UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(Mark One)
X QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
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EXCHANGE ACT OF 1934
For the quarterly period ended August 04, 2001
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OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
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EXCHANGE ACT OF 1934
For the transition period from to
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Commission file number 0-13200
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Astro-Med, Inc.
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(Exact name of registrant as specified in its charter)
Rhode Island 05-0318215
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
600 East Greenwich Avenue, West Warwick, Rhode Island 02893
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(Address of principal executive offices) (Zip Code)
(401) 828-4000
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(Registrant's telephone number, including area code)
__________________________
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes X . No ___.
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Indicate the number of shares outstanding of each of the issuer's classes
of common stock, as of the latest practicable date.
Common Stock, $.05 Par Value - 4,265,485 shares (excluding treasury
shares) as of August 31, 2001
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ASTRO-MED, INC.
INDEX
Page No.
Part I. Financial Information:
Consolidated Balance Sheets -
August 4, 2001 and January 31, 2001....................... 3
Consolidated Statements of Income -
Three Months Ended August 4, 2001 and July 29, 2000 ...... 4
Consolidated Statements of Income -
Six Months Ended August 4, 2001 and July 29, 2000 ........ 5
Consolidated Statements of Cash Flows -
Six Months Ended August 4, 2001 and July 29, 2000 ........ 6
Notes to Consolidated Financial Statements -
August 4, 2001............................................. 7-9
Management's Discussion and Analysis of Financial
Condition and Results of Operations....................... 10-12
Part II. Other Information................................... 13
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Part I. FINANCIAL INFORMATION
ASTRO-MED, INC.
CONSOLIDATED BALANCE SHEETS
August,4 January 31,
ASSETS 2001 2001
---- ----
(Unaudited)
CURRENT ASSETS
Cash and Cash Equivalents .................................................... $ 2,106,649 $ 806,069
Securities Available for Sale ................................................ 4,058,580 5,362,523
Accounts Receivable, Net ..................................................... 8,328,505 10,663,624
Inventories, Net ............................................................. 11,598,509 10,782,425
Prepaid Expenses and Other Current Assets .................................... 2,135,191 2,038,227
------------ ------------
Total Current Assets .................................................... 28,227,434 29,652,868
PROPERTY, PLANT AND
EQUIPMENT ...................................................................... 23,186,824 22,547,305
Less Accumulated Depreciation ................................................ (14,935,751) (14,259,992)
------------ ------------
8,251,073 8,287,313
OTHER ASSETS
Goodwill ..................................................................... 2,392,213 2,465,494
Amounts Due from Officers .................................................... 480,314 480,314
Other ........................................................................ 83,555 172,941
------------ ------------
2,956,082 3,118,749
$ 39,434,589 $ 41,058,930
============ ============
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts Payable ............................................................. $ 3,687,435 $ 3,711,248
Accrued Compensation ......................................................... 1,201,516 1,974,223
Accrued Expenses ............................................................. 1,587,749 1,916,597
Income Taxes Payable ......................................................... 30,330 96,058
Current Maturities of Long-Term Debt ......................................... 44,813 46,832
------------ ------------
Total Current Liabilities ............................................... 6,551,843 7,744,958
LONG-TERM DEBT, Less Current Maturities ........................................ -- 24,755
DEFERRED INCOME TAXES .......................................................... 923,914 996,157
SHAREHOLDERS' EQUITY
Preferred Stock, $10 Par Value,
Authorized 100,000 Shares, None Issued ..................................... -- --
Common Stock, $.05 Par Value, Authorized
13,000,000 Shares, Issued, 5,162,933
5,160,780 Shares, respectively ............................................. 258,147 258,039
Additional Paid-In Capital ................................................... 5,629,597 5,706,870
Retained Earnings ............................................................ 32,283,684 32,667,859
Treasury Stock, at Cost (897,895 and
930,895 Shares, respectively) .............................................. (5,860,610) (6,076,003)
Accumulated Other Comprehensive Loss ......................................... (351,986) (263,705)
------------ ------------
31,958,832 32,293,060
$ 39,434,589 $ 41,058,930
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ASTRO-MED, INC.
UNAUDITED CONSOLIDATED STATEMENTS OF INCOME
Three Months Ended
------------------
August 4, July 29,
2001 2000
---- ----
Net Sales................................... $12,131,706 $13,381,804
Cost of Sales............................... 7,365,737 7,979,218
----------- -----------
Gross Profit................................ 4,765,969 5,402,586
Costs and Expenses:
Selling, General and Administrative....... 4,156,183 3,998,476
Research and Development.................. 928,920 1,142,544
----------- -----------
5,085,103 5,141,020
----------- -----------
Operating Income(Loss)...................... (319,134) 261,566
Other Income (Expense):
Investment Income......................... 79,858 111,064
Interest Income (Expense)................. (1,471) 3,287
Other, Net................................ (1,825) (18,853)
----------- -----------
76,562 95,498
----------- -----------
Income (Loss) before Income Taxes........... (242,572) 357,064
(Provision) Benefit for Income Taxes........ 48,514 (89,266)
----------- -----------
Net Income (Loss)........................... $ (194,058) $ 267,798
=========== ===========
Net Income (Loss) Per Common
Share-basic and diluted.................. ($ 0.05) $ 0.06
=========== ===========
Weighted Average Number of Common
Shares Outstanding - basic 4,264,406 4,425,039
=========== ===========
Weighted Average Number of Common and Common
Equivalent Shares Outstanding - diluted... 4,264,406 4,468,497
=========== ===========
Dividends Declared Per Common Share......... $ .04 $ .04
=========== ===========
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ASTRO-MED, INC.
UNAUDITED CONSOLIDATED STATEMENTS OF INCOME
Six Months Ended
----------------
August 4, July 29,
2001 2000
---- ----
Net Sales...................................... $24,567,716 $25,908,578
Cost of Sales.................................. 14,749,650 15,336,069
---------- ----------
Gross Profit................................... 9,818,066 10,572,509
Costs and Expenses:
Selling, General and Administrative.......... 8,283,265 7,905,553
Research and Development..................... 1,837,454 2,235,634
---------- ----------
10,120,719 10,141,187
Operating Income (Loss)........................ (302,653) 431,322
Other Income (Expense):
Investment Income............................ 164,986 230,480
Interest Expense............................. (2,760) (2,198)
Other, Net................................... 84,937 (90,899)
----------- ----------
247,163 137,383
Income (Loss) before Income Taxes.............. (55,490) 568,705
(Provision)Benefit for Income Taxes............ 11,096 (143,047)
---------- ----------
Net Income (Loss).............................. $ (44,394) $ 425,658
========== ==========
Net Income (Loss) Per Common
Share-basic and diluted...................... $ (0.01) $ 0.10
========== ==========
Weighted Average Number of Common
Shares Outstanding - basic................... 4,252,809 4,422,043
========== ==========
Weighted Average Number of Common and Common
Equivalent Shares Outstanding - diluted...... 4,252,809 4,468,492
========== ==========
Dividends Declared Per Common Share............ $ .08 $ .08
========== ==========
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ASTRO-MED, INC.
UNAUDITED CONSOLIDATED STATEMENTS OF CASH FLOWS
Six Months Ended
----------------
August 4, July 29,
2001 2000
---- ----
Cash Flows from Operating Activities:
Net Income (Loss)............................ $ (44,394) $ 425,658
Adjustments to Reconcile Net Income (Loss) to
Net Cash Provided (Used) by Operating Activities:
Depreciation and Amortization........... 749,040 669,320
Other................................... (160,524) -
Changes in Assets and Liabilities:
Accounts Receivable...................... 2,335,119 (994,142)
Inventories.............................. (930,069) (65,096)
Other.................................... 30,879 22,229
Accounts Payable and Accrued Expenses.... (995,422) (2,086,099)
Income Taxes............................. (65,728) (211,113)
----------- ------------
Total Adjustments...................... 963,295 (2,664,901)
Net Cash Provided (Used) by
Operating Activities..................... 918,901 (2,239,243)
Cash Flows from Investing Activities:
Proceeds from Sales of Securities
Available for Sale......................... 2,200,044 2,726,901
Purchases of Securities Available
for Sale................................... (896,101) (1,714,423)
Refund of Purchase Price for Acquisition..... - 225,000
Additions to Property, Plant and Equipment... (563,990) (396,186)
----------- ------------
Net Cash Provided by Investing Activities.. 739,953 841,292
Cash Flows from Financing Activities:
Principle Payments on Capital Leases......... (26,775) (37,744)
Proceeds from Common Shares Issued
Under Employee Benefit Plans............... 8,282 48,120
Dividends Paid............................... (339,781) (353,682)
----------- ------------
Net Cash Used by Financing Activities...... (358,274) (343,306)
Net Increase (Decrease) in Cash and
Cash Equivalents.............................. 1,300,580 (1,741,257)
Cash and Cash Equivalents, Beginning of Period... 806,069 4,035,867
----------- ------------
Cash Equivalents, End of Period.............. $ 2,106,649 $ 2,294,610
=========== ============
Supplemental Disclosures of Cash Flow
Information:
Cash Paid During the Period for:
Interest................................. $ 2,760 $ 2,250
Income Taxes............................. $ 89,319 $ 232,823
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ASTRO-MED, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
August 4, 2001
Note 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(a) The accompanying financial statements have been prepared by the
Company, without audit, pursuant to the rules and regulations of the Securities
and Exchange Commission, and reflect all adjustments which, in the opinion of
management, are necessary for a fair statement of the results of the interim
periods presented. These financial statements do not include all disclosures
associated with annual financial statements and, accordingly, should be read in
conjunction with footnotes contained in the Company's annual report on Form 10-K
for the year ended January 31, 2001.
(b) Net income (loss) per common share has been computed and presented
pursuant to the provisions of Statement of Financial Accounting Standards No.
128, Earnings Per Share. Net income (loss) per share is based on the weighted
average number of shares outstanding during the period. Net income (loss) per
share assuming dilution is based on the weighted average number of shares and,
if dilutive, common equivalent shares for stock options outstanding during the
period.
Three Months Ended Six Months Ended
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August 4, July 29, August 4, July 29,
2001 2000 2001 2000
---- ---- ---- ----
Weighted Average Common Shares
Outstanding-basic........................ 4,264,406 4,425,039 4,252,809 4,422,043
Diluted Effect of Options Outstanding...... - 33,458 - 46,449
--------- --------- --------- ---------
Weighted Average Common Shares
Outstanding - diluted.................... 4,264,406 4,458,497 4,252,809 4,468,492
========= ========= ========= =========
For the three months ended August 4, 2001 and July 29, 2000, respectively, the
diluted per share amounts do not reflect options outstanding of 1,687,450 and
1,000,875, respectively because their effect is anti-dilutive.
For the six months ended August 4, 2001 and July 29, 2000, respectively, the
diluted per share amounts do not reflect options outstanding of 1,687,450 and
997,875, respectively because their effect is anti-dilutive.
(c) Derivative Instruments and Hedging: On February 1, 2001, the Company
adopted SFAS No. 133, Accounting for Derivative Instruments and Hedging
Activities, as amended by SFAS No. 137, Accounting for Derivative Instruments
and Hedging Activities - Deferral of the Effective Date of SFAS No. 133, and as
amended in June 2000 by SFAS No. 138 Accounting for Certain Derivative
Instruments and Certain Hedging Activities - an Amendment to SFAS No. 133
(combined SFAS No. 133). The statement requires companies to record derivatives
on the balance sheet as assets or liabilities, measured at fair value. Gains or
losses resulting from changes in the values of those derivatives would be
accounted for depending on the use of the derivative and whether it qualifies
for hedge accounting. The adoption of this statement did not have a material
impact on the Company's results of operations or financial position.
(d) Revenue Recognition: Revenue is recognized when products or services
are performed and the risk and rewards of ownership have been transferred.
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(e) In July 2000, the Emerging Issues Task Force, a body of the Financial
Accounting Standards Board, reached a consensus on Issue No. 00-10, Accounting
for Shipping and Handling Fees and Costs. The consensus requires companies to
start reporting amounts billed to customers in a sales transaction related to
shipping and handling as revenue in the fourth quarter of fiscal year 2001. The
Company previously reported these amounts as a reduction of cost of goods sold.
All previous periods presented have been reclassified to conform to the current
practice. The amount reclassed for three-months and six-months ending July 29,
2000 were $162,000 and $315,000, respectively.
(f) In July 2001, the Financial Accounting Standards Board released for
issuance SFAS No. 141, "Business Combinations" and SFAS No. 142, "Goodwill and
Other Intangible Assets." SFAS No. 141 requires that the purchase method of
accounting be used for all business combinations initiated after June 30, 2001.
SFAS No. 142 changes the accounting for goodwill from an amortization method to
an impairment-only approach. Under SFAS No. 142, amortization of goodwill to
earnings will cease and instead, the carrying value of goodwill will be
evaluated for impairment on at least an annual basis. The Company will adopt
SFAS No. 141 and SFAS No. 142 effective January 31, 2002. The Company is
evaluating the impact of adoption of these standards and has not yet determined
the effect of adoption on its financial statements.
Note 2 - COMPREHENSIVE INCOME
The Company's total comprehensive income is as follows.
Three Months Ended Six Months Ended
------------------ ----------------
August 4, July 29, August 4, July 29,
2001 2000 2001 2000
---- ---- ---- ----
Comprehensive Income:
Net Income (Loss)..................... ($194,058) $267,798 ($ 44,394) $425,658
-------- -------- -------- --------
Other Comprehensive Loss:
Foreign currency translation
adjustments, net of tax......... (22,190) (60,679) (93,580) (73,092)
Unrealized gain (loss)
in securities:
Unrealized holding gain (loss)
arising during the period,
net of tax..................... (17,823) 11,446 4,674 46,548
Reclassification adjustment
for gain (loss) included in
net income, net of tax......... - - 625 (1,875)
-------- -------- -------- --------
Other Comprehensive Loss.............. (40,013) (49,233) (88,281) (28,419)
Comprehensive Income (Loss) .......... ($234,071) $218,565 ($132,675) $397,239
======== ======== ======== ========
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Note 3 - INVENTORIES
Inventories, net of reserves are stated at the lower of cost (first-in,
first-out) or market and include material, labor and manufacturing overhead. The
components of inventories were as follows:
August 4, January 31,
2001 2001
---- ----
Materials and Supplies... $ 6,112,241 $ 5,921,934
Work-In-Process.......... 1,381,348 1,282,466
Finished Goods........... 4,104,920 3,578,025
----------- -----------
$11,598,509 $10,782,425
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-9-
ASTRO-MED, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
Results of Operations:
- ----------------------
For the Three-Months Ending August 4, 2001 vs. July 29, 2000
- ------------------------------------------------------------
Sales in the second quarter were $12,132,000, a decrease of 9% from the
prior year's second quarter sales of $13,382,000. Domestic sales were
$8,795,000, down from $9,501,000 for the second quarter of the prior fiscal
year. Sales through the Company's international channels were $3,337,000, down
14% over the previous year's second quarter sales of $3,881,000. Our
international sales continued to be negatively impacted by the sluggish European
economy and by the strong U.S. dollar.
Sales were lower in each of the Company's product groups. Grass-
Telefactor's sales were $4,400,000, a 14% decrease from the $5,110,000 of sales
reported in the second quarter of the previous year. This decrease in clinical
sales resulted primarily from an unusually large backlog in the prior year.
QuickLabel Systems (QLS) product sales were $4,761,000, down 4% from the
$4,958,000 the previous year. This decrease is attributed to the decrease in
hardware sales as a result of customers delaying their capital spending. Test &
Measurement (T&M) sales in the quarter were $2,971,000, down 10% from $3,314,000
reported in the second quarter of the previous year. The decline in T&M is a
result of delays in delivering the new Dash 18 to the marketplace.
Gross profit dollars were $4,766,000 in the quarter. The gross profit
margin realized in the quarter was 39.3%, a decrease from last year's margin of
40.4%. Product mix and lower margins in T&M and QLS account for this quarter's
results.
Operating Expenses in the quarter were $5,085,000. Selling and general
administrative spending rose 4% from last year to $4,156,000 due to higher
international dealer commissions in this quarter as compared to last year.
Excluding the impact of these commissions the selling and general administrative
spending was approximately flat with the previous year.
Research and development funding decreased 19% from the prior year to
$929,000. In the quarter, R & D spending was 7.7% of sales down from last year's
rate of 8.5%.
Operating loss in the quarter was $319,000 as compared to the operating
income for last year's second quarter of $262,000.
Other income for the quarter decreased to $77,000 from last year's $95,000.
Net loss in the current quarter was $194,000, equal to $0.05 loss per
share. This compares to net income of $268,000, equal to $0.06 net income per
share in the prior year's quarter.
-10-
Results of Operations (continued):
- ----------------------------------
For the Six-Months Ending August 4, 2001 vs. July 29, 2000
- ----------------------------------------------------------
Sales in the first half of this year were $24,568,000, down 5% from the
prior year's sales of $25,909,000. Domestic sales were $17,835,000, down from
$18,554,000 for the first half of the prior fiscal year. The decline in the
domestic sales is attributed to the 11% decline in the QLS domestic sales.
Domestic T&M and Grass-Telefactor sales were essentially flat with the prior
year. Sales through the Company's international channels were $6,733,000, 9%
lower than the previous year's first half sales of $7,355,000. Our international
sales continued to be negatively impacted by the sluggish European economy and
by the strengthening of the U.S. dollar.
Sales were lower in each of the Company's product groups. Grass-
Telefactor's sales decreased to $8,919,000, a 5% decrease over the $9,368,000 of
sales reported in the first half of the previous year. This decrease in clinical
sales resulted primarily from an unusually large backlog in first half of the
prior year. QuickLabel Systems (QLS) product sales were $9,660,000, down 5% from
the $10,214,000 the previous year. This decrease is attributed to the decrease
in hardware sales as a result of our customers delaying their capital spending.
Test & Measurement (T&M) sales were $5,989,000, down 5% from $6,327,000 reported
in the previous year. The decline in T&M sales is a result of delays in
delivering the new Dash 18 to the marketplace.
Gross profit dollars were $9,818,000, a 7% decrease over last year. The
gross profit margin realized in the first half of this fiscal year was 40.0%, a
decrease from last year's margin of 40.8%. Product mix and lower margins in T&M
and QLS account for the decline in the margin.
Operating Expenses in the first half were $10,121,000 down slightly from
the prior year. Selling and general administrative spending rose 5% from last
year to $8,283,000 due to higher international dealer commissions in the first
half of this year as compared to last year. Excluding the impact of these higher
international dealer commissions selling and general administrative spending was
approximately flat with the prior year.
Research and development funding decreased 18% from the prior year to
$1,837,000. In the first half of this year, R & D spending was 7.5% of sales
down from last year's rate of 8.6%.
Operating loss in the first half of this year was $303,000 as compared to
operating income of $431,000 in the prior year.
Other income increased to $247,000 from last year's $137,000. The increase
is attributed to a $125,000 gain relating to the settlement of litigation on a
contract dispute.
Net loss in the first half of this year was $44,000, equal to $0.01 loss per
share. This compares to net income of $426,000, equal to $0.10 income per share,
in the prior year.
-11-
Financial Condition:
- --------------------
The Company's Statements of Cash Flows for the six-months ending August 4,
2001 and July 29, 2000 are included on page 6. Net cash flow provided by
operating activities for the first half of this year was $919,000 versus cash
flow used by operating activities of $2,239,000 in the previous year.
Cash and securities available for sale at August 4, 2001 totaled
$6,165,000, which approximated the balance at year-end.
The collection cycle improved by 11 days decreasing to 55 days sales
outstanding at the end of the second quarter as compared to the 66 days sales
outstanding at year-end.
Inventory rose to $11,599,000 from the year-end level $10,782,000 as the
Company increased inventory in anticipation of the new Dash 18 and Pronto
product lines. In addition, inventory increased as a result of items being
manufactured for anticipated sales that were delayed. As a result of these
items, inventory turns declined to 2.0 from the year-end turns of 2.5.
Capital expenditures during the six-months ended August 4, 2001 were
$564,000, up 42% from the prior year amount of $396,000. The increase is
primarily attributed to the purchase of machinery and equipment that will
improve our manufacturing process.
In the second quarter, the Company entered into a new $2.0 million line of
credit agreement, all of which is currently available. Any borrowings on this
line of credit bear interest at LIBOR plus 11/2%. With the addition of this line
of credit the Company currently has $3.5 million of available and unused
borrowings.
In the second quarter, the Company entered into a foreign exchange zero
cost collar agreement to minimize the risk associated with changes in the
foreign exchange rates on certain foreign denominated receivables. This
agreement is a combination of buying a put and selling a call or vice versa and
effectively provides the Company a hedge on certain foreign denominated
receivables between an upper and a lower exchange rate limit. The notional
amount of the agreement is $200,000. The agreement expired on August 3, 2001.
The spot rate on the date the contract expired was within the collar limits and
neither party exercised its option.
Safe Harbor Statement
- ---------------------
This document contains forward-looking statements based on current expectations
that involve a number of risks and uncertainties. Factors which could cause
actual results to differ materially from those anticipated include, but are not
limited to, general economic, financial and business conditions; declining
demand in the test and measurement markets, especially defense and aerospace;
competition in the specialty printer industry; ability to develop market
acceptance of the QLS color printer products and effective design of customer
required features; competition in the data acquisition industry; competition in
the neurophysiology industry; the impact of changes in foreign currency exchange
rates on the results of operations; the ability to successfully integrate
acquisitions; the business abilities and judgment of personnel and changes in
business strategy.
-12-
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits:
None.
(b) Reports on Form 8-K:
No reports on Form 8-K have been filed during the quarter for which this
report is filed.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
ASTRO-MED, INC.
(Registrant)
Date: September 7, 2001 By /s/ A. W. Ondis
-----------------------------
A. W. Ondis, Chairman
(Principal Executive Officer)
Date: September 7, 2001 By /s/ Joseph P. O'Connell
-----------------------------
Joseph P. O'Connell, Vice
President and Treasurer
(Principal Financial Officer)
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