<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, 1998
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,
WEST WARWICK, RHODE ISLAND 02893
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) (ZIP CODE)
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: (401) 828-4000
SECURITIES REGISTERED PURSUANT TO SECTION 12(B) OF THE ACT:
<TABLE>
<CAPTION>
TITLE
OF
EACH NAME OF EACH EXCHANGE
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 17, 1998.
Common Stock, $.05 Par Value: $28,473,288
Indicate the number of shares outstanding (excluding treasury shares)
of each of the issuer's classes of common stock as of March 17, 1998.
Common Stock, $.05 Par Value: 4,784,827 shares
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the Company's definitive proxy statement for the 1998 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
Item 5. Market for the Registrant's Common Stock and Related
Stockholder Matters........................................ 15
Item 6. Selected Financial Data.................................... 15
Item 7. Management's Discussion and Analysis of Financial Condition
and Results of Operations.................................. 15
Item 8. Financial Statements and Supplementary Data................ 18
Item 9. Changes in and Disagreements with Accountants on Accounting
and Financial Disclosure................................... 18
PART III
Item 10. Directors and Executive Officers of the Registrant......... 19
Item 11. Executive Compensation..................................... 19
Item 12. Security Ownership of Certain Beneficial Owners and
Management................................................. 20
Item 13. Certain Relationships and Related Transactions............. 20
PART IV
Item 14. Exhibits, Financial Statement Schedules and Reports on Form
8-K........................................................ 20
</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, 1998
(herein referred to as "fiscal 1998").
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 facts included in this
annual report regarding the Company's financial position and operating and
strategic initiatives and addressing industry developments are forward-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; declining demand in the test & measurement markets, especially
defense and aerospace; competition in the specialty printer industry; ability
to develop market acceptance of the QLS printer products and effective design
of customer required features; competition in the data acquisition industry;
competition in the neurophysiology industry; 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 Test & Measurement
Group of products takes scientific signals and prints them onto charts or
electronic media; the Bar Code Printer Products Group known as QuickLabel(R)
Systems (QLS), 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.
Test and Measurement(T&M) Products
The Test and Measurement Group started with the stylus-based chart recorder
introduced in 1971, progressing to recorders with solid-state electronic
printheads and now featuring our completely digital Data Acquisition Systems.
Test and Measurement 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 Astro-
DAQ(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 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 record from
11
<PAGE>
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.
One other specialty printer completes the Company's T & M product
offerings--the TOUGH WRITER(TM) ruggedized COTS PostScript page printer for
military, airborne, shipboard and heavy industrial applications.
QuickLabel Systems Products(TM) (QLS)
The Company continues to expand its line of digital color label printers.
The Company recently introduced in February of fiscal year 1999 the 2000 and
3000 series of color label printers. This exciting line of four printers
significantly broadens the customer base for color printers. With either two
or three print stations and both one- and two-side configurations, the 2000
and 3000 series brings color printing to general applications, at a remarkably
affordable price. The Color QuickLabel-4(TM), including its exclusive
algorithm for near photographic quality printers, MicroCell(TM), continues as
the top-of-the-line, full process color printer for creating near 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 year the
Company introduced the Grass Heritage PSG system, the Company's first complete
digital system designed exclusively as a sleep system. This system, designed
for the growing sleep studies market, complements the Heritage EEG system,
providing solutions for all clinical physiological recording requirements.
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
classical EEG and polysomnograph systems as well as neurodata acquisition
systems such as the Model 12 and newer Model 15 which feature the world
renowned Grass amplifiers.
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 1996, 1997 and 1998, the
Company incurred costs of $2,415,494, $2,493,072 and $2,820,292 respectively,
on Company-sponsored product development. The Company is committed to product
development as a requisite to 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 QLS Division 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 forty 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 1996, 1997 and 1998, net sales to customers in various geographic
areas outside the U.S.A., primarily in Canada and Western Europe, amounted to
$13,234,380, $11,840,750, and $10,123,156, respectively.
13
<PAGE>
ORDER BACKLOG
The backlog regularly fluctuates. It consists of a blend of orders for end
user customers as well as OEM 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 one year against defects in
materials or workmanship. Warranty expenses have averaged approximately
$187,000 a year for the Company's last four fiscal years.
As of March 17, 1998, the Company employed approximately 365 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
owned properties, all of which are included in the consolidated balance sheet
appearing elsewhere in this report.
<TABLE>
<CAPTION>
APPROXIMATE
LOCATION 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 on The Nasdaq Stock Market 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
YEAR ENDED JANUARY 31, HIGH LOW PER SHARE
---------------------- ---- --- ---------
<S> <C> <C> <C>
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
1998:
First Quarter.................................... 9 1/4 7 3/4 .04
Second Quarter................................... 9 3/8 8 1/4 .04
Third Quarter.................................... 9 1/4 8 .04
Fourth Quarter................................... 8 7/8 7 1/2 .04
</TABLE>
The Company had approximately 497 shareholders of record on March 17, 1998
which does not reflect shareholders with beneficial ownership in shares held in
nominee name.
ITEM 6. SELECTED FINANCIAL DATA
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
1994 1995 1996 1997 1998
------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C>
Results of Operations:
Net Sales............................ $32,268 $38,233 $43,941 $44,175 $43,748
Net Income........................... 2,981 1,923 1,328 2,288 1,041
Earnings per Common Share-basic...... .59 .38 .26 .46 .21
Earnings per Common Share-diluted.... .58 .38 .26 .46 .21
Cash Dividends per Common Share...... .12 .12 .12 .12 .16
Financial Condition:
Working Capital...................... $24,895 $25,487 $26,420 $28,810 $27,111
Total Assets......................... 39,955 42,177 42,303 43,321 42,814
Long-Term Debt, less Current
Maturities.......................... 296 244 175 258 228
</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 (DECREASE)
---------------- --------------------------
YEARS ENDED
JANUARY 31, 1996 1997 1998
---------------- COMPARED COMPARED COMPARED
1996 1997 1998 TO 1995 TO 1996 TO 1997
---- ---- ---- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
Net Sales............................. 100% 100% 100% 15 % 1 % (1)%
Gross Profit.......................... 39 38 38 5 (1) (3)
Selling, General and Administrative... 30 28 30 13 (5) 5
Research and Development.............. 6 6 6 (5) 3 13
</TABLE>
15
<PAGE>
Sales decreased 1% to $43,748,000 in fiscal 1998 compared to $44,175,000 in
fiscal 1997. Excluding changes in foreign currency exchange rates, sales in
fiscal year 1998 were slightly higher than fiscal 1997. Looking at the
Company's sales by channel presents a varied profile. Domestically, sales rose
4% as our new QuickLabel(R) Systems and Grass Instruments Divisions expanded
their respective product lines. Conversely, export sales were disappointing,
declining 14% from the previous year as the strong US dollar and Asia's
financial crisis had a negative impact on export volume.
The Company's Test and Measurement (T&M) product group declined 10% as soft
demand in the aerospace and defense industries adversely affected sales of the
recorder products, Dash 10(TM), Dash IV(TM), and MT 95K(TM). On the domestic
front, T & M product sales declined 6% while export sales were lower than last
year by 23%. Progress was made in sales of the new recorder and data
acquisition products, Dash 8(TM) and AstroDAQ I & II(TM). Combined, these
products contributed nearly $2 million in sales during their first full year
of introduction.
The QuickLabel(R) Systems (QLS) Product Group reported an 18% increase in
sales during the current fiscal year. This group includes the Company's Color
QuickLabel Printer, CQL-4(TM), monochrome bar code printers, TOP HAND(TM) and
RANGE BOSS(TM), as well as related consumable products. It does not include
sales of the 2000 and 3000 series color printers, as these products were
launched in February of fiscal year 1999. In the domestic markets, sales
increased 19% while growth in the export markets was somewhat lower at 12%.
Grass Instruments sales increased 2% in fiscal year 1998. Sales through our
domestic channels rose 10% as demand for the Company's new Digital EEG and PSG
systems, Albert Grass Heritage(TM), exceeded $1.4 million. Sales in the export
markets tempered that result, with a decrease of 16%. The Company plans to
increase its marketing and promotional efforts of the Grass Heritage products
in the export market during fiscal year 1999.
Gross Profit Margins were 37.7% in fiscal 1998 as compared to last year's
38.3%. This year's result was more an outgrowth of product mix and lower unit
volume rather than any pricing or product cost influences.
Selling, General and Administrative expenses rose 5% during the year to
$13,043,000 from $12,451,000. The increment is traceable to the additions in
sales personnel and increased spending in promotional activities of marketing,
advertising and trade shows. The Company believes its strategy for growth is
dependent on an aggressive investment in selling and marketing programs.
Historically, the Company has funded its commitment to selling & marketing at
greater than 20% of Astro-Med's annual sales volume. This funding level is
expected to continue.
R & D expenditures rose 13% during the year to 6% of annual sales. The
increase is attributable to new hires, including electrical, software and
mechanical engineers, as well as project expenses related to new and existing
product lines. The Company will continue to fund R & D at 6% to 7% of its
annual sales dollars to ensure a continuous stream of customer focused new
products in the recorder, data acquisition, digital printing and
neurophysiology markets.
Interest and dividend income rose 37% during fiscal 1998. The improvement is
due to the increased cash position provided by operations as well as investing
strategies. Interest expense rose 3% from the prior year as capital lease
obligations associated with the acquisition of computer hardware and software
were contracted. Other income (expense) net, was significantly lower than
prior years due to the one time gain realized in the prior year 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
strenghthened against most European currencies.
Income before taxes, as a percent of sales was 3.2% for fiscal 1998 as
compared with 6.6% for fiscal 1997. The effective tax rate was 26% for fiscal
1998 against 22% for fiscal 1997. Changes in effective income tax rates from
year to year are explained in Note 6 of Notes to Consolidated Financial
Statements.
Net Income declined to $1.0 million in fiscal 1998 from $2.3 million in the
prior year. Net Income as a percent of sales was 2.4% in fiscal 1998 and 5.2%
for fiscal 1997, respectively.
16
<PAGE>
FINANCIAL CONDITION
Net cash flow from operating activities was $2,715,000 in fiscal 1998 as
compared with $4,764,000 in fiscal 1997. The decrease in net cash flow in
fiscal 1998 was due to changes in working capital requirements and the reduced
level of profit in fiscal 1998. Shareholders' equity declined to $35,759,000
from $36,759,000 at fiscal year end 1997 as a result of the stock repurchase
activities. During fiscal 1998, the Company repurchased 151,500 shares of
common stock at a cost of $1,301,300. As of fiscal year end 1998, 265,824
cumulative shares of common stock had been purchased since fiscal 1996 and
401,676 shares remain available for repurchase under the Board of Directors'
authorization.
LIQUIDITY AND CAPITAL RESOURCES
In addition to cash flow from operations, the Company has adequate cash
balances and financing arrangements to conduct its operations. The Company's
long-term debt includes debt acquired for facilities construction, acquisition
of machinery and equipment and major additions to the Company's information
technology infrastructure. Capital Expenditures during the year totalled
$810,000 and were funded from cash on hand and internally generated funds. The
annual dividend rate per share increased to 16 cents in fiscal 1998 from 12
cents in fiscal 1997.
At fiscal 1998 year end, the Company's current ratio was 5.7 to 1. Long term
debt was less than 1% of Shareholders' Equity. The Company is financially
strong and has no material commitments for capital expenditures and believes
capital resources would be available to meet the needs of its business, both
on a short-term and long-term basis.
YEAR 2000
The Year 2000 issue is the result of computer programs being written using
two digits (rather than four) to define the applicable year. Any of the
Company's computer programs that have date-sensitive software may recognize a
date using "00" as the year 1900 rather than the year 2000, which could result
in system failures or miscalculations.
The Company is currently working to resolve the Year 2000 issue and has
established processes for evaluating and managing the risks and costs
associated with products sold as well as products purchased by the Company.
The Company will utilize both internal and external resources to reprogram or
replace, and test the software for Year 2000 modifications. In addition, the
Company is communicating with suppliers and customers with whom the Company
does business to coordinate the Year 2000 conversion. The Company plans to
complete the Year 2000 project by fiscal year end 1999.
Based on current assessments, costs of addressing the Year 2000 issue are
not expected to have a material impact on the Company's future financial
results.
17
<PAGE>
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
-----------------------------------------
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-basic...... .09 .12 .14 .12
Earnings Per Common Share-diluted.... .09 .12 .14 .12
<CAPTION>
MAY 3, AUGUST 2, NOVEMBER 1, JANUARY 31,
1997 1997 1997 1998
------- --------- ----------- -----------
<S> <C> <C> <C> <C>
Net Sales............................ $11,707 $10,677 $11,344 $10,020
Gross Profit......................... 4,504 4,001 4,487 3,520
Net Income (Loss).................... 578 138 498 (173)
Earnings (Loss) Per Common Share-ba-
sic................................. .12 .03 .10 (.04)
Earnings (Loss) Per Common Share-di-
luted............................... .12 .03 .10 (.04)
</TABLE>
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
None.
18
<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 1998 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>
Albert W. Ondis...... 72 Chairman, Chief Executive Officer and Director
Everett V. Pizzuti... 61 President, Chief Operating Officer and Director
David M. Gaskill..... 52 Vice President--Research and Development
Joseph P. O'Connell.. 54 Vice President and Treasurer, Chief Financial Officer
Elias G. Deeb........ 56 Vice President--Manufacturing
A. Eric Bartholomay.. 49 Vice President--Sales
Gary A. Dalton....... 40 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. 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. From 1988, to
1991, he was 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 Manager of Product and Market Development.
Mr. Dalton joined the Company in 1997. He previously held financial
management positions with CVS Corporation (1996-1997), GTECH Corporation
(1988-1996), Teradyne Inc. (1983-1987), and Data General Corporation (1981-
1983).
ITEM 11. EXECUTIVE COMPENSATION
The response to this item is incorporated by reference to the Company's
definitive proxy statement for the 1998 annual meeting of shareholders.
19
<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 1998 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 1998 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.................................. 23
Consolidated Balance Sheets--January 31, 1997 and 1998.................... 24
Consolidated Statements of Income--Years Ended January 31, 1996, 1997 and
1998..................................................................... 25
Consolidated Statements of Shareholders' Equity--Years Ended January 31,
1996, 1997 and 1998...................................................... 26
Consolidated Statements of Cash Flows--Years Ended January 31, 1996, 1997
and 1998................................................................. 27
Notes to Consolidated Financial Statements--January 31, 1998.............. 28
</TABLE>
(a)(2) Financial Statement Schedules:
<TABLE>
<S> <C>
Schedule II--Valuation and Qualifying Accounts and Reserves--Years Ended
January 31, 1996, 1997 and 1998............................................ 36
</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.
(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,
filed as Exhibit 4.3 to Registration Statement on Form S-8,
Registration No. 333-32317 and incorporated by reference herein. (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.
333-43700, and incorporated by reference herein. (1)
</TABLE>
20
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
NUMBER
-------
<C> <S>
(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)
(10.5) Astro-Med, Inc. 1997 Incentive Stock Option Plan filed as Exhibit 4.3
to Registration Statement on Form S-8, Registration No. 333-32315.
(1)
(21) List of Subsidiaries of the Company. See page 23.
(23) Consent of Independent Public Accountants. See page 23.
</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.
21
<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___________________________________
(Albert W. Ondis, Chairman)
Date: April 15, 1998
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.
<TABLE>
<S> <C>
</TABLE>
SIGNATURE TITLE DATE
/s/ Albert W. Ondis Chairman and April 15, 1998
- ----------------------------------- Director (Principal
Albert W. Ondis Executive Officer)
/s/ Everett V. Pizzuti President and April 15, 1998
- ----------------------------------- Director (Principal
Everett V. Pizzuti Operating Officer)
/s/ Joseph P. O'Connell Vice President and April 15, 1998
- ----------------------------------- Treasurer (Principal
Joseph P. O'Connell Financial Officer)
/s/ Gary A. Dalton Controller (Principal April 15, 1998
- ----------------------------------- Accounting Officer)
Gary A. Dalton
/s/ Jacques V. Hopkins Director April 15, 1998
- -----------------------------------
Jacques V. Hopkins
22
<PAGE>
EXHIBIT 21
LIST OF SUBSIDIARIES OF THE COMPANY
<TABLE>
<CAPTION>
NAME JURISDICTION OF ORGANIZATION
---- ----------------------------
<S> <C>
AWO, Inc. Delaware
Astro-Med International Inc. Barbados
Astro-Med SRL Italy
Astro-Med GMBH Germany
</TABLE>
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, File No.
333-32315 pertaining to the Astro-Med, Inc. 1997 Incentive Stock Option Plan,
File No. 333-32317 pertaining to the 1989 Astro-Med, Inc. Non-Qualified 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, 1998
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, 1997 and 1998, and the related
consolidated statements of income, shareholders' equity and cash flows for
each of the three years in the period ended January 31, 1998. 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, 1997 and 1998, and the results of their
operations and their cash flows for each of the three years in the period
ended January 31, 1998, 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 17, 1998
23
<PAGE>
ASTRO-MED, INC.
CONSOLIDATED BALANCE SHEETS
AS OF JANUARY 31, 1997 AND 1998
<TABLE>
<CAPTION>
ASSETS 1997 1998
------ ----------- ------------
<S> <C> <C>
CURRENT ASSETS
Cash and Cash Equivalents......................... $ 6,561,184 $ 5,659,552
Securities Available for Sale..................... 7,099,358 7,472,693
Accounts Receivable, Less Reserve of $175,000 in
1997 and $175,788 in 1998........................ 8,311,736 7,828,064
Inventories....................................... 10,361,505 10,341,856
Prepaid Expenses and Other Current Assets......... 1,441,505 1,561,313
----------- ------------
Total Current Assets............................ 33,775,288 32,863,478
PROPERTY, PLANT AND EQUIPMENT
Land and Improvements............................. 376,502 398,191
Buildings and Improvements........................ 6,852,715 6,978,394
Machinery and Equipment........................... 9,817,752 10,680,108
----------- ------------
17,046,969 18,056,693
Less Accumulated Depreciation..................... (8,986,149) (10,155,952)
----------- ------------
8,060,820 7,900,741
OTHER ASSETS
Excess of Cost over Net Assets Acquired, Net...... 976,384 940,084
Amounts Due from Officers......................... 453,264 453,264
Other............................................. 55,671 656,147
----------- ------------
1,485,319 2,049,495
----------- ------------
$43,321,427 $ 42,813,714
=========== ============
<CAPTION>
LIABILITIES AND SHAREHOLDERS' EQUITY
------------------------------------
<S> <C> <C>
CURRENT LIABILITIES
Accounts Payable.................................. $ 1,614,986 $ 2,267,722
Accrued Compensation.............................. 1,115,026 1,221,662
Accrued Expenses.................................. 1,318,103 1,470,849
Income Taxes...................................... 819,535 614,631
Current Maturities of Long-Term Debt.............. 97,706 177,774
----------- ------------
Total Current Liabilities....................... 4,965,356 5,752,638
LONG-TERM DEBT, Less Current Maturities............. 258,135 227,998
EXCESS OF NET ASSETS ACQUIRED OVER COST, NET........ 544,199 326,519
DEFERRED INCOME TAXES............................... 794,895 747,560
SHAREHOLDERS' EQUITY
Preferred Stock, $10 Par Value, Authorized 100,000
Shares, Issued None..............................
Common Stock, $.05 Par Value, Authorized
13,000,000 Shares, Issued 5,136,737 in 1997 and
5,140,448 in 1998................................ 256,837 257,023
Additional Paid-in Capital........................ 5,624,239 5,649,101
Retained Earnings................................. 32,772,044 33,085,917
Treasury Stock, at Cost, 209,395 Shares in 1997
and 355,895 in 1998.............................. (1,804,986) (3,062,945)
Cumulative Translation Adjustment................. (76,649) (191,829)
Net Unrealized Gain (Loss) on Securities Available
for Sale......................................... (12,643) 21,732
----------- ------------
36,758,842 35,758,999
----------- ------------
$43,321,427 $ 42,813,714
=========== ============
</TABLE>
The accompanying notes are an integral part of these financial statements.
24
<PAGE>
ASTRO-MED, INC.
CONSOLIDATED STATEMENTS OF INCOME
YEARS ENDED JANUARY 31, 1996, 1997 AND 1998
<TABLE>
<CAPTION>
1996 1997 1998
----------- ----------- -----------
<S> <C> <C> <C>
Net Sales............................... $43,941,311 $44,175,133 $43,747,540
Cost of Sales........................... 26,923,192 27,241,473 27,236,046
----------- ----------- -----------
Gross Profit............................ 17,018,119 16,933,660 16,511,494
Costs and Expenses:
Selling, General and Administrative... 13,108,828 12,451,030 13,043,315
Research and Development.............. 2,415,494 2,493,072 2,820,292
----------- ----------- -----------
15,524,322 14,944,102 15,863,607
----------- ----------- -----------
Operating Income........................ 1,493,797 1,989,558 647,887
Other Income (Expense):
Interest and Dividend Income.......... 353,393 597,995 822,775
Interest Expense...................... (37,456) (27,278) (27,872)
Other, Net............................ (49,199) 375,750 (35,454)
----------- ----------- -----------
266,738 946,467 759,449
----------- ----------- -----------
Income before Income Taxes.............. 1,760,535 2,936,025 1,407,336
Provision for Income Taxes.............. 433,000 648,000 366,000
----------- ----------- -----------
Net Income.............................. $ 1,327,535 $ 2,288,025 $ 1,041,336
=========== =========== ===========
Net Income Per Common Share-basic....... $ .26 $ .46 $ .21
=========== =========== ===========
Net Income Per Common Share-diluted..... $ .26 $ .46 $ .21
=========== =========== ===========
Weighted Average Number of Common Shares
Outstanding--basic..................... 5,031,338 4,968,731 4,852,787
=========== =========== ===========
Weighted Average Number of Common Shares
Outstanding--diluted................... 5,095,661 5,018,143 4,900,460
=========== =========== ===========
Dividends Declared Per Common Share..... $ .12 $ .12 $ .16
=========== =========== ===========
</TABLE>
The accompanying notes are an integral part of these financial statements.
25
<PAGE>
ASTRO-MED, INC.
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
YEARS ENDED JANUARY 31, 1996, 1997 AND 1998
<TABLE>
<CAPTION>
NET UNREALIZED
GAIN (LOSS) ON
ADDITIONAL CUMULATIVE 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,
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 (Loss) 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) 69,811
Purchase of Stock for
Treasury............... (972,628)
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)
Net Income.............. 1,041,336
Shares Sold Under
Employee Stock Purchase
Plan................... 186 28,203
Shares Issued to
Employee Stock
Ownership Plan......... (3,341) 43,341
Purchase of Stock for
Treasury............... (1,301,300)
Dividends Declared...... (727,463)
Cumulative Translation
Adjustment............. (115,180)
Change in Net Unrealized
Gain (Loss) on
Securities Available
for Sale............... 34,375
-------- ---------- ----------- ----------- --------- --------
Balance, January 31,
1998................... $257,023 $5,649,101 $33,085,917 $(3,062,945) $(191,829) $ 21,732
======== ========== =========== =========== ========= ========
</TABLE>
The accompanying notes are an integral part of these financial statements.
26
<PAGE>
ASTRO-MED, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
YEARS ENDED JANUARY 31, 1996, 1997 AND 1998
<TABLE>
<CAPTION>
1996 1997 1998
----------- ----------- -----------
<S> <C> <C> <C>
Cash Flows from Operating Activities:
Net Income............................. $ 1,327,535 $ 2,288,025 $ 1,041,336
Adjustments to Reconcile Net Income to
Net Cash Provided by Operating
Activities:
Depreciation and Amortization......... 909,771 921,088 988,423
Gain on Sale of Assets................ (495,761)
Deferred Income Taxes................. 108,576 (39,859) (301,713)
Other................................. 165,277 (56,358) 242,558
Changes in Assets and Liabilities:
Accounts Receivable.................. (489,612) 6,269 483,672
Inventories.......................... 359,991 2,172,048 19,649
Other................................ 749,718 (399,118) (465,906)
Accounts Payable and Accrued
Expenses............................ (562,101) (19,137) 912,118
Income Taxes......................... (283,093) 386,995 (204,904)
----------- ----------- -----------
Total Adjustments................... 958,527 2,476,167 1,673,897
----------- ----------- -----------
Net Cash Provided (Used) by Operating
Activities........................... 2,286,062 4,764,192 2,715,233
Cash Flows from Investing Activities:
Proceeds from Sales of Securities
Available for Sale.................... 3,307,328 2,470,402 2,450,508
Purchases of Securities Available for
Sale.................................. (2,879,153) (2,527,562) (3,147,206)
Proceeds from Sales of Assets.......... 599,500
Proceeds from Sales of Investment...... 1,514,779
Additions to Property, Plant and
Equipment............................. (922,397) (816,229) (809,724)
----------- ----------- -----------
Net Cash Provided (Used) by Investing
Activities........................... (494,222) 1,240,890 (1,506,422)
Cash Flows from Financing Activities:
Proceeds from Short-Term Borrowing..... 500,000
Payments of Debt....................... (570,775) (50,000) (50,000)
Principal Payments on Capital Leases... (100,069)
Proceeds from Common Shares Issued
Under Employee Benefit Plans.......... 99,634 70,810 68,389
Purchases of Treasury Stock............ (290,327) (902,817) (1,301,300)
Dividends Paid......................... (603,850) (595,604) (727,463)
----------- ----------- -----------
Net Cash Used by Financing Activities. (865,318) (1,477,611) (2,110,443)
----------- ----------- -----------
Net Increase (Decrease) in Cash and Cash
Equivalents............................ 926,522 4,527,471 (901,632)
Cash and Cash Equivalents, Beginning of
Year................................... 1,107,191 2,033,713 6,561,184
----------- ----------- -----------
Cash and Cash Equivalents, End of Year.. $ 2,033,713 $ 6,561,184 $ 5,659,552
=========== =========== ===========
Supplemental Disclosures of Cash Flow
Information:
Cash Paid During the Year for:
Interest............................. $ 69,263 $ 33,108 $ 27,872
Income Taxes......................... $ 260,869 $ 437,855 $ 758,070
</TABLE>
The accompanying notes are an integral part of these financial statements.
27
<PAGE>
ASTRO-MED, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JANUARY 31, 1998
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 $420,434 and $456,734 as of January 31, 1997 and
1998, respectively. Excess of net assets acquired over cost is amortized on
the straight-line method over five years. Accumulated amortization amounted to
$493,548 and $711,228 as of January 31, 1997 and 1998, 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 common share have been computed and
presented pursuant to the provisions of Statement of Financial Accounting
Standards No. 128, Earnings per Share, which was adopted in fiscal 1998. Net
income per share is based on the weighted average number of shares outstanding
during the period. Net income per share assuming dilution is based on the
weighted average number of shares and common equivalent shares for stock
options outstanding during the period. Adoption of SFAS No. 128 had no impact
on previously reported Earnings per Share for Fiscal Years 1996 and 1997.
<TABLE>
<CAPTION>
1996 1997 1998
--------- --------- ---------
<S> <C> <C> <C>
Weighted Average Common Shares Outstanding--
basic....................................... 5,031,338 4,968,731 4,852,787
Dilutive Effect of Options Outstanding....... 64,323 49,412 47,673
--------- --------- ---------
Weighted Average Common Shares Outstanding--
diluted..................................... 5,095,661 5,018,143 4,900,460
</TABLE>
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
28
<PAGE>
ASTRO-MED, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(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, 1998 approximate fair value.
NOTE 2--SECURITIES AVAILABLE FOR SALE
As of January 31, 1998, securities included corporate and governmental debt
obligations of $2,565,295 with contractual or anticipated maturities of one
year or less and $4,907,398 with contractual or anticipated maturities of more
than one year through twenty-five years. 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-
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, 1998
was $7,436,318. The difference between market value and the cost basis as of
that date was $36,375 ($21,732 net of tax), which represented gross unrealized
gains of $36,375. As of January 31, 1997, the amortized cost of securities
available for sale was $7,119,426. The difference between market value and the
cost basis as of that date was $20,069, which represented gross unrealized
gains of $13,859 and gross unrealized losses of $33,928 . 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 statement of income for fiscal 1998 and 1997.
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,
-----------------------
1997 1998
----------- -----------
<S> <C> <C>
Materials and Supplies........................... $ 5,558,216 $ 5,620,041
Work-in-Progress................................. 779,337 993,149
Finished Goods................................... 4,023,952 3,728,666
----------- -----------
$10,361,505 $10,341,856
=========== ===========
</TABLE>
NOTE 4--LONG-TERM DEBT
Long-term debt consisted of the following:
<TABLE>
<CAPTION>
JANUARY 31,
-----------------
1997 1998
-------- --------
<S> <C> <C>
Capital Lease Obligations.............................. $355,841 $405,772
Less Current Maturities................................ 97,706 177,774
-------- --------
$258,135 $227,998
======== ========
</TABLE>
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
29
<PAGE>
ASTRO-MED, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
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 fiscal year 1998, the Company entered into a three year, $200,000
capital lease obligation for the purpose of upgrading its information
technology software. 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, 1998 scheduled to
mature in each of the succeeding three fiscal years are as follows: $177,774
in fiscal 1999, $179,581 in fiscal 2000 and $48,417 in fiscal 2001.
NOTE 5--COMMON STOCK
The Company's Board of Directors has authorized the purchase of up to
500,000 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 114,324 and 151,500 shares of treasury stock
in fiscal 1997 and 1998, respectively.
The Company maintains the following benefit plans involving the Company's
common stock:
Stock Option Plans: As of January 31, 1998, the Company has three 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
800,000 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 addition, the Company has a 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>
NUMBER WEIGHTED AVERAGE
OF OPTION PRICE OPTION PRICE PER
SHARES PER SHARE SHARE
------- ------------ ----------------
<S> <C> <C> <C>
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 Granted.......................... 162,500 $8.31-$ 8.94 8.45
Options Expired.......................... (23,250) $3.33-$13.00 8.89
-------
Outstanding Options, January 31, 1998.... 620,850 $3.33-$14.30 8.79
-------
Options Exercisable, January 31, 1997.... 416,200 $3.33-$14.30 8.61
-------
Options Exercisable, January 31, 1998.... 556,300 $3.33-$14.30 8.59
=======
</TABLE>
30
<PAGE>
ASTRO-MED, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
Set forth below is a summary of options outstanding at January 31, 1998:
<TABLE>
<CAPTION>
[OUTSTANDING] [EXERCISABLE]
- ------------------------------------------------------- ------------------------
RANGE OF
EXERCISE WEIGHTED AVERAGE REMAINING WEIGHTED AVERAGE
PRICES OPTIONS EXERCISE PRICE CONTRACTUAL LIFE OPTIONS EXERCISE PRICE
-------- ------- ---------------- ---------------- ------- ----------------
<S> <C> <C> <C> <C> <C>
$ 3.33- 5.50 110,100 $ 5.05 2 yrs. 110,100 $ 5.05
8.25-11.28 478,750 9.36 8 yrs. 421,200 9.24
13.00-14.30 32,000 13.12 5 yrs. 25,000 13.16
</TABLE>
At January 31, 1998, options covering 269,250 shares under the incentive
plans, and 50,000 shares under the non-qualified plan and 21,000 shares under
the Non-Employee Director Stock Option Plan were available for future grant.
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 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, the Company's net
income and earnings per share would have been reduced to the pro forma amounts
indicated below:
<TABLE>
<CAPTION>
JANUARY 31
--------------------------------
1996 1997 1998
---------- ---------- ----------
<S> <C> <C> <C>
Net income
As reported............................ $1,327,535 $2,288,025 $1,041,336
Pro forma.............................. $1,327,535 $1,821,039 $ 546,039
Earnings per share
As reported............................ $ .26 $ .46 $ .21
Pro forma, basic....................... $ .26 $ .37 $ .11
Pro forma, diluted..................... $ .26 $ .36 $ .11
</TABLE>
The fair value of each option granted was estimated on the grant date using
the Black-Scholes option-pricing model with the following weighted average
assumptions: The weighted average grant date fair value of options granted was
$3.24 and $3.40 in fiscal 1997 and 1998 respectively.
<TABLE>
<CAPTION>
1997 1998
------ ------
<S> <C> <C>
Risk-free interest rate................................... 6.5% 5.5%
Expected life (years)..................................... 5 5
Expected volatility....................................... 37.481% 34.879%
Expected dividend yield................................... 1.4% 1.9%
</TABLE>
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,
-------------------------
1996 1997 1998
------- ------- -------
<S> <C> <C> <C>
Shares Reserved, Beginning..................... 113,562 109,645 105,218
Shares Purchased............................... (3,917) (4,427) (3,711)
------- ------- -------
Shares Reserved, Ending........................ 109,645 105,218 101,507
======= ======= =======
</TABLE>
31
<PAGE>
ASTRO-MED, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(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 for fiscal 1996, $100,000 for fiscal 1997 and
$123,000 for fiscal 1998.
NOTE 6--INCOME TAXES
The components of the provision for income taxes were as follows:
<TABLE>
<CAPTION>
YEARS ENDED JANUARY 31,
----------------------------
1996 1997 1998
-------- -------- --------
<S> <C> <C> <C>
Current:
Federal................................... $380,213 $564,953 $511,324
State..................................... 100,473 173,284 88,092
Foreign................................... 24,000
-------- -------- --------
480,686 738,237 623,416
-------- -------- --------
Deferred:
Federal................................... (36,302) (68,474) (210,093)
State..................................... (11,384) (21,763) (47,323)
-------- -------- --------
(47,686) (90,237) (257,416)
-------- -------- --------
$433,000 $648,000 $366,000
======== ======== ========
</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,
-------------------------------
1996 1997 1998
--------- --------- ---------
<S> <C> <C> <C>
Income Tax Provision at Statutory Rate... $ 598,582 $ 998,249 $ 478,494
State Taxes, Net of Federal Income Tax
Benefits................................ 66,312 114,367 26,862
Nontaxable Interest Income............... (39,558) (38,420) (39,100)
Amortization of Intangibles.............. (62,623) (57,683) (57,683)
Utilization of Net Operating Loss
Carryforward............................ (171,749) (117,300) (117,580)
Other, Net............................... 42,036 (251,213) 75,007
--------- --------- ---------
$ 433,000 $ 648,000 $ 366,000
========= ========= =========
</TABLE>
Other, Net in fiscal 1997 includes the reversal of tax reserves no longer
required.
32
<PAGE>
ASTRO-MED, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(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,
--------------------
1997 1998
--------- ---------
<S> <C> <C>
Deferred Tax Assets:
Reserves and Accruals Not Yet Deducted for Tax
Purposes.............................................. $ 684,925 $ 949,282
Unrealized Foreign Currency Losses..................... 123,685 133,345
Net Operating Loss Carryforwards....................... 666,059 389,981
Other.................................................. 92,166 64,363
Valuation Allowance.................................... (666,059) (389,981)
--------- ---------
900,776 1,146,990
Deferred Tax Liabilities:
Accumulated Tax Depreciation in Excess of Book
Depreciation.......................................... 794,895 747,560
Other.................................................. 81,693 73,529
--------- ---------
876,588 821,089
--------- ---------
Net Deferred Tax Assets.................................. $ 24,188 $ 325,901
========= =========
</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 $416,000 domestic and $481,000 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 are under capital leases.
<TABLE>
<CAPTION>
JANUARY 31,
---------------------
1997 1998
---------- ----------
<S> <C> <C>
Real Estate........................................ $4,354,402 $4,477,966
Machinery and Equipment............................ 280,924 481,484
---------- ----------
4,635,326 4,959,450
Less: Accumulated Amortization..................... 1,562,542 1,802,149
---------- ----------
$3,072,784 $3,157,301
========== ==========
</TABLE>
33
<PAGE>
ASTRO-MED, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
Minimum lease payments under noncancellable leases at January 31, 1998, were
as follows:
<TABLE>
<CAPTION>
YEAR ENDING CAPITAL OPERATING
JANUARY 31, LEASE LEASES
----------- -------- ---------
<S> <C> <C>
1999................................................. $198,201 $359,116
2000................................................. 194,451 207,394
2001................................................. 43,002 114,734
2002................................................. 88,831
2003................................................. 69,360
2004 and Thereafter.................................. 54,346
-------- --------
Net Minimum Lease Payments........................... 435,654 $893,781
========
Less Amount Representing Interest.................... 29,882
--------
Current Value of Net Minimum Lease Payments.......... $405,772
========
</TABLE>
Total rental expense for fiscal 1996, 1997 and 1998 was $481,498, $425,817
and $432,654, respectively.
NOTE 8--OPERATIONS
The Company's operations consist of the design, development, manufacture and
sale of specialty data acquisition and 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 1996, 1997
and 1998 is set forth below.
<TABLE>
<CAPTION>
NORTH AMERICA EUROPE ELIMINATIONS CONSOLIDATED
------------- ---------- ------------ ------------
FISCAL 1996
- -----------
<S> <C> <C> <C> <C>
Net Sales to Unaffiliated
Customers................. $37,311,249 $6,630,062 $43,941,311
Transfers between Geo-
graphic 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
=========== ========== ===========
<CAPTION>
FISCAL 1997
- -----------
<S> <C> <C> <C> <C>
Net Sales to Unaffiliated
Customers................. $38,289,675 $5,885,458 $44,175,133
Transfers between Geo-
graphic 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
=========== ========== ===========
<CAPTION>
FISCAL 1998
- -----------
<S> <C> <C> <C> <C>
Net Sales to Unaffiliated
Customers................. $38,574,396 $5,173,144 $43,747,540
Transfers between Geo-
graphic Areas............. $ 4,195,162 $ 19,616 $(4,214,778)
----------- ---------- -----------
$42,769,558 $5,192,760 $(4,214,778) $43,747,540
=========== ========== =========== ===========
Operating Income (Loss).... $ 867,488 $ (219,601) $ 647,887
=========== ========== ===========
Identifiable Assets........ $40,153,959 $2,659,755 $42,813,714
=========== ========== ===========
</TABLE>
34
<PAGE>
ASTRO-MED, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
North America sales as shown above include export sales of $6,604,317 in
fiscal 1996, $5,812,450 in fiscal 1997, and $4,950,012 in fiscal 1998.
No single customer accounted for 10% of net sales in fiscal 1996, 1997 or
1998.
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 1996, $185,000 for fiscal
1997, and $227,400 for fiscal 1998.
35
<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,
1996........................ 157,000 58,227 58,227 157,000
1997........................ 157,000 2,152 (15,848) 175,000
1998........................ 175,000 38,585 37,797 175,788
</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.
36
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> JAN-31-1998
<PERIOD-START> FEB-01-1997
<PERIOD-END> JAN-31-1998
<CASH> 5,659,552
<SECURITIES> 7,472,693
<RECEIVABLES> 8,003,852
<ALLOWANCES> 175,788
<INVENTORY> 10,341,856
<CURRENT-ASSETS> 32,863,478
<PP&E> 18,056,693
<DEPRECIATION> 10,155,952
<TOTAL-ASSETS> 42,813,714
<CURRENT-LIABILITIES> 5,752,638
<BONDS> 227,998
0
0
<COMMON> 257,023
<OTHER-SE> 35,501,976
<TOTAL-LIABILITY-AND-EQUITY> 42,813,714
<SALES> 43,747,540
<TOTAL-REVENUES> 43,747,540
<CGS> 27,236,046
<TOTAL-COSTS> 43,099,653
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 27,872
<INCOME-PRETAX> 1,407,336
<INCOME-TAX> 366,000
<INCOME-CONTINUING> 1,041,336
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,041,336
<EPS-PRIMARY> .21
<EPS-DILUTED> .21
</TABLE>
