------- -------- -------- ---------
$ 7.25-$15.12 266,940 4.6 years $13.07 215,440 $12.72
$15.13-$22.68 1,836,015 7.9 years 18.20 704,702 17.91
$22.69-$28.25 353,304 9.1 years 25.71 22,000 24.48
--------- --------- ------ ------- ------
2,456,259 7.7 years $18.72 942,142 $16.88
========= ========= ====== ======= ======
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) 1999 1998 1997
- ------------------------------------ ------- ------- -------
Net earnings
As reported $29,580 $7,385 $16,009
Pro forma 27,227 5,323 15,510
Net earnings per common share-basic
As reported 1.31 .32 .69
Pro forma 1.21 .23 .67
Net earnings per common share-diluted
As reported 1.29 .32 .69
Pro forma 1.18 .23 .66
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:
1999 1998 1997
------- ------- -------
Risk-free interest rate 5.2% 5.7% 6.5%
Expected life of option 4.5 years 4.5 years 4 years
Expected volatility 34% 25% 24%
Expected dividend yield 2% 2% 2%
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, 1999, 1998, and 1997. The plan
for the year ended April 30, 1999 was also approved by
shareholders in September 1998. The plans covered substantially
all employees in the United States and were based upon pre-tax
profits of the Company's operating subsidiaries and the
consolidated group. The amounts charged to expense under these
plans totaled $3,167,000, $3,575,000, and $1,375,000 for the
years ended April 30, 1999, 1998, and 1997, 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, $2,800,000, and $3,086,000 for
the years ended April 30, 1999, 1998, and 1997, 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 nonqualified 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
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, 1999 and 1998:
Qualified Nonqualified
Pension Plan Pension Plan
---------------- ----------------
In thousands 1999 1998 1999 1998
- ----------------------------- ------- ------- ------- -------
Change in benefit obligation:
Beginning balance $57,304 $45,221 $ 4,905 $ 4,595
Service cost 4,127 2,487 210 216
Interest cost 3,734 3,482 259 315
Actuarial loss/(gain) 1,816 7,544 434 (118)
Benefits paid (1,873) (1,430) (334) (103)
------- ------- ------- -------
Ending balance 65,108 57,304 5,474 4,905
------- ------- ------- -------
Change in plan assets:
Beginning balance 66,793 50,419 4,405 3,369
Actual return on plan assets 6,583 15,004 793 1,039
Employer contributions 2,343 2,800 400 100
Benefits paid from plan assets (1,873) (1,430) (334) (103)
------- ------- ------- -------
Ending balance 73,846 66,793 5,264 4,405
------- ------- ------- -------
Funded status 8,738 9,489 (210) (500)
Unrecognized net actuarial
(gain) (1,085) (2,360) (185) (114)
Unrecognized net transition
liability 372 465 -- --
Unrecognized prior service
cost 9,901 10,888 1,838 2,185
------- ------- ------- -------
Prepaid pension cost $17,926 $18,482 $ 1,443 $ 1,571
======= ======= ======= =======
The following weighted average assumptions were used in the
accounting for the pension plans:
Qualified Nonqualified
Pension Plan Pension Plan
---------------------- -------------------
1999 1998 1997 1999 1998 1997
----- ----- ----- ----- ----- -----
Discount rate 6.75% 7.00% 7.75% 6.75% 7.00% 7.75%
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, 1999,
1998, and 1997:
Qualified Nonqualified
Pension Plan Pension Plan
---------------------- -------------------
In thousands 1999 1998 1997 1999 1998 1997
- --------------------- ------ ------ ------ ----- ----- ------
Service cost $4,127 $2,487 $2,254 $ 210 $ 216 $ 268
Interest cost 3,734 3,482 3,213 259 315 362
Expected return on
plan assets (6,042) (4,596) (4,040) (289) (303) (280)
Amortization of prior
service cost 987 987 987 347 347 347
Amortization of
transition
obligation 93 93 93 -- -- --
Amortization of
actuarial gain -- -- 13 -- -- 32
------ ------ ------ ----- ----- -----
Net periodic benefit
cost $2,899 $2,453 $2,520 $ 527 $ 575 $ 729
====== ====== ====== ===== ===== =====
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 $973,000,
$692,000, and $357,000 for the years ended April 30, 1999, 1998,
and 1997, respectively.
Postretirement Benefits Other Than Pensions
- -------------------------------------------
Statement of Financial Accounting Standards No. 106, "Employers'
Accounting for Postretirement Benefits Other Than Pensions"
changed the practice of accounting for these benefits
(principally health care) from an expense-as-paid basis to an
accrual accounting basis. The Company does not provide
postretirement benefits other than through its pension plans and,
as a result, Statement No. 106 has no impact on the Company's
consolidated financial position or results of operations.
NOTE 15.OTHER INCOME
The components of other income for each year were as follows:
In thousands 1999 1998 1997
- ----------------------------- ------ ------ ------
Interest income from
investments $1,110 $2,223 $2,440
Royalty income 1,383 1,426 1,470
Patent litigation settlement -- 1,563 --
Other, net (341) (1,043) 680
------ ------ ------
$2,152 $4,169 $4,590
====== ====== ======
NOTE 16.SPECIAL CHARGE
In the fourth quarter of fiscal year 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 plus contingent future
royalties. The special charge reflected the write-down of
inventory, accounts receivable, and other items. The special
charge amounted to approximately $16,300,000 after taxes or $.70
per share on a diluted basis.
NOTE 17.SEGMENT REPORTING
The Company and its 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 and sale of computer-controlled production systems,
software, and aftermarket supplies. The market is comprised of
the sign making and specialty graphics industries. The Apparel
and Flexible Materials segment includes the manufacture and sale
of computer-controlled production systems and software for
product design, marker-making (nesting), spreading, labeling,
cutting, and handling flexible materials such as fabrics and
composites. The market is comprised of the apparel, aerospace,
automotive, furniture, and other industries. The Ophthalmic Lens
Processing segment includes the manufacture and sale of computer-
controlled production systems and aftermarket supplies. 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 1999, 1998, or 1997.
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
described in the summary of significant accounting policies. The
effects of intersegment transactions, which are not material in
amount, have been eliminated. The Company incurs costs and
expenses and holds certain assets at the corporate level that
relate to its business as a whole. Certain of these amounts have
been allocated to the Company's operating segments by various
methods, largely on the basis of the segments' percentage of
consolidated sales. Management believes that such allocations are
reasonable.
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, 1999)
- ----------------
Revenue $278,466 $215,411 $100,741 $594,618 $ -- $594,618
Segment profit 32,606 21,856 1,801 56,263 -- 56,263
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 19,803 28,405 2,494 50,702 (38,811) 11,891
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
(As of and for
the year ended
April 30, 1997)
- ----------------
Revenue $116,200 $192,624 $ 26,275 $335,099 $ 45,818 $380,917
Segment profit 19,758 8,449 21 28,228 (13,319) 14,909
Segment assets 1 53,001 102,027 14,949 169,977 52,531 222,508
Capital
expenditures 2 2,245 4,743 910 7,898 1,958 9,856
Depreciation and
amortization 2 1,588 6,631 429 8,648 1,600 10,248
1 Assets exclude $86,575,000, $79,762,000, and $102,707,000 of corporate amounts
in 1999, 1998, and 1997, respectively.
2 Capital expenditures and depreciation and amortization exclude $609,000
and $1,924,000, $1,805,000 and $1,388,000, and $3,211,000 and $1,504,000
of corporate amounts in 1999, 1998, and 1997, 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).
A reconciliation of the totals reported for the operating
segments to the applicable line item in the consolidated
financial statements is as follows:
In thousands 1999 1998 1997
- --------------------------------- -------- -------- --------
Segment profit $56,263 $11,891 $14,909
Other income, net of corporate
expenses 1,318 (1,339) 7,638
------- ------- -------
Earnings before interest and
taxes 57,581 10,552 22,547
Interest expense (11,501) (667) (338)
------- ------- -------
Earnings before income taxes $46,080 $ 9,885 $22,209
======= ======= =======
Revenue and net property, plant and equipment by country where
located are as follows:
United United Continental All
In thousands States Kingdom Europe Other Total
- ---------------- -------- -------- ---------- ------ --------
(As of and for
the year ended
April 30, 1999)
- ----------------
Revenue 1 $241,269 $ 66,806 $180,631 $105,912 $594,618
Property, plant
and equipment,
net 63,493 17,005 8,461 1,626 90,585
(As of and for
the year ended
April 30, 1998)2
- ----------------
Revenue 1 $230,494 $ 29,858 $ 75,705 $ 94,423 $430,480
Property, plant
and equipment,
net 56,616 457 1,551 1,375 59,999
(As of and for
the year ended
April 30, 1997)2
- ----------------
Revenue 1 $196,766 $ 27,108 $ 70,770 $ 86,273 $380,917
Property, plant
and equipment,
net 59,072 523 1,652 1,317 62,564
1 Revenues are attributed to specific countries based on the destination
of the shipment.
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 $6.5 million and
$10.0 million for fiscal years 1998 and 1997, respectively. Accordingly,
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." Property, plant and
equipment in Europe for the imaging and inspection systems product
class at April 30, 1997 amounted to $0.2 million.
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 $6,200,000, $4,595,000, and $4,088,000 for the
years ended April 30, 1999, 1998, and 1997, respectively.
Minimum annual rental commitments at April 30, 1999 under
long-term noncancelable operating leases were as follows:
Building Machinery
In and Office and
thousands Space Equipment Total
- ---------- ---------- ---------- ------
2000 $3,096 $ 454 $3,550
2001 2,212 291 2,503
2002 1,193 58 1,251
2003 791 17 808
2004 627 16 643
After 2004 756 -- 756
------ ------ ------
$8,675 $ 836 $9,511
====== ====== ======
As of April 30, 1999, the Company was party to approximately
$9,800,000 in forward exchange contracts providing for the
delivery by the Company of various currencies in exchange for
others over the succeeding five 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 nonperformance
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, 1999 for future deliveries of the
various currencies, the hedging gain deferred at that date
amounted to approximately $440,000.
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 $140,000 at April 30, 1999.
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
$59,700,000 at April 30, 1999 and $42,700,000 at April 30, 1998.
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 that the allowance it
has established for losses under the recourse provisions is
adequate to cover the Company's obligations.
NOTE 19. EARNINGS PER SHARE
The following table sets forth the computation of basic and
diluted net earnings per common share:
1999 1998 1997
----------- ---------- -----------
Numerator:
Net earnings $ 29,580,000 $ 7,385,000 $16,009,000
============ =========== ===========
Denominators:
Denominator for basic
earnings per share -
weighted-average shares
outstanding 22,590,428 22,800,389 23,250,332
Effect of dilutive
securities:
Stock options 420,252 530,653 115,043
------------ ----------- -----------
Denominator for diluted
earnings per share -
adjusted weighted-
average shares
outstanding 23,010,680 23,331,042 23,365,375
============ =========== ===========
Net earnings per common
share-basic $ 1.31 $ .32 $ .69
============ =========== ===========
Net earnings per common
share-diluted $ 1.29 $ .32 $ .69
============ =========== ===========
NOTE 20.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
- --------------------- ------- ------- ------- ------- -------
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
--------------------------------------------
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 3 .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
--------------------------------------------
1997
Sales and service
revenue $85,808 $94,951 $94,591 $105,567 $380,917
Gross profit 36,666 42,529 42,309 47,011 168,515
Net earnings 4 1,603 5,135 4,144 5,127 16,009
Net earnings per
common share 4
Basic .07 .22 .18 .22 .69
Diluted .07 .22 .18 .22 .69
Dividends paid per
share .08 .08 .08 .08 .32
Stock price -High 17 5/8 14 7/8 15 7/8 17 1/2 17 5/8
-Low 13 7/8 13 13 3/8 13 7/8 13
--------------------------------------------
1 Net earnings for the first quarter of fiscal year 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 fiscal year 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 The quarterly earnings per share information is computed
separately for each period. Accordingly, the sum of such
quarterly earnings per share amounts may differ from the
total for the year.
4 Net earnings for the second quarter of fiscal year 1997
included a gain of $1,032,000 after taxes ($.04 per diluted
share) from life insurance benefits the Company received upon
the death of Mr. H. Joseph Gerber.
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 1999 Annual Meeting Proxy Statement,
which will be filed within 120 days of the Company's April 30,
1999 fiscal year-end.
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 (Sept. President and Chief
(50) 25, 1998) and Operating Officer;
Chief Executive President, General Signal
Officer (June 1, Electrical Group;
1998) President, General Signal
Electrical Power Systems
Group
Fredric K. Rosen Senior Vice President, Gerber
(60) President Technology, Inc.
(September 5,
1990)
Shawn M. Harrington Senior Vice President and Chief
(45) 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
(58) 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. (54) President,
General Counsel
and Secretary
(June 1, 1994)
Gary K. Bennett Senior Vice Vice President; Treasurer
(48) President, and Corporate Controller
Finance
(August 19,
1996)
David J. Gerber Vice President, Director, New Business
(38) Business Development and Technology
Development and Strategy; Secretary and
Technology Attorney
Strategy
(March 19, 1998)
Bernard J. Demko Vice President, Vice President, Finance,
(41) Corporate Gerber Technology, Inc.
Controller
(June 1, 1998)
Becket Q. McNab Vice President, Director, Human Resources,
(40) Human Resources Nabisco International;
(May 10, 1999) Manager, Resourcing,
PepsiCo (Europe)
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 1999
Annual Meeting Proxy Statement, which will be filed within 120
days of the Company's April 30, 1999 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 1999 Annual Meeting Proxy Statement,
which will be filed within 120 days of the Company's April 30,
1999 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
1999 Annual Meeting Proxy Statement, which will be filed within
120 days of the Company's April 30, 1999 fiscal year-end.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND
REPORTS ON FORM 8-K.
(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, 1999, 1998, and 1997. . . . . . . . .34
Consolidated Balance Sheets at April 30, 1999 and
1998. . . . . . . . . . . . . . . . . . . . . . . 35-36
Consolidated Statements of Changes in Shareholders'
Equity for the years ended April 30, 1999, 1998,
and 1997. . . . . . . . . . . . . . . . . . . . . 37-38
Consolidated Statements of Cash Flows for the years
ended April 30, 1999, 1998, and 1997. . . . . . . 39-40
Independent Auditors' Report . . . . . . . . . . . . 42
Summary of Significant Accounting Policies and
Notes to Consolidated Financial Statements. . . . 43-66
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.
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 July 18, 1996.
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.
22.1* Subsidiaries of the Registrant.
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 1999.
(c) See Item 14(a) 3. above.
(d) See Item 14(a) 2. above.
*Filed herewith.
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 26, 1999 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 26, 1999 /s/ Michael J. Cheshire Chairman, Director,
------------- ----------------------- President and Chief
(Michael J. Cheshire) Executive Officer
(Principal Executive
Officer)
July 26, 1999 /s/ George M. Gentile Director
------------- -----------------------
(George M. Gentile)
July 26, 1999 /s/ W. Jerome Vereen Director
------------- -----------------------
(W. Jerome Vereen)
July 26, 1999 /s/ A. Robert Towbin Director
------------- -----------------------
(A. Robert Towbin)
July 26, 1999 /s/ David J. Gerber Director, Vice President,
------------- ----------------------- Business Development and
(David J. Gerber) Technology Strategy
July 26, 1999 /s/ Edward E. Hood, Jr. Director
------------- -----------------------
(Edward E. Hood, Jr.)
July 26, 1999 /s/ David J. Logan Director
------------- -----------------------
(David J. Logan)
July 26, 1999 /s/ Donald P. Aiken Director
------------- -----------------------
(Donald P. Aiken)
July 26, 1999 /s/ Carole F. St. Mark Director
------------- -----------------------
(Carole F. St. Mark)
July 26, 1999 /s/ Gary K. Bennett Senior Vice President,
------------- ----------------------- Finance
(Gary K. Bennett) (Principal Financial and
Accounting Officer)
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.
10.3 Gerber Scientific, Inc. 1992 Non-Employee
Director Stock Option Plan (incorporated herein
by reference to Exhibit B to the Company's
Definitive Proxy Statement filed in connection
with the Annual Meeting of Shareholders held
September 24, 1992, File No. 1-5865 and by
reference to the Company's Registration
Statement on Form S-8, File No. 333-81447).
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.
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.
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 July 18, 1996
(incorporated herein by reference to Exhibit
10.7 to the Company's Annual Report on Form
10-K for the year ended April 30, 1997).
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.
22.1* Subsidiaries of the Registrant.
23.1* Consent of Independent Auditors.
27.1* Financial Data Schedule.
*Filed herewith.