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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 2, 2002
-------------------------------------------------
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
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Astro-Med, Inc.
- --------------------------------------------------------------------------------
(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
- --------------------------------------------------------------------------------
(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 4,267,132 shares
(excluding treasury shares)
as of November 22, 2002
1
ASTRO-MED, INC.
INDEX
Page No.
--------
Part I. Financial Information:
Consolidated Balance Sheets --
November 2, 2002 and January 31, 2002 ............................ 3
Consolidated Statements of Operations --
Three-Months Ended November 2, 2002 and November 3, 2001 ......... 4
Consolidated Statements of Operations --
Nine-Months Ended November 2, 2002 and November 3, 2001 .......... 5
Consolidated Statements of Cash Flows
Nine-Months Ended November 2, 2002 and November 3, 2001 .......... 6
Notes to Consolidated Financial Statements November 2, 2002 ........ 7-10
Management's Discussion and Analysis of Financial
Condition and Results of Operations .............................. 11-13
Part II. Other Information .......................................... 14
2
Part I. FINANCIAL INFORMATION
ASTRO-MED, INC.
CONSOLIDATED BALANCE SHEETS
November 2, January 31,
2002 2002
------------ -------------
(Unaudited)
ASSETS
CURRENT ASSETS
Cash and Cash Equivalents .................... $ 3,310,952 $ 2,569,721
Securities Available for Sale ................ 3,733,073 3,340,874
Accounts Receivable, Net ..................... 7,577,695 9,173,568
Inventories, Net ............................. 9,305,039 10,243,182
Prepaid Expenses and Other Current Assets .... 2,596,251 2,229,660
------------ ------------
Total Current Assets .................... 26,523,010 27,557,005
PROPERTY, PLANT AND EQUIPMENT 24,193,840 23,458,303
Less Accumulated Depreciation ................ (16,609,236) (15,478,613)
------------ ------------
7,584,604 7,979,690
OTHER ASSETS
Goodwill ..................................... 2,310,798 2,310,798
Amounts Due from Officers .................... 480,314 480,314
Other ........................................ 87,186 76,422
------------ ------------
2,878,298 2,867,534
------------ ------------
$ 36,985,912 $ 38,404,229
============ ============
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts Payable ............................. $ 2,844,226 $ 3,325,133
Accrued Compensation ......................... 1,208,800 1,114,490
Accrued Expenses ............................. 1,564,473 1,637,826
Income Taxes Payable ......................... -- --
Current Maturities of Long-Term Debt ......... 11,089 24,755
------------ ------------
Total Current Liabilities ............... 5,628,588 6,102,204
LONG-TERM DEBT, Less Current Maturities ........ 1,477 --
DEFERRED INCOME TAXES .......................... 1,064,396 876,867
SHAREHOLDERS' EQUITY
Preferred Stock, $10 Par Value,
Authorized 100,000 Shares, None Issued ..... -- --
Common Stock, $.05 Par Value, Authorized
13,000,000 Shares, Issued, 5,167,272
5,165,027 Shares, respectively ............. 258,251 258,251
Additional Paid-In Capital ................... 5,644,356 5,636,570
Retained Earnings ............................ 30,454,360 31,753,694
Treasury Stock, at Cost (897,895 shares) (5,860,609) (5,860,609)
Accumulated Other Comprehensive Loss ......... (204,907) (362,748)
------------ ------------
30,291,451 31,425,158
------------ ------------
$ 36,985,912 $ 38,404,229
============ ============
3
ASTRO-MED, INC.
UNAUDITED CONSOLIDATED STATEMENTS OF OPERATIONS
Three-Months Ended
November 2, November 3,
2002 2001
------------ ------------
Net Sales ...................................... $ 11,747,008 $ 12,398,711
Cost of Sales .................................. 7,357,186 7,957,468
------------ ------------
Gross Profit ................................... 4,389,822 4,441,243
Costs and Expenses:
Selling, General and Administrative .......... 3,715,618 3,869,002
Research and Development ..................... 1,176,456 997,231
------------ ------------
4,892,074 4,866,233
------------ ------------
Operating Loss ................................. (502,252) (424,990)
Other Income (Expense):
Investment Income ............................ 46,309 58,715
Interest Expense ............................. (226) (531)
Other, Net ................................... 60,463 79,632
------------ ------------
106,546 137,816
------------ ------------
Loss Before Income Taxes ....................... (395,706) (287,174)
Income Tax Benefit ............................. (85,077) (57,435)
------------ ------------
Net Loss ....................................... $ (310,629) $ (229,739)
============ ============
Loss Per Common Share--Basic and Diluted ....... $ (0.07) $ (0.05)
============ ============
Weighted Average Number of Common and Common
Equivalent Shares Outstanding--Basic
and Diluted .................................. 4,268,868 4,265,520
============ ============
Dividends Declared Per Common Share ............ $ 0.04 $ 0.04
============ ============
4
ASTRO-MED, INC.
UNAUDITED CONSOLIDATED STATEMENTS OF OPERATIONS
Nine-Months Ended
November 2, November 3,
2002 2001
------------ ------------
Net Sales ...................................... $ 36,051,280 $ 36,966,427
Cost of Sales .................................. 22,997,342 22,707,117
------------ ------------
Gross Profit ................................... 13,053,938 14,259,310
Costs and Expenses:
Selling, General and Administrative .......... 11,321,132 12,152,267
Research and Development ..................... 3,134,659 2,834,685
------------ ------------
14,455,791 14,986,952
------------ ------------
Operating Loss ................................. (1,401,853) (727,642)
Other Income (Expense):
Investment Income ............................ 144,574 223,701
Interest Expense ............................. (818) (3,291)
Other, Net ................................... 254,426 164,569
------------ ------------
398,182 384,979
------------ ------------
Loss before Income Taxes ....................... (1,003,671) (342,663)
Income Tax Benefit ............................. (216,510) (68,531)
------------ ------------
Net Loss ....................................... $ (787,161) $ (274,132)
============ ============
Loss Per Common Share--Basic and Diluted ....... $ (0.18) $ (0.06)
============ ============
Weighted Average Number of Common and Common
Equivalent Shares Outstanding--Basic
and Diluted .................................. 4,268,088 4,257,046
============ ============
Dividends Declared Per Common Share ............ $ 0.12 $ 0.12
============ ============
5
ASTRO-MED, INC.
UNAUDITED CONSOLIDATED STATEMENTS OF CASH FLOWS
Nine-Months Ended
November 2, November 3,
2002 2001
----------- -----------
Cash Flows from Operating Activities:
Net Loss ..................................... $ (787,161) $ (274,132)
Adjustments to Reconcile Net Loss to Net
Cash Provided by Operating Activities:
Depreciation and Amortization ............ 1,048,042 1,112,211
Gain on Sale of Securities Available for
Sale/Assets ............................ (12,017) (25,000)
Other .................................... 187,529 (149,465)
Changes in Assets and Liabilities:
Accounts Receivable ...................... 1,595,873 1,143,273
Inventories .............................. 828,884 (192,721)
Other .................................... (329,702) (170,912)
Accounts Payable and Accrued Expenses .... (459,950) (1,299,996)
----------- -----------
Total Adjustments .................... 2,858,659 417,390
Net Cash Provided by Operating Activities ........ 2,071,498 143,258
Cash Flows from Investing Activities:
Proceeds from Sales of Securities
Available for Sale ......................... 1,515,282 1,917,987
Purchases of Securities Available
for Sale ................................... (1,832,956) --
Proceeds from Sales of Assets ................ -- 25,000
Additions to Property, Plant and Equipment ... (496,017) (727,283)
----------- -----------
Net Cash Provided by (Used in) Investing
Activities ............................. (813,691) 1,215,704
Cash Flows from Financing Activities:
Principle Payments on Capital Leases/Debt .... (25,489) (34,675)
Issuance of Debt ............................. 13,300 --
Proceeds from Common Shares Issued
Under Employee Benefit Plans ............. 7,786 11,875
Dividends Paid ............................... (512,173) (510,401)
----------- -----------
Net Cash Used in Financing Activities .... (516,576) (533,201)
Net Increase in Cash and Cash Equivalents ........ 741,231 825,761
Cash and Cash Equivalents, Beginning of Period ... 2,569,721 806,069
----------- -----------
Cash and Cash Equivalents, End of Period ......... $ 3,310,952 $ 1,631,830
=========== ===========
Supplemental Disclosures of Cash Flow
Information:
Cash Paid During the Period for:
Interest ................................... $ 818 $ 3,291
Income Taxes ............................... $ -- $ 128,196
6
ASTRO-MED, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
November 2, 2002
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, 2002.
(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 Nine-Months Ended
------------------------ ------------------------
November 2, November 3, November 2, November 3,
2002 2001 2002 2001
---------- ---------- ----------- -----------
Weighted Average Common Shares
Outstanding - Basic ....................... 4,268,868 4,265,520 4,268,088 4,257,046
Diluted Effect of Options
Outstanding ............................... -- -- -- --
--------- --------- --------- ---------
Weighted Average Common Shares
Outstanding - Diluted ...................... 4,268,868 4,265,520 4,268,088 4,257,406
========= ========= ========= =========
For the three-month's ended November 2, 2002 and November 3, 2001,
respectively, the diluted per share amounts do not reflect options outstanding
of 2,053,575 and 1,686,950, respectively because their effect is anti-dilutive.
For the nine-month's ended November 2, 2002 and November 3, 2001,
respectively, the diluted per share amounts do not reflect options outstanding
of 2,053,575 and 1,686,950, 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: The majority of the Company's product sales are
recorded at the time of shipment and when persuasive evidence of an arrangement
exists, the seller's price to the buyer is fixed or determinable and
collectibility is reasonably assured. Provisions are made at the time the
related revenue is recognized for the cost of any installation obligations. When
other significant obligations remain after products are delivered, revenue is
recognized only after such obligations are fulfilled.
7
ASTRO-MED, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
(e) Long-Lived Assets: The Company adopted SFAS No. 141, Business
Combinations and SFAS No. 142, Goodwill and Other Intangible Assets, as of
February 1, 2002. 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. Also, under SFAS No. 142, amortization of goodwill to
earnings is discontinued and the carrying value of goodwill will be evaluated
for impairment on at least an annual basis. The impact of discontinuing the
amortization of goodwill for the three-months ending November 3, 2001 would have
resulted in the net loss decreasing by $31,000 and no change to the net loss per
share amount. The impact of discontinuing the amortization of goodwill for the
nine-months ending November 3, 2001 would have resulted in the reported net loss
and net loss per share amount of $274,132 and six cents, respectively, improving
to a net loss and a net loss per share of $181,315 and four cents, respectively.
In accordance with the provisions of this statement, the Company completed the
goodwill impairment review in the second quarter of this fiscal year and it has
determined that the goodwill is not impaired. As a result, the adoption of this
statement by the Company did not have a material impact on the financial
statements.
SFAS No. 143, Accounting for Asset Retirement Obligations addresses
financial accounting and reporting for obligations with the retirement of
tangible long-lived assets and the associated asset retirement costs. SFAS No.
143 requires the fair value of a liability for an asset retirement obligation to
be recognized in the period in which it is incurred if a reasonable estimate of
fair value can be made. The associated asset retirement costs are capitalized as
part of the carrying amount of the long-lived asset. SFAS No. 143, is effective
for financial statements issued for fiscal years beginning after June 15, 2002
with early adoption permitted. The Company is currently evaluating the impact of
adopting SFAS No. 143 on its financial statements.
The Company adopted SFAS No. 144, Accounting for the Impairment or
Disposal of Long-Lived Assets, which supersedes SFAS No. 121, Accounting for the
Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed Of, and
the accounting and reporting provisions of Accounting Principles Board (APB)
No. 30 as of February 1, 2002. SFAS No. 144 addresses the financial accounting
and reporting for the impairment or disposal of long-lived assets. The adoption
of this statement by the Company did not have an impact on its financial
statements.
In June 2002, the FASB issued SFAS No. 146, Accounting for Costs
Associated with Exit or Disposal Activities. SFAS No. 146 addresses financial
accounting and reporting for costs associated with exit or disposal activities
and nullifies EITF Issue No. 94-3, Liability Recognition for Certain Employee
Termination Benefits and Other Costs to Exit an Activity (including Certain
Costs Incurred in a Restructuring). SFAS No. 146 requires that a liability for
costs associated with an exit or disposal activity be recognized when the
liability is incurred rather than when a company commits to such an activity and
also establishes fair value as the objective for initial measurement of the
liability. SFAS No. 146 will be adopted by the Company for exit or disposal
activities (if any) that are initiated after January 31, 2003. The Company
anticipates at this time that adoption of SFAS No. 146 will not have a material
impact on the consolidated financial statements of the Company.
8
ASTRO-MED, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
Note 2 - COMPREHENSIVE LOSS
The Company's total comprehensive loss is as follows;
Three-Months Ended Nine-Months Ended
------------------------ ------------------------
November 2, November 3, November 2, November 3,
2002 2001 2002 2001
---------- ----------- ----------- -----------
Comprehensive Loss:
Net Loss ............................. $(310,629) $(229,739) $(787,161) $(274,132)
--------- --------- --------- ---------
Other Comprehensive Loss:
Foreign currency translation
adjustments, net of tax ........ 5,652 9,551 152,839 (84,032)
Unrealized gain in securities:
Unrealized holding gain
arising during the period,
net of tax ................... 42,684 66,191 12,933 71,493
Reclassification adjustment
for gain included in
net income, net of tax ....... (7,931) -- (7,931) --
--------- --------- --------- ---------
34,753 66,191 5,002 71,493
Other Comprehensive Income (Loss) .... 40,405 75,742 157,841 (12,539)
--------- --------- --------- ---------
Comprehensive Loss ................... $(270,224) $(153,997) $(629,320) $(286,671)
========= ========= ========= =========
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:
November 2, January 31,
2002 2002
----------- -----------
Materials and Supplies ..... $5,023,771 $ 5,850,797
Work-In-Process ............ 1,229,703 961,279
Finished Goods ............. 3,051,565 3,431,106
--------- -----------
$9,305,039 $10,243,182
========== ===========
Note 4 - INCOME TAX BENEFIT
The effective income tax rates used in the interim condensed financial
statements are estimates of the full year's rates. Net deferred tax assets
recognized on the Company's balance sheet continue to require management's
evaluation as to their realization. Although realization is not assured,
management believes it is more likely than not that the net deferred tax assets
will be realized. The amount realized is based upon estimates derived from tax
planning strategies which the Company believes is currently prudent and feasible
or future taxable income. Additions to the valuation allowance may be required
in the event that estimates are changed.
Note 5 - SEGMENT INFORMATION
The Company's operations have historically been aggregated into a single
reporting segment based on certain similarities in the nature and
characteristics of the products and services and the lack of the availability of
the financial information at the product group level. The Company has evolved to
the point where it can now place additional emphasis on the financial
information generated at the product group level. Consequently, the Company now
reports three reporting segments consistent with its sales product groups: Test
& Measurement (T & M); QuickLabel Systems (QLS) and Grass-Telefactor (G-T). As a
result, the Company has restated the prior years segment data to present all
periods on a comparable basis. The Company evaluates segment
performance based on the segment profit (loss) before corporate and financial
administration expenses.
9
ASTRO-MED, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
Summarized below are the sales and segment operating profit (loss) for each
reporting segment for three-months ended November 2, 2002 and November 3,2001:
Segment
Operating
Sales Profit(Loss)
---------------------------- ----------------------------
November 2, November 3, November 2, November 3,
2002 2001 2002 2001
----------- ----------- ----------- -----------
T&M ........................................... $ 3,427,000 $ 3,486,000 $ 432,000 $ 353,000
QLS ........................................... 4,885,000 5,505,000 (201,000) 182,000
G-T ........................................... 3,435,000 3,408,000 (113,000) (244,000)
----------- ----------- --------- ----------
Total ......................................... $11,747,000 $12,399,000 118,000 291,000
=========== ===========
Corporate Expenses ............................ 620,000 716,000
--------- ---------
Operating Loss ................................ (502,000) (425,000)
Other Income, Net ............................. 106,000 138,000
--------- ---------
Loss Before Income Taxes ..................... (396,000) (287,000)
Income Taxes Benefit .......................... (85,000) (57,000)
--------- ---------
Net Loss ...................................... $(311,000) $(230,000)
========= =========
Summarized below are the sales and segment operating profit (loss) for each
reporting segment for the nine-months ended November 2, 2002 and November 3,
2001:
Segment
Operating
Sales Profit(Loss)
---------------------------- ----------------------------
November 2, November 3, November 2, November 3,
2002 2001 2002 2001
----------- ----------- ----------- -----------
T&M ........................................... $ 9,441,000 $ 9,474,000 $ 678,000 $ 430,000
QLS ........................................... 15,773,000 15,156,000 (66,000) 535,000
G-T ........................................... 10,837,000 12,336,000 126,000 573,000
----------- ----------- --------- ----------
Total ......................................... $36,051,000 $36,966,000 738,000 1,538,000
=========== ===========
Corporate Expenses ............................ 2,140,000 2,266,000
---------- ----------
Operating Loss ................................ (1,402,000) (728,000)
Other Income, Net ............................. 398,000 385,000
---------- ---------
Loss Before Income Taxes ...................... (1,004,000) (343,000)
Income Tax Benefit ............................ (217,000) (69,000)
---------- ----------
Net Loss ...................................... $ (787,000) $ (274,000)
========== ==========
10
ASTRO-MED, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
Results of Operations:
The Company's operations have historically been aggregated into a
single reporting segment based on certain similarities in the nature and
characteristics of the products and services and the lack of the availability of
the financial information at the product group level. The Company has evolved to
the point where it can now place additional emphasis on the financial
information generated at the product group level. Consequently, the Company now
reports three reporting segments consistent with its sales product groups: Test
& Measurement (T & M); QuickLabel Systems (QLS) and Grass-Telefactor (G-T). As a
result, the Company has restated the prior year's segment data to present all
periods on a comparable basis. The Company evaluates segment performance based
on the segment profit (loss) before corporate and financial administration
expenses.
For the Three-Months Ending November 2, 2002 vs. November 3, 2001
Sales in the third quarter were $11,747,000, a decrease of 5% from the
prior year's third quarter sales of $12,399,000. Domestic sales were $9,081,000,
approximately flat with the $9,102,000 reported for the third quarter of the
prior fiscal year. Sales through the Company's international channels were
$2,666,000, 19% lower than the previous year's third quarter sales of
$3,297,000. The decline in international sales is traceable to lower shipments
in the Western European markets.
Gross profit dollars were $4,390,000 in the quarter. The gross profit
margin realized in the quarter was 37.4%, an increase from last year's margin of
35.8%. The improvement in the margin percentage can be attributed to the
favorable change in sales mix.
Operating Expenses in the quarter were $4,892,000. Selling, general and
administrative spending declined 4% from last year to $3,716,000 due to the
benefits of past workforce reductions.
Research and development funding increased 18% from the prior year to
$1,176,000. In the quarter, R & D spending was 10.0% of sales up from last
year's rate of 8.0%. This increase can be attributed primarily to personnel
costs and the additional expenditures related to the development of new T&M
products.
Net loss in the current quarter was $311,000, equal to $0.07 net loss
per share. This compares to a net loss of $230,000, equal to $0.05 net loss per
share in the prior year's quarter.
T&M's product sales were $3,427,000, down 2% from the $3,486,000 of the
previous year. This slight decrease in T&M's sales can be attributed lower
Everest sales being offset by the strong demand for the Dash 18 recorder . T&M's
segment profit margin improved to 13% in the quarter from 10% in the previous
year. The improvement in T&M's margin is attributed to higher Dash 18 and
cockpit printer sales and lower operating expenses.
QLS's sales decreased to $4,885,000, an 11% decrease over the
$5,505,000 of sales reported in the third quarter of the previous year. Printer
System sales decreased 43% while Media sales increased 9%. The decrease in
Printer System Sales can be attributed to lower shipments of color printers. The
increase in QLS's Media sales can be attributed to higher demand driven, in
part, by a larger installed base of QLS products. QLS's third quarter segment
profit (loss) margin declined to a loss of (4%) down from a profit of 3% in the
previous year. The decrease in margin is attributed to the change in sales mix
and the lower level of sales.
11
ASTRO-MED, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
Results of Operations (continued):
For the Three-Months Ending November 2, 2002 vs. November 3, 2001
G-T sales in the quarter were $3,435,000, up 1% from $3,408,000
reported in the third quarter of the previous year. The G-T segment operating
loss margin decreased to a loss margin of (3%) in the third quarter from a loss
margin of (7%) in the previous year. The improvement in margin is attributed to
the lower operating expenses.
For the Nine-Months Ending November 2, 2002 vs. November 3, 2001
Sales for the nine-month period were $36,051,000, down 2% from the
prior year's sales of $36,966,000. Domestic sales were $26,835,000, down
slightly from $26,939,000 for the nine-months in the prior fiscal year. Sales
through the Company's international channels were $9,216,000, down 8% from the
previous year's sales of $10,027,000. The decline in international sales can be
attributed to the weakness in the European economies as well as lower shipments
into Asia and Central America.
Gross profit dollars were $13,054,000, which generated a margin yield
of 36.2% for the nine-months of the current year as compared to a margin yield
last year of 38.6%. The lower margin percentage can be attributed to the change
in sales mix.
Operating expenses for the nine-months were $14,456,000. Selling and
general administrative spending declined 7% from last year to $11,321,000.
Spending reductions in personnel, advertising, travel, and commissions account
for the decrease.
Research and development funding rose 11% from the prior year to
$3,135,000. This increase can be attributed primarily to personnel costs and the
additional expenditures related to the development of new T&M products.
Other income (expense) increased slightly, primarily as a result of
higher foreign exchange gains, partially offset by lower investment income.
Net loss for the current nine-months was $787,000, equal to $0.18 loss
per share. This compares to a net loss of $274,000, equal to $0.06 net loss per
share in the prior year.
T&M's product sales were $9,441,000, down less than 1% from the
$9,474,000 of the previous year. T&M sales were essentially flat with the prior
year as a result of the strong demand for the Dash 18 being offset by soft
Everest sales. T&M's segment profit margin increased to 7% from 5% in the
previous year. The increase in T&M's margin is attributed to higher Dash 18
sales and lower operating expenses.
QLS's sales increased to $15,773,000, a 4% increase over the
$15,156,000 of sales reported in the nine-months of the previous year. This
increase is attributed to the 16% growth in Media sales which was partially
offset by an 18% decline in Printer System sales. QLS's segment profit (loss)
margin declined to a loss of less than (1%) in the last nine-months of the
current year, down from 4% from the previous year. The decline in margin is
primarily attributed to the change in sales mix caused by the significant
increase in Media sales.
12
ASTRO-MED, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
Results of Operations (continued):
For the Nine-Months Ending November 2, 2002 vs. November 3, 2001
G-T sales decreased to $10,837,000, down 12% from $12,336,000 reported
in the nine-months of the previous year. The decline in sales can be attributed
to lower sales in our long-term monitoring product line and lower spending by
research customers on biomedical applications, partially offset by the increase
in the G-T's Aurora product sales. The G-T segment operating profit margin
declined to 1% for the nine-months of this year from 5% in the previous year.
The decline in margin is attributed to the lower sales levels and the change in
sales mix being partially offset by lower operating expenses.
Financial Condition:
The Company's Statements of Cash Flows for the nine-months ending
November 2, 2002 and November 3, 2001 are included on page 6. Net cash flow
provided by operating activities for the nine-months ending November 2, 2002 and
November 3, 2001 were $2,071,000 versus $143,000 of the previous year. Cash and
securities available for sale at the end of the third quarter totaled
$7,044,000, up from $5,911,000 at year-end. This balance increased primarily as
a result of the Company lowering its accounts receivable and inventory balances
significantly since year-end. The accounts receivable collection cycle improved
to 56 net days sales outstanding at the end of the quarter as compared to the 60
days outstanding at year-end. Inventory declined to $9,305,000 from the year-end
$10,243,000 with better inventory control. As a result, inventory turns improved
to 2.6 times from 2.3 times at year-end.
Capital expenditures were $496,000 for the nine-months ended November
2, 2002 as the Company purchased machinery and equipment, information technology
hardware and software and tools and dies.
The Company paid cash dividends for the nine-months ending November 2,
2002 $512,000 or $0.12 per common share.
Critical Accounting Policies, Commitments and Certain Other Matters:
In the Company's Form 10-K for the year ended January 31, 2002, the
Company's most critical accounting policies and estimates upon which our
financial status depends were identified as those relating to revenue
recognition, warranty claims, bad debt, customer returns, inventories and
long-lived assets. We considered the disclosure requirements of Financial
Release ("FR") 60 ("FR-60") regarding critical accounting policies and FR-61
regarding liquidity and capital resources, certain trading activities and
related party/certain other disclosures, and concluded that nothing materially
changed during the quarter that would warrant further disclosure under these
releases.
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.
Item 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Astro-Med, Inc.'s exposure to market risk has not changed materially
from its exposure at January 31, 2002 as set forth in Item 7A in Astro-Med,
Inc.'s Form 10K for the fiscal year ended January 31, 2002.
13
ASTRO-MED, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
PART II. OTHER INFORMATION
Item 4. Controls and Procedures
Within the 90 days prior to the date of the Form 10Q, the Company
conducted an evaluation under the supervision and with the participation of the
Company's management, including the Chairman of the Board (serving as the
principal executive officer) and the Chief Financial Officer, of the
effectiveness of the Company's disclosure controls and procedures pursuant to
Exchange Act Rule 13a-14. Based on that evaluation, the Chairman of the Board
and the Chief Financial Officer concluded that the disclosure controls and
procedures are effective in ensuring that all material information required to
be filed in this quarterly report has been made known to them in a timely
fashion. There have been no significant changes in the Company's internal
controls or in other factors that could significantly affect internal controls,
subsequent to the date the Chairman of the Board and Chief Financial Officer
completed their evaluation.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits: The following exhibits are filed as part of this report on
Form 10-Q:
99.1 Certification Pursuant to 18 U.S.C. Section 1350, as Adopted
Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
99.2 Certification Pursuant to 18 U.S.C. Section 1350, as Adopted
Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
(b) Reports on Form 8-K:
None
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: November 27, 2002
By /s/ A. W. Ondis
----------------------------
A. W. Ondis, Chairman
(Principal Executive Officer)
Date: November 27, 2002
By /s/ Joseph P. O'Connell
----------------------------
Joseph P. O'Connell, Vice President and Treasurer
(Principal Financial Officer)
14
ASTRO-MED, INC
CERTIFICATIONS PURSUANT TO SECTION 302 OF
THE SARBANES-OXLEY ACT OF 2002
CERTIFICATION
I, Albert W. Ondis, certify that:
1. I have reviewed this quarterly report on Form 10-Q of Astro-Med,Inc;
2. Based on my knowledge, this quarterly report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to make
the statements made, in light of the circumstances under which such statements
were made, not misleading with respect to the period covered by this quarterly
report;
3. Based on my knowledge, the financial statements, and other financial
information included in this quarterly report, fairly present in all material
respects the financial condition, results of operations and cash flows of the
registrant as of, and for, the periods presented in this quarterly report;
4. The registrant's other certifying officer and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined in
Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have:
a) designed such disclosure controls and procedures to ensure that material
information relating to the registrant, including its consolidated
subsidiaries, is made known to us by others within those entities,
particularly during the period in which this quarterly report is being
prepared;
b) evaluated the effectiveness of the registrant's disclosure controls and
procedures as of a date within 90 days prior to the filing date of this
quarterly report (the "Evaluation Date"); and
c) presented in this quarterly report our conclusions about the
effectiveness of the disclosure controls and procedures based on our
evaluation as of the Evaluation Date;
5. The registrant's other certifying officers and I have disclosed, based on our
most recent evaluation, to the registrant's auditors and the audit committee of
registrant's board of directors (or persons performing the equivalent function):
a) all significant deficiencies in the design or operation of internal
controls which could adversely affect the registrant's ability to record,
process, summarize and report financial data and have identified for the
registrant's auditors any material weaknesses in internal controls; and
b) any fraud, whether or not material, that involves management or other
employees who have a significant role in the registrant's internal
controls; and
6. The registrant's other certifying officers and I have indicated in this
quarterly report whether or not there were significant changes in internal
controls or in other factors that could significantly affect internal controls
subsequent to the date of our most recent evaluation, including any corrective
actions with regard to significant deficiencies and material weaknesses.
Date: November 27, 2002
/s/ A. W. Ondis
- ---------------------
A. W. Ondis, Chairman
(Principal Executive Officer)
15
CERTIFICATION
I, Joseph P. O'Connell, certify that:
1. I have reviewed this quarterly report on Form 10-Q of Astro-Med, Inc;
2. Based on my knowledge, this quarterly report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to make
the statements made, in light of the circumstances under which such statements
were made, not misleading with respect to the period covered by this quarterly
report;
3. Based on my knowledge, the financial statements, and other financial
information included in this quarterly report, fairly present in all material
respects the financial condition, results of operations and cash flows of the
registrant as of, and for, the periods presented in this quarterly report;
4. The registrant's other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined in
Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have:
a) designed such disclosure controls and procedures to ensure that material
information relating to the registrant, including its consolidated
subsidiaries, is made known to us by others within those entities,
particularly during the period in which this quarterly report is being
prepared;
b) evaluated the effectiveness of the registrant's disclosure controls and
procedures as of a date within 90 days prior to the filing date of this
quarterly report (the "Evaluation Date"); and
c) presented in this quarterly report our conclusions about the
effectiveness of the disclosure controls and procedures based on our
evaluation as of the Evaluation Date;
5. The registrant's other certifying officers and I have disclosed, based on our
most recent evaluation, to the registrant's auditors and the audit committee of
registrant's board of directors (or persons performing the equivalent function):
a) all significant deficiencies in the design or operation of internal
controls which could adversely affect the registrant's ability to record,
process, summarize and report financial data and have identified for the
registrant's auditors any material weaknesses in internal controls; and
b) any fraud, whether or not material, that involves management or other
employees who have a significant role in the registrant's internal
controls; and
6. The registrant's other certifying officers and I have indicated in this
quarterly report whether or not there were significant changes in internal
controls or in other factors that could significantly affect internal controls
subsequent to the date of our most recent evaluation, including any corrective
actions with regard to significant deficiencies and material weaknesses.
Date: November 27, 2002
/s/ Joseph P. O'Connell
- -----------------------
Joseph P. O'Connell, Vice
President and Treasurer
(Principal Financial Officer)
16