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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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FORM 10-K
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[X]ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934]
For the fiscal year ended January 31, 2001
OR
[X]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
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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 Identification No.)
incorporation or organization)
600 East Greenwich Avenue, 02893
West Warwick, Rhode Island (Zip Code)
(Address of principal executive offices)
Registrant's telephone number, including area code: (401) 828-4000
Securities registered pursuant to Section 12(b) of the Act:
Name of each exchange
Title of each class on which registered
------------------- ---------------------
None None
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 [_] No [X]
State the aggregate market value of the voting stock held by
non-affiliates of the registrant as of March 23, 2001.
Common Stock, $0.05 Par Value: $12,017,084
Indicate the number of shares outstanding (excluding treasury shares)
of each of the issuer's classes of common stock as of March 23, 2001.
Common Stock, $0.05 Par Value: 4,230,224 shares
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the Company's definitive proxy statement for the 2001 annual
meeting of shareholders are incorporated by reference into Part III.
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9
ASTRO-MED, INC.
FORM 10-K ANNUAL REPORT
TABLE OF CONTENTS
Page
----
PART I
Item 1. Business................................................... 11
Item 2. Properties................................................. 16
Item 3. Legal Proceedings.......................................... 16
Item 4. Submission of Matters to a Vote of Security Holders........ 16
PART II
Item 5. Market for the Registrant's Common Stock and Related
Stockholder Matters........................................ 17
Item 6. Selected Financial Data.................................... 17
Item 7. Management's Discussion and Analysis of Financial Condition
and Results of Operations.................................. 18
Item 7A. Quantitative and Qualitative Disclosures About Market
Risk....................................................... 21
Item 8. Financial Statements and Supplementary Data................ 22
Item 9. Changes in and Disagreements with Accountants on Accounting
and Financial Disclosure................................... 22
PART III
Item 10. Directors and Executive Officers of the Registrant......... 23
Item 11. Executive Compensation..................................... 24
Item 12. Security Ownership of Certain Beneficial Owners and
Management................................................. 24
Item 13. Certain Relationships and Related Transactions............. 24
PART IV
Item 14. Exhibits, Financial Statement Schedules and Reports on Form
8-K........................................................ 24
10
ASTRO-MED, INC.
PART I
Item 1. Business
General
Astro-Med, Inc., (the Company) 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 (T&M), QuickLabel(R)
Systems (QLS) and Grass-Telefactor. The Company's products are distributed
both in North America and internationally through its direct sales force and
authorized distributors and agents located in approximately 60 countries.
Approximately 27% of the Company's sales were made outside of the United
States. The Company will describe the results of operations during the twelve
months ending January 31, 2001 (fiscal 2001).
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 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 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.
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 technology which
provides the ability to acquire electronic data, process, analyze, store and
present it in a variety of useable forms. 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 T&M products receive scientific data, process, analyze and
present it in a visible form while storing it for later review and study. The
digital printer products group known as QLS, includes printer, printer
applicators, software and media that create product labels in one or many
colors from a computer file. The Grass-Telefactor products process data that
represents the neurophysiological status of living creatures--from crayfish to
man--and records and analyzes it electronically for study and review by
clinicians and research scientists.
11
T&M Products
T&M is a leading supplier of data recording equipment for the aerospace,
automotive, paper, metal mill, power and telecommunications industries. In
fiscal 2001, the Company added the Dash 18, a touchscreen eighteen-channel
recorder with video and audio capabilities, to its successful line of portable
data acquisition recorders, which includes the Dash 2, Dash 4u, Dash 8n, Dash
8u and Dash 16u recorders.
The Everest(TM), a telemetry workstation, introduced in fiscal 2000
specifically for the aerospace industry, has solidified T&M systems'
leadership position in this important market. 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 the
demanding aerospace as well as other commercial applications.
QLS Products
The Company's QLS product line is composed of a line of high-technology
digital label printers, automatic labelers, print and apply systems, labeling
software and consumables. Innovative QLS products change the way companies do
business by providing just-in-time, in-plant label production capabilities and
labeling automation through the Company's advanced digital thermal transfer
printing technologies.
QLS Digital Color Label Printers
QLS digital color labels printers are designed to print multiple colors,
text and barcodes in a single pass on product labels 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 personal computer, Macintosh, mainframe or
AS/400 midrange computing platform.
Seven models comprise 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 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.
QLS Monochrome Barcode Label Printers
The Company also manufactures monochrome thermal/thermal transfer printers
that produce high-quality barcode labels quickly and easily in almost any
format. The TOP HAND QLS-500(TM) printer produces labels up to 5 inches wide
at speeds of up to 10 inches per second while the RANGE BOSS 8 inch wide label
printer creates shipping labels and other large formats quickly and reliably.
During fiscal 2001, the Company introduced the LRU(TM) (Less Ribbon Used), a
high-capacity industrial barcode printer with patented RibbonRation(TM) ribbon
management system. The LRU(TM) was designed to provide customers with a system
to reduce ribbon costs where only a very small portion of a label requires the
printing of variable information.
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.
The Company's software is designed to facilitate the integration of the QLS
printers within today's high-technology production environments, and includes
QLS MicroCell(TM) halftoning algorithms for exceptional image quality and
color output.
12
QLS Label Applicators and Print & Apply Systems
To complement the QLS printers, the Company manufactures a complete line of
automatic labelers that can apply labels to all types of packaging, from
cartons to "clamshell" containers. Applicator models include the AD-2550, AD-
2600, AT-2650 and AD 2800, 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. During fiscal 2001, the Company introduced
a new product, the LRU Print & Apply system, which incorporates as its print
engine the powerful LRU(TM) barcode printer. The LRU-PA, as it is known, is
equipped to efficiently print and apply large volumes of labels to cartons and
many types of product packaging in an automated production line environment,
while minimizing the cost per label with its patented RibbonRation(TM) ribbon
management system.
QLS Consumables: Thermal Transfer Ribbon and Labels
The Company offers a large variety of aftermarket printer consumables that
include thermal transfer ribbons, labels and tags. These consumables are not
only used in the Company's printers but also in any other manufacturer's
printer applications. 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 reliability. The products and services offered by Grass-Telefactor
are used worldwide by universities, hospitals, medical centers and companies
engaged in a variety of clinical and research activities.
For clinical applications, Grass-Telefactor has chosen to focus on the
dynamic field of polysomnography (sleep disorders monitoring), and on 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 a powerful software suite called TWin which provides
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
been active developing new products and has released a new product line
including the Beehive(TM) Millennium for long term monitoring and the
Aurora(TM) digital EEG system to complement the Heritage PSG.
For biomedical research applications, Grass-Telefactor offers hardware and
software for data acquisition and analysis of data. The research product line
builds on a strong foundation with world-renowned Grass amplifiers, such as
the Model 15RX modular, computer-controlled biomedical amplifier system.
Rounding out the offerings from Grass-Telefactor, the Company offers a
complete line of clinical and research instruments and supplies, including
stimulators, transducers, electrodes and consumables. The supplies and
accessories product line now uses e-commerce to reach the worldwide market
through the Grass-Telefactor Online Store, www.grass-telefactor.com.
13
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--T&M, QLS 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 applications for other patents that are
pending. The Company has patents covering its T&M recording products as well
as several patents for its QLS dual sided label printers and four-color label
printers. 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 2001, 2000 and 1999, the
Company incurred costs of $4,255,434, $3,353,883 and $2,938,820, respectively,
on Company-sponsored product development. The Company is committed to product
development as a requisite to its growth and expects to continue its focus on
research and development efforts in fiscal 2002.
Marketing and Competition
The Company competes worldwide in many markets including clinical and
research medicine, aerospace, automotive and general manufacturing. The
Company retains its leadership position in its respective markets by virtue of
proprietary technology, product reputation, delivery, technical assistance and
service to customers.
The products of the Company are marketed worldwide by advertising and
promotion using major national and international trade journals, scientific
meetings and trade shows, direct mailing campaigns, and the Worldwide Web.
The products are sold by direct field sales persons as well as independent
dealers and representatives. In the United States, the Company has twenty-two
direct field sales people located in major cities from coast to coast
specializing in either Recorders and Data Acquisitions systems, Color Label
printers and media systems, or Neurological Instrumentation. Additionally, the
Company has direct field sales and service centers in Canada, England, France,
Germany, Italy, and Holland. In the remaining parts of the world, the Company
retained approximately 90 independent dealers and representatives selling and
marketing its products in 60 countries. In fiscal 2001, 27% of the Company's
revenues were from international sales.
The Company has a number of competitors in each of the three products
groups and markets that it serves. In the T&M area, the Company feels that it
leads the field in Data Acquisition Recorders. It competes with the Gould
Instrument Division of Nicolet, a Thermo Electron company and Western
Graphtec, the US subsidiary of Graphtec, a Japanese company.
14
In the Color Label Printer product group, the Company feels it leads the
world in color printing using the thermal transfer printing technology. The
Company introduced the very first thermal transfer color printers late in 1995
and to this date faces only one competitor, TEC.
The Grass-Telefactor products of the company are devoted to clinical
applications in EEG, Polysomnography (PSG), and Long Term Epilepsy Montioring
(LTM). There are about fourteen companies that compete in one or more of the
three modalities (EEG, PSG, LTM) but none are the clear leader. The Company
feels it offers superior products based upon its long history and pioneering
the field since 1935. The Company, unlike most of its competitors, designs,
manufactures, and produces complete systems including transducers, amplifiers,
sensors, and Windows based application software. Additionally, the Company
produces a range of life science products for the research market. Many of the
latter products eventually find their way into clinical applications.
In fiscal 2001, no single customer accounted for 10% of the Company's net
sales in any of the last three fiscal years. The Company's products were sold
to approximately 5,500 customers.
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 2001, 2000 and 1999, net sales to customers in various geographic
areas outside the United States, primarily in Canada and Western Europe,
amounted to $13.9 million, $12.5 million and $11.0 million, respectively.
Order Backlog
The backlog fluctuates regularly. It consists of a blend of orders for end
user customers as well as original equipment manufacturer 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
$182,000 a year for the Company's last five fiscal years.
As of March 23, 2001, the Company employed approximately 390 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.
15
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.
Approximate
Square
Location Footage Principal Use
-------- ----------- ------------------------------------
West Warwick, RI........... 116,000 Corporate headquarters, research and
development, manufacturing
Braintree, MA.............. 91,000 Manufacturing
Slough, England............ 1,700 Sales and service
The Company also leases facilities in eight locations. The following
information pertains to each location:
Approximate
Square
Location Footage Principal Use
-------- ----------- ------------------------------------
West Conshohocken, PA...... 10,000 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
Zwolle, Netherlands........ 1,300 Sales and service
Schaumburg, IL............. 1,131 Sales and service
Irvine, CA................. 980 Sales and service
Milano, Italy.............. 753 Sales and service
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.
16
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.
Dividends
Years Ended January 31, High Low Per Share
----------------------- ----- ----- ---------
2001
First Quarter...................................... $7.50 $5.19 $0.04
Second Quarter..................................... $6.63 $5.00 $0.04
Third Quarter...................................... $6.00 $4.75 $0.04
Fourth Quarter..................................... $4.93 $3.09 $0.04
2000
First Quarter...................................... $7.00 $4.88 $0.04
Second Quarter..................................... $7.00 $5.50 $0.04
Third Quarter...................................... $6.38 $5.50 $0.04
Fourth Quarter..................................... $6.44 $5.13 $0.04
The Company had approximately 400 shareholders of record on March 23, 2001,
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. Visit
our Investor Relations website at www.astro-med.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)
2001 2000 1999 1998 1997
------- ------- ------- ------- -------
Results of Operations:
Net Sales............................ $51,688 $46,143 $42,166 $44,377 $44,730
Net Income........................... 302 937 496 1,041 2,288
Earnings per Common Share--Basic..... .07 .21 .11 .21 .46
Earnings per Common Share--Diluted... .07 .21 .11 .21 .46
Dividends Declared per Common Share.. .16 .16 .16 .16 .12
Financial Condition:
Working Capital...................... $21,908 $22,453 $25,507 $27,111 $28,810
Total Assets......................... 41,059 45,385 41,754 42,814 43,321
Long-Term Debt, less Current
Maturities.......................... 25 72 17 228 258
17
Item 7. Management's Discussion and Analysis of Financial Condition and
Results of Operations
Results of Operations
Fiscal 2001 compared to Fiscal 2000
The Company's sales in fiscal 2001 increased $5.6 million to $51.7 million,
a 12% increase over fiscal 2000 sales of $46.1 million. In accordance with
Emerging Issues Task Force (EITF) Issue No. 00-10 Accounting for Shipping and
Handling Fees and Costs, in the fourth quarter of fiscal year 2001, the
Company began to report amounts of shipping and handling billed to customers
in sales. The Company had previously reported these billings as a reduction in
costs of sales. All periods presented have been reclassified to conform to the
current practice.
The $5.6 million sales increase is due primarily to the sales growth for
the QLS and Grass-Telefactor product lines as well as the incremental sales
derived from the Telefactor acquisition, which was completed in the fourth
quarter of the prior fiscal year. Excluding Telefactor's products, the
Company's sales grew 5% organically in this past fiscal year. The Telefactor
acquisition combined the life sciences products of the Company's Grass
Instrument group together with Telefactor's neurophysiologic products into one
product group Grass-Telefactor. This new group offers a broad range of high-
performance products to researchers and clinical practitioners in the life
sciences markets. Telefactor is known worldwide as the gold standard for
video/EEG systems used for diagnostic monitoring and analysis of epilepsy. The
Company believes that the synergies 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. This
combination will also enable the Company to expand in the high growth areas of
ambulatory monitoring and intensive care unit and operating room monitoring.
T&M's product line sales declined to $15.1 million down 5% from $15.9
million from the previous year. T&M's sales declined as a result of the new
Everest Telemetery Recorder Workstation product taking longer than anticipated
to gain acceptance in the marketplace. While T&M's sales were down for fiscal
year 2001, its sales have increased significantly each quarter during the
year. T&M's fourth quarter sales were 11% higher than the same period in the
previous fiscal year.
QLS's product line sales increased to $18.8 million, up 11% from $17.0
million in the prior year. The Company continues to target specific markets to
distribute its wide range of QLS color printer systems, monochrome printer
systems, applicator and print & apply systems. These markets include medical
device manufacturers, tire manufacturers, financial services companies,
private label manufacturers and packaging industries.
Grass-Telefactor's product line sales increased to $17.8 million, up 33%
from $13.3 million in the prior year. Excluding the impact of Telefactor sales
Grass sales alone increased 9%. This sales growth is attributable primarily to
the Grass Heritage(R) EEG & PSG products in the high growth sleep monitoring
device market.
Product sales in the domestic channels represented 73% of the Company's
overall sales. Domestic QLS sales grew 15% over last year, and Grass-
Telefactor's domestic sales increased 32% from the prior year. Sales of Grass
Instruments products alone were responsible for 11% of the year over year
increase in Grass-Telefactor. Domestically T&M's sales were down 5% from the
previous year.
Sales through the international channels account for 27% of the Company's
annual sales and provided the Company with 12% sales growth in fiscal 2001.
Telefactor's international sales accounted for 9% of the sales growth in the
international channels. During fiscal 2001, the U.S. dollar continued to
strengthen making the Company's products less competitve internationally;
however, despite this fact the Company's European sales offices were able to
increase their sales year over year on a local currency basis by approximately
19%. This increase is attributable primarily to the increase in T&M's sales in
France and Italy.
18
Gross profit increased 10% to $20.8 million in fiscal 2001 from $18.9
million in fiscal 2000. The Company's gross profit margin declined to 40.2%
from 40.9% primarily as a result of the Telefactor acquisition and lower
margins on T&M products. In the third quarter of fiscal 2001, the Telefactor
manufacturing facility in Pennsylvania was closed and the manufacturing was
transferred to the Grass manufacturing facility in Braintree, Massachusetts.
The combination of these two operations and the resulting workforce reduction
will reduce manufacturing expenses annually by approximately $500,000.
Selling, general and administrative spending rose 12% to $16.5 million from
$14.7 million. The increase in selling, general and administrative expenses is
attributable to the Telefactor acquisition and the increase in use of outside
services. Selling, general and administrative expenses as a percent of sales
remained flat at 32% this year as compared to the prior year. In February
2001, we terminated certain Telefactor sales and administrative positions.
This additional workforce reduction is expected to yield savings in excess of
$500,000 annually.
Research & development expenses rose to $4.3 million in fiscal 2001 from
$3.4 million in fiscal 2000. The increase is a result of the additions of
engineering personnel from Telefactor as well as salaries and product
development related research projects. Research & development as a percentage
of sales rose to 8.2% in this fiscal year as compared 7.3% in the prior year.
Interest and dividend income declined in fiscal 2001 to $458,000 from
$666,000 in fiscal 2000. The decrease is due to lower investment levels
resulting from the Telefactor acquisition and Company's stock buyback program.
Other expense for fiscal 2001 was $126,000 down from last fiscal year expense
of $190,000. These expenses consist primarily of net losses on foreign
currency exchange with our European branches. These foreign currency exchange
losses declined as the U.S. dollar weakened.
Income before taxes declined to $402,000 in fiscal 2001 from the previous
fiscal year's income before taxes of $1,249,000 as result of the items noted
above.
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 declined to $302,000 in fiscal 2001 down from fiscal 2000 net
income of $937,000. Net income per share on a diluted basis was $0.07 in
fiscal 2001 as compared with $0.21 per diluted share in fiscal 2000.
Fiscal Year 2000 compared to Fiscal Year 1999
The Company's sales in fiscal 2000 increased $3.9 million to $46.1 million,
a 9% increment over fiscal 1999 sales of $42.2 million. The sales increase was
due to growth in product demand in the Company's domestic and international
channels as well as sales from the fourth quarter acquisition of the
Telefactor Corporation. Telefactor sales included in the fiscal 2000 annual
results were $1.2 million and represented less than 3% of the Company's annual
sales revenues.
The Grass-Telefactor product line sales increased 24% to $13.3 million in
fiscal 2000 up from $10.7 million in fiscal 1999. Excluding the impact of the
Telefactor acquisition Grass Instrument sales increased 14%. The QLS products
continued their double-digit growth profile in fiscal 2000. Sales increased
10% to $17.0 million in fiscal 2000 up from $15.4 million in fiscal 1999. The
T&M product line sales declined 1% to $15.8 million in fiscal year 2000 down
from $16.1 million in fiscal 1999. This decline tempered the double-digit
decline experienced over the previous two years. T&M's products have been
adversely affected by the decline in spending in the aerospace industry. The
strategy to reverse this trend was to develop a state of the art interactive
touchscreen recorder, the "Everest Telemetery Recorder Workstation," that will
replace existing recorders and that can be adapted to other commercial
applications.
19
Product sales in the domestic channels represented 73% of the Company's
overall sales. QLS sales grew 12% over last year, and Grass-Telefactor product
lines contributed 22% in sales growth over 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.
Sales through international channels accounted for 27% of the Company's
annual sales.
Gross profit increased 14% to $18.9 million in fiscal 2000 from $16.6
million in fiscal 1999. The Company's gross profit margin improved to 40.9%
from 39.3%. Fiscal 2000 yield is due to a healthy product group mix and
improved margins in the QLS 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 strengthening of the U.S. 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 effective tax
rate for fiscal 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 from $496,000 in fiscal 1999.
Net Income per share on a diluted share basis was $0.21 in fiscal 2000 as
compared with $0.11 per diluted share in fiscal 1999. The Company improved its
return on sales to 2.0% from the prior year's return of 1.1%.
Liquidity and Capital Resources
The Company expects to finance its future working capital needs, capital
expenditures and acquisition requirements through internal funds. To the
extent the Company's capital and liquidity requirements are not satisfied
internally, the Company may utilize a $1.5 million unsecured bank line of
credit, all of which is currently available. Borrowings under this line of
credit bear interest at the bank's prime rate.
The Company's Statements of Cash Flows for the three years ending January
31, 2001, 2000 and 1999 are included on page 31. Net cash flow used by
operating activities was $2.6 million in fiscal 2001 versus net cash flow
provided by operating activities of $4.7 million in fiscal 2000 and $3.2
million in fiscal 1999, respectively. The decline in net cash flow from
operations in fiscal 2001 is attributed primarily to the timing of payments to
vendors; increase in income tax payments and the decline in net income.
Working capital balances at January 31, 2001 were $21.9 million, a 2%
reduction from the $22.4 million at January 31, 2000. The composition of
fiscal 2001 year-end working capital balance includes cash and marketable
securities of $6.2 million as compared to $11.2 million of cash and marketable
securities at the end of last year. The Company's cash collection cycle
increased to 66 days sales outstanding from the prior year's 54 days.
20
Net cash flow provided by investing activities was $871,000 in fiscal 2001
versus net cash flow used by investing activities of $4.2 million in fiscal
2000 and $1.0 million in fiscal 1999. The significant change in fiscal year
2001 can be attributed to investments being liquidated to fund the stock
repurchase and certain capital expenditures. The significant use of cash in
fiscal 2000 is attributed to the acquisition of Telefactor. Capital
expenditures were $1,204,000, $975,000 and $600,000 in fiscal 2001, 2000 and
1999, respectively.
Net cash used by financing activities was $1.5 million in fiscal 2001, $1.4
million in fiscal 2000 and $2.9 million in fiscal 1999, respectively. This
category includes dividends paid to shareholders and the repurchase of the
Company's common stock. Dividends paid for the three years ended fiscal 2001
were $700,000, $709,000 and $744,000, respectively. The Company's annual
dividend per share was $0.16 in all three years. In fiscal 2001, the Company
repurchased 201,600 shares of the common stock at a cost of $807,900. In
fiscal 2000 and 1999 the Company repurchased $451,000 and $2.0 million of its
common stock, respectively. Since the inception of the stock buy back program
in fiscal 1997, the Company has repurchased 867,824 shares of the its common
stock. In January of 2001, the Board of Directors' increased the authorization
to purchase by an additional 250,000 shares of the Company's common stock to
take advantage of any future buying opportunities.
The Company has a contingent obligation relating to the Telefactor
acquisition that requires the Company to pay additional consideration to the
sellers if certain sales amounts are achieved during the seventy-two months
following the closing of the transaction.
Item 7A. Quantitative and Qualitative Disclosures about Market Risk
Foreign Exchange Risk
The Company's financial results are affected by changes in foreign currency
exchange rates or weak economic conditions in the foreign markets in which
products are sold. The Company's primary currency exposures are European
Common Currency (Euro), British Pound, and Canadian Dollar. At January 31,
2001, the Company's investment in foreign assets was $2,935,500. An overall
unfavorable change in foreign exchange rates of 10% would have resulted in a
reduction in net income of $84,000 and a $136,500 reduction in shareholders'
equity as a result of the impact on the cumulative translation adjustment.
The Company historically has not entered into any foreign exchange
contracts to hedge its foreign currency positions, the Company has developed a
hedging strategy and the Company may in the future enter into these contracts
to minimize its exposure to foreign exchange risk.
The functional currencies of the Company's foreign affiliates are their
respective local operating currencies, which are translated for consolidated
financial reporting purposes into U.S. dollars.
21
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)
Quarters Ended
------------------------------------------
April 29, July 29, October 28, January 31,
2000 2000 2000 2001
--------- -------- ----------- -----------
Net Sales.......................... $12,530 $13,384 $11,881 $13,893
Gross Profit....................... 5,170 5,403 4,233 5,986
Net Income (Loss).................. 158 268 (698) 573
Net Income (Loss) Per Common
Share--Basic...................... .04 .06 (.16) .13
Net Income (Loss) Per Common
Share--Diluted.................... .04 .06 (.16) .13
May 1, July 31, October 30, January 31,
1999 1999 1999 2000
--------- -------- ----------- -----------
Net Sales.......................... $10,524 $11,231 $11,184 $13,204
Gross Profit....................... 4,055 4,566 4,574 5,668
Net Income (Loss).................. (271) 271 410 526
Net Income (Loss) Per Common
Share--Basic...................... (.06) .06 .09 .12
Net Income (Loss) Per Common
Share--Diluted.................... (.06) .06 .09 .12
Item 9. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure
None.
22
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 2001 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.
Name Age Position
---- --- --------
Albert W. Ondis...... 75 Chairman, Chief Executive Officer and Director
Everett V. Pizzuti... 64 President, Chief Operating Officer and Director
Terence J. Jones..... 54 Senior Vice President
Joseph P. O'Connell.. 57 Vice President and Treasurer, Chief Financial Officer
John B. Chatten...... 73 President, Grass--Telefactor Product Group
Elias G. Deeb........ 59 Vice President--Media Manufacturing
Michael J. Sullivan.. 50 Vice President and Chief Technology Officer
Stephen M. Petrarca.. 38 Vice President--Instrument Manufacturing
Michael F. Silveira.. 35 Corporate Controller
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. Jones joined the Company in 2000. He previously held various senior
management positions with the Avery Dennison Corporation. Most recently
serving as Vice President of Business Development and Process Improvement at
Fasson Roll Worldwide.
Mr. O'Connell joined the Company in 1996. He previously held senior
financial management positions with Cherry Tree Products Inc., IBI Corporation
and Dennison Manufacturing Company. Mr. O'Connell is also Assistant Secretary
of the Company.
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. 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. Sullivan was appointed Vice President and Chief Technology Officer in
2000. Mr. Sullivan is an electronic engineer and has been with the Company for
seventeen years.
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. Silveira joined the Company in 2000. Mr. Silveira previously held
financial management positions with Textron Inc., most recently serving in the
Industrial Products, Mergers & Acquisitions group and with KPMG Peat Marwick
LLP. Mr. Silveira is a certified public accountant.
23
Item 11. Executive Compensation
The response to this item is incorporated by reference to the Company's
definitive proxy statement for the 2001 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 2001 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 2001 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:
Page
----
Report of Independent Public Accountants.................................. 27
Consolidated Balance Sheets as of January 31, 2001 and 2000............... 28
Consolidated Statements of Income--Years Ended January 31, 2001, 2000 and
1999..................................................................... 29
Consolidated Statements of Comprehensive Income and Changes in
Shareholders' Equity--Years Ended January 31, 2001, 2000 and 1999........ 30
Consolidated Statements of Cash Flows--Years Ended January 31, 2001, 2000
and 1999................................................................. 31
Notes to Consolidated Financial Statements................................ 32
(a)(2) Financial Statement Schedules:
Schedule II--Valuation and Qualifying Accounts and Reserves--
Years Ended January 31, 2001, 2000 and 1999.............................. 40
All other schedules for which provision is made in the applicable
accounting regulations of the Securities and Exchange Commission are not
required under the related instructions or are inapplicable, and therefore,
have been omitted.
24
(a)(3) Exhibits:
Exhibit
Number
-------
(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. (a)
(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. (a)
(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. (a)
(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. (a)
(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, 333-93565 and 333-44414, and incorporated by reference
herein. (a)
(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.
(10.7) Employment Agreement between Astro-Med, Inc. and John B. Chatten dated
as of December 14, 1999, filed as Exhibit 4.3 to Registration
Statement on Form S-8, Registration No. 333-62431, and incorporated
by reference herein. (a)
(21) List of Subsidiaries of the Company. See page 27.
(23) Consent of Independent Public Accountants. See page 27.
- --------
(a) Management contract or compensatory plan or arrangement.
(b) Reports on Form 8-K:
None
25
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be signed
on its behalf by the undersigned, thereunto duly authorized.
ASTRO-MED, INC.
(Registrant)
/s/ Albert W. Ondis
By __________________________________
(Albert W. Ondis, Chairman)
Date: April 17, 2001
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.
Name Title Date
---- ----- ----
/s/ Albert W. Ondis Chairman and Director April 17, 2001
_____________________________________ (Principal Executive
Albert W. Ondis Officer)
/s/ Everett V. Pizzuti Director President and April 17, 2001
____________________________________ (Principal Operating
Everett V. Pizzuti Officer)
/s/ Joseph P. O'Connell Vice President and April 17, 2001
____________________________________ Treasurer (Principal
Joseph P. O'Connell Financial Officer)
/s/ Michael F. Silveira Controller (Principal April 17, 2001
____________________________________ Accounting Officer)
Michael F. Silveira
/s/ Jacques V. Hopkins Director April 17, 2001
_____________________________________
Jacques V. Hopkins
26
EXHIBIT 21
LIST OF SUBSIDIARIES OF THE COMPANY
Name Jurisdiction of Organization
---- ----------------------------
AWO, Inc. Delaware
Astro-Med International Inc. Barbados
Astro-Med SRL Italy
Astro-Med GMBH Germany
EXHIBIT 23
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the incorporation
of our report dated March 16, 2001, 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, 333-93565 and 333-44414 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. It should be noted
that we have not audited any financial statements of the Company subsequent to
January 31, 2001 or performed any audit procedures subsequent to the date of
our report.
ARTHUR ANDERSEN LLP
Boston, Massachusetts
April 17, 2001
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Shareholders of Astro-Med, Inc.:
We have audited the accompanying consolidated balance sheets of Astro-Med,
Inc. and subsidiaries as of January 31, 2001 and 2000, and the related
consolidated statements of income, comprehensive income and changes in
shareholders' equity and cash flows for each of the three years in the period
ended January 31, 2001. These financial statements are the responsibility of
the Company's management. Our responsibility is to express an opinion on these
financial statements 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, 2001 and 2000, and the results of their
operations and cash flows for each of the three years in the period ended
January 31, 2001, 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 16, 2001
27
ASTRO-MED, INC.
CONSOLIDATED BALANCE SHEETS
As of January 31, 2001 and 2000
2001 2000
------------ ------------
ASSETS
------
CURRENT ASSETS
Cash and Cash Equivalents........................ $ 806,069 $ 4,035,867
Securities Available for Sale.................... 5,362,523 7,211,921
Accounts Receivable, less reserves of $467,882
and $405,783, respectively...................... 10,663,624 9,270,814
Inventories...................................... 10,782,425 10,821,521
Prepaid Expenses and Other Current Assets........ 2,038,227 1,926,111
------------ ------------
Total Current Assets........................... 29,652,868 33,266,234
PROPERTY, PLANT AND EQUIPMENT
Land and Improvements............................ 398,191 398,191
Buildings and Improvements....................... 7,236,148 7,087,520
Machinery and Equipment.......................... 14,912,966 13,616,612
------------ ------------
22,547,305 21,102,323
Less Accumulated Depreciation.................... (14,259,992) (12,874,889)
------------ ------------
8,287,313 8,227,434
OTHER ASSETS
Goodwill, net.................................... 2,465,494 3,153,371
Amounts Due from Officers........................ 480,314 480,314
Other............................................ 172,941 257,178
------------ ------------
3,118,749 3,890,863
------------ ------------
$ 41,058,930 $ 45,384,531
============ ============
LIABILITIES AND SHAREHOLDERS' EQUITY
------------------------------------
CURRENT LIABILITIES
Accounts Payable................................. $ 3,711,248 $ 6,379,792
Accrued Compensation............................. 1,974,223 1,710,622
Accrued Expenses................................. 1,916,597 2,324,593
Income Taxes Payable............................. 96,058 337,979
Current Maturities of Long-Term Debt............. 46,832 60,452
------------ ------------
Total Current Liabilities...................... 7,744,958 10,813,438
LONG-TERM DEBT, Less Current Maturities............ 24,755 71,588
DEFERRED INCOME TAXES.............................. 996,157 1,278,921
SHAREHOLDERS' EQUITY
Preferred Stock, $10 Par Value, Authorized
100,000 Shares, Issued None..................... -- --
Common Stock, $0.05 Par Value, Authorized
13,000,000 Shares, Issued 5,160,780 and
5,148,035, respectively......................... 258,039 257,402
Additional Paid-in Capital....................... 5,706,870 5,647,791
Retained Earnings................................ 32,667,859 33,065,454
Treasury Stock, at Cost, 930,895 and 729,295
Shares, respectively............................ (6,076,003) (5,268,103)
Accumulated Other Comprehensive Loss............. (263,705) (481,960)
------------ ------------
32,293,060 33,220,584
------------ ------------
$ 41,058,930 $ 45,384,531
============ ============
The accompanying notes are an integral part of these financial statements.
28
ASTRO-MED, INC.
CONSOLIDATED STATEMENTS OF INCOME
Years Ended January 31, 2001, 2000 and 1999
2001 2000 1999
----------- ----------- -----------
Net Sales.............................. $51,687,763 $46,143,206 $42,166,185
Cost of Sales.......................... 30,895,584 27,280,835 25,586,919
----------- ----------- -----------
Gross Profit........................... 20,792,179 18,862,371 16,579,266
Costs and Expenses:
Selling, General and Administrative.. 16,455,696 14,717,092 13,907,389
Research and Development............. 4,255,434 3,353,883 2,938,820
----------- ----------- -----------
20,711,130 18,070,975 16,846,209
----------- ----------- -----------
Operating Income (Loss)................ 81,049 791,396 (266,943)
Other Income (Expense):
Interest and Dividend Income......... 458,191 665,687 786,084
Interest Expense..................... (11,051) (18,239) (22,197)
Other, net........................... (125,700) (189,987) 112,721
----------- ----------- -----------
321,440 457,461 876,608
----------- ----------- -----------
Income before Income Taxes............. 402,489 1,248,857 609,665
Provision for Income Taxes............. 100,000 312,214 114,000
----------- ----------- -----------
Net Income............................. $ 302,489 $ 936,643 $ 495,665
=========== =========== ===========
Net Income Per Common Share--Basic..... $ 0.07 $ 0.21 $ 0.11
=========== =========== ===========
Net Income Per Common Share--Diluted... $ 0.07 $ 0.21 $ 0.11
=========== =========== ===========
Weighted Average Number of Common
Shares Outstanding--Basic............. 4,386,852 4,434,108 4,651,711
=========== =========== ===========
Weighted Average Number of Common
Shares Outstanding--Diluted........... 4,407,632 4,475,371 4,679,398
=========== =========== ===========
Dividends Declared Per Common Share.... $ 0.16 $ 0.16 $ 0.16
=========== =========== ===========
The accompanying notes are an integral part of these financial statements.
29
ASTRO-MED, INC.
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME AND CHANGES IN SHAREHOLDERS'
EQUITY
Years Ended January 31, 2001, 2000 and 1999
2001 2000 1999
----------- ----------- -----------
Comprehensive Income
Net Income.............................. $ 302,489 $ 936,643 $ 495,665
Other Comprehensive Income, Net
Foreign currency translation
adjustments.......................... (52,303) (34,865) 18,681
Unrealized gain (loss) on securities
available for sale................... 270,558 (301,872) 6,193
----------- ----------- -----------
Other comprehensive income (loss), net.. 218,255 (336,737) 24,874
----------- ----------- -----------
Comprehensive Income.................... $ 520,744 $ 599,906 $ 520,539
=========== =========== ===========
Shareholders' Equity
Common Stock, $0.05 Par Value:
Balance at beginning of year.......... $ 257,402 $ 257,176 $ 257,023
Net proceeds from issuance of Company
common stock (Note 5)................ 637 226 153
----------- ----------- -----------
Balance at end of year................ 258,039 257,402 257,176
----------- ----------- -----------
Additional Paid-In Capital:
Balance at beginning of year.......... 5,647,791 5,641,317 5,649,101
Net proceeds from issuance of Company
common stock (Note 5)................ 59,079 23,714 18,498
Net cost of shares issued to Employee
Stock Ownership Plan (Note 5)........ -- (17,240) (26,282)
----------- ----------- -----------
Balance at end of year................ 5,706,870 5,647,791 5,641,317
----------- ----------- -----------
Retained Earnings:
Balance at beginning of year.......... 33,065,454 32,837,880 33,085,917
Net income............................ 302,489 936,643 495,665
Dividends paid........................ (700,084) (709,069) (743,702)
----------- ----------- -----------
Balance at end of year................ 32,667,859 33,065,454 32,837,880
----------- ----------- -----------
Treasury Stock:
Balance at beginning of year.......... (5,268,103) (4,889,343) (3,062,945)
Purchases of Company common stock
(Note 5)............................. (807,900) (451,000) (1,954,680)
Net cost of shares issued to Employee
Stock Ownership Plan (Note 5)........ -- 72,240 128,282
----------- ----------- -----------
Balance at end of year................ (6,076,003) (5,268,103) (4,889,343)
----------- ----------- -----------
Accumulated Other Comprehensive Loss:
Balance at beginning of year.......... (481,960) (145,223) (170,097)
Other comprehensive income (loss),
net.................................. 218,255 (336,737) 24,874
----------- ----------- -----------
Balance at end of year................ (263,705) (481,960) (145,223)
----------- ----------- -----------
Total Shareholders' Equity.......... $32,293,060 $33,220,584 $33,701,807
=========== =========== ===========
The accompanying notes are an integral part of these financial statements.
30
ASTRO-MED, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
Years Ended January 31, 2001, 2000 and 1999
2001 2000 1999
----------- ----------- ------------
Cash Flows from Operating Activities:
Net Income........................... $ 302,489 $ 936,643 $ 495,665
Adjustments to Reconcile Net Income
to Net Cash Provided (Used) By
Operating Activities:
Depreciation and Amortization...... 1,774,764 1,355,513 1,234,048
Loss on Sale of Assets............. -- 3,017 --
Deferred Income Taxes.............. (182,410) (212,951) (436,425)
Other.............................. 258,807 76,674 (1,721)
Changes in Assets and Liabilities:
Accounts Receivable.............. (1,392,810) (986,656) 119,258
Inventories...................... (419,461) (439,547) 1,836
Other............................ 133,010 371,381 185,749
Accounts Payable and Accrued
Expenses........................ (2,563,107) 3,484,198 1,126,787
Income Taxes Payable............. (503,166) 106,342 448,261
----------- ----------- ------------
Total Adjustments.............. 2,894,373 3,757,971 2,677,793
----------- ----------- ------------
Net Cash (Used) Provided by
Operating Activities.............. (2,591,884) 4,694,614 3,173,458
Cash Flows from Investing Activities:
Proceeds from Sales of Securities
Available for Sale.................. 5,170,695 3,838,473 10,153,724
Purchases of Securities Available for
Sale................................ (3,321,296) (3,446,395) (10,582,545)
Proceeds from Sales of Assets........ -- 2,800 --
Escrow Returned (Payment) for
Acquisition......................... 225,000 (3,657,098) --
Additions to Property, Plant and
Equipment........................... (1,203,592) (975,113) (600,395)
----------- ----------- ------------
Net Cash Provided (Used) by
Investing Activities.............. 870,807 (4,237,333) (1,029,216)
Cash Flows from Financing Activities:
Payments of Debt..................... -- (75,000) (50,000)
Principal Payments on Capital
Leases.............................. (60,453) (156,574) (127,774)
Proceeds from Common Shares Issued
Under Employee Benefit Plans........ 59,716 23,940 18,651
Purchases of Treasury Stock.......... (807,900) (451,000) (1,954,680)
Dividends Paid....................... (700,084) (709,069) (743,702)
----------- ----------- ------------
Net Cash Used by Financing
Activities........................ (1,508,721) (1,367,703) (2,857,505)
----------- ----------- ------------
Net Decrease in Cash and Cash
Equivalents........................... (3,229,798) (910,422) (713,263)
Cash and Cash Equivalents, Beginning of
Year.................................. 4,035,867 4,946,289 5,659,552
----------- ----------- ------------
Cash and Cash Equivalents, End of
Year.................................. $ 806,069 $ 4,035,867 $ 4,946,289
=========== =========== ============
Supplemental Information:
Cash Paid During the Period for:
Interest........................... $ 11,104 $ 17,504 $ 24,072
Income Taxes....................... $ 746,000 $ 406,182 $ 257,889
The accompanying notes are an integral part of these financial statements.
31
ASTRO-MED, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
January 31, 2001
Note 1--Summary of Significant Accounting Policies
Principles of Consolidation: The consolidated financial statements include
the accounts of Astro-Med, Inc. (the Company) and its subsidiaries. All
material intercompany accounts and transactions are eliminated in
consolidation. Certain prior year balances have been reclassified to conform
to the current year reporting format.
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 income 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).
Included in property, plant and equipment is $251,600 of construction in
progress at January 31, 2001.
Amortization of Intangibles: Goodwill from the acquisition of Telefactor is
being amortized over 15 years. All other goodwill is amortized on the
straight-line method over 40 years. Accumulated amortization amounted to
$721,947 and $552,577 as of January 31, 2001 and 2000, respectively. At each
balance sheet date, in accordance with SFAS No. 121, Accounting for the
Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed Of,
the Company evaluates the carrying value of Long-Lived Assets. The Company
believes that no material impairment exists at January 31, 2001.
Derivative Instruments and Hedging: The Financial Accounting Standards
Board issued SFAS No. 133, Accounting for Derivative Instruments and Hedging
Activities, which was amended by SFAS No. 137, Accounting for Derivative
Instruments and Hedging Activities--Deferral of the Effective Date of SFAS No.
133, in June 1999 which was then 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). SFAS No. 133 is now
effective for all fiscal quarters of all fiscal years beginning after June 15,
2000. 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 is not expected to have a material
impact on the Company's results of operations or financial position.
Revenue Recognition: Revenue is recognized when products or services are
performed and the risk and rewards of ownership have been transferred. The
Securities and Exchange Commission required companies to adopt Staff
Accounting Bulletin (SAB) No. 101, Revenue Recognition in Financial Statements
in the fourth quarter of fiscal 2001. This SAB provides additional guidance on
the accounting for revenue recognition, including broad conceptual discussions
as well as certain industry--specific guidance. The adoption of this SAB did
not have a material impact on the Company's financial position or quarterly or
annual results of operations.
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
32
ASTRO-MED, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
as a reduction of cost of goods sold. All periods presented have been
reclassified to conform to the current practice. The amounts reclassed were
$650,295, $574,460 and $604,685, respectively for the three years ending
January 31, 2001.
Foreign Currency: The financial statements of foreign subsidiaries 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 with the translation adjustment reported as
a separate component of shareholders' equity. Revenues and expenses are
translated at average exchange rates during the year.
Income Taxes: The Company accounts for income taxes in accordance with
Statement of Financial Accounting Standard (SFAS) No. 109, Accounting for
Income Taxes. This SFAS 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 1,093,825, 600,325 and 653,500 shares of common stock were
outstanding during fiscal 2001, 2000 and 1999, 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.
2001 2000 1999
--------- --------- ---------
Weighted Average Common Shares Outstanding--
Basic....................................... 4,386,852 4,434,108 4,651,711
Dilutive Effect of Options Outstanding....... 20,780 41,263 27,687
--------- --------- ---------
Weighted Average Common Shares Outstanding--
Diluted..................................... 4,407,632 4,475,371 4,679,398
Use of Estimates: The presentation of financial statements in conformity
with generally accepted accounting principles requires management to make
estimates and assumptions that affect these financial statements and
accompanying notes. Some of the more significant estimates include the
allowance for doubtful accounts, inventory valuation and warranty reserves.
Management's estimates are based on the facts and circumstances available at
the time estimates are made, past historical experience, risk of loss, general
economic conditions and trends, and management's assessments of the probable
future outcome of these matters. Consequently, actual results could differ
from those estimates.
Fair Value of Financial Instruments: The Company's financial instruments
consist mainly of cash and cash equivalents, accounts receivable, accounts
payable and long-term debt. The carrying amounts of these financial
instruments as of January 31, 2001 approximate fair value.
33
ASTRO-MED, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
Note 2--Securities Available for Sale
Securities available for sale include corporate and governmental
obligations with various contractual or anticipated maturity dates.
Governmental obligations include U.S. Government, State, Municipal and Federal
Agencies securities. The market value, amortized cost and gross unrealized
gains and losses of the securities are as follows:
Gross Gross
Market Unrealized Unrealized Amortized
Value Gains Losses Cost
---------- ---------- ---------- ----------
January 31, 2001
Corporate........................ $1,486,495 $12,801 ($ 11,239) $1,478,933
Governmental..................... 3,876,028 17,063 ( 22,014) 3,880,979
---------- ------- --------- ----------
$5,362,523 $29,864 ($ 33,253) $5,365,912
========== ======= ========= ==========
January 31, 2000
Corporate........................ $2,179,794 $ -- ($ 77,194) $2,256,988
Governmental..................... 5,032,127 3,389 ( 200,142) 5,228,880
---------- ------- --------- ----------
$7,211,921 $ 3,389 ($277,336) $7,485,868
========== ======= ========= ==========
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.
The expected maturity dates of these securities are as follows: Less than
one year--$881,971; One to Five Years--$2,848,009; Six to Ten Years--
$1,125,696 and greater than Ten Years--$506,847. Actual maturities may differ
as a result of sales or earlier issuer redemptions.
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,
-----------------------
2001 2000
----------- -----------
Materials and Supplies............................ $ 5,921,934 $ 5,835,050
Work-in-Progress.................................. 1,282,466 1,557,734
Finished Goods.................................... 3,578,025 3,428,737
----------- -----------
$10,782,425 $10,821,521
=========== ===========
Note 4--Long-Term Debt
Long-term debt consisted of the following:
January 31,
-----------------------
2001 2000
----------- -----------
Capital Lease Obligations......................... $ 71,587 $ 132,040
Less Current Maturities........................... 46,832 60,452
----------- -----------
$ 24,755 $ 71,588
=========== ===========
34
ASTRO-MED, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
The amounts of long-term debt as of January 31, 2001 are scheduled to
mature as follows: $46,832 in fiscal 2002 and $24,755 in fiscal 2003.
Note 5--Shareholders' Equity
Common Stock: The Company's Board of Directors has authorized the purchase
of up to an additional 250,000 shares of the Company's common stock on the
open market. The Company repurchased 201,600, 77,000 and 323,400 shares, of
its common stock in fiscal 2001, 2000 and 1999, respectively.
The Company maintains the following benefit plans involving the Company's
common stock:
Stock Option Plans: As of January 31, 2001, 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 vest over various
periods that range from six months to five years. Options for an aggregate of
1,500,000 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.
Summarized option data for all plans is as follows:
Option Weighted Average
Number Price Per Option Price Per
of Shares Share Share
--------- ----------- ----------------
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 Granted......... 568,500 3.75- 7.50 6.90
Options Exercised....... (9,500) 3.33- 4.94 4.77
Options Expired......... (100,025) 3.33-10.25 6.93
---------
Options Outstanding,
January 31, 2001....... 1,334,450 $3.33-13.00 7.30
---------
Options Exercisable,
January 31, 2001....... 1,198,450 $3.33-13.00 7.40
---------
Options Exercisable,
January 31, 2000....... 780,675 $3.33-13.00 7.46
=========
35
ASTRO-MED, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
Set forth below is a summary of options outstanding at January 31, 2001:
Outstanding Exercisable
- ----------------------------------------------------- --------------------------
Range of
Exercise Weighted Average Remaining Weighted Average
prices Options Exercise Price Contractual Life Options Exercise Price
- -------- ------- ---------------- ---------------- ------- ----------------
$3.33-$
5.00 240,625 $ 4.82 9 yrs. 235,625 $ 4.84
$5.50-$
8.25 751,950 7.11 9 yrs. 642,950 7.37
$8.31-$
8.50 209,000 8.41 6 yrs. 209,000 8.41
$9.25-
$13.00 132,875 11.11 3 yrs. 110,875 11.11
--------- ---------
1,334,450 1,198,450
At January 31, 2001, options covering 794,300 shares under the incentive
plans, 124,000 shares under the non-qualified plan and 12,000 shares under the
Non-Employee Director Stock Option Plan were available for future grant.
As permitted by SFAS No. 123, "Accounting for Stock-Based Compensation,"
the Company accounts for its stock-based compensation in accordance with APB
No. 25 "Accounting for Stock Issued to Employees". Had compensation cost for
the Company's stock-based compensation plans been determined based on the fair
value at the grant dates consistent with the method set forth under SFAS No.
123, the Company's net income and net income per share would have been reduced
to the pro forma amounts indicated below:
January 31
----------------------------
2001 2000 1999
--------- -------- --------
Net Income (Loss)
As reported............................... $ 302,489 $936,643 $495,665
Pro forma................................. $(659,956) $599,322 $(42,914)
Net Income per share
As reported............................... $ 0.07 $ 0.21 $ 0.11
Pro forma, Basic.......................... $ (0.15) $ 0.14 $ (0.01)
Pro forma, Diluted........................ $ (0.15) $ 0.13 $ (0.01)
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 2001, 2000 and 1999 was $2.22, $1.60 and $2.43, respectively.
Years Ended January 31,
-------------------------
2001 2000 1999
------- ------- -------
Risk-free interest rate......................... 6.25% 5.5% 4.8%
Expected life (years)........................... 5 5 5
Expected volatility............................. 36.0% 35.5% 35.4%
Expected dividend yield......................... 2.9% 2.8% 2.4%
36
ASTRO-MED, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
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:
Years Ended January 31,
--------------------------------
2001 2000 1999
--------- ---------- ---------
Shares Reserved, Beginning............... 94,920 98,426 101,507
Shares Purchased......................... (3,245) (3,506) (3,081)
--------- ---------- ---------
Shares Reserved, Ending.................. 91,675 94,920 98,426
========= ========== =========
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 $130,000 in fiscal 2001, 2000 and 1999.
Note 6--Income Taxes
The components of domestic and foreign income (loss) before the provision
for income taxes are as follows:
Years Ended January 31,
--------------------------------
2001 2000 1999
--------- ---------- ---------
Domestic................................. $ (6,989) $1,021,075 $ 530,751
Foreign.................................. 409,478 227,782 78,914
--------- ---------- ---------
Total.................................. $ 402,489 $1,248,857 $ 609,665
========= ========== =========
The components of the provision for income taxes were as follows:
Years Ended January 31,
--------------------------------
2001 2000 1999
--------- ---------- ---------
Current:
Federal................................ $ 194,810 $ 387,820 $ 206,747
State.................................. (6,600) 53,842 8,687
Foreign................................ 94,200 57,000 28,000
--------- ---------- ---------
282,410 498,662 243,434
--------- ---------- ---------
Deferred:
Federal................................ (160,598) (164,143) (106,518)
State.................................. (21,812) (22,305) (22,916)
--------- ---------- ---------
(182,410) (186,448) (129,434)
--------- ---------- ---------
$ 100,000 $ 312,214 $ 114,000
========= ========== =========
37
ASTRO-MED, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
The provision for income taxes differs from the amount computed by applying
the statutory federal income tax rate (34%) to income before income taxes, due
to the following:
Years Ended January 31,
----------------------------
2001 2000 1999
-------- -------- --------
Income Tax Provision at Statutory Rate..... $136,846 $424,611 $207,269
State Taxes, Net of Federal Income Tax
Benefits.................................. (18,763) 57,697 (9,391)
Nontaxable Interest Income................. (17,625) (19,219) (34,083)
Amortization of Intangibles................ 12,342 (24,663) (61,669)
Utilization of Net Operating Loss
Carryforward.............................. -- (92,048) (117,580)
Research and Development Tax Credits....... -- (133,000) --
Other, Net................................. (12,800) 98,836 129,454
-------- -------- --------
$100,000 $312,214 $114,000
======== ======== ========
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:
January 31,
----------------------
2001 2000
---------- ----------
Deferred Tax Assets:
Reserves and Accruals Not Yet Deducted for Tax
Purposes........................................ $1,319,618 $1,216,529
Unrealized Foreign Currency Losses............... 66,950 28,965
Net Operating Loss Carryforwards................. 94,485 72,845
Other............................................ 398,448 344,672
Valuation Allowance.............................. (94,485) (72,845)
---------- ----------
1,785,016 1,590,166
Deferred Tax Liabilities:
Accumulated Tax Depreciation in Excess of Book
Depreciation.................................... 580,915 563,578
Other............................................ 46,480 51,310
---------- ----------
627,395 614,888
---------- ----------
Net Deferred Tax Assets............................ $1,157,621 $ 975,278
========== ==========
At January 31, 2001, the valuation allowance relates to the Company's
wholly owned subsidiary, Astro-Med GMBH and Astro-Med SRL, net operating loss
carryforward (NOL) of approximately $244,779 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.
January 31,
-----------------
2001 2000
-------- --------
Machinery and Equipment............................... $176,020 $382,598
Less: Accumulated Amortization........................ 88,008 219,322
-------- --------
$ 88,012 $163,276
======== ========
38
ASTRO-MED, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
Minimum lease payments under noncancellable leases at January 31, 2001 were
as follows:
Year Ending Capital Operating
January 31, Lease Leases
----------- -------- ---------
2002.................................................... $ 50,594 $293,754
2003.................................................... 25,296 124,933
2004.................................................... -- 47,764
2005.................................................... -- 40,602
2006 and Thereafter..................................... -- 35,218
-------- --------
Net Minimum Lease Payments.............................. 75,890 $542,271
-------- --------
Less Amount Representing Interest....................... 4,303
--------
Current Value of Net Minimum Lease Payments............. $ 71,587
========
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
2001, 2000 and 1999 is set forth below.
2001 2000 1999
----------- ----------- -----------
Geographical Information
Revenues:
United States.......................... $48,730,676 $43,140,724 $39,278,252
Foreign Branches....................... 8,680,464 7,967,070 7,689,047
Transfers among geographical areas..... (5,723,377) (4,964,588) (4,801,114)
----------- ----------- -----------
$51,687,763 $46,143,206 $42,166,185
=========== =========== ===========
Long-lived Assets:
United States.......................... $ 7,574,237 $ 7,514,389 $ 6,787,325
Foreign Branches....................... 713,076 713,045 442,350
----------- ----------- -----------
$ 8,287,313 $ 8,227,434 $ 7,229,675
=========== =========== ===========
39
ASTRO-MED, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
Export Revenues Included in United States Revenues Above:
Asia..................................... $ 1,516,000 $ 1,215,000 $ 904,000
Other Europe............................. 1,408,000 1,284,000 729,000
Central and South America................ 1,337,000 1,294,000 1,010,000
Australia and New Zealand................ 380,000 382,000 437,000
Other.................................... 553,000 351,000 255,000
----------- ----------- -----------
$ 5,194,000 $ 4,526,000 $ 3,335,000
=========== =========== ===========
Product Information
Revenues:
Test & Measurement....................... $15,061,000 $15,786,000 $16,076,000
QuickLabel Systems (QLS)................. 18,850,000 17,035,000 15,394,000
Grass Telefactor......................... 17,777,000 13,322,000 10,696,000
----------- ----------- -----------
$51,688,000 $46,143,000 $42,166,000
=========== =========== ===========
No single customer accounted for 10% of net sales in fiscal 2001, 2000, or
1999.
Note 9--Profit-Sharing Plan
Along with the Employee Stock Ownership Plan described in Note 5, the
Company has a non-contributory Profit-Sharing Plan which provides retirement
benefits to all eligible employees. In addition, the Plan allows participants
to defer a portion of their cash compensation and contribute such deferral to
the Plan through payroll deductions. The Company makes matching contributions
up to specified levels. The deferrals are made within the limits prescribed by
Section 401(k) of the Internal Revenue Code.
All contributions are deposited into trust funds. It is the policy of the
Company to fund any contributions accrued. The Company's annual contribution
amounts are determined by the Board of Directors. The Company's contributions
paid or accrued amounted to $230,000 in 2001, 2000 and 1999.
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. The acquisition was accounted for as a purchase under APB
Opinion No. 16, Business Combinations. At the time of closing, $225,000 was
established in an escrow account that was designated to be used to settle any
post-closing purchase price adjustments. In the first quarter of fiscal 2001,
the Company received $225,000 from the escrow. The purchase and sales
agreement contains a clause which will require the Company to pay additional
purchase price of up to $3,000,000 if certain sales levels are achieved. The
earnout provision is effective over a period of 72 months. The purchase price
allocation was completed during fiscal 2001 and it resulted in a final
goodwill amount of $1,776,000. Goodwill resulting from the Telefactor
acquisition is being amortized over 15 years.
SCHEDULE II--VALUATION AND QUALIFYING ACCOUNTS AND RESERVES
Balance at Provision Balance
Beginning Charged to at End
Description of Year Operations Deductions(2) Other(3) of Year
----------- ---------- ---------- ------------- -------- -------
Allowance for Doubtful
Accounts(1):
Year Ended January 31,
2001................. 405,783 193,341 131,242 -- 467,882
2000................. 212,337 167,234 42,414 68,626 405,783
1999................. 175,788 75,815 39,266 -- 212,337
- --------
(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.
40