===============================================================================
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
[X]ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE
ACT OF 1934 [FEE REQUIRED]
FOR THE FISCAL YEAR ENDED JANUARY 31, 1996
OR
[_]TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES
EXCHANGE ACT OF 1934 [NO FEE REQUIRED]
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 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:
TITLE OF EACH CLASS NAME OF EACH EXCHANGE 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 [X] No [_]
State the aggregate market value of the voting stock held by non-affiliates of
the registrant as of March 18, 1996.
Common Stock, $.05 Par Value: $27,474,072
Indicate the number of shares outstanding (excluding treasury shares) of each
of the issuer's classes of common stock as of March 18, 1996.
Common Stock, $.05 Par Value: 4,982,838 shares
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the Company's definitive proxy statement for the 1996 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..................................................... 13
Item 3. Legal Proceedings.............................................. 14
Item 4. Submission of Matters to a Vote of Security Holders............ 14
PART II
Item 5. Market for the Registrant's Common Stock and Related
Stockholder Matters............................................ 14
Item 6. Selected Financial Data........................................ 14
Item 7. Management's Discussion and Analysis of Financial Condition and
Results of Operations.......................................... 15
Item 8. Financial Statements and Supplementary Data.................... 17
Item 9. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure........................................... 17
PART III
Item 10. Directors and Executive Officers of the Registrant............. 17
Item 11. Executive Compensation......................................... 18
Item 12. Security Ownership of Certain Beneficial Owners and Management. 18
Item 13. Certain Relationships and Related Transactions................. 18
PART IV
Item 14. Exhibits, Financial Statement Schedules and Reports
on Form 8-K.................................................... 19
10
ASTRO-MED, INC.
PART I
ITEM 1. BUSINESS
GENERAL
Astro-Med, Inc., incorporated in Rhode Island in January 1969, operates in
the one industry segment described below. There was no significant change in
the nature of the Company's business during the year ended January 31, 1996
(herein referred to as "fiscal 1996").
NARRATIVE DESCRIPTION OF BUSINESS
PRODUCTS
The Company develops, designs, manufactures and sells a comprehensive line
of data acquisition and recording systems, specialty printers, computer
software for data analysis and display, and an extensive range of printer
consumables. Among the recording systems are the MT series, including the
MT95K2 and MT-95000, and the DASH family of portable recorders ranging from
the 10-30 channel Dash 10 to the 2-channel Dash IImt, with the Dash 8, Dash IV
and Dash IVxl rounding out the series.
Both the MT and DASH series recorders are used to capture, process, analyze
and record data in engineering, scientific, industrial and medical
applications.
The Company expanded its offerings of data acquisition products with the
introduction of the AstroDAQ(TM) in fiscal 1996. This digital data acquisition
product is a complete and ready to use system for acquiring, conditioning,
analyzing and networking data in a wide variety of applications in automotive,
aerospace, research and general manufacturing environments. The AstroDAQ
system includes a full range of signal conditions with built-in DSP (digital
signal processing), Astro-Med's Windows(TM)-based AstroLINK software for
control and data review, and a high speed network interface.
In the rapidly growing digital color printing market, the Company offers a
leading edge narrow web digital color printing system, the SUNDANCE(TM). The
SUNDANCE System, along with "Color QuickLabel for Windows" software, creates
lithographic quality labels and tags in both full process color and spot
color, in any quantity, on-site and on-demand. The system serves both
manufacturers who require short-run, high quality, color printing to enhance
their products as well as "Quick Print" retailers that can produce full color,
high-quality labels, business cards, banners and more, quickly and
inexpensively.
The Company's thermal/thermal transfer printer products also include the Top
Hand 2 monochrome printer and the Range Boss wide format printer for the
expanding product identification market, often referred to as the bar code
market.
The Company's thermal printer product lines include a broad variety of
printer consumables, including thermal transfer ribbons, labels and tags. The
Company produces such products using its propriety production equipment and,
as with all products, sells them to customers throughout the world.
Other specialty printers manufactured by the Company include the TOUGH
WRITER and the AG 1280. The Tough Writer is a ruggedized COTS PostScript page
printer that is a drop-in-replacement for the LaserJet III printer used in
military, airborne, shipboard and heavy industrial applications. The AG-1280
is a high-speed, drop-in-replacement for the Versatec V-80(TM) electrostatic
printer/plotter. Both use thermal printing technology.
The Company's K3 CATH LAB SYSTEM continues to gain acceptance by hospitals
around the world as a complete hemodynamic monitoring system for the cardiac
catherization lab. The system integrates the Company's data recorder and
signal processing technology and displays physiological data on high
resolution color monitors. The K3 System provides full hemodynamic analysis
through its Softheart(TM) software program.
11
The Company serves both the research and clinical neurophysiology markets
through its Grass Instrument Division. The neurophysiological market includes
universities, pharmaceutical companies, hospitals and sleep study clinics.
Grass products include a broad line of Classic EEG and Polosomnograph systems
including the Model 7, Model 78, Model 8plus10 and Model 9. Newer digital
neurodata acquisition systems include the Model 12 and Model 15 systems that
feature the world renowned Grass Amplifiers. The PolyVIEW data acquisition and
analysis system allows users to acquire, store, and analyze research data in a
Windows(TM) environment.
In fiscal 1996, the Company continued its strategy of marketing new products
with the introduction of the Grass MODEL 7400 Physiological Recorder. This
portable four-channel data system with its open ended instrumentation platform
performs a wide range of tasks characteristic of a large floor model
polygraph. This recorder follows in the footsteps of the K2G, an 8-32 channel
instrument that can record, display and archive an extensive range of
physiological data.
The Company also markets a broad line of stimulators, electrodes,
transducers and consumables, including chart paper.
The product development synergies of Astro-Med and Grass Instruments are
dramatically evident with the introduction of the Albert Grass HERITAGE(TM),
the Company's new digital EEG machine. This product will undergo clinical
trials during 1996 and be available for shipment in early 1997.
TECHNOLOGY
Since its inception, the Company has concentrated its research and
development efforts toward various methods to acquire, process, store and
print data so that the data can be analyzed, manipulated or affixed to a
product.
In recent years, the Company has developed and refined its digital printing
and signal processing systems. As its technology has become more advanced and
comprehensive, the Company has been able to enter an increasingly wide range
of markets.
PATENTS AND COPYRIGHTS
The Company holds a number of product patents in the United States and in
foreign countries. It has filed application for other patents that are
pending. In April 1988, the Company was granted Patent No. 4,739,344 covering
28 claims related to the MT-9500 as well as the newer MT-95000 and MT95K2. The
Company has a patent and a patent pending for its two-sided, 4-color process
printer, the SUNDANCE. 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 their component
parts. The balance of the parts are produced by suppliers to the Company's
specifications. 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 a growing program of product research and
development since its inception. During fiscal 1994, 1995 and 1996, the
Company incurred costs of $2,282,114, $2,542,940 and $2,415,494, respectively,
on Company-sponsored product development. However, costs alone are not a
totally accurate measure of research and development activities. The Company
is committed to product development as a vital factor in its growth and
expects to increase its research and development efforts again in the new
year.
MARKETING AND COMPETITION
The Company competes in varied markets throughout the world for all of its
products on the basis of proprietary technology, product reputation, delivery
and technical assistance to customers.
Most of the Company's products are sold to customers in North America and
selected European countries by a salaried field sales force. Certain products,
primarily those for the product identification market, are also sold through a
network of dealers which the Company began to set up in fiscal 1994. Export
sales are bolstered
12
by wholly-owned entities formed between fiscal 1988 and 1994 in England,
France, Germany, Italy and Canada. Other export sales are made through
authorized distributors or agents located in approximately thirty countries.
No single customer accounted for 10% of the Company's net sales in any of the
last three fiscal years.
During the last fiscal year, the Company's products were sold to
approximately 4,500 customers. The Company estimates that its products account
for approximately 20% of the original equipment market sales for high speed
printers/recorders, and that its share of sales to the end user market is
approximately 35%.
The Company's product promotion includes full-color advertising campaigns in
many leading trade magazines, exhibitions at trade shows, special mailings,
and public relations activities.
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 1994, 1995 and 1996, net sales to customers in various geographic
areas outside the U.S.A., primarily in Canada and Western Europe, amounted to
$6,988,747, $9,849,933 and $13,234,380, respectively. The Company's profit
margins on export sales approximate those on domestic sales. The Company's
management does not believe that its export sales involve materially greater
risks than its domestic sales.
ORDER BACKLOG
The backlog regularly fluctuates. The amount at any particular date is
comprised primarily of orders from OEM customers. For the past several years,
the Company has been developing and introducing new products aimed at end user
customers rather than OEM customers. Manufacturing is geared to forecasted
demands. 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 periods ranging from 45
days to one year against defects in materials or workmanship. Warranty
expenses have averaged approximately $190,000 a year for the Company's last
three fiscal years.
As of March 18, 1996, the Company employed approximately 377 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
excellent.
ITEM 2. PROPERTIES
The following table sets forth information regarding the Company's principal
properties, all of which are included in the consolidated balance sheet
appearing elsewhere in this report.
LOCATION APPROXIMATE SQUARE 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 believes its facilities are well maintained, in good operating
condition and generally adequate to meet its needs for the foreseeable future.
13
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.
PART II
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON STOCK AND RELATED STOCKHOLDER
MATTERS
The Company's common stock trades in the NASDAQ National Market System 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
----------------------- ------ ------ ---------
1995:
First Quarter.................................... 12 1/4 9 1/2 .03
Second Quarter................................... 10 1/2 8 1/2 .03
Third Quarter.................................... 11 1/2 8 1/4 .03
Fourth Quarter................................... 12 10 1/8 .03
1996:
First Quarter.................................... 12 3/8 8 1/2 .03
Second Quarter................................... 12 8 3/8 .03
Third Quarter.................................... 11 1/4 10 .03
Fourth Quarter................................... 10 1/2 8 7/8 .03
The Company had approximately 582 stockholders of record on March 18, 1996,
not including stockholders with shares held under beneficial ownership in
nominee name.
ITEM 6. SELECTED FINANCIAL DATA
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
YEARS ENDED JANUARY 31,
---------------------------------------
1992 1993 1994 1995 1996
------- ------- ------- ------- -------
Results of Operations:
Net Sales............................ $29,787 $31,333 $32,268 $38,233 $43,941
Net Income........................... 10,562 3,570 2,981 1,923 1,328
Earnings per Common Share............ 2.08 .69 .58 .38 .26
Cash Dividends per Common Share...... .06 .11 .12 .12 .12
Financial Condition:
Working Capital...................... $20,755 $23,479 $24,895 $25,487 $26,420
Total Assets......................... 35,743 37,492 39,955 42,177 42,303
Long-Term Debt, less Current
Maturities ......................... 999 647 296 244 175
- --------
(1) In the second quarter of fiscal 1992, the Company began a program of
paying quarterly cash dividends. No cash dividends on common stock had
previously been declared or paid during the fiscal years identified above.
(2) Earnings and cash dividends per common share amounts have been adjusted to
reflect a 3 for 2 stock split in the form of a 50% stock dividend paid May
18, 1992.
(3) Net income for fiscal 1992 includes $7,284,000, equal to $1.45 per share,
from settlement of litigation.
14
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
The following table provides percentage comparisons of the components of net
income as presented in the consolidated statements of income included
elsewhere herein for the last three fiscal years.
% OF NET SALES % INCREASE
--------------------------- --------------------------------
YEARS ENDED JANUARY 31, 1994 1995 1996
--------------------------- COMPARED TO COMPARED TO COMPARED
1994 1995 1996 1993 1994 TO 1995
------- ------- ------- ----------- ----------- --------
Net Sales............... 100% 100% 100% 3% 18% 15%
Gross Profit............ 51 43 39 0 (1) 5
Selling, General and
Administrative......... 30 30 30 0 18 13
Research and
Development............ 7 7 6 9 11 (5)
The Company continued its double digit sales growth in fiscal 1996. The
increase was bolstered by sales in the new product offerings of SUNDANCE, bar
code printer products, TOP HAND 2 and RANGE BOSS, DASH data recorders, and the
K3 CATH Lab System as well as a full year of revenues from the Grass
Instrument Division acquired by the Company in August 1994. Also contributing
to the Company's growth were international sales which grew 36% during the
current fiscal year and include the Canadian and European business units with
sales increases of 42% and 34%, respectively.
The order rate on domestic shipments was lower than anticipated. The Company
has responded by realigning its marketing strategy into a channel specific
product orientation format. This functional redesign in concert with the
Company's new product offerings is expected to stimulate additional sales
growth in fiscal 1997.
The Company's Gross Profit Percentage declined during fiscal 1996 to 39%
compared to 43% in fiscal 1995. Factors directly influencing this decline
include: a product line mix that encompassed a full year of lower margin Grass
Instrument revenues; and growth in lower margin domestic consumable products
markets and a slight decline in the domestic market. The Company continues to
implement its productivity improvement activities as a strategy to reduce
manufacturing cost.
The Company expects its marketing strategy in conjunction with its portfolio
of new product entries like AstroDAQ and the ALBERT GRASS HERITAGE digital EEG
system will result in improved margins as well as increased earnings for the
Company.
Annual selling, general and administrative expenses rose by 13% in fiscal
1996 partly because of a full year of Grass selling, general and
administrative expenses. Funding in selling and marketing categories were
increased to support the planned growth of the Company's new products. These
products include SUNDANCE, K3 Cath Lab System, AstroDAQ, PolyVIEW, Model 7400
as well as the thermal transfer printer products, TOP HAND 2 and RANGE BOSS 2.
The Company continued to commit marketing and selling funds to promote Grass
Products in the medical instrument marketplace. The Company believes these
investments are necessary and will result in continued revenue growth by
strategically positioning the Company's products in the appropriate industry
sector.
The Company's annual selling, general and administrative expenses increased
significantly in fiscal 1995 primarily due to the direct selling and marketing
costs related to launching new products, and an additional six months of Grass
Instrument expenses in this category. Selling, general and administrative
expenses incurred in fiscal 1994 were comparable to those of fiscal 1993.
The Company's commitment to the development of new products is partly
illustrated by the substantial research and development expenses incurred and
reported each year. However, the totals reflect variable expenses such as the
costs of materials consumed and of owning and upgrading the most advanced
engineering equipment available.
15
Research and Development expenses decreased 5% in fiscal 1996 compared to
fiscal 1995. The current fiscal year funding level is consistent with
requirements to support the Company's new and existing product lines. In
fiscal 1995, the Company's research and development expenses increased by 11%
over fiscal 1994 as the Company increased overall product development
activities, concentrating especially on the SUNDANCE Printing System and bar
code printing products.
The interest and dividend income level in fiscal 1996 declined from both
fiscal 1995 and fiscal 1994. This change occurred because of the Company's
decreased cash investment position as a result of funds used for the Grass
Instrument acquisition. Interest expense in fiscal 1996 was lower than the two
previous years as the level of short term borrowing requirements declined.
Other income (expense) net, has been affected annually, by fluctuations in
foreign currency exchange rates.
Changes in effective income tax rates from year to year are explained in
Note 6 of Notes to Consolidated Financial Statements. As described in Note 1,
a new accounting standard required a fiscal 1994 change in accounting for
income taxes. Such change, however, did not have a material effect on the
financial position or results of operations of the Company.
Inflation during recent years has not significantly impacted the Company's
operations. Generally, cost increases are offset by price increases and
improved manufacturing efficiencies from the Company's TQM program.
LIQUIDITY AND CAPITAL RESOURCES
Of the $1.5 million available under the Company's Revolving Credit Facility
with a bank, $500,000 was borrowed in June 1995 for operating needs. Such
amount was repaid during the year. The Company does not currently anticipate
any significant additional draw downs under its Revolving Credit Facility for
operating needs.
During the past three fiscal years, the Company has financed its operations
with on hand and internally generated funds. In August 1994, the Company
borrowed $3,400,000 from a bank to complete the acquisition of Grass
Instrument Co. The entire amount was repaid prior to the end of fiscal 1995.
The Company's long-term debt was acquired several years ago to construct
facilities and to make major acquisitions of machinery and equipment.
Expenditures for property and equipment during the past three fiscal years
have been made from on hand and internally generated funds. The balance of the
major portion of the Company's long-term debt was paid in full during January
1995.
As evidenced by the foregoing comments, the Company is financially strong.
The current ratio was 6.8:1 at the end of fiscal 1996 and long-term debt was
less than 1% of stockholders' equity. The Company has no material commitments
for capital expenditures and has no reason to believe that capital resources
available to it will not meet the needs of its business, both on a short-term
and long-term basis.
16
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 30, JULY 30, OCTOBER 29, JANUARY 31,
1994 1994 1994 1995
--------- -------- ----------- -----------
Net Sales............................ $ 6,551 $ 9,094 $11,221 $11,368
Gross Profit......................... 2,894 4,194 4,967 4,228
Net Income (Loss).................... (53) 905 892 179
Earnings (Loss) Per Common Share..... (.01) .18 .18 .04
APRIL 29, JULY 29, OCTOBER 28, JANUARY 31,
1995 1995 1995 1996
--------- -------- ----------- -----------
Net Sales............................ $10,955 $10,788 $10,824 $11,375
Gross Profit......................... 4,243 4,614 4,236 3,925
Net Income........................... 342 526 280 179
Earnings Per Common Share............ .07 .10 .06 .04
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
None.
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 1996 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.............. 70 Chairman, Chief Executive Officer and
Director
Everett V. Pizzuti........... 59 President, Chief Operating Officer and
Director
David M. Gaskill............. 50 Vice President--Research and Development
Joseph P. O'Connell.......... 52 Vice President and Treasurer, Chief Financial
Officer
Gordon W. Bentley............ 49 Vice President--Manufacturing-Instruments
Elias G. Deeb................ 54 Vice President--Media Products
A. Eric Bartholomay.......... 47 Vice President--International Sales
Richmond B. Woodward......... 64 Vice President--Grass Instrument Products
Jacques V. Hopkins........... 65 Secretary and Director
All of the persons named above have held the positions identified since
January 31, 1985, except as indicated.
Mr. Ondis was previously a Director, the Chief Executive Officer (President)
and the Chief Financial Officer (Treasurer) of the Company since 1969.
17
Mr. Pizzuti was previously a Vice President of the Company functioning as
Chief Operating Officer since 1971.
Mr. Gaskill previously had functioned as Vice President--Engineering of the
Company since 1974. He is a nephew of Mr. Ondis.
Mr. O'Connell joined the Company in 1996. He previously held senior
financial management positions with Cherry Tree Products Inc. (1994-1995), IBI
Corporation (1991-1994) and Dennison Manufacturing Company (1975-1990). Mr.
O'Connell is also Assistant Secretary of the Company.
Mr. Bentley has held the position identified since 1986. In 1983, he was
named Manager of Materiel after having been Purchasing Manager during the two
prior years.
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. Bartholomay has held the position identified since 1991. In 1988, he had
been named Manager of International Operations. He previously held various
sales and sales-related positions with Rhone-Poulenc Inc. beginning in the
United States in 1981. He transferred to France in 1985 and last held the
position of a Manager of Product and Market Development.
Mr. Woodward has held the position identified since 1994. He previously
served Grass Instrument Co. from 1980 as a self-employed consultant focusing
on financial and business administration matters.
Mr. Hopkins has held the positions identified since 1969. He has been a
partner in the law firm of Hinckley, Allen & Snyder, general counsel to the
Company, since 1966.
ITEM 11. EXECUTIVE COMPENSATION
The response to this item is incorporated by reference to the Company's
definitive proxy statement for the 1996 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 1996 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 1996 annual meeting of shareholders.
18
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............................... 21
Consolidated Balance Sheets--January 31, 1995 and 1996................. 22
Consolidated Statements of Income--Years Ended January 31, 1994, 1995
and 1996.............................................................. 23
Consolidated Statements of Stockholders' Equity--
Years Ended January 31, 1994, 1995 and 1996........................... 24
Consolidated Statements of Cash Flows--
Years Ended January 31, 1994, 1995 and 1996........................... 25
Notes to Consolidated Financial Statements--January 31, 1996........... 26
(a)(2) Financial Statement Schedules:
Schedule II--Valuation and Qualifying Accounts and Reserves--
Years Ended January 31, 1994, 1995 and 1996........................... 33
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.
(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. 1980 Non-Qualified Stock Option Plan, as
amended.(1)
(10.2) Astro-Med, Inc. 1989 Incentive Stock Option Plan, as
amended.(1)
(10.3) Astro-Med, Inc. 1993 Incentive Stock Option Plan.(1)
(21.0) List of Subsidiaries of the Company.
(24) Consent of Independent Public Accountants. See page 21.
- --------
(1) Management contract or compensatory plan or arrangement.
(b) Reports on Form 8-K:
No reports on Form 8-K were filed by the Company during the last quarter of
the period covered by this report.
19
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 __________________________________
Date: April 15, 1996 (ALBERT W. ONDIS, CHAIRMAN)
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 April 15, 1996
- ------------------------------------- Director (Principal
ALBERT W. ONDIS Executive Officer)
/s/ Everett V. Pizzuti President and April 15, 1996
- ------------------------------------- Director (Principal
EVERETT V. PIZZUTI Operating Officer)
/s/ Joseph P. O'Connell Vice President and April 15, 1996
- ------------------------------------- Treasurer
JOSEPH P. O'CONNELL (Principal
Financial Officer)
/s/ Jacques V. Hopkins Secretary and April 15, 1996
- ------------------------------------- Director
JACQUES V. HOPKINS
20
EXHIBIT 24
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the incorporation of
our report included in this Form 10-K, into the Company's previously filed
Registration Statements on Form S-8: File No. 2-81081 pertaining to the
Astro-Med, Inc. Employee Stock Purchase Plan, File No. 33-42993 pertaining to
the Astro-Med, Inc. 1980 Non-Qualified Stock Option Plan, File No. 33-43699
pertaining to the Astro-Med, Inc. 1982 Incentive Stock Option Plan and File No.
33-43700 pertaining to the Astro-Med, Inc. 1989 Incentive Stock Option Plan.
ARTHUR ANDERSEN LLP
Boston, Massachusetts
April 15, 1996
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To Astro-Med, Inc.:
We have audited the accompanying consolidated balance sheets of Astro-Med,
Inc. and subsidiaries as of January 31, 1995 and 1996, and the related
consolidated statements of income, stockholders' equity and cash flows for each
of the three years in the period ended January 31, 1996. These financial
statements and the schedule referred to below are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
financial statements and the schedule based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform our audits 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, 1995 and 1996, and the results of their
operations and their cash flows for each of the three years in the period ended
January 31, 1996, in conformity with generally accepted accounting principles.
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 15, 1996
21
ASTRO-MED, INC.
CONSOLIDATED BALANCE SHEETS
AS OF JANUARY 31, 1995 AND 1996
1995 1996
----------- -----------
ASSETS
CURRENT ASSETS
Cash and Cash Equivalents (Note 1)................. $ 1,107,191 $ 2,033,713
Securities Available for Sale (Notes 1 and 2)...... 6,897,781 6,659,828
Accounts Receivable, Less Reserve of $157,000 in
1995 and 1996..................................... 7,828,393 8,318,005
Inventories (Note 3)............................... 12,893,544 12,533,553
Prepaid Expenses and Other Current Assets (Note 6). 2,196,317 1,424,757
----------- -----------
Total Current Assets............................. 30,923,226 30,969,856
PROPERTY, PLANT AND EQUIPMENT (Notes 1 and 7)
Land and Improvements.............................. 283,341 288,341
Buildings and Improvements......................... 6,605,222 7,286,901
Machinery and Equipment............................ 9,000,121 9,488,613
----------- -----------
15,888,684 17,063,855
Less Accumulated Depreciation...................... (7,254,555) (8,350,722)
----------- -----------
8,634,129 8,713,133
OTHER ASSETS
Excess of Cost over Net Assets Acquired (Note 1)... 1,047,613 1,012,693
Amounts Due from Officers.......................... 453,264 453,264
Other.............................................. 1,119,062 1,153,785
----------- -----------
2,619,939 2,619,742
----------- -----------
$42,177,294 $42,302,731
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts Payable................................... $ 2,850,382 $ 2,136,825
Accrued Compensation............................... 1,015,956 1,200,082
Accrued Expenses................................... 802,321 730,345
Income Taxes....................................... 715,633 432,540
Current Maturities of Long-Term Debt (Note 4)...... 51,703 50,000
----------- -----------
Total Current Liabilities........................ 5,435,995 4,549,792
LONG-TERM DEBT, Less Current Maturities (Note 4)..... 244,072 175,000
EXCESS OF NET ASSETS ACQUIRED OVER COST (Note 1)..... 491,115 761,879
DEFERRED INCOME TAXES (Notes 1 and 6)................ 726,178 834,754
STOCKHOLDERS' EQUITY (Note 5)
Preferred Stock, $10 Par Value, Authorized 100,000
Shares, None Issued...............................
Common Stock, $.05 Par Value, Authorized 13,000,000
Shares, Issued 5,118,268 in 1995 and 5,123,310
in 1996........................................... 255,913 256,166
Additional Paid-in Capital......................... 5,515,632 5,554,100
Retained Earnings.................................. 30,355,938 31,079,623
Treasury Stock, at Cost, 77,566 Shares in 1995 and
103,066 Shares in 1996............................ (672,755) (902,169)
Cumulative Translation Adjustment (Note 1)......... (80,722) (38,368)
Net Unrealized Gain (Loss) on Securities Available
for Sale (Note 2)................................. (94,072) 31,954
----------- -----------
35,279,934 35,981,306
----------- -----------
$42,177,294 $42,302,731
=========== ===========
The accompanying notes are an integral part of these financial statements.
22
ASTRO-MED, INC.
CONSOLIDATED STATEMENTS OF INCOME
YEARS ENDED JANUARY 31, 1994, 1995 AND 1996
1994 1995 1996
----------- ----------- -----------
Net Sales............................... $32,267,816 $38,233,312 $43,941,311
Cost of Sales........................... 15,852,290 21,950,539 26,923,192
----------- ----------- -----------
Gross Profit............................ 16,415,526 16,282,773 17,018,119
Costs and Expenses:
Selling, General and Administrative... 9,821,338 11,575,712 13,108,828
Research and Development.............. 2,282,114 2,542,940 2,415,494
----------- ----------- -----------
12,103,452 14,118,652 15,524,322
----------- ----------- -----------
Operating Income........................ 4,312,074 2,164,121 1,493,797
Other Income (Expense):
Interest and Dividend Income.......... 719,647 572,345 353,393
Interest Expense...................... (59,016) (159,952) (37,456)
Other, Net............................ (211,398) 193,975 (49,199)
----------- ----------- -----------
449,233 606,368 266,738
----------- ----------- -----------
Income before Income Taxes.............. 4,761,307 2,770,489 1,760,535
Provision for Income Taxes
(Notes 1 and 6)........................ 1,780,000 847,000 433,000
----------- ----------- -----------
Net Income.............................. $ 2,981,307 $ 1,923,489 $ 1,327,535
=========== =========== ===========
Earnings Per Common Share (Note 1)...... $.58 $.38 $.26
==== ==== ====
Weighted Average Number of Common and
Common Equivalent Shares Outstanding... 5,138,710 5,099,004 5,095,661
========= ========= =========
Dividends Declared Per Common Share..... $.12 $.12 $.12
==== ==== ====
The accompanying notes are an integral part of these financial statements.
23
ASTRO-MED, INC.
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
YEARS ENDED JANUARY 31, 1994, 1995 AND 1996
NET
UNREALIZED
GAIN (LOSS)
ADDITIONAL CUMULATIVE ON SECURITIES
COMMON PAID-IN RETAINED TREASURY TRANSLATION AVAILABLE
STOCK CAPITAL EARNINGS STOCK ADJUSTMENT FOR SALE
-------- ---------- ----------- --------- ----------- -------------
Balance, January 31,
1993................... $255,293 $5,284,946 $26,661,996 $(294,674)
Net Income.............. 2,981,307
Shares Sold Under
Employee Stock Purchase
Plan................... 188 41,142
Exercise of Stock
Options, Including
Related Tax Benefits... 160 11,482
Purchase of Stock for
Treasury............... (465,133)
Shares Issued to
Employee Stock
Ownership Plan......... 27,976 26,339
Dividends Declared...... (606,581)
-------- ---------- ----------- ---------
Balance, January 31,
1994................... 255,641 5,365,546 29,036,722 (733,468)
Net Income.............. 1,923,489
Shares Sold Under
Employee Stock Purchase
Plan................... 216 39,006
Exercise of Stock
Options, Including
Related Tax Benefits... 56 107,043
Shares Issued to
Employee Stock
Ownership Plan......... 4,037 60,713
Dividends Declared...... (604,273)
Cumulative Translation
Adjustment............. $(80,722)
Change in Net Unrealized
Gain (Loss) on
Securities Available
for Sale............... $(94,072)
-------- ---------- ----------- --------- -------- --------
Balance, January 31,
1995................... 255,913 5,515,632 30,355,938 (672,755) (80,722) (94,072)
Net Income.............. 1,327,535
Shares Sold Under
Employee Stock Purchase
Plan................... 196 35,312
Exercise of Stock
Options, Including
Related Tax Benefits... 57 3,694
Shares Issued to
Employee Stock
Ownership Plan......... (538) 60,913
Purchase of Stock for
Treasury............... (290,327)
Dividends Declared...... (603,850)
Cumulative Translation
Adjustment............. 42,354
Change in Net Unrealized
Gain (Loss) on
Securities Available
for Sale............... 126,026
-------- ---------- ----------- --------- -------- --------
Balance, January 31,
1996................... $256,166 $5,554,100 $31,079,623 $(902,169) $(38,368) $ 31,954
======== ========== =========== ========= ======== ========
The accompanying notes are an integral part of these financial statements.
24
ASTRO-MED, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
YEARS ENDED JANUARY 31, 1994, 1995 AND 1996
1994 1995 1996
----------- ------------ -----------
Cash Flows from Operating Activities:
Net Income........................... $ 2,981,307 $ 1,923,489 $ 1,327,535
Adjustments to Reconcile Net Income
to Net Cash Provided by Operating
Activities:
Depreciation and Amortization...... 1,043,222 1,038,951 909,771
Deferred Income Taxes.............. (104,142) (30,687) 108,576
Other.............................. 8,987 22,836 165,277
Changes in Assets and Liabilities:
Accounts Receivable.............. (78,194) (511,187) (489,612)
Inventories...................... (1,313,836) (2,236,033) 359,991
Other............................ 103,884 (804,827) 749,718
Accounts Payable and Accrued
Expenses........................ 688,026 (70,444) (562,101)
Income Taxes..................... 213,470 89,750 (283,093)
----------- ------------ -----------
Total Adjustments.............. 561,417 (2,501,641) 958,527
----------- ------------ -----------
Net Cash Provided (Used) by
Operating Activities.............. 3,542,724 (578,152) 2,286,062
Cash Flows from Investing Activities:
Proceeds from Sales of Securities
Available for Sale.................. 21,267,964 3,307,328
Purchases of Securities Available for
Sale................................ (14,055,857) (2,879,153)
Proceeds from Sales of Investments... 7,525,926
Purchases of Investments............. (9,743,820) (518,731)
Additions to Property, Plant and
Equipment........................... (682,044) (1,265,012) (922,397)
Acquisition of New Business, Net of
Cash Acquired....................... (4,296,545)
----------- ------------ -----------
Net Cash Provided (Used) by
Investing Activities.............. (2,899,938) 1,131,819 (494,222)
Cash Flows from Financing Activities:
Proceeds from Short-Term Borrowing... 3,400,000 500,000
Payments of Debt..................... (351,703) (3,753,406) (570,775)
Proceeds from Common Shares Issued
Under Employee Benefit Plans........ 107,287 211,071 99,634
Purchases of Treasury Stock.......... (465,133) (290,327)
Dividends Paid....................... (606,581) (604,273) (603,850)
----------- ------------ -----------
Net Cash Used by Financing
Activities........................ (1,316,130) (746,608) (865,318)
----------- ------------ -----------
Net Increase (Decrease) in Cash and
Cash Equivalents...................... (673,344) (192,941) 926,522
Cash and Cash Equivalents, Beginning of
Year.................................. 1,973,476 1,300,132 1,107,191
----------- ------------ -----------
Cash and Cash Equivalents, End of Year. $ 1,300,132 $ 1,107,191 $ 2,033,713
=========== ============ ===========
Supplemental Disclosures of Cash Flow
Information:
Cash Paid During the Year for:
Interest........................... $ 60,071 $ 146,455 $ 69,263
Income Taxes....................... $ 1,631,712 $ 1,340,608 $ 260,869
Liabilities Assumed with Acquisition
of New Business..................... $ 1,039,676
The accompanying notes are an integral part of these financial statements.
25
ASTRO-MED, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JANUARY 31, 1996
NOTE 1--SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Principles of Consolidation: The consolidated financial statements include
the accounts of the Company and its subsidiaries. All material intercompany
accounts and transactions are eliminated in consolidation.
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
stockholders' 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 15 years).
Amortization of Intangibles: Excess of cost over net assets acquired is
amortized on the straight-line method over forty years. Accumulated
amortization amounted to $349,205 and $384,125 as of January 31, 1995 and
1996, respectively. Excess of net assets acquired over cost is amortized on
the straight-line method over five years. Accumulated amortization amounted to
$54,552 and $275,868 as of January 31, 1995 and 1996 respectively. The shorter
amortization period for the excess of net assets acquired over cost reflects
the more limited life of the assets involved.
Foreign Currency: The Company translates foreign currency denominated assets
and liabilities into U.S. dollars at year end exchange rates, and income and
expenses are translated at average exchange rates during the year. Prior to
February 1, 1994, the Company used the U.S. dollar as the functional currency
for its international sales and service operations and included translation
gains and losses in income currently. Effective February 1, 1994, the Company
changed to using local foreign currencies as the functional currency. This
change generally resulted in cumulative translation adjustments being
reflected as a separate component of stockholders' equity. It did not
materially affect the consolidated financial statements. The reporting of
transaction gains and losses in income currently was not affected.
Income Taxes: The Company utilizes a liability approach which 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 share are computed based on the
weighted average number of common shares and common share equivalents
outstanding during each period. Common share equivalents include certain stock
options under the treasury stock method. Fully diluted earnings per share have
not been separately presented since they are not materially different.
Use of Estimates in the Preparation of Financial Statements: The
presentation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions
that affect the reported amounts of assets and liabilities and disclosures of
contingent assets and liabilities as of the date of the financial statements
and the reported amounts of income and expenses during the reporting periods.
Actual results could differ from those estimates.
26
ASTRO-MED, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
NOTE 1--SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES--(CONTINUED)
Fair Value of Financial Instruments: The Company's financial instruments
consist mainly of cash and cash equivalents, accounts receivable, current
maturities of long-term debt, accounts payable and long-term debt. The
carrying amounts of these financial instruments as of January 31, 1996
approximate fair value.
NOTE 2--SECURITIES AVAILABLE FOR SALE
As of January 31, 1996, securities included corporate and governmental debt
obligations of $1,421,972 with contractual or anticipated maturities of one
year or less and $5,237,856 with contractual or anticipated maturities of more
than one year through twenty-five years. As of January 31, 1995, securities
included corporate and governmental debt obligations of $1,106,386 with
contractual or anticipated maturities of one year or less and $5,791,395 with
contractual or anticipated maturities of more than one year through six years.
Actual maturities may differ as a result of sales or early issuer redemptions.
The amortized cost of securities available for sale as of January 31, 1996
was $6,609,108. The difference between market value and the cost basis as of
that date was $50,720 ($31,954 net of tax), which represented gross unrealized
gains of $60,596 and gross unrealized losses of $9,876. As of January 31,
1995, the amortized cost of securities available for sale was $7,047,102. The
difference between market value and the cost basis as of that date was
$149,321 ($94,072 net of tax), which represented gross unrealized gains of
$6,227 and gross unrealized losses of $155,548. 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
statement of income for fiscal 1996 and 1995.
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,
-----------------------
1995 1996
----------- -----------
Materials and Supplies............................ $ 7,508,626 $ 6,460,730
Work-in-Progress.................................. 1,661,565 1,381,220
Finished Goods.................................... 3,723,353 4,691,603
----------- -----------
$12,893,544 $12,533,553
=========== ===========
NOTE 4--LONG-TERM DEBT
Long-term debt consisted of the following:
JANUARY 31,
-----------------
1995 1996
-------- --------
Capital Lease Obligations................................ $275,000 $225,000
Other.................................................... 20,775
-------- --------
295,775 225,000
Less Current Maturities.................................. 51,703 50,000
-------- --------
$244,072 $175,000
======== ========
27
ASTRO-MED, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
NOTE 4--LONG-TERM DEBT--(CONTINUED)
In February 1985, the Company obtained the $2,700,000 of proceeds from
industrial development revenue bonds issued by Rhode Island Industrial
Facilities Corporation. Quarterly principal installments of $75,000 to 1995
were due under terms of a capital lease obligation for real estate and certain
machinery and equipment. The final payment was made in January 1995.
Other real estate and certain equipment are financed under a capital lease
obligation with the Rhode Island Port Authority and Economic Development
Corporation pursuant to an industrial development revenue bond financing
arrangement. Monthly principal installments of $4,167 plus interest at 7 1/2%
are due to 2000. The obligation contains an option to purchase the particular
real estate and machinery and equipment at any time for the amount necessary
to retire the bonds involved. It also contains certain restrictive covenants
including, among other things, minimum working capital and net worth
requirements, and a maximum debt-to-equity ratio.
The aggregate amounts of long-term debt as of January 31, 1996 scheduled to
mature in each of the succeeding five fiscal years are as follows: $50,000 in
fiscal 1997, 1998, 1999, 2000 and $25,000 in fiscal 2001.
NOTE 5--COMMON STOCK
The Company's Board of Directors has authorized the purchase of up to
100,000 shares of the Company's common stock on the open market. As purchased,
such shares will become treasury stock available for general corporate
purposes. The Company purchased 32,500 shares of treasury stock in fiscal
1996.
The Company maintains the following benefit plans involving the Company's
common stock for eligible employees:
Stock Option Plans: Prior to January 31, 1993, the Company had two incentive
stock option plans and two non-qualified stock option plans under which
options may be granted to officers and key employees. As of January 31, 1993,
one of the incentive stock option plans and one of the non-qualified stock
option plans were no longer in effect. During fiscal 1994, a new incentive
stock option plan was approved by shareholders. Options for an aggregate of
550,000 shares may be granted under the remaining incentive stock option plans
at an option price of not less than fair market value at the date of grant.
Options for an aggregate of 150,000 shares may be granted under the remaining
non-qualified plan at an option price of not less than 50% of fair market
value at the date of grant. Summarized option data for all plans is as
follows:
NUMBER OPTION PRICE
OF SHARES PER SHARE
--------- -------------
Outstanding Options, January 31, 1993................ 234,425 $3.33-$11.25
Options Granted...................................... 42,000 $13-$14.30
Options Exercised.................................... (3,200) $3.33-$5.50
-------
Outstanding Options, January 31, 1994................ 273,225 $3.33-$14.30
Options Granted...................................... 111,500 $10.25-$11.28
Options Exercised.................................... (1,125) $3.33-$5.50
Options Expired...................................... (750) $11.25
-------
Outstanding Options, January 31, 1995................ 382,850 $3.33-$14.30
Options Exercised.................................... (1,125) $3.33
Options Expired...................................... (6,000) $3.33-$13.00
-------
Outstanding Options, January 31, 1996................ 375,725 $3.33-$14.30
=======
Of the outstanding options at January 31, 1996, 309,475 were exercisable. At
January 31, 1996, options covering 146,375 shares under the remaining
incentive plans and 150,000 shares under the remaining non-qualified plan were
available for future grant.
28
ASTRO-MED, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
NOTE 5--COMMON STOCK--(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,
-------------------------
1994 1995 1996
------- ------- -------
Shares Reserved, Beginning........................ 121,646 117,878 113,562
Shares Purchased.................................. (3,768) (4,316) (3,917)
------- ------- -------
Shares Reserved, Ending........................... 117,878 113,562 109,645
======= ======= =======
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 $75,000 annually for fiscal 1994, 1995 and 1996,
respectively.
NOTE 6--INCOME TAXES
The components of the provision for income taxes were as follows:
YEARS ENDED JANUARY 31,
------------------------------
1994 1995 1996
---------- -------- --------
Current:
Federal.................................... $1,527,029 $764,718 $380,213
State...................................... 287,173 112,969 100,473
---------- -------- --------
1,814,202 877,687 480,686
---------- -------- --------
Deferred:
Federal.................................... (28,371) (23,962) (36,302)
State...................................... (5,831) (6,725) (11,384)
---------- -------- --------
(34,202) (30,687) (47,686)
---------- -------- --------
$1,780,000 $847,000 $433,000
========== ======== ========
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,
------------------------------
1994 1995 1996
---------- -------- --------
Income Tax Provision at Statutory Rate...... $1,618,844 $941,966 $598,582
State Taxes, Net of Federal Income Tax
Benefits................................... 185,686 70,121 66,312
Nontaxable Interest Income.................. (93,031) (39,558)
Amortization of Intangibles................. 11,873 (4,447) (62,623)
Utilization of Net Operating Loss
Carryforward............................... (78,167) (171,749)
Other, Net.................................. (36,403) 10,558 42,036
---------- -------- --------
$1,780,000 $847,000 $433,000
========== ======== ========
29
ASTRO-MED, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
NOTE 6--INCOME TAXES--(CONTINUED)
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,
------------------------
1995 1996
----------- -----------
Deferred Tax Assets:
Reserves and Accruals Not Yet Deducted for Tax
Purposes....................................... $ 693,635 $ 621,888
Unrealized Foreign Currency Losses.............. 12,662 119,086
Net Operating Loss Carryforwards................ 1,156,466 1,213,762
Other........................................... 58,929 95,374
Valuation Allowance............................. (1,156,466) (1,213,762)
----------- -----------
765,226 836,348
Deferred Tax Liabilities:
Accumulated Tax Depreciation in Excess of Book
Depreciation................................... 726,178 834,754
Other........................................... 110,867 89,357
----------- -----------
837,045 924,111
----------- -----------
Net Deferred Tax Liabilities...................... $ 71,819 $ 87,763
=========== ===========
The total of deferred tax assets, net of other deferred tax liabilities, is
included in prepaid expenses and other current assets in the accompanying
consolidated balance sheets. The valuation allowance relates to net operating
loss carryforwards (approximately $1,267,000 domestic and $1,624,000 foreign)
expiring through 2007, the future tax benefits of which to be realized are
uncertain because they are limited to future annual taxable income of certain
subsidiaries. Also, the domestic net operating loss carryforward may only be
used at the rate of approximately $318,000 per year.
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 have been under capital leases. The January 31, 1995 amounts
include assets which were removed from lease status and become owned property
in 1996. As previously mentioned in Note 4, the major capital lease obligation
involved was satisfied in January 1995.
JANUARY 31,
---------------------
1995 1996
---------- ----------
Real Estate............................................ $6,279,488 $4,350,324
Machinery and Equipment................................ 613,355 100,083
---------- ----------
6,892,843 4,450,407
Less Accumulated Amortization.......................... 2,380,254 1,433,027
---------- ----------
$4,512,589 $3,017,380
========== ==========
30
ASTRO-MED, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
NOTE 7--LEASES--(CONTINUED)
Minimum lease payments under noncancellable leases at January 31, 1996 were
as follows:
YEAR ENDING CAPITAL OPERATING
JANUARY 31, LEASE LEASES
----------- -------- ---------
1997..................................................... $ 64,063 $364,841
1998..................................................... 60,312 204,889
1999..................................................... 56,563 94,692
2000..................................................... 52,813 51,199
2001..................................................... 25,937 48,311
2002 and Thereafter...................................... -- 12,412
-------- --------
Net Minimum Lease Payments............................... 259,688 $776,344
========
Less Amount Representing Interest........................ 34,688
--------
Current Value of Net Minimum Lease Payments.............. $225,000
========
Total rental expense for fiscal 1994, 1995 and 1996 was $406,547, $441,097
and $481,498, respectively.
NOTE 8--OPERATIONS
The Company's operations consist of the design, development, manufacture and
sale of specialty data printing systems and consumable printer supplies.
Business is conducted primarily in two major geographic areas: North America
and Europe. Substantially all manufacturing activities are conducted in the
United States.
Sales and service activities outside North America are conducted primarily
through wholly-owned entities and, to a lesser extent, through authorized
distributors or 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 1994, 1995
and 1996 is set forth below.
FISCAL 1994 NORTH AMERICA EUROPE ELIMINATIONS CONSOLIDATED
- ----------- ------------- ---------- ------------ ------------
Net Sales to Unaffiliated
Customers................. $27,825,362 $4,442,454 $32,267,816
Transfers between
Geographic Areas.......... 2,919,611 $(2,919,611)
----------- ---------- ----------- -----------
$30,744,973 $4,442,454 $(2,919,611) $32,267,816
=========== ========== =========== ===========
Operating Income........... $ 4,851,438 $ (541,442) $ 2,078 $ 4,312,074
=========== ========== =========== ===========
Identifiable Assets........ $37,167,917 $2,786,597 $39,954,514
=========== ========== ===========
FISCAL 1995
- -----------
Net Sales to Unaffiliated
Customers................. $33,288,364 $4,944,948 $38,233,312
Transfers between
Geographic Areas.......... 3,529,805 $(3,529,805)
----------- ---------- ----------- -----------
$36,818,169 $4,944,948 $(3,529,805) $38,233,312
=========== ========== =========== ===========
Operating Income........... $ 2,132,219 $ 168,895 $ (136,993) $ 2,164,121
=========== ========== =========== ===========
Identifiable Assets........ $38,861,677 $3,315,617 $42,177,294
=========== ========== ===========
FISCAL 1996
- -----------
Net Sales to Unaffiliated
Customers................. $37,311,249 $6,630,062 $43,941,311
Transfers between
Geographic Areas.......... 4,690,824 $(4,690,824)
----------- ---------- ----------- -----------
$42,002,073 $6,630,062 $(4,690,824) $43,941,311
=========== ========== =========== ===========
Operating Income........... $ 1,224,422 $ 299,022 $ (29,647) $ 1,493,797
=========== ========== =========== ===========
Identifiable Assets........ $37,989,186 $4,313,545 $42,302,731
=========== ========== ===========
31
ASTRO-MED, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONCLUDED)
NOTE 8--OPERATIONS--(CONTINUED)
North America sales as shown above include export sales of $2,546,293 in
fiscal 1994, $4,904,985 in fiscal 1995, and $6,604,317 in fiscal 1996.
No single customer accounted for 10% of net sales in fiscal 1994, 1995 or
1996.
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. The Company's subsidiary, Grass
Instrument Co. also had a non-contributory profit-sharing plan which was
terminated during fiscal 1996.
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 $135,000 for fiscal 1994, 1995 and 1996.
NOTE 10--ACQUISITION
On August 1, 1994, the Company acquired Grass Instrument Co., a privately
held corporation ("Grass"), and Cannon Manufacturing Company, a privately held
corporation ("Cannon") affiliated with Grass by common ownership. Following a
merger, the combined businesses of Grass and Cannon continued as a wholly-
owned subsidiary of the Company under the name "Grass Instrument Co." On
January 31, 1996, Grass Instrument Co. was merged into the Company.
The total consideration paid to the stockholders of Grass and Cannon was
approximately $10,277,000, of which approximately $4,989,000 was paid by Grass
and Cannon from their available funds to repurchase shares from stockholders
prior to the merger and approximately $5,288,000 was paid by the Company. The
Company used approximately $1,888,000 of funds on hand and borrowed $3,400,000
on a short-term basis from a bank. The Company repaid the bank loan prior to
January 31, 1995. The purchase price for Grass and Cannon was determined by
negotiation.
Grass designs, manufactures and sells neurophysiological instrumentation,
which comprised an expansion of the Company's existing line of products. The
acquisition was accounted for using the purchase method of accounting, and the
results of operations of the acquired business are included in the Company's
consolidated results beginning with the date of the acquisition.
On an unaudited proforma basis, assuming Grass and Cannon had been acquired
on February 1, 1993, the Company's consolidated net sales would have been
$42,265,553 for fiscal 1994 and $43,067,095 for fiscal 1995. The proforma
effect on net income and earnings per share is not material. The proforma
results are not necessarily indicative of future operations or the actual
results that would have occurred had the acquisition been made at the
beginning of fiscal 1994.
32
ASTRO-MED, INC.
SCHEDULE II--VALUATION AND QUALIFYING ACCOUNTS AND RESERVES
BALANCE AT PROVISION BALANCE
BEGINNING CHARGED TO AT END
DESCRIPTION OF PERIOD OPERATIONS DEDUCTIONS(2) OF PERIOD
----------- ---------- ---------- ------------- ---------
Allowance for Doubtful
Accounts(1):
Year Ended January 31,
1994........................ $145,000 $ 45,433 $45,433 $145,000
1995........................ 145,000 103,670 91,670 157,000
1996........................ 157,000 58,227 58,227 157,000
- --------
(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.
33