Unless indicated, or unless the context otherwise requires, references in this report to "Gerber" mean Gerber Scientific, Inc. and its consolidated subsidiaries.

CAUTIONARY NOTE CONCERNING FACTORS THAT MAY INFLUENCE FUTURE RESULTS

This Management's Discussion and Analysis of Financial Condition and Results of Operations contains statements which, to the extent they are not statements of historical or present fact, constitute forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. These forward-looking statements are intended to provide management's current expectations or plans for the future operating and financial performance of Gerber, based on assumptions currently believed to be reasonable. Forward-looking statements can be identified by the use of words such as "believe," "expect," "intend," "foresee," "may," "plan," "anticipate" and other words of similar meaning in connection with a discussion of future operating or financial performance. These forward-looking statements include, among others, statements relating to:

· expected financial condition, future earnings, levels of growth, or other measures of financial performance, or the future size of market segments or geographic markets;

· economic conditions;

· planned cost reductions;

· future cash flows and uses of cash and debt reduction strategies;

· prospective product developments and business growth opportunities, as well as competitor product developments;

· demand for Gerber's products and services;

· methods of and costs associated with potential geographic expansion;

· regulatory and market developments and the impact of such developments on future operating results;

· potential impacts from credit market risk;

· future effective income tax rates;

· the outcome of contingencies;

· the availability and cost of raw materials; and

· pension plan assumptions and future contributions.

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. Some of these risks and uncertainties are set forth in Item 1A, "Risk Factors" of Gerber's Annual Report on Form 10-K for the fiscal year ended April 30, 2009 and in subsequent filings with the Securities and Exchange Commission. Gerber cannot assure that its results of operations, financial condition or cash flows will not be adversely affected by one or more of these factors. Gerber does not undertake to update any forward-looking statement made in this report or that may from time to time be made by or on behalf of Gerber.

OVERVIEW

Through its global operations, Gerber develops, manufactures, distributes and services integrated automation equipment and software, as well as related aftermarket supplies, for sign making and specialty graphics, apparel and flexible materials and the ophthalmic lens processing industries.

The widespread nature of the current adverse global economic conditions continued during the first quarter of fiscal 2010 and resulted in challenges for Gerber's businesses and the markets in which they operate. Primarily as a result of these adverse global economic conditions, revenue declined $39.2 million, or 24.6 percent, in the first quarter of fiscal 2010 as compared with the same period a year ago. The overall decline reflected lower sales volume of approximately $32.0 million and the adverse impact of foreign currency translation of $11.6 million and was slightly offset by the revenue contribution of $3.8 million from the acquisitions of two companies in the second quarter of fiscal 2009.

Despite the decline in revenue, operating profit increased $2.2 million in the first quarter of fiscal 2010 as compared with the same period a year ago. The operating earnings improvement reflected cost reduction initiatives and operational improvements. The cost reduction initiatives commenced during fiscal 2009 and included a global workforce reduction of approximately 15 percent, 10 percent salary reductions in the United States and a temporary freeze of employer matching contributions to the United States 401(k) retirement plan. Gerber also has severely curtailed discretionary expenses, as well as instituted one-week work furloughs and a four-day work week at certain facilities. Additionally, Gerber froze its United States defined benefit pension plans as of April 30, 2009, which resulted in lower pension expense. The global workforce reduction and lower pension plan expenses should continue to favorably effect operating results for the remainder of fiscal 2010. For the first quarter of fiscal 2010, the benefits from the workforce reductions have been consistent with Gerber's expectations for full year benefits as previously disclosed.

As part of Gerber's strategic process, management continually reviews its operating segments and selected markets in terms of their potential long-term returns. Management periodically reviews and negotiates potential business acquisitions and divestitures, some of which may be material. Decisions regarding "bolt-on" acquisitions generally focus on candidates that 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. Gerber may also consider business divestitures if management determines that the applicable business no longer meets Gerber's long-term strategic objectives or that the divestiture could increase cash flows. On July 31, 2009, Gerber entered into an agreement to sell its laser marking and engraving business unit, FOBA Technology + Services GmbH, or "FOBA," to ALLTEC Angewandte Laserlicht Technologie GmbH, the laser business unit of Videojet Technologies Inc., and Gerber completed the sale on September 1, 2009. FOBA, acquired in October 2008 as part of the acquisition of Virtek Vision International, Inc., is being sold as it was not a core strategic focus for Gerber and this transaction represents one of several potential non-core asset sales that have been under management review. Proceeds from this sale will provide Gerber with additional flexibility under its senior credit facility. Results for FOBA are presented as discontinued operations within the condensed consolidated financial statements.

Economic conditions can significantly impact Gerber's businesses, as experienced during fiscal 2009 and the first quarter of fiscal 2010. While weak demand has persisted across most of the markets that Gerber serves, quote and order activity has improved. It remains difficult, however, to finalize orders due to the lack of credit availability and to economic uncertainty. Gerber believes that the significant efforts to stimulate the global economy will have a beneficial impact in the second half of fiscal 2010. Although global economic uncertainty continues, Gerber believes that the strength of its product portfolio, diversified business model and streamlined organizational structure should allow Gerber to resume growth quickly when its markets begin to recover. Until this economic recovery occurs, Gerber will continue to manage all aspects of its business with a heightened focus on cash generation.

RESULTS OF OPERATIONS

Revenue

                                     For the Fiscal Quarters Ended July 31,      Percent
In thousands                                   2009                    2008       Change
Equipment and software revenue    $          26,966       $          43,123        (37.5 )%
Aftermarket supplies revenue                 75,808                  96,684        (21.6 )%
Service revenue                              16,928                  19,051        (11.1 )%
Total revenue                     $         119,702       $         158,858        (24.6 )%

Consolidated revenue decreased by $39.2 million for the fiscal quarter ended July 31, 2009 as compared with the same quarter of the prior year. Unfavorable foreign currency translation negatively impacted revenue for the first quarter of fiscal 2010 by approximately $11.6 million as compared with the fiscal 2009 first quarter as a result of the United States dollar strengthening against several other currencies in which Gerber transacts business. Global adverse economic conditions continued to persist during the first quarter of fiscal 2010, resulting in substantially lower customer demand and sales volume, which decreased revenue by approximately $32.0 million as compared with the prior year.

Acquisitions completed during the second quarter of fiscal 2009 continued to be accretive to Gerber's results and contributed revenue of $3.8 million to the fiscal quarter ended July 31, 2009.

Key new product revenue was $4.7 million for the quarter ended July 31, 2009, and included revenue contribution from the Sign Making and Specialty Graphics segment's Solara™ ion UV inkjet printers and Fashion Lifecycle Management®, or "FLM," software marketed by the Apparel and Flexible Materials segment. Key new product revenue declined $5.0 million, or 51.7 percent, from the first quarter of fiscal 2009 and Gerber believes that key new product sales have been negatively impacted by the weak global economy and adverse credit markets that reduced credit availability for potential customers.

International markets are significant to Gerber's revenue base, as Gerber generates approximately two-thirds of its revenue annually from sales to non-U.S. markets, based on fiscal 2009 statistics. The Asian marketplace has been a strategic focus area for the Apparel and Flexible Materials segment and although total revenue within greater China decreased $1.0 million to $5.0 million for the fiscal quarter ended July 31, 2009 as compared with the prior year, Gerber believes that the greater China region represents significant growth opportunities when economic conditions improve. Revenue in the greater China region increased sequentially as compared with the fourth quarter of fiscal 2009 and Gerber has seen improved quote and order activity during the first quarter of fiscal 2010.

Orders by geographic region, as compared with the same period of fiscal 2009, were lower across all regions. The decrease reflected both the negative impact of the economy as well as the negative impact of foreign currency translation due to the strengthening of the United States dollar during the first quarter of fiscal 2010 compared with the prior year.

The following table provides backlog by segment and excludes FOBA's backlog as of July 31, 2009, as its results were reported as discontinued operations, whereas backlog as of April 30, 2009 included approximately $1.1 million attributable to FOBA:

                                        July 31,       April 30,
In thousands                                2009            2009
Backlog:
  Sign Making and Specialty Graphics   $   1,644     $     1,967
  Apparel and Flexible Materials          22,649          22,894
  Ophthalmic Lens Processing               1,200           1,200
                                       $  25,493     $    26,061

The decrease in Gerber's backlog reflected the classification of FOBA as a discontinued operation and was partially offset by improvements within apparel and flexible materials markets.

Gross Profit / Margin

                               For the Fiscal Quarters Ended July 31,      Percent
In thousands                          2009                       2008       Change
Gross profit            $           33,641         $           42,044        (20.0 )%
Gross profit margin                   28.1 %                     26.5 %

Gross profit was $8.4 million lower for the quarter ended July 31, 2009 as compared with the same period of the prior year. The majority of the decline was attributable to lower revenue volume. Additionally, foreign currency translation during the first quarter of fiscal 2010 negatively impacted gross profit by approximately $3.4 million as compared with the prior year.

Gerber's gross profit margin improved 1.6 percentage points. This improvement reflected operational efficiencies and cost reduction strategies that included a reduced workforce as well as favorable gross profit margins from acquired businesses. Savings from the reduced workforce and the profitability of acquired businesses should continue to benefit gross profit margin for the remainder of the fiscal year; however, if volumes continue to be depressed, unfavorable absorption of manufacturing costs could offset some of these

benefits. The improvement also reflected a shift in mix favoring higher margin aftermarket supplies and service revenue, which represented 77 percent of revenue in the quarter ended July 31, 2009 as compared with 73 percent in the quarter ended July 31, 2008.

Selling, General and Administrative Expenses

                                                    For the Fiscal Quarters Ended July
                                                                                   31,        Percent
In thousands                                                  2009                2008         Change
Selling, general and administrative expenses           $    25,422         $    34,211          (25.7 )%
Percentage of revenue                                         21.2 %              21.5 %

Selling, general and administrative expenses, or "SG&A," decreased by $8.8 million during the first quarter of fiscal 2010 as compared with the same quarter of the prior year and slightly decreased as a percentage of revenue. The lower costs demonstrated Gerber's continued focus on cost control efforts and the results of fiscal 2009 actions, as well as favorable benefits of foreign currency translation of $2.2 million compared with the same period of the prior year. The savings from workforce reductions should continue to benefit SG&A expenses for the remainder of the fiscal year. Additionally, April 30, 2009 actions to freeze future benefits under Gerber's United States defined benefit pension plans contributed to a decrease in pension expense of $0.4 million compared with the first quarter of the prior year. Partially offsetting these items, incremental costs from the acquired businesses increased SG&A costs by $1.1 million.

Research and Development

                                  For the Fiscal Quarters Ended July 31,      Percent
In thousands                              2009                      2008       Change
Research and development     $           4,428         $           6,233        (29.0 )%
Percentage of revenue                      3.7 %                     3.9 %

Research and development, or "R&D," costs decreased for the fiscal quarter ended July 31, 2009 as compared with the same quarter of the prior year. The reduction was primarily a result of cost savings initiatives implemented in fiscal 2009 including a workforce reduction and these cost savings should continue throughout fiscal 2010. Lower incremental development costs related to the fiscal 2009 launch of the Solara ion also contributed to the decrease as compared with the prior year.

Other Income (Expense), net

                                   For the Fiscal Quarters Ended July 31,
In thousands                                2009                     2008
Other income (expense), net     $           (945 )       $           (128 )

Other income (expense), net primarily includes bank fees and foreign currency transaction gains and losses. Foreign currency transaction losses were $0.6 million for the quarter ended July 31, 2009 as compared with a gain of $0.3 million for the quarter ended July 31, 2008.

Interest Expense

                                                      For the Fiscal Quarters Ended July
                                                                                     31,        Percent
In thousands                                                  2009                  2008         Change
Interest expense                                       $     1,017         $         614           65.6 %
Weighted-average credit facility interest rates                7.0 %                 5.7 %

The increase in interest expense of $0.4 million was primarily attributable to higher weighted-average outstanding borrowings and higher interest rates based upon a credit facility amendment effected during March 2009. Subsequent to the first quarter of fiscal 2009, Gerber completed two acquisitions that were funded through increased credit facility borrowings. Proceeds from pending future asset sales are expected to be utilized to reduce the overall outstanding credit facility balance, which is expected to reduce future interest expense.

Income Tax Expense

                          For the Fiscal Quarters Ended July 31,
                                   2009                     2008
Effective tax rate                 26.7 %                   20.6 %

Gerber's effective tax rate was lower than the statutory rate of 35.0 percent for the quarters ended July 31, 2009 and 2008 primarily due to foreign rate differences and the exclusion from the effective rate calculation of year-to-date income from foreign subsidiaries expected to have net losses for the full year, as required by FASB Interpretation No. 18, Accounting for Income Taxes in Interim Periods - an interpretation of APB Opinion No. 28.

Discontinued Operations

On July 31, 2009, Gerber entered into a definitive agreement to sell 100 percent of the capital stock of FOBA, and Gerber completed the sale on September 1, 2009 for a gross purchase price of approximately $10.4 million. The transaction net proceeds will be used to reduce Gerber's outstanding debt. The results of FOBA's operations were previously reported within the Apparel and Flexible Materials segment.

FOBA qualifies as an asset group to be disposed of under the provisions of FASB Statement of Financial Accounting Standards No. 144, Accounting for the Impairment or Disposal of Long-Lived Assets. As a result, Gerber has reported the results of operations as discontinued operations within the unaudited condensed consolidated financial statements and assets and liabilities held for sale as assets held for sale and liabilities held for sale, respectively.

Gerber allocated interest expense to the discontinued operations, as the proceeds from the sale are required to reduce the outstanding credit facility obligation. Gerber allocated approximately $0.1 million of interest expense to the discontinued operations for the quarter ended July 31, 2009.

SEGMENT REVIEW

Gerber is a leading worldwide provider of equipment, software and related
services in the sign making and specialty graphics, apparel and flexible
materials and ophthalmic lens processing industries.  Gerber conducts business
through three principal operating segments.  These operating segments and the
principal businesses within those segments are as follows:

Operating Segment          Principal Business
Sign Making and Specialty  Gerber Scientific Products
Graphics                   ("GSP") and Spandex
Apparel and Flexible       Gerber Technology
Materials

Sign Making and Specialty Graphics

                                           For the Fiscal Quarters Ended July 31,
                                         2009                                   2008
In thousands                   GSP      Spandex        Total          GSP      Spandex        Total
Revenue                   $ 19,426     $ 53,713     $ 73,139     $ 23,934     $ 70,435     $ 94,369
Operating (loss) income   $   (750 )   $  2,938     $  2,188     $ (1,163 )   $  3,303     $  2,140

Segment revenue decreased $21.2 million, or 22.5 percent, for the quarter ended July 31, 2009 from the prior year comparable quarter. Unfavorable foreign currency translation negatively impacted revenue by approximately $9.4 million as compared with the prior year. The remaining decline in revenue was primarily attributable to lower aftermarket and equipment volume believed to be the result of the persistent macroeconomic factors impacting the sign making markets. Equipment volume is also believed to be depressed from the lack of credit availability to finance purchases.

Despite lower revenue, recent cost savings actions allowed this segment to maintain profitability, driven by the Spandex business unit. GSP improved its operating results, though continued to report an operating loss. GSP's operating loss included incremental warranty costs associated with the Solara ion wide-format UV-cationic inkjet printer series which was launched in fiscal 2009. Though Gerber experienced a higher level of initial field problems than anticipated, the underlying causes have been identified and are being addressed by the company. Gerber believes that its product portfolio in this segment, including products currently under development, and aggressive cost controls will improve future profitability of this segment when the economies stabilize.

Apparel and Flexible Materials

                                    For the Fiscal Quarters Ended July 31,
In thousands                               2009                       2008
Segment revenue              $           35,060         $           48,949
Segment operating income     $            4,159         $            3,666

Segment revenue for the first quarter of fiscal 2010 decreased $13.9 million, or 28.4 percent, from the prior year comparable quarter. Foreign currency translation adversely impacted segment revenue by approximately $1.7 million as compared with the same period of the prior year. The Apparel and Flexible Materials segment revenue for the first quarter of fiscal 2010 was negatively impacted by global economic factors that included lack of credit availability and continued depressed demand in apparel end-user markets, which are believed to have resulted in lower capital equipment and software sales compared with the same period in the prior year. Partially offsetting the negative economic impacts, contribution from the recent acquisitions of Virtek Vision International, Inc. and Gamma Computer Tech Company, Ltd provided $3.8 million in revenue. Additionally, key new product revenue of $1.7 million, though depressed from prior year levels, included FLM software revenue. Software revenue typically carries higher gross profit margins than equipment sales.

Segment revenue in China of $4.9 million for the fiscal quarter ended July 31, 2009 represented the highest level of reported revenue in China for the past three sequential quarters, although it represented a decrease of $0.8 million as compared with the quarter ended July 31, 2008. Based on order and quote activity within Asian markets, Gerber believes that these markets are positioned for modest recovery in the second half of fiscal 2010 from fiscal 2009 levels. Industry consolidation efforts by larger apparel manufacturers within Asia are also beginning to benefit Gerber, as these manufacturers continue to purchase capital equipment aimed at increasing production efficiencies.

Segment operating profit for the first quarter of fiscal 2010 was $0.5 million higher than in the same quarter in the prior year, despite lower revenue, which was primarily attributable to cost saving actions initiated in fiscal 2009 and continuing into fiscal 2010 that included a reduced workforce. An unfavorable product mix that included less software revenue partially offset these benefits for the quarter ended July 31, 2009 as compared with the quarter ended July 31, 2008. Cost savings from the reduced workforce are expected to benefit the segment's operating performance for the remainder of fiscal 2010. If volumes do not improve until the second half of fiscal

2010, as anticipated, the cost savings measures may not be sufficient to avoid lower gross profit on a year over year basis as a result of unfavorable absorption of manufacturing costs.

Ophthalmic Lens Processing

                                    For the Fiscal Quarters Ended July 31,
In thousands                               2009                       2008
Segment revenue              $           11,503         $           15,540
Segment operating income     $              695         $              115

Segment revenue for the first quarter of fiscal 2010 decreased $4.0 million, or 26.0 percent, from the prior year comparable quarter. The decrease was driven by the weakened economy, resulting in lower equipment and aftermarket volume, as well as unfavorable foreign currency translation of approximately $0.5 million. Market studies indicate that purchases of eyeglasses continue to be depressed, which adversely impacts demand of this segment's aftermarket supplies and lens production capital equipment. Until markets recover, this segment intends to remain focused on prudent cost control measures and new product development.

Such cost control measures, which included a reduced workforce from fiscal 2009 actions, resulted in an increase in segment operating income of $0.6 million for the fiscal quarter ended July 31, 2009 as compared with the same period in the prior year.

Corporate Expenses

                            For the Fiscal Quarters Ended July 31,
In thousands                        2009                      2008
Operating expenses     $           3,251         $           4,321

Corporate operating expenses were $1.1 million lower in first quarter of fiscal 2010 compared with the same period in the prior year. The lower costs primarily reflected cost savings from fiscal 2009 workforce reductions and lower pension plan expenses of $0.4 million as compared with prior year, which should continue throughout fiscal 2010. The lower pension plan expenses are primarily attributable to the pension plan freeze of all future benefits that was effected during the fourth quarter of fiscal 2009.

FINANCIAL CONDITION

LIQUIDITY AND CAPITAL RESOURCES

Gerber's primary sources of liquidity are internally generated cash flows from operations and available borrowings under the company's $100 million senior secured revolving credit facility. These sources of liquidity are subject to all of the risks of Gerber's business and could be adversely affected by, among other factors, a decrease in demand for Gerber's products, charges that may be required because of changes in market conditions or other costs of doing business, delayed product introductions or adverse changes to availability of funds. Global distress in the credit and financial markets has reduced liquidity and credit availability and increased volatility in prices of securities across . . .