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The accompanying unaudited consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America for interim financial statements and with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by accounting principles generally accepted in the United States of America for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included. Operating results for the three-month period ended July 31, 2004 are not necessarily indicative of the results that may be expected for the year ending April 30, 2005. The financial information included in this quarterly report on Form 10-Q should be read in conjunction with the consolidated financial statements and notes in the Company's annual report on Form 10-K for the fiscal year ende d April 30, 2004, filed with the SEC on July 14, 2004. The consolidated balance sheet at April 30, 2004 has been derived from the audited consolidated financial statements at that date but does not include all of the information and footnotes required by accounting principles generally accepted in the United States of America for complete financial statements.

Certain reclassifications have been made to the prior year amounts to conform to the fiscal 2005 presentation.

The Company has stock option plans authorizing grants to officers and employees. The Company applies APB Opinion No. 25, "Accounting for Stock Issued to Employees," and related interpretations in accounting for its stock options. No stock-based compensation cost related to stock options is reflected in net earnings because all options granted under these plans had an exercise price equal to the market value of the underlying common stock on the date of the grant.

The following table illustrates the effect on net earnings and earnings per share if the Company had applied the fair value recognition provisions of SFAS No. 123, "Accounting for Stock-Based Compensation":

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The classification of inventories was as follows (in thousands):

For the three months ended July 31, 2004, the Company recorded restructuring charges of $1.9 million consisting of employee separation costs of $1.5 million and an adjustment to the fiscal 2004 facility consolidation costs of $0.4 million. The employee separation costs were primarily caused by the relocation of the Ophthalmic Lens Processing segment's operations in Muskogee, Oklahoma. The facility consolidation adjustment related to the sublease of a vacant Sign Making and Specialty Graphics segment facility. We anticipate additional restructuring charges of up to $5.0 million for the remainder of this fiscal year in connection with the Oklahoma facility relocation and the restructuring of our Spandex business.

In fiscal 2004 and 2003, the Company recorded restructuring charges, consisting of employee separation and facility consolidation costs, associated with efforts to reduce costs. Included in the facility consolidation charges was a provision for costs associated with a vacant facility through the remainder of its lease term. This was based on market assumptions when the provision was recorded. In June 2004, the Company sublet this facility and the fiscal 2005 first quarter charge of $0.4 million was recorded to adjust the original assumptions to the terms of the sublease agreement. For further information on previous fiscal years' restructuring charges, refer to the consolidated financial statements and footnotes thereto included in the Company's annual report on Form 10-K for the year ended April 30, 2004, filed with the SEC on July 14, 2004.

The following table presents a rollforward of the accruals established in fiscal 2005 by segment (in thousands):

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The remaining balance at July 31, 2004 of $1.4 million is expected to be paid through fiscal 2006.

The following table presents a rollforward of the accruals established in fiscal 2004 by segment (in thousands):

Of the remaining balance at July 31, 2004, $0.4 million, $0.4 million, $0.3 million, $0.1 million, and $1.0 million is expected to be paid in fiscal 2005, 2006, 2007, 2008, and thereafter, respectively.

Of the remaining accrual of $0.2 million at April 30, 2004 related to a fiscal 2003 facility consolidation charge, a minimal amount was paid in fiscal 2005 during the first quarter, resulting in an ending balance at July 31, 2004 of $0.2 million. Of the remaining balance at July 31, 2004, $0.1 million is expected to be paid in fiscal 2005 and $0.1 million in fiscal 2006.

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As of April 30, 2004, an accrual of approximately $0.3 million for severance costs remained, all of which represented severance and other amounts payable to the former Chief Executive Officer. No cash payments were charged against this accrual during the three months ended July 31, 2004. These amounts are expected to be paid later in fiscal 2005.

Goodwill and other intangible assets include (in thousands):

Intangible amortization expense was $0.2 million and $0.3 million for the three months ended July 31, 2004 and 2003, respectively, and is estimated to be approximately $0.6 million annually for fiscal years 2005 through 2010.

The following table presents the changes in the carrying amount of goodwill by operating segment for the quarter ended July 31, 2004 (in thousands):

During the three months ended July 31, 2004, the Company reviewed its Ophthalmic Lens Processing segment goodwill for impairment in accordance with its annual goodwill impairment review schedule. Based on this review, the Company was not required to record any goodwill impairment.

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The Company is exposed to fluctuations in foreign currency exchange rates because of its global presence and international sales and purchase activities. These foreign currency exposures are identified and managed at the operating unit level. To manage some of these risks, the Company uses forward exchange contracts. These contracts are viewed as risk management tools, involve little complexity, and are not used for trading or speculative purposes. Counterparties to forward exchange contracts are major international commercial banks. The Company does not anticipate non-performance by the counterparties.

The Company formally documents all relationships between hedging instruments and hedged items, as well as its risk management objectives and strategies for undertaking various hedge transactions.  In this documentation, the Company identifies the forecasted transactions that have been designated as a hedged item and states how the hedging instrument is expected to hedge the risks related to that item. The Company formally measures effectiveness of its hedging relationships both at the hedge inception and on an ongoing basis. The Company discontinues hedge accounting prospectively when it determines that the derivative is no longer effective in offsetting changes in the cash flows of a hedged item; when the derivative expires or is sold, terminated or exercised; when it is probable that the forecasted transaction will not occur; or when management determines that designation of the derivative as a hedge instrument is not appropriate.

The Company's forward exchange contracts are designated as a hedge of the cash flow variability arising from forecasted foreign currency denominated purchases. Accordingly, changes in the cash flows of these contracts must be highly correlated with changes in the cash flows of the underlying hedged item at inception of the hedge and over the life of the hedge contract. Gains and losses on these derivatives are recorded in shareholders' equity to the extent they are effective as hedges and reclassified into earnings in the period in which the hedged transaction settles. To the extent that the derivatives are not effective as hedges, gains and losses on these derivatives are recorded immediately into current earnings in other income expense, net.

As of July 31, 2004, the Company was party to approximately $8.3 million in forward exchange contracts providing for the delivery of the various currencies in exchange for others over the succeeding six months. The fair value of the contracts outstanding at July 31, 2004 was a $0.1 million net liability.

The changes in shareholders' equity associated with hedging activity for the three months ended July 31, 2004 and 2003 were as follows:

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The balance recorded in shareholders' equity at July 31, 2004 is expected to be reclassified into earnings in fiscal 2005.

The Company's operations are classified into three operating segments: Sign Making and Specialty Graphics; Apparel and Flexible Materials; and Ophthalmic Lens Processing. Those segments are determined based on management's evaluation of the Company's businesses. Financial data for the three months ended July 31, 2004 and 2003 are shown in the following tables:

A reconciliation of total segment profit to consolidated earnings before income taxes follows:

There were no material changes in the measure of segment profit or differences in the basis of segmentation since the Company's most recent annual report on Form 10-K, filed with the SEC on July 14, 2004.

The Company's total comprehensive income was as follows:

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The following table sets forth the computation of basic and diluted net earnings per common share:

For the three months ended July 31, 2004 and 2003, 2.9 million and 2.4 million, respectively, of common stock equivalents were antidilutive and not included in the above calculation.

There were no significant changes to the commitments and contingencies reported as of April 30, 2004 during the fiscal 2005 first quarter. Summarized below, however, are the matters previously disclosed in Note 16 of the "Notes to Consolidated Financial Statements" in the Company's annual report on Form 10-K for the year ended April 30, 2004, filed with the SEC on July 14, 2004.

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Product Liability Litigation
The Company is the defendant in a legal claim alleging that one of its machines caused a fire on the claimant's premises. The Company believes that it has substantial legal defense; however, there is no assurance that the Company will be successful in asserting defense against this claim.  As of July 31, 2004, the potential exposure for an unfavorable outcome is estimated to range from $0 to $0.5 million. The consolidated financial statements do not include an accrual for this contingency because the Company does not believe that an unfavorable settlement is probable.

Other

The Company currently has lawsuits and claims pending against it. The Company's management believes that the ultimate resolution of these other lawsuits and claims will not have a material effect on its consolidated financial condition or results of operations.

The Company extends financial and product performance guarantees to third parties. There have been no material changes to guarantees outstanding since April 30, 2004.

The changes in the carrying amount of product warranties for the three months ended July 31, 2004 and 2003 are as follows:

Components of net periodic benefit cost for the three months ended July 31 are presented below.

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As of July 31, 2004, no cash contributions to the Gerber Scientific, Inc. and Participating Subsidiaries Pension Plan have been made and the Company continues to expect to contribute $1.6 million to this plan later in fiscal 2005.

Effective July 9, 2004, the Company entered into amendments of its current credit facilities that, among other changes, reduced the interest rates accruing on its outstanding term loans and modified certain operating and financial covenants.

The amendments reduced the annual interest rates under both term loans by eliminating the 2.0 percent annual payment-in-kind interest rate, reducing the annual fee to 1.0 percent from 1.75 percent of average monthly balances, reducing the minimum prime or base rate to 4.0 percent from 4.25 percent, and fixing the annual interest rate at 6.0 percent over the prime rate. The effect of these changes as of July 9, 2004 was to reduce by 2.75 percent the annual rate of interest accruing on Term Loan A, which had an outstanding principal balance of $20.1 million, and to reduce by 4.25 percent the annual rate of interest accruing on Term Loan B, which had an outstanding principal balance of $20.1 million.

The amendments modified operating covenants to permit the Company, within specified limits, to prepay the term loans more frequently, make business acquisitions, pay dividends, and repurchase its common stock.

The amendments also eliminated, beginning with the fiscal quarter ending July 31, 2004, the financial covenant requiring the Company to maintain minimum levels of EBITDA (as defined) as of the end of each fiscal quarter. In addition, the amendments increased the maximum total funded debt (as defined) the Company may have as of the end of each fiscal quarter compared to EBITDA, by increasing the maximum total funded debt to EBITDA ratio from 2:1 to 2.5:1 for the fiscal quarters ending July 31, 2004, October 31, 2004, and January 31, 2005; from 1.5:1 to 2:1 for the fiscal quarter ending April 30, 2005 and for the first three quarters of fiscal 2006; and from 1.5:1 to 1.75:1 for the fiscal quarter ending April 30, 2006 and for each fiscal quarter thereafter.

The Term Loans amendment added a premium for the prepayment in full of the loans that result in the termination of the Term Loans agreement. This premium is subject to reduction over the life of the loans and was initially 1.375 percent of the principal balance based on the $40.1 million principal balance of the term loans outstanding on July 9, 2004.

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To the Board of Directors and Shareholders of
   Gerber Scientific, Inc.:

We have reviewed the accompanying consolidated balance sheet of Gerber Scientific, Inc. and subsidiaries as of July 31, 2004, and the related consolidated statements of operations and cash flows for the three-month periods ended July 31, 2004 and 2003. These consolidated financial statements are the responsibility of the Company's management.

We conducted our reviews in accordance with the standards of the Public Company Accounting Oversight Board (United States). A review of interim financial information consists principally of applying analytical procedures and making inquiries of persons responsible for financial and accounting matters. It is substantially less in scope than an audit conducted in accordance with the standards of the Public Company Accounting Oversight Board (United States), the objective of which is the expression of an opinion regarding the financial statements taken as a whole. Accordingly, we do not express such an opinion.

Based on our reviews, we are not aware of any material modifications that should be made to the consolidated financial statements referred to above for them to be in conformity with U.S. generally accepted accounting principles.

We have previously audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the consolidated balance sheet of Gerber Scientific, Inc. and subsidiaries as of April 30, 2004, and the related consolidated statements of operations, changes in shareholders' equity and cash flows for the year then ended (not presented herein); and in our report dated July 13, 2004, we expressed an unqualified opinion on those consolidated financial statements. In our opinion, the information set forth in the accompanying consolidated balance sheet as of April 30, 2004, is fairly stated, in all material respects, in relation to the consolidated balance sheet from which it has been derived.

/s/ KPMG LLP

Hartford, Connecticut
September 7, 2004

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The following discussion should be read in conjunction with the Consolidated Financial Statements for the three-month periods ended July 31, 2004 ("fiscal 2005 first quarter") and 2003 ("fiscal 2004 first quarter") and related notes to the Consolidated Financial Statements included elsewhere herein, as well as with our annual report on Form 10-K for the fiscal year ended April 30, 2004.

Our financial results for the fiscal 2005 first quarter were an improvement from the fiscal 2004 first quarter, which was largely the result of our cost control efforts and lower interest expense. We lowered both the costs to make our products and the expenses needed to run our businesses. The resulting operating efficiencies were most apparent in our Apparel and Flexible Materials business, which reported significantly higher profit on only a modest revenue increase. Similarly, the improved operational performance of our Ophthalmic Lens Processing segment, excluding restructuring charges, indicates that we can expect to see improvements in profitability as we continue to restructure that business and release new products.

In the fiscal 2005 first quarter, we amended our credit facilities to make changes that, among other things, reduced the interest rate on our higher cost term loans, eliminated certain financial covenants, and eased other financial and restrictive covenants. In conjunction with these amendments, we repaid $10.0 million of our term loans in July 2004. Between the lower debt balances and lower cost of our debt, our interest expense decreased by one-third, or $1.0 million, to $2.1 million in the fiscal 2005 first quarter compared to the fiscal 2004 first quarter.

In the Sign Making and Specialty Graphics segment, we reported an overall revenue decline in the fiscal 2005 first quarter compared to the fiscal 2004 first quarter. While sales of our aftermarket products were steady because of improvement in our U.S. and European markets, revenue declined because of lower equipment sales resulting from ink jet competition and large prior year sales to Kinkos that did not recur. We are developing our own ink jet products, both internally and with external partners, and we recently introduced a new ink jet product named Elan in Europe. While we experienced good initial customer demand for this product, we had some startup problems with units shipped and are proceeding slowly with the rollout to ensure customer satisfaction. Successful and timely market introduction of our new products and resolution of these startup problems are critical for us to compete in this market. Failure to achieve these goals could adversely affect our results of operations and financial con dition.

We continued to make progress implementing the key elements of our business strategy. We announced in the fiscal 2005 first quarter our plan to relocate the manufacturing operations of our Ophthalmic Lens Processing segment in Muskogee, Oklahoma. This move, which we expect will be completed by the end of this fiscal year, is expected to generate approximately $0.6 million of cash savings in fiscal 2005 and approximately $3.0 million of annual savings thereafter. In the fiscal 2005 first quarter, we recorded restructuring charges of $1.4 million for employee separations related to this action. We anticipate additional restructuring charges of up to $5.0 million for the remainder of this fiscal year in connection with the Oklahoma facility relocation and the restructuring of our Spandex business.

We are also continuing the implementation of our enterprise resource system, SAP, for our Sign Making and Specialty Graphics segment's Spandex businesses and are using our shared services organization to reduce costs and increase profitability in this segment. Because this segment's revenue is declining, successful implementation of these restructuring actions is critical to its future results of operations and financial condition.

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The preparation of financial statements requires management to make estimates and assumptions that affect amounts reported. We described the critical accounting policies that require management's most difficult, subjective, or complex judgments in our annual report on Form 10-K for the fiscal year ended April 30, 2004, filed with the SEC on July 14, 2004.

Revenue. Consolidated fiscal 2005 first quarter revenue was $127.7 million compared to fiscal 2004 first quarter revenue of $129.0 million. Foreign currency translation had the effect of increasing revenue in the fiscal 2005 first quarter by approximately $4.2 million compared to the fiscal 2004 first quarter. Adjusting for the effect of foreign currency translation, revenue increased in our Apparel and Flexible Materials and Ophthalmic Lens Processing segments and declined in our Sign Making and Specialty Graphics segment.

The following table shows equipment and aftermarket supplies and service revenue as a percentage of total revenue during the fiscal 2005 first quarter compared to the fiscal 2004 first quarter:

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On a geographic basis and adjusted for foreign currency translation, our fiscal 2005 first quarter business volume was lower in the North American and European regions and higher in the Rest of World region compared to the fiscal 2004 first quarter.

The North American decrease occurred in the Sign Making and Specialty Graphics segment. Fiscal 2004 first quarter equipment sales of $2.4 million to Kinkos that did not recur in the fiscal 2005 first quarter, as well as the transition of sign and specialty graphics production to lower cost ink jet imaging systems and competition from other ink jet system providers were the causes. Increases in the North American businesses of the Apparel and Flexible Materials and Ophthalmic Lens Processing segments, which reflected improving economic conditions, were offsets to the overall decrease.

The European business decline occurred primarily in the Sign Making and Specialty Graphics segment. In addition to the factors affecting this segment's North American equipment sales, startup problems with the Elan ink jet printer introduced in Europe and the discontinuation of a non-strategic product line contributed to the decline. The Apparel and Flexible Materials segment also experienced a decline in business volume because of the continued migration of apparel production from Europe to emerging markets, including China.

The higher business volume in the Rest of World markets was largely the result of the migration of apparel production to emerging markets in the Apparel and Flexible Materials segment. In particular, our business volume in China increased significantly, reflecting both our continued investments in that country and the strength of market conditions there.

Gross Profit Margins. Fiscal 2005 first quarter gross margin of 34.5 percent increased 0.5 percentage points compared to the fiscal 2004 first quarter and increased 1.1 percentage points after adjusting for service cost of sales recorded as selling, general, and administrative expenses (S,G,&A) in the fiscal 2004 period. The higher gross margin was the result of operating efficiencies from our costs reduction efforts, higher prices, and mitigated costs as a result of our hedging activities. These effects were partially offset by lower business volume and a product mix favoring lower margin equipment products. The service cost of sales adjustment was caused by better visibility resulting from the November 1, 2003 implementation of SAP for the Ophthalmic Lens Processing segment.

Selling, General, & Administrative Expenses. S,G,&A expenses as a percentage of revenue were 25.8 percent in the fiscal 2005 first quarter compared to 25.6 percent in the fiscal 2004 first quarter.

Adjusting for the effect of foreign currency translation, S,G,&A expenses decreased $1.2 million in the fiscal 2005 first quarter from the fiscal 2004 first quarter. In addition to the effect of the service cost of sales adjustment noted above, the decrease was primarily attributable to cost control, lower pension expense resulting primarily from the amendments to our pension plan made effective May 1, 2004, and lower legal expenses associated with an SEC investigation that was settled in the fiscal 2004 fourth quarter. These factors were partially offset by higher incentive compensation expense as there was no bonus expense recorded for fiscal 2004.

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Research and Development. Research and development, or R&D, expenses as a percentage of revenue were 4.8 percent in both the fiscal 2005 and 2004 first quarters. Our consistent investment in R&D reflects our commitment to new product development.

Restructuring Charges. During the fiscal 2005 first quarter, we initiated the relocation of the Ophthalmic Lens Processing segment's Muskogee, Oklahoma facility and incurred related employee separation costs of $1.4 million. Additionally, we entered into a sublease agreement for a facility vacated in fiscal 2004. The terms of the sublease required us to increase our original facility cease-use accrual by $0.4 million. Also, we recorded a fiscal 2005 first quarter charge of $0.1 million related to other employee separation costs within both our Sign Making and Specialty Graphics and Apparel and Flexible Materials operating segments. Of the total fiscal 2005 first quarter restructuring charges and excluding the adjustment to the fiscal 2004 facility consolidation accrual, we expect to realize cost savings of $0.6 million in fiscal 2005 and $1.9 million annually thereafter. In the fiscal 2005 first quarter, we paid $0.1 million relating to these restructuring actions, which were funded by cash generated from operations. All future cash payments that relate to fiscal 2005 first quarter charges are expected to be made by the end of fiscal 2006 and will be funded by cash generated from operations. If the estimated amount or timing of our sublease estimates or employee separations varies from our estimates at July 31, 2004, the difference will be realized within restructuring expense.

Other Expense, Net. Other expense, net of $0.2 million in the fiscal 2005 first quarter was lower than in the fiscal 2004 first quarter primarily because of lower foreign currency transaction losses of $0.4 million. The U.S. dollar weakened significantly more in the fiscal 2004 first quarter than in the fiscal 2005 first quarter and this currency effect was the primary cause of the expense decrease. We recognize foreign currency transaction gains and losses on the translation of accounts receivable and payable balances that are reported in one currency and paid in another. Also included in the fiscal 2004 first quarter was a loss of $0.3 million resulting from the write-off of deferred debt issue costs related to our previous credit facility that was in place through May 9, 2003. This expense did not recur in the fiscal 2005 first quarter.

Interest Expense. Interest expense decreased $1.0 million in the fiscal 2005 first quarter from the fiscal 2004 first quarter. The decrease was primarily attributable to lower debt balances and, to a lesser extent, lower term loan interest rates for a portion of the fiscal 2005 first quarter resulting from amendments entered into on July 9, 2004. Average debt balances under our credit facilities were $54.2 million in the fiscal 2005 first quarter compared to $84.7 million in the fiscal 2004 first quarter. The weighted average interest rate of our credit facility debt, inclusive of deferred debt issue costs amortized, was 11.9 percent in the fiscal 2005 first quarter and 13.2 percent in the fiscal 2004 first quarter.

Income Tax Expense. Our consolidated tax rate from continuing operations was 17.1 percent in the fiscal 2005 first quarter compared to the statutory rate in the United States of 35.0 percent. The difference from the statutory rate was primarily attributable to benefits related to export tax incentives and foreign tax planning strategies.

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Net earnings. As a result of the foregoing operating results, net earnings in the fiscal 2005 first quarter were $0.7 million ($0.03 per diluted share) compared to net earnings of $0.4 million ($0.02 per diluted share) in the fiscal 2004 first quarter.

Sign Making and Specialty Graphics