Greg Woods - President, Chief Executive Officer Joe O’Connell - SVP, Chief Financial Officer David Calusdian - IR, Sharon Merrill Associates.

Analysts:.

Good day and welcome to the Astro-Med First Quarter Fiscal 2016 Financial Results Conference Call. Today’s conference is being recorded. At this time, I would like to turn the conference over to David Calusdian of Sharon Merrill Associates. Please go ahead, sir..

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 then take you through the financials.

Greg will make some concluding comments 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. 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. I’ll now turn the call over to Greg Woods..

Thanks, David, and good morning everyone. There are three key points I’d like to cover on today’s call. First, we delivered strong first quarter results while continuing to invest strategically to introduce new products, enhance our operations and grow our business.

Second, as evidenced by the record orders received in Q1, the strategic steps we have taken to focus the company on data visualization technology are contributing to a high level of demand both here in the U.S. and abroad.

And third, we are seeing that our emphasis on continuous improvement and operational excellence is putting the company on a path towards improved profitability and working capital utilization. In a minute Joe will discuss our financial results in detail, but let me take you through the Q1 highlights.

The first quarter of this year marked the eight consecutive quarter in which we have registered year-on-year revenue growth. Net sales were up 7% for the quarter to $22.2 million with growth across all product lines and geographic markets.

Earnings per share were up 14% to $0.16 in the first quarter of fiscal 2016 from $0.14 in the same period last year. And gross margin after dipping below our target range in Q4 came back up to 40.7% in the first quarter. So what’s driving our performance? Well there a number of factors at work here.

They are driven by our strategic focus on data visualization technology. First and foremost we’re a technology company and more specifically we are innovators in the field of data visualization technology.

Our products are based on it, our R&D is focussed on it; we are committed to developing it and owning it, both through organic initiatives and potential M&A opportunities. Everything we do revolves around improving our customer’s ability to visually communicate, interpret and impart information more clearly and naturally.

By focussing this message both internally and externally, we have achieved better alignment with the company and more consistent brand image in the market place. While each business unit has their unique brand promise, they are all fundamentally related back to our corporate focus on data visualization technology.

And whether it’s during the growing number of trade shows we attend each year or in one-on-one meetings our people are doing a very good job conveying net brand promise to current and prospective customers. Consequently we continue to build our reputation across the industries we serve.

Now it obviously strengthens the case if you can consistently deliver high quality products that capture the market’s needs. In the fourth quarter of last year we launched four new color inkjet label printers and three of those were used in the highly durable pigment based inks suitable for rugged environments.

Similarly, we are investing in new products in our test and measurement business including several that will be unveiled in the coming months. These product development investments combined with some other accelerated development expenditures are reflected in the higher R&D expense incurred in the first quarter.

As a technology company we invest in R&D and we will continue to make investments in the 7% to 8% range as we move through the balance of this year. In addition to the R&D expenditures, we are investing in talent and upgrading some of our channel relationships ensuring that we have the right people in the right markets to accelerate our growth.

Recent examples include the opening of our Shanghai Technology Center in China as well as new direct offices in Malaysia and Singapore. The third initiative of driving our improved performance is our ongoing operational excellence program.

We took this program to the next level last year with the addition of new senior leadership focussed on operational excellence and by expanding the scope of our initiatives beyond the factory floor. By eliminating waste and improving efficiencies, this program is making steady improvements in our profitability in our working capital utilization.

For example, we have several initiatives aimed at reducing our inventory and improving our churns. In Q1 we made some good progress towards the goals we have set in this area. Inventory was down $1.7 million year-over-year and $1.1 million sequentially in the quarter.

This is one of the key factors in the 85% improvement in our free cash flow to $2.5 million in the quarter. Now let me turn the call over to Joe for his financial review..

Thank you, Greg. Good morning everyone. It’s a real pleasure to be with you to discuss Astro-Med's first quarter fiscal 2016 financial results. Q1 marked another good quarter for the company. Net sales were $22.2 million, that’s an increase of 7% over the first quarter of last year.

Sales to our domestic customers grew 7.5% from the prior year period to $15.7 million. Sales to international customers grew up 5.4% to $6.5 million. International sales were tempered by the strong dollar, which reduced international sales by approximately $1 million from last year’s first quarter international sales.

By business segment QuickLabel Systems reported record quarterly sales of $15.6 million that’s an increase of 8.5% driven in part by the new Kiaro! D printer line as well as the Kiaro! 50 introduced at the end of fiscal 2015.

Our Test & Measurement group which consists of ruggedized products and data acquisition systems, posted first quarter sales of $6.6 million, that’s up 3.3% from the year earlier. Looking at the first quarter sales by product category, our consumables totalled $11.8 million, that’s up 8.6% from the first quarter of fiscal 2015.

Hardware sales were flat to slightly down from a year earlier to $8.4 million and our service, parts and repairs contributed another $2 million to first quarter sales being up 48.3% from the Q1 of last year. First quarter 2016 sales generated gross profit of $9 million that compares with $8.6 million in the prior year period.

Gross margin for the quarter was 40.7% compared to 41.6% in the year ago period up from 39% in the fourth quarter of fiscal 2015, this quarter’s lower margin being an [inaudible] product mix and manufacturing absorption.

Turning to expenses, selling, R&D and general administrative expenses were $7.6 million in the first quarter or approximately 34.1% of our sales. This compares to an operating expenses of $6.9 million or 33.4% of the fiscal 2015 first quarter sales.

The increase resulted primarily from higher R&D spending on product development initiatives and outside testing for new products and contracts.

As a result of the plan operation spending, operating income in the quarter was $1.4 million or an operating margin of 6.5% versus $1.7 million or an operating margin of 8.2% in the first quarter of fiscal 2015.

Other income in the quarter was 234,000 consists of interest income, settlement on an escrow account, miscellaneous income net of foreign exchange.

Looking at the segment operating profit for the quarter, QuickLabel Systems earned $2 million in segment operating profit with a margin of 12.6% while the T&M segment had operating income of 900,000 and a corresponding margin of 14.2%. Our federal, state, foreign tax provision in the quarter was 471,000 representing an effective tax rate of 28%.

Net income in the first quarter increased $1.2 million or $0.16 per diluted share compared to $1.1 million or $0.14 per diluted share in the first quarter of fiscal 2015. Turning to the balance sheet, our total assets at May 02, 2015 were $74.9 million. Our equity balance was $64.5 million, representing a book value of $8.83 per share.

Our cash and marketable securities position were $24.6 million. Our accounts receivable at the end of the quarter was $14.5 million, that represents 52 days sales outstanding and compares with a 52-days sales outstanding at the end of fiscal 2015, although one day up over the first quarter of fiscal 2015.

Inventory levels at the end of the quarter were $14.5 million, representing 101 days that’s a comparison with the inventories of $15.6 million at the end of year-end and fiscal 2015 representing 106 days. Our capital expenditures for the quarter were $654,000.

Spending was primarily related to information technology, building improvements, machinery equipment tools and dies. Our dividends in the first quarter of fiscal 2016 were $510,000, representing $0.07 per share. Our employee population at the end of the quarter was 330 folks.

Our sales per employee increased to 269,000 from 232,000 on a year-over-year basis. Astro-Med’s EBITDA at the end of the quarter was 2,100,000 slightly up from the prior year’s EBITDA and for the first quarter. Orders received in the first quarter were up 11.1% to 26.1% and which Greg mentioned is a record for the company.

With the strong customer demand and a $14.5 million backlog to start the second quarter, Astro-Med is well positioned in fiscal 2016. Now let me turn it back to Greg for closing comments..

Thanks, Joe. At the start of this morning’s call I opened by referencing three themes. I’d like to restate them again now as we wrap up. First, the strong Q1 results, record orders with improving revenue and profitability. Second, our focus data visualization technology strategy is gaining traction.

We are seeing robust demand for our products in the U.S. and abroad, we are having an increasing number of sales conversations with Global 1000 organizations interested in multi unit orders for several countries. And third, our operational excellence efforts are paying off.

Sales per employee is up again this quarter from 232,000 to 269,000 per employee and our inventory was reduced by over $1 million. In summary, we expect to deliver another year of strong growth and profitability in fiscal 2016 while making new investments and improvements necessary to generate increasing returns for our shareholders.

Finally, as we did last year at this time we will close with full year guidance based on the current business environment we expect to generate revenue for fiscal 2016 in the range of $93 million to $103 million and earnings per diluted share of between $0.70 and $0.75. With that, Joe and I will be happy to take your questions.

Operator?.

Well great. Well thanks everyone for joining us here this morning. We look forward to keeping you updated on our progress, and enjoy the rest of the day. Thank you..

Bye now..

That does conclude today’s conference. We appreciate everyone’s participation..