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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, 1999
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)
<TABLE>
<S> <C>
Rhode Island 05-0318215
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
02893
600 East Greenwich Avenue, (Zip Code)
West Warwick, Rhode Island
(Address of principal executive
offices)
</TABLE>
Registrant's telephone number, including area code: (401) 828-4000
Securities registered pursuant to Section 12(b) of the Act:
<TABLE>
<S> <C>
Name of each exchange
Title of each class on which registered
---------- --------------
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 16, 1999.
Common Stock, $.05 Par Value: $19,126,862
Indicate the number of shares outstanding (excluding treasury shares)
of each of the issuer's classes of common stock as of March 16, 1999.
Common Stock, $.05 Par Value: 4,481,481 shares
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the Company's definitive proxy statement for the 1999 annual
meeting of shareholders are incorporated by reference into Part III.
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9
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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........................................... 15
Item 4. Submission of Matters to a Vote of Security Holders......... 15
PART II
Item 5. Market for the Registrant's Common Stock and Related
Stockholder Matters......................................... 16
Item 6. Selected Financial Data..................................... 16
Item 7. Management's Discussion and Analysis of Financial Condition
and Results of Operations................................... 17
Item 8. Financial Statements and Supplementary Data................. 22
Item 9. Changes in and Disagreements with Accountants on Accounting
and Financial Disclosure.................................... 22
PART III
Item 10. Directors and Executive Officers of the Registrant.......... 23
Item 11. Executive Compensation...................................... 24
Security Ownership of Certain Beneficial Owners and
Item 12. Management.................................................. 24
Item 13. Certain Relationships and Related Transactions.............. 24
PART IV
Exhibits, Financial Statement Schedules and Reports on Form
Item 14. 8-K......................................................... 24
</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. The Company is a diversified enterprise
providing products that serve the Test and Measurement, Product Identification
and Life Sciences markets. The dependence on Test and Measurement products as
the dominant revenue source has shifted. The Company's QuickLabel(R) Systems
and Grass(R) Instrument products have emerged as prominent growth contributors
during the year ended January 31, 1999 (herein referred to as "fiscal 1999").
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 and measurement markets, especially
defense and aerospace; competition in the specialty printer industry; ability
to develop market acceptance of the QLS color 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. All three groups supply a
complete range of products including hardware, software and supplies, and all
three place products in the industrial, medical (both clinical and research)
and commercial market sectors, providing the Company with a broad and diverse
market base. The Test and Measurement Group of products takes scientific
signals and prints them onto charts or electronic media. The Digital 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 product group also includes print and apply systems
as well as application products. The Grass Instrument 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
Since its inception in 1971, Astro-Med's Test and Measurement Product Group
has been in the business of providing recorders that acquire data. From
stylus-based chart recorders to solid state thermal array recorders to
11
<PAGE>
today's digital data acquisition systems, Astro-Med has pioneered the
technologies used to acquire data. Test and Measurement product lines include
the MT-series(TM), multi-channel, multi-function machines that emphasize
expandability and flexibility; the expanding Dash-series(TM) of portable
recorders that can record from 2-30 channels of data under almost any
condition in the field as well as the lab; and the Astro-DAQ(TM) paperless
data acquisition system that acquires data directly to a hard drive where it
can be transferred via direct connection, network or 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). The AstroDAQ(TM) can
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.
QuickLabel(R) Systems Products (QLS)
The Company continued to expand its line of digital color label printers in
fiscal year 1999 by adding seven new printing systems; the QLS 2000, QLS 2001,
QLS 3000, QLS 3001, QLS 4000, QLS 4001 and the four color high volume printer
with Ribbon Ration(TM), QLS 4100. All printers include an exclusive algorithm
for creating near photographic quality printing, MicroCell(TM). The QLS
2000/3000 printer series 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 price points of $5,450 to $9,995. The new QLS 4000 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 QLS 4100 with its volume capacity and
automatic ribbon control system can save customers thousands of dollars a year
in ribbon costs.
The Company also manufactures monochrome thermal/thermal transfer printers
that produce high-quality bar code labels quickly and easily in almost any
format. The TOP HAND 2(TM) printer produces labels up to 5 inches wide at
speeds of 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.
During fiscal 1999, the Company added to its QLS product lines by acquiring
a small manufacturer of print and apply and label applicator systems. The
Columbia Labeling Machinery products provide the Company with a full line of
automatic label applicating and print and apply systems for multiple printing
and labeling requirements.
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(R) Products
The Grass(R) Instrument Product Group serves both research and clinical
neurophysiology markets world-wide. The Grass name and product line is
renowned in universities, medical centers and pharmaceutical companies. 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 new portable Grass Colleague(TM) digital PSG system.
This system, designed for the rapidly growing sleep disorders market,
complements the lab-based Heritage(R) EEG and PSG digital recording systems
and expands the range of solutions offered by the Company for clinical
recording requirements.
Other products include PolyVIEW(R) and PolyVIEW(R) PRO/32, both Windows(TM)
95/NT based systems, for data acquisition and analysis of signals in
biomedical research, and the Model 15RX, a new, exceptionally compact,
modular, computer-controlled biomedical amplifier system.
12
<PAGE>
The Company continues to offer the traditional Grass product line of
classical EEG, polysomnograph and polygraph systems as well as biomedical
amplifier systems, such as the Model 12 and new Model 15, all featuring world
famous Grass amplifier technology.
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.
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 a patent for its
four color label printer. In addition, the Company has two other patents
pending on its multi-color printing technology. 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 1997, 1998 and 1999 the Company
incurred costs of $2,493,072, $2,820,292 and $2,938,820 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 fiscal 2000.
Marketing and Competition
The Company competes worldwide in many markets including clinical and
research medicine, aerospace, automotive and general manufacturing. Astro-Med
has become a world leader in our markets by virtue of proprietary technology,
product reputation, delivery, technical assistance and service to customers.
The Company's products are sold to customers by a direct field sales force
in North America and selected European countries. 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.
13
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The Company's product marketing has been greatly expanded by our continued
investment in product promotion and sales support via the internet. Each
product group has a dedicated site which will continue to be developed and
expanded over the next year. We continue to invest heavily in 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 1997, 1998 and 1999, net sales to customers in various geographic
areas outside the U.S.A., primarily in Canada and Western Europe, amounted to
$11,840,560, $10,142,287 and $11,024,047, respectively.
Order Backlog
The backlog fluctuates regularly. 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 meet 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
$165,000 a year for the Company's last four fiscal years.
As of March 16, 1999, the Company employed approximately 362 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
The Company also leases facilities in eight locations. The following
information pertains to each location:
<CAPTION>
Approximate
Location Square Footage Principal Use
-------- -------------- -------------
<S> <C> <C>
Longueuil, Quebec,
Canada................. 3,800 Sales and service
Rodgau, Germany......... 3,014 Manufacturing, sales and service
Trappes, France......... 2,164 Sales and service
Milano, Italy........... 753 Sales and service
Schaumburg, IL.......... 1,194 Sales and service
Millersville, MD........ 1,035 Sales and service
Irvine, CA.............. 980 Sales and service
Fremont, CA............. 810 Sales and service
</TABLE>
14
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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.
15
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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
Years Ended January 31, High Low Per Share
----------------------- ---- --- ---------
<S> <C> <C> <C>
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
1999
First Quarter.................................... 8 1/8 7 1/4 .04
Second Quarter................................... 7 7/8 6 5/8 .04
Third Quarter.................................... 7 1/4 5 1/16 .04
Fourth Quarter................................... 6 1/2 5 .04
</TABLE>
The Company had approximately 462 shareholders of record on March 16, 1999,
which does not reflect shareholders with beneficial ownership in shares held
in nominee name.
Shareholder Services
Shareholders of Astro-Med, Inc. who desire information about the Company are
invited to contact the Investor Relations Department, Astro-Med, Inc., 600
East Greenwich Avenue, West Warwick, RI 02893 or call (401) 828-4000. A
mailing list is maintained to enable shareholders whose stock is held in
street name and other interested individuals to receive quarterly reports,
annual reports and press releases as quickly as possible.
Dividend Policy
The Company began a program of paying quarterly cash dividends in the second
quarter of fiscal 1992. Previously, no cash dividends had been declared or
paid by the Company since inception. The Company anticipates that it will
continue to pay cash dividends on a quarterly basis.
Item 6. Selected Financial Data
(Dollars in Thousands, Except Per Share Amounts)
<TABLE>
<CAPTION>
1995 1996 1997 1998 1999
------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C>
Results of Operations:
Net Sales............................ $38,233 $43,941 $44,175 $43,748 $41,562
Net Income........................... 1,923 1,328 2,288 1,041 496
Earnings per Common Share--basic..... .38 .26 .46 .21 .11
Earnings per Common Share--diluted... .38 .26 .46 .21 .11
Cash Dividends per Common Share...... .12 .12 .12 .16 .16
Financial Condition:
Working Capital...................... $25,487 $26,420 $28,810 $27,111 $25,507
Total Assets......................... 42,177 42,303 43,321 42,814 41,754
Long-Term Debt, less Current
Maturities.......................... 244 175 258 228 17
</TABLE>
16
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Item 7. Management's Discussion and Analysis of Financial Condition and
Results of Operations
Results of Operations
Fiscal 1999 compared to Fiscal 1998
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, 1997 1998 1999
---------------- Compared Compared Compared
1997 1998 1999 to 1996 to 1997 to 1998
---- ---- ---- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
Net Sales............................. 100% 100% 100% 1% (1)% (5)%
Gross Profit.......................... 38 38 40 (1) (3) 0
Selling, General and Administrative... 28 30 33 (5) 5 7
Research and Development.............. 6 6 7 3 13 4
</TABLE>
Revenues decreased to $41.6 million in fiscal 1999 from $43.7 million in
fiscal 1998 primarily due to decreases in the Test & Measurement Product
Group. Domestic sales of the T & M products declined by 25%, while sales
through the international channels were down 32%, due to the continued
weakness in the Asian market. The sales decrease is due to a continued weak
demand prevalent in the aerospace and defense industries. This environment has
persisted for four years now and has adversely affected the sales of such T &
M recorder products as MT95K2(TM), Dash 10(TM), Dash IV(TM), as well as
related media products. The Company's response to this challenge has been to
shift its dependence from these traditional markets to new markets including
transportation, energy, telecommunications, metal fabrication and automotive.
Also, the Company has expanded its product offerings in the recorder product
line by introducing the Dash 8U(TM) and Dash 4U(TM) products.
Sales of the QuickLabel(R) Systems (QLS) products continued to grow during
fiscal 1999 increasing 22% over the prior year. Domestically, sales grew 5%
whereas internationally sales increased by 74%. The reason for QLS's growth is
twofold: First, an expanded product offering that now includes eight digital
color printing solutions; and secondly, the continued acceptance of Astro-
Med's color printing technology by manufacturers as the standard for color
thermal transfer printing. In fiscal 1999 the Company expanded the breadth of
the QLS product group by adding the following series of color printers: QLS-
2000, QLS-2001, QLS-3000, QLS-3001, QLS 4000, QLS 4001, and the four color
high volume printer with Ribbon Ration(TM), QLS-4100. Sales of QLS color
printing systems grew 93% in fiscal 1999 from the prior year sales volume. The
Company also added functionality to its product group through the acquisition
of Dynell, Inc. including its Columbia Labeling Machinery (CLM) products.
These products include label applicators, print and apply systems as well as
handling systems and accessories. Sales revenues of these Dynell/CLM products
were not material to the fiscal 1999 results.
The Grass(R) Instrument product sales also increased in fiscal 1999. Sales
grew by 9%, with the domestic channels increasing by 12% and international
sales rising by 2%. The Grass Heritage(R) EEG & PSG products including the new
Portable Digital PSG System, Colleague(TM) PSG, are the prime drivers behind
this year's sales growth. Sales revenues from the Heritage(R) product line
increased 86% in the current fiscal year.
Gross Profit Margins rose to 39.9% from the prior year's 37.7%. The
improvement is traceable to improved profit margins in all three product
groups.
Selling, general and administrative expenses rose 7% to $13.9 million from
$13.0 million. As a percentage of sales revenues, selling, general and
administrative rose to 33% from last year's 30%. The change was a combination
of incremental spending in selling and marketing strategies as well as reduced
sales revenues in fiscal 1999. Incremental spending was confined to new field
sales personnel, customer service support and marketing programs.
17
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Research & Development expenses rose 4% to $2.9 million from $2.8 million in
the prior year. Research & Development as a percentage of sales also increased
to 7% from 6% in the prior year. The Company is committed to R & D investments
as a prime source of innovation and improvement in both technology and
products.
Interest and dividend income declined 4% to $786,000 in fiscal 1999 from
$823,000 in fiscal 1998. The decrease is due to lower interest rates and lower
average investment balances stemming from the cash funding of the Company's
stock buyback program and the acquisition of Dynell, Inc. Interest expense
declined 20% to $22,000 from last year's $28,000. The decrease is due to a
declining balance in the Company's capital lease obligations. Other income net
of $113,000 in fiscal year 1999 improved sharply from fiscal year 1998's Other
Expense net of $35,000. Favorable fluctuations in foreign currency exchange
rates is the primary reason for this improvement.
Income before taxes as a percentage of sales was 1.5% for fiscal 1999 as
compared to 3.2% in the prior year. The effective tax rate was 19% for fiscal
1999 against 26% for fiscal 1998. Changes in the effective income tax rates
from year to year are explained in Note 6 of Notes to Consolidated Financial
Statements.
Net Income declined to $496,000 in fiscal 1999 from $1,041,000 in fiscal
1998. As a percentage of sales revenues, Net Income in fiscal 1999 was 1.2%
compared with 2.4% in fiscal 1998.
Financial Condition
Consolidated working capital was $25.5 million at January 31, 1999 as
compared with $27.1 million on January 31, 1998. The composition of the
consolidated working capital at January 31,1999 includes cash, cash
equivalents and securities available for sale at $12.9 million as compared
with $13.1 million as of January 31, 1998. The Company's average working
capital excluding cash, cash equivalents and securities available for sale, as
a percentage of sales was 32% in fiscal 1999 as compared to 33% in fiscal
1998. The decrease in fiscal 1999 was primarily due to improved payables
management. The number of days sales outstanding in accounts receivable was 58
days at fiscal year end 1999 against 62 days at fiscal year end 1998. Average
inventory turnover was 2.0 turns in fiscal 1999 as compared to 2.8 turns in
fiscal 1998. Shareholders' Equity was $33.7 million at January 31, 1999,
compared with $35.8 million at January 31, 1998. The Company purchased 323,400
shares of the Company's common stock at a cost of $2.0 million during fiscal
1999. As part of the Stock Repurchase Plan, the Company, since fiscal 1996,
has repurchased 589,224 shares of Astro-Med common stock. Under the Board of
Directors' authorization, the Company has approval to repurchase another
200,000 shares of the Company's common stock.
Liquidity and Capital Resources
Net cash flow from operating activities was $3.2 million in fiscal 1999,
$2.8 million in fiscal 1998 and $4.8 million in fiscal 1997. The increase in
net cash flow from operating activities in fiscal 1999 was primarily due to
changes in the Company's working capital requirements. The decrease in net
cash flow in fiscal 1998 as compared with fiscal 1997 was due to a decrease in
the Company's profitability and changes in the working capital requirements.
Net cash used by investing activities was $1.0 million in fiscal 1999, as
compared to $1.5 million in fiscal 1998. Capital Expenditures of $600,000 in
fiscal 1999 and $810,000 in fiscal 1998 represent the primary demand for cash
in this category. During fiscal 1997, the Company's investing activities
provided net cash of $1.2 million due to the liquidation of certain investment
positions from the Company's securities portfolio.
Net cash used by financing activities was $2.9 million in fiscal 1999, $2.2
million in fiscal 1998 and $1.5 million in fiscal 1997. The prime components
are dividends paid and purchases of common stock. Dividends paid in fiscal
1999 were $744,000 , $727,000 in fiscal 1998 and $596,000 in fiscal 1997. The
annual dividend per share was $.16 in fiscal 1999, $.16 in fiscal 1998 and
$.12 in fiscal 1997. The Company purchases of common stock were $2.0 million
in fiscal 1999, $1.3 million in fiscal 1998 and $0.9 million in fiscal 1997.
18
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Although additional cash may be required for acquisitions, the Company
expects to finance any such acquisitions through internal funds. The Company
expects to have positive cash flow from its existing operations, and believes
its existing cash resources are sufficient to meet the capital requirements of
its existing operation for the foreseeable future.
Fiscal 1998 Compared to Fiscal 1997
Sales decreased 1% to $43.7 million in fiscal 1998 compared to $44.2 million
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(R) Instruments product groups
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 the
previous year by 23%. Progress was made in sales of the new recorder and data
acquisition products, Dash 8(TM) and AstroDAQ 1 & 2(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 fiscal year 1998. 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. In the domestic
markets, sales increased 19% while growth in the export markets was somewhat
lower at 12%.
Grass(R) 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(R), exceeded $1.4 million. Sales in the
export markets tempered that result, with a decrease of 16%.
Gross Profit Margins were 37.7% in fiscal 1998 as compared to 38.3% in
fiscal 1997. This result was more an outgrowth of product mix and lower unit
volume than any pricing or product cost influences.
Selling, general and administrative expenses rose 5% during fiscal 1998 to
$13.0 million from $12.5 million in fiscal 1997. The increment was 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 and marketing at greater than 20% of Astro-Med's annual sales volume.
R & D expenditures rose 13% during fiscal 1998 to 6% of annual sales. The
increase was attributable to new hires, including electrical, software and
mechanical engineers, as well as project expenses related to new and existing
product lines.
Interest and dividend income rose 37% during fiscal 1998. The improvement
was due to the increased cash position provided by operations as well as
investing strategies. Interest expense rose 3% from the prior year as the
Company incurred capital lease obligations related to the acquisition of
computer hardware and software. Other income (expense) net, was significantly
lower than the prior year 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 strengthened 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.
19
<PAGE>
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.
Market Risk
The Company is exposed to the impact of foreign currency exchange rate
changes. The Company manages its exposure to exchange rate fluctuations
through its operating and financing activities in order to reduce the impact
on earnings and cash flows. It is anticipated that the likely transition to
the Euro as the eventual functional currency of European affiliates may
facilitate the Company's exchange rate exposure management in the future. The
Company does not hold or purchase any foreign currency contracts for trading
purposes. The functional currencies of the Company's foreign affiliates are
their respective local operating currencies, which are subsequently translated
for consolidated reporting purposes into U.S. dollars. Such translation
adjustments are reported as a separate component of Shareholders' Equity.
Euro Conversion
On January 1, 1999, a single currency called the euro was introduced in
Europe. Eleven member countries of the European Union adopted the euro as
their common legal currency on that date. Fixed conversion rates between those
countries' existing currencies and the euro were established on that date. The
existing currencies are scheduled to remain legal tender from January 1, 1999
to July 1, 2002. During this transition period, transactions can be settled
with either the euro or a member country's existing (legacy) currency. Those
Company branches operating in the participating countries will adopt the euro
as their functional currency within the compliance date. We do not expect the
euro conversion to have a material adverse impact in the Company's business or
financial condition.
Year 2000
The Year 2000 issue is the result of computer programs and embedded computer
chips being unable to distinguish between the year 1900 and the year 2000, and
therefore being unable to correctly recognize and process date information
beyond the year 1999. During 1998, the Company commenced a Year 2000 readiness
program to assess the impact of the Year 2000 issue on the Company's
operations and address necessary remediation.
Products
All of the Company's products, where applicable, are Year 2000 Compliant:
Grass Instruments Product Group--Products manufactured before 1997 did not
store time or date. Therefore, Year 2000 compliance is not applicable. New
products that do store time and date use only Windows(TM) 95 dates which are
compliant. QuickLabel Systems Product Group--Printer products do not generate
or store time and date, therefore Year 2000 compliance is not applicable.
Application software that stores time and date uses only Windows(TM) 95 dates
which are compliant. Label Applicator products and certain Print and Apply
models do not store time or date, therefore compliance is not an issue. Those
Print and Apply and Thermal Recorder products which do store time and date are
compliant. Test and Measurement Product Group--Data Acquisition Systems and
application software for all instruments use only Windows(TM) 95 dates which
are compliant. Stand-alone Recorders use a two-digit year for reference only.
The date is not used for time sorting or any calculations. Our Quality
Assurance Department has verified that there are no anomalies associated with
the turnover of the Year 2000.
Year 2000 Readiness Program
The Company's Year 2000 readiness program is divided into three major
sections--Information Technology (IT) infrastructure (which includes
manufacturing, finance, purchasing and sales), Applications Software and Non-
IT systems (including environmental, process control, and manufacturing
control systems), and Third-party suppliers and customers. All non-compliant
systems have been identified and prioritized. Assessment and
20
<PAGE>
remediation are proceeding in tandem, and the Company currently plans to have
all non-compliant systems repaired or replaced and tested by mid-1999.
The Information Technology infrastructure section of the Year 2000 readiness
program includes the Company's IBM AS400 Computer hardware system as well as
its J. D. Edwards financial, manufacturing and distribution business software
system. The AS400 system was made fully compliant in January 1998. In November
1998, the Company completed the installation of an upgrade to its J. D.
Edwards software suite, which is now fully compliant. This section of the
project is 100% complete.
The Applications Software and Non-IT section includes the conversion or
replacement of applications software and equipment that is not Year 2000
compliant. The Company utilizes both in-house and third-party software and
equipment to operate certain aspects of its business, including
telecommunications and sales contact management systems. The Company estimates
that this section of the Year 2000 readiness program is approximately 59%
complete at January 31, 1999, and the remaining conversion and testing
projects are on schedule to be completed by mid-1999. Contingency planning for
this section has begun and is scheduled to be complete by mid-1999.
The Third-party suppliers and customers section includes the process of
identifying and prioritizing critical suppliers and customers, and
communicating with them directly about their plans and progress in addressing
the Year 2000 problem. The Company is currently in the process of
communicating with its significant vendors, service providers and customers.
Detailed evaluations of the most critical third parties will be completed by
mid-1999. These evaluations will be followed by the completion of contingency
plans, with follow-up reviews scheduled through the remainder of 1999.
The total cost associated with required modifications to become Year 2000
compliant is not expected to be material to the Company's financial position.
The estimated total cost related to the Year 2000 readiness program is
approximately $745,000, which includes hardware and software that were
previously planned to obtain greater capacity and functionality. The total
amount expended through January 31, 1999 was $626,000, of which approximately
$553,000 related to Information Technology Infrastructure, approximately
$69,000 related to Applications Software and Non-IT projects, and
approximately $4,000 related to the Third-party project. The future cost of
completing the Year 2000 readiness program is estimated at approximately
$119,000, including $116,000 to complete the Applications Software and Non-IT
phase, and $3,000 to complete the Third-party compliance evaluation. The
Company has funded the incurred costs to-date and intends to fund the
estimated costs to complete the Year 2000 readiness program through operating
cash flows.
Although the Company is taking measures to address the impact, if any, of
Year 2000 issues, it cannot predict the outcome or success of its Year 2000
readiness program, or whether the failure of third party systems or equipment
to operate properly in the Year 2000 will have a material adverse effect on
the Company's business, operating results, or financial condition, or require
the Company to incur unanticipated material expenses to remedy any Year 2000
issue. The Year 2000 readiness program is expected to significantly reduce the
Company's level of uncertainty about the Year 2000 problem and, in particular,
about the Year 2000 compliance and readiness of its material external
suppliers and customers. The Company believes that, with the implementation of
upgraded business systems and completion of the Year 2000 readiness program as
scheduled, the possibility of significant interruptions of normal operations
should be reduced.
The foregoing discussion regarding the Company's Year 2000 readiness
program's implementation, effectiveness, and cost contains forward-looking
statements which are based on management's expectations, determined utilizing
certain assumptions of future events including third party compliance and
other factors. However, there can be no guarantee that these expectations will
be realized, and actual results could differ materially from management's
expectations. Specific factors that might cause such material differences
include, but are not limited to, the availability and cost of personnel
trained in this area and other similar uncertainties, and the remediation
success of the Company's suppliers, service providers and customers.
21
<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 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--
basic.............................. .12 .03 .10 (.04)
Earnings (Loss) Per Common Share--
diluted............................ .12 .03 .10 (.04)
<CAPTION>
May 2, August 1, October 31, January 31,
1998 1998 1998 1999
------- --------- ----------- -----------
<S> <C> <C> <C> <C>
Net Sales........................... $10,056 $10,528 $10,516 $10,462
Gross Profit........................ 3,876 4,269 4,294 4,140
Net Income (Loss)................... (104) 189 229 182
Earnings (Loss) Per Common Share--
basic.............................. (.02) .04 .05 .04
Earnings (Loss) Per Common Share--
diluted............................ (.02) .04 .05 .04
</TABLE>
Item 9. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure
None.
22
<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 1999 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...... 73 Chairman, Chief Executive Officer and Director
Everett V. Pizzuti... 62 President, Chief Operating Officer and Director
David M. Gaskill .... 53 Vice President--Research and Development
Joseph P. O'Connell.. 55 Vice President and Treasurer, Chief Financial Officer
Elias G. Deeb........ 57 Vice President--Media Manufacturing
A. Eric Bartholomay.. 50 Vice President--International Sales
Gary A. Dalton....... 41 Controller
Stephen M. Petrarca.. 36 Vice President--Instrument Manufacturing
Stephen E. Johnson .. 35 Vice President--Grass Research & Development
</TABLE>
All of the persons named above have held the positions identified since
January 31, 1985, except as indicated.
Mr. Ondis has been a Director and Chief Executive Officer since 1969. He was
previously President and the Chief Financial Officer (Treasurer) of the
Company from 1969 to 1985.
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).
Mr. Petrarca was appointed Vice President of Instrument Manufacturing in
November 1998. Mr. Petrarca has previously held positions as General Manager
of Manufacturing, Manager of Grass Operations and Manager of Grass Sales. He
has been with the Company since 1980.
Mr. Johnson was appointed Vice President of Grass Research and Development
in March 1999. Mr. Johnson joined the Grass Instrument Company in 1994. After
Astro-Med's acquisition of the Grass Instrument Company, he has served as
Manager of R & D and Assistant General Manager for Grass Operations.
Previously Mr. Johnson has held engineering and engineering management
positions with General Scanning, Inc. (l989-1993), Grass Instruments (1987-
1989), and Hewlett-Packard (1986-1987).
23
<PAGE>
Item 11. Executive Compensation
The response to this item is incorporated by reference to the Company's
definitive proxy statement for the 1999 annual meeting of shareholders.
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 1999 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 1999 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.................................. 27
Consolidated Balance Sheets--January 31, 1998 and 1999.................... 28
Consolidated Statements of Income--Years Ended January 31, 1997, 1998 and
1999..................................................................... 29
Consolidated Statements of Comprehensive Income and Shareholders' Equity--
Years Ended January 31, 1997, 1998 and 1999.............................. 30
Consolidated Statements of Cash Flows--Years Ended January 31, 1997, 1998
and 1999................................................................. 31
Notes to Consolidated Financial Statements................................ 32
(a)(2) Financial Statement Schedules:
Schedule II--Valuation and Qualifying Accounts and Reserves--
Years Ended January 31, 1997, 1998 and 1999.............................. 40
</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.
24
<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,
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)
(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, as amended, filed as
Exhibit 4.3 to Registration Statements on Form S-8, Registration Nos.
333-32315 and 333-93565, and incorporated by reference herein. (1)
(10.6) Astro-Med, Inc. 1998 Non-Qualified Stock Option Plan filed as Exhibit
4.3 to Registration Statement on Form S-8, Registration No. 333-
62431, and incorporated by reference herein. (1)
(21) List of Subsidiaries of the Company. See page 25.
(23) Consent of Independent Public Accountants. See page 25.
</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.
25
<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 12, 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>
Signature Title Date
</TABLE>
<TABLE>
<S> <C>
/s/ Albert W. Ondis Chairman and Director April 12,
- ----------------------------------- (Principal Executive Officer)1999
Albert W. Ondis
</TABLE>
<TABLE>
<S> <C>
/s/ Everett V. Pizzuti President and Director April 12,
- ----------------------------------- (Principal Operating 1999
Everett V. Pizzuti Officer)
</TABLE>
<TABLE>
<S> <C>
/s/ Jospeh P. O'Connell Vice President and April 12,
- ----------------------------------- Treasurer 1999
Joseph P. O'Connell (Principal financial
</TABLE> Officer)
<TABLE>
<S> <C>
/s/ Gary A. Dalton Controller (Principal April 12,
- ----------------------------------- Accounting Officer) 1999
Gary A. Dalton
</TABLE>
<TABLE>
<S> <C>
/s/ Jacques V. Hopkins Director April 12,
- ----------------------------------- 1999
Jacques V. Hopkins
</TABLE>
26
<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. 33-43700 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 Nos.
333-32315 and 333-93565 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, File No. 333-62431 pertaining to the 1998 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 12, 1999
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, 1999 and 1998, and the related
consolidated statements of income, comprehensive income and shareholders'
equity, and cash flows for each of the three years in the period ended January
31, 1999. 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, 1999 and 1998, and the results of its
operations and their cash flows for each of the three years in the period
ended January 31, 1999 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 12, 1999
27
<PAGE>
ASTRO-MED, INC.
CONSOLIDATED BALANCE SHEETS
As of January 31, 1998 and 1999
<TABLE>
<CAPTION>
ASSETS 1998 1999
------ ----------- -----------
<S> <C> <C>
CURRENT ASSETS
Cash and Cash Equivalents.......................... $ 5,659,552 $ 4,946,289
Securities Available for Sale...................... 7,472,693 7,907,142
Accounts Receivable, Less Reserves of $175,788 in
1998 and $212,337 in 1999......................... 7,828,064 7,708,806
Inventories........................................ 10,341,856 10,217,020
Prepaid Expenses and Other Current Assets.......... 1,561,313 1,986,336
----------- -----------
Total Current Assets............................. 32,863,478 32,765,593
PROPERTY, PLANT AND EQUIPMENT
Land and Improvements.............................. 398,191 398,191
Buildings and Improvements......................... 6,978,394 7,009,089
Machinery and Equipment............................ 10,680,108 11,270,775
----------- -----------
18,056,693 18,678,055
Less Accumulated Depreciation...................... (10,155,952) (11,448,380)
----------- -----------
7,900,741 7,229,675
OTHER ASSETS
Excess of Cost over Net Assets Acquired, Net....... 940,084 903,784
Amounts Due from Officers.......................... 453,264 480,314
Other.............................................. 656,147 374,866
----------- -----------
2,049,495 1,758,964
----------- -----------
$42,813,714 $41,754,232
=========== ===========
LIABILITIES AND SHAREHOLDERS' EQUITY
------------------------------------
CURRENT LIABILITIES
Accounts Payable................................... $ 2,267,722 $ 3,427,766
Accrued Compensation............................... 1,221,662 1,446,770
Accrued Expenses................................... 1,470,849 1,110,484
Income Taxes....................................... 614,631 1,062,892
Current Maturities of Long-Term Debt............... 177,774 211,021
----------- -----------
Total Current Liabilities........................ 5,752,638 7,258,933
LONG-TERM DEBT, Less Current Maturities.............. 227,998 16,977
EXCESS OF NET ASSETS ACQUIRED OVER COST, NET......... 326,519 108,839
DEFERRED INCOME TAXES................................ 747,560 667,676
SHAREHOLDERS' EQUITY
Preferred Stock, $10 Par Value, Authorized 100,000
Shares, Issued None...............................
Common Stock, $.05 Par Value, Authorized 13,000,000
Shares, Issued 5,140,448 in 1998 and 5,143,520 in
1999.............................................. 257,023 257,176
Additional Paid-in Capital......................... 5,649,101 5,641,317
Retained Earnings.................................. 33,085,917 32,837,880
Treasury Stock, at Cost, 355,895 Shares in 1998 and
662,295 in 1999................................... (3,062,945) (4,889,343)
Accumulated Other Comprehensive Items.............. (170,097) (145,223)
----------- -----------
35,758,999 33,701,807
----------- -----------
$42,813,714 $41,754,232
=========== ===========
</TABLE>
The accompanying notes are an integral part of these financial statements.
28
<PAGE>
ASTRO-MED, INC.
CONSOLIDATED STATEMENTS OF INCOME
Years Ended January 31, 1997, 1998 and 1999
<TABLE>
<CAPTION>
1997 1998 1999
----------- ----------- -----------
<S> <C> <C> <C>
Net Sales............................... $44,175,133 $43,747,540 $41,561,500
Cost of Sales........................... 27,241,473 27,236,046 24,982,234
----------- ----------- -----------
Gross Profit............................ 16,933,660 16,511,494 16,579,266
Costs and Expenses:
Selling, General and Administrative... 12,451,030 13,043,315 13,907,389
Research and Development.............. 2,493,072 2,820,292 2,938,820
----------- ----------- -----------
14,944,102 15,863,607 16,846,209
----------- ----------- -----------
Operating Income (Loss)................. 1,989,558 647,887 (266,943)
Other Income (Expense):
Interest and Dividend Income.......... 597,995 822,775 786,084
Interest Expense...................... (27,278) (27,872) (22,197)
Other, Net............................ 375,750 (35,454) 112,721
----------- ----------- -----------
946,467 759,449 876,608
----------- ----------- -----------
Income before Income Taxes.............. 2,936,025 1,407,336 609,665
Provision for Income Taxes.............. 648,000 366,000 114,000
----------- ----------- -----------
Net Income.............................. $ 2,288,025 $ 1,041,336 $ 495,665
=========== =========== ===========
Net Income Per Common Share--basic...... $ .46 $ .21 $ .11
=========== =========== ===========
Net Income Per Common Share--diluted.... $ .46 $ .21 $ .11
=========== =========== ===========
Weighted Average Number of Common Shares
Outstanding--basic..................... 4,968,731 4,852,787 4,651,711
=========== =========== ===========
Weighted Average Number of Common Shares
Outstanding--diluted................... 5,018,143 4,900,460 4,679,398
=========== =========== ===========
Dividends Declared Per Common Share..... $ .12 $ .16 $ .16
=========== =========== ===========
</TABLE>
The accompanying notes are an integral part of these financial statements.
29
<PAGE>
ASTRO-MED, INC.
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME AND
SHAREHOLDERS' EQUITY
Years Ended January 31, 1997, 1998 and 1999
<TABLE>
<CAPTION>
1997 1998 1999
----------- ----------- -----------
<S> <C> <C> <C>
Comprehensive Income
Net Income.............................. $ 2,288,025 $ 1,041,336 $ 495,665
Other Comprehensive Items, Net:
Foreign currency translation
adjustments.......................... (38,281) (115,180) 18,681
Unrealized gain (loss) on securities
available for sale................... (44,597) 34,375 6,193
----------- ----------- -----------
Other Comprehensive Items, Net.......... (82,878) (80,805) 24,874
----------- ----------- -----------
Comprehensive Income.................... $ 2,205,147 $ 960,531 $ 520,539
=========== =========== ===========
Shareholders' Equity
Common Stock, $.05 Par Value:
Balance at beginning of year.......... $ 256,166 $ 256,837 $ 257,023
Net proceeds from issuance of Company
common stock
(Note 5)............................. 671 186 153
----------- ----------- -----------
Balance at end of year................ 256,837 257,023 257,176
----------- ----------- -----------
Additional Paid-In Capital:
Balance at beginning of year.......... 5,554,100 5,624,239 5,649,101
Net proceeds from issuance of Company
common stock
(Note 5)............................. 75,990 28,203 18,498
Net cost of shares issued to Employee
Stock Ownership Plan (Note 5)........ (5,851) (3,341) (26,282)
----------- ----------- -----------
Balance at end of year................ 5,624,239 5,649,101 5,641,317
----------- ----------- -----------
Retained Earnings:
Balance at beginning of year.......... 31,079,623 32,772,044 33,085,917
Net Income............................ 2,288,025 1,041,336 495,665
Dividends declared.................... (595,604) (727,463) (743,702)
----------- ----------- -----------
Balance at end of year................ 32,772,044 33,085,917 32,837,880
----------- ----------- -----------
Treasury Stock:
Balance at beginning of year.......... (902,169) (1,804,986) (3,062,945)
Purchases of Company common stock..... (972,628) (1,301,300) (1,954,680)
Net cost of shares issued to Employee
Stock Ownership Plan (Note 5)........ 69,811 43,341 128,282
----------- ----------- -----------
Balance at end of year................ (1,804,986) (3,062,945) (4,889,343)
----------- ----------- -----------
Accumulated Other Comprehensive Items:
Balance at beginning of year.......... (6,414) (89,292) (170,097)
Other comprehensive items, net........ (82,878) (80,805) 24,874
----------- ----------- -----------
Balance at end of year................ (89,292) (170,097) (145,223)
----------- ----------- -----------
$36,758,842 $35,758,999 $33,701,807
=========== =========== ===========
</TABLE>
The accompanying notes are an integral part of these financial statements.
30
<PAGE>
ASTRO-MED, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
Years Ended January 31, 1997, 1998 and 1999
<TABLE>
<CAPTION>
1997 1998 1999
----------- ----------- ------------
<S> <C> <C> <C>
Cash Flows from Operating Activities:
Net Income........................... $ 2,288,025 $ 1,041,336 $ 495,665
Adjustments to Reconcile Net Income
to Net Cash Provided by Operating
Activities:
Depreciation and Amortization...... 921,088 988,423 1,111,048
Gain on Sale of Assets............. (495,761) -- --
Deferred Income Taxes.............. (39,859) (301,713) (436,425)
Other.............................. (56,358) 242,558 (1,721)
Changes in Assets and Liabilities:
Accounts Receivable.............. 6,269 483,672 119,258
Inventories...................... 2,172,048 19,649 124,836
Other............................ (399,118) (465,906) 185,749
Accounts Payable and Accrued
Expenses........................ 44,823 952,118 1,126,787
Income Taxes..................... 386,995 (204,904) 448,261
----------- ----------- ------------
Total Adjustments.............. 2,540,127 1,713,897 2,677,793
----------- ----------- ------------
Net Cash Provided by Operating
Activities........................ 4,828,152 2,755,233 3,173,458
Cash Flows from Investing Activities:
Proceeds from Sales of Securities
Available for Sale.................. 2,470,402 2,450,508 10,153,724
Purchases of Securities Available for
Sale................................ (2,527,562) (3,147,206) (10,582,545)
Proceeds from Sales of Assets........ 599,500 -- --
Proceeds from Sales of Investment.... 1,514,779 -- --
Additions to Property, Plant and
Equipment........................... (816,229) (809,724) (600,395)
----------- ----------- ------------
Net Cash Provided (Used) by
Investing Activities.............. 1,240,890 (1,506,422) (1,029,216)
Cash Flows from Financing Activities:
Payments of Debt..................... (50,000) (50,000) (50,000)
Principal Payments on Capital Leases. -- (100,069) (127,774)
Proceeds from Common Shares Issued
Under Employee Benefit Plans........ 76,661 28,389 18,651
Purchases of Treasury Stock.......... (972,628) (1,301,300) (1,954,680)
Dividends Paid....................... (595,604) (727,463) (743,702)
----------- ----------- ------------
Net Cash Used by Financing
Activities........................ (1,541,571) (2,150,443) (2,857,505)
----------- ----------- ------------
Net Increase (Decrease) in Cash and
Cash Equivalents...................... 4,527,471 (901,632) (713,263)
Cash and Cash Equivalents, Beginning of
Year.................................. 2,033,713 6,561,184 5,659,552
----------- ----------- ------------
Cash and Cash Equivalents, End of Year. $ 6,561,184 $ 5,659,552 $ 4,946,289
=========== =========== ============
Supplemental Disclosures of Cash Flow
Information:
Cash Paid During the Year for:
Interest .......................... $ 33,108 $ 27,872 $ 24,072
Income Taxes....................... $ 437,855 $ 758,070 $ 257,889
</TABLE>
The accompanying notes are an integral part of these financial statements.
31
<PAGE>
ASTRO-MED, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
January 31, 1999
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 $456,734 and $493,034 as of January 31, 1998 and
1999, respectively. Excess of net assets acquired over cost is amortized on
the straight-line method over five years. Accumulated amortization amounted to
$711,228 and $928,908 as of January 31, 1998 and 1999, respectively. The
shorter amortization period for the excess of net assets acquired over cost
reflects the more limited life of the assets involved.
Comprehensive Income: Effective February 1, 1999, the Company adopted SFAS
No. 130, "Reporting Comprehensive Income." This pronouncement sets forth
requirements for disclosure of the Company's comprehensive income and
accumulated other comprehensive items. In general, comprehensive income
combines net income and "other comprehensive items," which represents certain
amounts that are reported as components of shareholders' equity in the
accompanying balance sheets, including foreign currency translation
adjustments and unrealized gains (losses) on securities available for sale,
net of income tax.
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 potential common shares for stock
options outstanding during the period using the treasury stock method.
Adoption of SFAS No. 128 had no impact on previously reported Earnings per
Share for Fiscal Year 1997. Options to purchase 653,500 shares of common stock
between $8.125 and $13.00 per share were outstanding during fiscal year 1999
but were not included in the computation of diluted EPS because the options'
exercise
32
<PAGE>
ASTRO-MED, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
price was greater than the average market price of the common shares. The
options, which expire between 4/13/99 through 3/25/08 were still outstanding
on January 31, 1999.
<TABLE>
<CAPTION>
1997 1998 1999
--------- --------- ---------
<S> <C> <C> <C>
Weighted Average Common Shares Outstanding--
basic........................................ 4,968,731 4,852,787 4,651,711
Dilutive Effect of Options Outstanding........ 49,412 47,673 27,687
--------- --------- ---------
Weighted Average Common Shares Outstanding--
diluted...................................... 5,018,143 4,900,460 4,679,398
</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 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, 1999 approximate fair value.
Note 2--Securities Available for Sale
As of January 31, 1999, securities included corporate and governmental debt
obligations of $1,013,847 with contractual or anticipated maturities of one
year or less and $6,893,295 with contractual or anticipated maturities of more
than one year through twenty-five years. 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. 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, 1999
was $7,869,502. The difference between market value and the cost basis as of
that date was $37,640 ($27,925 net of tax), which represented unrealized
gains. As of January 31, 1998, the amortized cost of securities available for
sale 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. 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 1999
and 1998.
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,
-----------------------
1998 1999
----------- -----------
<S> <C> <C>
Materials and Supplies............................ $ 5,620,041 $ 5,356,973
Work-in-Progress.................................. 993,149 721,448
Finished Goods.................................... 3,728,666 4,138,599
----------- -----------
$10,341,856 $10,217,020
=========== ===========
</TABLE>
33
<PAGE>
ASTRO-MED, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
Note 4--Long-Term Debt
Long-term debt consisted of the following:
<TABLE>
<CAPTION>
January 31,
-----------------
1998 1999
-------- --------
<S> <C> <C>
Capital Lease Obligations............................... $405,772 $227,998
Less Current Maturities................................. 177,774 211,021
-------- --------
$227,998 $ 16,977
======== ========
</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 $8,333 plus interest at 7 1/2%
are due through the bond's maturity date of August, 1999. 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 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, 1999 scheduled to
mature in each of the succeeding two fiscal years are as follows: $211,021 in
fiscal 2000 and $16,977 in fiscal 2001.
Note 5--Common Stock
The Company's Board of Directors has authorized the purchase of up to
621,724 shares of the Company's common stock on the open market. As of January
31, 1999, the Company has remaining authorization to purchase an additional
200,000 shares. As purchased, such shares will become treasury stock available
for general corporate purposes. The Company purchased 151,500 and 323,400
shares of treasury stock in fiscal 1998 and 1999, respectively.
The Company maintains the following benefit plans involving the Company's
common stock:
Stock Option Plans: As of January 31, 1999, the Company has three incentive
stock option plans and two non-qualified stock option plans under which
options may be granted to officers and key employees. Options for an aggregate
of 1,050,000 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 550,000 shares may be granted under the non-qualified
plans 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.
34
<PAGE>
ASTRO-MED, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
Summarized option data for all plans is as follows:
<TABLE>
<CAPTION>
Weighted Average
Number Option Price Option Price Per
of Shares Per Share Share
--------- ------------ ----------------
<S> <C> <C> <C>
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 Granted......................... 216,500 6.13- 8.13 7.92
Options Expired......................... (56,250) 3.33- 14.30 9.25
-------
Outstanding Options, January 31, 1999... 781,100 3.33- 13.00 8.51
-------
Options Exercisable, January 31, 1998... 556,300 3.33- 14.30 8.59
-------
Options Exercisable, January 31, 1999... 717,900 3.33- 13.00 8.43
=======
</TABLE>
Set forth below is a summary of options outstanding at January 31, 1999:
<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-
$ 5.50 104,100 $ 5.09 1 yr. 104,100 $ 5.09
$ 5.88-
$ 9.25 484,000 $ 8.20 8 yrs. 460,500 $ 8.28
$10.25-
$13.00 193,000 $11.15 4 yrs. 153,300 $11.14
</TABLE>
At January 31, 1999, options covering 413,000 shares under the incentive
plans, and 399,000 shares under the non-qualified plan and 18,000 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
------------------------------
1997 1998 1999
---------- ---------- --------
<S> <C> <C> <C>
Net income (Loss)
As reported.............................. $2,288,025 $1,041,336 $495,665
Pro forma................................ $1,821,039 $ 546,039 $(42,914)
Earnings per share
As reported.............................. $ .46 $ .21 $ .11
Pro forma, basic......................... $ .37 $ .11 $ (.01)
Pro forma, diluted....................... $ .36 $ .11 $ (.01)
</TABLE>
35
<PAGE>
ASTRO-MED, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
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
during fiscal 1997, 1998 and 1999 was $3.24, $3.40 and $2.43, respectively.
<TABLE>
<CAPTION>
1997 1998 1999
------ ------ ------
<S> <C> <C> <C>
Risk-free interest rate............................ 6.5% 5.5% 4.8%
Expected life (years).............................. 5 5 5
Expected volatility................................ 37.481% 34.879% 35.367%
Expected dividend yield............................ 1.4% 1.9% 2.4%
</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,
-------------------------
1997 1998 1999
------- ------- -------
<S> <C> <C> <C>
Shares Reserved, Beginning...................... 109,645 105,218 101,507
Shares Purchased................................ (4,427) (3,711) (3,081)
------- ------- -------
Shares Reserved, Ending......................... 105,218 101,507 98,426
======= ======= =======
</TABLE>
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 $100,000 for fiscal 1997, $123,000 for fiscal 1998 and
$130,000 for fiscal 1999.
Note 6--Income Taxes
The components of the provision for income taxes were as follows:
<TABLE>
<CAPTION>
Years Ended January 31,
----------------------------
1997 1998 1999
-------- -------- --------
<S> <C> <C> <C>
Current:
Federal.................................... $564,953 $511,324 $206,747
State...................................... 173,284 88,092 8,687
Foreign.................................... -- 24,000 28,000
-------- -------- --------
738,237 623,416 243,434
-------- -------- --------
Deferred:
Federal.................................... (68,474) (210,093) (106,518)
State...................................... (21,763) (47,323) (22,916)
-------- -------- --------
(90,237) (257,416) (129,434)
-------- -------- --------
$648,000 $366,000 $114,000
======== ======== ========
</TABLE>
36
<PAGE>
ASTRO-MED, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
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,
----------------------------
1997 1998 1999
-------- -------- --------
<S> <C> <C> <C>
Income Tax Provision at Statutory Rate...... $998,249 $478,494 $207,269
State Taxes, Net of Federal Income Tax
Benefits................................... 114,367 26,862 (9,391)
Nontaxable Interest Income.................. (38,420) (39,100) (34,083)
Amortization of Intangibles................. (57,683) (57,683) (61,669)
Utilization of Net Operating Loss
Carryforward............................... (117,300) (117,580) (117,580)
Other, Net.................................. (251,213) 75,007 129,454
-------- -------- --------
$648,000 $366,000 $114,000
======== ======== ========
</TABLE>
Other, Net in fiscal 1997 includes the reversal of tax reserves no longer
required.
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,
--------------------
1998 1999
--------- ---------
<S> <C> <C>
Deferred Tax Assets:
Reserves and Accruals Not Yet Deducted for Tax
Purposes........................................... $ 949,282 $ 981,154
Unrealized Foreign Currency Losses.................. 133,345 111,130
Net Operating Loss Carryforwards.................... 389,981 141,578
Other............................................... 64,363 349,902
Valuation Allowance................................. (389,981) (141,578)
--------- ---------
1,146,990 1,442,186
Deferred Tax Liabilities:
Accumulated Tax Depreciation in Excess of Book
Depreciation....................................... 747,560 667,676
Other............................................... 73,529 12,183
--------- ---------
821,089 679,859
--------- ---------
Net Deferred Tax Assets............................... $ 325,901 $ 762,327
--------- ---------
</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 $70,000 domestic and $302,000 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.
37
<PAGE>
ASTRO-MED, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
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,
---------------------
1998 1999
---------- ----------
<S> <C> <C>
Real Estate....................................... $4,477,966 $4,477,966
Machinery and Equipment........................... 481,484 481,484
---------- ----------
4,959,450 4,959,450
Less: Accumulated Amortization.................... 1,802,149 2,073,867
---------- ----------
$3,157,301 $2,885,583
---------- ----------
</TABLE>
Minimum lease payments under noncancellable leases at January 31, 1999, were
as follows:
<TABLE>
<CAPTION>
Year Ending Capital Operating
January 31, Lease Leases
----------- ------- ---------
<S> <C> <C>
2000................................................... $221,326 $245,768
2001................................................... 17,064 143,924
2002................................................... -- 111,298
2003................................................... -- 69,299
2004................................................... -- 30,428
2005 and Thereafter.................................... -- 28,598
-------- --------
Net Minimum Lease Payments............................. 238,390 $629,315
-------- --------
Less Amount Representing Interest...................... 10,392
--------
Current Value of Net Minimum Lease Payments............ $227,998
--------
</TABLE>
Note 8--Operations, Geographical Information, and Product Information
The Company's operations consist of the design, development, manufacture and
sale of specialty data recorder and acquisition systems, label printing and
applicator systems, neurophysiological instrumentation systems, and consumable
printer supplies. The Company organizes and manages its business as a
portfolio of products and services designed around a common theme of data
acquisition and information output. The Company's operations are aggregated
into a single reporting segment based on similarities in the nature of its
products and services, the products' economic characteristics, production
processes, and methods of distribution. Business is conducted primarily in the
United States and through foreign affiliates in Canada and Europe.
Substantially all manufacturing activities are conducted in the United States.
Sales and service activities outside the United States are conducted
primarily through wholly-owned entities and, to a lesser extent, through
authorized distributors and 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
1997, 1998, and 1999 is set forth below.
38
<PAGE>
ASTRO-MED, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
<TABLE>
<CAPTION>
Fiscal 1997 Fiscal 1998 Fiscal 1999
----------- ----------- -----------
<S> <C> <C> <C>
Geographical Information
Revenues:
United States........................ $41,181,263 $41,332,031 $38,673,567
Foreign Branches..................... 7,397,560 6,630,287 7,689,047
Transfers among geographical areas... (4,403,690) (4,214,778) (4,801,114)
----------- ----------- -----------
$44,175,133 $43,747,540 $41,561,500
=========== =========== ===========
Long-lived Assets:
United States........................ $ 7,533,080 $ 7,415,100 $ 6,787,325
Foreign Branches..................... 527,740 485,641 442,350
----------- ----------- -----------
$ 8,060,820 $ 7,900,741 $ 7,229,675
=========== =========== ===========
Export Revenues Included in United
States Revenues Above:
Central and South America............ $ 375,000 $ 800,000 $ 1,010,000
Asia................................. 2,540,000 1,494,000 904,000
Other Europe......................... 550,000 617,000 729,000
Australia and New Zealand............ 448,000 310,000 437,000
Other................................ 530,000 291,000 255,000
----------- ----------- -----------
$ 4,443,000 $ 3,512,000 $ 3,335,000
=========== =========== ===========
Product Information
Revenues:
Test & Measurement................... $24,093,000 $21,653,000 $15,854,000
QuickLabel Systems................... 10,656,000 12,521,000 15,238,000
Grass Instruments.................... 9,426,000 9,574,000 10,470,000
----------- ----------- -----------
$44,175,000 $43,748,000 $41,562,000
=========== =========== ===========
</TABLE>
No single customer accounted for 10% of net sales in fiscal 1997, 1998, or
1999.
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.
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 $185,000 for fiscal 1997, $227,400 for fiscal
1998, and $230,000 for fiscal 1999.
39
<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,
1997........................ 157,000 2,152 (15,848) 175,000
1998........................ 175,000 38,585 37,797 175,788
1999........................ 175,788 75,815 39,266 212,337
</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.
40
