UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-Q (Mark One) X QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES - --- EXCHANGE ACT OF 1934 For the quarterly period ended JULY 29, 2000 ------------------------------------------------ OR TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES - --- EXCHANGE ACT OF 1934 For the transition period from to ---------------------- ---------------------- Commission file number 0-13200 -------------------------------------------------------- ASTRO-MED, INC. - ------------------------------------------------------------------------------- (Exact name of registrant as specified in its charter) RHODE ISLAND 05-0318215 - ------------------------------------------------------------------------------- (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) 600 EAST GREENWICH AVENUE, WEST WARWICK, RHODE ISLAND 02893 - ------------------------------------------------------------------------------- (Address of principal executive offices) (Zip Code) (401) 828-4000 - ------------------------------------------------------------------------------- (Registrant's telephone number, including area code) ------------------------ Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes X . No . --- --- Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practicable date. Common Stock, $.05 Par Value - 4,428,821 shares (excluding treasury shares) as of September 5, 2000 -1-
ASTRO-MED, INC. INDEX PAGE NO. Part I. Financial Information: Consolidated Balance Sheets - January 31, 2000 and July 29, 2000........................ 3 Consolidated Statements of Income - Three Months Ended July 31, 1999 and July 29, 2000 ....... 4 Consolidated Statements of Income - Six Months Ended July 31, 1999 and July 29, 2000 ......... 5 Consolidated Statements of Cash Flows - Six Months Ended July 31, 1999 and July 29, 2000 ......... 6 Notes to Consolidated Financial Statements - July 29, 2000............................................. 7,8 Management's Discussion and Analysis of Financial Condition and Results of Operations....................... 9-11 Part II. Other Information................................... 12 -2-
Part I. FINANCIAL INFORMATION ASTRO-MED, INC. UNAUDITED CONSOLIDATED BALANCE SHEETS JANUARY 31, JULY 29, ASSETS 2000 2000 ---- ---- (Unaudited) CURRENT ASSETS Cash and Cash Equivalents................... $ 4,035,867 $ 2,294,610 Securities Available for Sale............... 7,211,921 6,199,442 Accounts Receivable, Net.................... 9,270,814 10,264,957 Inventories................................. 11,537,478 11,602,574 Prepaid Expenses and Other Current Assets... 1,926,111 1,894,947 ----------- ----------- Total Current Assets................... 33,982,191 $32,256,530 PROPERTY, PLANT AND EQUIPMENT 20,089,355 20,426,627 Less Accumulated Depreciation............... (12,577,878) (13,179,859) ----------- ----------- 7,511,477 7,246,768 OTHER ASSETS Excess of Cost Over Net Assets Acquired..... 3,153,371 2,860,669 Amounts Due from Officers................... 480,314 480,314 Other....................................... 257,178 146,728 ----------- ----------- 3,890,863 3,487,711 ----------- ----------- $45,384,531 $42,991,009 =========== =========== LIABILITIES AND SHAREHOLDERS' EQUITY CURRENT LIABILITIES Accounts Payable............................ $ 6,379,792 $ 4,672,886 Accrued Compensation........................ 1,710,622 1,521,144 Accrued Expenses............................ 2,324,593 1,971,261 Income Taxes................................ 1,169,234 1,028,517 Current Maturities of Long-Term Debt........ 60,452 56,164 ----------- ---------- Total Current Liabilities.............. 11,644,693 9,249,972 LONG-TERM DEBT, Less Current Maturities....... 71,588 38,132 DEFERRED INCOME TAXES......................... 447,666 388,769 SHAREHOLDERS' EQUITY Preferred Stock, $10 Par Value, Authorized 100,000 Shares, None Issued.... Common Stock, $.05 Par Value, Authorized 13,000,000 Shares, Issued 5,148,035 and 5,157,663 Shares, Respectively........ 257,402 257,883 Additional Paid-In Capital.................. 5,647,791 5,695,423 Retained Earnings........................... 33,065,454 33,137,437 Treasury Stock, at Cost (729,295 Shares).... (5,268,103) (5,268,103) Accumulated Other Comprehensive Income (Loss)............................. (481,960) (508,504) ----------- ----------- 33,220,584 33,314,136 ----------- ----------- $45,384,531 $42,991,009 =========== =========== -3-
ASTRO-MED, INC. UNAUDITED CONSOLIDATED STATEMENTS OF INCOME THREE MONTHS ENDED JULY 31, JULY 29, 1999 2000 ---- ---- Net Sales.................................... $11,084,681 $13,219,471 Cost of Sales................................ 6,518,432 7,816,885 ----------- ----------- Gross Profit................................. 4,566,249 5,402,586 Costs and Expenses: Selling, General and Administrative........ 3,575,366 3,998,476 Research and Development................... 792,830 1 142,544 ----------- ----------- 4,368,196 5,141,020 ----------- ----------- Operating Income............................. 198,053 261,566 Other Income (Expense): Investment Income.......................... 174,778 111,064 Interest Income (Expense).................. (3,481) 3,287 Other, Net................................. (7,821) (18,853) ------------ ----------- 163,476 95,498 ----------- ----------- Income before Income Taxes..................... 361,529 357,064 Provision for Income Taxes.................. 91,000 89,266 ------------ ---------- Net Income................................... $ 270,529 $ 267,798 =========== =========== Earnings Per Common Share-basic.............. $ .06 $ .06 ==== ===== Earnings Per Common Share-diluted............ $ .06 $ .06 ==== ===== Weighted Average Number of Common and Common Equivalent Shares Outstanding-basic........ 4,433,858 4,425,039 ========= ========= Weighted Average Number of Common and Common Equivalent Shares Oustanding-diluted....... 4,497,357 4,458,497 ========= ========= Dividends Declared Per Common Share.......... $.04 $.04 ==== ==== -4-
ASTRO-MED, INC. UNAUDITED CONSOLIDATED STATEMENTS OF INCOME SIX MONTHS ENDED JULY 31, JULY 29, 1999 2000 ---- ---- Net Sales.................................... $21,461,938 $25,593,672 Cost of Sales................................ 12,840,942 15,021,163 ----------- ----------- Gross Profit................................. 8,620,996 10,572,509 Costs and Expenses: Selling, General and Administrative........ 7,263,416 7,905,553 Research and Development................... 1,673,839 2,235,634 ----------- ----------- 8,937,255 10,141,187 ----------- ----------- Operating Income (Loss)...................... (316,259) 431,322 Other Income (Expense): Investment Income.......................... 346,267 230,480 Interest Expense........................... (7,573) (2,198) Other, Net................................. 22,435 (90,899) ----------- ----------- 316,259 137,383 ----------- ----------- Income before Income Taxes................... 0 568,705 Provision for Income Taxes................... 0 (143,047) ----------- ------------ Net Income................................... $ 0 $ 425,658 =========== =========== Earnings Per Common Share-basic.............. $ .00 $ .10 ==== ===== Earnings Per Common Share-diluted............ $ .00 $ .10 ==== ===== Weighted Average Number of Common and Common Equivalent Shares Outstanding-basic........ 4,454,251 4,422,043 ========= ========= Weighted Average Number of Common and Common Equivalent Shares Oustanding-diluted....... 4,488,747 4,468,492 ========= ========= Dividends Declared Per Common Share.......... $.08 $.08 ==== ==== -5-
ASTRO-MED, INC. UNAUDITED CONSOLIDATED STATEMENTS OF CASH FLOWS SIX MONTHS ENDED JULY 31, JULY 29, 1999 2000 ---- ---- Cash Flows from Operating Activities: Net Income................................... $ 0 $ 425,658 Adjustments to Reconcile Net Income to Net Cash Used by Operating Activities: Depreciation and Amortization............ 724,685 669,320 Gain on Sale of Assets................... 3,912 -- Other.................................... (65,304) -- Changes in Assets and Liabilities: Accounts Receivable.................... (474,706) (994,142) Inventories............................ (229,387) (65,096) Other.................................. 136,825 22,231 Accounts Payable and Accrued Expenses.. (432,562) (2,086,099) Income Taxes........................... (76,760) (211,113) ---------- ---------- Total Adjustments.................... (413,297) (2,664,899) Net Cash Used by Operating Activities................... (413,297) (2,239,241) Cash Flows from Investing Activities: Proceeds from Sales of Securities Available for Sale......................... 2,616,150 2,726,901 Purchases of Securities Available for Sale................................... (2,772,170) (1,714,423) Proceeds from Sales of Assets................ 2,800 -- Refund of Purchase Price for Acquisition..... 225,000 Additions to Property, Plant and Equipment... (742,439) (396,186) ---------- ---------- Net Cash Provided (Used) by Investing Activities..................... (895,659) 841,292 Cash Flows from Financing Activities: Principle Payments on Capital Leases......... (86,788) (37,744) Proceeds from Common Shares Issued Under Employee Benefit Plans............... 9,331 48,120 Purchases of Treasury Stock.................. (404,001) -- Dividends Paid............................... (358,571) (353,682) ---------- ---------- Net Cash Used by Financing Activities...... (840,029) (343,306) Net Decrease in Cash and Cash Equivalents........ (2,148,985) (1,741,255) Cash and Cash Equivalents, Beginning of Period... 4,946,289 4,035,867 ---------- ---------- Cash Equivalents, End of Period.............. $2,797,304 $2,294,610 ========== ========== Supplemental Disclosures of Cash Flow Information: Cash Paid During the Period for: Interest................................. $ 7,260 $ 2,250 Income Taxes............................. $ 45,830 $ 232,823 -6-
ASTRO-MED, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS July 29, 2000 Note 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (a) The accompanying financial statements have been prepared by the Company, without audit, pursuant to the rules and regulations of the Securities and Exchange Commission, and reflect all adjustments which, in the opinion of management, are necessary for a fair statement of the results of the interim periods presented. These financial statements do not include all disclosures associated with annual financial statements and, accordingly, should be read in conjunction with footnotes contained in the Company's annual report on Form 10-K for the year ended January 31, 2000. (b) Earnings per common share has been computed and presented pursuant to the provisions of Statement of Financial Accounting Standards No. 128, Earnings Per Share, which was adopted in fiscal 1998. Net income per share basic 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, if dilutive, common equivalent shares for stock options outstanding during the period. <TABLE> <CAPTION> THREE MONTHS ENDED SIX MONTHS ENDED JULY 31, JULY 29, JULY 31, JULY 29, 1999 2000 1999 2000 ---- ---- ---- ---- <S> <C> <C> <C> <C> Weighted Average Common Shares Outstanding-basic ...................... 4,433,858 4,425,039 4,454,251 4,422,043 Diluted Effect of Options Outstanding...... 63,499 33,458 34,496 46,449 --------- --------- --------- --------- Weighted Average Common Shares Outstanding - diluted.................... 4,497,357 4,458,497 4,488,747 4,468,492 ========= ========= ========= ========= </TABLE> For the three month's ended July 31, 1999 and July 29, 2000, respectively, the diluted per share amounts do not reflect options outstanding of 636,500 and 1,000,875, respectively because their effect is anti-dilutive. For the six month's ended July 31, 1999 and July 29, 2000, respectively, the diluted per share amounts do not reflect options outstanding of 650,500 and 997,875, respectively because their effect is anti-dilutive. Note 2 - CHANGE IN ACCOUNTING PRINCIPLES Effective February 1, 1998, the Company adopted Statement of Financial Accounting Standards No. 130, "Reporting Comprehensive Income". This statement requires presentation of the components of comprehensive income, including the changes in equity from non-owner sources such as unrealized gains (losses) on securities and foreign currency translation adjustments. The Company's total comprehensive income is as follows. -7-
Note 2 - CHANGE IN ACCOUNTING PRINCIPLES (continued) <TABLE> <CAPTION> THREE MONTHS ENDED SIX MONTHS ENDED JULY 31, JULY 29, JULY 31, JULY 29, 1999 2000 1999 2000 ---- ---- ---- ---- <S> <C> <C> <C> <C> Comprehensive Income: Net Income............................ $270,529 $267,798 $ 0 $425,658 -------- -------- --------- -------- Other Comprehensive Income (Loss): Foreign currency translation adjustments, net of tax....... 64,354 (60,679) (23,663) (73,092) Unrealized gain (loss) in securities: Unrealized holding gain (loss) arising during the period, net of tax................... (99,514) 11,446 (159,577) 46,548 Reclassification adjustment for gain (loss) included in net income, net of tax....... -- -- -- (1,875) -------- -------- --------- -------- Other Comprehensive Income (Loss)..... (35,160) (49,233) (183,240) (28,419) Comprehensive Income (Loss) .......... $235,369 $218,565 $(183,240) $397,239 ======== ======== ========= ======== </TABLE> Note 3 - INVENTORIES Inventories are stated at the lower of cost (first-in, first-out) or market and include material, labor and manufacturing overhead. The components of inventories were as follows: JANUARY 31, JULY 29, 2000 2000 ---- ---- Materials and Supplies... $ 5,835,050 $ 5,956,072 Work-In-Process.......... 1,557,734 1,470,664 Finished Goods........... 4,144,694 4,175,838 ----------- ----------- $11,537,478 $11,602,574 =========== =========== -8-
ASTRO-MED, INC. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS RESULTS OF OPERATIONS: Astro-Med's sales in the quarter were $13,219,000, a 19% increase from the 2nd quarter sales of the prior year. Sales through the Company's domestic channels were $9,339,000, a 9% increment from last year, while export sales at $3,880,000, increased 52% from last year. Export sales volume is distributed globally through Europe, Asia, Middle East, South & Central America, Canada and Australia markets. In this quarter, shipments to European customers represented 60% of export sales, with sales of Telefactor products representing $906,000 of the increase. Relative to the Company's three product groups, the Grass-Telefactor-TM- group proved especially strong in this quarter, accounting for 38% of total revenue. The product group reached a record sales volume of $5,036,000, representing a 75% increase from the prior year's sales. The inclusion of the Telefactor product line at $1,822,000, coupled with shipments of the new Aurora-TM- product line drove the quarter's strong results. The Company's QuickLabel-Registered Trademark- Systems (QLS) products reached sales of $4,613,000 in the quarter, a 14% increase from last year. Sales of QLS products through the Company's domestic and export channels were both healthy. However, sales through the export channels were especially strong, rising 19% from the prior year level. Test and Measurement (T & M) sales, which include shipments of the Company's newest line of recorder workstations, Everest-TM-, were $3,570,000. Customer acceptance of the Everest by both Aerospace and non-aerospace companies continues to grow in spite of delayed capital budgetary approvals and funding timetables that somewhat tempered the current quarter's volume of Everest shipments. While 2nd quarter sales passed the 1st quarter's volume by 8%, sales of T & M products ran behind the prior year's 2nd quarter by 14%. Volatility in the aerospace market has continued to affect the Company's consistent growth strategy. After two quarters, the Company's current year's sales are $25,593,000. This volume is running ahead of the prior year by 19%, as a combination of QLS unit growth (up 16%), the addition of the Telefactor product line ($3,230,000) and new product introductions from Grass Instruments (Aurora) positively impacting this year's growth. The T & M product group shows a mixed performance through six months, exhibiting sales growth between the 1st two quarters of this year, but lagging behind in aggregate dollars from last year's sales by 8%. Gross profits in the 2nd quarter totaled $5,402,000, an 18% improvement over last year. The mix of sales in the 2nd quarter produced a gross profit margin of 40.9%, slightly lower than last year's 41.2% gross profit margin. For the year, gross profit dollars are $10,572,000, a 23% improvement from last year. Relative to gross -9-
profit margins, this year's sales mix generated a gross profit margin of 41.3%, an improvement on the prior year's gross profit margin of 40.2%. The second quarter's operating expenses of $5,141,000 increased 18% from last year's second quarter spending. The increment is traceable exclusively to personnel additions in sales, service, research and development, and general and administrative functions associated with the Telefactor acquisition. On a year to date basis, operating expenses were $10,141,000, 13% higher than the prior year's first six months. Exhibiting a similar profile, the increase is due to personnel additions from the Telefactor acquisition. Operating income reached $261,000 in the quarter, a strong improvement from the first quarter of 54% and a 32% increase from the prior year's 2nd quarter's operating increase. Our operating profit margin also improved from last year to reach 2% of sales. For the six-month period, operating income was $431,000, an improvement of $748,000 from the prior year's operating loss of $316,000. The current year's operating margin on sales is 1.7% as compared with a negative 1.5% for the comparable period last year. Other income in the quarter was $95,000, down from the prior year's $163,000. The change is due to lower interest and dividend income stemming from a reduced level of investable funds. For the first six months, the Company's other income totaled $137,000 as compared to other income for the prior year of $316,000. The result is traceable to lower interest income and foreign currency translation adjustments in the current year. The reduced income level also stems from a lower pool of investable funds. Net income in the quarter was $268,000 equal to 6(cent) per common share. This result approximates last year's net income in the 2nd quarter of $271,000 or 6(cent) per common share. The return on sales for the quarter was 2% down from the prior year's return of 2.5%. For the year, the Company has earned net income of $426,000 or 10(cent) per common share, which compares favorably to the Company's break even performance for last year's first six months. FINANCIAL CONDITION: The Company's balance sheet at quarter's end consisted of Assets of $42,991,000, Liabilities of $9,677,000 and Shareholders' Equity of $33,314,000. Relative to liquidity, the Company's combined Cash and Securities Available for Sale declined $2,754,000 from year-end to $8,494,000 at the end of the quarter. The decrease was due to cash being consumed in funding trade payable obligations as well as an increase in accounts receivable. Relative to capital asset efficiency, the Company's accounts receivable investment of $10,265,000 represents 65 days sales outstanding whereas the inventory balances of $11,603,000 reflects a turnover rate of 2 times. Capital expenditures during the first six months were $396,000 with spending confined to machinery and equipment, information technology hardware and software, and building improvements. -10-
We paid $354,000 in cash dividends to shareholders during the first six months. At the end of the quarter, the Company's book value per share was $7.47 per share, up nominally from the year end value of $7.39 per share. SAFE HARBOR STATEMENT This document contains forward-looking statements based on current expectations that involve a number of risks and uncertainties. The factors that could cause actual results to differ materially include the following: general economic conditions and growth rates in the data acquisition, digital color printing, and neurophysiology markets, including but not limited to the electronic, printing, and medical markets; competitive factors and pricing pressures; changes in product mix; changes in the seasonality of demand patterns; the timely development and acceptance of new products; inventory risks due to shifts in market demand; component constraints and shortages; risk of non-payment of accounts receivable; ramp up and expansion of manufacturing capacity; risks associated with the Euro conversion; and the risks described from time to time in Astro-Med's reports filed with the Securities and Exchange Commission. -11-
PART II. OTHER INFORMATION Item 6. Exhibits and Reports on Form 8-K (a) Exhibits: None. (b) Reports on Form 8-K: No reports on Form 8-K have been filed during the quarter for which this report is filed. SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. ASTRO-MED, INC. (Registrant) Date: September 5, 2000 By ----------------------------- A. W. Ondis, Chairman (Principal Executive Officer) Date: September 5, 2000 By ----------------------------- Joseph P. O'Connell, Vice President and Treasurer (Principal Financial Officer) -12-