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 August 04, 2001 ------------------------------------------------- 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 - 4,265,485 shares (excluding treasury shares) as of August 31, 2001 -1-
ASTRO-MED, INC. INDEX <TABLE> <CAPTION> Page No. <S> <C> Part I. Financial Information: Consolidated Balance Sheets - August 4, 2001 and January 31, 2001....................... 3 Consolidated Statements of Income - Three Months Ended August 4, 2001 and July 29, 2000 ...... 4 Consolidated Statements of Income - Six Months Ended August 4, 2001 and July 29, 2000 ........ 5 Consolidated Statements of Cash Flows - Six Months Ended August 4, 2001 and July 29, 2000 ........ 6 Notes to Consolidated Financial Statements - August 4, 2001............................................. 7-9 Management's Discussion and Analysis of Financial Condition and Results of Operations....................... 10-12 Part II. Other Information................................... 13 </TABLE> -2-
Part I. FINANCIAL INFORMATION ASTRO-MED, INC. CONSOLIDATED BALANCE SHEETS <TABLE> <CAPTION> August,4 January 31, ASSETS 2001 2001 ---- ---- (Unaudited) <S> <C> <C> CURRENT ASSETS Cash and Cash Equivalents .................................................... $ 2,106,649 $ 806,069 Securities Available for Sale ................................................ 4,058,580 5,362,523 Accounts Receivable, Net ..................................................... 8,328,505 10,663,624 Inventories, Net ............................................................. 11,598,509 10,782,425 Prepaid Expenses and Other Current Assets .................................... 2,135,191 2,038,227 ------------ ------------ Total Current Assets .................................................... 28,227,434 29,652,868 PROPERTY, PLANT AND EQUIPMENT ...................................................................... 23,186,824 22,547,305 Less Accumulated Depreciation ................................................ (14,935,751) (14,259,992) ------------ ------------ 8,251,073 8,287,313 OTHER ASSETS Goodwill ..................................................................... 2,392,213 2,465,494 Amounts Due from Officers .................................................... 480,314 480,314 Other ........................................................................ 83,555 172,941 ------------ ------------ 2,956,082 3,118,749 $ 39,434,589 $ 41,058,930 ============ ============ LIABILITIES AND SHAREHOLDERS' EQUITY CURRENT LIABILITIES Accounts Payable ............................................................. $ 3,687,435 $ 3,711,248 Accrued Compensation ......................................................... 1,201,516 1,974,223 Accrued Expenses ............................................................. 1,587,749 1,916,597 Income Taxes Payable ......................................................... 30,330 96,058 Current Maturities of Long-Term Debt ......................................... 44,813 46,832 ------------ ------------ Total Current Liabilities ............................................... 6,551,843 7,744,958 LONG-TERM DEBT, Less Current Maturities ........................................ -- 24,755 DEFERRED INCOME TAXES .......................................................... 923,914 996,157 SHAREHOLDERS' EQUITY Preferred Stock, $10 Par Value, Authorized 100,000 Shares, None Issued ..................................... -- -- Common Stock, $.05 Par Value, Authorized 13,000,000 Shares, Issued, 5,162,933 5,160,780 Shares, respectively ............................................. 258,147 258,039 Additional Paid-In Capital ................................................... 5,629,597 5,706,870 Retained Earnings ............................................................ 32,283,684 32,667,859 Treasury Stock, at Cost (897,895 and 930,895 Shares, respectively) .............................................. (5,860,610) (6,076,003) Accumulated Other Comprehensive Loss ......................................... (351,986) (263,705) ------------ ------------ 31,958,832 32,293,060 $ 39,434,589 $ 41,058,930 ============ ============ </TABLE> -3-
ASTRO-MED, INC. UNAUDITED CONSOLIDATED STATEMENTS OF INCOME Three Months Ended ------------------ August 4, July 29, 2001 2000 ---- ---- Net Sales................................... $12,131,706 $13,381,804 Cost of Sales............................... 7,365,737 7,979,218 ----------- ----------- Gross Profit................................ 4,765,969 5,402,586 Costs and Expenses: Selling, General and Administrative....... 4,156,183 3,998,476 Research and Development.................. 928,920 1,142,544 ----------- ----------- 5,085,103 5,141,020 ----------- ----------- Operating Income(Loss)...................... (319,134) 261,566 Other Income (Expense): Investment Income......................... 79,858 111,064 Interest Income (Expense)................. (1,471) 3,287 Other, Net................................ (1,825) (18,853) ----------- ----------- 76,562 95,498 ----------- ----------- Income (Loss) before Income Taxes........... (242,572) 357,064 (Provision) Benefit for Income Taxes........ 48,514 (89,266) ----------- ----------- Net Income (Loss)........................... $ (194,058) $ 267,798 =========== =========== Net Income (Loss) Per Common Share-basic and diluted.................. ($ 0.05) $ 0.06 =========== =========== Weighted Average Number of Common Shares Outstanding - basic 4,264,406 4,425,039 =========== =========== Weighted Average Number of Common and Common Equivalent Shares Outstanding - diluted... 4,264,406 4,468,497 =========== =========== Dividends Declared Per Common Share......... $ .04 $ .04 =========== =========== -4-
ASTRO-MED, INC. UNAUDITED CONSOLIDATED STATEMENTS OF INCOME Six Months Ended ---------------- August 4, July 29, 2001 2000 ---- ---- Net Sales...................................... $24,567,716 $25,908,578 Cost of Sales.................................. 14,749,650 15,336,069 ---------- ---------- Gross Profit................................... 9,818,066 10,572,509 Costs and Expenses: Selling, General and Administrative.......... 8,283,265 7,905,553 Research and Development..................... 1,837,454 2,235,634 ---------- ---------- 10,120,719 10,141,187 Operating Income (Loss)........................ (302,653) 431,322 Other Income (Expense): Investment Income............................ 164,986 230,480 Interest Expense............................. (2,760) (2,198) Other, Net................................... 84,937 (90,899) ----------- ---------- 247,163 137,383 Income (Loss) before Income Taxes.............. (55,490) 568,705 (Provision)Benefit for Income Taxes............ 11,096 (143,047) ---------- ---------- Net Income (Loss).............................. $ (44,394) $ 425,658 ========== ========== Net Income (Loss) Per Common Share-basic and diluted...................... $ (0.01) $ 0.10 ========== ========== Weighted Average Number of Common Shares Outstanding - basic................... 4,252,809 4,422,043 ========== ========== Weighted Average Number of Common and Common Equivalent Shares Outstanding - diluted...... 4,252,809 4,468,492 ========== ========== Dividends Declared Per Common Share............ $ .08 $ .08 ========== ========== -5-
ASTRO-MED, INC. UNAUDITED CONSOLIDATED STATEMENTS OF CASH FLOWS Six Months Ended ---------------- August 4, July 29, 2001 2000 ---- ---- Cash Flows from Operating Activities: Net Income (Loss)............................ $ (44,394) $ 425,658 Adjustments to Reconcile Net Income (Loss) to Net Cash Provided (Used) by Operating Activities: Depreciation and Amortization........... 749,040 669,320 Other................................... (160,524) - Changes in Assets and Liabilities: Accounts Receivable...................... 2,335,119 (994,142) Inventories.............................. (930,069) (65,096) Other.................................... 30,879 22,229 Accounts Payable and Accrued Expenses.... (995,422) (2,086,099) Income Taxes............................. (65,728) (211,113) ----------- ------------ Total Adjustments...................... 963,295 (2,664,901) Net Cash Provided (Used) by Operating Activities..................... 918,901 (2,239,243) Cash Flows from Investing Activities: Proceeds from Sales of Securities Available for Sale......................... 2,200,044 2,726,901 Purchases of Securities Available for Sale................................... (896,101) (1,714,423) Refund of Purchase Price for Acquisition..... - 225,000 Additions to Property, Plant and Equipment... (563,990) (396,186) ----------- ------------ Net Cash Provided by Investing Activities.. 739,953 841,292 Cash Flows from Financing Activities: Principle Payments on Capital Leases......... (26,775) (37,744) Proceeds from Common Shares Issued Under Employee Benefit Plans............... 8,282 48,120 Dividends Paid............................... (339,781) (353,682) ----------- ------------ Net Cash Used by Financing Activities...... (358,274) (343,306) Net Increase (Decrease) in Cash and Cash Equivalents.............................. 1,300,580 (1,741,257) Cash and Cash Equivalents, Beginning of Period... 806,069 4,035,867 ----------- ------------ Cash Equivalents, End of Period.............. $ 2,106,649 $ 2,294,610 =========== ============ Supplemental Disclosures of Cash Flow Information: Cash Paid During the Period for: Interest................................. $ 2,760 $ 2,250 Income Taxes............................. $ 89,319 $ 232,823 -6-
ASTRO-MED, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS August 4, 2001 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, 2001. (b) Net income (loss) per common share has been computed and presented pursuant to the provisions of Statement of Financial Accounting Standards No. 128, Earnings Per Share. Net income (loss) per share is based on the weighted average number of shares outstanding during the period. Net income (loss) per share assuming dilution is based on the weighted average number of shares and, if dilutive, common equivalent shares for stock options outstanding during the period. <TABLE> <CAPTION> Three Months Ended Six Months Ended ------------------ ---------------- August 4, July 29, August 4, July 29, 2001 2000 2001 2000 ---- ---- ---- ---- <S> <C> <C> <C> <C> Weighted Average Common Shares Outstanding-basic........................ 4,264,406 4,425,039 4,252,809 4,422,043 Diluted Effect of Options Outstanding...... - 33,458 - 46,449 --------- --------- --------- --------- Weighted Average Common Shares Outstanding - diluted.................... 4,264,406 4,458,497 4,252,809 4,468,492 ========= ========= ========= ========= </TABLE> For the three months ended August 4, 2001 and July 29, 2000, respectively, the diluted per share amounts do not reflect options outstanding of 1,687,450 and 1,000,875, respectively because their effect is anti-dilutive. For the six months ended August 4, 2001 and July 29, 2000, respectively, the diluted per share amounts do not reflect options outstanding of 1,687,450 and 997,875, respectively because their effect is anti-dilutive. (c) Derivative Instruments and Hedging: On February 1, 2001, the Company adopted SFAS No. 133, Accounting for Derivative Instruments and Hedging Activities, as amended by SFAS No. 137, Accounting for Derivative Instruments and Hedging Activities - Deferral of the Effective Date of SFAS No. 133, and as amended in June 2000 by SFAS No. 138 Accounting for Certain Derivative Instruments and Certain Hedging Activities - an Amendment to SFAS No. 133 (combined SFAS No. 133). 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 adoption of this statement did not have a material impact on the Company's results of operations or financial position. (d) Revenue Recognition: Revenue is recognized when products or services are performed and the risk and rewards of ownership have been transferred. -7-
(e) In July 2000, the Emerging Issues Task Force, a body of the Financial Accounting Standards Board, reached a consensus on Issue No. 00-10, Accounting for Shipping and Handling Fees and Costs. The consensus requires companies to start reporting amounts billed to customers in a sales transaction related to shipping and handling as revenue in the fourth quarter of fiscal year 2001. The Company previously reported these amounts as a reduction of cost of goods sold. All previous periods presented have been reclassified to conform to the current practice. The amount reclassed for three-months and six-months ending July 29, 2000 were $162,000 and $315,000, respectively. (f) In July 2001, the Financial Accounting Standards Board released for issuance SFAS No. 141, "Business Combinations" and SFAS No. 142, "Goodwill and Other Intangible Assets." SFAS No. 141 requires that the purchase method of accounting be used for all business combinations initiated after June 30, 2001. SFAS No. 142 changes the accounting for goodwill from an amortization method to an impairment-only approach. Under SFAS No. 142, amortization of goodwill to earnings will cease and instead, the carrying value of goodwill will be evaluated for impairment on at least an annual basis. The Company will adopt SFAS No. 141 and SFAS No. 142 effective January 31, 2002. The Company is evaluating the impact of adoption of these standards and has not yet determined the effect of adoption on its financial statements. Note 2 - COMPREHENSIVE INCOME The Company's total comprehensive income is as follows. <TABLE> <CAPTION> Three Months Ended Six Months Ended ------------------ ---------------- August 4, July 29, August 4, July 29, 2001 2000 2001 2000 ---- ---- ---- ---- <S> <C> <C> <C> <C> Comprehensive Income: Net Income (Loss)..................... ($194,058) $267,798 ($ 44,394) $425,658 -------- -------- -------- -------- Other Comprehensive Loss: Foreign currency translation adjustments, net of tax......... (22,190) (60,679) (93,580) (73,092) Unrealized gain (loss) in securities: Unrealized holding gain (loss) arising during the period, net of tax..................... (17,823) 11,446 4,674 46,548 Reclassification adjustment for gain (loss) included in net income, net of tax......... - - 625 (1,875) -------- -------- -------- -------- Other Comprehensive Loss.............. (40,013) (49,233) (88,281) (28,419) Comprehensive Income (Loss) .......... ($234,071) $218,565 ($132,675) $397,239 ======== ======== ======== ======== </TABLE> -8-
Note 3 - INVENTORIES Inventories, net of reserves 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: August 4, January 31, 2001 2001 ---- ---- Materials and Supplies... $ 6,112,241 $ 5,921,934 Work-In-Process.......... 1,381,348 1,282,466 Finished Goods........... 4,104,920 3,578,025 ----------- ----------- $11,598,509 $10,782,425 =========== =========== -9-
ASTRO-MED, INC. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Results of Operations: - ---------------------- For the Three-Months Ending August 4, 2001 vs. July 29, 2000 - ------------------------------------------------------------ Sales in the second quarter were $12,132,000, a decrease of 9% from the prior year's second quarter sales of $13,382,000. Domestic sales were $8,795,000, down from $9,501,000 for the second quarter of the prior fiscal year. Sales through the Company's international channels were $3,337,000, down 14% over the previous year's second quarter sales of $3,881,000. Our international sales continued to be negatively impacted by the sluggish European economy and by the strong U.S. dollar. Sales were lower in each of the Company's product groups. Grass- Telefactor's sales were $4,400,000, a 14% decrease from the $5,110,000 of sales reported in the second quarter of the previous year. This decrease in clinical sales resulted primarily from an unusually large backlog in the prior year. QuickLabel Systems (QLS) product sales were $4,761,000, down 4% from the $4,958,000 the previous year. This decrease is attributed to the decrease in hardware sales as a result of customers delaying their capital spending. Test & Measurement (T&M) sales in the quarter were $2,971,000, down 10% from $3,314,000 reported in the second quarter of the previous year. The decline in T&M is a result of delays in delivering the new Dash 18 to the marketplace. Gross profit dollars were $4,766,000 in the quarter. The gross profit margin realized in the quarter was 39.3%, a decrease from last year's margin of 40.4%. Product mix and lower margins in T&M and QLS account for this quarter's results. Operating Expenses in the quarter were $5,085,000. Selling and general administrative spending rose 4% from last year to $4,156,000 due to higher international dealer commissions in this quarter as compared to last year. Excluding the impact of these commissions the selling and general administrative spending was approximately flat with the previous year. Research and development funding decreased 19% from the prior year to $929,000. In the quarter, R & D spending was 7.7% of sales down from last year's rate of 8.5%. Operating loss in the quarter was $319,000 as compared to the operating income for last year's second quarter of $262,000. Other income for the quarter decreased to $77,000 from last year's $95,000. Net loss in the current quarter was $194,000, equal to $0.05 loss per share. This compares to net income of $268,000, equal to $0.06 net income per share in the prior year's quarter. -10-
Results of Operations (continued): - ---------------------------------- For the Six-Months Ending August 4, 2001 vs. July 29, 2000 - ---------------------------------------------------------- Sales in the first half of this year were $24,568,000, down 5% from the prior year's sales of $25,909,000. Domestic sales were $17,835,000, down from $18,554,000 for the first half of the prior fiscal year. The decline in the domestic sales is attributed to the 11% decline in the QLS domestic sales. Domestic T&M and Grass-Telefactor sales were essentially flat with the prior year. Sales through the Company's international channels were $6,733,000, 9% lower than the previous year's first half sales of $7,355,000. Our international sales continued to be negatively impacted by the sluggish European economy and by the strengthening of the U.S. dollar. Sales were lower in each of the Company's product groups. Grass- Telefactor's sales decreased to $8,919,000, a 5% decrease over the $9,368,000 of sales reported in the first half of the previous year. This decrease in clinical sales resulted primarily from an unusually large backlog in first half of the prior year. QuickLabel Systems (QLS) product sales were $9,660,000, down 5% from the $10,214,000 the previous year. This decrease is attributed to the decrease in hardware sales as a result of our customers delaying their capital spending. Test & Measurement (T&M) sales were $5,989,000, down 5% from $6,327,000 reported in the previous year. The decline in T&M sales is a result of delays in delivering the new Dash 18 to the marketplace. Gross profit dollars were $9,818,000, a 7% decrease over last year. The gross profit margin realized in the first half of this fiscal year was 40.0%, a decrease from last year's margin of 40.8%. Product mix and lower margins in T&M and QLS account for the decline in the margin. Operating Expenses in the first half were $10,121,000 down slightly from the prior year. Selling and general administrative spending rose 5% from last year to $8,283,000 due to higher international dealer commissions in the first half of this year as compared to last year. Excluding the impact of these higher international dealer commissions selling and general administrative spending was approximately flat with the prior year. Research and development funding decreased 18% from the prior year to $1,837,000. In the first half of this year, R & D spending was 7.5% of sales down from last year's rate of 8.6%. Operating loss in the first half of this year was $303,000 as compared to operating income of $431,000 in the prior year. Other income increased to $247,000 from last year's $137,000. The increase is attributed to a $125,000 gain relating to the settlement of litigation on a contract dispute. Net loss in the first half of this year was $44,000, equal to $0.01 loss per share. This compares to net income of $426,000, equal to $0.10 income per share, in the prior year. -11-
Financial Condition: - -------------------- The Company's Statements of Cash Flows for the six-months ending August 4, 2001 and July 29, 2000 are included on page 6. Net cash flow provided by operating activities for the first half of this year was $919,000 versus cash flow used by operating activities of $2,239,000 in the previous year. Cash and securities available for sale at August 4, 2001 totaled $6,165,000, which approximated the balance at year-end. The collection cycle improved by 11 days decreasing to 55 days sales outstanding at the end of the second quarter as compared to the 66 days sales outstanding at year-end. Inventory rose to $11,599,000 from the year-end level $10,782,000 as the Company increased inventory in anticipation of the new Dash 18 and Pronto product lines. In addition, inventory increased as a result of items being manufactured for anticipated sales that were delayed. As a result of these items, inventory turns declined to 2.0 from the year-end turns of 2.5. Capital expenditures during the six-months ended August 4, 2001 were $564,000, up 42% from the prior year amount of $396,000. The increase is primarily attributed to the purchase of machinery and equipment that will improve our manufacturing process. In the second quarter, the Company entered into a new $2.0 million line of credit agreement, all of which is currently available. Any borrowings on this line of credit bear interest at LIBOR plus 11/2%. With the addition of this line of credit the Company currently has $3.5 million of available and unused borrowings. In the second quarter, the Company entered into a foreign exchange zero cost collar agreement to minimize the risk associated with changes in the foreign exchange rates on certain foreign denominated receivables. This agreement is a combination of buying a put and selling a call or vice versa and effectively provides the Company a hedge on certain foreign denominated receivables between an upper and a lower exchange rate limit. The notional amount of the agreement is $200,000. The agreement expired on August 3, 2001. The spot rate on the date the contract expired was within the collar limits and neither party exercised its option. Safe Harbor Statement - --------------------- This document contains forward-looking statements based on current expectations that involve a number of risks and uncertainties. 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 impact of changes in foreign currency exchange rates on the results of operations; the ability to successfully integrate acquisitions; the business abilities and judgment of personnel and changes in business strategy. -12-
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 7, 2001 By /s/ A. W. Ondis ----------------------------- A. W. Ondis, Chairman (Principal Executive Officer) Date: September 7, 2001 By /s/ Joseph P. O'Connell ----------------------------- Joseph P. O'Connell, Vice President and Treasurer (Principal Financial Officer) -13-