Gerber Scientific, Inc., through its subsidiaries, develops, manufactures, distributes and services capital equipment and software in three industries worldwide. Of its total revenue of $552.8 million for fiscal 2009, Gerber generated $320.7 million in sales of printing equipment, software and related supplies to customers in the sign making and specialty graphics industry; $174.6 million in sales of sophisticated design and cutting equipment and software to customers in the apparel and flexible materials industry; and $57.5 million in sales of processing equipment, software and related supplies to customers in the ophthalmic lens processing industry. Gerber operates manufacturing facilities in the United States, Canada, the United Kingdom, Denmark, Germany and China and maintains sales, distribution and service operations in over 25 countries. To maximize its geographic sales coverage, Gerber markets its products through both a direct sales force and independent sales agents located throughout all of the company's domestic and international markets. Revenue from international sales, including United States export sales, represented approximately 68 percent of total revenue for fiscal 2009. As of April 30, 2009, Gerber had approximately 2,180 employees, of whom approximately two-thirds were based outside of the United States.
Gerber's sales strategy emphasizes new product development and expansion into new geographic markets. Significant product launches by Gerber's three businesses in the past two fiscal years have included Gerber Scientific Product's Solara ion™ wide-format ultraviolet inkjet printer, Gerber Technology's GERBERcutter® XLc7000 apparel cutting system, and Gerber Coburn's Advanced Lens Processing System. Gerber's product development process focuses on platform development that enables the company to leverage its product innovations with product extensions and add-ons. Gerber's long-term growth strategy features geographic expansion in Asian markets, particularly in China, and the addition of markets throughout Europe.
Gerber pursues a number of initiatives intended to improve its operating efficiency and gross profit margins. The focus of this effort is the implementation of lean manufacturing principles aimed at increasing Gerber's profit margins, including strengthening manufacturing policies and procedures, consolidating and improving supplier relationships, improving inventory methods and reducing inventory, seeking low-cost sourcing opportunities for key parts and components used in the company's newer products, and increasing the company's offerings of higher-margin value-added products.
To supplement its internal growth, Gerber follows a targeted acquisition strategy that focuses on "bolt-on" acquisition candidates that management expects will contribute to the growth of Gerber's core businesses, increase earnings per share, and generate positive cash flow in the first year of acquisition. In the past two fiscal years, in accordance with this strategy, Gerber has acquired Data Technology, Inc., a manufacturer of automated cutting hardware for the packaging and graphics industries, Gamma Computer Tech Co., Ltd, a China-based manufacturer of equipment for apparel and flexible materials markets, and Virtek Vision International, Inc., a company located primarily in Canada and Germany that manufactures precision laser-based templating, inspection, marking and engraving solutions for industrial material operations.
Gerber Scientific, Inc. was incorporated in Connecticut in 1948. Gerber's principal executive offices are located at 83 Gerber Road West, South Windsor, Connecticut 06074, and its main telephone number at that address is (860) 644-1551.
For additional financial information about Gerber's operating segments and geographic areas, refer to Note 17 of the Notes to Consolidated Financial Statements set forth in Part IV, Item 15. "Exhibits, Financial Statement Schedules" of this Annual Report on Form 10-K, which is incorporated herein by reference. Certain risks, affecting Gerber's business, including risks associated with Gerber's international operations, are discussed in Item 1A. "Risk Factors." The following business descriptions provide information about Gerber's segments, principal products and services.
SIGN MAKING AND SPECIALTY GRAPHICS
The Sign Making and Specialty Graphics operating segment includes the Gerber Scientific Products, or "GSP," and the Spandex operating units. These units market printing equipment, software and aftermarket supplies principally to sign makers, screen printers, exhibit and display houses, quick printers and award and trophy producers, as well as to the die making, short run and sample making segments of the packaging industry.
Gerber Scientific Products
Headquartered in Connecticut, GSP is a provider of computerized sign making and graphic design equipment, packaging equipment, software, aftermarket supplies and related services. GSP's printers, plotters and routers are used to produce indoor and outdoor durable signs. These products, which are integrated through GSP's Matched Technology System™, include computer aided design, or "CAD," and computer aided manufacturing, or "CAM," cutting systems used to produce samples and die boards and to convert short run production for packaging companies in the corrugated and folding carton industries. GSP's target market includes small to medium-sized sign printing shops with annual revenues ranging from $1 million to $3 million, printing chains such as FedEx Kinko's, FASTSIGNS and Signs Now, graphic arts professionals, major corporations and government agencies.
GSP Equipment, Software and Aftermarket Supplies
Digital Imaging Equipment – Inkjet and Thermal Printing Solutions
The digital imaging markets continue to evolve as a result of rapid technological advances. In May 2008, GSP launched the GERBER Solara ion™, which represents GSP's latest offering in the wide-format ultraviolet, or "UV," inkjet printer marketplace. This UV printer offers advanced performance in UV inkjet printing by using Gerber's patent pending Cold Fire Cure™ process and GerberCAT™ cationic ink. The Cold Fire Cure process offers material compatibility and extends the life of curing lamps used in UV printing due to the lower energy output and heat generation. GerberCAT cationic ink, which offers a matched print technology engine, enables printing on a wide array of both rigid and flexible substrates with high-quality adhesion, abrasion resistance and color output. The flat-bed construction of the Solara ion allows precision printing quality otherwise available only with more expensive printers. The Solara ion printers are a key new product family for Gerber. Of GSP's total sales in the last three fiscal years, sales of UV printing systems and related products used in printing represented 23 percent in fiscal 2009, 3 percent in fiscal 2008 and 10 percent in fiscal 2007.
While market demand for inkjet printers is outpacing that of thermal printers, Gerber still maintains a leadership position in the thermal imaging products line, and believes that there is a continuing role for thermal imaging printers due to their ease of use and the outdoor durability of the signs produced. In addition, given the large base of thermal printers still in use today, demand for aftermarket supplies used in thermal printing, though declining, remains strong. The GERBER EDGE® FX digital printing system is an easy-to-use solution for sign makers, screen printers and other graphic professionals seeking to quickly produce highly-customized short-run graphics. The EDGE FX uses heat and pressure to infuse durable resin pigments to more than 30 different printing material substrates, produces graphics with high-quality images, and dries instantly, with no waste, odor, harmful emissions, or need for ventilation. Of GSP's total sales in the last three fiscal years, sales of thermal imaging systems and related products used in printing represented 13 percent in fiscal 2009, 17 percent in fiscal 2008 and 21 percent in fiscal 2007.
Plotters and Routers
GSP's plotters are used to cut signs or graphic forms from vinyl substrates. Routers are used to make 3-D cuts in other signage materials, such as wood or plastic. GSP's plotter products include the enVision™ 375, which is a rugged tabletop sprocket-fed plotter designed for rigorous everyday use and a series of 24-, 48- and 62-inch plotters that employ Gerber P2C™, an optical positioning system that achieves high levels of accuracy. The Gerber M Series is a cutting system designed for wide-format graphics that provides manufacturers of graphics, signs and other rigid and flexible printed media with versatile tools to cut, rout and crease a wide variety of substrates.
GSP's CAD and CAM cutting systems are used to produce samples and die boards and to convert short-run production for packaging companies in the corrugated and folding carton industries. Products consist of sample making and digital die cutting systems, die tool production systems and rotary and flat rule die processing systems, which incorporate knife, laser and waterjet cutting technologies.
GSP software is used to design signs and specialty graphics, as well as to manage printing and cutting processes. Although GSP offers several proprietary software programs dependent upon customer needs, OMEGA™ 3.0 is GSP's most powerful design and production software and represents the most significant software product within this segment.
GSP offers a wide range of aftermarket supplies such as color foils (which is the "ink" used in thermal printers), adhesive-backed vinyls, banner materials and inks for inkjet printers. Cartridges include the GerberGauge™ marking system, a proprietary system that uses radio-frequency identification, or "RFID," technology to estimate the remaining foil length on cartridges to help prevent unexpected run-out, wasted foil and material, while improving workflow. GSP also offers a variety of durable and flexible UV curable inks for inkjet products.
GSP distributes its products, supplies and services globally through the Spandex distribution network, its Canadian distribution business and independent distributors and networks. In the United States, GSP uses distributors that operate in 42 states. None of GSP's external distributors individually accounted for sales representing more than 10 percent of Gerber's consolidated sales for fiscal 2009.
GSP has long-standing relationships with the majority of its distributors. Historically, there has not been any material disruption in sales operations as the result of the termination of key distributors. Gerber believes that the time needed to replace any GSP distributor generally would not exceed eight weeks.
GSP obtains critical materials from three primary suppliers and original equipment manufacturers, or "OEMs." GSP purchases cast vinyl from a supplier with which GSP has a long-standing relationship. GSP purchases color foils for a wide range of industries from a leading European supplier of roll foils. Thermal transfer print heads used in GSP's imaging systems are purchased from a Japanese supplier. GSP does not currently have written supply agreements with these suppliers. No other suppliers are considered significant.Of its total revenue in the last three fiscal years, GSP derived 30 percent in fiscal 2009, 29 percent in fiscal 2008 and 36 percent in fiscal 2007 from United States shipments of cast vinyl. GSP generated 13 percent of its total revenue from sales of thermal transfer foils in both fiscal 2009 and fiscal 2008 and 15 percent in fiscal 2007. Sales of products incorporating thermal transfer print heads accounted for 3 percent of sales in fiscal 2009 and 5 percent of sales in both fiscal 2008 and fiscal 2007.