Greg Woods - President, Chief Executive Officer Joe O’Connell - Senior Vice President, Chief Financial Officer David Calusdian - Investor Relations, Sharon Merrill.

Evan Greenberg - Legend Capital Management Joe Furst - Furst Associates Tom Spiro - Spiro Capital.

Good day and welcome to the Astro-Med Q4 Fiscal Year 2015 conference. Today’s conference is being recorded. At this time, I’d like to turn the conference over to David Calusdian. Please go ahead..

Thank you, and good morning everyone. Hosting this morning’s call are Greg Woods, Astro-Med’s President and CEO, and Joe O’Connell, Senior Vice President and CFO. Greg will begin today’s call by reviewing the company’s operating highlights and business outlook. Joe will take you through the financials.

Greg will make some concluding remarks and then management will be happy to take your questions. By now, you should have received a copy of the news release which was issued earlier today. If you have not received a copy, please go to the investor section of the company’s website, www.astro-medinc.com.

Please note that statements made during this call that are not statements of historical fact are considered forward-looking statements within the meaning of the Securities and Exchange Act of 1934. These forward-looking statements are based on a number of assumptions that could involve risks and uncertainties.

Accordingly, actual results could differ materially. Such forward-looking statements speak only as of the date made. Except as required by law, the company undertakes no obligation to update these forward-looking statements.

For further information regarding the forward-looking statements and the factors that may cause differences, please see the company’s risk factors in the company’s annual report on Form 10-K and other filings Astro-Med makes with the Securities and Exchange Commission.

During this morning’s call, management will make references to non-GAAP income from continuing operations and non-GAAP net income from continuing operations per diluted share.

The company believes that the inclusion of these non-GAAP financial measures in this press release helps investors gain a meaningful understanding of changes in the company’s core operating results and can also help investors who wish to make comparisons between Astro-Med and other companies on both a GAAP and non-GAAP basis.

For more information, please see the GAAP to non-GAAP reconciliation table in this morning’s new release. The tables have more details about the GAAP financial measures that are most directly comparable to non-GAAP financial measures and related reconciliations between those financials measures. With that, I’ll turn the call over to Greg Woods..

new products, geographic expansion, and manufacturing efficiencies. In addition, through focused investments in technology, marketing and personnel, we continue to build a solid foundation to generate sustained margin improvement and profitable growth.

I’ll discuss those investments in more detail shortly, but first let’s turn to the highlights of the fourth quarter which saw net sales increase by 24.5% to $22.1 million on strong growth in both of our segments.

Looking first at our QuickLabel Systems segment, revenue increased approximately 15% from the fourth quarter of fiscal 2014 to $14.8 million while for the full year sales were up 22% to $59.8 million. The performance of our QLS segment was led by strong demand for our family of six high performance digital inkjet color label printers.

Each of these products addresses a unique need for an on-demand label printing solution that is fast, efficient, affordable and delivers quality that rivals flexographic printing. Customers in dozens of industries are increasingly relying on our colored digital imaging solutions for their packaging needs.

For competitive reasons, we don’t provide a breakout of unit sales, but what we can say is that for the fiscal year ended January 31, our overall printer unit volume is up a very healthy 68%. There are a number of factors driving the growth at QLS. One factor is certainly the introduction of new products.

We launched four new color inkjet label printers in fiscal Q4. Our technology combined with our sales and support people have a great reputation in the industry, and we’re gratified to see the level of demand for these new products. Another factor in the success of QLS is our highly targeted marketing strategy.

One aspect of this strategy is to focus on key verticals that manufacture a broad line of specialty products where the product’s visual appearance is a key differentiator. In support of this marketing initiative, in fiscal 2016 we’ll be participating in many more trade shows in a wide range of industries.

Our QLS business is fulfilling its mission to provide customers with high quality color labels they need, when they need them. Using our printers, customers are able to instantly and more effectively convey the brand promise of their products, whether it’s tea, medical devices, or prepared foods.

For our customers, that brand promise carries an enormous value. In its recent Packaging Matters study, MeadWestvaco Corporation found that 31% of global consumers consider packaging very important or extremely important to their overall satisfaction with consumer products.

The study also found that packaging directly influences the frequency with which customers use, buy and try products.

Beyond the flexibility and efficiency benefits, QuickLabel digital color label printers give our customers a superior on-site ability to significantly improve the appearance of their product, and this is leading to higher sales for them and in turn for us as well.

Moving to our test and measurement segment, sales for the fourth quarter of fiscal 2015 grew 51%. Sales for the fiscal year were up 46% to $28.6 million as both our data acquisition products and our ruggedized aerospace printers enjoyed a solid year. We are seeing a steady increase in demand for our T&M products around the globe.

The increased demand has been enabled in part by our increased presence in new geographic regions. In Q4, we continued our channel expansion initiatives, adding sales personnel in the Americas, Asia and Europe. As we move through the year, we will continue to make additional sales investments to support our growing business.

Another important investment during the last quarter was the opening of our Shanghai Technology Center, marking the first time we’ve had a direct presence in China. You will recall that we gained a number of new aircraft customers in China through our Miltope acquisition in 2014.

This new technology center strengthens our ability to serve those customers and establish new relationships, such as the agreement we signed in January with China’s Donghai Airlines. We are supplying our ruggedized printers for Donghai’s fleet of Boeing 737 aircraft. Donghai is among a number of emerging commercial carriers in China.

The airline is on a nice growth trajectory, having recently expanded its domestic service and announced plans to begin international service to regional centers such as Hong Kong and Ho Chi Minh City.

In addition to the technology center, we recently opened a second office in Southeast Asia, giving us a presence now in three countries in one of the world’s fastest growing regions. Both the QLS and test and measurement segment continue to benefit from our lean operational excellence activities.

An important component of our operational excellence program has been last year’s deployment of a stage gate methodology to rapidly develop and introduce new products to the market. Our stage gate process evaluates new technologies and product ideas with respect to evolving market opportunities as driven by voice of the customer.

Only the best ideas are systematically developed and brought to market. This new approach has dramatically reduced our product development cycle. A recent case in point was our ability to release not one but four new color label printers in the fourth quarter of last year.

On our last call, I mentioned that during the fourth quarter we would be devoting a significant amount of time and effort to the upgrading of our IT system to a new platform.

As I’m sure you are aware, these types of conversions always require a significant effort, and our process is especially complicated due to the age of our existing platform, which was a vintage 1994 system.

I’m pleased to report that that process has now been completed and we are up and running on Oracle’s latest E1 enterprise resource planning platform. We expect to see a wide range of benefits from this system as it becomes more fully integrated into our operations throughout the year.

The system will strengthen our growth initiatives by providing infrastructure support across all the countries in which we do business. We also see opportunities to significantly enhance operational efficiencies, more effectively manage inventories, and to enhance the overall customer experience.

This new hardware and software installation will be able to support the growth of our company on a global basis for many years to come, although we probably won’t wait another 21 years for our next upgrade. Now let me turn it over to Joe for the financial review..

Thank you, Greg. Good morning everyone. Net sales in the fourth quarter were $22.1 million - that’s 24.5% greater than the fourth quarter of fiscal 2014. Foreign exchange lowered our sales by approximately $500,000 in the fourth quarter.

Looking at our channel distribution sales, to our domestic customers increased 19.3% from the prior year to $15.2 million, while our shipments to our international customers grew 37.5% year-over-year to $6.9 million.

International shipments represent approximately 31.3% of Astro-Med’s total revenues in the fourth quarter compared with 28.3% in the same period of fiscal 2014. Turning to the business segment, QuickLabel Systems reported sales of $14.8 million, ahead of the prior year’s fourth quarter by approximately 15%.

Test and measurement, which includes our ruggedized products and data acquisition systems, posted sales of $7.2 million. This represents an increase of 51% from the fourth quarter of fiscal 2014.

Profiling the fourth quarter by product, our consumables were $10.8 million - that’s up 23.2% from the fourth quarter of fiscal 2014, while our hardware sales increased 22.7% from a year ago to $9.6 million. Our service, parts and repair revenue contributed another $1.6 million in quarterly sales - that result is up 46.5% from the prior year.

Fourth quarter sales generated $8.6 million in gross profit dollars - that’s up 13% from the prior year. Our gross profit margin of 39% was down from 42.8% gross profit margin in the fourth quarter of fiscal 2014. The decrease in gross margin from a year ago is primarily attributable to inventory valuations and promotional activities.

Also, gross margins for the fourth quarter of fiscal 2014 included a $450,000 settlement from a supplier related product replacement program. Our operating expenses totaled $7.8 million in the quarter or 35.4% of our net sales That represents approximately 650 basis points lower than the fourth quarter of fiscal 2014.

In dollars, the operating expenses were $400,000 higher than the prior year’s fourth quarter. This is attributable to an increase in selling and marketing activities which were partially offset by lower R&D and G&A expenses. Operating income of $793,000 for the fourth quarter of fiscal 2015 translates to an operating margin of 3.6%.

This compares to an operating income of $185,000 or 1% of revenue for the fourth quarter of fiscal 2014.

While the year-over-year increase is sizeable, operating income would have been even stronger but for a few discrete items that landed in the quarter, among those the cost of the required fairness opinion associated with our share repurchase, our ERP implementation, inventory valuation, and to a lesser extent the impact of foreign currency.

In terms of segment operating margins, QuickLabel Systems earned $854,000 in the operating income with a margin of 5.8% in the quarter, while our test and measurement segment reported operating income of $1.6 million with a corresponding margin of 21.5%.

Our federal, state and foreign tax provision in the quarter was $36,000, representing an effective tax rate of 6.2%. Fourth quarter 2015 GAAP net income was $543,000 or $0.07 per diluted share versus net income of $1.9 million or $0.24 per diluted share for the fourth quarter of fiscal 2014.

Keep in mind, however, that the results in the fiscal 2014 period do include $0.19 per diluted share from the discontinued operation. Excluding the discontinued operation, income from continuing operations for the fourth quarter of fiscal 2014 was $399,000 or $0.05 per diluted share.

Turning to the balance sheet, our total assets at year-end fiscal 2015 were $74.3 million and our equity balance was $63.5 million, representing a book value of $8.76 per share. Accounts receivable at year-end were $14.1 million, representing 52 days sales outstanding.

This compares with the accounts receivable balance of $11.4 million or 54 days sales outstanding at the end of fiscal 2014. Inventory levels at year-end were $15.6 million, representing 106 days on hand and compares favorably with the prior year’s inventories of $15.2 million, representing 113 days of inventory on hand.

Our cash and cash equivalents position at year-end was $23.1 million compared with a balance of the prior year of 2014 of $27.1 million. During the quarter, the company purchased 500,000 shares of common stock from the estate of Albert W. Ondis for $6.2 million in December.

Capital expenditures in fiscal 2015 were $2.2 million, primarily related to investments in information technology, machinery and equipment, and building improvements, while our cash dividends for the year were $2.1 million, representing $0.07 per share per quarter. Our employee population at fiscal year-end 2015 was approximately 341 persons.

That’s an increase of 37 employees, approximately 12% from the end of the prior fiscal year. Our sales per employee was $267,000 and compares favorably with the prior year sales per employee of $216,000, or an improvement of approximately 24%.

At the end of 2015, orders received for the year were up 15.4%, higher than the prior year, and our backlog stands at $12.1 million. Now let me turn it back to Greg for his closing comments..

Thank you, Joe. To summarize this morning’s call, Astro-Med is putting the strategic pieces in place to generate sustained margin improvement and profitable growth. As we did last year, Joe and I will provide revenue and earnings guidance for fiscal 2016 during our Q1 call in May. With that, we’re happy to take your questions.

Operator?.

[Operator instructions] We’ll take our first question from Evan Greenberg..

Yes, Evan Greenberg - the K is silent.

How are you guys?.

Morning Evan..

Hey, how are you? I wanted to know what the [indiscernible] because you didn’t break that cost down on the ERP system, and why you didn’t put that in the pro forma number..

Well a lot of that, Evan, is capitalized. We have some expenses but it’s more activity-related expenses. As you might--as you know, most of those dollars related to the hardware and software product that we bought is capitalized and amortized over the life of the system..

Okay, all right.

So it wasn’t material for the quarter, the expense was material but not in terms of the earnings report?.

Right, it was material but it was not relative to the earnings, that’s correct..

I’ll just chime in there for a second, Evan. There’s a lot of unquantifiable numbers in there too, right, so all the time we spend training all the employees. There’s no way to really quantify that..

Right..

Yeah, I mean, I’ve got to believe it was at least $250,000 to $300,000 impact minimum. Just trying to get a handle on--.

So let me ask you another question - the gross margin numbers, you’d figure with the increased revenue that even with the mix improvement, you’d probably pick up--you might not pick up some gross margin points but it will at least be somewhat stable.

Why was the gross margin down so much year-over-year?.

We did incur some costs associated, as you say, with the relocation of activities to get ready for some of the lean initiatives. We also had some promotional programs during the quarter, Evan, that actually lowered a little bit the ASP. So a combination of factors, I think, were really the primary reasons behind the lower gross margins..

Okay. All right, thanks a lot, and keep up the good work. You guys are turning into a growth company..

Thanks..

We’ll go next to Joe Furst at Furst Associates..

Good morning, gentlemen. Congratulations - doing a good job.

I’m curious about over the next year or two, from which segments of the business do you expect the most growth?.

The most growth is kind of a difficult question to ask, because both areas are doing fairly well, so it’s really based on timing and specific orders. We think they’re both double-digit growth potential businesses. They’ve proven that so far and we expect that to continue; but exactly who is going to be in the lead, it’s kind of a bit of a horse race..

Okay, thank you. One other question, if I could ask. Your printing business seems to be going very well.

Is it the fact that there just aren’t good competitive printers out there, or are you sort of alone in some of these areas? What is it that makes your printers seem to be selling so very well?.

Well I, and I guess all our sales people wish that was the case, but it’s not. Yeah, it’s fairly competitive, to be honest with you, but we believe we deliver the best value. So there are a number of competitors out there, but for the areas that we’re targeting, certainly we believe and many of our customers do that we have the best solution for them.

So that’s--and again, if we just had the best product and we could just sit on our laurels, we wouldn’t have introduced four new products in Q4, so it is the type of thing where you’ve got to stay ahead of the pack.

We think we’re doing that, and not only from the product but also from our customer support and service and the salespeople we have out there. We feel by far we have the best team out there, so that does give us an edge..

Good, and are you still looking at potential acquisitions?.

Yes, we are. Nothing that we can talk about today, but it’s an active part of our business..

Okay, thank you..

As a reminder, that is star, one if you would like to ask a question. We’ll go next to Tom Spiro at Spiro Capital..

Good morning..

Morning Tom..

I’m new to the story, so a couple of basic questions.

On the ruggedized printers, can you give me a sense either for your own business or perhaps for the industry, if you’re more comfortable, how that business breaks down between the commercial military and everybody else in terms of sales?.

Yeah, we really don’t break that out. So we are in really three segments - it’s commercial--we break it into three, anyway, commercial, military, and business and regional jets. We participate in all three of those segments.

I guess the only thing I would say is that the military is not growing nearly as fast as the other segments, and it’s not as big of a segment, so the majority of it is coming from the commercial and business and regional jets..

I see. As I look at the sales numbers reported for the year, that’s a combination of both what I’d call your core business and the Miltope, if I pronounced that correctly, the Miltope business you picked up about a year ago.

In the quarter just ended, what were Miltope’s sales roughly?.

We don’t actually break that out independently..

We actually have in the last several Qs..

Well Tom, the difficulty is that we’re actually moving some of those products over to Astro-Med products, so it gets somewhat muddled, if you will, in terms of the revenues. I think the expectations for the year, we have totaled in the past of roughly $8 million annually, and I think we haven’t been disappointed.

But I think the difficulty would be to cull that out in the future..

Okay, if I use--I’m sorry?.

No, I was just going to comment on that, is that to amplify what Joe said, a lot of the customers--I shouldn’t say a lot, many customers that we have from the Miltope acquisition have looked at some of the Astro-Med products, and some of those have already converted over to Astro-Med products, so it gets very hard to sort out which is a Miltope customer versus an Astro-Med customer..

I see. If I used 8 as just kind of a ballpark number, that would suggest that apart from Miltope, the test and measurement sales grew at a modest rate this past year, something in the 5% or 6% kind of a range, if I’m doing my math right.

I think you’ve described it as kind of a double-digit grower, so maybe my math is wrong and you could correct me, or maybe there’s something else we need to be thinking about..

No, that’s just a matter of timing. So the way the aircraft business works is you get contracts--I can reference one that we got a few years ago for the Boeing 787. So really, what will happen is once you win the contract, you’ve got that business typically for the life of the air frame, but the actual orders are a bit erratic.

If you look at the 787, for example, we had the issue with their lithium batteries where production almost stopped and then it ramped up again, so the exact timing is a little bit difficult to predict. We think overall it will certainly be in that range..

And within the T&M, you’ve also got, I believe you call it your data acquisition products. I don’t really understand what’s growing that and how you’ll continue to grow it.

Can you give me just a little bit of color on that?.

Sure, so the data acquisition products, they are used in a wide range of industries but transportation is probably the dominant segment there, which includes aviation, rail and auto.

Really, what happens is we have kind of a high end product in that space, so more the high end users of those products, and that’s everything from airlines, like Airbus and Boeing for example, to auto manufacturers are looking at exactly how they can enhance their products. They use our products to validate their own testing.

It’s also used in the energy business quite a bit, whether it’s nuclear power plants or other types of power plants. There are federal requirements, other countries have similar requirements where they have to take independent measurements of those operations, and that’s what they use our equipment for.

It’s traceable back to the National Bureau of Standards, so we have a very high reputation in the business..

I see. Just a few of the macro variables, maybe you could comment on how they may be affecting you folks. Currency - the dollar is up, what that portends for you overseas. I would think those are challenges. Sluggishness in Europe, number two; and energy, I don’t know if you sell much into the energy sector.

It sounds like your data acquisition products really don’t go there, so I’m guessing it’s not much of an issue, but if you could just comment on those three variables..

Yeah, in energy you’re fairly right. We do have energy components in there, but it’s nothing significant; so for example, the slowdown in drilling doesn’t really affect us. Europe does affect us in a couple ways. As far as the economies, we do fairly well in Europe. We don’t really focus much in southern Europe.

Most of our business is in northern Europe, and you may or not be aware but we have direct facilities in the U.K., France and Germany, and we have dealers in the rest of Europe. So the northern European market for us is doing very well, and we sell in local currencies so yes, we are subject to the issues with the euro dropping.

I think Joe highlighted that in his comments..

And Canada, also..

Yeah, and Canada is also an area for us that we have some currency impact..

Lastly on the new IT system, you mentioned you went online a couple of weeks ago, but how long until you think the new IT system is sort of a net positive - you know, you’ve integrated it, everyone is used to it, it’s helpful rather than a hindrance?.

Well actually, that’s a good question, Tom. It’s not really so much a hindrance. It’s a little bit of a learning curve right now, but I think--I would say we’re probably talking six months. As Greg mentioned earlier, it’s going to be a terrific platform for us to also integrate a lot of our other applications that we have.

We have a brand-new PLM application, we also have a CRM application that we’ll also be able to integrate it, so probably this year will be an important transition year in terms of really bulking up the capabilities and really seeing some dramatic improvements in terms of the capabilities the system will bring us..

Well thanks much..

Sure..

That does conclude today’s question and answer session. At this time, I’d like to turn the conference back over to Greg Woods for any closing remarks..

Great. Thank you for joining us this morning everyone. We look forward to keeping you updated on our progress, and have a great day..

Bye now..

That does conclude today’s conference. Again, thank you for your participation..