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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM 10-K
(MARK ONE)
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<C> <S>
/X/ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934]
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FOR THE FISCAL YEAR ENDED JANUARY 31, 2000
OR
<TABLE>
<C> <S>
/ / TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934]
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FOR THE TRANSITION PERIOD FROM ______________ TO ______________
COMMISSION FILE NUMBER 0-13200
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ASTRO-MED, INC.
(Exact name of registrant as specified in its charter)
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<S> <C>
RHODE ISLAND 05-0318215
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
600 EAST GREENWICH AVENUE, 02893
WEST WARWICK, RHODE ISLAND (zip code)
(Address of principal executive
offices)
</TABLE>
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: (401) 828-4000
SECURITIES REGISTERED PURSUANT TO SECTION 12(B) OF THE ACT:
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<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 24, 2000.
Common Stock, $.05 Par Value: $21,952,088
Indicate the number of shares outstanding (excluding treasury shares)
of each of the issuer's classes of common stock as of March 24, 2000.
Common Stock, $.05 Par Value: 4,418,984 shares
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the Company's definitive proxy statement for the 2000 annual
meeting of shareholders are incorporated by reference into Part III.
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ASTRO-MED, INC.
FORM 10-K ANNUAL REPORT
TABLE OF CONTENTS
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PAGE
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PART I
Item 1. Business.................................................... 3
Item 2. Properties.................................................. 8
Item 3. Legal Proceedings........................................... 8
Item 4. Submission of Matters to a Vote of Security Holders......... 8
PART II
Item 5. Market for the Registrant's Common Stock and Related 9
Stockholder Matters.......................................
Item 6. Selected Financial Data..................................... 9
Item 7. Management's Discussion and Analysis of Financial Condition 10
and Results of Operations.................................
Item 8. Financial Statements and Supplementary Data................. 14
Item 9. Changes in and Disagreements with Accountants on Accounting 14
and Financial Disclosure..................................
PART III
Item 10. Directors and Executive Officers of the Registrant.......... 15
Item 11. Executive Compensation...................................... 16
Item 12. Security Ownership of Certain Beneficial Owners and 16
Management................................................
Item 13. Certain Relationships and Related Transactions.............. 16
PART IV
Item 14. Exhibits, Financial Statement Schedules and Reports on Form 16
8-K.......................................................
</TABLE>
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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 Company is strategically organized into three
product groups, Test & Measurement, QuickLabel-Registered Trademark- Systems and
Grass-Telefactor. The Company will describe the results of operations during the
twelve months ending January 31, 2000 (herein referred to as "fiscal 2000").
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 through three distinct
product groups that are tied together by a common thread--the ability to acquire
information, store it 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-Registered Trademark- Systems (QLS), includes
printers and media that create product and packaging labels and tags in one or
many colors from a computer file; this product group also includes print and
apply systems as well as applicator products. The Grass-Telefactor Group takes
signals that reflect the physiological status of living creatures--from crayfish
to man--and records them electronically for digital or analog access.
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TEST AND MEASUREMENT(T&M) PRODUCTS
Test & Measurement systems continues to be a leading supplier of data
recording equipment for the aerospace, automotive, metal mill, power and
telecommunications industries. Astro-Med recorders and data acquisition systems
are used worldwide for a variety of recording, monitoring, and troubleshooting
applications. In fiscal year 2000, two important products were introduced, the
Dash 16u Data Acquisition Recorder and the Everest-TM-Telemetry
Recorder-Workstation.
The Dash 16u sixteen-channel recorder augments the Company's highly
successful line of portable data acquisition recorders, which includes the Dash
2, Dash 4u, Dash 8n and Dash 8u recorders. With its high channel count and wide
bandwidth, the Dash 16u is ideally suited for portable troubleshooting and
service applications. Test & Measurement systems further strengthened its market
position by including powerful Windows-TM--based AstroSET setup software and
AstroVIEW-TM- data review software with all of these portable recorders. This
software--coupled with the recorder's built-in Ethernet interface and Zip
disk--gives the user the ability to easily interface with their PC for a
complete data acquisition solution.
The Everest-TM-, a revolutionary telemetry recorder ideally suited for the
aerospace industry, solidified Test & Measurement Systems' leadership position
in this important market segment. With a high resolution display, touch-panel
controls, Ethernet interface and digital filtering, the Everest utilizes leading
edge technology to provide a complete solution for demanding aerospace
applications. Designed especially for telemetry recording, its advanced feature
set makes it suitable for applications in other industries.
QUICKLABEL-REGISTERED TRADEMARK- SYSTEMS PRODUCTS (QLS)
The Company's QuickLabel Systems product line is composed of an array of
high-technology digital label printers, automatic labelers, print and apply
systems, labeling software and consumables to complete these system solutions.
Innovative QuickLabel Systems products continue to change the way companies do
business by providing just-in-time, in-plant label production capabilities and
labeling automation through Astro-Med's advanced digital thermal transfer
printing technologies.
QLS DIGITAL COLOR LABEL PRINTERS
QuickLabel Systems digital color labels printers are designed to print
multiple colors, text and barcodes in a single pass on labels, tags and tickets
of all kinds. Using Astro-Med's proprietary MicroCell-TM- halftoning algorithm,
these printers create near lithographic quality labels that can be generated on
demand and printed directly from a customer's PC, Macintosh, mainframe or AS/400
midrange computing platform.
Seven models complete the line of digital color label printers: 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. 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 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, and even offers the option of duplex printing. The QLS
4100, with its volume capacity and automatic ribbon control system, can save
customers thousands of dollars a year in ribbon costs.
During fiscal 2000, the Company introduced a line of new QLS Apparel
Printing Systems which incorporate QLS-2000 and QLS-3000 series printers
modified and optimized for printing apparel care labels. Successful target
marketing of the QuickLabel Systems printers to specific niche applications such
as this expanded in fiscal 2000 to include the printing of Tyvek pouches used in
the packaging of surgical instruments, the labeling of tires in an automatic
print and apply system, and the private labeling of medical supplies and
pharmaceuticals.
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QLS MONOCHROME BARCODE LABEL PRINTERS
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 8 1/2 inch wide format
printer creates shipping labels and other large formats quickly and reliably.
QLS SOFTWARE
An important component of the Company's digital printing systems is the
software that produces the label formatting and the printing functionality
required for successful in-plant printing. In fiscal 2000, the Company
introduced a major new software program, Color QuickLabel-TM- 99 (CQL99),
allowing customers to tap the true power inherent to the QuickLabel Systems
printers. CQL99, a 32-bit Windows-Registered Trademark--based label creation and
printing suite, supports high-color imaging, MicroCell-TM- image halftoning,
full network printing, and multiple database compatibility. CQL99 software
further advances integration of the QuickLabel Systems printers within today's
high-technology production environments.
QLS LABEL APPLICATORS AND PRINT & APPLY SYSTEMS
To complement the QuickLabel Systems printers, the Company manufactures a
complete line of automatic labelers that can apply labels to all types of
packaging, from cartons to "clamshell" containers. In fiscal 2000, the Company
introduced a new high-speed roll-on label applicator, the AD-2800, built for
high-performance and reliability on production lines. Other applicator models
include the AD-2550, AD-2600 and AT-2650, which offer standard roll-on and
air-tamp labeling capabilities. The CPA-350, the Company's high-end print and
apply system, offers companies the ability to print a label on-demand and apply
it to a product as it passes on a conveyor. The CPA-350 can be configured with
air tamp, air blast, dual apply or corner wrap applicator heads to apply a label
to two sides of the same carton.
QLS CONSUMABLES: THERMAL TRANSFER RIBBON AND LABELS
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-TELEFACTOR PRODUCTS
The Grass-Telefactor Product Group offers a range of instrumentation and
supplies for clinical neurophysiology (EEG and epilepsy monitoring),
polysomnography (PSG), and biomedical research applications. Grass-Telefactor
enjoys a reputation built on decades of innovative technology, thoughtful design
and responsiveness. The products and services offered by Grass-Telefactor are
used worldwide by universities, medical centers and companies engaged in a
variety of clinical and research activities.
On the clinical side, Grass-Telefactor has chosen to focus on the dynamic
field of polysomnography (sleep disorders monitoring), as well as the many
applications of EEG (brain wave monitoring), including epilepsy diagnosis and
surgery, critical care and intraoperative neuromonitoring. In fiscal 2000, the
Company's clinical product line expanded to include long-term epilepsy
monitoring through the acquisition of Telefactor Corporation, and the combined
group now offers a one-source solution for EEG and PSG departments seeking
instrumentation, software or supplies. The clinical product line now includes
in-lab or in-hospital integrated systems for EEG, PSG and long term monitoring,
featuring networking, database and report generation capabilities in addition to
powerful data acquisition and analysis tools. The product line also includes
laptop-based systems for EEG or PSG, which expand the capabilities of hospitals
to offer services by packaging clinical instruments in a compact, portable
package. Ambulatory systems for EEG or PSG allow patients to be recorded in
out-of-lab settings, including their own homes. The group has also
5
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been active developing new products, and has released a new,
Windows-Registered Trademark--based product line including the Beehive-TM-
Millennium for long term monitoring, and Aurora-TM- digital EEG system, to
complement the Heritage PSG.
On the research side, Grass-Telefactor offers hardware and software for data
acquisition and analysis of signals in biomedical research. The research product
line builds on a strong foundation with world-renowned Grass amplifiers, such as
the 15RX modular, computer-controlled biomedical amplifier system. This year,
Grass-Telefactor released a research catalog, a powerful marketing tool, which
also serves as a comprehensive resource for researchers in the life sciences.
Rounding out the offerings from Grass-Telefactor, the Company offers a
complete line of clinical and research supplies, including stimulators,
transducers, electrodes and consumables. Traditionally strong in sales
year-to-year, the supplies and accessories product line now uses e-commerce to
reach an even wider market through the Grass-Telefactor Online Store,
(www.grass-telefactor.com) launched in 1999.
TECHNOLOGY
The core technologies of the Company relate to (1) acquiring data,
(2) conditioning the data, (3) displaying the data on hard copy, monitor, or
electronic storage media, and finally (4) analyzing the data. All three product
groups of the Company, (Test & Measurement, QuickLabel Systems, and Grass-
Telefactor), use these technologies.
These core technologies are constantly being developed to the level of
cutting edge performance and enable the Company to lead the competition with
innovative industry level products.
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 Test & Measurement Recorder Products. The Company has several
patents for its dual sided label printing and four color label printer. In
addition, the Company has two other patents pending on its multi-color printing
technology. In fiscal 2001, the Company received a patent on its "ribbon saving"
feature for its color and monochrome printers. 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 to the Company's specifications by
suppliers. 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 1998, 1999 and 2000, the Company
incurred costs of $2,820,292, $2,938,820 and $3,353,883 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 2001.
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
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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. In fiscal 2000, through the
acquisition of Telefactor Corporation, the Company added a field sales and
support office in Holland. 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.
In fiscal 2000, the Company's products were sold to approximately 5,500
customers.
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 the Company intends to continue to develop and
expand 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 1998, 1999 and 2000, net sales to customers in various geographic
areas outside the U.S.A., primarily in Canada and Western Europe, amounted to
$10,142,287, $11,024,047 and $12,493,070, 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 $170,000
a year for the Company's last five fiscal years.
As of March 24, 2000, the Company employed approximately 387 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.
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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.
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LOCATION APPROXIMATE SQUARE FOOTAGE PRINCIPAL USE
- -------- -------------------------- -------------
<S> <C> <C>
West Warwick, RI Corporate headquarters, research
116,000 and development, manufacturing
Braintree, MA 91,000 Manufacturing
Slough, England 1,700 Sales and service
</TABLE>
The Company also leases facilities in seven locations. The following
information pertains to each location:
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LOCATION APPROXIMATE SQUARE FOOTAGE PRINCIPAL USE
- -------- -------------------------- -------------
<S> <C> <C>
West Conshohocken, PA 16,000 Manufacturing, sales and service
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 1,131 Sales and service
Irvine, CA 980 Sales and service
</TABLE>
The Company believes its facilities are well maintained, in good operating
condition and generally adequate to meet its needs for the foreseeable future.
ITEM 3. LEGAL PROCEEDINGS
There are no pending or threatened legal proceedings against the Company
believed to be material to the financial position or results of operations of
the Company.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No matters were submitted to a vote of the Company's security holders,
through solicitation of proxies or otherwise, during the last quarter of the
period covered by this report.
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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.
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<CAPTION>
DIVIDENDS
PER
YEARS ENDED JANUARY 31, HIGH LOW SHARE
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<S> <C> <C> <C>
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
2000
First Quarter........................................ 7 4 7/8 .04
Second Quarter....................................... 7 5 1/2 .04
Third Quarter........................................ 6 3/8 5 1/2 .04
Fourth Quarter....................................... 6 7/16 5 1/8 .04
</TABLE>
The Company had approximately 414 shareholders of record on March 24, 2000,
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, annual reports and press releases as
quickly as possible. Visit our Investor Relations website at (WWW.ASTROMED.COM).
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)
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1996 1997 1998 1999 2000
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Results of Operations:
Net Sales.......................................... $43,941 $44,175 $43,748 $41,562 $45,569
Net Income......................................... 1,328 2,288 1,041 496 936
Earnings per Common Share--basic................... .26 .46 .21 .11 .21
Earnings per Common Share--diluted................. .26 .46 .21 .11 .21
Cash Dividends per Common Share.................... .12 .12 .16 .16 .16
Financial Condition:
Working Capital.................................... $26,420 $28,810 $27,111 $25,507 $22,337
Total Assets....................................... 42,303 43,321 42,814 41,754 45,385
Long-Term Debt, less Current Maturities............ 175 258 228 17 72
</TABLE>
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ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
RESULTS OF OPERATIONS
FISCAL 2000 COMPARED TO FISCAL 1999
The following table provides comparison 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, 1998 1999 2000
------------------------------ COMPARED COMPARED COMPARED
1998 1999 2000 TO 1997 TO 1998 TO 1999
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<S> <C> <C> <C> <C> <C> <C>
Net Sales..................................... 100% 100% 100% (1)% (5)% 10%
Gross Profit.................................. 38 40 41 (3) 0 14
Selling, General and Administrative........... 30 33 32 5 7 6
Research and Development...................... 6 7 7 13 4 14
</TABLE>
The Company realized record sales in fiscal 2000 as revenues increased
$4.0 million to $45.6 million, a 10% increment over fiscal 1999 sales of
$41.6 million. The sales increase is due to growth in product demand in the
Company's domestic and export channels as well as sales from the acquisition of
the Telefactor Corporation, a manufacturer of neurophysiologic instrumentation.
The acquisition was made in the 4th quarter of fiscal 2000 with the intention of
combining the life sciences products of the Company's Grass Instrument group
together with Telefactor's neurophysiologic products in order to establish a
strategic product group namely, "Grass-Telefactor". This new group will offer a
broad range of high performance products to researchers and clinical
practitioners in the life sciences markets. Telefactor sales included in the
fiscal 2000 annual results were $1.2 million and represent less than 3% of the
Company's annual sales revenues. For the fiscal year end 11/30/99, Telefactor
unaudited sales were approximately $5.7 million.
Product sales in the domestic channels represented 6% of the Company's
overall sales increment as demand for QuickLabel Systems printer systems grew
11% from last year, and Grass-Telefactor product lines contributed 23% in sales
growth from the prior year. Sales of Grass Instruments products alone were
responsible for 14% of the year over year increase in the Grass-Telefactor
product group. Although the domestic 4th quarter Test & Measurement product
sales were up from the previous year, demand for Test and Measurement products
were down 1% for the year. Notwithstanding this year's overall results in
Test & Measurement sales in the domestic markets, the rate of decline has abated
sharply from the double-digit profile of the past two fiscal years. The
Company's strategy to reverse this trend will focus on introducing multiple new
products in fiscal 2001, including the Everest-TM-, the latest innovation in
interactive tough screen chart recording.
Sales through export channels account for 27% of the Company's annual sales
and represent the remaining 4% of the Company's sales growth in fiscal 2000.
Telefactor export sales account for 1% of that annual growth rate. Growth in
export sales is tied to increased demand for Test & Measurement products and
QuickLabel Systems products in Asia, Central and South America, and the Middle
East, whereas Grass Instrument products experienced sales increases of 15%, as
demand in the Canadian and European markets was especially strong. The Company's
growth in export sales was especially notable in view of the strength of the US
dollar during fiscal 2000. In the European, Canadian and Asian markets, unit
growth was achieved in all the product groups in spite of the adverse foreign
currency exchange environment.
The QuickLabel Systems product group continued its growth profile in fiscal
2000. Sales increased 10% from fiscal 1999. The Company continues to target
specific markets to distribute its wide range of color printer systems,
monochrome printer systems, and applicator and print & apply systems. These
markets include medical device manufacturers, tire manufacturers, financial
services companies, private label manufacturers and packaging industries. During
fiscal 2000 the Company enhanced its product
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offering by introducing CQL99, a Windows(-Registered Trademark-) based software
product that facilitates label creation, multiple image printing and is fully
networked and data base compatible. The QuickLabel Systems also added a new
product to its automatic label applicator line by introducing AD-2800, a high
volume, low price label applicator with roller and brush mechanism for
multi-sided and multi-surfaces applications.
The Company strengthened its position in the life sciences marketplace by
acquiring the Telefactor Corporation. Telefactor has long been a leading
competitor in neurophysiological instrumentation. They are known worldwide as
the gold standard for video/EEG systems used for diagnostic monitoring and
analysis of epilepsy. The synergy created by combining the Grass Instrument
products together with the Telefactor products will provide greater access to
markets in clinical instruments for EEG, sleep monitoring, epilepsy monitoring,
neurophysiological research instruments and consumables, while enabling the
Company to expand in the high growth areas of ambulatory monitoring and ICU/OR
monitoring. Worldwide sales of the Grass-Telefactor products grew 25% during
fiscal 2000 with the Grass Instruments products representing 14% of that growth
rate. The Grass Heritage(-Registered Trademark-) EEG & PSG products lines drove
that growth, increasing 38% from the prior year's sales.
Gross Profit dollars increased 14% to $18.9 million in fiscal 2000 from
$16.6 million in fiscal 1999. The Company's gross profit margin improved to
41.4% from 39.9%. This year's yield is due to a healthy product group mix and
improved margins in the QuickLabel Systems and Grass-Telefactor product groups
respectively.
Selling, general and administrative spending rose 6% to $14.7 million from
$13.9 million. Personnel additions in Telefactor sales, marketing and
administrative functions represents 2% of the rate increase. The balance of the
incremental spending was confined to personnel and outside professional service
expenses. Selling, general and administrative expenses as a percent of sales
revenues declined to 32% from last year's 33%.
Research & development expenses rose 14% to $3.4 million in fiscal 2000 from
$2.9 million in fiscal 1999. The spending increment is traceable to the
additions of engineering personnel from Telefactor as well as salaries and
product development related research projects.
Interest and dividend income declined by 15% in fiscal 2000 to $666,000 from
$786,000 in fiscal 1999. The decrease is due to lower investment levels as cash
has been used for the Telefactor acquisition as well as the Company's stock
buyback program. Interest expense at $18,000 was lower in fiscal 2000 by 18%
from the prior year's $22,000. The reduction reflects the declining balance of
the Company's capital lease obligation.
Other expense for fiscal 2000 was $190,000, an adverse change from fiscal
1999's other income of $113,000. The change is traceable to unfavorable
fluctuations in the foreign currency exchange rate in our European branches
stemming primarily from the impact of a strong dollar.
Income before taxes rose $639,000 to $1,249,000 in fiscal year 2000 from the
previous fiscal year's income before taxes of $610,000. The Company improved its
return on sales to 2.7% from the prior year's return of 1.5%. The effective tax
rate for fiscal year 2000 is 25% as compared to the fiscal 1999 rate of 19%.
Changes in the effective income tax rate from year to year are explained in
Note 6 of Notes to Consolidated Financial Statements included elsewhere herein.
Net Income rose to $937,000 in fiscal 2000, an 89% improvement over fiscal
1999 net income of $496,000. Earnings per share on a diluted share basis was
21 CENTS in fiscal 2000 as compared with 11 CENTS per diluted share in fiscal
1999.
FINANCIAL CONDITION:
Working Capital balances at January 31, 2000 were $22.3 million, a 13%
reduction from the $25.5 million balance at January 31, 1999. The composition of
fiscal 2000 year end working capital balance
11
<PAGE>
include cash and marketable securities at $11.2 million as compared to
$12.9 million of cash and marketable securities in the previous year end working
capital balance. The lower cash position is primarily an outgrowth of funding
requirements necessitated by the Telefactor acquisition. Accounts receivable
balances increased 20% to $9.3 million at fiscal 2000 year end from
$7.7 million at the end of fiscal 1999. The increase is due to the addition of
Telefactor's accounts receivable balances as the Company's resident accounts
receivable balance remained virtually unchanged year to year. The Company's cash
collection cycle improved to 54 days sales outstanding from the prior year's
58 days.
Inventories rose 13% to $11.5 million at January 31, 2000 from
$10.2 million at January 31, 1999. Telefactor inventories account for 7% of the
increase with the remaining increment traceable to growth in product lines. The
Company's inventory turnover rate remained flat in fiscal 2000 at 2 times with
the inventory turnover rate of fiscal 1999. The Company purchased 77,000 shares
of the Company's common stock at a cost of $451,000 during fiscal 2000. Since
its inception in fiscal 1996, the Company has repurchased 666,224 shares of
Astro-Med common stock. At present, the Company has Board of Directors' approval
to repurchase another 242,000 shares of the Company's common stock.
LIQUIDITY AND CAPITAL RESERVES
Net Cash Flow from operating activities was $4.7 million in fiscal 2000,
$3.2 million in fiscal 1999 and $2.8 million in fiscal 1998. The improvement in
cash flow in fiscal 2000 is due to increased profitability and accounts payable
management. The increment in net cash flow from operating activities in fiscal
1999 as compared to fiscal 1998 was due to changes in the Company's working
capital requirements.
Net Cash Flow from investing activities was $4.2 million in fiscal 2000,
$1.0 million in fiscal 1999 and $1.5 million in fiscal 1998. The purchase of
Telefactor's net assets for $3.7 million and capital expenditures of $975,000
represent the primary demand of investing funds in fiscal 2000. Capital
expenditures of $600,000 in fiscal 1999 and $810,000 in fiscal 1998 consumed
investing funds while increases in the Company's securities portfolio of
$428,000 in fiscal 1999 and $697,000 in fiscal 1998 account for the balance of
the investing activities.
Net cash used by financing activities was $1.4 million in fiscal 2000,
$2.8 million in fiscal 1999 and $2.2 million in fiscal 1998. This category is
dominated by dividends paid out and the purchase of common stock. Dividends paid
in fiscal 2000 were $709,000, $744,000 in fiscal 1999 and $727,000 in fiscal
1998. The Company's annual dividend per share was 16 CENTS in all three years.
Purchases of common stock were $451,000 in fiscal 2000, $2.0 million in fiscal
1999 and $1.3 million in fiscal 1998.
The Company has a contingent obligation relative to the acquisition of the
Telefactor Corporation. The additional purchase price is payable over a
72 month period and is contingent on the sales of the combined Grass-Telefactor
products exceeding certain sales amounts during that period. Discussion of the
Telefactor acquisition is explained in Note 10 of Notes to Consolidated
Financial Statements included elsewhere herein.
The Company expects to finance its future working capital needs, capital
expenditures and acquisition requirements through internal funds. The Company
expects to create positive cash flow from its existing operation and believes
that existing cash reserves are adequate to meet the capital requirements.
FISCAL 1999 COMPARED TO FISCAL 1998
Sales declined 5% to $41.6 million in fiscal 1999 from $43.7 million in
fiscal 1998. The decline is traceable to sales through the Company's domestic
channels where sales were down 7% from fiscal year 1998. Sales through the
export channels grew 2% in fiscal 1999 as the Company's European and Canadian
branches experienced healthy demand for the QuickLabel Systems and Grass
Instrument product groups.
Sales in fiscal 1999 reflect a mixed performance relative to the Company's
three product groups. Sales growth was evident both in QuickLabel Systems
product group up 22% in fiscal 1999 and Grass Instrument
12
<PAGE>
product group up 9% in fiscal 1999. Conversely, Test & Measurement product sales
were lower in fiscal 1999 by 27% from fiscal 1998. Soft demand in the Company's
traditional Test & Measurement markets of aerospace and defense were the prime
contributors to the sales results. The Company is meeting the challenge to the
Test & Measurement product group by a combination of diversifying its market
focus to include new markets such as transportation, energy, telecommunications,
metal fabrication and automotive as well as introducing new Test & Measurement
products.
The growth in QuickLabel Systems was fostered by an expanded product line,
including QLS-2000, QLS- 2001, QLS-3000, QLS-3001, QLS-4000, and QLS-4001 and
the four color high volume printer with Ribbon Ration-TM- QLS-4100. In addition,
the Company added a new suite of applicator and print & apply products through
the acquisition of Dynell, Inc.
Sales growth of the Grass Instrument products in fiscal 1999 over fiscal
1998 was driven by increased acceptance of the Company's digital Heritage EEG
and PSG product lines in the clinical markets of neurophsiology.
Gross profit dollars in fiscal 1999 were nominally higher than fiscal year
1998 as a favorable product mix improved the Company's gross profit margin to
39.9% in fiscal 1999 from 37.7% in fiscal 1998. Gross profit margins in the
QuickLabel Systems and Grass Instruments product groups experienced solid
improvement in fiscal 1999 from fiscal 1998.
Selling, general and administrative spending increased 7% to $13.9 million
from $13.0 million. Increased funding was required for new field sales
personnel, customer service support and marketing iniatives.
The Company continued its committment to funding Research & Development
activities at 7% of annual sales. Research and Development spending was
$2.9 million in fiscal 1999, an increase of 4% from fiscal 1998. The increase in
spending was attributable to personnel and outside services related activities.
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 fiscal 1998'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 1999 improved sharply from fiscal 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 included elsewhere herein.
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.
EURO CONVERSION AND CURRENCY MARKET RISK
A single currency, the "euro" was introduced in Europe on January 1, 1999.
To date eleven member countries of the European Union have adopted the euro as
their legal currency. Although a fixed conversion rate between those countries
existing currencies and the euro was set on January 1, 1999, a transition period
from January 1, 1999 to July 1, 2002 was established to facilitate the
conversion to the euro. During that period, currency translations can be settled
with either the old (legacy) currency or the euro. The Company branches
operating in the participating European Union countries will adopt the euro as
their functional currency within the prescribed compliance dates. We do not
expect the euro conversion to have a material adverse impact on the Company's
business or financial condition.
13
<PAGE>
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. 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. It is anticipated that the transition to the euro as the
eventual functional currency of European affiliates may facilitate the Company's
exchange rate exposure management in the future.
YEAR 2000
The Company addressed the Year 2000 issue with internal and external
resources. The Company formalized its strategy by adopting a Year 2000 Readiness
Program. The approach included three dimensions: IT infrastructure (reporting,
manufacturing, finance, purchasing and sales), Application Software and non IT
systems (including environment, process controls, and manufacturing control
systems) and third party suppliers and customers. The Company did not experience
any significant disruptions, malfunctions, or errors in these three defined
areas when the calendar changed from 1999 to 2000.
To date since January 1, 2000, the Company has not experienced any negative
occurrence in its IT infrastructure, applications and non IT systems or customer
or supplier activities as an outgrowth of the Year 2000 issue. The Company does
not anticipate any significant impact to its ongoing operating and business
environment from the Year 2000 issue. However, the Company is fully aware that
it is possible that the full impact of the Year 2000 issue has yet to be
determined. The Company's year 2000 compliance expenditures have been funded
from the Company's operating cash flow.
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 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>
<TABLE>
<CAPTION>
MAY 1, JULY 31, OCTOBER 30, JANUARY 31,
1999 1999 1999 2000
-------- -------- ----------- -----------
<S> <C> <C> <C> <C>
Net Sales............................................ $10,377 $11,085 $11,045 $13,062
Gross Profit......................................... 4,055 4,566 4,574 5,668
Net Income (Loss).................................... (271) 271 410 526
Earnings (Loss) Per Common Share--basic.............. (.06) .06 .09 .12
Earnings (Loss) Per Common Share--diluted............ (.06) .06 .09 .12
</TABLE>
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
None.
14
<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 2000 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........................... 74 Chairman, Chief Executive Officer and Director
Everett V. Pizzuti........................ 63 President, Chief Operating Officer and Director
John B. Chatten........................... 72 President, Grass-Telefactor Product Group
Joseph P. O'Connell....................... 56 Vice President and Treasurer, Chief Financial
Officer
Elias G. Deeb............................. 58 Vice President--Media Manufacturing
Stephen M. Petrarca....................... 37 Vice President--Instrument Manufacturing
Stephen E. Johnson........................ 36 Vice President--Grass-Telefactor Research &
Development
Jeffrey H. Cournoyer...................... 32 Controller
</TABLE>
All of the persons named above have held the positions identified since
January 31, 1985, except as indicated below.
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. Chatten joined the Company in December 1999 as President of
Grass-Telefactor Product Group. Prior to that, Mr. Chatten was founder and
President of Telefactor Corporation which was acquired by Astro-Med in
December 1999.
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. 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 Instruments Company, he has served as
Manager of R & D and Assistant General Manager for Grass Operations. Previously,
Mr. Johnson held engineering and engineering management positions with General
Scanning, Inc. (1989-1993), Grass Instruments Co. (1987-1989), and Hewlett
Packard Co. (1986-1987).
15
<PAGE>
Mr. Cournoyer joined the Company in 1998 as General Accounting Manager. He
previously held financial management positions with CVS Corporation (1997-1998),
Nyman Manufacturing Co. (1996-1997) and Davol, Inc. (1994-1996). He is also a
Certified Public Accountant.
ITEM 11. EXECUTIVE COMPENSATION
The response to this item is incorporated by reference to the Company's
definitive proxy statement for the 2000 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 2000 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 2000 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.................... 19
Consolidated Balance Sheets--January 31, 1999 and 2000...... 20
Consolidated Statements of Income--Years Ended January 31,
1998, 1999 and 2000....................................... 21
Consolidated Statements of Comprehensive Income and
Shareholders' Equity--Years Ended January 31, 1998, 1999
and 2000.................................................. 22
Consolidated Statements of Cash Flows--Years Ended
January 31, 1998,
1999 and 2000............................................. 23
Notes to Consolidated Financial Statements.................. 24
</TABLE>
(a)(2) FINANCIAL STATEMENT SCHEDULES:
<TABLE>
<S> <C>
Schedule II--Valuation and Qualifying Accounts and
Reserves--Years Ended January 31, 1998, 1999 and 2000..... 35
</TABLE>
All other schedules for which provision is made in the applicable accounting
regulations of the Securities and Exchange Commission are not required under the
related instructions or are inapplicable, and therefore, have been omitted.
16
<PAGE>
<TABLE>
<CAPTION>
PAGE
--------
<S> <C>
</TABLE>
(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) Employment Agreement between Astro-Med, Inc. and
John B. Chatten dated as of December 14, 1999 (1).
(21) List of Subsidiaries of the Company. See page 19.
(23) Consent of Independent Public Accountants. See page 19.
</TABLE>
- ------------------------
(1) Management contract or compensatory plan or arrangement.
(b) REPORTS ON FORM 8-K:
On December 29, 1999, the Company filed Form 8-K with reference to Item
2--Acquisition or Disposition of Assets and Item 7--Financial Statements and
Exhibits. In accordance with Item 7(a)(4) of Form 8-K, no financial statements
were filed with this report. The following Exhibit under Form 8-K Item 7(c)(2),
Plan of acquisition, reorganization, arrangement, liquidation or succession, has
been filed with this report: Asset Purchase Agreement dated December 14, 1999 by
and among Astro-Med, Inc., Telefactor Corporation, and John B. Chatten.
On February 25, 2000, the Company filed Amendment No. 1 to the Form 8-K
indicating that under the provisions of Regulation S-K no financial statements
were required to be filed with respect to this acquisition.
17
<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.
<TABLE>
<S> <C> <C>
ASTRO-MED, INC.
(Registrant)
Date: April 12, 2000
By /s/ ALBERT W. ONDIS
-----------------------------------------
(Albert W. Ondis, Chairman)
</TABLE>
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>
<CAPTION>
NAME TITLE DATE
---- ----- ----
<C> <S> <C>
/s/ ALBERT W.ONDIS Chairman and Director April 12, 2000
------------------------------------------- (Principal Executive Officer)
Albert W. Ondis
/s/ EVERETT V.PIZZUTI President and Director April 12, 2000
------------------------------------------- (Principal Operating Officer)
Everett V. Pizzuti
/s/ JOSEPH P. O'CONNELL Vice President and Treasurer April 12, 2000
------------------------------------------- (Principal Financial Officer)
Joseph P. O'Connell
/s/ JEFFREY H. COURNOYER Controller April 12, 2000
------------------------------------------- (Principal Accounting
Jeffrey H. Cournoyer Officer)
/s/ JACQUES V. HOPKINS Director April 12, 2000
-------------------------------------------
Jacques V. Hopkins
</TABLE>
18
<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. 2-21081 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 as amended May 28, 1991, 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, 2000
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To Astro-Med, Inc:
We have audited the accompanying consolidated balance sheet of
Astro-Med, Inc. and subsidiaries as of January 31, 1999 and 2000, 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, 2000. 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 auditing standards generally
accepted in the United States. Those standards require that we plan and perform
the audit to obtain reasonable assurance about whether the financial statements
are free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements. An
audit also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the 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 2000, and the results of their
operations and cash flows for each of the three years in the period ended
January 31, 2000, in conformity with accounting principles generally accepted in
the United States.
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 10, 2000
19
<PAGE>
ASTRO-MED, INC.
CONSOLIDATED BALANCE SHEETS
AS OF JANUARY 31, 1999 AND 2000
<TABLE>
<CAPTION>
1999 2000
------------ ------------
<S> <C> <C>
ASSETS
CURRENT ASSETS
Cash and Cash Equivalents................................. $ 4,946,289 $ 4,035,867
Securities Available for Sale............................. 7,907,142 7,211,921
Accounts Receivable, Less Reserves of $212,337 in 1999 and
$405,783 in 2000........................................ 7,708,806 9,270,814
Inventories............................................... 10,217,020 11,537,478
Prepaid Expenses and Other Current Assets................. 1,986,336 1,926,111
------------ ------------
Total Current Assets.................................... 32,765,593 33,982,191
PROPERTY, PLANT AND EQUIPMENT
Land and Improvements..................................... 398,191 398,191
Buildings and Improvements................................ 7,009,089 7,087,520
Machinery and Equipment................................... 11,270,775 12,603,644
------------ ------------
18,678,055 20,089,355
Less Accumulated Depreciation............................. (11,448,380) (12,577,878)
------------ ------------
7,229,675 7,511,477
OTHER ASSETS
Excess of Cost over Net Assets Acquired, Net.............. 903,784 3,153,371
Amounts Due from Officers................................. 480,314 480,314
Other..................................................... 374,866 257,178
------------ ------------
1,758,964 3,890,863
------------ ------------
$ 41,754,232 $ 45,384,531
============ ============
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts Payable.......................................... $ 3,427,766 $ 6,379,792
Accrued Compensation...................................... 1,446,770 1,710,622
Accrued Expenses.......................................... 1,110,484 2,324,593
Income Taxes.............................................. 1,062,892 1,169,234
Current Maturities of Long-Term Debt...................... 211,021 60,452
------------ ------------
Total Current Liabilities............................... 7,258,933 11,644,693
LONG-TERM DEBT, Less Current Maturities..................... 16,977 71,588
EXCESS OF NET ASSETS ACQUIRED OVER COST, NET................ 108,839 --
DEFERRED INCOME TAXES....................................... 667,676 447,666
SHAREHOLDERS' EQUITY
Preferred Stock, $10 Par Value, Authorized 100,000 Shares,
Issued None
Common Stock, $.05 Par Value, Authorized 13,000,000
Shares, Issued 5,143,520 in 1999 and 5,148,035 in
2000.................................................... 257,176 257,402
Additional Paid-in Capital................................ 5,641,317 5,647,791
Retained Earnings......................................... 32,837,880 33,065,454
Treasury Stock, at Cost, 662,295 Shares in 1999 and
729,295 in 2000......................................... (4,889,343) (5,268,103)
Accumulated Other Comprehensive Items..................... (145,223) (481,960)
------------ ------------
33,701,807 33,220,584
------------ ------------
$ 41,754,232 $ 45,384,531
============ ============
</TABLE>
The accompanying notes are an integral part of these financial statements.
20
<PAGE>
ASTRO-MED, INC.
CONSOLIDATED STATEMENTS OF INCOME
YEARS ENDED JANUARY 31, 1998, 1999 AND 2000
<TABLE>
<CAPTION>
1998 1999 2000
----------- ----------- -----------
<S> <C> <C> <C>
Net Sales............................................. $43,747,540 $41,561,500 $45,568,746
Cost of Sales......................................... 27,236,046 24,982,234 26,706,375
----------- ----------- -----------
Gross Profit.......................................... 16,511,494 16,579,266 18,862,371
Costs and Expenses:
Selling, General and Administrative................. 13,043,315 13,907,389 14,717,092
Research and Development............................ 2,820,292 2,938,820 3,353,883
----------- ----------- -----------
15,863,607 16,846,209 18,070,975
----------- ----------- -----------
Operating Income (Loss)............................... 647,887 (266,943) 791,396
Other Income (Expense):
Interest and Dividend Income........................ 822,775 786,084 665,687
Interest Expense.................................... (27,872) (22,197) (18,239)
Other, Net.......................................... (35,454) 112,721 (189,987)
----------- ----------- -----------
759,449 876,608 457,461
----------- ----------- -----------
Income before Income Taxes............................ 1,407,336 609,665 1,248,857
Provision for Income Taxes............................ 366,000 114,000 312,214
----------- ----------- -----------
Net Income............................................ $ 1,041,336 $ 495,665 $ 936,643
----------- ----------- -----------
Net Income Per Common Share-basic..................... $ .21 $ .11 $ .21
=========== =========== ===========
Net Income Per Common Share-diluted................... $ .21 $ .11 $ .21
=========== =========== ===========
Weighted Average Number of Common Shares Outstanding-
basic............................................... 4,852,787 4,651,711 4,434,108
=========== =========== ===========
Weighted Average Number of Common Shares Outstanding-
diluted............................................. 4,900,460 4,679,398 4,475,371
=========== =========== ===========
Dividends Declared Per Common Share................... $ .16 $ .16 $ .16
=========== =========== ===========
</TABLE>
The accompanying notes are an integral part of these financial statements.
21
<PAGE>
ASTRO-MED, INC.
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME AND
SHAREHOLDERS' EQUITY
YEARS ENDED JANUARY 31, 1998, 1999 AND 2000
<TABLE>
<CAPTION>
1998 1999 2000
----------- ----------- -----------
<S> <C> <C> <C>
COMPREHENSIVE INCOME
Net Income............................................ $ 1,041,336 $ 495,665 $ 936,643
Other Comprehensive Items, Net:
Foreign currency translation adjustments............ (115,180) 18,681 (34,865)
Unrealized gain (loss) on securities available for
sale.............................................. 34,375 6,193 (301,872)
----------- ----------- -----------
Other Comprehensive Items, Net........................ (80,805) 24,874 (336,737)
----------- ----------- -----------
Comprehensive Income.................................. $ 960,531 $ 520,539 $ 599,906
=========== =========== ===========
SHAREHOLDERS' EQUITY
Common Stock, $.05 Par Value:
Balance at beginning of year........................ $ 256,837 $ 257,023 $ 257,176
Net proceeds from issuance of Company common stock
(Note 5).......................................... 186 153 226
----------- ----------- -----------
Balance at end of year.............................. 257,023 257,176 257,402
----------- ----------- -----------
Additional Paid-In Capital:
Balance at beginning of year........................ 5,624,239 5,649,101 5,641,317
Net proceeds from issuance of Company common stock
(Note 5).......................................... 28,203 18,498 23,714
Net cost of shares issued to Employee Stock
Ownership Plan (Note 5)........................... (3,341) (26,282) (17,240)
----------- ----------- -----------
Balance at end of year.............................. 5,649,101 5,641,317 5,647,791
----------- ----------- -----------
Retained Earnings:
Balance at beginning of year........................ 32,772,044 33,085,917 32,837,880
Net Income.......................................... 1,041,336 495,665 936,643
Dividends declared.................................. (727,463) (743,702) (709,069)
----------- ----------- -----------
Balance at end of year.............................. 33,085,917 32,837,880 33,065,454
----------- ----------- -----------
Treasury Stock:
Balance at beginning of year........................ (1,804,986) (3,062,945) (4,889,343)
Purchases of Company common stock (Note 5).......... (1,301,300) (1,954,680) (451,000)
Net cost of shares issued to Employee Stock
Ownership Plan (Note 5)........................... 43,341 128,282 72,240
----------- ----------- -----------
Balance at end of year.............................. (3,062,945) (4,889,343) (5,268,103)
----------- ----------- -----------
Accumulated Other Comprehensive Items:
Balance at beginning of year........................ (89,292) (170,097) (145,223)
Other comprehensive items, net...................... (80,805) 24,874 (336,737)
----------- ----------- -----------
Balance at end of year.............................. (170,097) (145,223) (481,960)
----------- ----------- -----------
$35,758,999 $33,701,807 $33,220,584
=========== =========== ===========
</TABLE>
The accompanying notes are an integral part of these financial statements.
22
<PAGE>
ASTRO-MED, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
YEARS ENDED JANUARY 31, 1998, 1999 AND 2000
<TABLE>
<CAPTION>
1998 1999 2000
----------- ------------ -----------
<S> <C> <C> <C>
Cash Flows from Operating Activities:
Net Income.......................................... $ 1,041,336 $ 495,665 $ 936,643
Adjustments to Reconcile Net Income to Net Cash
Provided By Operating Activities:
Depreciation and Amortization................... 988,423 1,111,048 1,223,436
Loss on Sale of Assets.......................... -- -- 3,017
Deferred Income Taxes........................... (301,713) (436,425) (212,951)
Other........................................... 242,558 (1,721) 76,674
Changes in Assets and Liabilities:
Accounts Receivable........................... 483,672 119,258 (986,656)
Inventories................................... 19,649 124,836 (307,470)
Other......................................... (465,906) 185,749 371,381
Accounts Payable and Accrued Expenses......... 952,118 1,126,787 3,484,198
Income Taxes.................................. (204,904) 448,261 106,342
----------- ------------ -----------
Total Adjustments........................... 1,713,897 2,677,793 3,757,971
----------- ------------ -----------
Net Cash Provided by Operating Activities....... 2,755,233 3,173,458 4,694,614
Cash Flows from Investing Activities:
Proceeds from Sales of Securities Available for
Sale.............................................. 2,450,508 10,153,724 3,838,473
Purchases of Securities Available for Sale.......... (3,147,206) (10,582,545) (3,446,395)
Proceeds from Sales of Assets....................... -- -- 2,800
Payment for Purchase of Telefactor Corporation...... -- -- (3,657,098)
Additions to Property, Plant and Equipment.......... (809,724) (600,395) (975,113)
----------- ------------ -----------
Net Cash Used by Investing Activities........... (1,506,422) (1,029,216) (4,237,333)
Cash Flows from Financing Activities:
Payments of Debt.................................... (50,000) (50,000) (75,000)
Principal Payments on Capital Leases................ (100,069) (127,774) (156,574)
Proceeds from Common Shares Issued Under Employee
Benefit Plans..................................... 28,389 18,651 23,940
Purchases of Treasury Stock......................... (1,301,300) (1,954,680) (451,000)
Dividends Paid...................................... (727,463) (743,702) (709,069)
----------- ------------ -----------
Net Cash Used by Financing Activities........... (2,150,443) (2,857,505) (1,367,703)
----------- ------------ -----------
Net Decrease in Cash and Cash Equivalents............. (901,632) (713,263) (910,422)
Cash and Cash Equivalents, Beginning of Year.......... 6,561,184 5,659,552 4,946,289
----------- ------------ -----------
Cash and Cash Equivalents, End of Year................ $ 5,659,552 $ 4,946,289 $ 4,035,867
=========== ============ ===========
Supplemental Information:
Cash Paid During the Period for:
Interest........................................ $ 27,872 $ 24,072 $ 17,504
Income Taxes.................................... $ 758,070 $ 257,889 $ 406,182
</TABLE>
The accompanying notes are an integral part of these financial statements.
23
<PAGE>
ASTRO-MED, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JANUARY 31, 2000
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
accumulated other comprehensive items 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 for
the acquisition of Telefactor Corporation is being amortized over 15 years. All
other excess of cost over net assets acquired is amortized on the straight-line
method over 40 years. Accumulated amortization amounted to $493,034 and $552,577
as of January 31, 1999 and 2000, respectively. Excess of net assets acquired
over cost was amortized on the straight-line method over five years. Accumulated
amortization amounted to $928,908 and $1,037,747 as of January 31, 1999 and
2000, respectively. The shorter amortization period for the excess of net assets
acquired over cost reflected the more limited life of the assets involved. As of
January 31, 2000, the excess of net assets acquired over cost has been fully
amortized.
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.
DERIVATIVE INSTRUMENTS AND HEDGING: The Financial Accounting Standards
Board issued SFAS No. 137, Accounting for Derivative Instruments and Hedging
Activities--Deferral of the Effective Date of SFAS No. 133, in June 1999. SFAS
No. 133 is now effective for all fiscal quarters of all fiscal years beginning
after June 15, 2000; earlier adoption is allowed. The statement requires
companies to record derivatives on the balance sheet as assets or liabilities,
measured at fair value. Gains or losses resulting from changes in the values of
those derivatives would be accounted for depending on the use of the derivative
and whether it qualifies for hedge accounting. The Company has not yet
determined the effect that adoption of SFAS No. 133 will have or when the
provisions of the statement will be adopted. However, the Company currently
expects that, due to its relatively limited use of derivative instruments, the
adoption of SFAS No. 133 will not have a material effect on the Company's
results of operations or financial position.
24
<PAGE>
ASTRO-MED, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
JANUARY 31, 2000
NOTE 1--SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
REVENUE RECOGNITION: The Securities and Exchange Commission released Staff
Accounting Bulletin (SAB) No. 101, Revenue Recognition in Financial Statements,
on December 3, 1999. This SAB provides additional guidance on the accounting for
revenue recognition, including broad conceptual discussions as well as certain
industry-specific guidance. The Company is in the process of accumulating the
information necessary to quantify the potential impact, if any, of this new
guidance. The new guidance that is most likely to have a potential impact on the
Company concerns customer acceptance and installation terms. The guidance is
effective for the second quarter of fiscal 2001 and would be adopted by
recording the effect of any prior revenue transaction effected as a "cumulative
effect of change in accounting principle" as of February 1, 2000.
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 (SFAS 128), Earnings per Share. 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. In accordance with SFAS 128, options to
purchase 235,250, 653,500 and 600,325 shares of common stock were outstanding
during fiscal 1998, 1999 and 2000, respectively, but were not included in the
computation of diluted EPS because the options' exercise price was greater than
the average market price of the common shares. The options, which expire between
11/21/01 through 1/03/10, were still outstanding on January 31, 2000.
<TABLE>
<CAPTION>
1998 1999 2000
--------- --------- ---------
<S> <C> <C> <C>
Weighted Average Common Shares
Outstanding--basic........................ 4,852,787 4,651,711 4,434,108
Dilutive Effect of Options Outstanding...... 47,673 27,687 41,263
--------- --------- ---------
Weighted Average Common Shares
Outstanding--diluted...................... 4,900,460 4,679,398 4,475,371
</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.
25
<PAGE>
ASTRO-MED, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
JANUARY 31, 2000
NOTE 1--SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
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, 2000 approximate fair value.
NOTE 2--SECURITIES AVAILABLE FOR SALE
Securities available for sale include corporate and governmental obligations
with various contractual or anticipated maturity dates. Scheduled maturity dates
are as follows:
<TABLE>
<CAPTION>
JANUARY 31, 1999 JANUARY 31, 2000
------------------------- -------------------------
CORPORATE GOVERNMENTAL CORPORATE GOVERNMENTAL
---------- ------------ ---------- ------------
<S> <C> <C> <C> <C>
Less than 1 year............ $ -- $ 811,424 $ 99,802 $1,129,081
1 to 5 years................ 1,686,166 3,895,623 1,252,354 2,629,325
6 to 10..................... 149,414 308,105 235,719 444,735
Greater than 10 years....... 1,056,410 -- 1,086,078 334,827
---------- ---------- ---------- ----------
$2,891,990 $5,015,152 $2,673,953 $4,537,968
========== ========== ========== ==========
</TABLE>
Actual maturities may differ as a result of sales or earlier issuer
redemptions.
The amortized cost of securities available for sale as of January 31, 2000
was $7,485,868. The difference between market value and the cost basis as of
that date was $273,947, which represented unrealized losses. 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. 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 2000 and 1999.
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,
-------------------------
1999 2000
----------- -----------
<S> <C> <C>
Materials and Supplies............................. $ 5,356,973 $ 5,835,050
Work-in-Progress................................... 721,448 1,557,734
Finished Goods..................................... 4,138,599 4,144,694
----------- -----------
$10,217,020 $11,537,478
=========== ===========
</TABLE>
26
<PAGE>
ASTRO-MED, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
JANUARY 31, 2000
NOTE 4--LONG-TERM DEBT
Long-term debt consisted of the following:
<TABLE>
<CAPTION>
JANUARY 31,
-------------------
1999 2000
-------- --------
<S> <C> <C>
Capital Lease Obligations............................... $227,998 $132,040
Less Current Maturities................................. 211,021 60,452
-------- --------
$ 16,977 $ 71,588
======== ========
</TABLE>
During fiscal 2000, the Company entered into a three year, $135,615 capital
lease obligation for the purpose of upgrading its information technology
operating system. 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, 2000 scheduled to
mature in each of the succeeding three fiscal years are as follows: $60,452 in
fiscal 2001, $46,832 in fiscal 2002 and $24,756 in fiscal 2003.
NOTE 5--COMMON STOCK
The Company's Board of Directors has authorized the purchase of up to
793,900 shares of the Company's common stock on the open market. As of
January 31, 2000, the Company has remaining authorization to purchase an
additional 242,000 shares. As purchased, such shares will become treasury stock
available for general corporate purposes. The Company purchased shares of
treasury stock amounting to 151,500 shares in fiscal 1998, 323,400 shares in
fiscal 1999 and 77,000 in fiscal 2000.
The Company maintains the following benefit plans involving the Company's
common stock:
STOCK OPTION PLANS: As of January 31, 2000, the Company has two incentive
stock option plans and one non-qualified stock option plan under which options
may be granted to officers and key employees. Options for an aggregate of
750,000 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 400,000 shares may be granted under the non-qualified plan at
option prices of not less than 50% of fair market value at the date of grant.
In addition, the Company has a Non-Employee Director Stock Option Plan under
which each non-employee director automatically receives an annual grant of
options to acquire 1,000 shares of common stock. The options are granted as of
the first business day of January of each year at an option price equal to the
fair market value at the date of grant. Options for a total of 30,000 shares may
be granted under the plan.
27
<PAGE>
ASTRO-MED, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
JANUARY 31, 2000
NOTE 5--COMMON STOCK (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,
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
--------
Options Outstanding, January 31,
1999................................. 781,100 3.33-13.00 8.51
Options Granted........................ 253,700 4.94- 6.25 5.22
Options Exercised...................... (1,000) 4.94 4.94
Options Expired........................ (158,325) 4.94-11.29 8.93
--------
Options Outstanding, January 31,
2000................................. 875,475 $ 3.33-13.00 $7.49
--------
Options Exercisable, January 31,
1999................................. 717,900 $ 3.33-13.00 $8.43
--------
Options Exercisable, January 31,
2000................................. 780,675 $ 3.33-13.00 $7.46
========
</TABLE>
Set forth below is a summary of options outstanding at January 31, 2000:
<TABLE>
<CAPTION>
OUTSTANDING EXERCISABLE
- ---------------------------------------------------------------------- ---------------------------
RANGE OF WEIGHTED AVERAGE REMAINING WEIGHTED AVERAGE
EXERCISE PRICES OPTIONS EXERCISE PRICE CONTRACTUAL LIFE OPTIONS EXERCISE PRICE
- --------------------- -------- ---------------- ---------------- -------- ----------------
<S> <C> <C> <C> <C> <C>
$3.33-$ 4.94 203,650 $ 4.78 9 yrs. 203,650 $ 4.78
$5.50-$ 8.25 317,950 $ 7.06 9 yrs. 254,000 $ 7.31
$8.31-$ 8.50 220,000 $ 8.41 7 yrs. 220,000 $ 8.41
$9.25-$13.00 133,875 $11.11 3 yrs. 103,025 $11.09
------- -------
875,475 780,675
------- -------
</TABLE>
At January 31, 2000, options covering 304,800 shares under the incentive
plans, 349,000 shares under the non-qualified plan and 15,000 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
28
<PAGE>
ASTRO-MED, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
JANUARY 31, 2000
NOTE 5--COMMON STOCK (CONTINUED)
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
--------------------------------
1998 1999 2000
---------- -------- --------
<S> <C> <C> <C>
Net income (Loss)
As reported............................... $1,041,336 $495,665 $936,643
Pro forma................................. $ 546,039 $(42,914) $599,322
Earnings per share
As reported............................... $ .21 $ .11 $ .21
Pro forma, basic.......................... $ .11 $ (.01) $ .14
Pro forma, diluted........................ $ .11 $ (.01) $ .13
</TABLE>
The fair value of each option granted was estimated on the grant date using
the Black-Scholes option-pricing model with the following weighted average
assumptions: The weighted average grant date fair value of options granted
during fiscal 1998, 1999 and 2000 was $3.40, $2.43 and $1.60, respectively.
<TABLE>
<CAPTION>
YEARS ENDED JANUARY 31,
-------------------------
1998 1999 2000
------- ------- -------
<S> <C> <C> <C>
Risk-free interest rate....................... 5.5% 4.8% 5.5%
Expected life (years)......................... 5 5 5
Expected volatility........................... 34.879% 35.367% 35.542%
Expected dividend yield....................... 1.9% 2.4% 2.8%
</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,
------------------------------
1998 1999 2000
-------- -------- --------
<S> <C> <C> <C>
Shares Reserved, Beginning........................ 105,218 101,507 98,426
Shares Purchased.................................. (3,711) (3,081) (3,506)
------- ------- ------
Shares Reserved, Ending........................... 101,507 98,426 94,920
======= ======= ======
</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 $123,000 for fiscal 1998, $130,000 for fiscal 1999 and
$130,000 for fiscal 2000.
29
<PAGE>
ASTRO-MED, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
JANUARY 31, 2000
NOTE 6--INCOME TAXES
The components of domestic and foreign income (loss) before the provision
for income taxes are as follows:
<TABLE>
<CAPTION>
YEARS ENDED JANUARY 31,
----------------------------------
1998 1999 2000
---------- -------- ----------
<S> <C> <C> <C>
Domestic................................... $1,491,492 $530,751 $1,021,075
Foreign.................................... (84,156) 78,914 227,782
---------- -------- ----------
Total.................................. $1,407,336 $609,665 $1,248,857
========== ======== ==========
</TABLE>
The components of the provision for income taxes were as follows:
<TABLE>
<CAPTION>
YEARS ENDED JANUARY 31,
---------------------------------
1998 1999 2000
--------- --------- ---------
<S> <C> <C> <C>
Current:
Federal................................... $ 511,324 $ 206,747 $ 387,820
State..................................... 88,092 8,687 53,842
Foreign................................... 24,000 28,000 57,000
--------- --------- ---------
623,416 243,434 498,662
--------- --------- ---------
Deferred:
Federal................................... (210,093) (106,518) (164,143)
State..................................... (47,323) (22,916) (22,305)
--------- --------- ---------
(257,416) (129,434) (186,448)
--------- --------- ---------
$ 366,000 $ 114,000 $ 312,214
========= ========= =========
</TABLE>
The provision for income taxes differs from the amount computed by applying
the statutory federal income tax rate (34%) to income before income taxes, due
to the following:
<TABLE>
<CAPTION>
YEARS ENDED JANUARY 31,
---------------------------------
1998 1999 2000
--------- --------- ---------
<S> <C> <C> <C>
Income Tax Provision at Statutory Rate...... $ 478,494 $ 207,269 $ 424,611
State Taxes, Net of Federal Income Tax
Benefits.................................. 26,862 (9,391) 57,697
Nontaxable Interest Income.................. (39,100) (34,083) (19,219)
Amortization of Intangibles................. (57,683) (61,669) (24,663)
Utilization of Net Operating Loss
Carryforward.............................. (117,580) (117,580) (92,048)
Research and Development Tax Credits........ -- -- (133,000)
Other, Net.................................. 75,007 129,454 98,836
--------- --------- ---------
$ 366,000 $ 114,000 $ 312,214
========= ========= =========
</TABLE>
30
<PAGE>
ASTRO-MED, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
JANUARY 31, 2000
NOTE 6--INCOME TAXES (CONTINUED)
The tax effects of temporary differences and carryforwards which gave rise
to significant portions of deferred tax assets and liabilities in the
accompanying consolidated balance sheets were as follows:
<TABLE>
<CAPTION>
JANUARY 31,
-----------------------
1999 2000
---------- ----------
<S> <C> <C>
Deferred Tax Assets:
Reserves and Accruals Not Yet Deducted for Tax
Purposes......................................... $ 981,154 $1,216,529
Unrealized Foreign Currency Losses................. 111,130 28,965
Net Operating Loss Carryforwards................... 141,578 72,845
Other.............................................. 349,902 344,672
Valuation Allowance................................ (141,578) (72,845)
---------- ----------
1,442,186 1,590,166
Deferred Tax Liabilities:
Accumulated Tax Depreciation in Excess of Book
Depreciation..................................... 667,676 563,578
Other.............................................. 12,183 51,310
---------- ----------
679,859 614,888
---------- ----------
Net Deferred Tax Assets.............................. $ 762,327 $ 975,278
========== ==========
</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. At January 31, 2000, the valuation allowance
relates to the Company's wholly owned subsidiary, Astro-Med GMBH, net operating
loss carryforward (NOL) of approximately $186,800 which can be carryforward
indefinitely. The future tax benefits of this (NOL) is uncertain because it is
limited to future annual taxable income of the subsidiary.
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,
---------------------
1999 2000
---------- --------
<S> <C> <C>
Real Estate........................................... $4,477,966 $ --
Machinery and Equipment............................... 481,484 382,598
---------- --------
4,959,450 382,598
Less: Accumulated Amortization........................ 2,073,867 219,322
---------- --------
$2,885,583 $163,276
---------- --------
</TABLE>
31
<PAGE>
ASTRO-MED, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
JANUARY 31, 2000
NOTE 7--LEASES (CONTINUED)
Minimum lease payments under noncancellable leases at January 31, 2000, were
as follows:
<TABLE>
<CAPTION>
YEAR ENDING CAPITAL OPERATING
JANUARY 31, LEASE LEASES
- ----------- -------- ---------
<S> <C> <C>
2001.................................................... $ 67,658 $317,765
2002.................................................... 50,594 170,943
2003.................................................... 25,296 108,781
2004.................................................... -- 31,612
2005.................................................... -- 24,450
2006 and Thereafter..................................... -- 24,450
-------- --------
Net Minimum Lease Payments.............................. 143,548 $678,001
========
Less Amount Representing Interest....................... 11,508
--------
Current Value of Net Minimum Lease Payments............. $132,040
========
</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
1998, 1999, and 2000 is set forth below.
<TABLE>
<CAPTION>
FISCAL 1998 FISCAL 1999 FISCAL 2000
----------- ----------- -----------
<S> <C> <C> <C>
GEOGRAPHICAL INFORMATION
Revenues:
United States....................... $41,332,031 $38,673,567 $42,566,264
Foreign Branches.................... 6,630,287 7,689,047 7,967,070
Transfers among geographical
areas............................. (4,214,778) (4,801,114) (4,964,588)
----------- ----------- -----------
$43,747,540 $41,561,500 $45,568,746
=========== =========== ===========
Long-lived Assets:
United States....................... $ 7,415,100 $ 6,787,325 $ 7,029,468
Foreign Branches.................... 485,641 442,350 482,009
----------- ----------- -----------
$ 7,900,741 $ 7,229,675 $ 7,511,477
=========== =========== ===========
</TABLE>
32
<PAGE>
ASTRO-MED, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
JANUARY 31, 2000
NOTE 8--OPERATIONS, GEOGRAPHICAL INFORMATION, AND PRODUCT INFORMATION
(CONTINUED)
<TABLE>
<CAPTION>
FISCAL 1998 FISCAL 1999 FISCAL 2000
----------- ----------- -----------
<S> <C> <C> <C>
Export Revenues Included in United
States Revenues Above:
Central and South America........... $ 800,000 $ 1,010,000 $ 1,294,000
Asia................................ 1,494,000 904,000 1,215,000
Other Europe........................ 617,000 729,000 1,284,000
Australia and New Zealand........... 310,000 437,000 382,000
Other............................... 291,000 255,000 351,000
=========== =========== ===========
$ 3,512,000 $ 3,335,000 $ 4,526,000
=========== =========== ===========
Product Information
Revenues:
Test & Measurement.................. $21,653,000 $15,854,000 $15,702,000
QuickLabel Systems.................. 12,521,000 15,238,000 16,749,000
Grass Instruments................... 9,574,000 10,470,000 13,118,000
----------- ----------- -----------
$43,748,000 $41,562,000 $45,569,000
=========== =========== ===========
</TABLE>
No single customer accounted for 10% of net sales in fiscal 1998, 1999, or
2000.
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 $227,400 for fiscal 1998, $230,000 for fiscal 1999
and $230,000 for fiscal 2000.
NOTE 10--ACQUISITIONS
Effective December 1, 1999, the Company acquired the assets and business of
Telefactor Corporation (Telefactor), a privately held corporation for an
aggregate purchase price of approximately $3.7 million in cash, including
transaction fees. In addition, under the terms of the Asset Purchase Agreement
dated December 14, 1999 between the Company and Telefactor (the "Purchase
Agreement"), the Company assumed certain liabilities of Telefactor in the amount
of approximately $946,000. The acquisition was accounted for as a purchase under
APB Opinion No. 16, BUSINESS COMBINATIONS. The Company allocated the purchase
price based on the fair values of the net assets acquired and liabilities
assumed. Telefactor's results of operations have been included in the Company's
consolidated financial results subsequent to the effective date of the
acquisition. The purchase price is subject to post-closing purchase price
adjustments,
33
<PAGE>
ASTRO-MED, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
JANUARY 31, 2000
NOTE 10--ACQUISITIONS (CONTINUED)
which are currently in negotiation. Up to $225,000 of an escrow account may be
refunded to the Company during the next year. The adjustments also include
contingent purchase price of up to $3,000,000 to be paid over a 72 month period
only if sales of the combined Grass-Telefactor products exceed certain base
amounts during that period. In addition, the Company is assessing and
formulating a restructuring plan that will include initiatives to integrate the
operations of the Company and Telefactor, and reduce overhead costs.
Consequently, the purchase price allocation is preliminary and subject to
revision.
The assets acquired by the Company include cash, accounts receivable,
inventories, prepaid assets, tangible personal property (consisting primarily of
office equipment, furniture and fixtures, motor vehicles and manufacturing
equipment) and intangible personal property. Goodwill resulting from the
Telefactor acquisition is being amortized over 15 years.
The components of the purchase price and allocation were as follows:
<TABLE>
<CAPTION>
(IN THOUSANDS)
--------------
<S> <C>
CONSIDERATION AND ACQUISITION COSTS:
Cash paid................................................... $3,342
Transaction costs........................................... 332
------
$3,674
PRELIMINARY ALLOCATION OF PURCHASE PRICE:
Current Assets.............................................. $1,630
Property, Plant and Equipment............................... 500
Other Assets................................................ 67
Goodwill.................................................... 2,423
Liabilities assumed......................................... (946)
------
$3,674
</TABLE>
Pro forma results have not been presented because they would not be
materially different from the Company's historical financial statements.
Telefactor's unaudited sales for the 12 months ended November, 1999 were
approximately $5.7 million.
34
<PAGE>
ASTRO-MED, INC.
SCHEDULE II--VALUATION AND QUALIFYING ACCOUNTS AND RESERVES
<TABLE>
<CAPTION>
BALANCE AT PROVISION BALANCE
BEGINNING CHARGED TO AT END
DESCRIPTION OF YEAR OPERATIONS DEDUCTIONS(2) OTHER(3) OF YEAR
- ----------- ---------- ---------- ------------- -------- --------
<S> <C> <C> <C> <C> <C>
Allowance for Doubtful Accounts(1):
Year Ended January 31,
1998.................................. 175,000 38,585 37,797 -- 175,788
1999.................................. 175,788 75,815 39,266 -- 212,337
2000.................................. 212,337 167,234 42,414 68,626 405,783
</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.
(3) Reserve addition from the acquisition of Telefactor.
35
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> JAN-31-2000
<PERIOD-START> FEB-01-1999
<PERIOD-END> JAN-31-2000
<CASH> 4,035,867
<SECURITIES> 7,211,921
<RECEIVABLES> 9,270,814
<ALLOWANCES> 0
<INVENTORY> 11,537,478
<CURRENT-ASSETS> 33,982,191
<PP&E> 20,089,355
<DEPRECIATION> 12,577,878
<TOTAL-ASSETS> 45,384,531
<CURRENT-LIABILITIES> 11,644,693
<BONDS> 71,588
0
0
<COMMON> 257,402
<OTHER-SE> 32,963,182
<TOTAL-LIABILITY-AND-EQUITY> 45,384,531
<SALES> 45,568,746
<TOTAL-REVENUES> 45,568,746
<CGS> 26,706,375
<TOTAL-COSTS> 26,706,375
<OTHER-EXPENSES> 18,070,975
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 18,239
<INCOME-PRETAX> 1,248,857
<INCOME-TAX> 312,214
<INCOME-CONTINUING> 936,643
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 936,643
<EPS-BASIC> .21
<EPS-DILUTED> .21
</TABLE>
