<PAGE>
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(Mark One)
X QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
- -- EXCHANGE ACT OF 1934
For the quarterly period ended May 1, 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)
RHODE ISLAND 05-0318215
- --------------------------------------------------------------------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
600 EAST GREENWICH AVENUE, WEST WARWICK, RHODE ISLAND 02893
- --------------------------------------------------------------------------------
(Address of principal executive offices) (Zip Code)
(401) 828-4000
- --------------------------------------------------------------------------------
(Registrant's telephone number, including area code)
------------------------
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 .
--- ---
Indicate the number of shares outstanding of each of the issuer's
classes of common stock, as of the latest practicable date.
Common Stock, $.05 Par Value - 4,420,789 shares (excluding treasury
shares) as of June 4, 1999
-1-
<PAGE>
ASTRO-MED, INC.
INDEX
<TABLE>
<CAPTION>
Page No.
--------
<S> <C>
Part I. Financial Information:
Consolidated Balance Sheets -
January 31, 1999 and May 1, 1999. ........................ 3
Consolidated Statements of Operations -
Three Months Ended May 2, 1998 and May 1, 1999............ 4
Consolidated Statements of Cash Flows -
Three Months Ended May 2, 1998 and May 1, 1999............ 5
Notes to Consolidated Financial Statements -
May 1, 1999............................................... 6,7
Management's Discussion and Analysis of Financial
Condition and Results of Operations....................... 8-11
Part II. Other Information................................... 12
</TABLE>
-2-
<PAGE>
Part I. FINANCIAL INFORMATION
ASTRO-MED, INC.
UNAUDITED CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
January 31, May 1,
ASSETS 1999 1999
---- ----
(Unaudited)
<S> <C> <C>
CURRENT ASSETS
Cash and Cash Equivalents................... $ 4,946,289 $ 3,673,244
Securities Available for Sale............... 7,907,142 7,924,443
Accounts Receivable, Net.................... 7,708,806 6,989,929
Inventories................................. 10,217,020 10,730,367
Prepaid Expenses and Other Current Assets... 1,986,336 2,085,761
----------- -----------
Total Current Assets................... 32,765,593 31,403,744
PROPERTY, PLANT AND EQUIPMENT 18,678,055 19,000,166
Less Accumulated Depreciation............... (11,448,380) (11,817,244)
----------- -----------
7,229,675 7,182,922
OTHER ASSETS
Excess of Cost Over Net Assets Acquired..... 903,784 894,709
Amounts Due from Officers................... 480,314 480,314
Other....................................... 374,866 444,913
----------- -----------
1,758,964 1,819,936
----------- -----------
$41,754,232 $40,406,602
----------- -----------
----------- -----------
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts Payable............................ $ 3,427,766 $ 3,450,349
Accrued Compensation........................ 1,446,770 1,207,998
Accrued Expenses............................ 1,110,484 905,715
Income Taxes................................ 1,062,892 1,018,737
Current Maturities of Long-Term Debt........ 211,021 169,792
----------- -----------
Total Current Liabilities.............. 7,258,933 6,752,591
LONG-TERM DEBT, Less Current Maturities....... 16,977 --
EXCESS OF NET ASSETS ACQUIRED OVER COST....... 108,839 81,283
DEFERRED INCOME TAXES......................... 667,676 562,029
SHAREHOLDERS' EQUITY
Preferred Stock, $10 Par Value,
Authorized 100,000 Shares, None Issued....
Common Stock, $.05 Par Value, Authorized
13,000,000 Shares, Issued 5,143,520
and 5,144,360 Shares, Respectively........ 257,176 257,218
Additional Paid-In Capital.................. 5,641,317 5,645,588
Retained Earnings........................... 32,837,880 32,386,851
Treasury Stock, at Cost (662,295 Shares
and 668,939 Shares, Respectively).......... (4,889,343) (4,985,655)
Accumulated Other Comprehensive Income (Loss) (145,223) (293,303)
----------- -----------
33,701,807 33,010,699
----------- -----------
$41,754,232 $40,406,602
----------- -----------
----------- -----------
</TABLE>
-3-
<PAGE>
ASTRO-MED, INC.
UNAUDITED CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
Three Months Ended
------------------
May 2, May 1,
1998 1999
---- ----
<S> <C> <C>
Net Sales.................................... $10,056,440 $10,377,257
Cost of Sales................................ 6,180,833 6,322,510
----------- -----------
Gross Profit................................. 3,875,607 4,054,747
Costs and Expenses:
Selling, General and Administrative........ 3,507,636 3,688,050
Research and Development................... 757,964 881,009
----------- -----------
4,265,600 4,569,059
----------- -----------
Operating Loss............................... (389,992) (514,312)
Other Income (Expense):
Investment Income.......................... 208,804 171,489
Interest Expense........................... (6,143) (4,092)
Other, Net................................. 46,523 (14,614)
----------- -----------
249,184 152,783
----------- -----------
Loss before Income Taxes..................... (140,808) (361,529)
Benefit for Income Taxes..................... (37,000) (91,000)
----------- -----------
Net Loss..................................... $ (103,808) $ (270,529)
----------- -----------
----------- -----------
Loss Per Common Share-basic.................. $(.02) $(.06)
----------- -----------
----------- -----------
Loss Per Common Share-diluted................ $(.02) $(.06)
----------- -----------
----------- -----------
Weighted Average Number of Common and Common
Equivalent Shares Outstanding-basic........ 4,780,634 4,474,873
----------- -----------
----------- -----------
Weighted Average Number of Common and Common
Equivalent Shares Oustanding-diluted....... 4,780,634 4,474,873
----------- -----------
----------- -----------
Dividends Declared Per Common Share.......... $.04 $.04
----------- -----------
----------- -----------
</TABLE>
-4-
<PAGE>
ASTRO-MED, INC.
UNAUDITED CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
Three Months Ended
------------------
May 2, May 1,
1998 1999
---- ----
<S> <C> <C>
Cash Flows from Operating Activities:
Net Loss............. ...................... $ (103,808) $ (270,529)
Adjustments to Reconcile Net Loss to
Net Cash Provided by Operating Activities:
Depreciation and Amortization.......... 312,273 350,384
Other.................................. 35,634 (159,576)
Changes in Assets and Liabilities:
Accounts Receivable.................... 430,329 718,876
Inventories............................ (376,027) (513,347)
Other.................................. (228,723) (169,473)
Accounts Payable and Accrued Expenses.. 334,341 (420,958)
Income Taxes........................... (45,977) (44,155)
---------- ----------
Total Adjustments.................... 461,850 (238,249)
Net Cash Provided (Used) by
Operating Activities................... 358,042 (508,778)
Cash Flows from Investing Activities:
Proceeds from Sales of Securities
Available for Sale....................... 1,417,000 1,891,670
Purchases of Securities Available
for Sale................................. (1,462,917) (1,969,034)
Additions to Property, Plant and Equipment. (184,487) (356,200)
---------- ----------
Net Cash Used by
Investing Activities................... (230,404) (433,564)
Cash Flows from Financing Activities:
Principle Payments on Capital Leases....... (56,205) (58,207)
Proceeds from Common Shares Issued
Under Employee Benefit Plans............. 5,467 4,316
Purchases of Treasury Stock................ (39,961) (96,313)
Dividends Paid............................. (191,720) (180,499)
---------- ----------
Net Cash Used by Financing Activities.... (282,419) (330,703)
Net Decrease in Cash and Cash Equivalents...... (154,781) (1,273,045)
Cash and Cash Equivalents, Beginning of Period. 5,659,552 4,946,289
---------- ----------
Cash and Cash Equivalents, End of Period....... $5,504,771 $3,673,244
---------- ----------
---------- ----------
Supplemental Disclosures of Cash Flow
Information:
Cash Paid During the Period for:
Interest............................... $ 8,956 $ 3,155
Income Taxes........................... $ 5,675 $ 45,830
</TABLE>
-5-
<PAGE>
ASTRO-MED, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
May 1, 1999
Note 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(a) The accompanying financial statements have been prepared by the
Company, without audit, pursuant to the rules and regulations of the Securities
and Exchange Commission, and reflect all adjustments which, in the opinion of
management, are necessary for a fair statement of the results of the interim
periods presented. These financial statements do not include all disclosures
associated with annual financial statements and, accordingly, should be read in
conjunction with footnotes contained in the Company's annual report on Form 10-K
for the year ended January 31, 1999.
(b) Loss per common share has 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 loss per share is based on the
weighted average number of shares outstanding during the period. Net loss per
share assuming dilution is based on the weighted average number of shares and,
if dilutive, common equivalent shares for stock options outstanding during the
period.
<TABLE>
<CAPTION>
Three Months Ended
------------------
May 2, May 1,
1998 1999
---- ----
<S> <C> <C>
Weighted Average Common Shares
Outstanding-basic and dilutive.......... 4,780,634 4,474,873
--------- ---------
--------- ---------
Diluted Effect of Options Outstanding
(not considered because anti-dilutive).. 38,404 15,178
--------- ---------
--------- ---------
</TABLE>
Note 2 - CHANGE IN ACCOUNTING PRINCIPLES
Effective February 1, 1998, the Company adopted Statement of Financial
Accounting Standards No. 130, "Reporting Comprehensive Income". This statement
requires presentation of the components of comprehensive income, including the
changes in equity from non-owner sources such as unrealized gains (losses) on
securities and foreign currency translation adjustments. The Company's total
comprehensive income is as follows.
-6-
<PAGE>
Note 2 - CHANGE IN ACCOUNTING PRINCIPLES (continued)
<TABLE>
<CAPTION>
Three Months Ended
------------------
May 2, May 1,
1998 1999
---- ----
<S> <C> <C>
Comprehensive Income:
Net Loss................................... $(103,808) $(270,529)
--------- ---------
Other Comprehensive Income (Loss):
Foreign currency translation adjustments. 58,408 (88,018)
Unrealized gain(loss) on securities:
Unrealized holding gain (loss)
arising during the period........ (22,795) (62,210)
Less: reclassification adjustment
for losses included in net income -- 2,148
--------- ---------
Other Comprehensive Income (Loss): ........ 35,613 (148,080)
--------- ---------
Comprehensive Income (Loss) ............... (68,195) (418,609)
--------- ---------
--------- ---------
</TABLE>
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, May 1,
1999 1999
---- ----
<S> <C> <C>
Materials and Supplies... $ 5,356,973 $ 5,763,676
Work-In-Process.......... 721,448 971,000
Finished Goods........... 4,138,599 3,995,691
----------- -----------
$10,217,020 $10,730,367
----------- -----------
----------- -----------
</TABLE>
-7-
<PAGE>
ASTRO-MED, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS:
Net Sales in the first quarter were $10,377,000, an increase of 3% over
the prior year's first quarter sales of $10,056,000. Export sales were up by 42%
over the prior year's first quarter, offsetting a 7% decline in domestic channel
sales. The shortfall in the domestic channels was concentrated in the Test &
Measurement product line, which was down 24%, whereas growth in the QuickLabel
Systems (QLS) and Grass product lines continued across both the domestic and
export channels. QLS sales were $4,115,000, increasing by 24%, and Grass sales
were $2,940,000, increasing by 26% over last year's first quarter results.
Gross Profit dollars in the first quarter were $4,055,000, which
represents a 39% gross profit margin. The first quarter gross profit margin
matched last year's first quarter margin, despite the continued shift in product
mix from T&M to QLS and Grass.
Operating expenses were $4,569,000 in the first quarter, an increase of
7% over the prior year's first quarter. This increase was due to additions in
sales personnel and sales incentives, personnel additions in research and
development, and increased information technology expenditures.
Other income in the first quarter was $153,000 as compared to $249,000
in the prior year's first quarter, with the decrease due to unfavorable foreign
currency translation adjustments and lower interest and dividend income.
Net loss after taxes in the quarter was $271,000, equal to a loss of 6
cents per share. This compares to a net loss of $104,000, equal to a loss of 2
cents per share in the prior year's first quarter.
Due to the continuing softness in the Company's traditional Test &
Measurement markets, the Company has taken steps to lower its break-even point
through a reduction in personnel, which took place at the beginning of the
second quarter. The Company will record severance pay of approximately $200,000
during the second quarter, to cover this reduction in force. Going forward, the
reduction in force will lower the Company's break-even level by approximately $2
million on an annualized basis.
FINANCIAL CONDITION:
Total Assets as of May 1, 1999 were $40,407,000, down $1,347,000 or 3%
from fiscal 1999 year end.
Cash and marketable securities declined by $1,256,000 from fiscal 1999
year end, primarily due to the net loss, increased working capital, capital
expenditures, and the Company's continuing common stock repurchase program.
Accounts receivable dollars declined by 9% to $6,990,000 at quarter end, which
reflects 57 days sales outstanding.
-8-
<PAGE>
Inventories increased by 5% to $10,730,000. Overall, working capital
excluding cash and marketable securities increased by 3% to $13,053,000, and the
current ratio remains strong at 5 to 1.
Capital expenditures during the first quarter were $356,000 and include
the purchase of production and test equipment, hardware and software technology
investments, and building improvements. Depreciation expense for the quarter was
$369,000.
The Company purchased 18,500 shares of its common stock during the
first quarter, under its Board of Directors approved share repurchase program,
for $96,000. Under the Board of Directors' authorization, the Company has
approval to repurchase another 181,500 shares of the Company's common stock.
Cash dividends of 4 cents per share were paid to shareholders of record
during the first quarter. Shareholders' equity was $33,010,000 at the end of the
quarter, reflecting a book value of $7.38 per share.
YEAR 2000 READINESS DISCLOSURE
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 WindowsTM 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 WindowsTM
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 WindowsTM 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
-9-
<PAGE>
been identified and prioritized. Assessment and remediation are proceeding in
tandem, and the Company currently plans to have all non-compliant systems
repaired or replaced and tested by the fall of 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 50%
complete at May 1, 1999, and the remaining conversion and testing projects are
on schedule to be completed by the fall of 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 development 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 $723,000, which includes hardware and software upgrades that were
previously planned to obtain greater capacity and functionality. The total
amount expended through May 1, 1999 was $640,000, of which approximately
$553,000 related to Information Technology Infrastructure, approximately $82,000
related to Applications Software and Non-IT projects, and approximately $5,000
related to the Third-party project. The future cost of completing the Year 2000
readiness program is estimated at approximately $83,000, including $81,000 to
complete the Applications Software and Non-IT phase, and $2,000 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
-10-
<PAGE>
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.
SAFE HARBOR STATEMENT
This document contains forward-looking statements based on current
expectations that involve a number of risks and uncertainties. The factors that
could cause actual results to differ materially include the following: general
economic conditions and growth rates in the data acquisition, digital color
printing, and neurophysiology markets, including but not limited to the
electronic, printing, and medical markets; competitive factors and pricing
pressures; changes in product mix; changes in the seasonality of demand
patterns; the timely development and acceptance of new products; inventory risks
due to shifts in market demand; component constraints and shortages; risk of
non-payment of accounts receivable; ramp up and expansion of manufacturing
capacity; all risks associated with the Year 2000 issue including, but not
limited to, the impact on the Company's business due to internal systems or
systems of suppliers and other third parties adversely affected by Year 2000
problems as previously discussed above; risks associated with the Euro
conversion; and the risks described from time to time in Astro-Med's reports
filed with the Securities and Exchange Commission.
-11-
<PAGE>
PART II. OTHER INFORMATION
Item 4. Results of Votes of Security Holders
An Annual Meeting of Shareholders of the registrant was held May 18,
1999. The shareholders were asked to elect a Board of Directors to serve until
the next Annual Meeting of Shareholders or until their successors are elected
and qualified.
In an uncontested election, nominees for directors were elected by the
following votes:
<TABLE>
<CAPTION>
Name of Nominee Votes Votes
for Director for Withheld
--------------- ---- --------
<S> <C> <C>
Albert W. Ondis 3,907,547 15,194
Everett V. Pizzuti 3,907,697 15,044
Jacques V. Hopkins 3,905,597 17,144
Hermann Viets 3,905,597 17,144
Neil K. Robertson 3,905,597 15,144
</TABLE>
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits:
None.
(b) Reports on Form 8-K:
No reports on Form 8-K have been filed during the quarter for which this
report is filed.
SIGNATURES
Pursuant to the requirements 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)
Date: June 8, 1999 By ____________________________
A. W. Ondis, Chairman
(Principal Executive Officer)
Date: June 8, 1999 By ____________________________
Joseph P. O'Connell, Vice
President and Treasurer
(Principal Financial Officer)
-12-
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> JAN-31-2000
<PERIOD-START> FEB-01-1999
<PERIOD-END> MAY-01-1999
<CASH> 3,673,244
<SECURITIES> 7,924,443
<RECEIVABLES> 6,989,929
<ALLOWANCES> 0
<INVENTORY> 10,730,367
<CURRENT-ASSETS> 31,403,744
<PP&E> 19,000,166
<DEPRECIATION> 11,817,244
<TOTAL-ASSETS> 40,406,602
<CURRENT-LIABILITIES> 6,752,591
<BONDS> 0
0
0
<COMMON> 257,218
<OTHER-SE> 32,753,481
<TOTAL-LIABILITY-AND-EQUITY> 40,406,602
<SALES> 10,377,257
<TOTAL-REVENUES> 10,377,257
<CGS> 6,322,510
<TOTAL-COSTS> 6,322,510
<OTHER-EXPENSES> 4,569,059
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 4,092
<INCOME-PRETAX> (361,529)
<INCOME-TAX> (91,000)
<INCOME-CONTINUING> (270,529)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (270,529)
<EPS-BASIC> (.06)
<EPS-DILUTED> (.06)
</TABLE>
