SOUTH WINDSOR, CT -- Gerber Scientific, Inc. (NYSE: GRB) today reported that fiscal 2004 fourth quarter earnings per share increased to $0.18 compared to $0.06 per share for the comparable fiscal 2003 period. Revenue for the fiscal 2004 fourth quarter increased to $136.7 million compared to $135.7 million for the comparable fiscal 2003 period. Foreign currency translation had the effect of increasing revenue by approximately $9.5 million in the fiscal 2004 fourth quarter compared to the fiscal 2003 period.

For the fiscal year ended April 30, 2004, diluted earnings per share was $0.27 compared to $0.43 per share for fiscal 2003. Revenue for the fiscal year ended April 30, 2004 was $516.8 million compared to $512.4 million for fiscal 2003. Foreign currency translation had the effect of increasing revenue by approximately $37.5 million for the fiscal 2004 full year compared to fiscal 2003.

"Gerber Scientific made good progress against its strategic objectives this fiscal year," said Marc T. Giles, president and chief executive officer. "Strong cash flow enabled us to accelerate repayment of our higher cost debt. We expect this trend to continue, allowing us to refinance our debt on more favorable terms. We also successfully completed the second year of our three-year turnaround plan, which included a broad range of restructuring and re-engineering actions to enhance operational efficiencies Company-wide. In completing year three of our plan, we anticipate restructuring charges of up to $7.0 million that will contribute to significant cost savings on an annualized basis thereafter. These factors, momentum in our Gerber Technology business, new products under development, and general improvement in economies and markets worldwide position us for improved profitability going forward."

"Each of our U.S. businesses now uses our shared services platform, including the implementation of our information technology system, SAP. Our goal is to complete the transition of Spandex to this platform during fiscal year 2005. We have achieved substantial cost benefits and realized solid sales leverage in our Gerber Technology business. We expect to leverage our cost platform as business conditions in the U.S. and key emerging markets continue to improve."

In the fiscal 2004 fourth quarter, Gerber:

• Generated strong operating cash flow enabling debt repayment of $10.8 million.
• Settled the previously disclosed Securities and Exchange Commission investigation, incurred significantly lower legal and professional fees and received insurance proceeds of $1.7 million for costs previously incurred.
• Reported year-over-year operating income improvement resulting from cost control, lower SEC investigation-related expenses, and prior year restructuring and other charges that did not recur.
• Benefited from higher Apparel and Flexible Materials business levels resulting from improving market conditions in the U.S. and key emerging markets.
• Amended certain credit agreement financial covenants.

Fiscal 2004 fourth quarter revenue and order entry were $136.7 million and $139.1 million, respectively, compared to $135.7 million and $131.1 million for the fiscal 2003 period. Foreign currency translation had the effect of increasing revenue by approximately $9.5 million for the fiscal 2004 fourth quarter compared to the fiscal 2003 period. Gerber's backlog of orders increased $2.4 million to $35.9 million in the fiscal 2004 fourth quarter and occurred primarily in the Ophthalmic Lens Processing segment, largely because of orders received during a recent trade show.

Fiscal 2004 fourth quarter gross profit margin of 32.2 percent decreased 1.7 percentage points compared to the fiscal 2003 period. While the fourth quarter continued to benefit from shared services cost reductions, gross profit margin decreased as a result of lower business volume, higher inventory write-downs as Gerber continued to implement its shared services initiative, higher freight costs, and increased pension costs. The implementation of SAP for the Ophthalmic Lens Processing segment on November 1, 2003 resulted in the ability to better classify service costs previously included in selling, general, and administrative (S,G,&A) expenses, which also lowered the gross profit margin.

Consolidated operating income increased to $7.1 million in the fiscal 2004 fourth quarter compared to $4.5 million in the fiscal 2003 period as a result of lower incentive compensation, lower legal and professional fees associated with the settled SEC investigation, fiscal 2003 restructuring and other charges that did not recur, and shared services cost reductions. The effect of these factors was offset in part by the lower gross margin, increased pension costs, and increased allowance for doubtful accounts relating primarily to prolonged soft market conditions in Latin America.

Interest expense in the fiscal 2004 fourth quarter increased $0.9 million compared to the fiscal 2003 period because of higher weighted-average interest rates. The effect of higher rates was partially offset by lower average debt balances. The weighted-average interest rates increased under the terms of Gerber's four-year $110.0 million senior credit facility, which was entered into on May 9, 2003.

For the fiscal year ended April 30, 2004, Gerber recorded a tax benefit of $3.4 million as compared to tax expense of $0.9 million at the statutory rate of 35.0 percent. The tax benefit was primarily the result of a change in the tax law of a foreign jurisdiction and the favorable resolution of a prior year foreign tax issue. Excluding these items, Gerber's consolidated tax rate from continuing operations would have been a benefit of 20.6 percent for the fiscal 2004 year compared to the statutory rate. This difference was primarily attributable to export tax incentives, tax credits based on research and development costs, and foreign tax planning strategies.

Segment profit (defined as segment earnings before interest and taxes - see attached segment information for reconciliation to GAAP measure) for the fiscal 2004 fourth quarter decreased to $7.3 million from $7.6 million for the fiscal 2003 period.

The Apparel and Flexible Materials segment reported fiscal 2004 fourth quarter revenue of $43.3 million, which represented an increase of $2.9 million, or 7.3 percent, from the fiscal 2003 period. Foreign currency translation had the effect of increasing segment revenue by approximately $1.8 million in the fiscal 2004 fourth quarter compared to the fiscal 2003 period. Excluding the effects of foreign currency translation, the increase was attributable to improving U.S. economic conditions, particularly in industrial and automotive market segments. Building on positive sales trends that began in the fiscal 2004 third quarter, the Apparel and Flexible Materials segment achieved its highest revenue level in the fiscal 2004 fourth quarter in three years.

Segment profit of $6.2 million for the fiscal 2004 fourth quarter increased by $3.8 million from the fiscal 2003 period as a result of higher sales volume and operating leverage from prior shared services cost reduction efforts, lower incentive compensation, and prior period restructuring and other charges that did not recur. Higher pension costs and inventory write-downs partially offset these benefits.

Sign Making and Specialty Graphics 

The Sign Making and Specialty Graphics segment reported fiscal 2004 fourth quarter revenue of $73.0 million, which represented an increase of $1.9 million from the fiscal 2003 period. Foreign currency translation had the effect of increasing revenue by approximately $7.0 million for the fiscal 2004 fourth quarter compared to the fiscal 2003 period. Excluding the effects of foreign currency translation, the lower current year revenue was principally attributable to decreased sales in Europe as a result of disruption in Gerber's French operations due to re-engineering efforts earlier in the year, sluggish market growth, competition from ink jet imaging products (which also affected North American revenue), and the discontinuation of a product line.

Segment profit was $2.2 million for the fiscal 2004 fourth quarter compared to $3.5 million for the fiscal 2003 period. Benefits from cost-reduction efforts, prior period restructuring and other charges that did not recur, and lower incentive compensation were more than offset by lower business volume, price discounting, higher pension costs, and inventory write-downs.

The Ophthalmic Lens Processing segment reported revenue for the fiscal 2004 fourth quarter of $20.4 million, which represented a decrease of $3.9 million compared to the fiscal 2003 period. The revenue decline reflected unusually high demand in the fiscal 2003 fourth quarter from major retail chains that did not repeat. The effect of foreign currency translation was not significant with respect to this segment's results in the fiscal 2004 fourth quarter.

Segment loss was $1.1 million for the fiscal 2004 fourth quarter compared to segment profit of $1.8 million in the fiscal 2003 period. The segment loss was the result of lower business volume, inventory write-downs and shared services transition costs, higher pension costs, and a higher allowance for doubtful accounts associated with continued weak Latin American business conditions. The effect of these factors was offset in part by lower incentive compensation.

The November 1, 2003 implementation of SAP resulted in the ability to better classify service costs previously included in S,G&A expense and represented $0.9 million of the overall segment gross profit decline. The impact of this reclassification was totally offset as a reduction of S,G,&A expenses, resulting in no impact to the fiscal 2004 fourth quarter segment loss.

Gerber's total debt was reduced by $10.8 million and $26.8 million for the fiscal quarter and fiscal year periods ended April 30, 2004, respectively. Gerber was able to achieve this debt reduction as the result of operating earnings and working capital improvements, primarily from better cash management, and promissory note sale proceeds in the fiscal 2004 first quarter.

At April 30, 2004, Gerber had $6.4 million in cash and cash equivalents and $59.1 million in total debt. Gerber's net debt (defined as total debt less cash and cash equivalents) declined $9.9 million during the fourth quarter to $52.7 million and the ratio of net debt to capital (defined as the sum of net debt plus shareholders' equity) was 30.8 percent.

In the fiscal 2004 fourth quarter, to ensure compliance with its covenants as of April 30, 2004, Gerber obtained lender consent to amendments of financial covenants in its credit agreements which require it to meet, as of the end of each fiscal quarter, a specified leverage ratio and a specified level of EBITDA (as defined) as measured over the last twelve months.  In connection with these amendments, Gerber repaid $10.0 million of its higher cost term loan debt with borrowings under its revolving credit facility.  To ensure its compliance with the foregoing financial covenants in future periods, Gerber will be required to obtain additional amendments to these covenants.  Gerber is currently pursuing such amendments with the lenders under its credit facilities. Gerber currently expects that it will be able to obtain the requested amendments although it cannot provide assurance in this respect. Pending the resolution of these issues, Gerber has reclassified $40.5 million of its term loan debt as current liabilities as required by generally accepted accounting principles.  In light of its improved operating cash flow and reduced debt level, Gerber will seek to refinance its term loan debt with the goal of obtaining better terms including less restrictive financial covenants.

Gerber Scientific, Inc. (http://www.gerberscientific.com) is the world's leading supplier of sophisticated automated manufacturing systems for sign making and specialty graphics, apparel and flexible materials, and ophthalmic lens processing. Headquartered in South Windsor, Connecticut, the Company operates through four businesses: Gerber Scientific Products, Spandex Ltd., Gerber Technology, and Gerber Coburn.