"Gerber Scientific made good progress in its third quarter of fiscal 2003, with the turnaround of the Company proceeding in line with our expectations," said Marc Giles, president and chief executive officer. "Highlights of the quarter included continued steady cash flow and a solid earnings performance driven by ongoing improvements in operations. We also successfully met our debt repayment goals for the period."

Commenting on the Company's supply-chain shared-services initiative, which is proceeding as planned, Giles stressed that Gerber must continue its focus on operational improvements to maintain its positive momentum. "The overall economic outlook remains weak, demand for our capital equipment products has not improved, and competitive pressures are holding down prices," said Giles. "The Company's shared-services initiative focuses on the integration of all supply-chain activities, from purchasing, materials and inventory management, and manufacturing, to the logistics functions of two of the Company's subsidiaries - Gerber Scientific Products and Gerber Technology. It also includes optimizing the Company's real-estate utilization and capitalizing on additional opportunities to leverage purchasing and logistics activities in the Gerber Coburn and Spandex subsidiaries." When completed, Gerber's shared-services initiative is expected to generate more than $10.0 million in net annual operating efficiency improvements.

The Company's management noted that the shared-services initiative is expected to result in employee separation costs and related charges of approximately $1.5 million to be recorded in the fourth quarter of fiscal 2003 and are expected to represent approximately $5.0 million of the total expected annual operating efficiency improvements.

For the nine months ended January 31, 2003, the Company reported earnings of $0.37 per diluted share on revenues of $376.7 million, compared with a year-ago loss of $5.23 per diluted share ($5.19 of which was the result of an accounting change that led to a goodwill impairment charge of $114.7 million) on revenues of $373.2 million. Excluding the income and gain on sale of a business divested in the fiscal 2003 first-quarter and the year-ago goodwill impairment charges, earnings from continuing operations for the nine months ended January 31, 2003 were $0.31 per diluted share compared with a loss of $0.07 per diluted share in the prior year period. The prior year's results also included the restructuring charge of $0.18 cents per diluted share noted above.

Third-quarter revenue and order entry was $122.0 million and $124.4 million, respectively, compared with $116.7 million and $113.9 million a year ago. The Company's backlog of orders grew $2.4 million to $34.3 million in the third quarter due primarily to an incremental equipment order received by the Ophthalmic Lens Processing segment from a large retail chain. Segment profit (defined as earnings before interest and taxes) for the quarter increased to $7.7 million, from $4.6 million in the third quarter of 2002. The prior year third quarter segment profit included $2.8 million of restructuring charges. Corporate expenses of $4.2 million in the third quarter were 35.5%, or $2.3 million, less than the prior year primarily due to restructuring charges of $2.2 million recorded in the third quarter of the prior year. The Company incurred legal and professional fees associated with the U.S. Securities and Exchange Commission's investigation of approximately $0.1 million and $3.7 million for the three- and nine-months ended January 31, 2003, respectively, versus $0.3 million and $1.0 million in the comparable prior year periods. Net interest expense decreased to $2.0 million in the third quarter, down $1.1 million from a year ago, due to lower debt balances and lower average interest rates. The lower debt balances were the result of steady free cash flow generation (defined as operating cash flow less capital expenditures) and proceeds from non-strategic asset sales during the year. The consolidated tax rate from continuing operations was 6.4% for the third quarter and 23.3% for the current year versus the statutory rate of 35.0%. The third quarter rate reflects a cumulative adjustment to lower the Company's tax rate to 23.3% for the year as a result of greater benefits related to foreign tax planning strategies and increased earnings generated by international subsidiaries with lower effective tax rates.

The Apparel and Flexible Materials reported segment profit increased $1.8 million to $3.2 million from the comparable prior year period. Excluding the effect of $1.5 million in restructuring charges recorded in the third quarter of the prior year, segment profit increased 11.5%, or $0.3 million. Revenues decreased 1.0%, or $0.2 million, to $37.3 million in the third quarter from the comparable period of the prior year. Foreign currency translation contributed $2.4 million to the third quarter fiscal 2003 revenue figure. Excluding the effects of foreign currency translation, the revenue decline was due primarily to the general weakness for capital goods purchases as well as the continued migration of apparel and furniture production to lower cost overseas markets and the related factory automation lag in those markets. Segment gross margin of 45.5% in the third quarter of fiscal 2003 was down 0.5% from the corresponding period of the prior year due primarily to a shift in the product mix toward multi-ply cutting equipment. Segment new order entry in the quarter was $38.5 million, an increase of 9.1% from the prior year. Backlog increased 1.4% from the beginning of the current year to $27.7 million.

The Sign Making and Specialty Graphics reported segment profit increased $0.9 million to $3.2 million from the comparable prior year period. Excluding the effect of $1.0 million in restructuring charges recorded in the third quarter of the prior year, segment profit decreased 3.3%, or $0.1 million. Revenues increased 6.6%, or $3.9 million, to $63.0 million. Foreign currency translation contributed $6.3 million to the third quarter fiscal 2003 revenue figure. Excluding the effects of foreign currency translation, the lower current year revenue was the result of continued soft economic conditions for the segment's capital equipment products, particularly in North America, as well as a sales shift from higher quality proprietary aftermarket supplies to lower priced, more cost-competitive supplies. Segment gross margin of 28.8% for the quarter was down 0.6% from the same period of the prior year. The decrease in gross margin was primarily related to the lower volume noted above, unfavorable sales mix, and unfavorable factory overhead absorption due to the lower business volume.

The Ophthalmic Lens Processing reported segment profit increased $0.4 million to $1.2 million from the comparable prior year period. Excluding the effect of $0.3 million in restructuring charges recorded in the third quarter of the prior year, segment profit increased 9.6%, or $0.1 million. Revenues increased 8.0%, or $1.6 million, to $21.7 million in the third quarter from the comparable period of the prior year. The effect of foreign currency translation was not significant. Segment gross margin increased to 32.0% for the quarter, up 0.7% from the corresponding period of the prior year. The increased sales volume was primarily the result of incremental automated lens processing equipment sales to a large retail customer in the United States. This offset the effect of lower industry prescription volumes for spectacle lens eyewear, which affected both sales of the segment's capital equipment products to wholesale lens production laboratories and aftermarket products. The slightly higher gross margin was the result of both the overall higher sales volume and manufacturing productivity gains. On July 1, 2002, the Company completed the sale of Stereo Optical Company, Inc., which was included in the Ophthalmic Lens Processing segment. Both the gain on disposition and the discontinued company's results from operations are excluded from the Ophthalmic Lens Processing segment's operating results reported above.

The Company's total debt was reduced by $11.5 million and $24.3 million for the three- and nine-month periods ended January 31, 2003, respectively. This was the result of asset sales, operating earnings, working capital improvements, and lower capital expenditures. At January 31, 2003, the Company had $16.9 million in cash and cash equivalents and $103.7 million in debt. The ratio of debt to capitalization was 49.8% at January 31, 2003 compared with 60.3% at April 30, 2002.

At January 31, 2003, the majority of the Company's debt was classified as short-term borrowings since its existing credit facility expires within one year's time (August 15, 2003). The Company fully expects to secure new financing before the expiration date of the current credit facility and has engaged a leading bank to complete the refinancing. If and when new financing is secured, it is the Company's expectation that these short-term borrowings will be reclassified back to long-term debt. The Company was in compliance with all covenants related to its credit facility as of
January 31, 2003. However, the credit facility requires the Company to reduce its indebtedness to $80.0 million by April 30, 2003; borrowings under the facility were at $97.7 million as of January 31, 2003. Thus, arranging the new financing has a high priority. The Company expects that the new financing currently being discussed will meet its financing requirements for the next twelve months and beyond.

Like many other companies, market performance over the last two years has decreased the value of the assets held by the Company's defined benefit pension plans. Lower market interest rates and plan asset returns have resulted in declines in pension plan asset performance and funded status. As a result, the Company will lower the plans' pension obligation discount rate and expected return on plan assets upon the final measurement of the plans' funded status in the fourth quarter to reflect current economic conditions. With these changes, the Company expects to recognize a minimum pension liability through a non-cash after-tax reduction to shareholders' equity in the range of $8.0 to $14.0 million in the fourth quarter. Although the Company doesn't expect to be required to make cash contributions to the defined benefit plans next fiscal year, pension expense is expected to be higher next year because of these changes.

The current economic outlook and demand for the Company's capital equipment products remains challenging, particularly in the markets served by our Apparel and Flexible Materials and Sign Making and Specialty Graphics businesses. Accordingly, the Company's focus is on continuing to implement its cost reduction initiatives, including supply chain optimization and warehouse consolidation, to further reduce those businesses' cost structures. The Company continues to encourage and support new product development across the organization so that it is well positioned to take advantage of the opportunities created by a sustained recovery. Enhancing the Company's geographic diversity also continues to be a priority, particularly in the Apparel and Flexible Materials segment, as evidenced by the Company's increasing presence in Asia to better serve those growing markets.

The weak global economy and political uncertainty continues to make forecasting demand for the Company's capital equipment products challenging. Because of this and many other risks and uncertainties, some of which are cited below and in our Annual Report on Form 10-K for the fiscal year ended April 30, 2002, it is difficult to predict future results. However, on the basis of the cost reduction actions management has already put in place and those it is currently implementing, management expects that the Company's earnings will continue to increase on a year-over-year basis.

About Gerber Scientific, Inc.

Gerber Scientific, Inc. (http://www.gerberscientific.com) is the world's leading supplier of sophisticated automated manufacturing systems that enable mass customization in sign making and specialty graphics, apparel and flexible goods, and optical lens processing. Headquartered in South Windsor, Connecticut, the Company operates through four wholly owned subsidiaries: Gerber Scientific Products and Spandex PLC, Gerber Technology, and Gerber Coburn.