Gerber Scientific reports decline of 15.7% in Q2 revenues
Gerber Scientific, Inc. reported revenue and earnings results for its fiscal 2010 second quarter ended October 31, 2009. In accordance with U.S. generally accepted accounting principles, FOBA Technology + Services GmbH (“FOBA”), ND Graphics (both sold in September 2009) and Spandex Poland (closed in October 2009) have been reflected as discontinued operations for all periods reported.
Summary of Results from Continuing Operations for FY 2010 Second Quarter versus FY 2009 Second Quarter
Reported revenue declined 15.7% to $120.2 million from $142.6 million. Core business was down 17.7% including the effects of currency fluctuations, which increased revenue by $1.1 million, or 0.7%, while acquisitions completed after the fiscal 2009 first quarter added incremental revenue of $2.5 million, or 1.8%;
Gross profit was $35.2 million or 29.3% of sales versus $41.4 million or 29.0% of sales. Gross profit and margin reflected the adverse impact of significantly lower sales volume and the resulting impact of lower manufacturing cost absorption, as well as a less favorable sales mix, partially offset by cost reductions. In addition, gross profit and margin in the current quarter benefited from $1.3 million of patent license revenue and the favorable contribution from acquisitions;
Selling, general and administrative (SG&A) expenses declined $2.3 million to $27.8 million, or 23.1% of sales, compared with $30.2 million, or 21.2% of sales, due to expense reduction initiatives. R&D spending was down $1.2 million to $4.5 million;
Operating income was $2.9 million, or a 2.4% operating margin, compared with $5.6 million of operating income and an operating margin of 3.9%, reflecting the impact of significantly lower gross profit moderated by cost savings measures;
Income from continuing operations was $1.9 million or $0.08 per diluted share, compared with $6.4 million or $0.26 per diluted share. Net income was $0.5 million or $0.02 per diluted share, compared with $6.1 million or $0.25 per diluted share. Net income in the current and prior year second quarters included non-recurring tax benefits of $0.7 million, or $0.03 per diluted share, and $3.4 million, or $0.14 per diluted share, respectively;
Net cash flows from operations, less capital expenditures, totaled $0.4 million compared with $5.2 million, due principally to the lower net income in the current quarter;
Total outstanding debt was reduced by $9.5 million in the current quarter. Total debt has been reduced by $22.5 million since the Company's April 30, 2009 fiscal year end.
“Despite weak market conditions and difficult year-over-year comparisons, revenue from continuing operations on a sequential basis appears to have stabilized, which gives us further conviction that our markets have bottomed,” said Marc Giles, Gerber Scientific President and Chief Executive Officer. “Equally important, order activity strengthened in the quarter and was up roughly ten percent from the fiscal 2009 fourth quarter with gains across all business segments. We also continued to tightly manage controllable expenses, which resulted in an eight percent, or $2.3 million, decline in SG&A expenses from a year ago – which was on top of a $2.3 million decline last year in the second quarter, when we initiated our aggressive cost cutting actions.”