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                UNITED STATES SECURITIES AND EXCHANGE COMMISSION
                            Washington, D. C. 20549
                                   FORM 10-K

                (Mark One) Annual Report / X / (Fee Required) or
                     Transition Report / / (No Fee Required)
                        Pursuant to Section 13 or 15(d)
                     of the Securities Exchange Act of 1934

For the Fiscal Year Ended April 30, 1998             Commission File No. 1-5865

                            GERBER SCIENTIFIC, INC.
             (Exact name of Registrant as specified in its charter)

             Connecticut                                06-0640743
    -----------------------------------          -------------------------
     (State or other jurisdiction of                 (I.R.S. Employer 
      incorporation or organization)              Identification Number)
      

                83 Gerber Road West
                 South Windsor, CT                       06074
    -------------------------------------------       -----------
      (Address of principal executive offices)        (Zip Code)

  Registrant's telephone number, including area code:     (860) 644-1551

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Securities registered pursuant to Section 12(b) of the Act:

                                                    Name of each Exchange
        Title of each class                          on which registered
   -----------------------------------------       -------------------------
    Common Stock, par value $1.00 per share         New York Stock Exchange


At June 30, 1998, 22,694,864 shares of common stock of the registrant were
outstanding. On such date the aggregate market value of the voting stock held by
non-affiliates of the registrant was approximately $455,063,000. Excluded from
this amount is voting stock having an aggregate market value of approximately
$61,245,000 (representing 11.9% of the outstanding voting stock), which is
owned, directly or in trust, by the family of H. Joseph Gerber, the Company's
founder, and by the other members of the Company's Board of Directors, who
are deemed affiliates for purposes of this computation.

Securities registered pursuant to Section 12(g) of the Act: None

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Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of the registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K. / X /.

Indicate by check mark whether the registrant (l) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports) and (2) has been subject to such
filing requirements for the past 90 days. Yes / X /  No /   /.

                      DOCUMENTS INCORPORATED BY REFERENCE

    PORTIONS OF THE DOCUMENTS LISTED BELOW HAVE BEEN INCORPORATED BY REFERENCE
INTO THE INDICATED PARTS OF THIS REPORT, AS SPECIFIED IN THE RESPONSES TO THE
ITEM NUMBERS INVOLVED. 

        (1) 1998 ANNUAL MEETING PROXY STATEMENT (PARTS I, III, AND IV).

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<PAGE>

                            GERBER SCIENTIFIC, INC.

                             Index to Annual Report
                                  on Form 10-K
                           Year Ended April 30, 1998

PART I                                                                    PAGE

Item 1.     Business .............................................          1
Item 2.     Properties ...........................................          5
Item 3.     Legal Proceedings ....................................          5
Item 4.     Submission of Matters to a Vote of Security 
            Holders ..............................................          6
            Executive Officers of the Registrant .................          6


PART II

Item 5.     Market for the Registrant's Common Equity 
            and Related Stockholder Matters ......................          6
Item 6.     Selected Financial Data ..............................          6
Item 7.     Management's Discussion and Analysis of 
            Financial Condition and Results of Operations ........          7
Item 8.     Financial Statements and Supplementary Data ..........         14 
Item 9.     Changes in and Disagreements with Auditors 
            on Accounting and Financial Disclosure ...............         29 


PART III

Item 10.    Directors and Executive Officers of the 
            Registrant ...........................................         29 
Item 11.    Executive Compensation ...............................         30 
Item 12.    Security Ownership of Certain Beneficial 
            Owners and Management ................................         30 
Item 13.    Certain Relationships and Related Transactions .......         30 


PART IV

Item 14.    Exhibits, Financial Statement Schedules, and 
            Reports on Form 8-K ..................................         30 
            Signatures ...........................................         32


<PAGE>

                             GERBER SCIENTIFIC, INC.


PART I

ITEM 1.     BUSINESS.

    Gerber Scientific, Inc., a Connecticut corporation incorporated in 1948, is
a holding company providing corporate management services and financial
resources to its subsidiaries. As used herein, the term "Company" means Gerber
Scientific, Inc. and, unless the context indicates otherwise, its subsidiaries.
The Company designs, develops, manufactures, markets, and services
computer-aided design and computer-aided manufacturing (CAD/CAM) systems to
automate the design and production processes in a broad range of industries. The
Company's principal manufacturing and administrative facilities are located in
Connecticut.

    The Company conducts its business primarily through three wholly owned
operating subsidiaries. Gerber Technology, Inc. (GT), formerly named Gerber
Garment Technology, Inc., designs, develops, manufactures, markets, and services
computer-controlled systems and software for product design, marker-making
(nesting), spreading, labeling, cutting, and handling flexible materials, such
as fabrics and composites, in the apparel, aerospace, automotive, furniture, and
other industries. Gerber Scientific Products, Inc. (GSP) designs, develops,
manufactures, markets, and services microprocessor- and PC-controlled production
systems, software, and aftermarket supplies for the sign making and specialty
graphics industries. Gerber Coburn Optical, Inc., formerly Gerber Optical, Inc.,
designs, develops, manufactures, markets, and services computer-controlled
production systems and aftermarket supplies for the ophthalmic lens
manufacturing industry.

    The Company has foreign subsidiaries that provide marketing and field
service support for the Company's products. These subsidiaries are located in
Belgium, Germany, Holland, Italy, France, Portugal, the United Kingdom, Sweden,
Canada, Mexico, Australia, New Zealand, Singapore, and Hong Kong. The Company
also has a subsidiary in Denmark that performs manufacturing operations.

    As of April 30, 1998, the Company had approximately 2,200 regular, full-time
employees.

    In May 1998, the Company announced the successful completion of its tender
offer for the acquisition of UK-based Spandex PLC ("Spandex"), Europe's and
North America's largest distributor of sign making systems and supplies. In its
results for the year ended December 31, 1997, Spandex reported sales of 
[pound sterling]101.3 ($167 million). The tender price for the shares valued
Spandex at approximately [pound sterling]106.4 million (approximately $173 
million). In addition, Spandex had bank debt outstanding at the time of 
acquisition of approximately [pound sterling]6.2 million (approximately $10 
million). The acquisition of Spandex and the results of its operations will be 
accounted for in the Company's new fiscal year, which began May 1, 1998.

    Effective March 31, 1998, the Company sold its imaging and inspection
systems product class to the BARCO Group, Inc. for $25,000,000 and royalties on
future sales of certain products. This product class developed, manufactured,
marketed, and serviced interactive imaging and inspection systems for the
electronics and commercial printing industries.

    On February 27, 1998, Gerber Optical, Inc., a wholly owned subsidiary of the
Company, acquired the outstanding stock of Coburn Optical Industries, Inc.
(Coburn) of Muskogee, Oklahoma, and subsequently merged with Coburn. The company
was renamed Gerber Coburn Optical, Inc. (GC). The purchase price, including the
costs of acquisition and the repayment of Coburn's outstanding debt, was
approximately $63,000,000. Coburn is a leading manufacturer and international
distributor of a broad range of ophthalmic lens processing equipment and related
supplies used in the production of eyeglass lenses. GC has continued to develop,
manufacture, market, and support the Coburn product lines.

    On February 12, 1997, the Company's GT subsidiary acquired the outstanding
stock of Cutting Edge Inc. (Cutting Edge) of Marblehead, Massachusetts, for a
total cost of approximately $7.8 million and subsequently merged that company
into GT. Cutting Edge manufactures high-performance single layer fabric cutting
systems for the industrial fabric, automotive, furniture, apparel, and composite
materials industries. GT has continued to develop, manufacture, market, and
support the Cutting Edge product lines.

    On September 1, 1994, GT acquired the outstanding stock of Microdynamics,
Inc., (Microdynamics) of Dallas, Texas and subsequently merged that company into
GT. The Microdynamics purchase price was approximately $8.5 million.
Microdynamics was a leading supplier of computer-aided design, graphic design,
and product management systems for the apparel, footware, and other sewn goods
industries. GT has continued to develop, manufacture, market, and support the
Microdynamics product lines.

    On March 1, 1994, GT purchased the business and certain assets and
liabilities of Niebuhr Maskinfabrik A/S (Niebuhr) of Ikast, Denmark, for a total
cost of approximately $1 million. Niebuhr manufactures and markets
computer-automated fabric spreading equipment used in the apparel and related
industries. The acquisition was accomplished through a newly formed Danish
subsidiary of GT known as Gerber Technology A/S, which has continued to
manufacture, market, and support Niebuhr equipment.

                                       1
<PAGE>

INFORMATION ABOUT INDUSTRY SEGMENTS

    The Company designs, develops, manufactures, markets, and services CAD/CAM
factory automation systems, software, and related aftermarket supplies for a
wide range of industries, including ophthalmic, apparel and flexible goods, sign
making and specialty graphics, and automotive and aerospace. No other segment of
the Company constituted 10 percent or more of revenue or net earnings in the
Company's last three fiscal years.

    For each of the Company's last three fiscal years, the approximate
percentage of consolidated sales and service revenue accounted for by the
Company's principal CAD/CAM products and their related aftermarket supplies was
as follows:

                                                 1998        1997       1996
                                                 ----        ----       ----
Cutting, nesting, spreading, and 
  material handling systems                       51%         51%        54%
Microprocessor- and PC-controlled 
  sign making and specialty graphics systems      28%         30%        30%
Ophthalmic lens manufacturing systems             12%          7%         6%
Interactive imaging and inspection systems         9%         12%        10%


CAD/CAM CUTTING, NESTING, SPREADING, AND MATERIAL HANDLING SYSTEMS

    The Company produces computer-controlled material spreading and cutting
systems for the apparel, aerospace, automotive, and other industries that
manufacture with sewn goods. Material spreading systems enhance cutting room
efficiency by automating the preparation of multiple layers of material for the
cutting table. The Company's computer-controlled cutting systems accurately cut
parts out of single and multiple layers of flexible materials, such as textiles,
vinyls, plastics, fiberglass, and advanced composite materials, quickly,
efficiently, and with more precision than the traditional methods of hand
cutting or die cutting.

    The Company's computer-aided design, pattern-making, and marker-making
(nesting) systems automate the design, pattern-making, pattern-grading (sizing),
and marker-making functions. This improves the efficiency of material usage in
the apparel, furniture, luggage, automotive, aerospace, sheet metal, composites,
and other industries.

    The Company also produces several related hardware and software products for
the sewn goods industries. Among the software products is a product data
management system that provides a powerful tool for developing product
specifications, controlling and managing data, and documenting the product
development process, along with production and quality requirements.



CAD/CAM MICROPROCESSOR- AND PC-CONTROLLED SIGN MAKING AND SPECIALTY GRAPHICS
SYSTEMS

    The Company's microprocessor- and PC-controlled production systems and
software bring computer automation to the sign making and specialty graphics
industries. The Company produces a full range of automated lettering systems,
software, plotters, routers, and color digital imaging systems for the design
and production of signs and graphic arts on adhesive-backed vinyls and other
materials. The Company's color digital imaging systems create continuous length,
durable, professional-quality text and graphics, including complicated
halftones, multiple colors, and process four color images directly on sign
making vinyl.

    The Company also sells aftermarket supplies to these industries, including a
wide variety of adhesive-backed vinyls, translucent vinyl films, color foil
cartridges, reflective sheeting, masking film, sandblast stencil, heat transfer
flock, and specialty and screenprinting films.


CAD/CAM OPHTHALMIC LENS MANUFACTURING SYSTEMS

    The Company produces innovative, high-technology system solutions in the
manufacture of prescription eyewear. The ophthalmic manufacturing systems
offered by the Company replace a set of related manual tasks with
computer-controlled automation, reducing operator skill levels and increasing
productivity. The Company's product offerings include the components required to
process an entire prescription, including computerized frame tracing, lens
blocking, surface generating, and lens edging. The individual systems can be
used with other manufacturing equipment or can be combined in a complete system
managed by the Company's processing software. The markets for the Company's
ophthalmic manufacturing systems include independent wholesale eyeglass
processing laboratories, "super-optical" retail stores with on-site processing
facilities, retail chains with central processing laboratories, and independent
optometrists, ophthalmologists, and opticians.

    The Coburn acquisition in February 1998 broadened the Company's product
markets to include the manufacturers of both plastic and glass lenses. Also
gained was a significant consumables and spare parts business and a direct
worldwide distribution network, which extended the Company's geographic reach.
Consumable and spare parts acquired included lens polishing pads, tinting
chemicals, coatings, and miscellaneous tools.

                                       2
<PAGE>

CAD/CAM INTERACTIVE IMAGING AND INSPECTION SYSTEMS

    Prior to the sale of this product class, the Company produced interactive
computer-based photoplotting systems that automate the production of artwork,
tooling, and documentation for printed circuit board (PCB) manufacturers.
Photoplotting systems image with a beam of light on photographic film or glass.
They are used in the electronics industry for producing master artwork and
associated manufacturing aids for PCBs, micropackaging of microchips and
ultra-large scale integrated circuits, and for various other applications
requiring accurate, high-quality graphic masters. The Company also produced
automatic optical inspection systems which are used for quality control in PCB
manufacturing. These systems perform an on-line defect analysis by comparing a
PCB or its artwork master to the original computer-aided design database.

    The Company also produced laser imaging systems for the commercial printing
industry that are used to expose digital printing plates, enabling direct
computer-to-plate printing. These systems enable printing plates to be imaged in
a digital work flow environment, which eliminates the need to expose film to
make a plate for the printing press. The result is the elimination of a number
of steps in the printing process, a reduction in waste, and an improvement in
press efficiency, providing cost savings and faster job turnaround for
commercial printers.

    After the sale of this product class, the Company no longer produces this
particular class of CAD/CAM factory automation system.


RESEARCH AND DEVELOPMENT

    The Company continues to emphasize technological development with research
and development programs designed to create new software and hardware products,
improve existing products, and modify products to meet specific customer needs.
The Company's research and development expenses for the years ended April 30,
1998, 1997, and 1996 were $31,810,000, $30,415,000, and $25,771,000,
respectively. The Company also received and expended approximately $213,000,
$736,000, and $1,373,000 for the years ended April 30, 1998, 1997, and 1996,
respectively, for customer-funded research and development projects.


MARKETING

    More than two-thirds of the Company's product sales are to end-users and are
sold through the Company's direct sales force in the United States, subsidiaries
in Europe, Canada, Mexico, Australia, New Zealand, Singapore, and the Far East,
and independent sales representatives and agents in various parts of the world.
The Company's microprocessor- and PC-controlled sign making and specialty
graphics systems are sold principally to independent distributors for resale by
them. Domestic sales personnel are located in a number of cities, including
Hartford, New York, Atlanta, Chicago, Dallas, Los Angeles, and Miami. The
Company's foreign sales and service subsidiaries are located in Belgium,
Germany, Holland, Italy, France, Portugal, the United Kingdom, Sweden, Canada,
Mexico, Australia, New Zealand, Singapore and Hong Kong. The Company's foreign
subsidiaries act both as sales representatives on a commission basis and as
distributors, depending upon the product and the territory involved.


RAW MATERIALS

    The Company purchases materials, such as computers, computer peripherals,
electronic parts, hardware, and sheet metal from numerous suppliers. Many of
these materials are incorporated directly into the Company's manufactured
products, while others require additional processing. In some cases the Company
uses only one source of supply for certain materials, but to date the Company
has not experienced significant difficulties in obtaining timely deliveries.
Increased demand for these materials or future unavailability could result in
production delays that might adversely affect the Company's business. The
Company believes that, if required, it could develop alternative sources of
supply for the materials that it uses.


PATENTS AND TRADEMARKS

    The Company owns and has applications pending for a large number of patents
in the United States and other countries, which expire from time to time, and
cover many of its products and systems. The Company has pending lawsuits in the
United States and elsewhere where the Company alleges that others are violating
one or more of its patents. While the Company considers that such patents and
patent applications as a group are important to its operations, it does not
consider that any patent or group of them related to a specific product or
system is of such importance that the loss or expiration thereof would have a
materially adverse effect on its business considered as a whole.

                                       3
<PAGE>

    The Company believes that its success depends, to a significant extent, on
the innovative skills, technical competence, and marketing abilities of its
personnel.

    The Company also has registered trademarks for a number of its products.
Trademarks do not expire when continued in use and properly protected.


SEASONALITY

    No portion of the Company's business is subject to significant seasonal
fluctuation.


WORKING CAPITAL

    The Company's business generally does not require unusually large amounts of
working capital. The Company receives advance payments on customer orders for
some of its products. The Company also sells certain of its products through
leasing programs that are financed by third-party financial institutions. These
leases are generally for three- to five-year terms. The Company has recourse
obligations for leases that are financed under these leasing programs and these
obligations are secured and collateralized by the underlying equipment.


CUSTOMERS

    The Company's customers are primarily end-users, except in the sale of
microprocessor- and PC-controlled sign making and graphic arts systems, for
which the Company's customers are predominantly independent distributors. No
single customer accounted for 10 percent or more of the Company's consolidated
revenue in 1998, 1997, or 1996. Customer purchases of capital goods often vary
from year to year, and it is normal for the Company's customer base to change
accordingly. The Company believes that the loss of any single customer or small
group of customers would not have a materially adverse impact on the Company's
business.


BACKLOG

    The Company's backlog of orders considered firm was approximately
$51,700,000 at April 30, 1998, compared with $56,800,000 at April 30, 1997.
Substantially all the backlog at April 30, 1998, is scheduled for delivery in
fiscal 1999. The Company records as backlog firm orders from customers for
delivery at specified dates. Historically, the Company has experienced few
cancellations of orders.


COMPETITION

    The Company competes in a variety of markets and with a variety of other
companies. In the markets the Company serves, the principal competitive factors
are product performance, price, customer support, and company reputation.

    The Company believes that it is the largest worldwide supplier to the
apparel and allied industries of computer-controlled limp material cutting
systems and pattern-making, grading, and nesting systems. There is worldwide
competition in these markets, and certain competing companies have become
significant suppliers. Certain of these competitors have marketed cutting
equipment that the Company believes may have infringed the Company's patents,
and the Company has received favorable settlements from such competitors.

    The Company holds the predominant market position in the marketplace for
microprocessor- and PC-controlled sign making and specialty graphics systems.
The Company pioneered the development of these technologies, holding several key
related patents. While there has been an increase in the number of companies
marketing competing products, the Company believes that none have been able to
match the combined product, marketing, and selling/distribution strength of the
Company.

    The Company is the largest worldwide supplier of ophthalmic manufacturing
systems used in the manufacture of eyeglass lenses. The Company believes that
its leadership in technology and ability to make strategic alliances and
acquisitions has enabled it to become the major supplier of computerized surface
blocking systems, three-axis lens generating systems, and three-axis lens edging
polishing systems.

    The Company could be adversely affected if it were unable to respond with
competitive products, in a timely manner, to pricing changes or significant new
product announcements affecting its product lines.

                                       4
<PAGE>

    In order to hedge the effect of unfavorable foreign currency fluctuations on
prices that could potentially adversely affect it, the Company was party to
approximately $9 million in forward exchange contracts at April 30, 1998
providing for the delivery by the Company of various foreign currencies in
exchange for U.S. dollars over the succeeding five months. The counterparties to
these contracts were major international commercial banks. The Company
continually monitors its open forward exchange contract position and does not
anticipate nonperformance by the counterparties.


FINANCIAL INFORMATION ABOUT FOREIGN AND DOMESTIC OPERATIONS AND EXPORT SALES

    The financial information required by Item 1 relating to export sales is
included in Note 1, "Products and Operations" of "Summary of Significant
Accounting Policies and Notes to Consolidated Financial Statements" appearing on
page 20 of this Form 10-K.

    The approximate percentage of consolidated sales and service revenue from
foreign (i.e., non-U.S.) customers for each of the last three fiscal years was
as follows:

                                               1998         1997         1996
                                               ----         ----         ----
Percentage of consolidated sales and
   service revenue from foreign customers       46%          48%          49%

    The Company is subject to the usual risks involved in international sales,
which include unfavorable economic or political conditions in foreign countries,
restrictive trade policies imposed by foreign governments, restrictions on the
transfer of funds, and foreign currency exchange rate fluctuations. The
Company's foreign product sales have generally been made in U.S. dollars, but
for certain products and territories (principally in Western Europe), the
Company has made sales in local currencies. The Company has a program to hedge
such sales through the use of forward foreign currency exchange contracts.


ITEM 2.     PROPERTIES.

    The Company's principal operations are conducted in the following
facilities:

                                                                    Square
Type of Facility                           Location                 Footage
----------------                           --------                 -------

Manufacturing/office (O)             South Windsor, CT (3 sites)    412,000
Manufacturing/office (O)             Tolland, CT                    252,000
Manufacturing/office (O)             Manchester, CT                 118,000
Manufacturing/office (O)             Muskogee, OK                   133,000
Manufacturing/office (L)             Ikast, Denmark                  64,000
Manufacturing/office (L)             Marblehead, MA                  32,000
Service/office (O)                   Richardson, TX                  68,000
Warehouses/sales and 
  service offices (O)                Various                         42,000
Warehouses/sales and 
  service offices (L)                Various                        248,000
_____________________
(O) Company owned
(L) Leased

    Management believes that the Company's present facilities, which are
utilized primarily on a single-shift basis with overtime, are well maintained
and are adequate to meet the Company's immediate requirements.

    The Company's leases for warehouse and sales and service office space are
generally on short-term bases. Rentals for leased facilities aggregated
$2,787,000 in the fiscal year ended April 30, 1998.

    The Company owns substantially all of the machinery and equipment used in
its operations and leases the remainder. In the fiscal year ended April 30,
1998, the aggregate rental under such leases was $1,808,000. The Company fully
utilizes such machinery and equipment.


ITEM 3.     LEGAL PROCEEDINGS.

    Various lawsuits, claims, and governmental proceedings are pending against
the Company. Certain of these matters relate to the Company's patents.
Management of the Company believes that the ultimate resolution of these matters
will not have a materially adverse effect on the Company's consolidated
financial position or the results of its operations.

                                       5
<PAGE>

    Other relevant information regarding legal proceedings is included in Part
II, Item 8, Note 10, "Litigation Award," of the "Notes to Consolidated Financial
Statements" appearing on page 22 of this Form 10-K.


ITEM 4.     SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.

    No matters were submitted to a vote of the security holders during the
fourth quarter of the Company's fiscal year ended April 30, 1998.



EXECUTIVE OFFICERS OF THE REGISTRANT.

    Included in Part III, Item 10, "Directors and Executive Officers of the
Registrant" appearing on page 29 of this Form 10-K.



PART II

ITEM 5.     MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER
            MATTERS.

      The Company's common stock is listed on the New York Stock Exchange under
the symbol "GRB". Shareholders of record totaled 1,471 at April 30, 1998. The
other information required by Item 5 is included in Part II, Item 8, Note 18,
"Quarterly Results (Unaudited)" of the "Notes to Consolidated Financial 
Statements" appearing on page 28 of this Form 10-K.


ITEM 6.     SELECTED FINANCIAL DATA.

<TABLE>
<CAPTION>

                                                                                        For years ended April 30
                                                          ------------------------------------------------------------------------
In thousands except per share amounts                         1998              1997            1996           1995           1994
----------------------------------------------------------------------------------------------------------------------------------
<S>                                                       <C>               <C>             <C>            <C>            <C>    
Sales and service revenue ............................... $430,480          $380,917        $359,120       $322,708       $260,734
Net earnings before non-recurring special charge(1)......   23,685            16,009          19,868         18,111         15,321
  Per common share           
    Basic ...............................................     1.04               .69             .85            .76            .64
    Diluted .............................................     1.02               .69             .84            .76            .64

Net earnings(2-5)........................................    7,385            16,009          19,868         18,111         15,321
  Per common share
    Basic ...............................................      .32               .69             .85            .76            .64
    Diluted .............................................      .32               .69             .84            .76            .64
Cash dividends per common share .........................      .32               .32             .32            .30            .23
Total assets ............................................  338,767           325,215         312,988        324,428        286,443
Long-term debt ..........................................    6,953             7,145           7,338          7,531          7,724
Shareholders' equity .................................... $230,914          $248,021        $239,298       $237,302       $224,824
Weighted average common shares outstanding(6)
    Basic ...............................................   22,800            23,250          23,463         23,796         23,792
    Diluted .............................................   23,331            23,365          23,689         23,950         23,967
</TABLE>

1. Excludes a non-recurring special charge of $16,300,000 ($.70 diluted earnings
per share) from the write-down of certain assets on the sale of the Company's
Gerber Systems unit. Gerber Systems represented the Company's imaging and
inspection systems product class.

2. Net earnings for the year ended April 30, 1998 included the non-recurring
special charge discussed in Note 1 above and again of approximately $1,000,000
($.04 diluted earnings per share) from the final settlement of the Company's UK
patent litigation with Lectra Systemes S.A. of France. 

3. Net earnings for the year ended April 30, 1997 included a gain of $1,032,000
($.04 diluted earnings per share) from life insurance benefits the Company 
received upon the death of Mr. H. Joseph Gerber. 

4. Net earnings for the year ended April 30, 1994 included a gain of $788,000 
($.03 diluted earnings per share) from adopting the method of accounting for 
income taxes required by Statement of Financial Accounting
Standards No. 109. 

5. Net earnings for the year ended April 30, 1994 included a gain of 
approximately $3,400,000 ($.14 diluted earnings per share) from the final
judgment in a U.S. patent infringement case against Lectra Systemes S.A. of
France and its U.S. subsidiary. 

6. In the year ended April 30, 1998, the Company purchased 800,000 shares of the
stock from the estate of Company founder H. Joseph Gerber. 

                                       6

<PAGE>

ITEM 7.     MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
            RESULTS OF OPERATIONS.

For years ended April 30, 1998, 1997, and 1996


RESULTS OF OPERATIONS

In February 1998, the Company acquired the outstanding stock of Coburn Optical
Industries, Inc. (Coburn). Fiscal year 1998 included two months results of
operations and cash flows of that company.

In March 1998, the Company sold its Gerber Systems unit, which comprised the
Company's imaging and inspection systems product class. As a result, fiscal year
1998 included eleven months results of operations and cash flows for this
product class.

In May 1998, the Company announced the successful conclusion of its tender offer
for the outstanding capital stock of Spandex PLC (Spandex). No effect has been
given to this acquisition in the financial statements as of and for the year
ended April 30, 1998. Pro forma financial data giving effect to the Spandex
acquisition, as well as the Coburn acquisition, as if they had occurred at the
beginning of the two-year period ended April 30, 1998, has been included in Note
5 to the consolidated financial statements.

REVENUE--1998 VS. 1997
Consolidated revenue in 1998 was $430.5 million, an increase of $49.6 million or
13 percent from $380.9 million in 1997. The increase in 1998 reflected higher
product sales and a slight increase in service revenue. Each of the Company's
product classes experienced sales growth in 1998, except for the Company's
imaging and inspection systems. This product class was sold in March 1998.
Consolidated revenue was also bolstered by acquisitions in 1998. Gerber
Technology's (GT) Cutting Edge[registered trademark], an acquisition in last
year's fourth quarter, and Coburn Optical Industries, Inc., an acquisition in
this year's fourth quarter, incrementally added $16.5 million and $12.5 million
in sales, respectively.

The largest increases in product sales occurred in the Company's line of
computer-controlled pre-production, design, manufacturing, spreading, and unit
production systems for the apparel and flexible goods industries. The most
significant increases within this product class were from
GERBERcutter[registered trademark] fabric cutting systems and fabric spreading
systems, both in the U.S. and European markets. Also contributing were higher
sales of related software products, including a product data management system
that provides a powerful tool for developing product specifications, controlling
and managing data, and documenting the product development process, production,
and quality requirements.

Product sales also increased in 1998 from sales of the Company's lens edge
finishing systems to both the optical superstore chains and the wholesale
optical laboratories. The Company continued to benefit from higher demand in
these markets for its complete lab system. Another developing segment was the
independent eyewear practitioner market (ophthalmologists, optometrists, and
opticians). Sales to this market, as well as sales to the wholesale optical
laboratories, were generated from the Company's strategic distribution alliance
with a major, vertically integrated lens manufacturer.

Higher sales of the Company's aftermarket supplies for the sign making and
specialty graphics product class also contributed to the 1998 sales increase.
Demand for consumables for the GERBER EDGE, a digital imaging system for color
printing directly on sign vinyl, was the principal factor.

The decrease in the imaging and inspection systems product class was caused by
lower shipments of computer-to-plate imaging systems for the commercial printing
industry and the inclusion of less than a full year's results (eleven months) in
the Company's consolidated results of operations, and was partially offset by
higher shipments of OEM-supplied equipment for the electronics industry.

On a geographic basis, sales gains were realized in 1998 in each of the
Company's major geographic markets--U.S., Europe, Far East, and other
international. Most notably, export sales to European customers improved
significantly, up $7.7 million from the previous year to $76.1 million. This
increase was the continuation of a stronger shipment trend that started in the
prior year's second half. Export sales to Latin American markets were $13.1
million, up $3.7 million from the prior year, largely due to an increase in
demand for the Company's ophthalmic lens manufacturing systems. Export sales to
the Far East were $44.9 million, up $2.6 million from the prior year, due
principally to an increase in demand for the Company's computer-controlled
pre-production, design, manufacturing, spreading, and unit production systems
for the apparel and flexible materials industries. In total, export sales from
the United States in 1998 were $165.6 million, 11.1 percent higher than the
prior year, and represented 38.5 percent of total revenue compared with 39
percent in both 1997 and 1996.

                                       7
<PAGE>

REVENUE--1997 VS. 1996
Consolidated revenue in 1997 was $380.9 million, an increase of $21.8 million or
6.1 percent from $359.1 million in 1996. The increase in 1997 reflected higher
product sales and a slight increase in service revenue. Each of the Company's
product classes experienced sales growth in 1997, except for the Company's line
of computer-controlled cutting, nesting, spreading, and material handling
systems. The decrease in this product class was caused by the relative weakness
in demand from the apparel industry for fabric cutting systems, which occurred
in the first half of the year.

The largest increase in product sales occurred in imaging systems as the Company
attempted to penetrate the commercial printing industry with computer-to-plate
digital imaging systems. Increased sales of the Company's sign making systems
and aftermarket supplies also contributed to the 1997 sales increase. The sales
increase was fueled by the introduction of two new high-speed sign making
routers and strong demand for aftermarket supplies, especially consumables for
the GERBER EDGE.

Product sales gains were also realized in 1997 from sales of the Company's
optical lens manufacturing systems to both the optical superstore chains and the
wholesale optical laboratories. The opening of new retail stores, as well as the
conversion of existing stores, led to higher demand for the Company's complete
lab system. Market consolidation and the Company's initial strategic
distribution alliance with a major, vertically integrated lens manufacturer
contributed to higher sales to the wholesale optical laboratories.

In the third and fourth quarters of 1997, the Company experienced stronger
demand, especially from the United States and certain international markets, for
its line of computer-controlled cutting, nesting, spreading, and material
handling systems for the apparel and related industries. Also contributing were
higher sales of related software products, including a product data management
system.

Slightly affecting 1997 comparative sales was the Company's acquisition of
Cutting Edge, Inc. (Cutting Edge) in February 1997, which added $2.3 million to
1997 fourth quarter and annual revenue. GT Cutting Edge manufactures
high-performance single layer fabric cutting systems for the industrial fabric,
automotive, furniture, apparel, and composite materials industries.

Geographically, sales gains were realized in 1997 in each of
the Company's major geographic markets. Export sales to Far East customers
improved significantly, up $5.9 million from the previous year to $42.4 million.
All of the Company's product classes had increased sales in the Far East in 1997
compared with 1996. Also, export sales to Latin America and Canada were up $1.9
million and $2.7 million, respectively. The increase in Latin American exports
was largely a result of increased demand for the Company's computer-controlled
pre-production, design, manufacturing, spreading and unit production systems for
the apparel and flexible materials industries. The increase in Canadian exports
was largely due to increased demand for the Company's interactive imaging and
inspection systems for the printed circuit board and graphic arts industries. In
total, export sales from the United States in 1997 rose $10.4 million, or 7.5
percent, from the previous year and represented 39 percent of total revenue.

REVENUE--1996 VS. 1995
Consolidated revenue in 1996 was $359.1 million, an increase of $36.4 million or
11 percent from $322.7 million in 1995. The increase in 1996 reflected higher
product sales while service revenue was substantially unchanged. Revenue in 1995
included the effect of a change in fiscal year-end for certain of the Company's
foreign subsidiaries, which added $6.7 million to the 1995 total. Excluding this
amount from the comparison, year-to-year revenue increased 14 percent from 1995
to 1996.

Each of the Company's product classes and major geographic markets experienced
sales growth in 1996. The largest sales increase occurred in color digital
imaging sign making systems and was led by sales of the GERBER EDGE and related
aftermarket supplies. Also contributing to the higher sales in this product
class was a new line of friction-fed plotters, which are used to cut sign images
from sign making vinyl.

    Increased sales of the Company's computer-to-plate digital imaging systems
for the commercial printing and graphic arts industries also contributed to the
1996 sales increase. Product sales gains were also realized in 1996 in optical
lens manufacturing systems and in the Company's line of marker-making and 
fabric-spreading systems for the apparel and allied industries.

                                       8
<PAGE>

GROSS MARGINS
The overall gross profit margin in 1998 was 44.8 percent compared with 44.2
percent in 1997. This increase reflected higher margins on product sales, which
were partially offset by lower service margins. The gross profit margin on
product sales was 45.9 percent in 1998 compared with 45.2 percent in 1997.
Favorable volume effects from higher shipments of fabric cutting systems,
especially in North American markets, was a primary reason for the improvement.
This was partially offset by higher sales of OEM-supplied equipment for the
electronics industry and also by price discounting on computer-to-plate imaging
systems for the commercial printing market. Service gross profit margins
decreased in 1998 to 36.4 percent from 37 percent in 1997. The reduction in
service margins was caused by costs in 1998 associated with development of an
applications training revenue stream from the computer-to-plate systems
business.

The overall gross profit margin in 1997 was 44.2 percent compared with 44.8
percent in 1996. This reflected lower margins on product sales partially offset
by higher service margins. The gross profit margin on product sales was 45.2
percent in 1997 compared with 46.3 percent in 1996. Contributing to the lower
product gross margin in 1997 were higher sales of OEM-supplied equipment,
particularly for the electronics industry, and price discounting on newly
introduced computer-to-plate digital imaging systems in support of efforts to
penetrate the commercial printing market. Product gross margins were also
pressured by price discounting on sales of cutting and marker-making systems to
the apparel industry, especially in the European market. Service gross profit
margins increased in 1997 to 37 percent from 34.2 percent in 1996. The
improvement in service gross profit margins resulted, in part, from the
utilization of service personnel on a product retrofit program.

The gross profit margins on product sales in 1996 were higher than in 1995 while
margins on service revenue declined slightly. The improvement in product margins
reflected the favorable impact of higher sales volume in 1996, although product
margins were pressured by price discounting on sales of cutting and
marker-making systems to the apparel industry. Service gross margins were lower
in 1996 due to less-than-anticipated revenue growth in servicing cutting and
marker-making systems.

SELLING, GENERAL AND ADMINISTRATIVE EXPENSES
Excluding a non-recurring special charge in 1998, selling, general and
administrative (S, G & A) expenses were $129.8 million (30.2 percent of
revenue), which compared with $120.1 million (31.5 percent of revenue) in 1997
and $111.7 million (31.1 percent of revenue) in 1996. The higher S, G & A
expenses in each year related primarily to the higher sales volume. Significant
marketing expenses associated with the introduction of computer-to-plate imaging
systems for the commercial printing and graphic arts industries affected 1998,
1997, and 1996 S, G & A expenses. The increased expenses in 1998 were also
caused by higher marketing expenses associated with major trade shows, the
inclusion of the first full year of GT Cutting Edge expenses, and the inclusion
of two months of Coburn expenses. Partially offsetting these increases was the
effect of a cost reduction program implemented at the Company's Gerber
Technology subsidiary.

RESEARCH AND DEVELOPMENT EXPENSES
The Company has historically committed significant resources to research and the
development of new products and strives to maintain a leading position in
automation technology in the various markets it serves. Research and development
(R&D) expenses represented 7.4 percent of revenue in 1998 compared with 8.0
percent and 7.2 percent of revenue in 1997 and 1996, respectively. Although R&D
expenses increased from the prior year, the percentage of R&D expenses to
revenue was lower this year. The dollar increase related to increased
development of new microprocessor- and PC- controlled sign making and graphic
arts systems ($1.7 million), ophthalmic lens manufacturing systems ($1.2
million), and the inclusion of the expenses of GT Cutting Edge ($0.8 million).
Partially offsetting these were decreased development expenses for interactive
imaging and inspection systems ($2.2 million). R&D expenses in 1997 were higher
than in 1996 due largely to the increased development of new interactive imaging
and inspection systems ($1.9 million). Also contributing to higher R&D levels in
1997 were the development of new sign making plotters ($1.4 million) and new
Windows-based software products for the Company's optical lens manufacturing
systems ($1 million). The Company's R&D to revenue percentage will decline in
fiscal year 1999 with the acquisition of Spandex. Spandex, which had revenue of
approximately $167 million in its last reported year ended December 31, 1997, is
principally a distribution company and has insignificant research and
development activities.

                                    9
<PAGE>

NON-RECURRING SPECIAL CHARGE
In the fourth quarter of fiscal year 1998, the Company recorded a $25 million
pre-tax charge related to the write-down of certain assets of the Company's
Gerber Systems unit. Gerber Systems comprised the Company's imaging and
inspection systems product class, which was sold to the BARCO Group of Belgium
as of March 31, 1998 for $25 million in cash plus contingent future royalties
based on the sales of certain products. The special charge reflected the
write-down of inventory, accounts receivable, and other items. The special
charge amounted to approximately $16.3 million after taxes or $.70 per share on
a diluted basis.

INTEREST EXPENSE
In each of the years 1998, 1997, and 1996, the Company's debt obligations
consisted primarily of Industrial Revenue Bonds with short-term variable
tax-exempt interest rates. In February 1998, the Company borrowed $32.5 million
to finance the acquisition of Coburn. This debt was fully repaid by April 30,
1998. With the exception of that borrowing, debt levels changed only slightly
over this three-year period, and the changes in the Company's interest expense
reflected primarily the movements in short-term interest rates. The Company's
interest expense will increase substantially in fiscal year 1999 as a result of
the acquisition of Spandex, which was financed with debt.

OTHER INCOME
Other income in 1998 included a gain of approximately $1.6 million from the
final settlement of the Company's UK patent litigation with Lectra Systemes S.A.
of France, which related to computer-controlled cutting equipment. In 1995, the
Company collected a damage award of $5.9 million in this case. Lectra appealed
this damage award and the Company deferred any income recognition pending the
outcome of the appeals process. In December 1996, a Court of Appeals decision
required the Company to repay $3.2 million to Lectra. The gain recorded in 1998
represented the difference between the judgment and additional legal expenses
incurred by the Company.

Other income in 1997 included a gain of approximately $1 million from life
insurance benefits the Company received upon the death of Mr. H. Joseph Gerber,
the Company's founder and former president. Exclusive of these amounts, other
income in 1998, 1997, and 1996 came primarily from interest on investments and
royalty income.

TAXES
The statutory U.S. Federal income tax rate was 35 percent for 1998, 1997, and
1996 while the effective income tax provision rates were 25.3 percent, 27.9
percent, and 28.7 percent, respectively. Offsetting the statutory U.S. Federal
income tax rate were research and development tax credits (reinstated through
legislation in 1997), tax-exempt interest income from the Company's municipal
bond investments, and the tax savings derived from the Company's Foreign Sales
Corporation (FSC). Each of these items impacted the effective income tax rate to
a greater degree in 1998 because of the reduction in pre-tax income from the
non-recurring special charge. Additionally, the tax-exempt life insurance
benefit noted above reduced the effective tax rate in 1997. The temporary
expiration of the research and development tax credit in 1996 contributed to the
higher tax rate in that year.

NET EARNINGS
Net earnings were $7.4 million, or $.32 diluted earnings per share for fiscal
1998, which included a non-recurring special charge of approximately $16.3
million, or $.70 diluted earnings per share. Excluding the special charge, net
earnings rose 48 percent to $23.7 million, or $1.02 diluted earnings per share
from $16 million, or $.69 diluted earnings per share, in fiscal 1997. The
increase was attributable to successful implementation of a profit improvement
plan at GT, favorable volume effects from higher shipments of fabric cutting
systems and optical lens manufacturing systems, and results of operations of
acquired companies.

REPORTING
In June 1997, the FASB issued two additional statements, SFAS No. 130,
"Reporting Comprehensive Income" and SFAS No. 131, "Disclosures About Segments
of an Enterprise and Related Information." These statements are both effective
for years beginning after December 15, 1997. Their adoption is not expected to
impact the financial results of the Company but may require the Company to add
certain disclosures not currently included in the financial statements.

In April 1998, the FASB issued SFAS No. 132, "Employers' Disclosures About
Pensions and Other Postretirement Benefits", which is effective for years
beginning after December 15, 1997. The Statement revises the required
disclosures for employee benefit plans, but it does not change the measurement
or recognition of such plans. As a result of implementing this statement, the
Company does not expect significant additional reporting requirements.

                                       10
<PAGE>

FINANCIAL CONDITION

In May 1998, the Company acquired the outstanding capital stock of Spandex
pursuant to a cash tender offer. The acquisition was financed by borrowing
[pound sterling]104.4 million (approximately $170 million) under a new bank
revolving credit agreement, [pound sterling]4.0 million (approximately $6.5
million) under acquisition loan notes, and by utilizing cash balances. No effect
has been given to this acquisition in the financial statements as of and for the
year ended April 30, 1998. Pro forma financial data giving effect to the Spandex
acquisition, as well as the Coburn acquisition, as if they had occurred at the
beginning of the two-year period ended April 30, 1998, has been included in Note
5 to the consolidated financial statements.

LIQUIDITY
Cash and short-term cash investments totaled $27 million at April 30, 1998
compared with $9.5 million at April 30, 1997 and $8.7 million at April 30, 1996.
As of April 30, 1998, the Company had liquidated its longer-term investment
portfolio of tax-exempt municipal securities. This portfolio totaled $36.6
million at April 30, 1997 and $14.8 million immediately prior to its sale. The
sale of the portfolio along with the cash received on the Gerber Systems sale
was used to partially fund the Coburn acquisition.

Net working capital was $94.8 million at April 30, 1998, compared with $118.9
million and $101.7 million at April 30, 1997 and 1996, respectively. The working
capital ratio at April 30, 1998 was 2.0 to 1 compared with 3.0 to 1 and 2.8 to 1
at April 30, 1997 and 1996, respectively. The net working capital position of
Coburn was weaker than the Company's at the time of acquisition and, when
combined with the acquisition related cash payments, lowered the Company's
consolidated liquidity, working capital, and current ratio at April 30, 1998.

CASH FLOWS
Operating activities provided $58.6 million in cash in 1998. The cash generated
by earnings and by the non-cash charges against earnings for depreciation,
amortization, and the special charge recorded on the sale of the imaging and
inspection systems product class was somewhat offset by growth in inventories.
The growth in inventories related to a significantly higher volume of business
in the 1998 fourth quarter. Significant operating cash flow was also generated
in 1998 from increases in accounts payable, which was related primarily to
improved management of vendor payment cycles.

Significant non-operating uses of cash were $61.5 million for the acquisition of
Coburn and repayment of its debt; purchase of treasury stock of $16.4 million;
additions to property, plant and equipment of $15.9 million; and dividends on
common stock of $7.3 million. Significant non-operating sources of cash included
$36.6 million in proceeds from maturities and the sale of the Company's
longer-term investment portfolio and $26.7 million in proceeds from the sale of
the imaging and inspection systems product class, including the sale of a
facility.

Operating activities provided $8.4 million in cash in 1997. The cash generated
by earnings and by depreciation and amortization was offset substantially by
growth in accounts receivable. The growth in receivables related to a
significantly higher volume of business in the 1997 fourth quarter. Also
affecting the Company's receivables in 1997 were extended payment terms given on
sales of computer-to-plate digital imaging systems. Significant non-operating
uses of cash were $7.4 million for the acquisition of Cutting Edge and $1.0
million for repayment of its debt; additions to property, plant and equipment of
$13.1 million; and dividends on common stock of $7.4 million.

Operating activities provided $5.9 million in cash in 1996. The cash generated
by earnings and by depreciation and amortization was substantially offset by
growth in accounts receivable and inventories related to the higher volume of
business and by a reduction in accounts payable related primarily to the timing
of vendor payments. Significant non-operating uses of cash in 1996 were for
additions to property, plant and equipment of $12.6 million; open market
purchases of the Company's common stock of $11.3 million; and dividends on
common stock of $7.5 million.

The additions to property, plant and equipment of $15.9 million in 1998 were
funded by operations. In 1997 and 1996, the Company spent $13.1 million and
$12.6 million, respectively, for additions to property, plant and equipment. The
Company expects that 1999 capital expenditures, including those of Spandex, will
be in the range of $22-$24 million and expects to fund these additions with cash
on hand and cash generated by operations.

                                       11
<PAGE>

The Company has a common stock buy-back program authorized by the Board of
Directors. Under this authorization, the Company may purchase up to an
additional 763,000 shares of its outstanding common stock as, in the opinion of
management, market conditions warrant. No purchases of common stock were made
under this authorization in 1998 and 1997. Under a separate special Board of
Directors' authorization, the Company purchased 800,000 shares of its common
stock from the estate of H. Joseph Gerber for a total of $16.4 million, or
$20.56 per share including expenses. These shares are being held by the Company
as authorized but unissued shares. In 1996, the Company purchased 681,200 shares
for $11.3 million at an average price of $16.64 per share.

DEBT
At April 30, 1998 and 1997, the Company's long-term debt consisted of tax-exempt
Industrial Revenue Bonds amounting to $7.1 million and $7.3 million,
respectively, at those dates. The Company's ratio of total debt to shareholders'
equity was 3.1 percent at April 30, 1998 compared with 3.0 percent at April 30,
1997 and 3.1 percent at April 30, 1996. Scheduled maturities of this long-term
debt in 1999 amount to $.2 million, and payment is expected to be made with cash
from operations.

At April 30, 1998, the Company had bank lines of credit, which included a $190
million bridge loan facility and a $40 million line of credit from a major U.S.
commercial bank. The bridge loan facility supported the Company's tender offer
to purchase the outstanding stock of Spandex.

In May 1998, the Company entered into a five-year $235 million revolving
multi-currency credit facility with a group of major U.S., European, and Asian
commercial banks. The facility provided the long-term financing for the
acquisition of the capital stock of Spandex and the refinancing of its debt, and
for other general corporate purposes and replaced the $190 million bridge loan
facility and the $40 million line of credit. The interest rate on borrowings
under this facility is variable and is based on the London Interbank Offered
Rate (LIBOR) plus an applicable margin, which ranges from 5/8 percent to 1/4
percent based on the relationship of the Company's consolidated total debt to
EBITDA (earnings before interest, taxes, depreciation, and amortization). This
credit line also has a facility fee, which ranges from 1/4 percent to 1/8
percent of the credit line. Covenants in the credit facility require the Company
to maintain certain levels of net worth, certain ratios of debt to EBITDA, and a
minimum fixed charge coverage amount, as defined therein.

In addition to the $235 million revolving line of credit, the Company has a $15
million multi-currency line of credit from a major European commercial bank.
This line of credit is available in various sub-limits to certain of the
Company's European subsidiaries, and repayment is guaranteed by the parent
Company. Borrowings under this line of credit bear interest at 1/4 percent above
the LIBOR for the relevant currency and term with a commitment fee of 1/8
percent of the unused amount.

                                       12
<PAGE>

FORWARD EXCHANGE CONTRACTS
As of April 30, 1998, the Company was party to approximately $9 million in
forward exchange contracts providing for the delivery by the Company of various
foreign currencies in exchange for U.S. dollars over the succeeding five months.
The counterparties to the forward exchange contracts were major international
commercial banks. The Company continually monitors its open forward exchange
contract position and does not anticipate nonperformance by the counterparties.
In management's opinion, these financial instruments do not represent a material
off-balance sheet risk in relation to the consolidated financial statements.
Based upon market prices at April 30, 1998 for future deliveries of the foreign
currencies in exchange for U.S. dollars, the hedging gain deferred at that date
amounted to approximately $.2 million.

LEASE FINANCING AGREEMENT
The Company has an agreement with a major financial services institution to
provide lease financing to purchasers of the Company's equipment. The present
value of the lease receivables financed under this agreement amounted to
approximately $42.7 million at April 30, 1998 and $46.2 million at April 30,
1997. The underlying equipment collateralizes the lease receivables. In the
event of default by the lessee, the Company has liability to the financial
services institution under recourse provisions. The Company's liability for
uncollected amounts financed in excess of the estimated resale value of the
equipment is limited to the extent of loss pools. These loss pools are
established as percentages of each associated group of transactions that are
financed in a calendar year and range from five to ten percent of the amount
financed. Management believes that the allowance it has established for losses
under the recourse provisions is adequate to cover the Company's obligations.

YEAR 2000
The Company is assessing its exposure to the Year 2000 date issue, which can
affect computer programs that use only two digits to identify a year in a date
field. The Company's products and key financial and operational systems are
being reviewed and, where required, detailed plans have been, or are being,
developed and implemented on a schedule intended to permit the Company's
computer systems and products to continue to function properly. The Year 2000
date issue is expected to increase costs in fiscal years 1999 and 2000 although
cost estimates are not complete. Management does not expect that these costs
will have a material adverse impact on the Company's financial position, results
of operations, or cash flows. However, the Year 2000 date issue could adversely
impact the Company if suppliers, customers, and other businesses do not address
this issue in a timely manner.

FORWARD LOOKING STATEMENTS

This report includes forward looking statements that describe the Company's
business prospects. Readers should keep in mind factors that could have an
adverse impact on those prospects. These include political, economic, or other
conditions, such as recessionary or expansive trends, inflation rates, currency
exchange rates, taxes, and regulations and laws affecting the business, as well
as product competition, pricing, the degree of acceptance of new products to the
marketplace, and the difficulty of forecasting sales at various times in various
markets.

                                       13
<PAGE>

ITEM 8.     FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.

CONSOLIDATED STATEMENT OF EARNINGS


<TABLE>
<CAPTION>
                                                                                                 For years ended April 30
                                                                                      ------------------------------------------
In thousands except per share amounts                                                     1998             1997             1996
--------------------------------------------------------------------------------------------------------------------------------
<S>                                                                                   <C>              <C>              <C>     
REVENUE:
      Product sales.............................................................      $383,926         $334,990         $314,118
      Service...................................................................        46,554           45,927           45,002
                                                                                      --------         --------         --------
                                                                                       430,480          380,917          359,120
                                                                                      --------         --------         --------


COSTS AND EXPENSES:
      Cost of product sales.....................................................       207,880          183,472          168,710
      Cost of service...........................................................        29,605           28,930           29,627
      Selling, general and administrative expenses..............................       129,802          120,143          111,666
      Research and development expenses.........................................        31,810           30,415           25,771
      Non-recurring special charge (Note 16)....................................        25,000               --               --
                                                                                      --------         --------         --------
                                                                                       424,097          362,960          335,774
                                                                                      --------         --------         --------


Operating income................................................................         6,383           17,957           23,346

Other income....................................................................         4,169            4,590            4,940
Interest expense................................................................          (667)            (338)            (418)
                                                                                      --------         --------         --------

Earnings before income taxes....................................................         9,885           22,209           27,868
Provision for income taxes......................................................         2,500            6,200            8,000
                                                                                      --------         --------         --------

NET EARNINGS....................................................................      $  7,385         $ 16,009         $ 19,868
                                                                                      ========         ========         ========

NET EARNINGS PER COMMON SHARE:
      BASIC.....................................................................      $    .32         $    .69         $    .85
                                                                                      ========         ========         ========
      DILUTED...................................................................      $    .32         $    .69         $    .84
                                                                                      ========         ========         ========
</TABLE>

See summary of significant accounting policies and notes to consolidated
financial statements.

                                       14
<PAGE>

CONSOLIDATED BALANCE SHEET


<TABLE>
<CAPTION>
                                                                                                               April 30
                                                                                                      ----------------------
In thousands except per share amounts                                                                     1998          1997
----------------------------------------------------------------------------------------------------------------------------
<S>                                                                                                   <C>           <C>     
ASSETS
CURRENT ASSETS:
      Cash and short-term cash investments......................................................      $ 27,007      $  9,503
      Accounts receivable.......................................................................        79,114        92,378
      Inventories...............................................................................        61,111        62,221
      Prepaid expenses..........................................................................        18,227        13,702
                                                                                                      --------      --------

                                                                                                       185,459       177,804
                                                                                                      --------      --------
INVESTMENTS AND LONG-TERM RECEIVABLES...........................................................            --        37,037
                                                                                                      --------      --------
PROPERTY, PLANT AND EQUIPMENT...................................................................       117,334       121,447
      Less accumulated depreciation.............................................................        57,335        58,883
                                                                                                      --------      --------
                                                                                                        59,999        62,564
                                                                                                      --------      --------
INTANGIBLE ASSETS...............................................................................        99,463        56,687
      Less accumulated amortization.............................................................         8,208        10,774
                                                                                                      --------      --------
                                                                                                        91,255        45,913
                                                                                                      --------      --------
OTHER ASSETS....................................................................................         2,054         1,897
                                                                                                      --------      --------
                                                                                                      $338,767      $325,215
                                                                                                      ========      ========


----------------------------------------------------------------------------------------------------------------------------
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
      Notes payable.............................................................................      $    326      $     --
      Current maturities of long-term debt......................................................           193           193
      Accounts payable..........................................................................        30,462        17,453
      Accrued compensation and benefits.........................................................        17,253        14,038
      Other accrued liabilities.................................................................        30,347        18,458
      Deferred revenue and litigation award.....................................................         6,619         6,249
      Advances on sales contracts...............................................................         5,498         2,465
                                                                                                      --------      --------
                                                                                                        90,698        58,856
                                                                                                      --------      --------

NONCURRENT LIABILITIES:
      Deferred income taxes.....................................................................        10,202        11,193
      Long-term debt............................................................................         6,953         7,145
                                                                                                      --------      --------
                                                                                                        17,155        18,338
                                                                                                      --------      --------

CONTINGENCIES AND COMMITMENTS (NOTES 3, 5, 10, AND 17)

SHAREHOLDERS' EQUITY:
      Preferred stock, no par value; authorized 10,000,000 shares; no shares issued.............            --            --
      Common stock, $1 par value; authorized 65,000,000 shares;
            issued 23,436,523 and 23,306,900 shares.............................................        23,437        23,307
      Paid-in capital...........................................................................        37,779        36,100
      Retained earnings.........................................................................       187,981       187,880
      Cumulative translation component..........................................................        (1,833)          734
      Treasury stock, at cost (800,000 shares)..................................................       (16,450)           --
                                                                                                      --------      --------
                                                                                                       230,914       248,021
                                                                                                      --------      --------
                                                                                                      $338,767      $325,215
                                                                                                      ========      ========
</TABLE>

See summary of significant accounting policies and notes to consolidated
financial statements.

                                       15
<PAGE>

CONSOLIDATED STATEMENT OF
CHANGES IN SHAREHOLDERS' EQUITY


<TABLE>
<CAPTION>
                                                                 Common                               Cumulative
                                                                 Stock,     Paid-in     Retained     Translation      Treasury
In thousands except per share amounts                      $1 Par Value     Capital     Earnings       Component         Stock
------------------------------------------------------------------------------------------------------------------------------
<S>                                                             <C>         <C>         <C>              <C>         <C>      
APRIL 30, 1995........................................          $23,758     $34,885     $176,621         $ 2,038     $      --
                                                                                                     
Net earnings..........................................               --          --       19,868              --            --
Foreign currency translation adjustment...............               --          --           --            (464)           --  
Dividends ($.32 per share)............................               --          --       (7,536)             --            --
Exercise of stock options and related tax benefit.....              122       1,344           --              --            --
Purchase and retirement of common stock...............             (681)     (1,011)      (9,646)             --            --
                                                                -------     -------     --------         -------      --------
APRIL 30, 1996........................................           23,199      35,218      179,307           1,574            --
                                                                                                     
Net earnings..........................................               --          --       16,009              --            --
Foreign currency translation adjustment...............               --          --           --            (840)           --
Dividends ($.32 per share)............................               --          --       (7,436)             --            --
Exercise of stock options and related tax benefit.....              108         882           --              --            --
                                                                -------     -------     --------         -------      --------
April 30, 1997........................................           23,307      36,100      187,880             734            --
                                                                                                     
Net earnings..........................................               --          --        7,385              --            --
Foreign currency translation adjustment...............               --          --           --          (2,567)           --
Dividends ($.32 per share)............................               --          --       (7,284)             --            --
Exercise of stock options and related tax benefit.....              129       1,654           --              --            --
Common stock issued for directors' fees...............                1          25           --              --            --
Purchase of common stock..............................               --          --           --              --       (16,450)
                                                                -------     -------     --------         -------      --------
APRIL 30, 1998........................................          $23,437     $37,779     $187,981         $(1,833)     $(16,450)
                                                                =======     =======     ========         =======      ========
</TABLE>

See summary of significant accounting policies and notes to consolidated
financial statements.

                                       16
<PAGE>

CONSOLIDATED STATEMENT OF CASH FLOWS


<TABLE>
<CAPTION>

                                                                                                For years ended April 30
                                                                                           -----------------------------------
In thousands                                                                                   1998         1997          1996
------------------------------------------------------------------------------------------------------------------------------
<S>                                                                                        <C>          <C>          <C>      
CASH PROVIDED BY (USED FOR)
OPERATING ACTIVITIES:
      Net earnings...................................................................      $  7,385     $ 16,009     $  19,868
      Adjustments to reconcile net earnings to cash provided by operating activities:
            Depreciation and amortization.......................................             13,572       11,752        10,810
            Deferred income taxes...............................................             (3,687)       1,137           515
            Non-recurring special charge........................................             25,000           --            --
            Other noncash items.................................................                 26           --            --
            Changes in operating accounts, net of effects of business acquisitions:
                  Receivables...................................................                664      (17,320)      (10,358)
                  Inventories...................................................             (5,502)        (826)       (3,489)
                  Prepaid expenses..............................................               (407)      (1,664)        2,289
                  Accounts payable and accrued expenses.........................             21,564         (729)      (13,708)
                                                                                           --------     --------     ---------
            PROVIDED BY OPERATING ACTIVITIES....................................             58,615        8,359         5,927
                                                                                           --------     --------     ---------

FINANCING ACTIVITIES:
      Purchase of common stock..................................................            (16,450)          --       (11,338)
      Repayments of long-term debt..............................................               (192)        (548)         (193)
      Net short-term financing...................................................               326         (595)           --
      Debt issue costs..........................................................               (587)          --            --
      Exercise of stock options.................................................              1,783          990         1,466
      Dividends on common stock.................................................             (7,284)      (7,436)       (7,536)
                                                                                           --------     --------     ---------
            (USED FOR) FINANCING ACTIVITIES.....................................            (22,404)      (7,589)      (17,601)
                                                                                           --------     --------     ---------

INVESTING ACTIVITIES:
      Purchases of long-term debt securities....................................                 --       (1,075)      (10,728)
      Maturities and sales of long-term debt securities.........................             36,571       23,376        34,530
      Business acquisitions.....................................................            (61,546)      (7,384)         (486)
      Sale of product class.....................................................             26,678           --            --
      Additions to property, plant and equipment................................            (15,935)     (13,067)      (12,647)
      Intangible and other assets...............................................             (1,908)      (1,614)          (14)
      Other, net................................................................             (2,567)        (207)         (485)
                                                                                           --------     --------     ---------
            PROVIDED BY (USED FOR) INVESTING ACTIVITIES.........................            (18,707)          29        10,170
                                                                                           --------     --------     ---------

INCREASE (DECREASE) IN CASH AND SHORT-TERM CASH INVESTMENTS.....................             17,504          799        (1,504)

Cash and Short-Term Cash Investments, Beginning of Year.........................              9,503        8,704        10,208
                                                                                           --------     --------     ---------
CASH AND SHORT-TERM CASH INVESTMENTS, END OF YEAR...............................           $ 27,007     $  9,503     $   8,704
                                                                                           ========     ========     =========
</TABLE>

See summary of significant accounting policies and notes to consolidated
financial statements.

                                       17
<PAGE>

REPORT OF MANAGEMENT


TO THE SHAREHOLDERS OF GERBER SCIENTIFIC, INC.

The financial statements of Gerber Scientific, Inc. included in this Annual
Report have been prepared by the Company's management, who are responsible for
the integrity and objectivity of the data presented. The financial statements
have been prepared in conformity with generally accepted accounting principles
appropriate in the circumstances and include amounts based on management's best
estimates and judgments. Financial information elsewhere in this Annual Report
is consistent with the financial statements.

Management maintains a system of internal accounting controls and procedures,
supported by a program of internal auditing. This system is intended to provide
reasonable assurance, in relation to reasonable cost, that transactions are
executed in accordance with management's authorization and are recorded properly
and accurately, that accountability for assets is maintained, and that the
financial records are reliable for preparing financial statements.

The financial statements have been audited by KPMG Peat Marwick LLP, independent
auditors, in accordance with generally accepted auditing standards. Their role
is to assess the accounting principles used and the estimates made by management
and to form an independent opinion as to the fairness with which the financial
statements present the financial condition of the Company, the results of its
operations, and its cash flows. They obtain and maintain an understanding of the
Company's accounting policies and controls and conduct such tests and related
procedures as they consider necessary to arrive at an opinion on the fairness of
the financial statements.

The Board of Directors has appointed an Audit and Finance Committee composed of
outside directors who are not employees of the Company. The Audit and Finance
Committee meets periodically with representatives of management, the internal
auditors, and the independent auditors for the purpose of monitoring their
activities to ensure that each is properly discharging its responsibilities. The
Audit and Finance Committee reports to the Board of Directors on its activities
and findings.


INDEPENDENT AUDITORS' REPORT


TO THE BOARD OF DIRECTORS AND SHAREHOLDERS OF
GERBER SCIENTIFIC, INC.

We have audited the accompanying consolidated balance sheet of Gerber
Scientific, Inc. and subsidiaries as of April 30, 1998 and 1997 and the related
consolidated statements of earnings, changes in shareholders' equity and cash
flows for each of the years in the three-year period ended April 30, 1998. These
consolidated financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these consolidated
financial statements based on our audits.

We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of Gerber Scientific,
Inc. and subsidiaries as of April 30, 1998 and 1997 and the results of their
operations and their cash flows for each of the years in the three-year period
ended April 30, 1998 in conformity with generally accepted accounting
principles.


/s/ KPMG Peat Marwick LLP


Hartford, Connecticut
May 21, 1998

                                       18
<PAGE>

SUMMARY OF SIGNIFICANT ACCOUNTING
POLICIES AND NOTES TO 
CONSOLIDATED FINANCIAL STATEMENTS


BASIS OF CONSOLIDATION
The consolidated financial statements include the accounts of the Company and
its subsidiaries. Intercompany accounts and transactions are eliminated.

FOREIGN CURRENCY TRANSLATION AND FORWARD
EXCHANGE CONTRACTS
Assets and liabilities of foreign subsidiaries are translated to U.S. dollars at
year-end exchange rates, and related revenue and expenses are translated at
average exchange rates during the year. Translation adjustments and gains and
losses on intercompany foreign currency balances of a long-term investment
nature are deferred and accumulated in a separate component of shareholders'
equity. Transaction gains and losses are included in earnings.

The Company enters into forward foreign exchange contracts with major
international financial institutions to hedge the effects of exchange rate
fluctuations on foreign currency commitments. The Company does not engage in
speculation. These forward exchange contracts are accounted for as hedges of
commitments, and the gains and losses on these hedges are deferred and included
in the basis of the transaction underlying the commitment.

REVENUE
Product sales are generally recognized upon shipment. Sales under certain
production contracts have been recognized on the percentage-of-completion method
of accounting. Anticipated losses on these contracts, if any, were provided for
when determined. Service revenue is recognized ratably over the contractual
period or as services are performed. Royalties are accounted for as other income
as received.

CASH AND SHORT-TERM CASH INVESTMENTS
Short-term cash investments are stated at cost plus accrued interest, which
approximates market value. For purposes of the statement of cash flows, the
Company considers short-term, highly liquid investments with maturities of three
months or less to be cash equivalents.

LONG-TERM INVESTMENTS
In accordance with the criteria of Statement of Financial Accounting Standards
No. 115, "Accounting for Certain Investments in Debt and Equity Securities",
the Company's investments in long-term debt securities were stated at amortized
cost plus accrued interest based on the Company's ability and intention to hold
these securities to maturity. In February 1998, the Company liquidated its
portfolio of long-term debt securities to partially fund the acquisition of
Coburn Optical Industries, Inc. The effect on assets and shareholders' equity of
accounting for these investments as available-for-sale would have been
insignificant in any reported period.

INVENTORIES
Inventories are stated at the lower of cost or market. Inventory costs of raw
materials and purchased parts have been determined primarily by the average cost
method (which approximates first-in, first-out or FIFO). Work in process
inventory includes materials, direct labor, and manufacturing overhead costs,
less the portion of such costs allocated to products delivered.

PROPERTY, PLANT, EQUIPMENT, AND DEPRECIATION
Property, plant and equipment are stated on the basis of cost. Major
improvements and betterments to existing plant and equipment are capitalized.
Expenditures for maintenance and repairs that do not extend the life of the
applicable asset are charged to expense as incurred. The cost and related
accumulated depreciation of properties sold or otherwise disposed of are removed
from the accounts, and any gain or loss is included in other income.

Depreciation is provided generally on a straight-line basis. Estimated useful
lives used for calculating depreciation are 45 years for buildings and 3 to 10
years for machinery, tools, and other equipment.

INTANGIBLE ASSETS
The excess of acquisition cost over the fair values of the net assets of
businesses acquired is included as goodwill in intangible assets and is
amortized over periods ranging from 20 to 25 years on a straight-line basis.
Impairment of goodwill, if any, is measured periodically on the basis of whether
anticipated undiscounted operating cash flows generated by the acquired
business will recover the recorded net goodwill balances over the remaining
amortization period.

Intangible assets also includes patents, which are stated at cost and amortized
on a straight-line basis over the life of the patent. Patents and other
long-lived assets are reviewed for possible impairment whenever events or
changes in circumstances indicate their carrying value may not be recoverable.
Management evaluates the carrying value of these assets based upon projections
of undiscounted future net cash flows of the related business unit. An
impairment loss is recognized if the carrying value of these assets exceeds the
related estimate of future cash flows.

                                       19
<PAGE>

EARNINGS PER SHARE
The Financial Accounting Standards Board (FASB) issued Statement of Financial
Accounting Standards (SFAS) No. 128, "Earnings Per Share", effective for
financial statements for both annual and interim periods ending after December
15, 1997. SFAS No. 128 replaced the previously reported primary and fully
diluted earnings per share with basic and diluted earnings per share. Unlike
primary earnings per share, basic earnings per share excludes any dilutive
effects of options, warrants, and convertible securities. Diluted earnings per
share is similar to the previously reported fully diluted earnings per share.
All earnings per share amounts for all periods have been presented, and where
necessary restated, to conform to the requirements. This restatement had an
immaterial impact on the prior period earnings per share amounts reported under
the previous method.

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

                                          For years ended April 30
                                   ---------------------------------------
                                          1998          1997          1996
--------------------------------------------------------------------------
Numerator:
    Net earnings                   $ 7,385,000   $16,009,000   $19,868,000
                                   ===========   ===========   ===========

Denominators:
    Denominator for basic
      earnings per share --
      weighted-average shares
      outstanding                   22,800,389    23,250,332    23,463,141
    Effect of dilutive
      securities:
      Stock options                    530,653       115,043       225,812
                                   -----------   -----------   -----------
    Denominator for diluted
      earnings per share --
      adjusted weighted-
      average shares
      outstanding                   23,331,042    23,365,375    23,688,953
                                   ===========   ===========   ===========

Net earnings per common
    share-basic                    $       .32   $       .69   $       .85
                                   ===========   ===========   ===========

Net earnings per common
    share-diluted                  $       .32   $       .69   $       .84
                                   ===========   ===========   ===========


USE OF ESTIMATES
The preparation of the Company's financial statements in conformity with
generally accepted accounting principles requires management to make estimates
and assumptions that affect the amounts reported in the financial statements and
the related disclosures. Actual results could differ from those estimates.

NEW ACCOUNTING STANDARDS
The FASB has issued three additional statements, SFAS No. 130, "Reporting
Comprehensive Income", SFAS No. 131, "Disclosures About Segments of an
Enterprise and Related Information", and SFAS No. 132, "Employers' Disclosures
About Pensions and Other Postretirement Benefits", which are all effective for
years beginning after December 15, 1997. The Company does not expect these
statements will have a significant effect on its current financial reporting
and disclosure requirements.


NOTE 1. PRODUCTS AND OPERATIONS
The Company designs, manufactures, markets, and services computer-aided design
(CAD) and computer-aided manufacturing (CAM) systems and sells related
aftermarket supplies and consumables. No other segment of the Company accounted
for more than 10 percent of consolidated revenue or net earnings in 1998, 1997,
or 1996. No individual customer accounted for more than 10 percent of
consolidated revenue in 1998, 1997, or 1996.

The Company's primary manufacturing facilities are in the United States, and it
also manufactures in Denmark. Company sales and service offices are in numerous
United States and foreign locations.

Export sales from the United States for each year were as follows:

                             --------------------------------------
In thousands                     1998           1997           1996
-------------------------------------------------------------------
Europe                       $ 76,148       $ 68,494       $ 67,025
Far East                       44,938         42,375         36,462
Other areas                    44,500         38,187         35,180
                             --------       --------       --------
                             $165,586       $149,056       $138,667
                             ========       ========       ========


NOTE 2. CASH AND SHORT-TERM CASH INVESTMENTS
Cash and short-term cash investments at the end of each year were as follows:

                                            -----------------------
In thousands                                    1998           1997
-------------------------------------------------------------------
Cash                                        $ 11,004         $1,161
Time deposits                                 16,003          8,342
                                            --------         ------
                                            $ 27,007         $9,503
                                            ========         ======

The Company's short-term cash investments are in high-quality securities placed
with major U.S. and international financial institutions. The Company's
investment policies limit the amount of exposure to any one financial
institution. Due to the relatively short maturity of these financial
instruments, their carrying value at April 30, 1998 was a reasonable estimate of
their fair value.

                                       20
<PAGE>

NOTE 3. ACCOUNTS RECEIVABLE
The Company sells products and services to customers in a variety of industries
and geographic areas and, accordingly, does not have significant concentrations
of credit risk. The Company evaluates the creditworthiness of its customers
prior to extending credit and in some instances requires bank letters of credit
to support customer obligations. In addition, the Company's lease receivables
and its recourse obligations for leases that are financed by third parties are
secured and collateralized by the underlying equipment.

Included in accounts receivable were amounts earned under specific contracts
that were not billable of $10,757,000 at April 30, 1997. There were no such
amounts included in accounts receivable at April 30, 1998.


NOTE 4. INVENTORIES
The classification of inventories at the end of each year was as follows:

                                          ---------------------
In thousands                                 1998          1997
---------------------------------------------------------------
Raw materials and purchased parts         $37,329       $49,461
Work in process                            23,782        12,760
                                          -------       -------
                                          $61,111       $62,221
                                          =======       =======


NOTE 5. BUSINESS ACQUISITIONS
On February 12, 1997, Gerber Technology, Inc. (GT), a wholly owned subsidiary of
the Company and formerly known as Gerber Garment Technology, Inc., acquired the
outstanding stock of Cutting Edge, Inc. (Cutting Edge) of Marblehead,
Massachusetts and subsequently merged that company into GT. The purchase price
was approximately $7,800,000. Cutting Edge was a leading supplier of
high-performance single layer fabric cutting systems for the industrial fabric,
automotive, furniture, apparel, and composite materials industries. GT has
continued to develop, manufacture, market, and support the Cutting Edge product
lines.

On February 27, 1998, Gerber Optical, Inc., a wholly owned subsidiary of the
Company, acquired the outstanding stock of Coburn Optical Industries, Inc.
(Coburn) of Muskogee, Oklahoma, and subsequently merged with Coburn. The company
was renamed Gerber Coburn Optical, Inc. (GC). The purchase price, including the
costs of acquisition and the repayment of Coburn's outstanding debt, was
approximately $63,000,000. Coburn was a leading manufacturer and international
distributor of a broad range of ophthalmic lens processing equipment and related
supplies used in the production of eyeglass lenses. GC has continued to develop,
manufacture, market, and support the Coburn product lines.

Each acquisition was accounted for as a purchase and the results of operations
of the acquired companies have been included in the Company's consolidated
statements of earnings from the respective dates of acquisition. The acquisition
costs were allocated to the assets and liabilities acquired based upon their
fair values. The excess of acquisition costs over the fair values of the net
assets acquired was included in intangible assets as goodwill and is being
amortized on a straight-line basis over periods ranging from 20 to 25 years from
the date of acquisition.

Effective May 1, 1998, the Company announced its successful tender offer for the
outstanding capital stock of Spandex PLC (Spandex) of Bristol, UK. Spandex is
the largest distributor of equipment and related materials to the sign making
industry in Europe and North America. The offer valued Spandex at approximately
$173,000,000. In addition, Spandex had approximately $10,000,000 in outstanding
debt that was assumed. The acquisition of the shares and refinancing of the
assumed debt will be accomplished through a new syndicated bank credit facility
(see Note 12).

The following pro forma combined results of operations for the years ended April
30, 1998 and 1997 have been prepared as if the Coburn and Spandex acquisitions
occurred at the beginning of each of the respective fiscal years and give effect
to estimated purchase accounting and other adjustments resulting from the
acquisitions. The pro forma information is presented on the assumption that the
acquisition costs would have been the same at the beginning of each period. The
pro forma financial information is not necessarily indicative of the results of
operations that would have been achieved had the acquisitions of Coburn and
Spandex actually been effective as of the beginning of each fiscal year or of
future results of the combined companies.

                                                      (Unaudited)
                                                -----------------------
In thousands (except per share amounts)             1998           1997
-----------------------------------------------------------------------
Sales                                           $641,556       $587,045
Net earnings                                       7,368         15,023
Net earnings per common share-basic                  .32            .65
Net earnings per common share-diluted                .32            .64


NOTE 6. INVESTMENTS AND LONG-TERM RECEIVABLES
Investments and long-term receivables at the end of each year were as follows:

                                                -----------------------
In thousands                                        1998           1997
-----------------------------------------------------------------------
Tax-exempt municipal bonds                      $     --        $36,571
Long-term receivables                                 --            466
                                                --------        -------
                                                $     --        $37,037
                                                ========        =======

                                       21
<PAGE>

In February 1998, the Company sold its portfolio of investment-grade tax-exempt
municipal bonds to partially fund the acquisition of Coburn. The amortized cost
of the portfolio was $14,842,000 at the time of sale and the Company realized a
gain of $156,000, which has been included in other income. The estimated
aggregate fair value of the Company's tax-exempt municipal bonds was $36,764,000
at April 30, 1997 based upon quoted market prices or market prices for similar
securities and the gross unrealized gains and losses were $201,000 and $8,000,
respectively.


NOTE 7. PROPERTY, PLANT AND EQUIPMENT
The components of property, plant and equipment at the end of each year were as
follows:

                                              -----------------------
In thousands                                      1998           1997
---------------------------------------------------------------------
Land                                          $  3,888       $  4,368
Buildings                                       49,458         45,098
Machinery, tools, and equipment                 63,722         68,628
Construction in progress                           266          3,353
                                              --------       --------
                                              $117,334       $121,447
                                              ========       ========
                                  

NOTE 8. INTANGIBLE ASSETS
The components of net intangible assets at April 30, 1998 and 1997 were as
follows:

                                               ----------------------
In thousands                                      1998           1997
---------------------------------------------------------------------
Prepaid pension cost                           $20,053        $20,181
Patents, net of accumulated amortization         6,573          8,092
Goodwill, net of accumulated amortization       63,920         17,502
Other                                              709            138
                                               -------        -------
                                               $91,255        $45,913
                                               =======        =======

                                         
NOTE 9. NOTES PAYABLE
The notes payable balance outstanding at April 30, 1998 represented a draw
against an overdraft facility by an Australian subsidiary of GC. No amounts were
borrowed against credit lines as of April 30, 1997.

The Company had bank lines of credit that totaled approximately $247,000,000 at
April 30, 1998. Included in the bank lines of credit was a $190,000,000 bridge
loan facility and a $40,000,000 line of credit from a major U.S. commercial
bank. The bridge loan facility supported the Company's tender offer
to purchase the outstanding stock of Spandex. The other line of
credit was used to partially finance the purchase of Coburn in February 1998.
This borrowing was repaid prior to April 30, 1998. Both the bridge loan facility
and the $40,000,000 line of credit were replaced in May 1998 by a five-year
$235,000,000 revolving multi-currency credit facility (see Note 12).

The Company also has a $15,000,000 multi-currency line of credit from a major
European commercial bank. The multi-currency line of credit is available in
various sub-limits to certain of the Company's European subsidiaries and
repayment is guaranteed by the parent Company. Borrowings under this line of
credit bear interest at 1/4 percent above the London Interbank Offered Rate
(LIBOR) for the relevant currency and term with a commitment fee of 1/8 percent
of the unused amount.


NOTE 10. LITIGATION AWARD
The Company had brought suit in the UK alleging Lectra Systemes, S.A. of France
and its UK subsidiary (Lectra) infringed certain Company patents dealing with
automated fabric cutting equipment. The High Court of Justice, Chancery
Division, in London found that Lectra had infringed two of the Company's
patents, and in 1995 awarded damages to the Company of $5,868,000. Lectra paid
this award of damages to the Company and filed an appeal. In December 1996, the
Court of Appeals for the UK reduced the earlier award to the Company by
$3,164,000, which was repaid to Lectra. In July 1997, the highest court in the
UK denied the Company's petition to appeal the earlier decision of the Court of
Appeals. The previously deferred gain associated with the award was recorded in
other income and added $1,563,000 to earnings before income taxes and
approximately $1,000,000, or $.04 per share, to net income in the year ended
April 30, 1998.


NOTE 11. INCOME TAXES
The components of the provision for income taxes for the years ended April 30,
1998, 1997, and 1996 were as follows:

                               ------------------------------------
In thousands                      1998           1997          1996
-------------------------------------------------------------------
Currently payable:
    Federal                    $ 3,600        $ 1,400       $ 6,300
    State and local                400            100           600
    Foreign                      1,300            600           500
                               -------        -------       -------
                                 5,300          2,100         7,400
Deferred                        (2,800)         4,100           600
                               -------        -------       -------
                               $ 2,500        $ 6,200       $ 8,000
                               =======        =======       =======
                     
                                       22
<PAGE>

Income tax payments totaled $5,628,000, $3,415,000, and $4,179,000 in the years
ended April 30, 1998, 1997, and 1996, respectively. Reconciliations of the
statutory U.S. Federal income tax rate to the effective income tax rate for each
year were as follows:

                                    -------------------------------
                                     1998         1997         1996
-------------------------------------------------------------------
Statutory U.S. Federal
   income tax rate .........         35.0%        35.0%        35.0%
State income taxes, net of
   U.S. Federal tax benefit           (.4)          .7           .9
Foreign tax rate differences          3.8           .8           --
Life insurance benefits ....           --         (1.6)          --
Tax-exempt interest income .         (4.6)        (3.4)        (3.8)
Foreign Sales Corporation ..        (10.9)        (2.2)        (2.4)
Research and development
   tax credits .............         (5.2)        (3.2)         (.2)
Goodwill amortization ......          4.7          1.2           .9
Other, net .................          2.9           .6         (1.7)
                                     ----         ----         ----

Effective income tax rate ..         25.3%        27.9%        28.7%
                                     =====        =====        =====

The Company's deferred income tax balances related principally to differing
depreciation methods for property, plant, and equipment, differing book and tax
treatment of patent costs, the timing of employee benefit plan funding versus
expense recognition, differing valuations of inventories, accounts receivable,
and other assets for book and tax purposes, expense provisions not deductible
until paid, and tax operating loss carryforwards. At April 30, 1998 and 1997,
current deferred tax assets of approximately $9,000,000 and $8,000,000,
respectively, were included in prepaid expenses in the consolidated balance
sheet. Deferred tax assets and deferred tax liabilities as of April 30, 1998 and
1997 were as follows:

<TABLE>
<CAPTION>
                                            1998                             1997
                                   -----------------------------------------------------------
                                   Deferred          Deferred       Deferred          Deferred
                                        Tax               Tax            Tax               Tax
In thousands ...............         Assets       Liabilities         Assets       Liabilities
----------------------------------------------------------------------------------------------
<S>                                <C>               <C>            <C>               <C>     
Depreciation ...............       $     --          $  2,600       $     --          $  3,100
Patents ....................             --             2,600             --             3,200
Employee benefit                                                                  
    plans ..................          1,800             8,300          1,400             8,400
Asset valuations ...........          7,500               600          7,200               700
Litigation award ...........             --                --            600                --
Provisions for                                                                    
    estimated expenses .....          7,500             5,900          3,600             3,200
Foreign exchange                                                                  
    gains and losses .......             --               600             --               700
Tax carryforwards ..........          3,300                --          4,300                --
Other ......................            200               200            200               300
                                   --------          --------       --------          --------
                                     20,300            20,800         17,300            19,600
Valuation allowance ........           (700)               --           (900)               --
                                   --------          --------       --------          --------
                                   $ 19,600          $ 20,800       $ 16,400          $ 19,600
                                   ========          ========       ========          ========
</TABLE>

Consolidated earnings before income taxes included foreign pre-tax earnings of
$4,557,000, $3,371,000, and $612,000 for 1998, 1997, and 1996, respectively. The
Company has not provided U.S. income taxes on the unremitted earnings of foreign
subsidiaries because such earnings are considered to be indefinitely reinvested
in those operations. It is not practicable for the Company to estimate the
deferred tax liability that might arise on the remittance of the earnings of
these foreign subsidiaries. For income tax reporting purposes, the Company has
U.S. and foreign net operating loss carryforwards of approximately $4,000,000 at
April 30, 1998. Such carryforwards have various expiration dates and begin to
expire in the 2003 fiscal year.


NOTE 12. LONG-TERM DEBT
The composition of long-term debt at the end of each year was as follows:

                                           -------------------
In thousands                                1998          1997
--------------------------------------------------------------
Industrial Revenue Bonds                   $7,146       $7,338
Less current maturities                       193          193
                                           ------       ------
                                           $6,953       $7,145
                                           ======       ======

The Company's Industrial Revenue Bonds are collateralized by certain property,
plant and equipment and are payable to 2014 at variable interest rates which
ranged from 4.2 percent to 6.0 percent at April 30, 1998. Included therein are
$6,000,000 of Variable Rate Demand Industrial Development Bonds (VRDBs). The
interest rate payable on the VRDBs is adjusted weekly to maintain their market
value at par. During 1998 and 1997, the average interest rate on the VRDBs was
3.7 percent and 3.5 percent, respectively. The remaining Industrial Revenue
Bonds bear interest at 70 percent of the U.S. prime rate. The variable interest
rate feature of the Company's long-term debt allows its repricing at current
market interest rates and, accordingly, the carrying amount of the debt at April
30, 1998 was a reasonable estimate of its fair value.

The demand feature of the VRDBs is supported by a letter of credit from a major
U.S. commercial bank. The letter of credit has a provision for automatic
extension of an 18-month term and carries a fee of .65 percent of the face
amount. Any advances under the letter of credit in support of the demand feature
would be repayable over the remaining letter of credit term at the bank's prime
interest rate. The bank providing the letter of credit was also granted a
mortgage and security interest in the project property.

                                       23
<PAGE>

Covenants in the Industrial Revenue Bond agreements require the Company to
maintain certain levels of tangible net worth and certain ratios of debt to
tangible net worth and working capital, as defined therein. At April 30, 1998,
the Company was in compliance with these covenants. Under the most restrictive
of these covenants, approximately $182,000,000 of retained earnings was not
available for dividend payments at April 30, 1998. The covenants in the
Company's May 1998 revolving multi-currency credit facility (see below)
supersede this limitation and under those covenants, approximately $141,000,000
was not available for dividend payments at April 30, 1998.

The aggregate annual maturities of long-term debt for each of the four years
after 1999 total $193,000 annually. Interest payments totaled $666,000,
$343,000, and $426,000 in the years ended April 30, 1998, 1997, and 1996,
respectively.

In May 1998, the Company obtained a five-year $235,000,000 revolving
multi-currency credit facility from a group of major U.S., European, and Asian
commercial banks. The purpose of the facility was to finance the acquisition of
the capital stock of Spandex and the refinancing of its debt, and for other
general corporate purposes. The interest rate on borrowings under this facility
is variable and is based on the LIBOR plus an applicable margin, which ranges
from 5/8 percent to 1/4 percent based on the relationship of the Company's
consolidated total debt to EBITDA (earnings before interest, taxes,
depreciation, and amortization). This credit line also has a facility fee, which
ranges from 1/4 percent to 1/8 percent of the credit line. Covenants in the
credit facility require the Company to maintain certain levels of net worth,
certain ratios of total debt to EBITDA, and a minimum fixed charge coverage
amount, as defined therein.


NOTE 13. PREFERRED STOCK, COMMON STOCK, STOCK OPTION 
PLANS, AND INCENTIVE BONUS PLANS

Preferred Stock
The Company's Certificate of Incorporation authorizes 10,000,000 shares of
preferred stock, without par value, issuable in series. The Board of Directors
is authorized to fix and determine the terms, limitations, and relative rights
and preferences of the preferred stock, including voting rights (if any), the
amount of liquidation preference over the common stock, and to establish series
of preferred stock and fix and determine the various terms among the series. As
of April 30, 1998, no preferred stock had been issued.

Common Stock
Pursuant to a Board of Directors' resolution, the Company is authorized to
purchase up to 3,000,000 shares of its outstanding common stock over an
indeterminate period of time as, in the opinion of management, market conditions
warrant. Under this authorization, the Company has cumulatively purchased
2,237,000 shares at a total cost of $38,836,000, or an average cost of $17.36
per share. The reacquired shares have been retired and under Connecticut law
constitute authorized but unissued shares. As of April 30, 1998, the Company
could purchase up to an additional 763,000 shares under this Board of Directors'
resolution.

Pursuant to a separate Board of Directors' resolution, the Company purchased
800,000 shares of its common stock from the estate of the Company's founder in
the year ended April 30, 1998. The cost of this acquisition, including
transaction fees incurred, was $16,450,000 or $20.56 per share. The reacquired
shares were accounted for as treasury stock.

Stock Option Plans
The Company's 1992 Employee Stock Plan (the 1992 Plan) was approved by
shareholders in September 1992 and provides for incentive and nonqualified stock
option grants to officers and key employees. Stock options under the 1992 Plan
are for a ten-year term and are granted at the market price of the common stock
on the date of grant.

In 1995, shareholders approved amendments to the 1992 Plan permitting the grant
of performance units in conjunction with stock option grants. The performance
units become payable in cash in the event certain pre-established performance
goals are attained and the grantee simultaneously exercises related stock
options with the cash award. The maximum number of shares of common stock
available for grant as stock options under the amended 1992 Plan is 3,000,000
shares, and the maximum number of performance units available for grant is
2,000,000.

The 1992 Non-Employee Director Stock Option Plan (the 1992 Director Plan) was
approved by shareholders in September 1992. As of April 30, 1998, the 1992
Director Plan provided for the automatic award each May 1 of options to purchase
1,000 shares of common stock to eligible members of the Board of Directors who
are not also employees of the Company. Stock options under the 1992 Director
Plan are nonqualified options with a ten-year term and are granted at the market
price of the common stock on the date of grant. Options granted under the 1992
Director Plan are immediately exercisable. The maximum number of shares of
common stock available for grant as stock options under the 1992 Director Plan
is 75,000 shares.

                                       24
<PAGE>

A summary of the stock option activity for the three years ended April 30, 1998
is set forth below:

<TABLE>
<CAPTION>
                                               1998                             1997                             1996
                                     ----------------------------------------------------------------------------------------------
                                                 WEIGHTED-AVERAGE                 Weighted-Average                 Weighted-Average
                                      OPTIONS     EXERCISE PRICE       Options     Exercise Price       Options     Exercise Price
-----------------------------------------------------------------------------------------------------------------------------------
<S>                                  <C>              <C>             <C>              <C>               <C>            <C>   
Outstanding-beginning of year        1,171,170        $14.31          1,208,970        $13.67            699,365        $11.18
Granted .....................        1,669,800         18.80            138,000         15.01            689,000         15.76
Exercised ...................         (128,625)        12.11           (108,175)         7.80           (122,145)        10.74
Cancelled ...................         (137,750)        16.20            (67,625)        14.80            (57,250)        14.57
                                     ---------        ------          ---------         -----          ---------        ------
Outstanding-end of year .....        2,574,595        $17.23          1,171,170        $14.31          1,208,970        $13.67
                                     =========        ======          =========        ======          =========        ======
Exercisable at end of year ..          653,795        $14.32            491,045        $12.69            434,470        $10.52
                                     =========        ======          =========        ======          =========        ======
Reserved for future grants ..          621,825                        2,153,875                        2,231,250
                                     =========                        =========                        =========
</TABLE>

The exercise prices for options outstanding as of April 30, 1998 ranged from
$7.25 to $27.81. The weighted-average remaining contractual life of options
outstanding at April 30, 1998 is 8.2 years. In the event of a change in control
of the Company, all unexercised outstanding stock options become immediately
exercisable.

The Company applies APB Opinion No. 25, "Accounting for Stock Issued to
Employees", and related interpretations in accounting for stock options.
Accordingly, no compensation cost has been recognized in the Company's
consolidated statement of earnings for the stock option plans. Had compensation
cost for the Company's stock option plans been determined based on the fair
value at the grant date for awards under those plans, consistent with the
requirements of SFAS No. 123, "Accounting for Stock-Based Compensation", the
Company's pro forma net earnings and earnings per share would have been as
follows:

                                           -------------------
In thousands (except per share amounts)      1998         1997
--------------------------------------------------------------
Net earnings
    As reported                            $7,385      $16,009
    Pro forma                               5,323       15,510
Net earnings per common share-basic
    As reported                               .32          .69
    Pro forma                                 .23          .67
Net earnings per common share-diluted
    As reported                               .32          .69
    Pro forma                                 .23          .66

To arrive at the pro forma amounts shown above, the fair value
of each stock option grant was estimated on the date of grant using the
Black-Scholes option pricing model with the following weighted-average
assumptions:

                                        ----------------------
                                             1998         1997
--------------------------------------------------------------
Risk-free interest rate                      5.7%         6.5%
Expected life of option                 4.5 years      4 years
Expected volatility                           25%          24%
Expected dividend yield                        2%           2%

Incentive Bonus Plans
The Management Development and Compensation Committee of the Board of Directors
approved cash profit incentive bonus plans for each of the years ended April 30,
1998, 1997, and 1996. The plans covered substantially all employees in the
United States and were based upon pre-tax profits of the Company's operating
subsidiaries and the consolidated group. The amounts charged to expense under
these plans totaled $3,575,000, $1,375,000, and $1,908,000 for the years ended
April 30, 1998, 1997, and 1996, respectively. Plans for subsequent years and
their criteria are subject to the approval of the Management Development and
Compensation Committee of the Board of Directors.


NOTE 14. EMPLOYEE BENEFIT PLANS

Pension Plans
The Company has a noncontributory defined benefit pension plan covering
substantially all employees in the United States. Plan benefits are based on
years of service and an average of an employee's highest five consecutive years
of compensation, as defined, in the last ten years of service.

The Company's general policy is to fund the Plan's normal cost plus amounts
required to amortize actuarial gains and losses and prior service costs over
periods ranging from 5 to 30 years. Amounts funded totaled $2,800,000,
$3,086,000, and $3,000,000 for the years ended April 30, 1998, 1997, and 1996,
respectively. 

  
                                  25
<PAGE>

Plan assets were invested in a portfolio consisting primarily of common stocks,
fixed income securities, money market instruments, and mutual and collective
trust funds consisting of these instruments. Pension arrangements for employees
of foreign subsidiaries were provided generally through local insurance
contracts, the costs of which were funded currently.

The following table summarizes the funded status of the pension plan and the
related amounts recognized in the consolidated balance sheet at the end of each
year.

                                                      ------------------------
In thousands                                              1998            1997
------------------------------------------------------------------------------
Actuarial present value of benefit obligations:
    Vested benefits ...........................       $ 43,361        $ 35,468
    Nonvested benefits ........................          2,126           1,551
                                                      --------        --------
Accumulated benefit obligation ................         45,487          37,019
Provision for future salary increases .........         11,817           8,202
                                                      --------        --------
Projected benefit obligation for services
    rendered to date ..........................         57,304          45,221
Plan assets available for benefits ............        (66,793)        (50,419)
                                                      --------        --------
Plan assets (greater than) projected
    benefit obligation ........................         (9,489)         (5,198)
Unrecognized net actuarial gain (loss) ........          2,360            (504)
Unrecognized net transition liability .........           (465)           (558)
Unrecognized prior service cost ...............        (10,888)        (11,875)
                                                      --------        --------
Net pension plan (asset) in the consolidated
    balance sheet .............................       $(18,482)       $(18,135)
                                                      ========        ========

The Company also maintains a nonqualified supplemental pension plan. The
supplemental pension plan provides for the pension benefits earned under the
Company's primary pension plan benefit formula that cannot be paid from such
plan because of limitations imposed by income tax regulations. The Company has
established a trust to provide funding for the benefits payable under the
supplemental pension plan. The trust is irrevocable and assets contributed to
the trust can only be used to pay such benefits, with certain exceptions. The
trust assets were invested in collective trust funds whose portfolios consisted
primarily of common stocks, fixed income securities, and money market
instruments.

The following table summarizes the funded status of the nonqualified
supplemental pension plan and the related amounts recognized in the consolidated
balance sheet at the end of each year.

                                                         ----------------------
In thousands                                                1998           1997
-------------------------------------------------------------------------------
Actuarial present value of benefit obligations:
    Vested benefits ..............................       $ 3,881        $ 3,327
    Nonvested benefits ...........................            52             19
                                                         -------        -------
Accumulated benefit obligation ...................         3,933          3,346
Provision for future salary increases ............           972          1,249
                                                         -------        -------
Projected benefit obligation for services
    rendered to date .............................         4,905          4,595
Plan assets available for benefits ...............        (4,405)        (3,369)
                                                         -------        -------
Plan assets less than projected benefit obligation           500          1,226
Unrecognized net actuarial gain (loss) ...........           114           (740)
Unrecognized prior service cost ..................        (2,185)        (2,532)
                                                         -------        -------
Net supplemental pension plan (asset)
    in the consolidated balance sheet ............       $(1,571)       $(2,046)
                                                         =======        =======

The following table summarizes the components of the net periodic pension cost
for the years ended April 30, 1998, 1997, and 1996. The pension cost associated
with the supplemental pension plan was $575,000, $729,000, and $662,000 in the
years ended April 30, 1998, 1997, and 1996, respectively, and is included in the
amounts shown below.

                                      ----------------------------------------
In thousands                              1998            1997            1996
------------------------------------------------------------------------------
Cost related to current service       $  2,703        $  2,522        $  1,792
Interest cost on projected
    benefit obligation ........          3,797           3,575           2,980
Actual return on plan assets ..        (16,042)         (6,671)         (6,758)
Net amortization and deferral .         12,570           3,823           5,004
                                      --------        --------        --------
Net periodic pension cost .....       $  3,028        $  3,249        $  3,018
                                      ========        ========        ========

For 1998, 1997, and 1996, the projected benefit obligation was determined using
assumed discount rates of 7 percent, 7.75 percent, and 7.25 percent,
respectively, and an assumed long-term compensation increase rate of 4.5 percent
in each of those years. The assumed long-term rate of return on invested assets
was 9 percent in each of 1998, 1997, and 1996.

401(k) Plan
Under the Company's 401(k) Maximum Advantage Program, employees in the United
States may contribute a portion of their compensation to a tax-deferred 401(k)
Plan. The Company contributes an amount equal to a specified percentage of each
employee's contribution up to an annual maximum. The Company's expense for
matching contributions under this Plan was $692,000, $357,000, and $302,000 for
the years ended April 30, 1998, 1997, and 1996, respectively.

                                       26
<PAGE>

Postemployment and Postretirement Benefits Other Than Pensions
SFAS No. 106, "Employers' Accounting for Postretirement Benefits Other Than
Pensions", and No. 112, "Employers' Accounting for Postemployment Benefits",
changed the practice of accounting for these benefits (principally health care)
from an expense-as-paid basis to an accrual accounting basis. The Company does
not provide postemployment or postretirement benefits other than through its
pension plans, and as a result, SFAS No. 106 and No. 112 have no impact on the
Company's consolidated financial position or results of operations.


NOTE 15. OTHER INCOME
The components of other income for each year were as follows:

                                       ------------------------------------
In thousands                              1998           1997          1996
---------------------------------------------------------------------------
Interest income from investments       $ 2,223        $ 2,440       $ 3,352
Royalty income .................         1,426          1,470         1,700
Patent litigation settlement ...         1,563           --            --
Other, net .....................        (1,043)           680          (112)
                                       -------        -------       -------
                                       $ 4,169        $ 4,590       $ 4,940
                                       =======        =======       =======


NOTE 16. SPECIAL CHARGE
In the fourth quarter of fiscal year 1998, the Company recorded a $25,000,000
pre-tax charge related to the write-down of certain assets of the Company's
Gerber Systems unit. Gerber Systems comprised the Company's imaging and
inspection systems product class, which was sold to the BARCO Group of Belgium
as of March 31, 1998 for $25,000,000 in cash plus contingent future royalties
based on the sales of certain products. The special charge reflected the
write-down of inventory, accounts receivable, and other items. The special
charge amounted to approximately $16,300,000 after taxes or $.70 per share on a
diluted basis.


NOTE 17. CONTINGENCIES AND COMMITMENTS
Various lawsuits, claims, and governmental proceedings are pending against the
Company. Management believes that the ultimate resolution of these matters will
not have a materially adverse effect on the Company's consolidated financial
position or the results of its operations.

The Company occupies space and uses certain equipment under operating lease
arrangements. The Company is not the lessee under any significant capital
leases. Rental expense under lease arrangements was $4,595,000, $4,088,000, and
$3,487,000 for the years ended April 30, 1998, 1997, and 1996, respectively.
Minimum annual rental commitments at April 30, 1998 under long-term
noncancelable operating leases were as follows:

                        ------------------------------------------
                            Building       Machinery
                                 and             and
In thousands            Office Space       Equipment         Total
------------------------------------------------------------------
1999                          $2,125            $562       $2,687
2000                           1,362             338        1,700
2001                             629             182          811
2002                             263              12          275
2003                             243               3          246
After 2003                       649              --          649
                              ------          ------       ------
                              $5,271          $1,097       $6,368
                              ======          ======       ======

As of April 30, 1998, the Company was party to approximately $9,000,000 in
forward exchange contracts providing for the delivery by the Company of various
foreign currencies in exchange for U.S. dollars over the succeeding five months.
The counterparties to the forward exchange contracts were major international
commercial banks. The Company continually monitors its open forward exchange
contract position and does not anticipate nonperformance by the counterparties.
In management's opinion, these financial instruments do not represent a material
off-balance sheet risk in relation to the consolidated financial statements.
Based upon market prices at April 30, 1998 for future deliveries of the foreign
currencies in exchange for U.S. dollars, the hedging gain deferred at that date
amounted to approximately $242,000.

The Company has an agreement with a major financial services institution to
provide lease financing to purchasers of the Company's equipment. The present
value of the lease receivables financed under this agreement amounted to
approximately $42,700,000 at April 30, 1998 and $46,200,000 at April 30, 1997.
The underlying equipment collateralizes the lease receivables. In the event of
default by the lessee, the Company has liability to the financial services
institution under recourse provisions. The Company's liability for uncollected
amounts financed in excess of the estimated resale value of the equipment is
limited to the extent of loss pools. These loss pools are established as
percentages of each associated group of transactions that are financed in a
calendar year and range from five to ten percent of the amount financed.
Management believes that the allowance it has established for losses under the
recourse provisions is adequate to cover the Company's obligations.

                                       27
<PAGE>

NOTE 18. QUARTERLY RESULTS (UNAUDITED)
The quarterly results of operations, the dividends paid per share, and the
market price range of the Company's common stock as reported on the New York
Stock Exchange for each quarterly period of the past three fiscal years are set
forth below.

<TABLE>
<CAPTION>
                                                             ----------------------------------------------------------------
                                                                First        Second         Third        Fourth
In thousands except per share amounts                         Quarter       Quarter       Quarter       Quarter          Year
-----------------------------------------------------------------------------------------------------------------------------

<S>                                                          <C>           <C>           <C>           <C>           <C>     
1998
Sales and service revenue .............................      $ 98,961      $106,392      $104,836      $120,291      $430,480
Gross profit ..........................................        43,056        47,037        48,792        54,110       192,995
Net earnings (loss)(1,2) ..............................         4,571         5,496         6,215        (8,897)        7,385
Net earnings (loss) per common share(1,2)
      Basic(3) ........................................           .20           .24           .28          (.38)          .32
      Diluted .........................................           .19           .24           .27          (.38)          .32
Dividends paid per share ..............................           .08           .08           .08           .08           .32
Stock price-High ......................................        21 3/8        24 1/2      21 15/16        29 1/4        29 1/4
           -Low .......................................        16 3/8       19 1/16      17 11/16       18 5/16        16 3/8
                                                             ----------------------------------------------------------------

1997
Sales and service revenue .............................      $ 85,808      $ 94,951      $ 94,591      $105,567      $380,917
Gross profit ..........................................        36,666        42,529        42,309        47,011       168,515
Net earnings(4) .......................................         1,603         5,135         4,144         5,127        16,009
Net earnings per common share(4)
   Basic ..............................................           .07           .22           .18           .22           .69
   Diluted ............................................           .07           .22           .18           .22           .69
Dividends paid per share ..............................           .08           .08           .08           .08           .32
Stock price-High ......................................        17 5/8        14 7/8        15 7/8        17 1/2        17 5/8
           -Low .......................................        13 7/8            13        13 3/8        13 7/8            13
                                                             ----------------------------------------------------------------

1996
Sales and service revenue .............................      $ 88,191      $ 90,158      $ 86,884      $ 93,887      $359,120
Gross profit ..........................................        38,976        40,892        38,896        42,019       160,783
Net earnings ..........................................         4,493         5,533         5,151         4,691        19,868
Net earnings per common share                                                                                       
   Basic(3) ...........................................           .19           .23           .22           .20           .85
   Diluted ............................................           .19           .23           .22           .20           .84
Dividends paid per share ..............................           .08           .08           .08           .08           .32
Stock price-High ......................................        17 5/8        19 1/2            18        17 3/4        19 1/2
           -Low .......................................            15        16 3/8        15 3/8        14 1/4        14 1/4
</TABLE>

1. Net earnings for the first quarter of fiscal year 1998 included a gain of
approximately $1,000,000 after taxes ($.04 per diluted share) from the final
settlement of the Company's UK patent litigation with Lectra Systemes S.A. of
France.

2. Net earnings for the fourth quarter of fiscal year 1998 included a
non-recurring special charge of approximately $16,300,000 after taxes ($.70 per
share on a diluted basis) from the write-down of certain assets upon the sale of
the Company's Gerber Systems unit, which comprised the imaging and inspection
systems product class.

3. The quarterly earnings per share information is computed separately for each
period. Therefore, the sum of such quarterly per share amounts may differ from
the total for the year.

4. Net earnings for the second quarter of fiscal year 1997 included a gain of
$1,032,000 after taxes ($.04 per diluted share) from life insurance benefits the
Company received upon the death of Mr. H. Joseph Gerber.

                                       28
<PAGE>

ITEM 9.     CHANGES IN AND DISAGREEMENTS WITH AUDITORS ON ACCOUNTING 
            AND FINANCIAL DISCLOSURE.

      None.


PART III

ITEM 10.    DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT.

    The information required by Item 10 relating to identification of directors
is incorporated herein by reference to the information contained under the
caption "Election of Directors" in the Company's 1998 Annual Meeting Proxy
Statement, which will be filed within 120 days of the Company's April 30, 1998
fiscal year-end.

    Identification of executive officers appears below. All officers serve at
the pleasure of the Board of Directors. The following table presents the name
and age of each of the Company's executive officers, their present positions
with the Company and date of initial appointment thereto, and other positions
held during the past five years, including positions held with other companies
and with subsidiaries of the Company.

                                 PRESENT POSITION           OTHER POSITIONS
                                   AND DATE OF                HELD DURING
     NAME AND AGE              INITIAL APPOINTMENT          LAST FIVE YEARS
     ------------              -------------------          ---------------

George M. Gentile (62)         Chairman                 Chief Executive Officer;
                               (June 1, 1998)           President and Chief
                                                        Operating Officer;
                                                        Senior Vice President,
                                                        Finance; Treasurer

Michael J. Cheshire (49)       President and Chief      Chief Operating Officer;
                               Executive Officer        President, General 
                               (June 1, 1998)           Signal Electrical Group;
                                                        President, General 
                                                        Signal Electrical Power
                                                        Systems Group; 
                                                        President, Sola Electric

Fredric K. Rosen (59)          Senior Vice President    President, Gerber
                               (September 5, 1990)      Technology, Inc.

Shawn M. Harrington (44)       Senior Vice President    President and Chief
                               (March 20, 1997)         Operating Officer,
                                                        Gerber Coburn Optical,
                                                        Inc.; Vice President, 
                                                        Finance and Operations,
                                                        Gerber Optical, Inc.

Charles M. Hevenor (57)        Senior Vice President    President, Gerber 
                               (May 1, 1998)            Scientific Products, 
                                                        Inc.; Executive
                                                        Vice President and 
                                                        General Manager, Gerber 
                                                        Scientific Products, 
                                                        Inc.; Senior Vice
                                                        President, Software and
                                                        Systems, Gerber 
                                                        Scientific Products, 
                                                        Inc. 

Richard F. Treacy, Jr. (53)    Senior Vice President,   None
                               General Counsel and 
                               Secretary
                               (June 1, 1994)

Gary K. Bennett (47)           Senior Vice President,   Vice President;
                               Finance                  Treasurer and 
                               (August 19, 1996)        Corporate Controller

David J. Gerber (37)           Vice President,          Director, New Business
                               Business Development     Development and   
                               and Technology Strategy  Technology Strategy;
                               (March 19, 1998)         Secretary and Attorney

Bernard J. Demko (40)          Vice President,          Vice President, Finance,
                               Corporate Controller     Gerber Technology, Inc.
                               (June 1, 1998)

                                       29
<PAGE>

ITEM 11.    EXECUTIVE COMPENSATION.

    The information required by Item 11 is incorporated herein by reference to
the information contained under the caption "Executive Compensation and
Transactions" in the Company's 1998 Annual Meeting Proxy Statement, which will
be filed within 120 days of the Company's April 30, 1998 fiscal year-end.


ITEM 12.    SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.

    The information required by Item 12 is incorporated herein by reference to
the information contained under the captions "Voting Rights and Principal
Shareholders" and "Election of Directors" in the Company's 1998 Annual Meeting
Proxy Statement, which will be filed within 120 days of the Company's April 30,
1998 fiscal year-end.


ITEM 13.    CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.

    The information required by Item 13 is incorporated herein by reference to
the information contained under the caption "Election of Directors" in the
Company's 1998 Annual Meeting Proxy Statement, which will be filed within 120
days of the Company's April 30, 1998 fiscal year-end.



PART IV

ITEM 14.    EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K.

            (a)   The following documents are filed as part of this report:
                                                                            
                 1. Financial Statements:                               Page
                                                                       ------
                    Consolidated Statement of Earnings 
                      for the years ended April 30, 1998, 
                      1997, and 1996. . . . . . . . . . . . . . .        14
                    Consolidated Balance Sheet at 
                      April 30, 1998 and 1997 . . . . . . . . . .        15
                    Consolidated Statement of Changes in 
                      Shareholders' Equity for the years 
                      ended April 30, 1998, 1997, and 1996  . . .        16
                    Consolidated Statement of Cash Flows 
                      for the years ended April 30, 
                      1998, 1997, and 1996. . . . . . . . . . . .        17
                    Independent Auditors' Report  . . . . . . . .        18
                    Summary of Significant Accounting 
                      Policies and Notes to Consolidated 
                      Financial Statements. . . . . . . . . . . .   19 - 28

                    
                 2. Financial Statement Schedules:

                    All financial statement schedules are omitted because they
                    are not applicable or the required information is shown in 
                    the consolidated financial statements or notes thereto.

                                       30
<PAGE>

                3.  Exhibits:
                    
                    2.1   Stock Purchase Agreement among Gerber Optical, Inc.,
                          Coburn Optical Industries, Inc. and The Other Parties
                          Hereto, dated as of February 27, 1998.

                    2.2   Recommended Cash Offers by Schroders on behalf of
                          Gerber Scientific, Inc. for Spandex PLC.

                    3.1   Restated Certificate of Incorporation of the Company.

                    3.2   By-laws of the Company.

                    4.1*  Agreement pursuant to S-K Item 601(b)(4)(iii)(A) to 
                          provide to the Commission, upon request, copies of
                          certain other instruments with respect to long-term 
                          debt where the amount of securities authorized
                          under each such instrument does not exceed 10 percent 
                          of the total assets of the Registrant and its
                          subsidiaries on a consolidated basis.

                   10.1   Gerber Scientific, Inc. 1982 Employee Stock Plan.

                   10.2   Gerber Scientific, Inc. 1992 Employee Stock Plan as 
                          amended and restated as of April 28, 1995.

                   10.3   Gerber Scientific, Inc. 1992 Non-Employee Director 
                          Stock Option Plan.

                   10.4   Employment Agreement dated as of January 29, 1997 
                          between the Company and Michael J. Cheshire.

                   10.5   Consulting Agreement between the Company and David J. 
                          Logan commencing July 18, 1996.

                   10.6*  Consulting Agreement dated August 21, 1997 between the
                          Company and Stanley Simon and Associates.

                   10.7   Gerber Scientific, Inc. Profit and Growth Incentive 
                          Bonus Plan for the Fiscal Year Ending April 30, 1998.

                   10.8*  U.S. $190,000,000 (or [pound sterling]112,000,000 
                          for Offer Funding Borrowings) Tender Offer Facility 
                          among Gerber Scientific, Inc. as the Borrower; 
                          Gerber Technology, Inc., Gerber Scientific Products, 
                          Inc., and Gerber Optical, Inc. as the Guarantors; and 
                          Wachovia Bank, N.A. as the Bank dated as of 
                          March 23, 1998.

                   22.1*  Subsidiaries of the Registrant.

                   23.1*  Consent of Independent Auditors.

                   27.1*  Financial Data Schedule.

            (b)  The Company filed three Form 8-K's with the Securities and
                 Exchange Commission in the last quarter of fiscal year 1998.  
                 These Form 8-K's reported the following events:

                 1.  Form 8-K, dated February 27, 1998, reported that the 
                     Company, through its wholly owned subsidiary Gerber 
                     Optical, Inc., and Coburn Industries, Inc. entered into 
                     a stock purchase agreement and consummated the
                     transactions contemplated by that agreement.

                 2.  Form 8-K, dated March 24, 1998, reported the announcement 
                     of recommended cash offers for Spandex PLC.

                 3.  Form 8-K, dated March 30, 1998, reported the announcement 
                     of the Company's agreement to sell its Gerber Systems 
                     Corporation unit to BARCO, Inc.

            (c)  See Item 14(a) 3. above.

            (d)  See Item 14(a) 2. above.

     * Filed herewith.

                                       31
<PAGE>

                                   SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.


                                            GERBER SCIENTIFIC, INC.
                                            -----------------------
                                                  (Registrant)

Date:   July 28, 1998                       BY:    /s/ Gary K. Bennett
        -------------                              ----------------------------
                                                   Gary K. Bennett
                                                   Senior Vice President,
                                                   Finance and Principal 
                                                   Accounting Officer


Pursuant to the requirements of the Securities Exchange Act of 1934, this 
report has been signed below by the following persons on behalf of the 
Registrant and in the capacities and on the dates indicated:


      Date                Signature                      Title
      ----                ---------                      -----
 

 July 28, 1998      /s/ George M. Gentile       Chairman, Director
--------------      ------------------------
                     (George M. Gentile)


 July 28, 1998      /s/ Michael J. Cheshire     President and Chief Executive
--------------      ------------------------    Officer, Director
                     (Michael J. Cheshire)      


 July 28, 1998      /s/ W. Jerome Vereen        Director
--------------      ------------------------
                     (W. Jerome Vereen)


 July 28, 1998      /s/ A. Robert Towbin        Director
--------------      ------------------------
                     (A. Robert Towbin)


 July 28, 1998      /s/ David J. Gerber         Vice President, Business
--------------      ------------------------    Development and
                     (David J. Gerber)          Technology Strategy, Director


 July 28, 1998      /s/ Edward E. Hood, Jr.     Director
--------------      ------------------------
                     (Edward E. Hood, Jr.)


 July 28, 1998      /s/ David J. Logan          Director
--------------      ------------------------
                     (David J. Logan)


 July 28, 1998      /s/ Donald P. Aiken         Director
--------------      ------------------------
                     (Donald P. Aiken)


 July 28, 1998      /s/ Carole F. St. Mark      Director
--------------      ------------------------
                     (Carole F. St. Mark)


 July 28, 1998      /s/ Gary K. Bennett         Senior Vice President,
--------------      ------------------------    Finance
                     (Gary K. Bennett)          

                                       32
<PAGE>

                                  EXHIBIT INDEX

Exhibit Index
    Number                            Exhibit                              Page
-------------                         -------                              ----

   2.1      Stock Purchase Agreement among Gerber Optical, Inc.,
            Coburn Optical Industries, Inc. and The Other Parties
            Hereto, dated as of February 27, 1998 (incorporatd
            herein by reference to Exhibit 2 to the Company's
            Current Report on Form 8-K dated March 9, 1998).

   2.2      Recommended Cash Offers by Schroders on behalf of
            Gerber Scientific, Inc. for Spandex PLC (incorporated
            herein by reference to Exhibit 2 to the Company's
            Current Report on Form 8-K dated May 20, 1998).

   3.1      Restated Certificate of Incorporation of the Company 
            (incorporated herein by reference to Exhibit 3.1 to 
            the Company's Annual Report on Form 10-K for the year 
            ended April 30, 1990).

   3.2      By-laws of the Company (incorporated herein by reference 
            to Exhibit 3.2 to the Company's Annual Report on Form 
            10-K for the year ended April 30, 1990).

   4.1*     Agreement pursuant to S-K Item 601(b)(4)(iii)                  
            (A) to provide to the Commission, upon request, copies 
            of certain other instruments with respect to long-term
            debt where the amount of securities authorized under 
            each such instrument does not exceed 10 percent of the 
            total assets of the Registrant and its subsidiaries 
            on a consolidated basis.

   10.1     Gerber Scientific, Inc. 1982 Employee Stock Plan 
            (incorporated herein by reference to the Company's 
            Registration Statement on Form S-8, File No. 2-93695
            and Post-Effective Amendment No. 1 to the 
            Registration Statement).

   10.2     Gerber Scientific, Inc. 1992 Employee Stock Plan as
            amended and restated as of April 28, 1995
            (incorporated herein by reference to Exhibit A to 
            the Company's Proxy Statement filed in connection 
            with the Annual Meeting of Shareholders held 
            October 13, 1995, File No. 1-5865, and by reference 
            to the Company's Registration Statement on Form S-8,
            File No. 333-26177).

   10.3     Gerber Scientific, Inc. 1992 Non-Employee Director
            Stock Option Plan (incorporated herein by reference
            to Exhibit B to the Company's Proxy Statement filed 
            in connection with the Annual Meeting of Shareholders
            held September 24, 1992, File No. 1-5865).

   10.4     Employment Agreement dated as of January 29, 1997 
            between the Company and Michael J. Cheshire                
            (incorporated herein by reference to Exhibit 10 
            to the Company's quarterly report on Form 10-Q for 
            the quarter ended January 31, 1997).

   10.5     Consulting Agreement between the Company and David J.
            Logan commencing July 18, 1996 (incorporated herein by
            reference to Exhibit 10.7 to the Company's Annual Report
            on Form 10-K for the year ended April 30, 1997).

   10.6*    Consulting Agreement dated August 21, 1997 between the        
            Company and Stanley Simon & Associates.               

   10.7     Gerber Scientific, Inc. Profit and Growth Incentive
            Bonus Plan for the Fiscal Year Ending April 30, 1998     
            (incorporated herein by reference to Exhibit 10 to 
            the Company's quarterly report on Form 10-Q for the
            quarter ended January 31, 1998).

   10.8*    U.S. $190,000,000 (or [pound sterling]112,000,000             
            for Offer Funding  Borrowings) Tender Offer Facility 
            among Gerber Scientific, Inc. as the Borrower; 
            Gerber Technology, Inc., Gerber Scientific Products, 
            Inc., and Gerber Optical Inc. as the Guarantors; 
            and Wachovia Bank, N.A. as the Bank dated as of 
            March 23, 1998.

   22.1*    Subsidiaries of the Registrant.                                     

   23.1*    Consent of Independent Auditors.                                

   27.1*    Financial Data Schedule.                                           

            *Filed herewith.


                                       33