<PAGE>
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE
ACT OF 1934
FOR THE FISCAL YEAR ENDED JANUARY 31, 1997
OR
[_] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES
EXCHANGE ACT OF 1934
FOR THE TRANSITION PERIOD FROM......... TO...................................
COMMISSION FILE NUMBER 0-13200
ASTRO-MED, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
RHODE ISLAND 05-0318215
(STATE OR OTHER JURISDICTION OF (I.R.S. EMPLOYER IDENTIFICATION NO.)
INCORPORATION OR ORGANIZATION)
600 EAST GREENWICH AVENUE, 02893
WEST WARWICK, RHODE ISLAND (ZIP CODE)
(ADDRESS OF PRINCIPAL EXECUTIVE
OFFICES)
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: (401) 828-4000
SECURITIES REGISTERED PURSUANT TO SECTION 12(B) OF THE ACT:
<TABLE>
<CAPTION>
NAME OF EACH EXCHANGE
TITLE OF EACH CLASS ON WHICH REGISTERED
------------------- ---------------------
<S> <C>
None None
</TABLE>
SECURITIES REGISTERED PURSUANT TO SECTION 12(G) OF THE ACT:
COMMON STOCK, $.05 PAR VALUE
(TITLE OF CLASS)
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 registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. [X]
Indicate by check mark whether the registrant (1) 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 [_]
State the aggregate market value of the voting stock held by
non-affiliates of the registrant as of March 18, 1997.
Common Stock, $.05 Par Value: $32,732,945
Indicate the number of shares outstanding (excluding treasury shares)
of each of the issuer's classes of common stock as of March 18, 1997.
Common Stock, $.05 Par Value: 4,927,642 shares
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the Company's definitive proxy statement for the 1997 annual
meeting of shareholders are incorporated by reference into Part III.
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
9
<PAGE>
ASTRO-MED, INC.
FORM 10-K ANNUAL REPORT
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<C> <S> <C>
PART I
Item 1. Business....................................................... 11
Item 2. Properties..................................................... 14
Item 3. Legal Proceedings.............................................. 14
Item 4. Submission of Matters to a Vote of Security Holders............ 14
PART II
Market for the Registrant's Common Stock and Related
Item 5. Shareholder Matters............................................ 15
Item 6. Selected Financial Data........................................ 15
Management's Discussion and Analysis of Financial Condition and
Item 7. Results of Operations.......................................... 15
Item 8. Financial Statements and Supplementary Data.................... 17
Item 9. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure.......................................... 17
PART III
Item 10. Directors and Executive Officers of the Registrant............. 18
Item 11. Executive Compensation......................................... 18
Item 12. Security Ownership of Certain Beneficial Owners and Management. 19
Item 13. Certain Relationships and Related Transactions................. 19
PART IV
Exhibits, Financial Statement Schedules and Reports on Form 8-
Item 14. K.............................................................. 19
</TABLE>
10
<PAGE>
ASTRO-MED, INC.
PART I
ITEM 1. BUSINESS
GENERAL
Astro-Med, Inc., incorporated in Rhode Island in January 1969, operates in
the industry segment described below. There was no significant change in the
nature of the Company's business during the year ended January 31, 1997
(herein referred to as "fiscal 1997").
The Company and its subsidiaries and their representatives may from time to
time make written or oral statements, including statements contained in the
Company's filings with the Securities and Exchange Commission (SEC) and in its
reports to shareholders, including this annual report which constitute or
contain "forward-looking statements" as that term is defined in the Private
Securities Litigation Reform Act of 1995 or by the SEC in its rules,
regulations and releases.
All statements other than statements of historical fact included in this
annual report regarding the Company's financial position and operating and
strategic initiatives and addressing industry developments are foward-looking
statements. Where, in any forward-looking statement, the Company, or its
management, expresses an expectation or belief as to future results, such
expectation or belief is expressed in good faith and believed to have a
reasonable basis, but there can be no assurance that the statement of
expectation or belief will result or be achieved or accomplished. Factors
which could cause actual results to differ materially from those anticipated,
include but are not limited to general economic, financial and business
conditions; competition in the specialty printer market; competition in the
data acquisition market; competition in the neurophysiology market; the
business abilities and judgment of personnel; the impacts of unusual items
resulting from ongoing evaluations of business strategies; and changes in
business strategy.
NARRATIVE DESCRIPTION OF BUSINESS
PRODUCTS
Overview
The Company develops, designs, manufactures and sells three distinct product
groups that are tied together by a common thread--the ability to acquire
information and present it in a more useable form. The Core Group of products
takes scientific signals and prints them on charts or electronic media; the
Bar Code Printer Products Group includes printers and media that create
product and packaging labels and tags in one or many colors from a computer
file; the Grass Group takes signals that reflect the physiological status of
living creatures--from crayfish to man--and records them on paper--or hard
drive--or on a CD-ROM.
Core Products
The core of the Company's business since 1971 has been the chart recorder.
Recorders began as (ink-filled) pens writing on paper, progressed to solid-
state electronic printheads imaging specialized thermal paper and now include
systems that have no paper at all--just electronic signals captured onto
electronic storage devices. Core product lines include the MT-series(TM),
multi-channel, multi-function machines that emphasize expandability and
flexibility; the Dash-series(TM) of portable recorders that can record data
wherever it may be, under almost any condition in the field as well as the
lab; and the new AstroDAQ(TM) paperless data acquisition system that acquires
data directly to a hard drive where it can be transferred--either by a direct
connection or over a modem--to a personal computer for analysis.
The size of the recorders range from the all-new portable 2-channel Dash
II(TM) to the world-standard 32- channel rack mounted MT95K2(TM), and range in
price from about $5,500 to $25,000 each. The AstroDAQ(TM) can
11
<PAGE>
record from 4 to 300 channels depending on the configuration of the individual
machine and the number of systems linked together. All recording systems have
corresponding software packages that provide for recorder control and data
review and manipulation.
Two other specialty printers complete the Company's core product offerings--
the TOUGH WRITER(TM) ruggedized COTS PostScript page printer for military,
airborne, shipboard and heavy industrial applications and the AG-1280 high-
speed, drop-in replacement for the Versatec V-80 electrostatic
printer/plotter.
Bar Code/Label Printer Products
The Company continues to expand its base in the digital color printing
market. The narrow web color printing system, formerly known as the
SUNDANCE(TM) system has been enhanced with new MICROCELL(TM) printing
technology, and new Windows and Macintosh printer drivers and is now known as
the Color QuickLabel-4(TM) (CQL-4), better reflecting the capabilities of the
machine. The system creates lithographic quality labels and tags in both full
process and spot color, in any quantity, on-site and on-demand.
The Company also manufactures monochrome thermal/thermal transfer printers
that produce high-quality bar code labels quickly and easily in almost any
format required. The TOP HAND 2(TM) printer produces labels up to 5 inches
wide at up to 10 inches per second while the RANGE BOSS(TM) 8 1/2 inch wide
format printer creates shipping labels and other large formats quickly and
reliably.
Rounding out the Company's printer products is a large variety of printer
consumables including thermal transfer ribbons, labels and tags. A wide range
of materials are available, all manufactured on-site, to guarantee a finished
label that meets almost any requirements from single-use paper labels to
garment labels, to outdoor signage and product labels of almost any
description.
Grass Products
The Grass(R) Instrument Division serves both research and clinical
neurophysiology markets world-wide. The Grass name and product line is
renowned in universities, medical centers and pharmaceutical companies and the
Company is now building on that brand recognition by combining superior
quality and market understanding with the newest technology. This has been a
year of intense product development highlighted by the introduction of the
Albert Grass HERITAGE(TM) Digital EEG machine that is poised to meet the
anticipated market demand for digital recording capability as facilities
switch from the traditional paper based systems.
Other new products include PolyVIEW PRO(TM), a Windows 95 based system for
data acquisition and analysis of signals in biomedical research and the
BrainTree(TM) system designed to offer users the best of both the traditional
analog and the new digital worlds.
The Company continues to offer the traditional Grass product line of Classic
EEG and polysomnograph systems as well as the newer digital neurodata
acquisition systems such as the Model 12 and Model 15 which feature the world
renowned Grass amplifiers.
The next expansion of the Grass product group will be the HERITAGE(TM) PSG
system, now in clinical trials, designed for the expanding market of sleep and
pulmonary studies. The Company anticipates that this system will be available
in fiscal 1998.
Rounding out the offerings from Grass is a complete line of stimulators,
transducers, electrodes and consumables, products with traditionally strong
sales year-to-year which should continue to expand with the installed base of
Grass products.
TECHNOLOGY
Historically, the Company has concentrated its research and development
efforts toward various methods to acquire, process, store and print data so
that the data can be analyzed, manipulated, stored or affixed to a product.
12
<PAGE>
In recent years, the Company has developed and refined its digital printing
and data acquisition systems. As its technology has become more advanced and
comprehensive, the Company has been able to enter an increasingly wide range
of markets.
PATENTS AND COPYRIGHTS
The Company holds a number of product patents in the United States and in
foreign countries. It has filed application for other patents that are
pending. In April 1988, the Company was granted Patent No. 4,739,344 covering
28 claims related to the MT-9500 as well as the newer MT-95000 and MT95K2. The
Company has a patent for its dual sided label printing and has a patent
pending for its two side,--4 color process printer,--the CQL-4. The Company
considers its patents to be important but does not believe that its business
is materially dependent on them. The Company copyrights its extensive software
and registers its trademarks.
MANUFACTURING AND SUPPLIES
The Company designs its products and manufactures many of the component
parts. The balance of the parts are produced by suppliers to the Company's
specifications. Raw materials required for the manufacture of products,
including parts produced to the Company's specifications, are generally
available from numerous suppliers.
PRODUCT DEVELOPMENT
The Company has maintained an active program of product research and
development since its inception. During fiscal 1995, 1996 and 1997, the
Company incurred costs of $2,542,940, $2,415,494 and $2,493,072, respectively,
on Company-sponsored product development. The Company is committed to product
development as a core competence in its growth and expects to continue to
increase its research and development efforts in the new year.
MARKETING AND COMPETITION
The Company competes in varied markets throughout the world for all of its
products on the basis of proprietary technology, product reputation, delivery,
technical assistance and service to customers.
The Company's products are sold to customers in North America and selected
European countries by a direct field sales force. The Company distributes a
limited number of products within the Bar Code Products Group through a
nationwide network of dealers. Export sales are distributed primarily through
wholly-owned entities formed between fiscal 1988 and 1994 in England, France,
Germany, Italy and Canada. Other export sales are made through authorized
distributors or agents located in approximately thirty countries. No single
customer accounted for 10% of the Company's net sales in any of the last three
fiscal years.
During the last fiscal year, the Company's products were sold to
approximately 4,500 customers.
The Company's product promotion includes full-color advertising campaigns in
many leading trade magazines, exhibitions at trade shows, special mailings,
and public relations activities.
INTERNATIONAL SALES
Astro-Med International, Inc., a subsidiary of the Company, participates in
all export sales. The subsidiary is a Foreign Sales Corporation and qualifies
for certain tax benefits provided as an incentive for exports.
In fiscal 1995, 1996 and 1997, net sales to customers in various geographic
areas outside the U.S.A., primarily in Canada and Western Europe, amounted to
$9,849,933, $13,234,380 and $11,840,750, respectively. The Company's
management does not believe that its export sales involve materially greater
risks than its domestic sales.
13
<PAGE>
ORDER BACKLOG
The backlog regularly fluctuates. It consists of a blend of orders for OEM
customers as well as end user customers. Manufacturing is geared to forecasted
demands and applies a rapid turn cycle to meeting customer expectations.
Accordingly, the amount of order backlog does not indicate future sales trends
and the Company does not normally carry any material backlog.
OTHER INFORMATION
The Company's business is not seasonal in nature.
Most of the Company's products are warranted for periods ranging from 45
days to one year against defects in materials or workmanship. Warranty
expenses have averaged approximately $198,000 a year for the Company's last
three fiscal years.
As of March 18, 1997, the Company employed approximately 356 persons. The
Company is generally able to satisfy its employment requirements. No employees
are represented by a union. The Company believes that employee relations are
good.
ITEM 2. PROPERTIES
The following table sets forth information regarding the Company's principal
properties, all of which are included in the consolidated balance sheet
appearing elsewhere in this report.
<TABLE>
<CAPTION>
LOCATION APPROXIMATE SQUARE FOOTAGE PRINCIPAL USE
-------- -------------------------- -------------
<S> <C> <C>
West Warwick, RI 116,000 Corporate headquarters,
research and development,
manufacturing
Braintree, MA 91,000 Manufacturing
Slough, England 1,700 Sales and service
</TABLE>
The Company believes its facilities are well maintained, in good operating
condition and generally adequate to meet its needs for the foreseeable future.
ITEM 3. LEGAL PROCEEDINGS
There are no pending or threatened legal proceedings against the Company
believed to be material to the financial position or results of operations of
the Company.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No matters were submitted to a vote of the Company's security holders,
through solicitation of proxies or otherwise, during the last quarter of the
period covered by this report.
14
<PAGE>
PART II
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON STOCK AND RELATED STOCKHOLDER
MATTERS
The Company's common stock trades in the NASDAQ National Market System under
the symbol ALOT. The following table sets forth dividend data and the range of
high and low closing prices, as furnished by NASDAQ, for the periods indicated.
<TABLE>
<CAPTION>
DIVIDENDS
YEARS ENDED JANUARY 31, HIGH LOW PER SHARE
----------------------- ------ ------ ---------
<S> <C> <C> <C>
1996:
First Quarter.................................... 12 3/8 8 1/2 .03
Second Quarter................................... 12 8 3/8 .03
Third Quarter.................................... 11 1/4 10 .03
Fourth Quarter................................... 10 1/2 8 7/8 .03
1997:
First Quarter.................................... 9 1/4 7 3/4 .03
Second Quarter................................... 9 3/4 7 5/8 .03
Third Quarter.................................... 9 7 3/4 .03
Fourth Quarter................................... 9 7 1/2 .03
</TABLE>
The Company had approximately 540 shareholders of record on March 18, 1997,
not including shareholders with shares held under beneficial ownership in
nominee name.
ITEM 6. SELECTED FINANCIAL DATA
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
YEARS ENDED JANUARY 31,
---------------------------------------
1993 1994 1995 1996 1997
------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C>
Results of Operations:
Net Sales............................ $31,333 $32,268 $38,233 $43,941 $44,175
Net Income........................... 3,570 2,981 1,923 1,328 2,288
Earnings per Common Share............ .69 .58 .38 .26 .46
Cash Dividends per Common Share...... .11 .12 .12 .12 .12
Financial Condition:
Working Capital...................... $23,479 $24,895 $25,487 $26,420 $28,810
Total Assets......................... 37,492 39,955 42,177 42,303 43,321
Long-Term Debt, less Current
Maturities.......................... 647 296 244 175 258
</TABLE>
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
RESULTS OF OPERATIONS
The following table provides percentage comparisons of the components of net
income as presented in the consolidated statements of income included elsewhere
herein for the last three fiscal years.
<TABLE>
<CAPTION>
% OF NET SALES % INCREASE
--------------------------- -----------------------------------
YEARS ENDED JANUARY 31, 1995 1996 1997
--------------------------- COMPARED TO COMPARED TO COMPARED TO
1995 1996 1997 1994 1995 1996
------- ------- ------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
Net Sales............... 100% 100% 100% 18% 15% 1%
Gross Profit............ 43 39 38 (1) 5 (1)
Selling, General and
Administrative......... 30 30 28 18 13 (5)
Research and
Development............ 7 6 6 11 (5) 3
</TABLE>
15
<PAGE>
The Company's sales grew 1% during fiscal 1997. The increment was traceable
to sales in the domestic markets which increased 5% over the prior year.
Conversely, the Company's international sales declined 11% from the prior
fiscal year as the recession ridden economies of Western Europe hampered the
Company's historical growth rates.
Sales of the Company's core products were relatively flat during the year.
Although demand for the MT95K2, DASH 10, Astro-DAQ, and TOUGH WRITER products
was healthy, sales of the Company's OEM product lines declined. Sales in the
Bar Code products group remained solid in fiscal 1997 with gains reported in
all product lines, especially the CQL-4 digital color printer, the TOP HAND 2
monochrome printer products and related media products.
In the neurophysiology markets the migration from the traditional analog
systems to digital continued. As a consequence, the Company reported a decline
in its Grass sales as the Company's Albert Grass HERITAGE Digital EEG machine
and BrainTree machine were introduced in the latter part of the fiscal year.
The full impact of these products as well as the Company's newest entry in
polysomnography, the HERITAGE(TM) PSG system, are expected to stimulate sales
growth in fiscal 1998.
The Company's Gross Profit Percentage declined slightly from 39% in the
prior fiscal year to 38% in fiscal year 1997. The change is traceable to
product mix where growth in sales of lower margin consumable products as well
as declines in margins on international sales affected the overall Gross
Profit Percentage.
Spending in the Selling and G & A categories declined by 5% in fiscal 1997
from the prior fiscal year. The change stems from a reduction in personnel in
these support services as well as elimination of various discretionary
expenses. The Company intends to commit selling and marketing funds necessary
to support growth of its Core Products, Bar Code Printer product lines and
Grass Division products. The Company believes its marketing investment is
critical to expanding its market position in both domestic and international
markets.
R & D spending increased 3% in fiscal 1997 as compared to fiscal 1996. The
current year funding level is consistent with requirements to support the
Company's new and existing product lines. The Company is committed to spending
6% to 7% annually of its sales dollars in Research & Development in order to
ensure that its product lines provide customers with the most effective
digital printing and data acquisition solutions available.
The interest and dividend income level in fiscal 1997 rose from both fiscal
1996 and fiscal 1995. This improvement is attributable to the increased cash
position provided by operations and investing activities. Interest expense in
fiscal 1997 was lower than the two previous years as the level of short term
borrowings declined. Other income (expense) net, was significantly higher than
previous years due to the gains realized from the sale of securities in the
Company's investment portfolio.
The Company was nominally affected by fluctuations in foreign currency
exchange rates as the US dollar strengthened against most European currencies.
Changes in effective income tax rates from year to year are explained in
Note 6 of Notes to Consolidated Financial Statements.
Inflation during the recent year has not significantly affected the
Company's operations. Historically, cost increases have been offset by
improved manufacturing efficiencies and/or by selected price increases.
LIQUIDITY AND CAPITAL RESOURCES
The Company enhanced its cash and cash equivalent balances during the fiscal
year. The increase is traceable to operating activities, primarily net income
and reductions in inventories as well as investing activities including the
sale of securities and depreciable assets.
16
<PAGE>
The Company has a $1.5 million Credit Line with a bank. The Company does not
currently anticipate any significant draw downs under its Credit Line for
operating needs.
The Company's long-term debt includes debt acquired several years ago to
construct facilities and to make major acquisitions of machinery and
equipment. During the fiscal year, the Company entered into a three year
Capital Lease Agreement for the purpose of upgrading its information
technology platform. Expenditures for property and equipment during the past
three fiscal years have been made from on hand and internally generated funds.
The Company is financially strong. The current ratio was 6.8:1 at the end of
fiscal 1997 and long-term debt was less than 1% of shareholders' equity. The
Company has no material commitments for capital expenditures and has no reason
to believe that capital resources available to it will not meet the needs of
its business, both on a short-term and long-term basis.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The consolidated financial statements required under this item are submitted
as a separate section of this report on the pages indicated at Item 14(a)(1).
The supplementary data regarding quarterly results of operations is set forth
in the following table.
QUARTERLY FINANCIAL DATA (UNAUDITED)
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
QUARTERS ENDED
-------------------------------------------
APRIL 29, JULY 29, OCTOBER 28, JANUARY 31,
1995 1995 1995 1996
--------- --------- ----------- -----------
<S> <C> <C> <C> <C>
Net Sales........................... $10,955 $10,788 $10,824 $11,375
Gross Profit........................ 4,243 4,614 4,236 3,925
Net Income.......................... 342 526 280 179
Earnings Per Common Share........... .07 .10 .06 .04
<CAPTION>
MAY 4, AUGUST 3, NOVEMBER 2, JANUARY 31,
1996 1996 1996 1997
--------- --------- ----------- -----------
<S> <C> <C> <C> <C>
Net Sales........................... $10,490 $11,179 $11,111 $11,396
Gross Profit........................ 3,958 4,403 4,539 4,034
Net Income.......................... 443 586 684 574
Earnings Per Common Share........... .09 .12 .14 .12
</TABLE>
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
None.
17
<PAGE>
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
The response to this item is incorporated by reference to the Company's
definitive proxy statement for the 1997 annual meeting of shareholders.
The following is a list of the names and ages of, and the positions and
offices presently held by, all executive officers of the Company. All officers
serve at the pleasure of the Board of Directors.
<TABLE>
<CAPTION>
NAME AGE POSITION
---- --- --------
<S> <C> <C>
Chairman, Chief Executive Officer and
Albert W. Ondis............... 71 Director
President, Chief Operating Officer and
Everett V. Pizzuti............ 60 Director
David M. Gaskill.............. 51 Vice President--Research and Development
Vice President and Treasurer, Chief Financial
Joseph P. O'Connell........... 53 Officer
Gordon W. Bentley............. 50 Vice President--Manufacturing-Instruments
Elias G. Deeb................. 55 Vice President--Media Products
A. Eric Bartholomay........... 48 Vice President--International Sales
Arthur F. Reine............... 37 Controller
</TABLE>
All of the persons named above have held the positions identified since
January 31, 1985, except as indicated.
Mr. Ondis was previously a Director, the Chief Executive Officer (President)
and the Chief Financial Officer (Treasurer) of the Company since 1969.
Mr. Pizzuti was previously a Vice President of the Company functioning as
Chief Operating Officer since 1971.
Mr. Gaskill previously had functioned as Vice President--Engineering of the
Company since 1974. He is a nephew of Mr. Ondis.
Mr. O'Connell joined the Company in 1996. He previously held senior
financial management positions with Cherry Tree Products Inc. (1994-1995), IBI
Corporation (1991-1994) and Dennison Manufacturing Company (1975-1990). Mr.
O'Connell is also Assistant Secretary of the Company.
Mr. Bentley has held the position identified since 1986. In 1983, he was
named Manager of Materiel after having been Purchasing Manager during the two
prior years.
Mr. Deeb has held the position identified since 1987. In 1985, he was named
General Manager--Media Products after having been Vice President and General
Manager since 1981 of a business sold by the Company in 1984.
Mr. Bartholomay has held the position identified since 1991. In 1988, he had
been named Manager of International Operations. He previously held various
sales and sales-related positions with Rhone-Poulenc Inc. beginning in the
United States in 1981. He transferred to France in 1985 and last held the
position of a Manager of Product and Market Development.
Mr. Reine joined the Company in 1996. He previously held financial
management positions with Brainstorm Technology, Inc. (1995-1996), Analytical
Technology, Inc. (1989-1995) and Spectra-Physics, Inc. (1983-1988).
ITEM 11. EXECUTIVE COMPENSATION
The response to this item is incorporated by reference to the Company's
definitive proxy statement for the 1997 annual meeting of shareholders.
18
<PAGE>
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The response to this item is incorporated by reference to the Company's
definitive proxy statement for the 1997 annual meeting of shareholders.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The response to this item is incorporated by reference to the Company's
definitive proxy statement for the 1997 annual meeting of shareholders.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
(a)(1) Financial Statements:
The following consolidated financial statements of Astro-Med, Inc. and
subsidiaries are incorporated by reference in Item 8:
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Report of Independent Public Accountants............................... 22
Consolidated Balance Sheets--January 31, 1996 and 1997................. 23
Consolidated Statements of Income--Years Ended January 31, 1995, 1996
and 1997.............................................................. 24
Consolidated Statements of Shareholders' Equity--
Years Ended January 31, 1995, 1996 and 1997........................... 25
Consolidated Statements of Cash Flows--
Years Ended January 31, 1995, 1996 and 1997........................... 26
Notes to Consolidated Financial Statements--January 31, 1997........... 27
(a)(2) Financial Statement Schedules:
Schedule II--Valuation and Qualifying Accounts and Reserves--
Years Ended January 31, 1995, 1996 and 1997........................... 35
</TABLE>
All other schedules for which provision is made in the applicable accounting
regulations of the Securities and Exchange Commission are not required under
the related instructions or are inapplicable, and therefore, have been
omitted.
19
<PAGE>
(a)(3) Exhibits:
<TABLE>
<CAPTION>
EXHIBIT
NUMBER
-------
<C> <S>
(3A) Articles of Incorporation of the Company and all amendments thereto
(filed as Exhibit No. 3A to the Company's report on Form 10-Q for
the quarter ended August 1, 1992 and by this reference incorporated
herein).
(3B) By-laws of the Company and all amendments thereto (filed as Exhibit
No. 3B to the Company's report on Form 10-Q for the quarter ended
July 30, 1988 and by this reference incorporated herein).
(4) Specimen form of common stock certificate of the Company (filed as
Exhibit No. 4 to the Company's report on Form 10-K for the year
ended January 31, 1985 and by this reference incorporated herein).
(10.1) Astro-Med, Inc. 1989 Non-Qualified Stock Option Plan, as amended.(1)
(10.2) Astro-Med, Inc. 1989 Incentive Stock Option Plan, as amended, filed
as Exhibit 28 to Registration Statement on Form S-8, Registration
No. 33-43700, and incorporated by reference herein.(1)
(10.3) Astro-Med, Inc. 1993 Incentive Stock Option Plan filed as Exhibit
4.3 to Registration Statement on Form S-8, Registration No. 333-
24127, and incorporated by reference herein. (1)
(10.4) Astro-Med, Inc. Non-Employee Director Stock Option Plan filed as
Exhibit 4.3 to Registration Statement on Form S-8, Registration No.
333-24123, and incorporated by reference herein. (1)
(21) List of Subsidiaries of the Company. See page 22.
(23) Consent of Independent Public Accountants. See page 22.
</TABLE>
- --------
(1) Management contract or compensatory plan or arrangement.
(b) Reports on Form 8-K:
No reports on Form 8-K were filed by the Company during the last quarter of
the period covered by this report.
20
<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.
ASTRO-MED, INC.
(Registrant)
/s/ Albert W. Ondis
By __________________________________
Date: April 15, 1997 (ALBERT W. ONDIS, CHAIRMAN)
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 DATE INDICATED.
NAME TITLE DATE
/s/ Albert W. Ondis Chairman and April 15, 1997
- ------------------------------------- Director (Principal
ALBERT W. ONDIS Executive Officer)
/s/ Everett V. Pizzuti President and April 15, 1997
- ------------------------------------- Director (Principal
EVERETT V. PIZZUTI Operating Officer)
/s/ Joseph P. O'Connell Vice President and April 15, 1997
- ------------------------------------- Treasurer
JOSEPH P. O'CONNELL (Principal
Financial Officer)
/s/ Arthur F. Reine Controller April 15, 1997
- ------------------------------------- (Principal
ARTHUR F. REINE Accounting Officer)
/s/ Jacques V. Hopkins Director April 15, 1997
- -------------------------------------
JACQUES V. HOPKINS
21
<PAGE>
EXHIBIT 21
LIST OF SUBSIDIARIES OF THE COMPANY
Name Jurisdiction of Organization
AWO, Inc. Delaware
Astro-Med International Inc. Barbados
Astro-Med SRL Italy
Astro-Med GMBH Germany
EXHIBIT 23
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the incorporation of
our report included in this Form 10-K, into the Company's previously filed
Registration Statements on Form S-8: File No. 2-81081 pertaining to the Astro-
Med, Inc. Employee Stock Purchase Plan, File No. 33-43699 pertaining to the
Astro-Med, Inc. 1982 Incentive Stock Option Plan, File No. 33-43700 pertaining
to the Astro-Med, Inc. 1989 Incentive Stock Option Plan, File No. 333-24127
pertaining to the Astro-Med, Inc. 1993 Incentive Stock Option Plan and File
No. 333-24123 pertaining to the Astro-Med, Inc. Non-Employee Director Stock
Option Plan.
ARTHUR ANDERSEN LLP
Boston, Massachusetts
April 15, 1997
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To Astro-Med, Inc.:
We have audited the accompanying consolidated balance sheets of Astro-Med,
Inc. and subsidiaries as of January 31, 1996 and 1997, and the related
consolidated statements of income, shareholders' equity and cash flows for
each of the three years in the period ended January 31, 1997. These financial
statements and the schedule referred to below are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
financial statements and the schedule based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform our audits 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 financial statements referred to above present fairly,
in all material respects, the financial position of Astro-Med, Inc. and
subsidiaries as of January 31, 1996 and 1997, and the results of their
operations and their cash flows for each of the three years in the period
ended January 31, 1997, in conformity with generally accepted accounting
principles.
Our audits were made for the purpose of forming an opinion on the basic
financial statements taken as a whole. The schedule listed in the index at
Item 14(a)(2) is presented for purposes of complying with the Securities and
Exchange Commission's rules and is not part of the basic financial statements.
This schedule has been subjected to the auditing procedures applied in the
audits of the basic financial statements and, in our opinion, fairly states in
all material respects the financial data required to be set forth therein in
relation to the basic financial statements taken as a whole.
ARTHUR ANDERSEN LLP
Boston, Massachusetts
March 14, 1997
22
<PAGE>
ASTRO-MED, INC.
CONSOLIDATED BALANCE SHEETS
AS OF JANUARY 31, 1996 AND 1997
<TABLE>
<CAPTION>
1996 1997
----------- -----------
<S> <C> <C>
ASSETS
CURRENT ASSETS
Cash and Cash Equivalents (Note 1)................. $ 2,033,713 $ 6,561,184
Securities Available for Sale (Notes 1 and 2)...... 6,659,828 7,099,358
Accounts Receivable, Less Reserve of $157,000 in
1996 and $175,000 in 1997......................... 8,318,005 8,311,736
Inventories (Note 3)............................... 12,533,553 10,361,505
Prepaid Expenses and Other Current Assets (Note 6). 1,424,757 1,441,505
----------- -----------
Total Current Assets............................. 30,969,856 33,775,288
PROPERTY, PLANT AND EQUIPMENT (Notes 1 and 7)
Land and Improvements.............................. 288,341 376,502
Buildings and Improvements......................... 7,286,901 6,852,715
Machinery and Equipment............................ 9,488,613 9,817,752
----------- -----------
17,063,855 17,046,969
Less Accumulated Depreciation...................... (8,350,722) (8,986,149)
----------- -----------
8,713,133 8,060,820
OTHER ASSETS
Excess of Cost over Net Assets Acquired (Note 1)... 1,012,693 976,384
Amounts Due from Officers.......................... 453,264 453,264
Other.............................................. 1,153,785 55,671
----------- -----------
2,619,742 1,485,319
----------- -----------
$42,302,731 $43,321,427
=========== ===========
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts Payable................................... $ 2,136,825 $ 1,614,986
Accrued Compensation............................... 1,200,082 1,115,026
Accrued Expenses................................... 730,345 1,318,103
Income Taxes....................................... 432,540 819,535
Current Maturities of Long-Term Debt (Note 4)...... 50,000 97,706
----------- -----------
Total Current Liabilities........................ 4,549,792 4,965,356
LONG-TERM DEBT, Less Current Maturities (Note 4)..... 175,000 258,135
EXCESS OF NET ASSETS ACQUIRED OVER COST (Note 1)..... 761,879 544,199
DEFERRED INCOME TAXES (Notes 1 and 6)................ 834,754 794,895
SHAREHOLDERS' EQUITY (Note 5)
Preferred Stock, $10 Par Value, Authorized 100,000
Shares, Issued None...............................
Common Stock, $.05 Par Value, Authorized 13,000,000
Shares, Issued 5,123,310 in 1996 and 5,136,737 in
1997.............................................. 256,166 256,837
Additional Paid-in Capital......................... 5,554,100 5,624,239
Retained Earnings.................................. 31,079,623 32,772,044
Treasury Stock, at Cost, 103,066 Shares in 1996 and
209,395 Shares in 1997............................ (902,169) (1,804,986)
Cumulative Translation Adjustment (Note 1)......... (38,368) (76,649)
Net Unrealized Gain (Loss) on Securities Available
for Sale (Note 2)................................. 31,954 (12,643)
----------- -----------
35,981,306 36,758,842
----------- -----------
$42,302,731 $43,321,427
=========== ===========
</TABLE>
The accompanying notes are an integral part of these financial statements.
23
<PAGE>
ASTRO-MED, INC.
CONSOLIDATED STATEMENTS OF INCOME
YEARS ENDED JANUARY 31, 1995, 1996 AND 1997
<TABLE>
<CAPTION>
1995 1996 1997
----------- ----------- -----------
<S> <C> <C> <C>
Net Sales............................... $38,233,312 $43,941,311 $44,175,133
Cost of Sales........................... 21,950,539 26,923,192 27,241,473
----------- ----------- -----------
Gross Profit............................ 16,282,773 17,018,119 16,933,660
Costs and Expenses:
Selling, General and Administrative... 11,575,712 13,108,828 12,451,030
Research and Development.............. 2,542,940 2,415,494 2,493,072
----------- ----------- -----------
14,118,652 15,524,322 14,944,102
----------- ----------- -----------
Operating Income........................ 2,164,121 1,493,797 1,989,558
Other Income (Expense):
Interest and Dividend Income.......... 572,345 353,393 597,995
Interest Expense...................... (159,952) (37,456) (27,278)
Other, Net............................ 193,975 (49,199) 375,750
----------- ----------- -----------
606,368 266,738 946,467
----------- ----------- -----------
Income before Income Taxes.............. 2,770,489 1,760,535 2,936,025
Provision for Income Taxes (Notes 1 and
6)..................................... 847,000 433,000 648,000
----------- ----------- -----------
Net Income.............................. $ 1,923,489 $ 1,327,535 $ 2,288,025
=========== =========== ===========
Earnings Per Common Share (Note 1)...... $.38 $.26 $.46
==== ==== ====
Weighted Average Number of Common and
Common Equivalent Shares Outstanding... 5,099,004 5,095,661 5,018,143
=========== =========== ===========
Dividends Declared Per Common Share..... $.12 $.12 $.12
==== ==== ====
</TABLE>
The accompanying notes are an integral part of these financial statements.
24
<PAGE>
ASTRO-MED, INC.
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
YEARS ENDED JANUARY 31, 1995, 1996 AND 1997
<TABLE>
<CAPTION>
NET
UNREALIZED
GAIN (LOSS)
ADDITIONAL CUMULATIVE ON SECURITIES
COMMON PAID-IN RETAINED TREASURY TRANSLATION AVAILABLE
STOCK CAPITAL EARNINGS STOCK ADJUSTMENT FOR SALE
-------- ---------- ----------- ----------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Balance, January 31,
1994................... $255,641 $5,365,546 $29,036,722 $ (733,468)
Net Income.............. 1,923,489
Shares Sold Under
Employee Stock Purchase
Plan................... 216 39,006
Exercise of Stock
Options, Including
Related Tax Benefits... 56 107,043
Shares Issued to
Employee Stock
Ownership Plan......... 4,037 60,713
Dividends Declared...... (604,273)
Cumulative Translation
Adjustment............. $(80,722)
Change in Net Unrealized
Gain (Loss) on
Securities Available
for Sale............... $(94,072)
-------- ---------- ----------- ----------- -------- --------
Balance, January 31,
1995................... 255,913 5,515,632 30,355,938 (672,755) (80,722) (94,072)
Net Income.............. 1,327,535
Shares Sold Under
Employee Stock Purchase
Plan................... 196 35,312
Exercise of Stock
Options, Including
Related Tax Benefits... 57 3,694
Shares Issued to
Employee Stock
Ownership Plan......... (538) 60,913
Purchase of Stock for
Treasury............... (290,327)
Dividends Declared...... (603,850)
Cumulative Translation
Adjustment............. 42,354
Change in Net Unrealized
Gain on Securities
Available for Sale..... 126,026
-------- ---------- ----------- ----------- -------- --------
Balance, January 31,
1996................... 256,166 5,554,100 31,079,623 (902,169) (38,368) 31,954
Net Income.............. 2,288,025
Shares Sold Under
Employee Stock Purchase
Plan................... 221 33,440
Exercise of Stock
Options, Including
Related Tax Benefits... 450 42,550
Shares Issued to
Employee Stock
Ownership Plan......... (5,851)
Purchase of Stock for
Treasury............... (902,817)
Dividends Declared...... (595,604)
Cumulative Translation
Adjustment............. (38,281)
Change in Net Unrealized
Gain (Loss) on
Securities Available
for Sale............... (44,597)
-------- ---------- ----------- ----------- -------- --------
Balance, January 31,
1997................... $256,837 $5,624,239 $32,772,044 $(1,804,986) $(76,649) $(12,643)
======== ========== =========== =========== ======== ========
</TABLE>
The accompanying notes are an integral part of these financial statements.
25
<PAGE>
ASTRO-MED, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
YEARS ENDED JANUARY 31, 1995, 1996 AND 1997
<TABLE>
<CAPTION>
1995 1996 1997
------------ ----------- -----------
<S> <C> <C> <C>
Cash Flows from Operating Activities:
Net Income........................... $ 1,923,489 $ 1,327,535 $ 2,288,025
Adjustments to Reconcile Net Income
to Net Cash Provided by Operating
Activities:
Depreciation and Amortization...... 1,038,951 909,771 921,088
Gain on Sale of Assets............. (495,761)
Deferred Income Taxes.............. (30,687) 108,576 (39,859)
Other.............................. 22,836 165,277 (56,358)
Changes in Assets and Liabilities:
Accounts Receivable.............. (511,187) (489,612) 6,269
Inventories...................... (2,236,033) 359,991 2,172,048
Other............................ (804,827) 749,718 (399,118)
Accounts Payable and Accrued
Expenses........................ (70,444) (562,101) (19,137)
Income Taxes..................... 89,750 (283,093) 386,995
------------ ----------- -----------
Total Adjustments.............. (2,501,641) 958,527 2,476,167
------------ ----------- -----------
Net Cash Provided (Used) by
Operating Activities.............. (578,152) 2,286,062 4,764,192
Cash Flows from Investing Activities:
Proceeds from Sales of Securities
Available for Sale.................. 21,267,964 3,307,328 2,470,402
Purchases of Securities Available for
Sale................................ (14,574,588) (2,879,153) (2,527,562)
Proceeds from Sales of Assets........ 599,500
Proceeds from Sales of Investment.... 1,514,779
Additions to Property, Plant and
Equipment........................... (1,265,012) (922,397) (997,070)
Acquisition of New Business, Net of
Cash Acquired....................... (4,296,545)
------------ ----------- -----------
Net Cash Provided (Used) by
Investing Activities.............. 1,131,819 (494,222) 1,060,049
Cash Flows from Financing Activities:
Proceeds from Short-Term Borrowing... 3,400,000 500,000
Payments of Debt..................... (3,753,406) (570,775) (50,000)
Proceeds from Capital Lease
Obligations......................... 180,841
Proceeds from Common Shares Issued
Under Employee Benefit Plans........ 211,071 99,634 70,810
Purchases of Treasury Stock.......... (290,327) (902,817)
Dividends Paid....................... (604,273) (603,850) (595,604)
------------ ----------- -----------
Net Cash Used by Financing
Activities........................ (746,608) (865,318) (1,296,770)
------------ ----------- -----------
Net Increase (Decrease) in Cash and
Cash Equivalents...................... (192,941) 926,522 4,527,471
Cash and Cash Equivalents, Beginning of
Year.................................. 1,300,132 1,107,191 2,033,713
------------ ----------- -----------
Cash and Cash Equivalents, End of Year. $ 1,107,191 $ 2,033,713 $ 6,561,184
============ =========== ===========
Supplemental Disclosures of Cash Flow
Information:
Cash Paid During the Year for:
Interest........................... $ 146,455 $ 69,263 $ 33,108
Income Taxes....................... $ 1,340,608 $ 260,869 $ 437,855
Liabilities Assumed with Acquisition
of New Business..................... $ 1,039,676
</TABLE>
The accompanying notes are an integral part of these financial statements.
26
<PAGE>
ASTRO-MED, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JANUARY 31, 1997
NOTE 1--SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Principles of Consolidation: The consolidated financial statements include
the accounts of the Company and its subsidiaries. All material intercompany
accounts and transactions are eliminated in consolidation.
Cash and Cash Equivalents: Highly liquid investments with an original
maturity of three months or less at date of acquisition are considered to be
cash equivalents when purchased as part of the Company's cash management
activities. Similar investments with original maturities beyond three months
are classified as securities available for sale.
Securities Available for Sale: Securities available for sale are carried at
market value based on quoted market prices. The difference between cost and
market value, net of related tax effects, is recorded as a component of
shareholders' equity.
Property, Plant and Equipment: Property, plant and equipment are stated at
cost. Depreciation is provided on the straight-line basis over the estimated
useful lives of the assets (land improvements--10 to 20 years; buildings and
improvements--10 to 45 years; machinery and equipment--3 to 10 years).
Amortization of Intangibles: Excess of cost over net assets acquired is
amortized on the straight-line method over forty years. Accumulated
amortization amounted to $384,125 and $420,434 as of January 31, 1996 and
1997, respectively. Excess of net assets acquired over cost is amortized on
the straight-line method over five years. Accumulated amortization amounted to
$275,868 and $493,548 as of January 31, 1996 and 1997, respectively. The
shorter amortization period for the excess of net assets acquired over cost
reflects the more limited life of the assets involved.
Foreign Currency: The financial statements of subsidiaries outside the
United States are measured using the local currency as the functional
currency. The Company translates foreign currency denominated assets and
liabilities into U.S. dollars at year end exchange rates, and income and
expenses are translated at average exchange rates during the year.
Income Taxes: The Company utilizes a liability approach which requires that
deferred income taxes be determined based on estimated future tax effects of
differences between the tax and book bases of assets and liabilities
considering the provisions of enacted tax laws.
Earnings Per Common Share: Earnings per share are computed based on the
weighted average number of common shares and common share equivalents
outstanding during each period. Common share equivalents include certain stock
options under the treasury stock method. Fully diluted earnings per share have
not been separately presented since they are not materially different.
In February, 1997, the Financial Accounting Standards Board issued Statement
of Financial Accounting Standard (SFAS) No. 128, Earnings Per Share, which
supercedes APB Opinion 15. The Statement's objective is to simplify and
harmonize the computation of earnings per share and to make the U.S. standard
for computing earnings per share more compatible with the EPS standards of
other countries and with that of the International Accounting Standards
Committee. As required by SFAS No. 128, the Company will adopt this statement
for the fiscal year ending January 31, 1998.
Use of Estimates in the Preparation of Financial Statements: The
presentation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions
that affect the reported amounts of assets and liabilities and disclosures of
contingent assets and
27
<PAGE>
ASTRO-MED, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
NOTE 1--SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES--(CONTINUED)
liabilities as of the date of the financial statements and the reported
amounts of income and expenses during the reporting periods. Actual results
could differ from those estimates.
Fair Value of Financial Instruments: The Company's financial instruments
consist mainly of cash and cash equivalents, accounts receivable, accounts
payable and long-term debt. The carrying amounts of these financial
instruments as of January 31, 1997 approximate fair value.
NOTE 2--SECURITIES AVAILABLE FOR SALE
As of January 31, 1997, securities included corporate and governmental debt
obligations of $1,100,703 with contractual or anticipated maturities of one
year or less and $5,998,655 with contractual or anticipated maturities of more
than one year through twenty-four years. As of January 31, 1996, securities
included corporate and governmental debt obligations of $1,421,972 with
contractual or anticipated maturities of one year or less and $5,237,856 with
contractual or anticipated maturities of more than one year through twenty-
five years. Actual maturities may differ as a result of sales or early issuer
redemptions.
The amortized cost of securities available for sale as of January 31, 1997
was $7,119,426. The difference between market value and the cost basis as of
that date was $20,069 ($12,643 net of tax), which represented gross unrealized
gains of $13,859 and gross unrealized losses of $33,928. As of January 31,
1996, the amortized cost of securities available for sale was $6,609,108. The
difference between market value and the cost basis as of that date was $50,720
($31,954 net of tax), which represented gross unrealized gains of $60,596 and
gross unrealized losses of $9,876. The cost of securities available for sale
that were sold was based on specific identification in determining realized
gains or losses included in the accompanying consolidated statements of income
for fiscal 1997 and 1996.
NOTE 3--INVENTORIES
Inventories are stated at the lower of cost (first-in, first-out) or market
and include material, labor and manufacturing overhead. The components of
inventories were as follows:
<TABLE>
<CAPTION>
JANUARY 31,
-----------------------
1996 1997
----------- -----------
<S> <C> <C>
Materials and Supplies............................ $ 6,460,730 $ 5,558,216
Work-in-Progress.................................. 1,381,220 779,337
Finished Goods.................................... 4,691,603 4,023,952
----------- -----------
$12,533,553 $10,361,505
=========== ===========
</TABLE>
NOTE 4--LONG-TERM DEBT
Long-term debt consisted of the following:
<TABLE>
<CAPTION>
JANUARY 31,
-----------------
1996 1997
-------- --------
<S> <C> <C>
Capital Lease Obligations............................... $225,000 $355,841
Less Current Maturities................................. 50,000 97,706
-------- --------
$175,000 $258,135
======== ========
</TABLE>
28
<PAGE>
ASTRO-MED, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
NOTE 4--LONG-TERM DEBT--(CONTINUED)
Other real estate and certain equipment are financed under a capital lease
obligation with the Rhode Island Port Authority and Economic Development
Corporation pursuant to an industrial development revenue bond financing
arrangement. Monthly principal installments of $4,167 plus interest at 7 1/2%
are due to 2000. The obligation contains an option to purchase the particular
real estate and machinery and equipment at any time for the amount necessary
to retire the bonds involved. It also contains certain restrictive covenants
including, among other things, minimum working capital and net worth
requirements, and a maximum debt-to-equity ratio.
During the fiscal year, the Company entered into a three year Capital Lease
Agreement for the purpose of upgrading its information technology platform.
Expenditures for property and equipment during the past three fiscal years
have been made from on hand and internally generated funds.
The aggregate amounts of long-term debt as of January 31, 1997 scheduled to
mature in each of the succeeding four fiscal years are as follows: $97,706 in
fiscal 1998, $109,767 in fiscal 1999, $112,640 in fiscal 2000 and $35,728 in
fiscal 2001.
NOTE 5--COMMON STOCK
The Company's Board of Directors has authorized the purchase of up to
250,000 shares of the Company's common stock on the open market. As purchased,
such shares will become treasury stock available for general corporate
purposes. The Company purchased 32,500 and 114,324 shares of treasury stock in
fiscal 1996 and 1997, respectively.
The Company maintains the following benefit plans involving the Company's
common stock:
Stock Option Plans: As of January 31, 1997, the Company has two incentive
stock option plans and a non- qualified stock option plan under which options
may be granted to officers and key employees. Options for an aggregate of
550,000 shares may be granted under the incentive stock option plans at option
prices of not less than fair market value at the date of grant. Options for an
aggregate of 150,000 shares may be granted under the non-qualified plan at
option prices of not less than 50% of fair market value at the date of grant.
In May 1996, the Company adopted the Non-Employee Director Stock Option Plan
under which each non- employee director automatically receives an annual grant
of options to acquire 1,000 shares of common stock. The options are granted as
of the first business day of January of each year at an option price equal to
the fair market value at the date of grant. Options for a total of 30,000
shares may be granted under the plan.
Summarized option data for all plans is as follows:
<TABLE>
<CAPTION>
WEIGHTED AVERAGE
NUMBER OPTION PRICE OPTION PRICE
OF SHARES PER SHARE PER SHARE
--------- ------------- ----------------
<S> <C> <C> <C>
Outstanding Options, January 31,
1994............................. 273,225 $3.33-$14.30 $8.67
Options Granted................... 111,500 $10.25-$11.28 10.39
Options Exercised................. (1,125) $3.33-$5.50 4.78
Options Expired................... (750) $11.25 11.25
-------
Outstanding Options, January 31,
1995............................. 382,850 $3.33-$14.30 9.17
Options Exercised................. (1,125) $3.33 3.33
Options Expired................... (6,000) $3.33-$13.00 10.89
-------
Outstanding Options, January 31,
1996............................. 375,725 $3.33-$14.30 9.17
Options Granted................... 152,000 $8.31-$9.25 8.40
Options Exercised................. (9,000) $3.33-$5.50 5.00
Options Expired................... (37,125) $5.50-$13.00 10.47
-------
Outstanding Options, January 31,
1997............................. 481,600 $3.33-$14.30 8.90
=======
Options Exercisable, January 31,
1996............................. 309,475 $3.33-$14.30 8.73
=======
Options Exercisable, January 31,
1997............................. 416,200 $3.33-$14.30 8.61
=======
</TABLE>
29
<PAGE>
ASTRO-MED, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
NOTE 5--COMMON STOCK--(CONTINUED)
Set forth below is a summary of options outstanding at January 31, 1997:
<TABLE>
<CAPTION>
OUTSTANDING EXERCISABLE
------------------------------------------------------------------------------------
RANGE OF WEIGHTED AVERAGE REMAINING WEIGHTED AVERAGE
EXERCISE PRICES OPTIONS EXERCISE PRICE CONTRACTUAL LIFE OPTIONS EXERCISE PRICE
--------------- ------- ---------------- ---------------- ------- ----------------
<S> <C> <C> <C> <C> <C>
$3.33-
5.50 112,725 $ 5.05 3 yrs. 112,725 $ 5.05
8.25-
11.28 335,375 9.79 9 yrs. 276,975 9.62
13.00-
14.30 33,500 13.12 5 yrs. 26,500 13.15
</TABLE>
At January 31, 1997, options covering 105,500 shares under the incentive
plans, and 100,000 shares under the non-qualified plan and 24,000 shares under
the Non-Employee Director Stock Option Plan were available for future grant.
On March 24, 1997, the Board of Directors adopted, subject to shareholder
approval at the Company's annual meeting on May 20, 1997, the 1997 Incentive
Stock Option Plan pursuant to which 250,000 shares are available for future
grants.
Accounting for Stock-Based Compensation: In October 1995, the Financial
Accounting Standards Board issued SFAS No. 123, "Accounting for Stock-Based
Compensation," which sets forth a fair-value based method of recognizing
stock-based compensation expense. As permitted by SFAS No. 123, the Company
has elected to continue to apply APB No. 25 to account for its stock-based
compensation plans. Had compensation cost for awards in fiscal 1996 and 1997
under the Company's stock-based compensation plans been determined based on
the fair value at the grant dates consistent with the method set forth under
SFAS No. 123, there would have been no effect on the Company's net income and
earnings per share for fiscal 1996 and the effect for fiscal 1997 would have
been as follows:
<TABLE>
<CAPTION>
1997
----------
<S> <C>
Net income:
As reported................................................. $2,288,025
Pro forma................................................... $1,821,039
Earnings per share:
As reported................................................. $.46
Pro forma................................................... $.36
</TABLE>
The fair value of each option granted is estimated on the grant date using
the Black-Scholes option-pricing model. The weighted average grant date fair
value of options granted in fiscal 1997 was $8.41. In computing the above pro
forma amounts the Company has assumed a risk-free interest rate of 6.5%, an
expected life of 5 years, an expected volatility of 37.481%, and an expected
dividend yield of 1.4%.
Employee Stock Purchase Plan: The Company has an Employee Stock Purchase
Plan allowing eligible employees to purchase shares of common stock at a 10%
discount from fair market value on the date of purchase. A total of 180,000
shares was initially reserved for issuance under the Plan. Summarized Plan
activity is as follows:
<TABLE>
<CAPTION>
YEARS ENDED JANUARY 31,
-------------------------
1995 1996 1997
------- ------- -------
<S> <C> <C> <C>
Shares Reserved, Beginning........................ 117,878 113,562 109,645
Shares Purchased.................................. (4,316) (3,917) (4,427)
------- ------- -------
Shares Reserved, Ending........................... 113,562 109,645 105,218
======= ======= =======
</TABLE>
30
<PAGE>
ASTRO-MED, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
NOTE 5--COMMON STOCK--(CONTINUED)
Employee Stock Ownership Plan: The Company has an Employee Stock Ownership
Plan providing retirement benefits to all eligible employees. Annual
contributions in amounts determined by the Company's Board of Directors are
invested by the Plan's Trustees in shares of common stock of the Company.
Contributions may be in cash or stock. The Company's contributions paid or
accrued amounted to $75,000 annually for fiscal 1995 and 1996, and $100,000
for fiscal 1997.
NOTE 6--INCOME TAXES
The components of the provision for income taxes were as follows:
<TABLE>
<CAPTION>
YEARS ENDED JANUARY 31,
----------------------------
1995 1996 1997
-------- -------- --------
<S> <C> <C> <C>
Current:
Federal...................................... $764,718 $380,213 $564,953
State........................................ 112,969 100,473 173,284
-------- -------- --------
877,687 480,686 738,237
-------- -------- --------
Deferred:
Federal...................................... (23,962) (36,302) (68,474)
State........................................ (6,725) (11,384) (21,763)
-------- -------- --------
(30,687) (47,686) (90,237)
-------- -------- --------
$847,000 $433,000 $648,000
======== ======== ========
</TABLE>
The provision for income taxes differs from the amount computed by applying
the statutory federal income tax rate (34%) to income before income taxes, due
to the following:
<TABLE>
<CAPTION>
YEARS ENDED JANUARY 31,
----------------------------
1995 1996 1997
-------- -------- --------
<S> <C> <C> <C>
Income Tax Provision at Statutory Rate........ $941,966 $598,582 $998,249
State Taxes, Net of Federal Income Tax
Benefits..................................... 70,121 66,312 114,367
Nontaxable Interest Income.................... (93,031) (39,558) (38,420)
Amortization of Intangibles................... (4,447) (62,623) (57,683)
Utilization of Net Operating Loss
Carryforward................................. (78,167) (171,749) (117,300)
Other, Net.................................... 10,558 42,036 (251,213)
-------- -------- --------
$847,000 $433,000 $648,000
======== ======== ========
</TABLE>
Other, Net in fiscal 1997 includes the reversal of tax reserves no longer
required.
31
<PAGE>
ASTRO-MED, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
NOTE 6--INCOME TAXES--(CONTINUED)
The tax effects of temporary differences and carryforwards which gave rise
to significant portions of deferred tax assets and liabilities in the
accompanying consolidated balance sheets were as follows:
<TABLE>
<CAPTION>
JANUARY 31,
----------------------
1996 1997
----------- ---------
<S> <C> <C>
Deferred Tax Assets:
Reserves and Accruals Not Yet Deducted for Tax
Purposes..................................... $ 621,888 $ 684,925
Unrealized Foreign Currency Losses............ 119,086 123,685
Net Operating Loss Carryforwards.............. 1,213,762 666,059
Other......................................... 95,374 92,166
Valuation Allowance........................... (1,213,762) (666,059)
----------- ---------
836,348 900,776
Deferred Tax Liabilities:
Accumulated Tax Depreciation in Excess of Book
Depreciation................................. 834,754 794,895
Other......................................... 89,357 81,693
----------- ---------
924,111 876,588
----------- ---------
Net Deferred Tax Liabilities (Assets)........... $ 87,763 $ (24,188)
=========== =========
</TABLE>
The total of deferred tax assets, net of other deferred tax liabilities, is
included in prepaid expenses and other current assets in the accompanying
consolidated balance sheets. The valuation allowance relates to net operating
loss carryforwards (approximately $762,000 domestic and $781,000 foreign)
expiring through 2007, the future tax benefits of which to be realized are
uncertain because they are limited to future annual taxable income of certain
subsidiaries. Also, the domestic net operating loss carryforward may only be
used at the rate of approximately $345,000 per year.
NOTE 7--LEASES
There are both capital and operating lease commitments for the Company's
facilities and certain machinery and equipment. Following is an analysis of
assets which have been under capital leases.
<TABLE>
<CAPTION>
JANUARY 31,
---------------------
1996 1997
---------- ----------
<S> <C> <C>
Real Estate........................................... $4,350,324 $4,354,402
Machinery and Equipment............................... 100,083 280,924
---------- ----------
4,450,407 4,635,326
Less Accumulated Amortization......................... 1,433,027 1,562,542
---------- ----------
$3,017,380 $3,072,784
========== ==========
</TABLE>
32
<PAGE>
ASTRO-MED, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
NOTE 7--LEASES--(CONTINUED)
Minimum lease payments under noncancellable leases at January 31, 1997, were
as follows:
<TABLE>
<CAPTION>
YEAR ENDING CAPITAL OPERATING
JANUARY 31, LEASE LEASES
----------- -------- ---------
<S> <C> <C>
1998..................................................... $114,273 $326,489
1999..................................................... 121,315 202,272
2000..................................................... 117,565 121,218
2001..................................................... 36,729 78,467
2002..................................................... -- 74,329
2003 and Thereafter...................................... -- 120,701
-------- --------
Net Minimum Lease Payments............................... 389,882 $923,476
========
Less Amount Representing Interest........................ 34,041
--------
Current Value of Net Minimum Lease Payments.............. $355,841
========
</TABLE>
Total rental expense for fiscal 1995, 1996 and 1997 was $441,097, $481,498
and $425,817, respectively.
NOTE 8--OPERATIONS
The Company's operations consist of the design, development, manufacture and
sale of specialty data printing systems and consumable printer supplies.
Business is conducted primarily in two major geographic areas: North America
and Europe. Substantially all manufacturing activities are conducted in the
United States.
Sales and service activities outside North America are conducted primarily
through wholly-owned entities and, to a lesser extent, through authorized
distributors or agents. Transfer prices are intended to produce gross profit
margins commensurate with the sales and service effort associated with the
product sold. Certain information on a geographic basis for fiscal 1995, 1996
and 1997 is set forth below.
<TABLE>
<CAPTION>
FISCAL 1995 NORTH AMERICA EUROPE ELIMINATIONS CONSOLIDATED
- ----------- ------------- ---------- ------------ ------------
<S> <C> <C> <C> <C>
Net Sales to Unaffiliated
Customers.................. $33,288,364 $4,944,948 $38,233,312
Transfers between Geographic
Areas...................... 3,529,805 $(3,529,805)
----------- ---------- ----------- -----------
$36,818,169 $4,944,948 $(3,529,805) $38,233,312
=========== ========== =========== ===========
Operating Income............ $ 2,132,219 $ 168,895 $ (136,993) $ 2,164,121
=========== ========== =========== ===========
Identifiable Assets......... $38,861,677 $3,315,617 $42,177,294
=========== ========== ===========
<CAPTION>
FISCAL 1996
- -----------
<S> <C> <C> <C> <C>
Net Sales to Unaffiliated
Customers.................. $37,311,249 $6,630,062 $43,941,311
Transfers between Geographic
Areas...................... 4,690,824 $(4,690,824)
----------- ---------- ----------- -----------
$42,002,073 $6,630,062 $(4,690,824) $43,941,311
=========== ========== =========== ===========
Operating Income............ $ 1,224,422 $ 299,022 $ (29,647) $ 1,493,797
=========== ========== =========== ===========
Identifiable Assets......... $37,989,186 $4,313,545 $42,302,731
=========== ========== ===========
</TABLE>
33
<PAGE>
ASTRO-MED, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONCLUDED)
NOTE 8--OPERATIONS--(CONTINUED)
<TABLE>
<CAPTION>
FISCAL 1997 NORTH AMERICA EUROPE ELIMINATIONS CONSOLIDATED
- ----------- ------------- ---------- ------------ ------------
<S> <C> <C> <C> <C>
Net Sales to Unaffiliated
Customers.................. $38,289,675 $5,885,458 $44,175,133
Transfers between Geographic
Areas...................... 4,260,847 142,843 $(4,403,690)
----------- ---------- ----------- -----------
$42,550,522 $6,028,301 $(4,403,690) $44,175,133
=========== ========== =========== ===========
Operating Income............ $ 1,873,249 $ 146,309 $ (30,000) $ 1,989,558
=========== ========== =========== ===========
Identifiable Assets......... $40,718,264 $2,603,163 $43,321,427
=========== ========== ===========
</TABLE>
North America sales as shown above include export sales of $4,904,985 in
fiscal 1995, $6,604,317 in fiscal 1996, and $5,812,450 in fiscal 1997.
No single customer accounted for 10% of net sales in fiscal 1995, 1996 or
1997.
NOTE 9--PROFIT-SHARING PLAN
Along with the Employee Stock Ownership Plan described in Note 5, the
Company has a non-contributory Profit-Sharing Plan which provides retirement
benefits to all eligible employees. In addition, the Plan allows participants
to defer a portion of their cash compensation and contribute such deferral to
the Plan through payroll deductions. The Company makes matching contributions
up to specified levels. The deferrals are made within the limits prescribed by
Section 401(k) of the Internal Revenue Code. The Company's former subsidiary,
Grass Instrument Co., also had a non-contributory profit-sharing plan which
was terminated during fiscal 1996.
All contributions are deposited into trust funds. It is the policy of the
Company to fund any contributions accrued. The Company's annual contribution
amounts are determined by the Board of Directors. The Company's contributions
paid or accrued amounted to $135,000 for fiscal 1995 and 1996, and $185,000
for fiscal 1997.
NOTE 10--ACQUISITION
On August 1, 1994, the Company acquired Grass Instrument Co., a privately
held corporation ("Grass"), and Cannon Manufacturing Company, a privately held
corporation ("Cannon") affiliated with Grass by common ownership. Following a
merger, the combined businesses of Grass and Cannon continued as a wholly-
owned subsidiary of the Company under the name "Grass Instrument Co." On
January 31, 1996, Grass Instrument Co. was merged into the Company.
The total consideration paid to the shareholders of Grass and Cannon was
approximately $10,277,000, of which approximately $4,989,000 was paid by Grass
and Cannon from their available funds to repurchase shares from shareholders
prior to the merger and approximately $5,288,000 was paid by the Company. The
Company used approximately $1,888,000 of funds on hand and borrowed $3,400,000
on a short-term basis from a bank. The Company repaid the bank loan prior to
January 31, 1995. The purchase price for Grass and Cannon was determined by
negotiation.
Grass designs, manufactures and sells neurophysiological instrumentation,
which comprised an expansion of the Company's existing line of products. The
acquisition was accounted for using the purchase method of accounting, and the
results of operations of the acquired business are included in the Company's
consolidated results beginning with the date of the acquisition.
On an unaudited pro forma basis, assuming Grass and Cannon had been acquired
on February 1, 1994, the Company's consolidated net sales would have been
$43,067,095 for fiscal 1995. The pro forma effect on net income and earnings
per share is not material. The pro forma results are not necessarily
indicative of future operations or the actual results that would have occurred
had the acquisition been made at the beginning of fiscal 1995.
34
<PAGE>
ASTRO-MED, INC.
SCHEDULE II--VALUATION AND QUALIFYING ACCOUNTS AND RESERVES
<TABLE>
<CAPTION>
BALANCE AT PROVISION BALANCE
BEGINNING CHARGED TO AT END
DESCRIPTION OF PERIOD OPERATIONS DEDUCTIONS(2) OF PERIOD
----------- ---------- ---------- ------------- ---------
<S> <C> <C> <C> <C>
Allowance for Doubtful
Accounts(1):
Year Ended January 31,
1995........................ 145,000 103,670 91,670 157,000
1996........................ 157,000 58,227 58,227 157,000
1997........................ 157,000 2,152 (15,848) 175,000
</TABLE>
- --------
(1) The allowance for doubtful accounts has been netted against accounts
receivable as of the respective balance sheet dates.
(2) Uncollectible accounts written off, net of recoveries.
35
<PAGE>
[This Page is Intentionally Left Blank.]
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> JAN-31-1997
<PERIOD-START> FEB-01-1996
<PERIOD-END> JAN-31-1997
<CASH> 6,561,184
<SECURITIES> 7,099,358
<RECEIVABLES> 8,486,736
<ALLOWANCES> 175,000
<INVENTORY> 10,361,505
<CURRENT-ASSETS> 33,775,288
<PP&E> 17,046,969
<DEPRECIATION> 8,986,149
<TOTAL-ASSETS> 43,321,427
<CURRENT-LIABILITIES> 4,965,356
<BONDS> 258,135
0
0
<COMMON> 256,837
<OTHER-SE> 36,502,005
<TOTAL-LIABILITY-AND-EQUITY> 43,321,427
<SALES> 44,175,133
<TOTAL-REVENUES> 44,175,133
<CGS> 27,241,473
<TOTAL-COSTS> 42,185,575
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 27,278
<INCOME-PRETAX> 2,936,025
<INCOME-TAX> 648,000
<INCOME-CONTINUING> 2,288,025
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 2,288,025
<EPS-PRIMARY> .46
<EPS-DILUTED> .46
</TABLE>
