Gerber Hit With Class-Action Suit
Tech company continues local and international efforts
Apparel technology supplier Gerber Technology Inc. continues status quo operations despite big concerns at its parent company’s headquarters in South Windsor, Conn., where Gerber Scientific Inc. has been hit with a series of class-action lawsuits and federal inquiries over its accounting practices.
At least six law firms have joined a suit filed recently in U.S. District Court in Delaware, charging Gerber Scientific with issuing false and misleading information concerning its financial condition. The complaint said that Gerber Scientific issued misrepresentative statements about its financial condition on several occasions between May 27, 1999, and April 30 of this year and did so while “employing improper inventory and reserve accounting practices.” Furthermore, the complaint said, Gerber Scientific “lacked adequate internal controls and was therefore unable to ascertain the true financial condition of the company.”
The suit charged that some of Gerber Scientific’s remarks contributed to artificially inflated stock prices that reached $24.50 per share at one point in 1999 but have since tumbled more than 70 percent to under $7 following news last month that the company would incur a $12 million charge for inventory write-downs for its fourth quarter and would likely have to restate earnings for the prior year.
The recent developments were fueled by an investigation of Gerber Scientific’s accounting practices by the Securities & Exchange Commission. Gerber Scientific itself is currently conducting an audit of its finances between January 1999 and April 30, 2002. The fourth-quarter charge was related to inventory write-downs for slower-than-expected deliveries of technology for its sign-making division. The shortfall has forced the company to secure waivers from its lenders regarding covenants attached to its credit line.
While all this is going on, Gerber Technology continues business as usual delivering product and services. The company’s Los Angeles office, which supplies computer-aided design software and cutting-room equipment to the sewn-products industry, is coming off a year of double-digit percentage growth, according to regional sales manager for the West Coast Warren Hartenstine.
In other regions, Gerber Technology continues to generate cash and remains profitable, said Stephen Lovass, executive director of product management and marketing.
“We have a clear strategy and are implementing it,” he said.
The strategy Lovass referred to involves continued investment in research and development “to ensure Gerber remains at the forefront of development” and to continue to expand into emerging manufacturing bases in Asia, Mexico and other places.—Robert McAllister
