UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-Q (Mark One) [X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended November 1, 1997 ------------------------------------------- OR [_] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from to ----------------- ----------------- Commission file number 0-13200 --------------------------------------------------- Astro-Med, Inc. - ------------------------------------------------------------------------- (Exact name of registrant as specified in its charter) Rhode Island 05-0318215 - ------------------------------------------------------------------------- (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) 600 East Greenwich Avenue, West Warwick, Rhode Island 02893 - ------------------------------------------------------------------------- (Address of principal executive offices) (Zip Code) (401) 828-4000 - ------------------------------------------------------------------------- (Registrant's telephone number, including area code) ------------------------- Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes [X]. No [_]. Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practicable date. Common Stock, $.05 Par Value - 4,809,904 shares (excluding treasury shares) as of December 2, 1997 -1- ASTRO-MED, INC. INDEX Page No. -------- Part I. Financial Information: Consolidated Balance Sheets - January 31, 1997 and November 1, 1997........................ 3 Consolidated Statements of Income - Three Months Ended November 2, 1996 and November 1, 1997..... 4 Consolidated Statements of Income - Nine Months Ended November 2, 1996 and November 1, 1997...... 5 Consolidated Statements of Cash Flows - Nine Months Ended November 2, 1996 and November 1, 1997...... 6 Notes to Consolidated Financial Statements - November 1, 1997............................................. 7 Management's Discussion and Analysis of Financial Condition and Results of Operations.......................... 8,9 Part II. Other Information................................... 10 -2- Part I. FINANCIAL INFORMATION ASTRO-MED, INC. UNAUDITED CONSOLIDATED BALANCE SHEETS January 31, November 1, ASSETS 1997 1997 ---- ---- (Unaudited) CURRENT ASSETS Cash and Cash Equivalents.................. $ 6,561,184 $ 6,485,277 Securities Available for Sale.............. 7,099,358 7,437,510 Accounts Receivable, Net................... 8,311,736 8,206,339 Inventories................................ 10,361,505 10,199,655 Prepaid Expenses and Other Current Assets.. 1,441,505 1,346,758 ----------- ----------- Total Current Assets..................... 33,775,288 33,675,539 PROPERTY, PLANT AND EQUIPMENT 17,046,969 17,957,665 Less Accumulated Depreciation.............. (8,986,149) (10,057,557) ----------- ----------- 8,060,820 7,900,108 OTHER ASSETS Excess of Cost Over Net Assets Acquired.... 976,384 949,159 Other...................................... 508,935 785,668 ----------- ----------- 1,485,319 1,734,827 ----------- ----------- $43,321,427 43,310,474 =========== =========== LIABILITIES AND STOCKHOLDERS' EQUITY CURRENT LIABILITIES Accounts Payable........................... $ 1,614,986 $ 2,495,317 Accrued Compensation....................... 1,115,026 1,163,211 Accrued Expenses........................... 1,318,103 1,283,114 Income Taxes............................... 819,535 360,620 Current Maturities of Long-Term Debt....... 97,706 150,628 ----------- ----------- Total Current Liabilities................ 4,965,356 5,452,890 LONG-TERM DEBT, Less Current Maturities...... 258,135 285,873 EXCESS OF NET ASSETS ACQUIRED OVER COST...... 544,199 380,939 DEFERRED INCOME TAXES........................ 794,895 794,895 STOCKHOLDERS' EQUITY Preferred Stock, $10 Par Value, Authorized 100,000 Shares, None Issued.... Common Stock, $.05 Par Value, Authorized 13,000,000 Shares, Issued 5,136,737 and 5,139,495 Shares, Respectively........ 256,837 256,975 Additional Paid-In Capital................. 5,624,239 5,642,368 Retained Earnings.......................... 32,772,044 33,451,461 Treasury Stock, at Cost (209,395 Shares and 329,895 Shares, Respectively)......... (1,804,986) (2,851,695) Cumulative Translation Adjustment.......... (76,649) (102,561) Net Unrealized (Loss) on Securities Available for Sale........................ (12,643) (671) ----------- ----------- 36,758,842 36,395,877 ----------- ----------- $43,321,427 $43,310,474 =========== =========== -3- ASTRO-MED, INC. UNAUDITED CONSOLIDATED STATEMENTS OF INCOME Three Months Ended ------------------ November 2, November 1, 1996 1997 ---- ---- Net Sales.................................... $11,110,514 $11,344,294 Cost of Sales................................. 6,572,197 6,857,626 ----------- ----------- Gross Profit.................................. 4,538,317 4,486,668 Costs and Expenses: Selling, General and Administrative.......... 3,017,702 3,383,091 Research and Development..................... 643,092 668,924 ----------- ----------- 3,660,794 4,052,015 Operating Income.............................. 877,523 434,653 Other Income (Expense): Investment Income............................ 157,489 211,241 Interest Expense............................. (3,349) (7,546) Other, Net................................... 41,665 84,040 ----------- ----------- 195,805 287,735 ----------- ----------- Income before Income Taxes.................... 1,073,328 722,388 Provision for Income Taxes.................... 389,620 223,945 ----------- ----------- Net Income.................................... $ 683,708 $ 498,443 =========== =========== Earnings Per Common Share..................... $.14 $.10 ==== ==== Weighted Average Number of Common and Common Equivalent Shares Outstanding................ 5,014,191 4,896,071 ========== =========== Dividends Declared Per Common Share........... $.03 $.04 ==== ==== -4- ASTRO-MED, INC. UNAUDITED CONSOLIDATED STATEMENTS OF INCOME Nine Months Ended ----------------- November 2, November 1, 1996 1997 ---- ---- Net Sales.................................... $32,779,109 $33,727,329 Cost of Sales................................ 19,879,552 20,735,370 ----------- ----------- Gross Profit................................. 12,899,557 12,991,959 Costs and Expenses: Selling, General and Administrative......... 9,500,079 9,772,735 Research and Development.................... 1,846,599 2,075,620 ----------- ----------- 11,346,678 11,848,355 Operating Income............................. 1,552,879 1,143,604 Other Income (Expense): Investment Income........................... 828,197 606,159 Interest Expense............................ (15,366) (20,840) Other, Net.................................. 81,200 (4,440) ----------- ----------- 894,031 580,879 ----------- ----------- Income before Income Taxes................... 2,446,910 1,724,483 Provision for Income Taxes................... 733,620 510,000 ----------- ----------- Net Income .................................. $ 1,713,290 $ 1,214,483 =========== =========== Earnings Per Common Share.................... $.34 $.25 ==== ==== Weighted Average Number of Common and Common Equivalent Shares Outstanding............... 5,025,371 4,919,601 =========== =========== Dividends Declared Per Common Share.......... $.09 $.12 ==== ==== -5- ASTRO-MED, INC. UNAUDITED CONSOLIDATED STATEMENTS OF CASH FLOWS Nine Months Ended ----------------- November 2, November 1, 1996 1997 ---- ---- Cash Flows from Operating Activities: Net Income...................................... $1 ,713,290 $ 1,214,483 Adjustments to Reconcile Net Income to Net Cash Provided by Operating Activities: Depreciation and Amortization................. 703,175 935,373 Gain on Sale of Investment.................... (416,090) Other......................................... (13,940) Changes in Assets and Liabilities: Accounts Receivable......................... 60,389 105,397 Inventories................................. 904,664 161,850 Other....................................... (95,881) (284,263) Accounts Payable and Accrued Expenses....... 535,791 893,529 Income Taxes................................ 639,613 (458,915) ----------- ----------- Total Adjustments........................ 2,331,661 1,339,031 Net Cash Provided by Operating Activities.......................... 4,044,951 2,553,514 Cash Flows from Investing Activities: Proceeds from Sales of Securities Available for Sale............................. 1,487,684 2,335,200 Purchases of Securities Available for Sale....................................... (282,669) (2,571,075) Proceeds from Sale of Building.................. 515,935 Additions to Property, Plant and Equipment...... (649,455) (710,696) ----------- ----------- Net Cash Provided by Investing Activities.......................... 1,071,495 (946,571) Cash Flows from Financing Activities: Payments of Long-Term Debt...................... (50,000) (119,339) Proceeds from Common Shares Issued Under Employee Benefit Plans................... 62,084 18,267 Purchases of Treasury Stock..................... (565,942) (1,046,709) Dividends Paid.................................. (457,359) (535,069) ----------- ----------- Net Cash (Used) by Financing Activities........ (1,011,217) (1,682,850) Net Increase in Cash and Cash Equivalents..................................... 4,105,229 (75,907) Cash and Cash Equivalents, Beginning of Period...... 2,033,713 6,561,184 ----------- ----------- Cash and Cash Equivalents, End of Period............ $ 6,138,942 $ 6,485,277 =========== =========== Supplemental Disclosures of Cash Flow Information: Cash Paid During the Period for: Interest...................................... $ 24,477 $ 25,061 Income Taxes.................................. $ 69,855 $ 751,437 Other Non-Cash Transactions: Acquisition of Leased Equipment............... $ 200,000 -6- ASTRO-MED, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS November 1, 1997 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, 1997. (b) Earnings per common share are computed based on the weighted average number of common shares and common share equivalents outstanding during each period. Common share equivalents include the dilutive effect of certain stock options under the treasury stock method. Fully diluted earnings per share have not been separately presented since they would not be materially different. In February, 1997, the Financial Accounting Standards Board issued Statement of Financial Accounting Standard (SFAS) No. 128, Earnings Per Share, which supercedes APB Opinion 15. The Statement's objective is to simplify and harmonize the computation of earnings per share and to make the U.S. standard for computing earnings per share more compatible with the EPS standards of other countries and with that of the International Accounting Standards Committee. As required by SFAS No. 128, the Company will adopt this statement for the fiscal year ending January 31, 1998. Pro-Forma basic and diluted earnings per share had the Company adopted SFAS No. 128 for the third quarter of fiscal year 1997 would have been $.14. Pro-Forma basic and diluted earnings per share had the Company adopted SFAS No. 128 for the nine month period of fiscal year 1997 would have been $.34. Pro-Forma basic and diluted earnings per share had the Company adopted SFAS No. 128 for the third quarter of fiscal year 1998 would have been $.10. Pro-Forma basic and diluted earnings per share had the Company adopted SFAS No. 128 for the nine month period of fiscal year 1998 would have been $.25. Note 2 - 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, November 1, 1997 1997 ---- ---- Materials and Supplies.. $ 5,558,216 $ 5,449,024 Work-In-Process......... 779,337 1,069,655 Finished Goods.......... 4,023,952 3,680,976 ----------- ----------- $10,361,505 $10,199,655 =========== =========== -7- ASTRO-MED, INC. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Results of Operations: - --------------------- Sales in the 3rd quarter of $11,344,000 increased 2% over last year's 3rd quarter. The increase was confined to our domestic channels which saw volume growth of 10% over the prior year's 3rd quarter sales. International sales showed mixed results with sales volume from our European and Canadian branches up 2% over last year, while sales volume from our export channels were behind last year by 42%. The lower sales volume from the export channel is traceable primarily to soft demand in the Asian and Pacific Rim markets. Product line performance reflects 9% sales growth in the QLS [Quick Label Systems] division which includes the CQL-4 Color Printer, and 15% sales growth in the Grass Instrument Products division, driven primarily by the Heritage digital EEG and PSG Systems sales. Sales volume in the Core Products line was down 7% from last year's 3rd quarter level. After nine months, current fiscal year sales of $33,727,000 are ahead of last year by 3%. Domestic sales are up 10% while international sales are down 15% from the prior year's nine month volume. Gross profit was $4,487,000 in the 3rd quarter or a 40% margin. The result was below last year's 3rd quarter margin of 41% due to a combination of product mix and factory related expenses. After nine months, gross profit of $12,992,000 is virtually flat with last year and gross profit margins at 39% are comparable to last year's level of 39%. Operating expenses were $4,052,000 during the 3rd quarter, an increase of 11% over last year's 3rd quarter. The increase reflects the investment the Company continues to make in expanding its field sales personnel as well as its commitment to new product development through R & D funding. After nine months, operating expenses are $11,848,000, higher by 4% over the prior year's nine month result. This year's spending has selling & marketing up 7%, R & D up 12% and G & A down 9% from last year's results. Other income, net, for the 3rd quarter was $288,000, a 47% increase over last year's 3rd quarter. The improvement stems from additional interest and dividend income as well as gains related to foreign currency valuations. On a year to date basis, other income, net, is $581,000 as compared to last year's $894,000. The primary reason for the difference is a $416,000 gain realized on the sale of a partnership interest during the 1st quarter of the prior fiscal year. Income taxes for the 3rd quarter were at a rate of 31% as compared to last year's 36% rate in the 3rd quarter. For the nine month period, this year's provision for income taxes was 30% and matched last year's rate. -8- Financial Condition: - ------------------- On the Balance Sheet total assets of $43,310,000 are flat with the previous fiscal year-end. During the nine months, Cash and marketable securities have risen by $262,000 to $13,923,000. Working capital levels excluding cash and marketable securities declined 6% to $14,300,000, while the Company's current ratio remained strong at 6.2 to 1. Capital expenditures this year are $711,000 and are mostly related to investments in machinery and equipment, building renovations and information technology improvements. During the 3rd quarter the Company purchased an additional 43,000 shares of common stock under its Stock Repurchase Plan. To date, the Company has purchased 126,000 shares of treasury stock at an aggregate cost of $1,047,000. The Shareholders' Equity investment rose nominally from the 2nd quarter to $36,396,000 at quarter's end resulting in a book value of $7.43 per share. Safe Harbor Statement: - --------------------- Statements which are not historical facts including statements about our expectations on new and existing products and opportunities, market growth, demand and acceptance of new and existing products are forward looking statements that involve risks and uncertainties. Those uncertainties include but are not limited to product demand and market acceptance risks; the impact of competitive products and pricing; delays or difficulties in developing, producing, testing and selling new products and technologies; capacity and supply constraints or difficulties; trade, legal, social and economic risks such as licensing, and trade restrictions, including those affecting international trade; and other risk factors listed from time to time in the Company's SEC reports including but not limited to the report on Form 10-Q for the quarter ended November 1, 1997. -9- 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: December 2, 1997 By /s/ A. W. Ondis ----------------------------- A. W. Ondis, Chairman (Principal Executive Officer) Date: December 2, 1997 By /s/ Joseph P. O'Connell ----------------------------- Joseph P. O'Connell, Vice President and Treasurer (Principal Financial Officer) -10-