2021☒ 2019☐ (§Indicate by checkmark if disclosure of delinquent filers pursuant to Item 405 of regulationS-K is not contained herein, and will not be contained, to the best of the registrant’s knowledge, in definitive proxy or information statement incorporated by reference in Part III of this Form10-K or any amendment to this Form10-K. ☐Large accelerated filer ☐ Accelerated filer ☒☐ Non-accelerated filer ☐☒ Smaller reporting company ☒ 27, 201831, 2020 was approximately $112,325,000$47,045,000 based on the closing price on the Nasdaq Global Market on that date.5, 20196,987,8237,212,977 shares of Common Stock (par value $0.05 per share) of the registrant outstanding.20192021 Annual Meeting of Shareholders are incorporated by reference into Part III of this Annual Report on Form
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AstroNova designs, develops, manufactures
The Company’s
On September 28, 2017, AstroNova, Inc. entered into an Asset Purchase and License Agreement with Honeywell International, Inc. pursuant to which it acquired an exclusive perpetual world-wide license to manufacture Honeywell’s narrow-format flight deck printers for the Boeing 737 and Airbus 320 aircraft. Revenue related to that transaction has been included as part of the aerospace printer product line of the Company’s Test & Measurement segment since the acquisition date. On February 1, 2017, AstroNova completed its acquisition of TrojanLabel ApS (“TrojanLabel”), a European manufacturer of digital color label presses and specialty printing systems for label professionals and commercial printers. TrojanLabel is reported as part of our PI segment beginning with the first quarter of fiscal year 2018. Refer to Note 3, “Acquisitions,” in our audited consolidated financial statements included elsewhere in this report.
AstroNova leverages its
Products
Product Identification
QuickLabel brand products include tabletop and work cell-ready digital color labelsupplies for OEMs, commercial printers, and specialty OEM printing systems. QuickLabel products are sold to manufacturers, processors, and retailers whobrand owners. Our customers typically label or mark products on ashort-run basis. QuickLabel customers short tolabelsin-housefacility,on demand. Industry segments that commonly benefit fromshort-runspecialty OEM printing systems for either standalone output or inline integration with existinglabel printing include chemicals,products in a wide variety of industries, including chemical, cosmetics, food and beverage, medical products, nutraceutical, pharmaceutical, and pharmaceuticals, among many others.
TrojanLabel expands our customer market by providing a range of higher volume digital color printers, OEM printing systems and supplies that target the more demanding needs of brand owners, commercial printers, label converters, and packaging manufacturers, giving them the ability to digitally mark or encode products directly or to produce labels for post-printing applications. GetLabels brand products include a full line of media supplies, including label materials, tags, inks, toners and thermal transfer ribbons designed for optimal performance with our printing hardware, while also being compatible with a wide variety of competitive and third-party printing hardware.
TrojanLabel brand products includefrom professional digital color label presses andmini-presses to large-scale
Our current TrojanLabel portfolio includes theprinters. Themini pressmini-press designed for 24/7 label production;production, includes numerous differentiating features for several parenttheT2-C, the T2, a label press with afull-size PC displayflat products, including cardboard, paper bags, flat wood planks and many other items using pigment inks that supports mini jumbo label rolls for commercial production; the T4, aare water-resistant and highly resistant to UV exposure. A professional label press and finishing system, whichthe T4, enables print, die cut all in one anmarket;market.
GetLabels brand products include a full line of suppliesthird-party printers including labels, tags,label and tag materials, inks, toners,toner and thermal transfer ribbons. Quality label materials and substrates arematerial, all specifically designed and constructed for an extensivea wide variety of labeling applications. Every one of the label materialsLabel material and substrates are carefully qualified and tested in our Rhode Island Materials Research Laboratory to ensure durability and compatibility for thewith our QuickLabel brand,and TrojanLabel brand and alsobranded products, along with a variety of competitor printers to meet the specific labeling needs for a wide diversitythird-party printers.
Our T&M products include; the Daxusour flagship ToughWriterDXS-100 distributed data acquisition system, the TMX® high-speed data acquisition system, the SmartCorder®DDX-100 portable data acquisition system, theEV-5000 digital strip chart recording system, the ToughWriter®, Miltope-brand and RITEC-brand airborne printers, thePTA-45B cockpit printer that is subject to the Asset Purchase and Licenses Agreement with Honeywell and ToughSwitch® ruggedized Ethernet switches.AstroNova airborne printers aredeckdecks and in the cabincabins of military, commercial and business aircraft to print hard copies of data required for the safe and efficient operation of aircraft, includingaircraft. Examples of printed data include navigation maps, arrival and departure procedures,information, flight itineraries, weather maps, performance data, passenger data, and various air traffic control data. ToughSwitchThe Company isWe are currently furnishing ToughWriter airborne printers for many aircraft made by Airbus, Boeing, Embraer, Bombardier, Lockheed, Gulfstream and others.
In addition to the ToughWriter products, we manufacture other flight deck printers, including the TP/NP series, the RTP80 series and the Company’s portable data acquisition systems are usedresearch2017 we acquired an exclusive perpetual world-wide license to manufacture and development (R&D), field testing, productionsupport Honeywell’s narrow-format flight deck printers for the Boeing 737 and maintenance applications in a wide range of industries including aerospaceAirbus 320 aircraft. Over time we expect customers will replace thedefense, energy, industrialfunctional advantages and transportation. Thesignificant weight savings.
To service data visualization, we maintain technological core competencies and trade
The Company competes
We retain a leadership position by virtue of proprietary technology, product reputation, delivery, technical assistance, and service to customers. The number of competitors varies by product line. Our management
strengthened through diversity and inclusion. Our diversity initiatives include—but are not limited to—our practices and policies on recruitment and selection; compensation and benefits; professional development and training; promotions; transfers; social and recreational programs; layoffs; terminations; and the ongoing development of a work environment built on the premise of gender and diversity equity. These initiatives include periodic evaluation of our workforce demographics as compared to the demographics in the workforce market, and an affirmative effort to attract, recruit, retain and train a diverse workforce that is representative of the populations in the regions in which we do business.
The Company’s
AstroNova’s
AstroNova’s
AstroNova is
AstroNova faces
AstroNova’s
structure
We are continually reviewing our operations with a view towards reducing our cost structure, including but not limited to downsizingreducing our employee base,labor
AstroNova has
Economic, political and other risks associated with international sales and operations could adversely affect AstroNova’s results of operations and financial position.
Because we sell our products worldwide, our business is subject to risks associated with doing business internationally. Revenue from international operations, which includes both direct and indirect sales to customers outside the U.S., accounted for 39% of our total revenue for fiscal year 2019, and we anticipate that international sales will continue to account for a significant portion of our revenue. In addition, we have employees, suppliers, job functions and facilities located outside the U.S. Accordingly, our business, operating results and financial condition could be harmed by a variety of factors, including:
Interruption to transportation flows for delivery of parts to us and finished goods to our customers;
Customer and vendor financial stability;
Fluctuations in foreign currency exchange rates;
Changes in a specific country’s or region’s environment including political, economic, monetary, regulatory or other conditions;
Trade protection measures and import or export licensing requirements;
Negative consequences from changes in tax laws;
Difficulty in managing and overseeing operations that are distant and remote from corporate headquarters;
Difficulty in obtaining and maintaining adequate staffing;
Differing labor regulations;
Differing protection of intellectual property;
Unexpected changes in regulatory requirements; and
Geopolitical turmoil, including terrorism and war.
AstroNovaWe could incur liabilities as a result of installed product failures due to design or manufacturing defects.
AstroNova has
In addition, through our acquisitions, we have assumed, and may in the future assume, liabilities related to products previously developed by an acquired company that have not been subjected to the same level of product development, testing and quality control processes used by us,we employ, and may have knownunknown or undetected errors.defects. Some types of errorsdefects may not be detected until the product is installed in a user environment. This may cause AstroNovaus to incur significant warranty, and repair or costs, mayandwhich may cause significant customer relations problems such as reputational problems with customers resultingresult in increased costs and lower profitability.
Certain of our products require certifications by regulators or standards organizations, and our failure to obtain or maintain such certifications could negatively impact our business.
In certain industries and for certain products, such as those used in aircraft, we must obtain certifications for our products by regulators or standards organizations. If we fail to obtain required certifications for our products, or if we fail to maintain such certifications on our products after they have been certified, our business, financial condition, results of operations and cash flows could be materially and adversely affected.
Changes in our tax rates or exposure to additional income tax liabilities or assessments could affect our profitability. In addition, audits by tax authorities could result in additional tax payments for prior periods.
On December 22, 2017, the Tax Cuts and Jobs Act (“TCJA” or “Tax Act”) was signed into law. The Tax Act significantly revises the U.S. federal corporate income tax law and includes a broad range of tax reform measures affecting business including among other things, the reduction of the corporate income tax rate from 35% to 21%, the loss of certain business deductions, the acceleration of first-year expensing of certain capital expenditures and aone-time tax imposed on unremitted cumulativenon-U.S. earnings of foreign subsidiaries. The Tax Act is complex andfar-reaching, and we continue to evaluate the actual impact of its enactment on the Company. Any material adverse impact resulting from the Tax Act that has not yet been identified could have an adverse affect on our business, results of operations, financial condition and cash flow.
Changes to tax laws and regulations or changes to the interpretation thereof (including regulations and interpretations pertaining to the Tax Act), the ambiguity of tax laws and regulations, the subjectivity of factual interpretations, uncertainties regarding the geographic mix of earnings in any particular period, and other factors, could have a material impact on our estimates of our effective tax rate and our deferred tax assets and liabilities. The impact of these factors may be substantially different from period-to-period.
In addition, the amount of income taxes we pay is subject to ongoing audits by U.S. federal, state and local tax authorities. If audits result in payments or assessments different from our reserves, our future results may include unfavorable adjustments to our tax liabilities and our financial statements could be adversely affected. Any further significant changes to the tax system in the United States or in other jurisdictions(including changes in the taxation of international income as further described below) could adversely affect our financial statements.
The agreements governing our indebtedness subject us to various restrictions that may limit our ability to pursue business opportunities.
The agreement governing our current credit facility contains, and any future debt agreements may include, a number of restrictive covenants that impose significant operating and financial restrictions on us and our subsidiaries. Such restrictive covenants may significantly limit our ability to:
Incur future indebtedness;
Place liens on assets;
Pay dividends or distributions on our and our subsidiaries’ capital stock;
Repurchase or acquire our capital stock;
Conduct mergers or acquisitions;
Sell assets; and/or
Alter our or our subsidiaries’ capital structure, to make investments and loans, to change the nature of their business, and to prepay subordinated indebtedness.
Such agreements also require us to satisfy other requirements, including maintaining certain financial ratios and condition tests. Our ability to meet these requirements can be affected by events beyond our control, and we may be unable to meet them. To the extent we fail to meet any such requirements and are in default under our debt obligations, our financial condition may be materially adversely affected. These restrictions may limit our ability to engage in activities that could otherwise benefit us. To the extent that we are unable to engage in activities that support the growth, profitability and competitiveness of our business, our business, results of operations and financial condition could be adversely affected.
AstroNova may not realize the anticipated benefits of past or future acquisitions, divestitures and strategic partnerships, and integration of acquired companies or divestiture of businesses may negatively impact AstroNova’s overall business.
We have made strategic investments in other companies, products and technologies, including our September 2017 Asset Purchase and License Agreement with Honeywell International, Inc. and our February 2017 acquisition of the digital color label press and specialty printing systems business of the Danish company, TrojanLabel. We may continue to identify and pursue acquisitions of complementary companies and strategic assets, such as customer bases, products and technology. However, there can be no assurance that we will be able to identify suitable acquisition opportunities. In any acquisition that we complete we cannot be certain that:
We will successfully integrate the operations of the acquired business with our own;
All the benefits expected from such integration will be realized;
Management’s attention will not be diverted or divided, to the detriment of current operations;
Amortization of acquired intangible assets or possible impairment of acquired intangibles will not have a negative impact on operating results or other aspects of our business;
Delays or unexpected costs related to the acquisition will not have a detrimental impact on our business, operating results and financial condition;
Customer dissatisfaction with, or performance problems at, an acquired company will not have an adverse impact on our reputation; and
Respective operations, management and personnel will be compatible.
In certain instances as permitted by applicable law and NASDAQ rules, acquisitions may be consummated without seeking and obtaining shareholder approval, in which case shareholders will not have an opportunity to consider and vote upon the merits of such an acquisition. Although we will endeavor to evaluate the risks inherent in a particular acquisition, there can be no assurance that we will properly ascertain or assess such risks.
We may also divest certain businesses from time to time. Divestitures will likely involve risks, such as difficulty splitting up businesses, distracting employees, potential loss of revenue and negatively impacting margins, and potentially disrupting customer relationships. A successful divestiture depends on various factors, including our ability to:
Effectively transfer assets, liabilities, contracts, facilities and employees to the purchaser;
Identify and separate the intellectual property to be divested from the intellectual property that we wish to keep; and
Reduce fixed costs previously associated with the divested assets or business.
All of these efforts require varying levels of management resources, which may divert our attention from other business operations. Further, if market conditions or other factors lead us to change our strategic direction, we may not realize the expected value from such transactions.
If we are not able to successfully integrate or divest businesses, products, technologies or personnel that we acquire or divest, or able to realize expected benefits of our acquisitions, divestitures or strategic partnerships, AstroNova’s business, results of operations and financial condition could be adversely affected.
Adverse conditions in the global banking industry and credit markets could impair our liquidity or interrupt our access to capital markets, borrowings or financial transactions to hedge certain risks.
At the end of fiscal 2019, we had approximately $7.5 million of cash and cash equivalents. Our cash and cash equivalents are held in a mix of money market funds, bank demand deposit accounts and foreign bank accounts. Disruptions in the financial markets may, in some cases, result in an inability to access assets such as money market funds that traditionally have been viewed as highly liquid. Any failure of our counterparty financial institutions or funds in which we have invested may adversely impact our cash and cash equivalent positions and, in turn, our financial position.
To date, we have been able to access financing that has allowed us to make investments in growth opportunities and fund working capital requirements as needed. In addition, we occasionally enter into financial transactions to hedge certain foreign exchange and interest rate risks. Our continued access to capital markets, the stability of our lenders and their willingness to support our needs, and the stability of the counter parties to our financial transactions that hedge risks are essential for us to meet our current and long-term obligations, fund operations, and fund our future strategic initiatives. An interruption in our access to external financing or financial transactions to hedge risk could materially and adversely affect our business and financial condition.
AstroNova could experience a significant disruption in or security breach in security of our information technology system which could harm our business and adversely affect our results of operations.
AstroNova
AstroNova depends
AstroNova
officials and others for the purpose of obtaining or retaining business. Our internal policies mandate compliance with these anti-corruption laws. We operate in parts of the world that have experienced governmental corruption to some degree, and in certain circumstances, strict compliance with anti-corruption laws may conflict with local customs and practices. Despite our training and compliance programs, there can be no assurance that our internal control policies and procedures will protect us from reckless or criminal acts committed by those of our employees or agents who violate our policies.
AstroNova collects
Whileour business, we believe that we materially comply with industry standards and applicable laws and industry codes of conduct relating to privacy and
conduct.
We may record future impairment charges, which could materially adversely impact our results of operations.
We test our goodwill balances annually, or more frequently if indicators are present or changes in circumstances suggest that impairment may exist. We assess goodwill for impairment at the reporting unit level and, in evaluating the potential for impairment of goodwill, we make assumptions regarding estimated revenue projections, growth rates, cash flows and discount rates. We monitor the key drivers of fair value to detect events or other changes that would warrant an interim impairment test of our goodwill and intangible assets. Relatively small declines in the future performance and cash flows of a reporting unit or asset group, changes in our reporting units or in the structure of our business as a result of future reorganizations, acquisitions or divestitures of assets or businesses, or small changes in other key assumptions, may result in the recognition of significant asset impairment charges, which could have a material adverse impact on our results of operations.
We also review our long-lived assets including property, plant and equipment, and other intangibles assets for impairment when events or changes in circumstances indicate the carrying value may not be recoverable. Factors we consider include significant under-performance relative to expected historical or projected future
operating results, significant negative industry or economic trends and our market capitalization relative to net book value. We may be required in the future to record a significant charge to earnings in our financial statements during the period in which any impairment of our long-lived assets is determined. Such charges could have a significant adverse impact on our results of operations and our financial condition.
Compliance with rules governing “conflict minerals” could adversely affect the availability of certain product components and our costs and results of operations could be materially harmed.
SEC rules require disclosures regarding the use of “conflict minerals” mined from the Democratic Republic of the Congo and adjoining countries necessary to the functionality or production of products manufactured or contracted to be manufactured. We have determined that we use gold, tin and tantalum, each of which is considered a “conflict mineral” under the SEC rules, as they occur in electronic components supplied to us in the manufacture of our products. Because of this finding, we are required to conduct inquiries designed to determine whether any of the conflict minerals contained in our products originated or may have originated in the conflict region or come from recycled or scrap sources. There are costs associated with complying with these disclosure requirements, including performing due diligence in regards to the source of any conflict minerals used in our products, in addition to the cost of remediation or other changes to products, processes or services of supplies that may be necessary as a consequence of such verification activities. As we use contract manufacturers for some of our products, we may not be able to sufficiently verify the origins of the relevant minerals used in our products through the due diligence procedures that we implement. We may also encounter challenges to satisfy those customers who require that all of the components of our products be certified as conflict-free, which could place us at a competitive disadvantage if we are unable to do so. As a result, our business, operating results and financial condition could be harmed.
Due to the fact that we have operations located within the United Kingdom (UK), our business and financial results may be negatively impacted as a result of the UK’s planned exit from the European Union (EU). These risks would be heightened in the event that the UK and the EU are unable to reach a mutually satisfactory exit agreement.
On June 23, 2016, the UK held a referendum in which voters approved an exit from the European Union, commonly referred to as “Brexit.” On March 29, 2017, the UK Government invoked Article 50 of the Treaty on the European Union, which is expected to result in the UK exiting the EU. The UK Government continues to negotiate the terms of the UK’s future relationship with the EU, although there is still considerable uncertainty as to the outcome. It is possible that following agreement, the new relationship will result in greater restrictions on imports and exports between the UK and EU countries, as well as the US. and increased regulatory complexity. There is also the potential for disruption to the movement of raw materials and finished goods in the event that no agreement is reached by the planned exit date. These changes may adversely affect our operations and financial results.
Additionally, following the referendum on Brexit, the value of the British pound (GBP) incurred significant fluctuations. If the value of the British Pound Sterling continues to incur similar fluctuations, unfavorable exchange rate changes may negatively affect the value of our operations located in the UK, as translated to our
reporting currency, the USD, in accordance with US GAAP, which may impact the revenue and earnings we report. Continued fluctuations in the GBP may also result in the imposition of price adjustments byEU-based suppliers to our UK operations, as those suppliers seek to compensate for the changes in value of the GBP as compared to the Euro. In addition, aso-called “Hard Brexit,” where no formal agreement is made between the EU and the UK prior to the UK’s exit, could result in a continued deflation of the British Pound Sterling; additional increases in prices, fees, taxes or tariffs applicable to goods that are bought and sold between the UK and EU, and a negative impact on end markets in the UK as a result of declines in consumer sentiment or decreased immigration rates into the UK. Any of these results could have a material adverse effect on our business, financial condition and results of operations.
| Approximate Square Footage |
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West Warwick, Rhode Island, | 135,500 | Corporate headquarters, research and development, manufacturing, sales and service | ||||
AstroNova
| Approximate Square Footage |
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Dietzenbach, Germany | 18,630 | Manufacturing, sales and service | ||||
Copenhagen, Denmark | 4,800 | R&D, sales and service | ||||
Brossard, Quebec, Canada | 4,500 | Manufacturing, sales and service | ||||
Elancourt, France | 4,150 | Sales and service | ||||
Schaumburg, Illinois, United States | ||||||
Irvine, California, United States | Sales | |||||
Shah Alam, Selangor, Malaysia | 2,067 | Sales | ||||
Maidenhead, England | 1,021 | Sales and service | ||||
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Shanghai, China | 461 | Sales | ||||
Mexico City, Mexico | Sales | |||||
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There
nature of our business, we may be subject in the future to lawsuits or other claims, including those pertaining to product liability, patent infringement, commercial, employment, employee benefits, environmental and stockholder matters
Item 5. |
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AstroNova
AstroNova
Dividend Policy
AstroNova began a program of paying quarterly cash dividends in fiscal 1992 and has paid a dividend for 110 consecutive quarters. During fiscal 2019, 2018 and 2017, we paid a dividend of $0.07 per share in each quarter and anticipate that we will continue to pay comparable cash dividends on a quarterly basis.
Pursuant to an authorization approved by AstroNova’s Board of Directors in August 2011, the Company is currently authorized to repurchase up to 390,000 shares of common stock, subject to any increase or decrease by the Board of Directors at any time. This is an ongoing authorization without any expiration date.
| Total Number of Shares Repurchased | Average Price paid Per Share | Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs | Maximum Number of Shares That May Be Purchased Under The Plans or Programs | |||||||||||||
November 1 – November 30 | — | — | — | 390,000 | ||||||||||||
December 1 - December 31 | — | — | — | 390,000 | ||||||||||||
January 1 - January 31 | 1,899 | (a) | 19.55 | (a) | — | 390,000 | ||||||||||
Total Number of Shares Repurchased | Average Price paid Per Share ($) | Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs | Maximum Number of Shares That May Be Purchased Under the Plans or Programs | |||||||||||||
November 1 – November 30 | — | — | — | — | ||||||||||||
December 1 – December 31 | — | — | — | — | ||||||||||||
January 1 – January 31 | 1,870 | (a) | 10.53 | (a) | — | — | ||||||||||
$ 116,033 $ 133,446 $ 136,657 $ 113,401 $ 98,448 41,360 48,758 53,999 44,002 39,489 2,433 2,433 8,720 5,412 6,281 2,179 1,370 7,308 5,157 6,605 $ 1,284 $ 1,759 $ 5,730 $ 3,286 $ 4,228 $ 0.18 $ 0.25 $ 0.83 $ 0.48 $ 0.57 $ 0.18 $ 0.24 $ 0.81 $ 0.47 $ 0.56 $ 0.07 $ 0.28 $ 0.28 $ 0.28 $ 0.28 $ 11,439 $ 4,249 $ 7,534 $ 11,688 $ 24,821 60,721 60,151 62,608 62,948 61,423 115,473 116,664 118,983 122,313 83,665 — 6,500 1,500 — — 20,968 26,767 24,665 25,912 11,985 12,576 13,034 18,242 23,372 — $ 74,683 $ 71,375 $ 69,775 $ 63,647 $ 70,537 AstroNova isThe Company organizes itsWe organize our structure around a core set of competencies, including research and development, manufacturing, service, marketing and distribution. It marketsWe market and sells itssell our products and services through the following two segments:(PI)(“PI”) – offers color and monochromatic digital label printers, over-printers and custom OEM printers. PI also provides software to design, manage and print labeling software, spare parts, service contracts and packaging images locally and across networked printing systems, as well as all related printing supplies such as pressure sensitive labels, tags, inks, toners and thermal transfer ribbons used in those product identificationby digital printers. PI also providesProduct Group (T&M)(“T&M”) – offers a suite of products and services that acquire data from local and networked data streams and sensors as well as wired and wireless networks. The recorded data is processed and analyzed and then stored and presented in various visual output formats. The T&M segment also includes a line of aerospace printers that are used to print hard copies of data required for the safe and efficient operation of aircraft, including navigation maps, clearances, arrival and departure procedures, flight itineraries, weather maps, performance data, passenger data, and various air traffic control data. Aerospace products also include Ethernet switches which are used in military aircraft networking systems for high-speed onboard data transfer. T&M also provides repairs, service and military vehicles to connect multiple computers or Ethernet devices.spare parts.The Company markets
On September 28, 2017, AstroNova
On February 1, 2017, AstroNova completed its acquisition of TrojanLabel ApS (TrojanLabel), a European manufacturer of digital color label presses and specialty printing systemscondition for the commercial label printing and packaging markets. TrojanLabel is reported as partnear term.
revenue has adversely impacted our profitability.
2020
| ($ in thousands) | 2019 | 2018 | ||||||||||||||||||
| Revenue | As a % of Total Revenue | % Change Over Prior Year | Revenue | As a % of Total Revenue | ||||||||||||||||
Product Identification | $ | 86,786 | 63.5 | % | 6.2 | % | �� | $ | 81,681 | 72.0 | % | |||||||||
T&M | 49,871 | 36.5 | % | 57.2 | % | 31,720 | 28.0 | % | ||||||||||||
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Total | $ | 136,657 | 100.0 | % | 20.5 | % | $ | 113,401 | 100.0 | % | ||||||||||
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| ($ in thousands) | 2021 | 2020 | ||||||||||||||||||
Revenue | As a % of Total Revenue | % Change Over Prior Year | Revenue | As a % of Total Revenue | ||||||||||||||||
Product Identification | $ | 90,268 | 77.8 | % | 2.4 | % | $ | 88,116 | 66.0 | % | ||||||||||
T&M | 25,765 | 22.2 | % | (43.2 | )% | 45,330 | 34.0 | % | ||||||||||||
Total | $ | 116,033 | 100.0 | % | (13.0 | )% | $ | 133,446 | 100.0 | % | ||||||||||
Hardware revenue in fiscal 20192021 was $53.2$34.1 million, a $15.7$14.8 million, or 41.9%30.3%, increasedecrease compared to prior yearfiscal 2020 hardware revenue of $37.5$49.0 million. The largest contributioncurrent year decrease in hardware revenue is primarily due to this increase wasthe decline in revenue in the T&M segment whereresulting from lower aerospace printer product lines sales as a result of the full yeareffects of the Boeing 737 MAX grounding and the impact of the Honeywell acquisition (which was completed on September 28, 2017) caused sharp decline in air travel due to
group.
T&M segment.
The Company achieveddeclines in commercial aircraft flight hours.
reductions on our manufacturing and period costs.
2021 we recognized a $1.6$0.9 million income tax expense, and had anor a 41.1% effective tax rate of 21.6% compared to an income tax expensebenefit of $1.8$0.4 million, or a 36.2%28.4% negative effective tax rate for fiscal 2020. The increase in the effective tax rate in fiscal 2018.
Fiscal 2018 compared to Fiscal 2017
The following table presents the revenue of each of the Company’s segments, as well as the percentage of total revenue and change2021 from prior year.
| ($ in thousands) | 2018 | 2017 | ||||||||||||||||||
| Revenue | As a % of Total Revenue | % Change Over Prior Year | Revenue | As a % of Total Revenue | ||||||||||||||||
Product Identification | $ | 81,681 | 72.0 | % | 16.9 | % | $ | 69,862 | 71.0 | % | ||||||||||
T&M | 31,720 | 28.0 | % | 11.0 | % | 28,586 | 29.0 | % | ||||||||||||
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Total | $ | 113,401 | 100.0 | % | 15.2 | % | $ | 98,448 | 100.0 | % | ||||||||||
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Net revenue in fiscal 2018 was $113.4 million, a 15.2% increase compared to the prior year revenue of $98.4 million. Revenue through domestic channels of $69.8 million was consistent with prior year domestic revenue of $69.8 million. International revenue of $43.6 million increased 52.4% over the prior year international revenue of $28.6 million primarily due to the impact on revenue from the Honeywell and TrojanLabel acquisitions. The international revenue for fiscal 2018 includes a favorable foreign exchange rate impact of $0.6 million.
Hardware revenue in fiscal 2018 was $37.5 million, a 10.9% increase compared to the prior year’s revenue of $33.8 million. Hardware revenue in the Product Identification segment increased 23.5% in fiscal 2018 compared to the prior year due to the integration of TrojanLabel, but was tempered by lower OEM bar code printer sales. Hardware revenue in the T&M segment increased 4.6% in fiscal 2018 primarily due to the Honeywell acquisition and the introduction of theEV-5000 data recorder. These revenue increases were partially offset by lower sales from the Aerospace ToughWriter 4 product line.
Revenue from supplies in fiscal 2018 was $65.3 million, representing a 16.2% increase compared to the prior year revenue of $56.2 million. This increase2020 is primarily attributable to double-digit growth from Product Identification inkjet printer inks and labels. Also contributing to the revenue increase in fiscal 2018 was the impact of Honeywell and TrojanLabel paper and ink sales.
Service and other revenue in fiscal 2018 was $10.6 million, a 26.2% increase compared to the prior year revenue of $8.4 million. Product Identification and Test & Measurement segments both generated double-digit growth in service and other revenue as a result of the TrojanLabel and Honeywell acquisitions.
The Company achieved gross profit of $44.0 million for fiscal 2018, reflecting an 11.4% improvement compared to the prior year’s gross profit of $39.5 million. The Company’s gross profit margin of 38.8% in fiscal 2018 reflects a decrease from the prior year’s gross profit margin of 40.1%. The higher gross profit for fiscal 2018 compared to the prior year is primarily attributable to increased revenue; fiscal 2018’s decrease in gross margin was due to product mix and higher manufacturing and period costs.
Operating expenses for fiscal 2018 were $38.6 million, representing a 16.2% increase from the prior year’s operating expenses of $33.2 million. Specifically, selling and marketing expenses of $22.2 million in fiscal 2018 increased 17.3% from the prior year’s amount of $19.0 million. The increase in selling and marketing expenses primarily relates to increases in wages and amortization related to the TrojanLabel and Honeywell acquisitions. Selling and marketing expenses represent 19.6% and 19.3% of net revenue for fiscal 2018 and 2017, respectively. Fiscal 2018 G&A expenses increased by 12.1% from the prior year to $8.9 million primarily as a result of an increase in share-based compensation expenses, as well as outside and professional service costs, includingnon-recurring costs related to expenses incurred pursuant to a transition service agreement we entered into with Honeywell. The increase in G&A was offset by income of $1.4 million due to the change in mix of income between relevant jurisdictions in which we are subject to income taxes. Specific items increasing the fair
value of the Company’s contingent earn out liability related to the TrojanLabel acquisition. R&D costs in fiscal 2018 of $7.5 million increased 18.0% from $6.3 million in fiscal 2017, primarily due to the increase related to the absorption of the TrojanLabel R&D team, as well as an increase in wages.2021 effective tax rate include foreign rate differential, Denmark statutory audit adjustments, stock-based compensation, and Canada withholding taxes. This increase was slightly temperedoffset by the foreign derived intangible income deduction, the release of a decreasevaluation allowance in outside service costsChina, and prototype expenses. The R&D spending level for fiscal 2018 represents 6.6% of net revenue, an increasetax credits expected to be utilized.
Other expense in fiscal 2018 was $0.3 million compared to other income of $0.3 million in fiscal 2017. Other expense for fiscal 2018 includes interest expense on debt of $0.4 million and foreign exchange loss of $0.2 million, offset by investment income of $0.2 and income related toFiscal 2019
Net income for fiscal 2018 was $3.3 million, or $0.47 per diluted share, a decrease from $4.2 million, or $0.56 per diluted share in fiscal 2017. The results for fiscal 2018 were impacted by income of $1.4 million ($1.1 million net of tax or $0.16 per diluted share) related to change in the fair value of the Company’s contingent earn out liability and $1.1 million, or $0.16 per diluted share, in taxes as a result of the enactment of the Tax Act. The $1.1 million increase in tax provision includes $1.0 million related to revaluationcomparison of our deferred tax assets atresults of operations for the new lower corporate tax ratefiscal years ended January 31, 2020 and $0.1 million related to the transition tax on theun-repatriated earningsJanuary 31, 2019, see “Part II, Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations” of our foreign subsidiaries also included in the Tax Act. During fiscal 2017 the Company recognized a $2.4 million income tax expense and had an effective tax rate of 36.0%. Fiscal 2017 income tax expense included a $0.2 million tax expense related tonon-deductible transaction costs annual report on FormTrojanLabel acquisition and a $0.2 million tax expense related tofiscal year ended January 31, 2020, filed with the increase for unrecognized tax benefits.
SEC on April 10, 2020.
The following table summarizes selected financial information by segment.
| ($ in thousands) | Revenue | Segment Operating Profit | Segment Operating Profit as a % of Revenue | |||||||||||||||||||||||||||||||||
| 2019 | 2018 | 2017 | 2019 | 2018 | 2017 | 2019 | 2018 | 2017 | ||||||||||||||||||||||||||||
Product Identification | $ | 86,786 | $ | 81,681 | $ | 69,862 | $ | 7,910 | $ | 10,561 | $ | 9,821 | 9.1 | % | 12.9 | % | 14.1 | % | ||||||||||||||||||
T&M | 49,871 | 31,720 | 28,586 | 11,933 | 3,754 | 4,399 | 23.9 | % | 11.8 | % | 15.4 | % | ||||||||||||||||||||||||
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Total | $ | 136,657 | $ | 113,401 | $ | 98,448 | 19,843 | 14,315 | 14,220 | 14.5 | % | 12.6 | % | 14.4 | % | |||||||||||||||||||||
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Corporate Expenses | 11,123 | 8,903 | 7,939 | |||||||||||||||||||||||||||||||||
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Operating Income | 8,720 | 5,412 | 6,281 | |||||||||||||||||||||||||||||||||
Other Income (Expense), Net | (1,412 | ) | (255 | ) | 324 | |||||||||||||||||||||||||||||||
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Income Before Income Taxes | 7,308 | 5,157 | 6,605 | |||||||||||||||||||||||||||||||||
Income Tax Provision | 1,578 | 1,871 | 2,377 | |||||||||||||||||||||||||||||||||
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Net Income | $ | 5,730 | $ | 3,286 | $ | 4,228 | ||||||||||||||||||||||||||||||
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| ($ in thousands) | Revenue | Segment Operating Profit (Loss) | Segment Operating Profit (Loss) as a % of Revenue | |||||||||||||||||||||||||||||||||
2021 | 2020 | 2019 | 2021 | 2020 | 2019 | 2021 | 2020 | 2019 | ||||||||||||||||||||||||||||
PI | $ | 90,268 | $ | 88,116 | $ | 86,786 | $ | 12,885 | $ | 7,509 | $ | 7,910 | 14.3 | % | 8.5 | % | 9.1 | % | ||||||||||||||||||
T&M | 25,765 | 45,330 | 49,871 | (1,032 | ) | 6,281 | 11,933 | (4.0 | )% | 13.9 | % | 23.9 | % | |||||||||||||||||||||||
Total | $ | 116,033 | $ | 133,446 | $ | 136,657 | 11,853 | 13,790 | 19,843 | (10.2 | )% | 10.3 | % | 14.5 | % | |||||||||||||||||||||
Corporate Expenses | 9,420 | 11,357 | 11,123 | |||||||||||||||||||||||||||||||||
Operating Income | 2,433 | 2,433 | 8,720 | |||||||||||||||||||||||||||||||||
Other Expense, Net | (254 | ) | (1,063 | ) | (1,412 | ) | ||||||||||||||||||||||||||||||
Income Before Income Taxes | 2,179 | 1,370 | 7,308 | |||||||||||||||||||||||||||||||||
Income Tax Provision (Benefit) | 895 | (389 | ) | 1,578 | ||||||||||||||||||||||||||||||||
Net Income | $ | 1,284 | $ | 1,759 | $ | 5,730 | ||||||||||||||||||||||||||||||
Revenue from the Product Identification segment increased 16.9% in fiscal 2018 with revenue of $81.7 million compared to revenue of $69.9 million in the prior year. Both the hardware and supplies product lines saw strong growth in fiscal 2018, with increases of 23.5% and 15.2%, respectively, as compared to the prior year. The increase in hardware revenue for fiscal 2018 was primarily due to the contribution from the TrojanLabel line of presses. The supplies revenue increase in fiscal 2018 was a result of supplies revenue from the newly acquired TrojanLabel business and continued strong demand for digital color printer ink as well as label and tag products supplies. Fiscal 2018 Product Identification segment operating profit was $10.6 million, reflecting a profit margin of 12.9%14.3%, compared to the prior year segment operating profit of $9.8$7.5 million and related profit margin of 14.1%8.5%. The decreaseincrease in Product Identificationcurrent year segment operating profit and margin in fiscal 2018 wasis primarily due to unfavorable product mixincreased revenue and increasedlower operating and period costs.
Revenue from the T&M product group was $31.7 million for fiscal 2018, an 11.0% increase compared to revenue of $28.6 million in the prior year. Both the hardware and supplies product lines saw sustained growth in fiscal 2018, with the overall increase primarily attributable to the contribution of revenue from the entry into the arrangement with Honeywell in September 2017. T&M’s segment operating profit for fiscal 2018 was $3.8 million which resulted in an 11.8% profit margin compared to the prior year’s segment operating profit of $4.4 million and related operating margin of 15.4%. The lower segment operating profit and related margin in fiscal 2018 were due to product mix and higher operating costs.
current year revenue.
Generally,
During fiscal 2019, we converted our securities available for sale to cash. Inus through the second quarter of fiscal 2019,2021 despite our efforts to reduce expenses as rapidly as possible and preserve liquidity. As a result of the availability of the PPP loan during our fiscal second quarter of 2021discussed below, we drew $3.0 millionwere able, despite a pending default on our revolving credit facility, to secure an amendment at the end of which $1.5 million was repaidthe second quarter of fiscal 2021 that provided additional liquidity. Those two sources of capital allowed us the time necessary to retain employment levels and $1.5 million remains outstandingfocus on continuing efforts to reduce costs, and as of January 31, 2019. Our cashthose cost reductions took hold, to improve operating profit and cash equivalents at January 31, 2019,flow. Based on improved conditions in the credit market and in recognition of the substantial cost and working capital reductions we accomplished, we were $7.5able to reduce our debt, and, subsequent to the end of fiscal year 2021, renegotiate the amendment to the credit agreement we had signed in the second quarter of fiscal 2021, which, together with our improved performance, restored us to a solid liquidity position.
Indebtedness
Onobtaining the PPP Loan and suspending the payment of dividends on our common stock were instrumental in our ability to successfully negotiate the A&R Credit Agreement, as defined below.
On November 30, 2017, the Parties entered into the Second Amendment to the Credit Agreement which, in addition to the revolving credit facility and the term loan previously borrowed by ANI ApS under the original Credit Agreement, provided for a term loan to the Company in the principal amount of $15.0 million. Upon the closing of the Second Amendment, the Company used the proceeds from the $15.0 million term loan to repay the entire $14.6 million principal balance of the revolving loan outstanding under the revolving credit facility as of October 28, 2017, with the remaining proceeds retained by the Company to be usedus for general corporate purposes. The principal amount of the revolving credit facility under the Credit Agreement, which had been temporarily increased to $15.0 million pursuant to the First Amendment, was reduced to $10.0 million effective upon the closing of the Second Amendment, and the revolving credit facility termination and maturity date was extended from January 31, 2022 to November 22, 2022.
On April 17, 2018, the Parties entered into a Third Amendment to the Credit Agreement with the Lender. The Third Amendment provides that no “Immaterial Subsidiary” will be required to become a guarantor or securing party under (unless requested by the Lender during default) or have its equity pledged pursuant to the Credit Agreement. The Third Amendment defines “Immaterial Subsidiary” as any subsidiary of the Company with (a) consolidated total assets that do not exceed 5.0% of the consolidated total assets of the Company and its subsidiaries as a whole and (b) revenues that do not exceed 5.0% of the consolidated revenues of the Company and its subsidiaries as a whole, as of the last day of the most recent fiscal quarter. Immaterial Subsidiaries may not account for, in the aggregate, more than 10% the of consolidated total assets or consolidated revenues of the Company and its subsidiaries.
Revolving credit loans may be borrowed, at the Company’sour option, in U.S. Dollars or, subject to certain conditions, Euros, British Pounds, Canadian Dollars or Danish Krone. Amounts borrowedKroner.
Both term loans bear interest at a rate per annum equal to the LIBOR rate plus a margin that varies within a range of 1.0% to 1.5%0.15% and 0.30% based on the Company’sour consolidated leverage ratio. In connection
In connection with the Credit Agreement, AstroNova and ANI ApS entered into certain hedging arrangements with the Lender to manage the variable interest rate risk and currency risk associated with its payments in respect of the term loans.
The obligations of ANI ApS in respect of the $9.2 million term loan are guaranteedwere eliminated by the CompanyAmendment. The primary
exceptions and thresholds as set forth in the Amended Credit Agreement, certain of which provisions were modified by the Amendment.
The Parties must comply with various customary financial andnon-financialdefault, which include, among other events, the following (which are subject, in some cases, to certain grace periods): failure to pay when due any principal, interest or other amounts in respect of the loans, breach of any of our covenants or representations under the loan documents, default under any other of our or our subsidiaries’ significant indebtedness agreements, a bankruptcy, insolvency or similar event with respect to us or any of our subsidiaries, a significant unsatisfied judgment against us or any of our subsidiaries, or a change of control.
AsAgreement continue to be secured by substantially all of our personal property assets (including a pledge of the equity interests held by us in ANI ApS, in our wholly-owned German subsidiary AstroNova GmbH, and in our wholly-owned French subsidiary AstroNova SAS), subject to certain exceptions, and by a mortgage on our owned real property in West Warwick, Rhode Island. Pursuant to the Amendment, the guarantees of our obligations under the A&R Credit Agreement that were previously provided by ANI ApS and TrojanLabel were released.
CARES Act, the PPP Flexibility Act and the regulations and guidance provided by the SBA with respect to the PPP, a portion of the PPP Loan may be forgiven in an amount up to the amount of the PPP Loan proceeds we spent on payroll, rent, utilities and interest on certain debt during the twenty-four week period following incurrence of the PPP Loan; interest accrued on the forgiven portion of the principal amount of the PPP Loan is also forgiven. The amount of the PPP Loan to be forgiven in respect of rent, utilities and interest on certain debt will be capped at 40% of the forgiven amount, with the remaining forgiven amount allocated to payroll costs. We fully utilized the PPP Loan proceeds for qualifying expenses and have applied for forgiveness of the PPP Loan (including all associated accrued interest) subsequent to year end. Whether our application for forgiveness will be granted and in what amount is subject to an application to, and approval by, the SBA and may also be subject to further requirements in any regulations and guidelines the SBA may adopt.
Net cash provided by operating activities was $3.7 million in fiscal 2018 compared to net cash provided by operating activities of $7.0 million in fiscal 2017. Theperiod decrease in net cash from operations for fiscal 2018 was primarilyinventory is due to lower production demand, particularly in the decrease in net incomeTest & Measurement segment and the increase in working capital accounts, particularly inventory and accounts receivables. Excluding the impact of the TrojanLabel acquisition, inventory increased $6.8 million
to $27.6 million in fiscal 2018 compared to $19.5 million in fiscal 2017, and accounts receivable increased $5.9 million to $22.4 million in fiscal 2018 from $15.7 million in fiscal 2017. The increase in inventory for fiscal 2018 was due to increased purchasing volume and decreased inventory turns, as inventoryrelated days on hand increased to 124 days at fiscal year end 2018 from 114 days at the prior year end. The increase in accounts receivable for fiscal 2018 was due to increased revenuedecline is a reflection of improved procurement strategies and an increase in the accounts receivable collection cycle to 55 days at January 31, 2018 compared to 49 days at the prior year end.
Net cash provided by operating activities was $7.0 million in fiscal 2017 compared to net cash provided by operating activities of $7.7 million in fiscal 2016. The decrease in net cash from operations for fiscal 2017 is primarily due to increased net income and increased cash used for working capital. The combination of changes in accounts receivable, inventory, and accounts payable and accrued expenses decreased cash by $3.6 million in fiscal 2017, compared to a decrease of $0.5 million in fiscal 2016. The year-over-year decline was due to increased inventory and purchasing volume in fiscal 2017. The accounts receivable collection cycle decreased to 49 days of revenue at January 31, 2017 compared to 50 days of revenue at the prior year end. Inventory days on hand increased to 114 days at the end of the 2017 fiscal year from 92 days at the prior year end.
production scheduling.
Net cash used by investing activities for fiscal 2018 was $20.8 million, which included $23.9 million of cash paid for the TrojanLabel acquisition and the Honeywell asset purchase and licenses agreement, partially offset by $5.5 million of proceeds from sales and maturities of securities available for sale. Cash used for investing activities for fiscal 2018 included capital expenditures of $2.2 million, consisting of $0.7 million for land and building improvements; $0.7 million for information technology; $0.5 million for machinery and equipment; $0.2 million for tools and dies; and $0.1 million for furniture, fixtures and other capital expenditures.
Net cash provided by investing activities for fiscal 2017 was $3.1 million, which included $4.0 million of proceeds from maturities of securities available for sale and proceeds of $0.5 million related to the sale of the UK property. Cash used for investing activities for fiscal 2017 included capital expenditures of $1.2 million, consisting of $0.4 million for land and building improvements; $0.3 million for information technology; $0.3 million for machinery and equipment; $0.1 million for tools and dies; and $0.1 million for furniture, fixtures and other capital expenditures.
dies.
Purchase Commitments (1) Debt Interest on Debt (2) Royalty Obligation (3) Excess Royalty Obligation (4) Operating Lease Obligations 2019, the Company’s2021, our contractual obligations with initial remaining terms in excess of one year were as follows:(In thousands) Total Less than
1 Year 1-3
Years 3-5
Years More than
5 Years $ 30,617 $ 30,146 $ 471 $ — $ — 18,242 5,208 10,784 2,250 — 1,517 585 709 223 — 11,791 1,779 3,651 3,152 3,209 1,265 1,265 — — — 2,616 574 907 567 568 $ 64,783 $ 38,292 $ 16,522 $ 6,192 $ 3,777 (In thousands)
1 Year
Years
Years
5 Years $ 15,250 $ 14,959 $ 291 $ — $ — 12,576 5,326 7,250 — — 648 496 152 — — 8,161 1,300 3,652 1,959 1,250 177 177 — — — 1,599 372 610 347 270 $ 38,411 $ 22,630 $ 11,955 $ 2,306 $ 1,520 (1) (2) (3) provided at the effective fixed rate paid by the Company per the hedging arrangements plus the maximum additional margin payable based on the Company’sLIBOR Rate, plus a margin that varies within a range of 2.15% to 3.65% based on our consolidated leverage ratio for the outstanding loan under the A&R Credit Agreement as of 1.5%.January 31, 2021.(3)(4)The Company istenseven years pursuant to the Honeywell Asset Purchase and License Agreement. Refer to Note 3, “Acquisitions,”11, “Royalty Obligation” in the audited consolidated financial statements included elsewhere in this report for further details.(4)(5)The Company is3, “Acquisitions,11, “Royalty Obligation,” in the audited consolidated financial statements included elsewhere in this report for further details.The Company isaffecteffect on our consolidated financial position or results of operations. It is possible, however, that results of operations for any particular future period could be materially affected by changes in our assumptions or strategies related to these contingencies or changes out of the Company’sour control.the Company’sour consolidated financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States. Certain of our accounting policies require the application of judgment in selecting the appropriate assumptions for calculating financial estimates. By their nature, these judgments are subject to an inherent degree of uncertainty. We periodically evaluate the judgments and estimates used for our critical accounting policies to ensure that such judgments and estimates are reasonable for our interim andthe Company’sour historical experience, current trends and information available from other sources, as appropriate. If differentactual conditions resultdiffer from thosethe assumptions used in our judgments, theour financial results could be materially different from our estimates. We believe the following critical accounting policies require significant judgments and estimates in the preparation of our consolidated financial statements:
Effective February 1, 2018, we adopted We recognize revenue in accordance with Accounting Standards Update and the related amendments (also referred to as Topic 606) using the modified retrospective method. Topic 606 was applied to all contracts within the scope of Topic 606 as of the February 1, 2018 adoption date.. Under ASC Topic 606, based on the nature of our contracts and consistent with prior practice, we recognize the large majoritymost of our revenue upon shipment, which is when the performance obligation has been satisfied. Accordingly, the adoption of this standard did not have a material impact on our revenue recognition and there was no cumulative effective adjustment as of February 1, 2018 as a result of the adoption of ASC Topic 606.
Warranty Claims
we revise our estimated warranty liability accordingly.
2019, the Company has2021, we had provided valuation allowances for future state tax benefits resulting from certain domestic R&D tax credits and foreign tax credit carryforwards, both of which could expire unused.
accordance with the terms of the CARES Act, as amended by the PPP Flexibility Act. Consistent with the legislation, we expect to deduct the full $4.4 million of qualified expenses on our 2020 federal tax return.
assumptions and estimates including future revenue, expenses, capital expenditures, and working capital, as well as discount factors and income tax rates. If the fair value of the reporting unit exceeds the carrying value of the net assets including goodwill assigned to that unit, goodwill is not impaired. If the carrying value of the reporting unit’s net assets including goodwill exceeds the fair value of the reporting unit, then we record an impairment charge based on that difference.
We have exposure to
rates that fluctuate with the market on our variable rate credit borrowings under our existing credit agreement.
2021.
20192021 to ensure that the information required to be disclosed in our Exchange Act reports is (1) recorded, processed, summarized and reported in a timely manner and (2) accumulated and communicated to our management, including our Chief Executive Officer and our Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure.The Company’sThe Company’sOur internal control over financial reporting is designed to provide reasonable assurance regarding the reliability of its financial reporting and the preparation of published financial statements in accordance with generally accepted accounting principles.2019.2021. In making this assessment, management used the criteria set forth in the Internal Control-Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”). Based on this assessment, the principal executive officer and principal financial officer believe that as of January 31, 2019, the Company’s2021, our internal control over financial reporting was effective based on criteria set forth by COSO in “Internal Control-Integrated Framework.”The attestation report of the Company’s registered public accounting firm regarding internal control over financial reporting appears in Part IV, Item 15 of this Form10-K and is incorporated herein by reference.
| Age |
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Gregory A. Woods |
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| 62 | President, Chief Executive Officer and Director | ||||
David S. Smith | 64 | Vice President, Chief Financial Officer and Treasurer | ||||
Stephen M. | Vice President— | |||||
Michael J. Natalizia | Chief Technology Officer and Vice | |||||
Tom Carll | Vice President and | |||||
Mr. Morawetz was appointed Vice President—EMEA in 2006. He was previously the General Manager of Branch Operations for the Company’s German subsidiary, having joined the Company in 1989.
The Company has
Plan Category | Number of Securities to be Issued Upon Exercise of Outstanding Options, Warrants and Rights | Weighted- Average Exercise Price of Outstanding Options, Warrants and Rights | Number of Securities Remaining Available for Future Issuance Under Equity Compensation Plans | |||||||||
Equity Compensation Plans Approved by Shareholders | 901,664 | (1) | $ | 14.30 | (2) | 290,593 | (3) | |||||
Equity Compensation Plans Not Approved by Shareholders | — | — | — | |||||||||
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Total | 901,664 | (1) | $ | 14.30 | (2) | 290,593 | (3) | |||||
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Plan Category | Number of Securities to be Issued Upon Exercise of Outstanding Options, Warrants and Rights | Weighted- Average Exercise Price of Outstanding Options, Warrants and Rights | Number of Securities Remaining Available for Future Issuance Under Equity Compensation Plans | |||||||||
Equity Compensation Plans Approved by Shareholders | 771,496 | (1) | $ | 14.63 | (2) | 538,853 | (3) | |||||
Equity Compensation Plans Not Approved by Shareholders | — | — | — | |||||||||
Total | 771,496 | (1) | $ | 14.63 | (2) | 538,853 | (3) | |||||
| (1) | Includes |
| (2) | Does not include restricted stock units. |
| (3) | Represents |
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| (32.1) | Certification of Chief Executive Officer Pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. | |
| (32.2) | Certification of Chief Financial Officer Pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. | |
| | ||
| (101.SCH) | Inline XBRL Taxonomy Extension Schema Document | |
| (101.CAL) | Inline XBRL Taxonomy Extension Calculation Linkbase Document | |
| (101.DEF) | Inline XBRL Taxonomy Extension Definition Linkbase Document | |
| (101.LAB) | Inline XBRL Taxonomy Extension Label Linkbase Document | |
| (101.PRE) | Inline XBRL Taxonomy Extension Presentation Linkbase Document | |
| (104) | Cover Page Interactive Data File (embedded within the | |
| * |
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| ** | Management contract or compensatory plan or arrangement. |
ASTRONOVA, INC. (Registrant) | ||||||
| Date: April | By: |
| ||||
| (Gregory A. Woods, Chief Executive Officer) | ||||||
S/s/ GREGORY A. WOODS April 10, 201913, 2021S/s/ DAVID S. SMITH April 10, 201913, 2021S/s/ JEAN A. BUA April 10, 201913, 2021S/s/ MITCHELL I. QUAIN April 10, 201913, 2021S/s/ YVONNE E. SCHLAEPPI April 10, 201913, 2021S/s/ HAROLD SCHOFIELD April 10, 201913, 2021S/s/ RICHARD S. WARZALA April 10, 201913, 2021
In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of the Company as of January 31, 20192021 and 2018,2020, and the results of its operations and its cash flows for each of the years in the three-year period ended January 31, 20192021 in conformity with accounting principles generally accepted in the United States of America. Also in our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of January 31, 2019, based on criteria established in Internal Control—Integrated Framework (2013) issued by the COSO.
The Company’s management is responsible for these
but not for the purpose of expressing an opinion on the effectiveness of internal control over financial reporting. Accordingly, we express no such opinion.
Definition and Limitationsopinion.
A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in
accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertainwere communicated or required to be communicated to the maintenance of recordsaudit committee and that: (1) relate to accounts or disclosures that in reasonable detail, accurately and fairly reflectare material to the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements and (2) involved our especially challenging, subjective or complex judgments. The communication of critical audit matters does not alter in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effectany way our opinion on the financial statements.
Becausestatements, taken as a whole, and we are not, by communicating the critical audit matters below, providing separate opinions on the critical audit matters or on the accounts or disclosures to which they relate.
included, among others (i) evaluating the qualifications of the third-party expert engaged by management; (ii) testing management’s, and the third-party expert’s, process for developing the fair value estimates, including consideration of the appropriateness of the methods used; (iii) testing the completeness and accuracy of underlying data used in the fair value estimates; and (iv) evaluating the significant assumptions used in developing financial projections. In evaluating management’s assumptions used in the development of financial projections we considered (i) the current and past performance of the reporting units; (ii) whether these assumptions were consistent with evidence obtained in other areas of the audit and (iii) the sensitivity to change of the assumptions used.
CURRENT ASSETS Cash and Cash Equivalents Securities Available for Sale Accounts Receivable, net of reserves of $521 in 2019 and $377 in 2018 Inventories Prepaid Expenses and Other Current Assets Total Current Assets Property, Plant and Equipment, net Identifiable Intangibles, net Goodwill Deferred Tax Assets, net Other TOTAL ASSETS CURRENT LIABILITIES Accounts Payable Accrued Compensation Other Accrued Expenses Current Portion of Long-Term Debt Current Liability —Royalty Obligation Revolving Credit Facility Current Liability —Excess Royalty Payment Due Income Taxes Payable Deferred Revenue Total Current Liabilities NON CURRENT LIABILITIES Long-Term Debt, net of current portion Royalty Obligation, net of current portion Deferred Tax Liabilities Other Long Term Liabilities TOTAL LIABILITIES Commitments and Contingencies (See Note 20) SHAREHOLDERS’ EQUITY Preferred Stock, $10 Par Value, Authorized 100,000 shares, None Issued Common Stock, $0.05 Par Value, Authorized 13,000,000 shares; Issued 10,218,559 shares in 2019 and 9,996,120 shares in 2018 AdditionalPaid-in Capital Retained Earnings Treasury Stock, at Cost, 3,261,672 shares in 2019 and 3,227,942 shares in 2018 Accumulated Other Comprehensive Loss, Net of Tax TOTAL SHAREHOLDERS’ EQUITY TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY 2019 2018 ASSETS $ 7,534 $ 10,177 — 1,511 23,486 22,400 30,161 27,609 1,427 1,251 62,608 62,948 10,380 9,752 29,674 33,633 12,329 13,004 2,928 1,829 1,064 1,147 $ 118,983 $ 122,313 LIABILITIES AND SHAREHOLDERS’ EQUITY $ 5,956 $ 11,808 5,023 2,901 2,911 2,414 5,208 5,498 1,875 1,625 1,500 — 1,265 615 554 684 373 367 24,665 25,912 12,870 17,648 9,916 11,760 40 698 1,717 2,648 49,208 58,666 — — 511 500 53,568 50,016 49,511 45,700 (32,997 ) (32,397 ) (818 ) (172 ) 69,775 63,647 $ 118,983 $ 122,313 $ 11,439 $ 4,249 17,415 19,784 30,060 33,925 1,807 2,193 60,721 60,151 12,011 11,268 21,502 25,383 12,806 12,034 5,941 5,079 1,389 1,661 1,103 1,088 $ 115,473 $ 116,664 $ 5,734 $ 4,409 2,852 2,700 3,939 4,711 — 6,500 5,326 5,208 2,000 2,000 177 773 655 — 285 466 20,968 26,767 7,109 7,715 6,161 8,012 4,422 — 1,065 1,279 681 1,081 384 435 40,790 45,289 0 0 0— 0— 521 517 58,049 56,130 50,085 49,298 (33,588 ) (33,477 ) (384 ) (1,093 ) 74,683 71,375 $ 115,473 $ 116,664
| 2019 | 2018 | 2017 | ||||||||||
Revenue | $ | 136,657 | $ | 113,401 | $ | 98,448 | ||||||
Cost of Revenue | 82,658 | 69,399 | 58,959 | |||||||||
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Gross Profit | 53,999 | 44,002 | 39,489 | |||||||||
Costs and Expenses: | ||||||||||||
Selling and Marketing | 26,343 | 22,234 | 18,955 | |||||||||
Research and Development | 7,813 | 7,453 | 6,314 | |||||||||
General and Administrative | 11,123 | 8,903 | 7,939 | |||||||||
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Operating Expenses | 45,279 | 38,590 | 33,208 | |||||||||
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Operating Income | 8,720 | 5,412 | 6,281 | |||||||||
Other Income (Expense): | ||||||||||||
Interest Expense | (876 | ) | (402 | ) | — | |||||||
Investment Income | 145 | 168 | 78 | |||||||||
Other, Net | (681 | ) | (21 | ) | 246 | |||||||
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| (1,412 | ) | (255 | ) | 324 | ||||||||
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Income before Income Taxes | 7,308 | 5,157 | 6,605 | |||||||||
Income Tax Provision | 1,578 | 1,871 | 2,377 | |||||||||
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Net Income | $ | 5,730 | $ | 3,286 | $ | 4,228 | ||||||
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Net Income Per Common Share—Basic | $ | 0.83 | $ | 0.48 | $ | 0.57 | ||||||
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Net Income Per Common Share—Diluted | $ | 0.81 | $ | 0.47 | $ | 0.56 | ||||||
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Weighted Average Number of Common Shares Outstanding—Basic | 6,881 | 6,911 | 7,421 | |||||||||
Dilutive Effect of Common Stock Equivalents | 203 | 104 | 151 | |||||||||
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Weighted Average Number of Common Shares Outstanding—Diluted | 7,084 | 7,015 | 7,572 | |||||||||
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2021 | 2020 | 2019 | ||||||||||
Revenue | $ | 116,033 | $ | 133,446 | $ | 136,657 | ||||||
Cost of Revenue | 74,673 | 84,688 | 82,658 | |||||||||
Gross Profit | 41,360 | 48,758 | 53,999 | |||||||||
Costs and Expenses: | ||||||||||||
Selling and Marketing | 23,301 | 26,884 | 26,343 | |||||||||
Research and Development | 6,206 | 8,084 | 7,813 | |||||||||
General and Administrative | 9,420 | 11,357 | 11,123 | |||||||||
Operating Expenses | 38,927 | 46,325 | 45,279 | |||||||||
Operating Income | 2,433 | 2,433 | 8,720 | |||||||||
Other Expense: | ||||||||||||
Interest Income (Expense), net | (955 | ) | (682 | ) | (731 | ) | ||||||
Gain (Loss) on Foreign Currency Transactions | 590 | (448 | ) | (745 | ) | |||||||
Other, net | 111 | 67 | 64 | |||||||||
| (254 | ) | (1,063 | ) | (1,412 | ) | |||||||
Income before Income Taxes | 2,179 | 1,370 | 7,308 | |||||||||
Income Tax Provision (Benefit) | 895 | (389 | ) | 1,578 | ||||||||
Net Income | $ | 1,284 | $ | 1,759 | $ | 5,730 | ||||||
Net Income Per Common Share—Basic | $ | 0.18 | $ | 0.25 | $ | 0.83 | ||||||
Net Income Per Common Share—Diluted | $ | 0.18 | $ | 0.24 | $ | 0.81 | ||||||
Weighted Average Number of Common Shares Outstanding—Basic | 7,104 | 7,024 | 6,881 | |||||||||
Dilutive Effect of Common Stock Equivalents | 62 | 214 | 203 | |||||||||
Weighted Average Number of Common Shares Outstanding—Diluted | 7,166 | 7,238 | 7,084 | |||||||||
| 2019 | 2018 | 2017 | ||||||||||
Net Income | $ | 5,730 | $ | 3,286 | $ | 4,228 | ||||||
Other Comprehensive Income (Loss), net of taxes and reclassification adjustments: | ||||||||||||
Foreign Currency Translation Adjustments | (671 | ) | 867 | (65 | ) | |||||||
Change in Value of Derivatives Designated as Cash Flow Hedge | 622 | (1,036 | ) | — | ||||||||
(Gains) Losses from Cash Flow Hedges Reclassified to Income Statement | (600 | ) | 1,048 | — | ||||||||
Unrealized Gain (Loss) on Securities Available for Sale | — | 5 | (16 | ) | ||||||||
Realized Gain on Securities Available for Sale Reclassified to Income Statement | 3 | — | — | |||||||||
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Other Comprehensive Income (Loss) | (646 | ) | 884 | (81 | ) | |||||||
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Comprehensive Income | $ | 5,084 | $ | 4,170 | $ | 4,147 | ||||||
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2021 | 2020 | 2019 | ||||||||||
Net Income | $ | 1,284 | $ | 1,759 | $ | 5,730 | ||||||
Other Comprehensive Income (Loss), net of taxes and reclassification adjustments: | ||||||||||||
Foreign Currency Translation Adjustments | 710 | (133 | ) | (671 | ) | |||||||
Change in Value of Derivatives Designated as Cash Flow Hedge | (239 | ) | 122 | 622 | ||||||||
(Gains) Losses from Cash Flow Hedges Reclassified to Income Statement | 193 | (264 | ) | (600 | ) | |||||||
Cross-Currency Interest Rate Swap Terminations | 45 | — | — | |||||||||
Realized Gain on Securities Available for Sale Reclassified to Income Statement | — | — | 3 | |||||||||
Other Comprehensive Income (Loss) | 709 | (275 | ) | (646 | ) | |||||||
Comprehensive Income | $ | 1,993 | $ | 1,484 | $ | 5,084 | ||||||
| Common Stock | Additional Paid-in Capital | Retained Earnings | Treasury Stock | Accumulated Other Comprehensive Income (Loss) | Total Shareholders’ Equity | |||||||||||||||||||||||
| Shares | Amount | |||||||||||||||||||||||||||
Balance January 31, 2016 | 9,666,290 | $ | 483 | $ | 45,675 | $ | 42,212 | $ | (20,022 | ) | $ | (975 | ) | $ | 67,373 | |||||||||||||
Share-based compensation | — | — | 1,019 | — | — | — | 1,019 | |||||||||||||||||||||
Employee option exercises | 93,483 | 5 | 834 | — | (451 | ) | — | 388 | ||||||||||||||||||||
Restricted stock awards vested, net | 75,133 | 4 | (4 | ) | — | (308 | ) | — | (308 | ) | ||||||||||||||||||
Common Stock – cash dividend—$0.28 per share | — | — | — | (2,082 | ) | — | — | (2,082 | ) | |||||||||||||||||||
Net income | — | — | — | 4,228 | — | — | 4,228 | |||||||||||||||||||||
Other comprehensive loss | — | — | — | — | — | (81 | ) | (81 | ) | |||||||||||||||||||
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Balance January 31, 2017 | 9,834,906 | $ | 492 | $ | 47,524 | $ | 44,358 | $ | (20,781 | ) | $ | (1,056 | ) | $ | 70,537 | |||||||||||||
Share-based compensation | — | — | 1,583 | — | — | — | 1,583 | |||||||||||||||||||||
Employee option exercises | 90,042 | 4 | 913 | — | (275 | ) | — | 642 | ||||||||||||||||||||
Restricted stock awards vested, net | 71,172 | 4 | (4 | ) | — | (103 | ) | — | (103 | ) | ||||||||||||||||||
Repurchase of Common Stock | — | — | — | — | (11,238 | ) | — | (11,238 | ) | |||||||||||||||||||
Common Stock – cash dividend—$0.28 per share | — | — | — | (1,944 | ) | — | — | (1,944 | ) | |||||||||||||||||||
Net income | — | — | — | 3,286 | — | — | 3,286 | |||||||||||||||||||||
Other comprehensive loss | — | — | — | — | — | 884 | 884 | |||||||||||||||||||||
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Balance January 31, 2018 | 9,996,120 | $ | 500 | $ | 50,016 | $ | 45,700 | $ | (32,397 | ) | $ | (172 | ) | $ | 63,647 | |||||||||||||
Share-based compensation | — | — | 1,886 | — | — | — | 1,886 | |||||||||||||||||||||
Employee option exercises | 150,125 | 7 | 1,669 | — | (366 | ) | — | 1,310 | ||||||||||||||||||||
Restricted stock awards vested, net | 72,314 | 4 | (3 | ) | — | (234 | ) | — | (233 | ) | ||||||||||||||||||
Reclassification due to adoption of ASU2018-02 | — | — | — | 14 | — | — | 14 | |||||||||||||||||||||
Common Stock – cash dividend—$0.28 per share | — | — | — | (1,933 | ) | — | — | (1,933 | ) | |||||||||||||||||||
Net income | — | — | — | 5,730 | — | — | 5,730 | |||||||||||||||||||||
Other comprehensive income | — | — | — | — | — | (646 | ) | (646 | ) | |||||||||||||||||||
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Balance January 31, 2019 | 10,218,559 | $ | 511 | $ | 53,568 | $ | 49,511 | $ | (32,997 | ) | $ | (818 | ) | $ | 69,775 | |||||||||||||
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Common Stock | Additional Paid-in Capital | Retained Earnings | Treasury Stock | Accumulated Other Comprehensive Income (Loss) | Total Shareholders’ Equity | |||||||||||||||||||||||
Shares | Amount | |||||||||||||||||||||||||||
Balance January 31, 2018 | 9,996,120 | $ | 500 | $ | 50,016 | $ | 45,700 | $ | (32,397 | ) | $ | (172 | ) | $ | 63,647 | |||||||||||||
Share-based compensation | — | — | 1,886 | — | — | — | 1,886 | |||||||||||||||||||||
Employee option exercises | 154,992 | 7 | 1,669 | — | (366 | ) | — | 1,310 | ||||||||||||||||||||
Restricted stock awards vested, net | 67,447 | 4 | (3 | ) | — | (234 | ) | — | (233 | ) | ||||||||||||||||||
Reclassification due to adoption of ASU 2018-02 | — | — | — | 14 | — | — | 14 | |||||||||||||||||||||
Common Stock—cash dividend—$0.28 per share | — | — | — | (1,933 | ) | — | — | (1,933 | ) | |||||||||||||||||||
Net income | — | — | — | 5,730 | — | — | 5,730 | |||||||||||||||||||||
Other comprehensive loss | — | — | — | — | — | (646 | ) | (646 | ) | |||||||||||||||||||
Balance January 31, 2019 | 10,218,559 | $ | 511 | $ | 53,568 | $ | 49,511 | $ | (32,997 | ) | $ | (818 | ) | $ | 69,775 | |||||||||||||
Share-based compensation | — | — | 1,775 | — | — | — | 1,775 | |||||||||||||||||||||
Employee option exercises | 65,121 | 3 | 790 | — | (11 | ) | — | 782 | ||||||||||||||||||||
Restricted stock awards vested, net | 59,930 | 3 | (3 | ) | — | (469 | ) | — | (469 | ) | ||||||||||||||||||
Common Stock—cash dividend—$0.28 per share | — | — | — | (1,972 | ) | — | — | (1,972 | ) | |||||||||||||||||||
Net income | — | — | — | 1,759 | — | — | 1,759 | |||||||||||||||||||||
Other comprehensive loss | — | — | — | — | — | (275 | ) | (275 | ) | |||||||||||||||||||
Balance January 31, 2020 | 10,343,610 | $ | 517 | $ | 56,130 | $ | 49,298 | $ | (33,477 | ) | $ | (1,093 | ) | $ | 71,375 | |||||||||||||
Share-based compensation | — | — | 1,819 | — | — | — | 1,819 | |||||||||||||||||||||
Employee option exercises | 16,487 | 1 | 103 | — | — | — | 104 | |||||||||||||||||||||
Restricted stock awards vested, net | 64,997 | 3 | (3 | ) | — | (111 | ) | — | (111 | ) | ||||||||||||||||||
Common Stock—cash dividend—$0.07 per share | — | — | — | (497 | ) | — | — | (497 | ) | |||||||||||||||||||
Net income | — | — | — | 1,284 | — | — | 1,284 | |||||||||||||||||||||
Other comprehensive income | — | — | — | — | — | 709 | 709 | |||||||||||||||||||||
Balance January 31, 2021 | 10,425,094 | $ | 521 | $ | 58,049 | $ | 50,085 | $ | (33,588 | ) | $ | (384 | ) | $ | 74,683 | |||||||||||||
| 2019 | 2018 | 2017 | ||||||||||
Cash Flows from Operating Activities: | ||||||||||||
Net Income | $ | 5,730 | $ | 3,286 | $ | 4,228 | ||||||
Adjustments to Reconcile Net Income to Net Cash Provided By Operating Activities: | ||||||||||||
Depreciation and Amortization | 6,152 | 3,994 | 2,431 | |||||||||
Amortization of Debt Issuance Costs | 51 | 34 | — | |||||||||
Share-Based Compensation | 1,886 | 1,583 | 1,019 | |||||||||
Deferred Income Tax Provision (Benefit) | (1,638 | ) | 744 | 174 | ||||||||
Gain on Sale of UK Property | — | — | (419 | ) | ||||||||
Changes in Assets and Liabilities, Net of Impact of Acquisitions: | ||||||||||||
Accounts Receivable | (1,493 | ) | (4,722 | ) | (416 | ) | ||||||
Inventories | (2,872 | ) | (5,509 | ) | (4,659 | ) | ||||||
Accounts Payable and Accrued Expenses | (3,967 | ) | 5,207 | 1,426 | ||||||||
Income Taxes Payable | (151 | ) | (801 | ) | 2,187 | |||||||
Other | (318 | ) | (92 | ) | 982 | |||||||
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Net Cash Provided by Operating Activities | 3,380 | 3,724 | 6,953 | |||||||||
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Cash Flows from Investing Activities: | ||||||||||||
Proceeds from Sales/Maturities of Securities Available for Sale | 1,511 | 5,539 | 4,029 | |||||||||
Purchases of Securities Available for Sale | — | (321 | ) | (400 | ) | |||||||
Proceeds from Sale of UK Property | — | — | 474 | |||||||||
Cash Paid for TrojanLabel Acquisition, Net of Cash Acquired | — | (9,007 | ) | — | ||||||||
Cash Paid for Honeywell Asset Purchase and License Agreement | (400 | ) | (14,873 | ) | — | |||||||
Payments Received on Line of Credit and Note Receivable | — | 85 | 256 | |||||||||
Additions to Property, Plant and Equipment | (2,645 | ) | (2,204 | ) | (1,238 | ) | ||||||
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Net Cash Provided (Used) by Investing Activities | (1,534 | ) | (20,781 | ) | 3,121 | |||||||
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Cash Flows from Financing Activities: | ||||||||||||
Net Proceeds from Common Shares Issued Under Employee Benefit Plans and Employee Stock Option Plans, Net of Payment of Minimum Tax Withholdings | 1,077 | 539 | 79 | |||||||||
Purchase of Treasury Stock | — | (11,238 | ) | — | ||||||||
Proceeds from Issuance of Long-Term Debt | — | 24,200 | — | |||||||||
Borrowings under Revolving Credit Facility | 3,000 | — | — | |||||||||
Repayments under Revolving Credit Facility | (1,500 | ) | — | — | ||||||||
Change in TrojanLabel Earn Out Liability | — | (1,438 | ) | — | ||||||||
Principal Payments on Long-Term Debt | (4,762 | ) | (828 | ) | — | |||||||
Payments of Debt Issuance Costs | — | (234 | ) | — | ||||||||
Dividends Paid | (1,933 | ) | (1,944 | ) | (2,082 | ) | ||||||
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Net Cash (Used) Provided by Financing Activities | (4,118 | ) | 9,057 | (2,003 | ) | |||||||
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Effect of Foreign Exchange Rate Changes on Cash and Cash Equivalents | (371 | ) | 79 | (16 | ) | |||||||
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Net (Decrease) Increase in Cash and Cash Equivalents | (2,643 | ) | (7,921 | ) | 8,055 | |||||||
Cash and Cash Equivalents, Beginning of Year | 10,177 | 18,098 | 10,043 | |||||||||
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Cash and Cash Equivalents, End of Year | $ | 7,534 | $ | 10,177 | $ | 18,098 | ||||||
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Supplemental Information: | ||||||||||||
Cash Paid (Received) During the Period for: | ||||||||||||
Interest | $ | 636 | $ | 246 | $ | — | ||||||
Income Taxes, Net of Refunds | $ | 3,472 | $ | 1,940 | $ | (84 | ) | |||||
Schedule ofnon-cash financing activities: | ||||||||||||
Value of Shares Received in Satisfaction of Option Exercise Price | $ | 366 | $ | 275 | $ | 451 | ||||||
2021 | 2020 | 2019 | ||||||||||
Cash Flows from Operating Activities: | ||||||||||||
Net Income | $ | 1,284 | $ | 1,759 | $ | 5,730 | ||||||
Adjustments to Reconcile Net Income to Net Cash Provided By Operating Activities: | ||||||||||||
Depreciation and Amortization | 5,983 | 6,284 | 6,152 | |||||||||
Amortization of Debt Issuance Costs | 75 | 49 | 51 | |||||||||
Share-Based Compensation | 1,819 | 1,775 | 1,886 | |||||||||
Deferred Income Tax Provision (Benefit) | (1,021 | ) | (1,638 | ) | (1,638 | ) | ||||||
Changes in Assets and Liabilities: | ||||||||||||
Accounts Receivable | 2,702 | 3,594 | (1,493 | ) | ||||||||
Inventories | 4,247 | (3,938 | ) | (2,872 | ) | |||||||
Accounts Payable and Accrued Expenses | (57 | ) | (2,732 | ) | (2,342 | ) | ||||||
Income Taxes Payable | 1,482 | (1,773 | ) | (151 | ) | |||||||
Other | (970 | ) | (156 | ) | (318 | ) | ||||||
Net Cash Provided by Operating Activities | 15,544 | 3,224 | 5,005 | |||||||||
Cash Flows from Investing Activities: | ||||||||||||
Proceeds from Sales/Maturities of Securities Available for Sale | — | — | 1,511 | |||||||||
Cash Paid for Honeywell Asset Purchase and License Agreement | — | — | (400 | ) | ||||||||
Additions to Property, Plant and Equipment | (2,587 | ) | (2,906 | ) | (2,645 | ) | ||||||
Net Cash Used by Investing Activities | (2,587 | ) | (2,906 | ) | (1,534 | ) | ||||||
Cash Flows from Financing Activities: | ||||||||||||
Net Proceeds Employee Stock Option Plans | 9 | 654 | 1,228 | |||||||||
Net Cash Proceeds from Share Purchases under Employee Stock Purchase Plan | 95 | 128 | 82 | |||||||||
Net Cash Used for Payment of Taxes Related to Vested Restricted Stock | (111 | ) | (469 | ) | (233 | ) | ||||||
Net ( Repayments) /Borrowings under Revolving Credit Facility | (6,500 | ) | 5,000 | 1,500 | ||||||||
Payment of Minimum Guarantee Royalty Obligation | (2,000 | ) | (1,875 | ) | (1,625 | ) | ||||||
Proceeds from Long-Term Debt – PPP Loan | 4,422 | — | — | |||||||||
Proceeds from Long-Term Debt Borrowings | 15,232 | — | — | |||||||||
Payoff of Long-Term Debt | (11,732 | ) | — | — | ||||||||
Principal Payments on Long-Term Debt | (3,958 | ) | (5,208 | ) | (5,130 | ) | ||||||
Payments of Debt Issuance Costs | (100 | ) | — | — | ||||||||
Dividends Paid | (497 | ) | (1,972 | ) | (1,933 | ) | ||||||
Net Cash Used by Financing Activities | (5,140 | ) | (3,742 | ) | (6,111 | ) | ||||||
Effect of Foreign Exchange Rate Changes on Cash and Cash Equivalents | (627 | ) | 139 | (3 | ) | |||||||
Net Increase (Decrease) in Cash and Cash Equivalents | 7,190 | (3,285 | ) | (2,643 | ) | |||||||
Cash and Cash Equivalents, Beginning of Year | 4,249 | 7,534 | 10,177 | |||||||||
Cash and Cash Equivalents, End of Year | $ | 11,439 | $ | 4,249 | $ | 7,534 | ||||||
Supplemental Information: | ||||||||||||
Cash Paid During the Period for: | ||||||||||||
Interest | $ | 677 | $ | 531 | $ | 636 | ||||||
Income Taxes, Net of Refunds | $ | 446 | $ | 2,913 | $ | 3,472 | ||||||
Schedule of non-cash financing activities: | ||||||||||||
Value of Shares Received in Satisfaction of Option Exercise Price | $ | — | $ | 11 | $ | 366 | ||||||
Securities Available for Sale:Securities available for sale are carried at fair value based on quoted market prices, where available. The difference between cost and fair value, net of related tax effects, is recorded as a component of accumulated other comprehensive income (loss) in shareholders’ equity.
We adopted this standard using the modified retrospective method and have applied the guidance to all contracts within the scope of Topic 606 as of the February 1, 2018 adoption date. Under Topic 606,
based on the nature of our contracts and consistent with prior practice, we recognize the large majority of our revenue upon shipment, which is when the performance obligation has been satisfied. Accordingly, the adoption of this standard did not have a material impact on our revenue recognition and there was no cumulative effective adjustment as of February 1, 2018 as a result of the adoption of Topic 606.
The majority
estimated warranty liability are recorded at that time, with an offsetting adjustment to cost of revenue. On occasion, customers request a warranty period longer than our standard warranty. In those instances, in which extended warranty services are separately quoted to the customer, an additional performance obligation is created, and the associated revenue is deferred and recognized as service revenue ratably over the term of the extended warranty period. The portion of service contracts and extended warranty services agreements that are uncompleted at the end of any reporting period are included in deferred revenue.
2019.
assets in fiscal years 2021, 2020 or 2019.
and are amortized over the assets’ useful lives using a systematic and rational basis which is representative of the assets’ use. Intangible assets with a definite life are tested for impairment whenever events or circumstances indicate that the carrying amount of an asset (asset group) may not be recoverable. If necessary, an impairment loss is recognized when the carrying amount of an asset exceeds the estimated undiscounted cash flows used in determining the fair value of the asset. The amount of the impairment loss recorded is calculated by the excess of the asset’s carrying value over its fair value. Fair value is generally determined using a discounted cash flow analysis. For 2019, 2018 and 2017, thereThere were no0 impairment charges for our intangible assets.
assets in fiscal years 2021, 2020 or 2019.
We performed a qualitative assessment for our fiscal 2019quantitative analysis of goodwill. Based on this assessment, management does not believe that it is more likely than not that the carrying values of the reporting units exceed theiras of January 31, 2021 and determined that the fair values. Accordingly,value was in excess of our carrying value and therefore, no quantitative assessment was performed,goodwill impairment has occurred. See Note 3, “Goodwill,” for further details.
other long-term assets, short-term lease liabilities are classified in other current liabilities, and long-term lease liabilities are classified in other long-term liabilities in the consolidated balance sheet. In the statement of cash flow, payments for operating leases are classified as operating activities.
AstroNova accounts In addition, during fiscal 2021, we provided a valuation allowance for deferred tax assets attributable to foreign tax credit carryforwards which would expire unused.
On December 22, 2017, the 2017 Tax Cuts and Jobs Act (“Tax Act”) was enacted into law and the new legislation contains several key tax provisions that affected us, including a Refer
accordance with the terms of the CARES Act, as amended by the PPP Flexibility Act. Consistent with the legislation, we expect to deduct the full $4.4 million of qualified expenses on our 2020 federal tax return.
we have observed the actual terms of prior grants with similar characteristics and the actual vesting schedule of the grant and has assessed the expected risk tolerance of different option groups. The risk-free interest rate is based on the actual U.S. Treasury zero coupon rates for bonds matching the expected term of the option as of the option grant date. The dividend assumption is based upon the prior year’s average dividend yield. NoNaN compensation expense is recognized for options that are forfeited for which the employee does not render the requisite service. Our accounting for share-based compensation for restricted stock awards (RSA) and restricted stock units (RSU) is also based on the fair value method. The fair value of the RSUs and RSAs is based on the closing market price of the Company’sour common stock on the grant date. Reductions in compensation expense associated with forfeited awards are estimated at the date of grant, and this estimated forfeiture rate is adjusted periodically based on actual forfeiture experience.
Share-Based Compensation
Income Taxes
In March 2018, the FASB issued ASU2018-05—“Income Taxes (Topic 740): Amendments to SEC Paragraphs Pursuant to SEC Staff Accounting BulletinNo. 118.” ASU 2018-05 provides guidance for companies
related to the U.S. government-enacted comprehensive tax legislation commonly referred to as the Tax Act.ASU 2018-05 allows for a measurement period of up to one year after the enactment date of the Tax Act to finalize the recording of the related tax impacts. This ASU is effective immediately as new information is available to adjust provisional amounts that were previously recorded. The Company adopted this standard in the first quarter of fiscal 2019 and has properly reflected the income tax effects of all aspects of the legislation for which the accounting under ASC 740 was impacted. All conclusions under SAB 118 were finalized during the fourth quarter of 2019 with no material changes to the provisional amounts. Refer to Note 15, “Income Taxes” for further details.
Comprehensive Income
In February 2018, the FASB issued ASU2018-02, “Income Statement-Reporting Comprehensive Income (Topic 220): Reclassification of Certain Tax Effects from Accumulated Other Comprehensive Income.” ASU2018-02 amends ASU Topic 220 and allows a reclassification from accumulated other comprehensive income to retained earnings for stranded tax effects resulting from the Tax Act, to eliminate the stranded tax effects resulting from the Tax Act. This ASU is effective for fiscal years beginning after December 15, 2018 with early adoption permitted. The amendments in this update should be applied either in the period of adoption or retrospectively to each period (or periods) in which the effect of the change in the U.S. federal corporate income tax rate in the Tax Cuts and Jobs Act is recognized. The Company early adopted this amendment in the second quarter of fiscal 2019 and reclassified $14,000 from accumulated other comprehensive income to retained earnings.
Revenue Recognition
In May 2014, the FASB issued ASU2014-09, “Revenue from Contracts with Customers (Topic 606).” ASU2014-09 completes the joint effort by the FASB and International Accounting Standards Board to improve financial reporting by creating common revenue recognition guidance for U.S. GAAP and International Financial Reporting Standards. ASU2014-09 applies to all companies that enter into contracts with customers to transfer goods or services. Under this guidance, revenue is recognized when a customer obtains control of promised goods or services in an amount that reflects the consideration the entity expects to receive in exchange for those goods or services. In addition, the standard requires disclosure of the nature, amount, timing, and uncertainty of revenue and cash flows arising from contracts with customers. The Company adopted this guidance effective February 1, 2018 using the modified retrospective method. The adoption of this guidance did not have a material impact on the Company’s consolidated financial statements. Refer to the significant accounting policy discussion for “Revenue Recognition” included above for further details.
Derivatives and Hedging
In August 2017, the FASB issued ASU2017-12, “Derivatives and Hedging: Targeted Improvements to Accounting for Hedging Activities.” The objective of this new guidance is to improve the financial reporting of hedging relationships by, among other things, eliminating the requirement to separately measure and record hedge ineffectiveness. ASU2017-12 is effective for public companies for fiscal years beginning after December 15, 2018, and interim periods within those fiscal years with early adoption permitted. We adopted the provisions of this guidance effective for the first quarter of fiscal 2019. The adoption of this guidance did not have a material impact on the Company’s consolidated financial statements.
Share-Based Compensation
In May 2017, the FASB issued ASU2017-09 “Stock Compensation: Scope of Modification Accounting.” ASU2017-09 provides guidance on the types of changes to the terms or conditions of share-based payment awards to which an entity would be required to apply modification accounting under ASC 718. The Company adopted this guidance effective February 1, 2018. The adoption of this guidance did not have a material impact on its consolidated financial statements.
Statement of Cash Flows
In August 2016, the FASB issued ASU2016-15, “Classification of Certain Cash Receipts and Cash Payments (Topic 230).” ASU2016-15 addresses eight specific cash flow issues with the objective of reducing the existing diversity in practice for certain cash receipts and cash payments. The Company adopted this guidance affective February 1, 2018. The adoption of this guidance did not have a material impact on the Company’s consolidated financial statements.
Recent Accounting Standards Not Yet Adopted
Internal-Use Software
In August 2018, the FASB issued ASU2018-15, “Intangibles—Goodwill andOther—Internal-Use Software (Subtopic350-40): Customer’s Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement That Is a Service Contract.” ASU2018-15 reduces complexity for the accounting for costs of implementing a cloud computing service arrangement and aligns the requirements for capitalizing implementation costs incurred in a hosting arrangement that is a service contract with the requirements for capitalizing implementation costs incurred to develop or obtaininternal-use software (and hosting arrangements that include an internal use software license). This ASU is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2019 (Q1 fiscal 2021 for AstroNova), with early adoption permitted. Implementation should be applied either retrospectively or prospectively to all implementation costs incurred after the date of adoption. The Company is currently evaluating the impact this new guidance will have on its consolidated financial statements.
“Fair Value Measurement
In August 2018, the FASB issued ASU2018-13, “Fair Value Measurement (Topic 820), Disclosure Framework-Changes to the Disclosure Requirements for Fair Value Measurement.” ASUThis ASU is effective for annual periods beginning after December 15, 2019 including interim periods within those fiscal years (Q1 fiscal 2021 for AstroNova), with early adoption permitted. The provisions of ASUThe Company is currently evaluatingWe adopted the impactprovisions of this new guidance will have on its consolidated financial statements and related disclosures.
Leases
Ineffective February 2016, the FASB issued ASU2016-02, “Leases (Topic 842).” ASU2016-02 supersedes current guidance related to accounting for leases and is intended to increase transparency and comparability among organizations by requiring lessees to recognize assets and liabilities in the balance sheet for operating leases with lease terms greater than twelve months.1, 2020. The update also requires improved disclosures to help users of financial statements better understand the amount, timing and uncertainty of cash flows arising from leases. In July 2018, the FASB issued ASU2018-10, “Codification Improvements to Topic 842” which includes certain clarifications to address potential narrow-scope implementation issues. Additionally in July 2018 the FASB issued ASU2018-11, “Leases (Topic 842) Targeted Improvements,” which amends ASU2016-02 to provide an alternative transition method to adopt the new lease standard which will not require adjustments to comparative periods nor require modified disclosure in those comparative periods. The new standard will be effective for Astronova at the beginning of fiscal 2020.
Upon the adoption of this guidance the Company expects to recognize approximately $2.0 million ofright-of-use assets and lease liabilities on its consolidated balance sheet related to its operating leases. The
Company anticipates electing the package of practical expedients, which among other things, allows the carryforward of the historical lease classification. The Company is in the process of identifying appropriate changes to its accounting policies and procedures, system processes, and related internal controls to support the requirements of this new guidance. This standard willdid not have a material impact on our liquidityconsolidated financial statements and accompanying disclosures.
our consolidated financial statements and accompanying disclosures.
| Year Ended | ||||||||||||
| (In thousands) | January 31, 2019 | January 31, 2018 | January 31, 2017 | |||||||||
United States | $ | 83,668 | $ | 69,795 | $ | 69,850 | ||||||
Europe | 31,574 | 29,948 | 18,848 | |||||||||
Asia | 8,207 | 3,808 | 1,664 | |||||||||
Canada | 6,692 | 5,373 | 5,008 | |||||||||
Central and South America | 4,147 | 3,402 | 3,053 | |||||||||
Other | 2,369 | 1,075 | 25 | |||||||||
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Total Revenue | $ | 136,657 | $ | 113,401 | $ | 98,448 | ||||||
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Year Ended | ||||||||||||
(In thousands) | January 31, 2021 | January 31, 2020 | January 31, 2019 | |||||||||
United States | $ | 70,911 | $ | 83,671 | $ | 83,668 | ||||||
Europe | 29,029 | 29,617 | 31,574 | |||||||||
Canada | 5,574 | 5,719 | 6,692 | |||||||||
Asia | 5,105 | 8,316 | 8,207 | |||||||||
Central and South America | 3,950 | 4,145 | 4,147 | |||||||||
Other | 1,464 | 1,978 | 2,369 | |||||||||
Total Revenue | $ | 116,033 | $ | 133,446 | $ | 136,657 | ||||||
| Year Ended | ||||||||||||
| (In thousands) | January 31, 2019 | January 31, 2018 | January 31, 2017 | |||||||||
Hardware | $ | 53,207 | $ | 37,501 | $ | 33,797 | ||||||
Supplies | 71,178 | 65,265 | 56,169 | |||||||||
Service and Other | 12,272 | 10,635 | 8,482 | |||||||||
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Total Revenue | $ | 136,657 | $ | 113,401 | $ | 98,448 | ||||||
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Year Ended | ||||||||||||
(In thousands) | January 31, 2021 | January 31, 2020 | January 31, 2019 | |||||||||
Hardware | $ | 34,111 | $ | 48,959 | $ | 53,207 | ||||||
Supplies | 71,772 | 71,838 | 71,178 | |||||||||
Service and Other | 10,150 | 12,649 | 12,272 | |||||||||
Total Revenue | $ | 116,033 | $ | 133,446 | $ | 136,657 | ||||||
HoneywellGoodwill
(In thousands) | Product Identification | T&M | Total | |||||||||
Balance at January 31, 2019 | $ | 7,807 | $ | 4,522 | $ | 12,329 | ||||||
Foreign currency translation | (295 | ) | — | (295 | ) | |||||||
Balance at January 31, 2020 | $ | 7,512 | $ | 4,522 | $ | 12,034 | ) | |||||
Foreign currency translation | 772 | — | 772 | |||||||||
Balance at January 31, 2021 | $ | 8,284 | $ | 4,522 | $ | 12,806 | ||||||
January 31, 2021 | January 31, 2020 | |||||||||||||||||||||||||||||||
(In thousands) | Gross Carrying Amount | Accumulated Amortization | Currency Translation Adjustment | Net Carrying Amount | Gross Carrying Amount | Accumulated Amortization | Currency Translation Adjustment | Net Carrying Amount | ||||||||||||||||||||||||
Miltope: | ||||||||||||||||||||||||||||||||
Customer Contract Relationships | $ | 3,100 | $ | (2,284 | ) | $ | — | $ | 816 | $ | 3,100 | $ | (2,021 | ) | $ | — | $ | 1,079 | ||||||||||||||
RITEC: | ||||||||||||||||||||||||||||||||
Customer Contract Relationships | 2,830 | (1,423 | ) | — | 1,407 | 2,830 | (1,076 | ) | — | 1,754 | ||||||||||||||||||||||
Non-Competition Agreement | 950 | (950 | ) | — | 0 | 950 | (871 | ) | — | 79 | ||||||||||||||||||||||
TrojanLabel: | ||||||||||||||||||||||||||||||||
Existing Technology | 2,327 | (1,405 | ) | 196 | 1,118 | 2,327 | (1,053 | ) | 78 | 1,352 | ||||||||||||||||||||||
Distributor Relations | 937 | (396 | ) | 89 | 630 | 937 | (297 | ) | 27 | 667 | ||||||||||||||||||||||
Honeywell: | ||||||||||||||||||||||||||||||||
Customer Contract Relationships | 27,243 | (9,712 | ) | — | 17,531 | 27,243 | (6,791 | ) | — | 20,452 | ||||||||||||||||||||||
Intangible Assets, net | $ | 37,387 | $ | (16,170 | ) | $ | 285 | $ | 21,502 | $ | 37,387 | $ | (12,109 | ) | $ | 105 | $ | 25,383 | ||||||||||||||
| (In thousands) | 2022 | 2023 | 2024 | 2025 | 2026 | |||||||||||||||
Estimated amortization expense | $ | 3,938 | $ | 3,956 | $ | 4,055 | $ | 3,416 | $ | 3,021 | ||||||||||
January 31 | ||||||||
2021 | 2020 | |||||||
| (In thousands) | ||||||||
Materials and Supplies | $ | 20,265 | $ | 20,151 | ||||
Work-in-Progress | 2,076 | 1,408 | ||||||
Finished Goods | 16,371 | 17,992 | ||||||
| 38,712 | 39,551 | |||||||
Inventory Reserve | (8,652 | ) | (5,626 | ) | ||||
| $ | 30,060 | $ | 33,925 | |||||
January 31 | ||||||||
2021 | 2020 | |||||||
| (In thousands) | ||||||||
Land and Land Improvements | $ | 1,004 | $ | 967 | ||||
Buildings and Leasehold Improvements | 12,642 | 12,524 | ||||||
Machinery and Equipment | 23,346 | 23,167 | ||||||
Computer Equipment and Software | 13,847 | 11,388 | ||||||
Gross Property, Plant and Equipment | 50,839 | 48,046 | ||||||
Accumulated Depreciation | (38,828 | ) | (36,778 | ) | ||||
Net Property Plant and Equipment | $ | 12,011 | $ | 11,268 | ||||
January 31 | ||||||||
2021 | 2020 | |||||||
| (In thousands) | ||||||||
Warranty | $ | 730 | $ | 850 | ||||
Professional Fees | 546 | 697 | ||||||
Lease Liability | 372 | 416 | ||||||
Accrued Payroll & Sales Tax | 292 | 193 | ||||||
Stockholder Relation Fees | 91 | 194 | ||||||
Dealer Commissions | 57 | 236 | ||||||
Other Accrued Expenses | 1,851 | 2,125 | ||||||
| $ | 3,939 | $ | 4,711 | |||||
January 31 | ||||||||
| (In thousands) | 2021 | 2020 | ||||||
USD Term Loan (4.65% as of January 31, 2021); maturity date of June 15, 2022 | $ | 12,576 | $ | 0 | ||||
USD Term Loan (3.03% as of January 31, 2021); maturity date November 30, 2022 | 0 | 8,250 | ||||||
USD Term Loan (3.03% as of January 31, 2021); maturity date of January 31, 2022 | 0 | 4,784 | ||||||
| 12,576 | 13,034 | |||||||
Debt Issuance Costs, net of accumulated amortization | (141 | ) | (111 | ) | ||||
Current Portion of Term Loan | (5,326 | ) | (5,208 | ) | ||||
Long-Term Debt | $ | 7,109 | $ | 7,715 | ||||
| (In thousands) | ||||
Fiscal 2022 | $ | 5,326 | ||
Fiscal 2023 | 7,250 | |||
| $ | 12,576 | |||
On September 28, 2017, with Honeywell International, we entered into an interest rate swap agreement to modify our exposure to interest rate risk by effectively converting our floating-rate borrowings to fixed-rate debt over the term of the loan, thus reducing the impact of interest-rate changes on future interest expense. This swap involved the receipt of floating interest rate amounts in U.S. Dollars in exchange for fixed interest rate payments in U.S. dollars over the life of the term loan.
Cash Flow Hedges (In thousands) | January 31, 2021 | January 31, 2020 | ||||||||||||||||||||||
Notional Amount | Fair Value Derivatives | Notional Amount | Fair Value Derivatives | |||||||||||||||||||||
Asset | Liability | Asset | Liability | |||||||||||||||||||||
Cross-currency Interest Rate Swap | $ | — | $ | — | $ | — | $ | 4,489 | $ | — | $ | 250 | ||||||||||||
Interest Rate Swap | $ | — | $ | — | $ | — | $ | 8,250 | $ | — | $ | 96 | ||||||||||||
Years Ended | ||||||||||||||||||||
Cash Flow Hedge (In thousands) | Amount of Gain(Loss) Recognized in OCI on Derivative | Location of Gain (Loss) Reclassified from Accumulated OCI into Income | Amount of Gain (Loss) Reclassified from Accumulated OCI into Income | |||||||||||||||||
January 31, 2021 | January 31, 2020 | January 31, 2021 | January 31, 2020 | |||||||||||||||||
Swap contracts | $ | (301 | ) | $ | 159 | Other Income | $ | (248 | ) | $ | 338 | |||||||||
This transaction was evaluated under ASU2017-01, “Business Combinations (Topic 805): Clarifying the Definition of a Business,” and was accounted for as an asset acquisition.
In connection with2021.
Under the termsoperating lease with annual rental payments of the TSA, the Company is required to pay$63,000 for certain expenses incurred by Honeywell during the period in which product manufacturing is transferred to the Company’s facilities. In the first quarter of fiscal 2019, a change in accounting estimates for product costs and operating expenses related to the TSA resulted in an increase of $1.0 million in operating income ($0.8 million net of tax or $0.12 per diluted share). Additionally, in the first quarter of fiscal 2019, a change in accounting estimates for revenue subject to customer
rebates under the Honeywell Agreement increased operating income by $0.4 million ($0.3 million net of tax or $0.05 per diluted share). These changes in accounting estimates were the result of actual amounts billed and received differing from initial estimates.
Transaction costs incurred for this acquisition were $0.3 million and were included as part of the purchase price.
The assets acquired in connection with the acquisition were recorded by the Company at their estimated relative fair values as of the acquisition date as follows:
| (In thousands) | ||||
Inventory | $ | 1,411 | ||
Identifiable Intangible Assets | 27,243 | * | ||
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Total Purchase Price | $ | 28,654 | ||
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The purchase price, including the initial payment, minimum royalty payment obligation, transaction costs and subsequent additional TSA obligation payment, was allocated based on the relative fair value of the assets acquired. The fair value of the intangible assets acquired was estimated by applying the income approach. These fair value measurements are based on significant inputs that are not observable in the market and therefore represent a Level 3 measurement as defined in ASC 820, “Fair Value Measurement and Disclosure.” Key assumptions in estimating the fair value of the intangibles include (1) the remaining life of the intangibles based on the term of the Honeywell Asset Purchase and License Agreement of 10 years, (2) a range of annual earnings projections from $3.9 million – $5.4 million and (3) the Company’s internal rate of return of 21.0%.
The acquired identifiable intangible assets are as follows:
| (In thousands) | Fair Value | Useful Life (Years) | ||||||
Customer Contract Relationships | $ | 27,243 | 10 | |||||
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Trojan Label
On February 1, 2017, the Company’s wholly-owned Danish subsidiary, ANI ApS, completed the acquisition of the issued and outstanding equity interests of TrojanLabel ApS (“TrojanLabel”). The acquisition of TrojanLabel was accounted for as a purchase of a business under the acquisition method in accordance with the guidance provided by FASB ASC 805, “Business Combinations.”
The purchase price of this acquisition was 62.9 million Danish Krone (approximately $9.1 million), net of cash acquired of 976,000 Danish Krone (approximately $0.1 million), of which 6.4 million Danish Krone (approximately $0.9 million) was placed in escrow to secure certain post-closing working capital adjustments and indemnification obligations of the sellers. The acquisition was funded using available cash and investment securities. In the first quarter of fiscal 2019, the Company settled the post-closing adjustment with TrojanLabel and recovered approximately 891,000 Danish Krone (approximately $145,000) of the amount held in the escrow account, which was recognized as an adjustment to the allowance account for TrojanLabel receivables. The remaining escrow balance was retained by TrojanLabel.
Part of the purchase agreement included an additional contingent consideration to be paid to the sellers of TrojanLabel if 80% of specified earnings targets were achieved by the TrojanLabel business during the seven years following the closing. However, subsequent to the acquisition, the Company restructured the operating model for the TrojanLabel business such that most of the sales and some of the expenses of the business would
be transferred to other legal entities of the Company. This caused the expected earnings targets in TrojanLabel, which was the basis upon which the contingent consideration was structured, to become unlikely to be met. As a result, during fiscal 2018, the estimated fair value of the contingent consideration was reduced resulting in the Company recognizing an additional $1.4 million of income for the year which is offset in general and administrative expense on the Company’s Consolidated Income Statement for the period endedboth January 31, 2018.
Total acquisition-related costs were approximately $0.7 million, of which $0.1 million and $0.6 million are included in the general and administrative expenses in the Company’s consolidated statements of income for the years ending January 31, 20182021 and January 31, 2017, respectively.
The US dollar purchase price of the acquisition has been allocated on the basis of fair value as follows:
| (In thousands) | ||||
Accounts Receivable | $ | 1,322 | ||
Inventory | 796 | |||
Other Current Assets | 166 | |||
Property, Plant and Equipment | 15 | |||
Identifiable Intangible Assets | 3,264 | |||
Goodwill | 7,388 | |||
Accounts Payable and Other Current Liabilities | (1,821 | ) | ||
Other Liability | (114 | ) | ||
Contingent Liability (Earnout) | (1,314 | ) | ||
Deferred Tax Liability | (695 | ) | ||
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Total Purchase Price | $ | 9,007 | ||
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The fair value of the intangible assets acquired was estimated by applying the income approach,2020.
Goodwill of $7.4 million, which is not deductible for tax purposes, represents the excess of the purchase price over the estimated fair value assigned to the tangible and identifiable intangible assets acquired and liabilities assumed from TrojanLabel. The goodwill recognized is attributable to synergies which are expected to enhance and expand the Company’s overall product portfolio and opportunities in new and existing markets, future technologies that have yet to be determined and TrojanLabel’s assembled work force. The carrying amount of the goodwill was allocated to the Product Identification segment of the Company.
The following table reflects the fair value of the acquired identifiable intangible assets and related estimated useful lives:
| (In thousands) | Fair Value | Useful Life (Years) | ||||||
Existing Technology | $ | 2,327 | 7 | |||||
Distributor Relations | 937 | 10 | ||||||
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Total | $ | 3,264 | ||||||
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The existing technology intangible asset acquired represents the various technologies TrojanLabel has developedother information related to its seriesour leases is as follows:
Operating Leases (In thousands) | Balance Sheet Classification | January 31, 2021 | January 31, 2020 | |||||||
Lease Assets | Right of Use Assets | $ | 1,389 | $ | 1,661 | |||||
Lease Liabilities — Current | Other Accrued Expenses | 372 | 416 | |||||||
Lease Liabilities — Long Term | Lease Liabilities | $ | 1,065 | $ | 1,279 | |||||
Operating Leases (In thousands) | Statement of Income Classification | Year Ended January 31, 2021 | Year Ended January 31, 2020 | |||||||||
Operating Lease Costs | General and Administrative Expense | $ | 485 | $ | 449 | |||||||
Beginning February 1, 2017, the results of operations for TrojanLabel have been included in the Company’s statement of income for the period ended January 31, 2019 and 2018 and are reported as part of the Product Identification segment. Assuming the acquisition of TrojanLabel had occurred on February 1, 2016, the impact would not have had a material effect on the Company’s results for period ended January 31, 2017, as the acquisition was not considered a significant subsidiary.
Note 4—Intangible Assets
Intangible assetsoperating lease liabilities are as follows:
| January 31, 2019 | January 31, 2018 | |||||||||||||||||||||||||||||||
| (In thousands) | Gross Carrying Amount | Accumulated Amortization | Currency Translation Adjustment | Net Carrying Amount | Gross Carrying Amount | Accumulated Amortization | Currency Translation Adjustment | Net Carrying Amount | ||||||||||||||||||||||||
Miltope: | ||||||||||||||||||||||||||||||||
Customer Contract Relationships | $ | 3,100 | $ | (1,723 | ) | $ | — | $ | 1,377 | $ | 3,100 | $ | (1,438 | ) | $ | — | $ | 1,662 | ||||||||||||||
RITEC: | ||||||||||||||||||||||||||||||||
Customer Contract Relationships | 2,830 | (725 | ) | — | 2,105 | 2,830 | (461 | ) | — | 2,369 | ||||||||||||||||||||||
Non-Competition Agreement | 950 | (681 | ) | — | 269 | 950 | (491 | ) | — | 459 | ||||||||||||||||||||||
TrojanLabel: | ||||||||||||||||||||||||||||||||
Existing Technology | 2,327 | (711 | ) | 140 | 1,756 | 2,327 | (350 | ) | 313 | 2,290 | ||||||||||||||||||||||
Distributor Relations | 937 | (200 | ) | 56 | 793 | 937 | (99 | ) | 130 | 968 | ||||||||||||||||||||||
Honeywell: | ||||||||||||||||||||||||||||||||
Customer Contract Relationships | 27,243 | * | (3,869 | ) | — | 23,374 | 26,843 | (958 | ) | — | 25,885 | |||||||||||||||||||||
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Intangible Assets, net | $ | 37,387 | $ | (7,909 | ) | $ | 196 | $ | 29,674 | $ | 36,987 | $ | (3,797 | ) | $ | 443 | $ | 33,633 | ||||||||||||||
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There were no impairments to intangible assets during the periods ended January 31, 2019, 2018 and 2017. Amortization expense of $4.1 million; $2.2 million and $0.7 million with regard to acquired intangibles has been included in the consolidated statements of income for years ended January 31, 2019, 2018 and 2017, respectively.
Estimated amortization expense for the next five years is as follows:
| (In thousands) | 2020 | 2021 | 2022 | 2023 | 2024 | |||||||||||||||
Estimated amortization expense | $ | 4,223 | $ | 4,093 | $ | 4,005 | $ | 4,001 | $ | 3,997 | ||||||||||
Note 5—Securities Available for Sale
Pursuant to our investment policy, securities available for sale include state and municipal securities with contractual or anticipated maturity dates ranging from 1 to 13 months. These securities are carried at fair value, with unrealized gains and losses reported as a component of accumulated other comprehensive income (loss), net of taxes, in shareholders’ equity until realized. Realized gains and losses from the sale of available for sale securities, if any, are determined on a specific identification basis. A decline in the fair value of any available for sale security below cost that is determined to be other than temporary will result in a write-down of its carrying amount to fair value. No such impairment charges were recorded for any period presented. All short-term investment securities have original maturities greater than 90 days.
The fair value, amortized cost and gross unrealized gains and losses of the securities are as follows:
| Amortized Cost | Gross Unrealized Gains | Gross Unrealized Losses | Fair Value | |||||||||||||
| (In thousands) | ||||||||||||||||
January 31, 2019 | ||||||||||||||||
State and Municipal Obligations | $ | — | $ | — | $ | — | $ | — | ||||||||
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January 31, 2018 | ||||||||||||||||
State and Municipal Obligations | $ | 1,513 | $ | — | $ | (2 | ) | $ | 1,511 | |||||||
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The contractual maturity dates of these securities are as follows:
| January 31 | ||||||||
| 2019 | 2018 | |||||||
| (In thousands) | ||||||||
Less than one year | $ | — | $ | 1,096 | ||||
One to two years | — | 415 | ||||||
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| $ | — | $ | 1,511 | |||||
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Actual maturities may differ from contractual dates as a result of revenue or earlier issuer redemptions.
Note 6—Inventories
The components of inventories are as follows:
| January 31 | ||||||||
| 2019 | 2018 | |||||||
| (In thousands) | ||||||||
Materials and Supplies | $ | 17,517 | $ | 13,715 | ||||
Work-in-Progress | 1,633 | 1,404 | ||||||
Finished Goods | 15,688 | 17,210 | ||||||
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| 34,838 | 32,329 | |||||||
Inventory Reserve | (4,677 | ) | (4,720 | ) | ||||
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Balance at January 31 | $ | 30,161 | $ | 27,609 | ||||
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Finished goods inventory includes $2.1 million and $2.0 million of demonstration equipment at January 31, 2019 and 2018, respectively.
(In thousands) | January 31, 2021 | |||
2022 | $ | 372 | ||
2023 | 318 | |||
2024 | 292 | |||
2025 | 184 | |||
2026 | 163 | |||
Thereafter | 270 | |||
Total Lease Payments | 1,599 | |||
Less: Imputed Interest | (162 | ) | ||
Total Lease Liabilities | $ | 1,437 | ||
Note 7—Property, Plant and Equipment
Property, plant and equipment consist of the following:
| January 31 | ||||||||
| 2019 | 2018 | |||||||
| (In thousands) | ||||||||
Land and Land Improvements | $ | 967 | $ | 967 | ||||
Buildings and Leasehold Improvements | 12,165 | 12,056 | ||||||
Machinery and Equipment | 22,810 | 22,125 | ||||||
Computer Equipment and Software | 9,385 | 7,729 | ||||||
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Gross Property, Plant and Equipment | 45,327 | 42,877 | ||||||
Accumulated Depreciation | (34,947 | ) | (33,125 | ) | ||||
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Net Property Plant and Equipment | $ | 10,380 | $ | 9,752 | ||||
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Depreciation expense on property, plant and equipment was $2.0 million, $1.8 million and $1.7 million for the years ended January 31, 2019, 2018 and 2017, respectively.
Note 8—Accrued Expenses
Accrued expenses consisted of the following:
| January 31 | ||||||||
| 2019 | 2018 | |||||||
| (In thousands) | ||||||||
Warranty | $ | 832 | $ | 575 | ||||
Professional Fees | 403 | 392 | ||||||
Dealer Commissions | 320 | 232 | ||||||
Accrued Payroll & Sales Tax | 97 | 191 | ||||||
Product Replacement Cost Reserve | — | 158 | ||||||
Other | 1,259 | 866 | ||||||
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| $ | 2,911 | $ | 2,414 | |||||
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Note 9—Revolving Line of Credit
The Company has a $10.0 million revolving line of credit under its existing Credit Agreement with Bank of America. Revolving credit loans may be borrowed, at the Company’s option, in U.S. Dollars or, subject to certain conditions, Euros, British Pounds, Canadian Dollars or Danish Krone. Amounts borrowed under the revolving credit facility bear interest at a rate per annum equal to, at the Company’s option, either (a) the LIBOR rate (or in the case of revolving credit loans denominated in a currency other than U.S. Dollars, the applicable quoted rate), plus a margin that varies within a range of 1.0% to 1.5% based on the Company’s consolidated leverage ratio, or (b) a fluctuating reference rate equal to the highest of (i) the federal funds’ rate plus 0.50%, (ii) Bank of America’s publicly announced prime rate or (iii) the LIBOR rate plus 1.00%, plus a margin that varies within a range of 0.0% to 0.5% based on the Company’s consolidated leverage ratio.
During fiscal 2019, $3.0 million was drawn on the revolving credit facility, of which $1.5 million was repaid and $1.5 million remains outstanding as of January 31, 2019. The outstanding balance bears interest at a weighted average annual rate of 5.6% and $61,000 of interest has been accrued and paid on this obligation and included in other expense in the accompanying consolidated income statement for the period ended January 31, 2019.
The Company is requiredrates of interest that we would pay to payborrow funds on a commitment fee on the undrawn portion of the revolving credit facility at the rate of 0.25% per annum.
Note 10—Debt
Long-term debt in the accompanying condensed consolidated balance sheets
| January 31 | ||||||||
| (In thousands) | 2019 | 2018 | ||||||
USD Term Loan (4.02% and 2.85% as of January 31, 2019 and 2018, respectively); maturity date November 30, 2022 | $ | 11,250 | $ | 15,000 | ||||
USD Term Loan (4.02% and 3.06% as of January 31, 2019 and 2018, respectively); maturity date of January 31, 2022 | 6,992 | 8,372 | ||||||
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| 18,242 | 23,372 | |||||||
Debt Issuance Costs, net of accumulated amortization | (164 | ) | (226 | ) | ||||
Current Portion of Term Loan | (5,208 | ) | (5,498 | ) | ||||
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Long-Term Debt | $ | 12,870 | $ | 17,648 | ||||
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The schedule
(In thousands) | Year Ended January 31, 2021 | Year Ended January 31, 2020 | ||||||
Cash paid for operating lease liabilities | $ | 429 | $ | 406 | ||||
The Parties must comply with various customary financial andnon-financial covenants under the Credit Agreement. The financial covenants consist of a maximum consolidated leverage ratio and a minimum consolidated fixed charge coverage ratio. The Credit Agreement contains limitations, in each case subject to various exceptions and thresholds, on the Company’s and its subsidiaries’ ability to incur future indebtedness, to place liens on assets, to conduct mergers or acquisitions, to sell assets, to alter their capital structure, to make investments and loans, to change the nature of their business, and to prepay subordinated indebtedness. The Credit Agreement permits the Company to pay cash dividends on and repurchase shares of its common stock, subject to certain limitations.
The Lender is entitled to accelerate repayment of the loans and to terminate its revolving credit commitment under the Credit Agreement upon the occurrence of any of various customary events of default, which include, among other events, the following: failure to pay when due any principal, interest or other amounts in respect of the loans, breach of any of the Company’s covenants or representations under the loan documents, default under any other of the Company’s or its subsidiaries’ significant indebtedness agreements, a bankruptcy, insolvency or similar event with respect to the Company or any of its subsidiaries, a significant unsatisfied judgment against the Company or any of its subsidiaries, or a change of control of the Company.
The obligations of ANI ApS in respect of the $9.2 million term loan are guaranteed by the Company and TrojanLabel ApS. The Company’s obligations in respect of the $15.0 million term loan, revolving credit facility and its guarantee in respect of the ANI ApS term loan are secured by substantially all of the assets of the Company (including a pledge of a portion of the equity interests held by the Company in ANI ApS and the Company’s wholly-owned German subsidiary AstroNova GmbH), subject to certain exceptions.
As of January 31, 2019, the Company believes it is in compliance with all of the covenants in the Credit Agreement.
Note 11—Derivative Financial Instruments and Risk Management
The Company has entered into a cross-currency interest rate swap to manage the interest rate risk and foreign currency exchange risk associated with the floating-rate foreign currency-denominated term loan borrowing by our Danish Subsidiary and an interest rate swap to manage the interest rate risk associated with the variable rate term loan borrowing by the Company. In accordance with the guidance in ASC 815, both swaps have been designated as cash flow hedges of floating-rate borrowings and are recorded at fair value.
The cross-currency interest rate swap agreement utilized by the Company effectively modifies the Company’s exposure to interest rate risk and foreign currency exchange rate risk by converting the Company’s floating-rate debt denominated in U.S. Dollars on our Danish subsidiary’s books to a fixed-rate debt denominated in Danish Krone for the term of the loan, thus reducing the impact of interest-rate and foreign currency exchange rate changes on future interest expense and principal repayments. This swap involves the receipt of floating rate amounts in U.S. Dollars in exchange for fixed-rate interest payments in Danish Krone, as well as exchanges of principal at the inception spot rate, over the life of the term loan. As of January 31, 2019 and 2018, the total notional amount of the Company’s cross-currency interest rate swap was $6.3 million and $7.8 million, respectively.
The interest rate swap agreement utilized by the Company on the term loan effectively modifies the Company’s exposure to interest rate risk by converting the Company’s floating-rate debt to fixed-rate debt for the next five years, thus reducing the impact of interest-rate changes on future interest expense. This swap involves the receipt of floating rate amounts in U.S. dollars in exchange for fixed rate payments in U.S. dollars over the life of the term loan. As of January 31, 2019 and 2018, the total notional amount of the Company’s interest rate swap was $11.3 million and $14.3 million, respectively.
The following table provides a summary of the fair values of the Company’s derivatives recorded in the consolidated balance sheets:
Cash Flow Hedges (In thousands) | Balance Sheet Classification | January 31, 2019 | January 31, 2018 | |||||||||
Cross-currency interest rate swap | Other Long Term Liabilities | $ | 600 | $ | 1,513 | |||||||
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Interest rate swap | Other Assets | $ | 85 | $ | 101 | |||||||
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The following tables present the impact of the derivative instruments in our condensed consolidated financial statements for the years ended January 31, 2019 and 2018:
| Years Ended | ||||||||||||||||||||
| Amount of Gain (Loss) Recognized in OCI on Derivative | Location of Gain (Loss) Reclassified from Accumulated OCI into Income | Amount of Gain (Loss) Reclassified from Accumulated OCI into Income | ||||||||||||||||||
Cash Flow Hedge (In thousands) | January 31, 2019 | January 31, 2018 | January 31, 2019 | January 31, 2018 | ||||||||||||||||
Swap contracts | $ | 797 | $ | (1,330 | ) | Other Income (Expense) | $ | 769 | $ | (1,344 | ) | |||||||||
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At January 31, 2019, the Company expects to reclassify approximately $0.4 million of net gains on the swap contracts from accumulated other comprehensive income (loss) to earnings during the next 12 months due to changes in foreign exchange rates and the payment of variable interest associated with the floating-rate debt.
Note 12—13—Accumulated Other Comprehensive Loss
Income (Loss)
| (In thousands) | Foreign Currency Translation Adjustments | Unrealized Holding Gain (Loss) on Available for Sale Securities | Net Unrealized Gain (Losses) on Cash Flow Hedges | Total | ||||||||||||
Balance at January 31, 2016 | $ | (983 | ) | $ | 8 | — | $ | (975 | ) | |||||||
Other Comprehensive Loss | (65 | ) | (16 | ) | — | (81 | ) | |||||||||
Amounts Reclassified to Net Income | — | — | — | — | ||||||||||||
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Net Other Comprehensive Loss | (65 | ) | (16 | ) | — | (81 | ) | |||||||||
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Balance at January 31, 2017 | $ | (1,048 | ) | $ | (8 | ) | $ | — | $ | (1,056 | ) | |||||
Other Comprehensive Income (Loss) before reclassification | 867 | 5 | (1,036 | ) | (164 | ) | ||||||||||
Amounts reclassified from AOCI to Earnings | — | — | 1,048 | 1,048 | ||||||||||||
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Other Comprehensive Income | 867 | 5 | 12 | 884 | ||||||||||||
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Balance at January 31, 2018 | $ | (181 | ) | $ | (3 | ) | $ | 12 | $ | (172 | ) | |||||
Other Comprehensive Income (Loss) before reclassification | (671 | ) | — | 622 | (49 | ) | ||||||||||
Amounts reclassified from AOCI to Earnings | — | 3 | (600 | ) | (597 | ) | ||||||||||
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Other Comprehensive Income (Loss) | (671 | ) | 3 | 22 | (646 | ) | ||||||||||
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Balance at January 31, 2019 | $ | (852 | ) | $ | — | $ | 34 | $ | (818 | ) | ||||||
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| (In thousands) | Foreign Currency Translation Adjustments | Unrealized Holding Gain (Loss) on Available for Sale Securities | Net Unrealized Gain (Losses) on Cash Flow Hedges | Total | ||||||||||||
Balance at January 31, 2018 | $ | (181 | ) | $ | (3 | ) | $ | 12 | $ | (172 | ) | |||||
Other Comprehensive Income (Loss) before reclassification | (671 | ) | — | 622 | (49 | ) | ||||||||||
Amounts reclassified from AOCI to Earnings | — | 3 | (600 | ) | (597 | ) | ||||||||||
Other Comprehensive Income (Loss) | (671 | ) | 3 | 22 | (646 | ) | ||||||||||
Balance at January 31, 2019 | $ | (852 | ) | $ | — | $ | 34 | $ | (818 | ) | ||||||
Other Comprehensive Income (Loss) before reclassification | (133 | ) | — | 122 | (11 | ) | ||||||||||
Amounts reclassified from AOCI to Earnings | — | — | (264 | ) | (264 | ) | ||||||||||
Other Comprehensive Income (Loss) | (133 | ) | — | (142 | ) | (275 | ) | |||||||||
Balance at January 31, 2020 | $ | (985 | ) | $ | — | $ | (108 | ) | $ | (1,093 | ) | |||||
Other Comprehensive Income (Loss) before reclassification | 710 | — | (239 | ) | 471 | |||||||||||
Amounts Reclassified from AOCI to Earnings | — | — | 193 | 193 | ||||||||||||
Cross-Currency Interest Rate Swap Termination | — | — | 45 | 45 | ||||||||||||
Other Comprehensive Income (Loss) | 710 | — | (1 | ) | 709 | |||||||||||
Balance at January 31, 2021 | $ | (275 | ) | $ | — | $ | (109 | ) | $ | (384 | ) | |||||
On May 1, 2017, the Company entered into a stock repurchase agreement to repurchase 826,305 shares of the Company’s common stock held by a trust established by Albert W. Ondis at a per share price of $13.60, for an aggregate repurchase price of $11.2 million. This stock repurchase was consummated on May 2, 2017 and was funded using existing cash on hand. Following this stock repurchase, the Ondis trust owns 36,000 shares of the Company’s common stock.
April L. Ondis, who was then a director of the Company, is a beneficiary of the trust. The stock repurchase was authorized and approved by the Company’s Audit Committee as a related party transaction. Prior to entering into the agreement, the Company obtained an opinion from an independent investment banking firm that the consideration to be paid by the Company to the trust pursuant to the stock repurchase agreement would be fair to the public stockholders of the Company, other than the trust, from a financial point of view.
As of January 31, 2019, the Company’s Board of Directors has authorized the purchase of up to an additional 390,000 shares of the Company’s common stock on the open market or in privately negotiated transactions.
14—15—Share-Based Compensation
During the year ending January 31, 2019,
The 2018 Plan was approved by the Company’s shareholders at the Company’s annual meeting of shareholders held on June 4, 2018. The 2018 Plan provides for, among other things, the issuance of awards, with respect toincluding incentive stock options,
Under the 2015 Plan, the Company could grant incentive stock options,non-qualified stock options, stock appreciation rights, time or performance-based restricted stock units (RSUs), restricted stock awards (RSAs), and other stock-based awards to executives, key employees, directors and other eligible individuals. Options granted to employees under the plan vest over four years and expire after ten years. The exercise price of each stock option is established at the discretion of the Compensation Committee; however, all options granted under the 2015 Plan must be issued at an exercise price of not less than the fair market value of the Company’sour common stock on the date of grant. As of January 31, 2019, 50,585grant and expire after ten years. Under the 2018 Plan, 186,500 unvested shares of restricted stock granted and options to purchase an aggregate of 202,450135,500 shares were outstanding under the 2015 Plan.
Under the 2015 Plan, eachnon-employee director received an automatic annual grant often-year options to purchase 5,000 shares of stock upon the adjournment of each annual shareholders meeting. Each such option is exercisable at the fair market value of the Company’s common stock as of the grant date, and vests immediately prior to the next annual shareholders’ meeting. Accordingly, on May 17, 2017, 30,000 options were issued to thenon-employee directors.
January 31, 2021.
either the 2007 or 2015 Plans, but outstanding awards will continue to be governed by it.those plans. As of January 31, 2019, 2,1482021, options to purchase an aggregate of 337,958 shares were outstanding under the 2007 Plan and 10,833 unvested shares of restricted stock granted and options to purchase an aggregate of 417,695148,625 shares were outstanding under the 20072015 Plan.
The Company had
Refer to Note 22, “Subsequent Event” for details regarding the Amended and Restated Non-Employee Director Annual Compensation Program adopted January 31, 2019 and effective beginning on February 1, 2019.
In May 2015 (fiscal year 2016), the Company granted an aggregate of 80,000 time-based and 155,000 performance-based RSUs to certain officers of the Company. Based upon revenue in fiscal 2018, 2017 and 2016, 33,638, 9,025 and 15,810 shares of the performance based RSUs were earned in the first quarter of fiscal 2019, 2018 and 2017, respectively.
In March 2016 (fiscal year 2017), the Company granted 50,000 options and 4,030 RSAs to its Chief Executive Officer pursuant to an Equity Incentive Award Agreement dated as of November 24, 2014 (the “CEO Equity Incentive Agreement”).
In May 2016 (fiscal year 2017) the Company granted 37,000 options to certain key employees. On August 1, 2016 (fiscal year 2017) the Company granted 5,000 options to its Chief Financial Officer.
In March 2017 (fiscal year 2018), the Company granted 50,000 options to the Chief Executive Officer pursuant to the CEO Equity Incentive Agreement. In February and April 2017 the Company granted 52,189 options to certain other key employees. In December 2017, upon election to the Board, the Company granted 5,000non-qualified options and 675 RSUs to a Board member. In January 2018, the Company granted 50,000non-qualified options and 15,000 RSUs to the newly appointed Chief Financial Officer.
In April 2018 (fiscal year 2019), the Company granted 5,000non-qualified options.
In May 2018 (fiscal year 2019), the Company granted 40,000 options to certain key employees.
In June 2018 (fiscal year 2019), the Company granted an aggregate of 25,000non-qualified options to the members of the Board of Directors. Also in June 2018, the Company granted an aggregate of 126,000 options, 44,275 time-based RSUs and 38,000 performance-based RSUs to certain officers of the Company, all of which vest over three years. Of the 38,000 performance-based RSUs, 35,657 were earned based upon achievement of fiscal 2019 revenue and operating income targets.
| Years Ended January 31 | ||||||||||||
| 2019 | 2018 | 2017 | ||||||||||
| (In thousands) | ||||||||||||
Stock Options | $ | 783 | $ | 437 | $ | 321 | ||||||
Restricted Stock Awards and Restricted Stock Units | 1,088 | 1,134 | 685 | |||||||||
Employee Stock Purchase Plan | 15 | 12 | 13 | |||||||||
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Total | $ | 1,886 | $ | 1,583 | $ | 1,019 | ||||||
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Years Ended January 31 | ||||||||||||
2021 | 2020 | 2019 | ||||||||||
| (In thousands) | ||||||||||||
Stock Options | $ | 517 | $ | 616 | $ | 783 | ||||||
Restricted Stock Awards and Restricted Stock Units | 1,285 | 1,136 | 1,088 | |||||||||
Employee Stock Purchase Plan | 17 | 23 | 15 | |||||||||
Total | $ | 1,819 | $ | 1,775 | $ | 1,886 | ||||||
| Number of Shares | Weighted- Average Exercise Price Per Share | |||||||
Options Outstanding, January 31, 2016 | 657,936 | $ | 11.00 | |||||
Options Granted | 122,000 | 14.82 | ||||||
Options Exercised | (87,107 | ) | 8.73 | |||||
Options Forfeited | (4,250 | ) | 13.91 | |||||
Options Cancelled | (3,123 | ) | 8.95 | |||||
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Options Outstanding, January 31, 2017 | 685,456 | $ | 11.96 | |||||
Options Granted | 187,189 | 13.57 | ||||||
Options Exercised | (84,025 | ) | 10.08 | |||||
Options Forfeited | (18,750 | ) | 14.49 | |||||
Options Cancelled | (24,600 | ) | 11.76 | |||||
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Options Outstanding, January 31, 2018 | 745,270 | $ | 12.52 | |||||
Options Granted | 196,000 | 18.21 | ||||||
Options Exercised | (150,125 | ) | 10.62 | |||||
Options Forfeited | (16,300 | ) | 15.10 | |||||
Options Cancelled | (3,700 | ) | 8.95 | |||||
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Options Outstanding, January 31, 2019 | 771,145 | $ | 14.30 | |||||
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Number of Shares | Weighted- Average Exercise Price Per Share | |||||||
Options Outstanding, January 31, 2018 | 745,270 | $ | 12.52 | |||||
Options Granted | 196,000 | 18.21 | ||||||
Options Exercised | (150,125 | ) | 10.62 | |||||
Options Forfeited | (16,300 | ) | 15.10 | |||||
Options Cancelled | (3,700 | ) | 8.95 | |||||
Options Outstanding, January 31, 2019 | 771,145 | $ | 14.30 | |||||
Options Granted | 0 | 0 | ||||||
Options Exercised | (57,175 | ) | 11.60 | |||||
Options Forfeited | (34,526 | ) | 15.73 | |||||
Options Cancelled | (400 | ) | 6.22 | |||||
Options Outstanding, January 31, 2020 | 679,044 | $ | 14.46 | |||||
Options Granted | 0 | — | ||||||
Options Exercised | (1,200 | ) | 7.60 | |||||
Options Forfeited | (54,361 | ) | 12.89 | |||||
Options Cancelled | (1,400 | ) | 7.36 | |||||
Options Outstanding, January 31, 2021 | 622,083 | $ | 14.63 | |||||
Outstanding | Exercisable | |||||||||||||||||||||||
Range of Exercise prices | Number of Shares | Weighted- Average Exercise Price | Weighted- Average Remaining Contractual Life | Number of Shares | Weighted- Average Exercise Price | Weighted Average Remaining Contractual Life | ||||||||||||||||||
| $5.00-10.00 | 74,981 | $ | 7.72 | 2.6 | 74,981 | $ | 7.72 | 2.6 | ||||||||||||||||
| $10.01-15.00 | 453,164 | 13.65 | 6.8 | 313,347 | 13.66 | 6.3 | ||||||||||||||||||
| $15.01-20.00 | 243,000 | 17.55 | 8.9 | 30,000 | 15.17 | 7.5 | ||||||||||||||||||
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| 771,145 | $ | 14.30 | 7.0 | 418,328 | $ | 12.70 | 5.7 | |||||||||||||||||
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The fair value of each stock option
Outstanding | Exercisable | |||||||||||||||||||||||
Range of Exercise prices | Number of Shares | Weighted- Average Exercise Price | Weighted- Average Remaining Contractual Life | Number of Shares | Weighted- Average Exercise Price | Weighted Average Remaining Contractual Life | ||||||||||||||||||
| $5.00-10.00 | 41,044 | $ | 7.97 | 1.3 | 41,044 | $ | 7.97 | 1.3 | ||||||||||||||||
| $10.01-15.00 | 359,314 | 13.63 | 4.9 | 326,741 | 13.65 | 4.7 | ||||||||||||||||||
| $15.01-20.00 | 221,725 | 17.48 | 6.8 | 167,367 | 17.22 | 6.7 | ||||||||||||||||||
| 622,083 | $ | 14.63 | 5.3 | 535,152 | $ | 14.33 | 5.1 | |||||||||||||||||
| Years Ended January 31 | ||||||||||||
| 2019 | 2018 | 2017 | ||||||||||
Risk-Free Interest Rate | 2.6 | % | 1.9 | % | 1.4 | % | ||||||
Expected Life (years) | 9 | 9 | 5 | |||||||||
Expected Volatility | 39.4 | % | 39.0 | % | 28.3 | % | ||||||
Expected Dividend Yield | 1.5 | % | 2.0 | % | 1.9 | % | ||||||
during fiscal 2021 or
respectively.
| RSAs & RSUs | Weighted-Average Grant Date Fair Value | |||||||
Outstanding at January 31, 2016 | 293,088 | $ | 13.02 | |||||
Granted | 24,839 | 14.89 | ||||||
Vested | (75,133 | ) | 12.05 | |||||
Forfeited | (28,926 | ) | 11.49 | |||||
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Outstanding at January 31, 2017 | 213,868 | $ | 14.08 | |||||
Granted | 43,737 | 13.78 | ||||||
Vested | (71,171 | ) | 14.12 | |||||
Forfeited | (9,087 | ) | 14.05 | |||||
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Outstanding at January 31, 2018 | 177,347 | $ | 13.99 | |||||
Granted | 108,790 | 17.85 | ||||||
Vested | (67,447 | ) | 14.26 | |||||
Forfeited | (85,023 | ) | 14.17 | |||||
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Outstanding at January 31, 2019 | 133,667 | $ | 16.90 | |||||
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RSAs & RSUs | Weighted-Average Grant Date Fair Value | |||||||
Outstanding at January 31, 2018 | 177,347 | $ | 13.99 | |||||
Granted | 108,790 | 17.85 | ||||||
Vested | (67,447 | ) | 14.26 | |||||
Forfeited | (85,023 | ) | 14.17 | |||||
Outstanding at January 31, 2019 | 133,667 | $ | 16.90 | |||||
Granted | 119,522 | 19.86 | ||||||
Vested | (59,930 | ) | 14.50 | |||||
Forfeited | (58,625 | ) | 19.00 | |||||
Outstanding at January 31, 2020 | 134,634 | $ | 16.79 | |||||
Granted | 245,131 | 7.61 | ||||||
Vested | (64,997 | ) | 17.28 | |||||
Forfeited | (117,355 | ) | 8.83 | |||||
Outstanding at January 31, 2021 | 197,413 | $ | 9.96 | |||||
AstroNova’s
| Years Ended January 31 | ||||||||||||
| 2019 | 2018 | 2017 | ||||||||||
Shares Reserved, Beginning | 39,207 | 45,224 | 51,600 | |||||||||
Shares Purchased | (5,354 | ) | (6,017 | ) | (6,376 | ) | ||||||
|
|
|
|
|
| |||||||
Shares Reserved, Ending | 33,853 | 39,207 | 45,224 | |||||||||
|
|
|
|
|
| |||||||
Years Ended January 31 | ||||||||||||
2021 | 2020 | 2019 | ||||||||||
Shares Reserved, Beginning | 24,974 | 33,853 | 39,207 | |||||||||
Shares Purchased | (14,600 | ) | (8,879 | ) | (5,354 | ) | ||||||
Shares Reserved, Ending | 10,374 | 24,974 | 33,853 | |||||||||
| January 31 | ||||||||||||
| 2019 | 2018 | 2017 | ||||||||||
| (In thousands) | ||||||||||||
Domestic | $ | 6,859 | $ | 2,110 | $ | 4,026 | ||||||
Foreign | 449 | 3,047 | 2,579 | |||||||||
|
|
|
|
|
| |||||||
| $ | 7,308 | $ | 5,157 | $ | 6,605 | |||||||
|
|
|
|
|
| |||||||
January 31 | ||||||||||||
2021 | 2020 | 2019 | ||||||||||
| (In thousands) | ||||||||||||
Domestic | $ | (1,193 | ) | $ | 1,930 | $ | 6,859 | |||||
Foreign | 3,372 | (560 | ) | 449 | ||||||||
| $ | 2,179 | $ | 1,370 | $ | 7,308 | |||||||
| January 31 | ||||||||||||
| 2019 | 2018 | 2017 | ||||||||||
| (In thousands) | ||||||||||||
Current: | ||||||||||||
Federal | $ | 1,807 | $ | 592 | $ | 1,269 | ||||||
State | 457 | 251 | 209 | |||||||||
Foreign | 952 | 284 | 725 | |||||||||
|
|
|
|
|
| |||||||
| 3,216 | 1,127 | 2,203 | ||||||||||
|
|
|
|
|
| |||||||
Deferred: | ||||||||||||
Federal | $ | (843 | ) | $ | 903 | $ | 150 | |||||
State | (170 | ) | (25 | ) | 37 | |||||||
Foreign | (625 | ) | (134 | ) | (13 | ) | ||||||
|
|
|
|
|
| |||||||
| (1,638 | ) | 744 | 174 | |||||||||
|
|
|
|
|
| |||||||
| $ | 1,578 | $ | 1,871 | $ | 2,377 | |||||||
|
|
|
|
|
| |||||||
On December 22, 2017, the President signed the Tax Cuts and Jobs Act of 2017 (“Tax Act”). The Tax Act, among other things, lowered the U.S. corporate
January 31 | ||||||||||||
2021 | 2020 | 2019 | ||||||||||
| (In thousands) | ||||||||||||
Current: | ||||||||||||
Federal | $ | 1,272 | $ | 660 | $ | 1,807 | ||||||
State | 224 | 221 | 457 | |||||||||
Foreign | 420 | 368 | 952 | |||||||||
| 1,916 | 1,249 | 3,216 | ||||||||||
Deferred: | ||||||||||||
Federal | $ | (910 | ) | $ | (1,364 | ) | $ | (843 | ) | |||
State | (189 | ) | (282 | ) | (170 | ) | ||||||
Foreign | 78 | 8 | (625 | ) | ||||||||
| (1,021 | ) | (1,638 | ) | (1,638 | ) | |||||||
| $ | 895 | $ | (389 | ) | $ | 1,578 | ||||||
The Tax Act taxes certain unrepatriated earnings and profits (E&P) of our foreign subsidiaries (“transition tax”). In order to determine the transition tax, we were required to determine, along with other information, the amount of our accumulated post-1986 E&P for our foreign subsidiaries, as well as the non-U.S. income tax paid by those subsidiaries on such E&P. We were capable of reasonably estimating theone-time deemed repatriation tax and recorded a provisional expense of $0.1 million. The U.S. Treasury issued certain notices and proposed regulations (“interpretative guidance”) during fiscal 2019 which provided additional guidance to assist companies in calculating theone-time deemed repatriation tax. The U.S. Treasury issued final regulations in January 2019. The final regulations did not impact the computation of the final income tax expense. The finalone-time deemed repatriation tax remained $0.1 million.
The SEC issued Staff Accounting Bulletin 118 (“SAB 118”) in December 2017, which provides guidance on accounting for the tax effects of Tax Reform. SAB 118 provides a measurement period in which to finalize the accounting under ASC 740, Income Taxes (“ASC 740”) as it relates to the Tax Act. This measurement period should not extend beyond one year from the Tax Act enactment date. In accordance with SAB 118, the Company has properly reflected the income tax effects of all aspects of the legislation for which the accounting under ASC 740 was impacted. All conclusions under SAB 118 were finalized during the fourth quarter of 2018 with no material changes to the provisional amounts.
The Company’s
January 31 | ||||||||||||
2021 | 2020 | 2019 | ||||||||||
| (In thousands) | ||||||||||||
Income Tax Provision at Statutory Rate | $ | 458 | $ | 288 | $ | 1,534 | ||||||
Denmark Statutory Audit | 341 | — | — | |||||||||
Foreign Rate Deferential | 197 | 315 | 558 | |||||||||
Share Based Compensation | 171 | (145 | ) | (127 | ) | |||||||
Canada Withholding Taxes | 62 | — | — | |||||||||
State Taxes, Net of Federal Tax Effect | 28 | (48 | ) | 226 | ||||||||
Global Intangible Low Taxed Incom e | 14 | 107 | — | |||||||||
Meals and Entertainment | 11 | 31 | 56 | |||||||||
U.S. Corporate Rate Change | — | — | 52 | |||||||||
Transition Tax on Repatriated Earnings | — | — | 14 | |||||||||
Return to Provision Adjustment | (2 | ) | (207 | ) | 58 | |||||||
Change in Reserves Related to ASC 740 Liability | (10 | ) | (352 | ) | (34 | ) | ||||||
Change in Valuation Allowance | (81 | ) | 256 | — | ||||||||
R&D Credits | (157 | ) | (209 | ) | (218 | ) | ||||||
Foreign Derived Intangible Income | (150 | ) | (107 | ) | (53 | ) | ||||||
Foreign Tax Credits | — | (344 | ) | (477 | ) | |||||||
Other | 13 | 26 | (11 | ) | ||||||||
| $ | 895 | $ | (389 | ) | $ | 1,578 | ||||||
| January 31 | ||||||||||||
| 2019 | 2018 | 2017 | ||||||||||
| (In thousands) | ||||||||||||
Income Tax Provision at Statutory Rate | $ | 1,534 | $ | 1,697 | $ | 2,246 | ||||||
U.S Corporate Rate Change | 52 | 1,010 | — | |||||||||
State Taxes, Net of Federal Tax Effect | 226 | 149 | 162 | |||||||||
Transition Tax on Repatriated Earnings | 14 | 104 | — | |||||||||
Capitalized Transaction Costs | — | — | 179 | |||||||||
Unrecognized State Tax Benefits | (34 | ) | (20 | ) | 165 | |||||||
Domestic Production Deduction | — | (47 | ) | (103 | ) | |||||||
Return to Provision Adjustment | 58 | (122 | ) | (75 | ) | |||||||
TrojanLabel Earn Out Liability Adjustment | — | (316 | ) | — | ||||||||
R&D Credits | (218 | ) | (537 | ) | (168 | ) | ||||||
Foreign Deferred Intangible Income | (53 | ) | — | — | ||||||||
Other | (1 | ) | (47 | ) | (29 | ) | ||||||
|
|
|
|
|
| |||||||
| $ | 1,578 | $ | 1,871 | $ | 2,377 | |||||||
|
|
|
|
|
| |||||||
| January 31 | ||||||||
| 2019 | 2018 | |||||||
| (In thousands) | ||||||||
Deferred Tax Assets: | ||||||||
Inventory | $ | 1,800 | $ | 1,648 | ||||
Honeywell Royalty Liability | 3,146 | 3,382 | ||||||
State R&D Credits | 1,305 | 1,161 | ||||||
Share-Based Compensation | 493 | 399 | ||||||
Compensation Accrual | 155 | 194 | ||||||
Warranty Reserve | 201 | 139 | ||||||
Unrecognized State Tax Benefits | 133 | 138 | ||||||
Deferred Service Contract Revenue | 91 | 84 | ||||||
Bad Debt | 101 | — | ||||||
Net Operating Loss | 505 | — | ||||||
Other | 142 | 176 | ||||||
|
|
|
| |||||
| 8,072 | 7,321 | |||||||
Deferred Tax Liabilities: | ||||||||
Intangibles | 2,660 | 3,679 | ||||||
Accumulated Tax Depreciation in Excess of Book Depreciation | 982 | 1,028 | ||||||
Other | 238 | 322 | ||||||
|
|
|
| |||||
| 3,880 | 5,029 | |||||||
|
|
|
| |||||
Subtotal | 4,192 | 2,292 | ||||||
Valuation Allowance | (1,304 | ) | (1,161 | ) | ||||
|
|
|
| |||||
Net Deferred Tax Assets | $ | 2,888 | $ | 1,131 | ||||
|
|
|
| |||||
January 31 | ||||||||
2021 | 2020 | |||||||
| (In thousands) | ||||||||
Deferred Tax Assets: | ||||||||
Inventory | $ | 2,700 | $ | 2,094 | ||||
Honeywell Royalty Liability | 2,590 | 2,583 | ||||||
State R&D Credits | 1,546 | 1,496 | ||||||
Share-Based Compensation | 600 | 582 | ||||||
Bad Debt | 245 | 165 | ||||||
Warranty Reserve | 176 | 205 | ||||||
Compensation Accrual | 159 | 159 | ||||||
Net Operating Loss | 154 | 443 | ||||||
| ASU 842 Adjustment—Lease Liability | 125 | — | ||||||
Unrecognized State Tax Benefits | 101 | 116 | ||||||
Foreign Tax Credit | 83 | 113 | ||||||
Deferred Service Contract Revenue | 68 | 111 | ||||||
Other | 308 | 295 | ||||||
| 8,855 | 8,362 | |||||||
Deferred Tax Liabilities: | ||||||||
Accumulated Tax Depreciation in Excess of Book Depreciation | 752 | 1,002 | ||||||
Intangibles | 399 | 776 | ||||||
| ASU 842 Adjustment – Lease Liability | 119 | 0 | ||||||
Other | 307 | 188 | ||||||
| 1,577 | 1,966 | |||||||
Subtotal | 7,278 | 6,396 | ||||||
Valuation Allowance | (1,721 | ) | (1,752 | ) | ||||
Net Deferred Tax Assets | $ | 5,557 | $ | 4,644 | ||||
research credit carryforwards of approximately $1.5 million which expire in 2021 through 2028. We maintain a full valuation allowance against these credits as we expect these credits to expire unused.
| 2019 | 2018 | 2017 | ||||||||||
| (In thousands) | ||||||||||||
Balance at February 1 | $ | 665 | $ | 708 | $ | 591 | ||||||
Increases in prior period tax positions | — | — | 75 | |||||||||
Increases in current period tax positions | 7 | 55 | 133 | |||||||||
Reductions related to lapse of statute of limitations | (54 | ) | (98 | ) | (91 | ) | ||||||
|
|
|
|
|
| |||||||
Balance at January 31 | $ | 618 | $ | 665 | $ | 708 | ||||||
|
|
|
|
|
| |||||||
2021 | 2020 | 2019 | ||||||||||
| (In thousands) | ||||||||||||
Balance at February 1 | $ | 362 | $ | 618 | $ | 665 | ||||||
Increases in prior period tax position s | 59 | — | — | |||||||||
Increases in current period tax positions | 5 | 2 | 7 | |||||||||
Reductions related to lapse of statutes of limitations | (42 | ) | (26 | ) | (54 | ) | ||||||
Reductions related to settlement with tax authorities | — | (232 | ) | — | ||||||||
Balance at January 31 | $ | 384 | $ | 362 | $ | 618 | ||||||
2020.
time other than information requests. No assessments have been made as of January 31, 2021.
The Company’s
The Product Identification
The T&M segment also includes our line of aerospace flight deck and cabin printers.
On September 28, 2017, AstroNova entered into the Honeywell Agreement to acquire the exclusive perpetual world-wide license to manufacture Honeywell’s narrow format flight deck printers for two aircraft families. Revenue from the sales of these printers is reported as part of our T&M segment beginning in the third quarter of fiscal 2018. Refer to Note 3, “Acquisitions,” for further details.
On February 1, 2017, AstroNova completed its acquisition of TrojanLabel. TrojanLabel is reported as part of our Product Identification segment beginning with the first quarter of fiscal 2018. Refer to Note 3, “Acquisitions,” for further details.
| ($ in thousands) | Revenue | Segment Operating Profit | Segment Operating Profit as a % of Revenue | |||||||||||||||||||||||||||||||||
| 2019 | 2018 | 2017 | 2019 | 2018 | 2017 | 2019 | 2018 | 2017 | ||||||||||||||||||||||||||||
Product Identification | $ | 86,786 | $ | 81,681 | $ | 69,862 | $ | 7,910 | $ | 10,561 | $ | 9,821 | 9.1 | % | 12.9 | % | 14.1 | % | ||||||||||||||||||
T&M | 49,871 | 31,720 | 28,586 | 11,933 | 3,754 | 4,399 | 23.9 | % | 11.8 | % | 15.4 | % | ||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||
Total | $ | 136,657 | $ | 113,401 | $ | 98,448 | 19,843 | 14,315 | 14,220 | 14.5 | % | 12.6 | % | 14.4 | % | |||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||||||||
Corporate Expenses | 11,123 | 8,903 | 7,939 | |||||||||||||||||||||||||||||||||
|
|
|
|
|
| |||||||||||||||||||||||||||||||
Operating Income | 8,720 | 5,412 | 6,281 | |||||||||||||||||||||||||||||||||
Other Income (Expense), Net | (1,412) | (255) | 324 | |||||||||||||||||||||||||||||||||
|
|
|
|
|
| |||||||||||||||||||||||||||||||
Income Before Income Taxes | 7,308 | 5,157 | 6,605 | |||||||||||||||||||||||||||||||||
Income Tax Provision | 1,578 | 1,871 | 2,377 | |||||||||||||||||||||||||||||||||
|
|
|
|
|
| |||||||||||||||||||||||||||||||
Net Income | $ | 5,730 | $ | 3,286 | $ | 4,228 | ||||||||||||||||||||||||||||||
|
|
|
|
|
| |||||||||||||||||||||||||||||||
No
| ($ in thousands) | Revenue | Segment Operating Profit (Loss) | Segment Operating Profit (Loss) as a % of Revenue | |||||||||||||||||||||||||||||||||
2021 | 2020 | 2019 | 2021 | 2020 | 2019 | 2021 | 2019 | 2018 | ||||||||||||||||||||||||||||
Product Identification | $ | 90,268 | $ | 88,116 | $ | 86,786 | $ | 12,885 | $ | 7,509 | $ | 7,910 | 14.3 | % | 8.5 | % | 9.1 | % | ||||||||||||||||||
T&M | 25,765 | 45,330 | 49,871 | (1,032 | ) | 6,281 | 11,933 | (4.0 | )% | 13.9 | % | 23.9 | % | |||||||||||||||||||||||
Total | $ | 116,033 | $ | 133,446 | $ | 136,657 | 11,853 | 13,790 | 19,843 | (10.3 | )% | 10.3 | % | 14.5 | % | |||||||||||||||||||||
Corporate Expenses | 9,420 | 11,357 | 11,123 | |||||||||||||||||||||||||||||||||
Operating Income | 2,433 | 2,433 | 8,720 | |||||||||||||||||||||||||||||||||
Other Expense, Net | (254 | ) | (1,063 | ) | (1,412 | ) | ||||||||||||||||||||||||||||||
Income Before Income Taxes | 2,179 | 1,370 | 7,308 | |||||||||||||||||||||||||||||||||
Income Tax Provision (Benefit) | 895 | (389 | ) | 1,578 | ||||||||||||||||||||||||||||||||
Net Income | $ | 1,284 | $ | 1,759 | $ | 5,730 | ||||||||||||||||||||||||||||||
2021, 2020 or 2019.
| (In thousands) | Assets | |||||||
| 2019 | 2018 | |||||||
Product Identification | $ | 49,091 | $ | 49,832 | ||||
T&M | 62,250 | 60,579 | ||||||
Corporate* | 7,642 | 11,902 | ||||||
|
|
|
| |||||
Total | $ | 118,983 | $ | 122,313 | ||||
|
|
|
| |||||
| (In thousands) | Assets | |||||||
2021 | 2020 | |||||||
Product Identification | $ | 50,047 | $ | 51,439 | ||||
T&M | 51,262 | 57,050 | ||||||
Corporate* | 14,164 | 8,175 | ||||||
Total | $ | 115,473 | $ | 116,664 | ||||
| * | Corporate assets consist principally of cash, cash equivalents, deferred tax assets and |
| (In thousands) | Depreciation and Amortization | Capital Expenditures | ||||||||||||||||||||||
| 2019 | 2018 | 2017 | 2019 | 2018 | 2017 | |||||||||||||||||||
Product Identification | $ | 1,888 | $ | 1,536 | $ | 885 | $ | 1,935 | $ | 1,497 | $ | 767 | ||||||||||||
T&M | 4,264 | 2,458 | 1,546 | 710 | 707 | 471 | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
Total | $ | 6,152 | $ | 3,994 | $ | 2,431 | $ | 2,645 | $ | 2,204 | $ | 1,238 | ||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
(In thousands)
Amortization $ 1,835 $ 1,928 $ 1,888 $ 1,563 $ 2,001 $ 1,935 4,148 4,356 4,264 1,024 905 710 $ 5,983 $ 6,284 $ 6,152 $ 2,587 $ 2,906 $ 2,645
| (In thousands) | Revenue | Long-Lived Assets* | ||||||||||||||||||
| 2019 | 2018 | 2017 | 2019 | 2018 | ||||||||||||||||
United States | $ | 83,668 | $ | 69,795 | $ | 69,850 | $ | 36,750 | $ | 39,432 | ||||||||||
Europe | 31,574 | 29,948 | 18,848 | 3,223 | 3,808 | |||||||||||||||
Asia | 8,207 | 3,808 | 1,664 | — | — | |||||||||||||||
Canada | 6,692 | 5,373 | 5,008 | 81 | 145 | |||||||||||||||
Central and South America | 4,147 | 3,402 | 3,053 | — | — | |||||||||||||||
Other | 2,369 | 1,075 | 25 | — | — | |||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Total | $ | 136,657 | $ | 113,401 | $ | 98,448 | $ | 40,054 | $ | 43,385 | ||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
| (In thousands) | Revenue | Long-Lived Assets* | ||||||||||||||||||
2021 | 2020 | 2019 | 2021 | 2020 | ||||||||||||||||
United States | $ | 70,911 | $ | 83,671 | $ | 83,668 | $ | 31,226 | $ | 34,072 | ||||||||||
Europe | 29,029 | 29,617 | 31,574 | 2,274 | 2,544 | |||||||||||||||
Canada | 5,574 | 5,719 | 6,692 | 13 | 35 | |||||||||||||||
Asia | 5,105 | 8,316 | 8,207 | — | — | |||||||||||||||
Central and South America | 3,950 | 4,145 | 4,147 | — | — | |||||||||||||||
Other | 1,464 | 1,978 | 2,369 | — | — | |||||||||||||||
Total | $ | 116,033 | $ | 133,446 | $ | 136,657 | $ | 33,513 | $ | 36,651 | ||||||||||
| * | Long-lived assets |
2019. Balance, beginning of the year Provision for Warranty Expense Cost of Warranty Repairs Balance, end of the year 17—18—Employee Benefit PlansEmployee Stock Ownership Plan (ESOP):AstroNova had an ESOP which provided retirement benefits to all eligible employees. Annual contributions of either cash or stock in amounts determined by the Company’s Board of Directors were invested by the ESOP’s Trustees in shares of common stock of AstroNova. On January 23, 2017, the Compensation Committee of the Board of Directors voted to terminate the ESOP and the Company did not make contributions to the ESOP in fiscal years 2019, 2018 and 2017. AstroNova is in the process of allocating all shares owned by the ESOP to the participants; once completed, the ESOP will be terminated.Profit-Sharing Plan:AstroNova sponsors the of the Company The Company’sOur annual contribution amounts are determined by the Board of Directors. Contributions paid or accrued amounted to $0.4 million in fiscal 2021 and $0.5 million in both fiscal years 2019, 20182020 and 2017.18—19—Product Warranty LiabilityAstroNova offersitsour hardware products. The specific terms and conditions of warranty vary depending upon the products sold and country in which the Company doeswe do business. For products sold in the United States, the Company provides a basic limited warranty, including parts and labor. The Company estimatesWe estimate the warranty costs based on historical claims experience and recordsrecord a liability in the amount of such estimates at the time product revenue is recognized. The CompanyWe regularly assessesassess the adequacy of itsour recorded warranty liabilities and adjusts the amounts as necessary. Activity in the product warranty liability, which is included in other accrued expenses in the accompanying consolidated balance sheet, is as follows: January 31 2019 2018 2017 (In thousands) $ 575 $ 515 $ 400 1,680 1,294 971 (1,423 ) (1,234 ) (856 ) $ 832 $ 575 $ 515 (In thousands) $ 850 $ 832 $ 575 855 1,733 1,680 (975 ) (1,715 ) (1,423 ) $ 730 $ 850 $ 832 19—20—Concentration of Riskthe Company’sour customer base. The CompanyWe periodically performsperformitsour customers. The Company hasWe have not historically experienced significant credit losses on collection of itsour accounts receivable.Excess cash is invested principally in investment grade government and state municipal securities. The Company has established guidelines relative to diversification and maturities that maintain safety
Note 20—Commitments and Contingencies
The Company maintains leases for certain facilities and equipment and has entered into facility agreements, some of which contain provisions for future rent increases. The total amount of rental payments due over the lease term is being charged to rent expense on the straight-line method over the term of the lease. The difference between rent expense recorded and the amount paid is credited or charged to deferred rent, which is included in other liabilities in the accompanying consolidated balance sheets.
Minimum future rental commitments under allnon-cancelable operating leases during the next five yearsrespectively, as of January 31, 20192021, 2020 and 2019.
(In thousands) | ||||
2020 | $ | 574 | ||
2021 | 520 | |||
2022 | 387 | |||
2023 | 294 | |||
2024 | 273 | |||
Thereafter | 568 | |||
|
| |||
| $ | 2,616 | |||
|
| |||
Rental expense was $0.8 million, $0.7 million and $0.5 million in fiscal 2019, 2018 and 2017, respectively.
The Company is subject to contingencies, including legal proceedings and claims arising in the normal course of business that cover a wide range of matters including, among others, contract and employment claims; workers compensation claims; product liability; warranty and modification; and adjustment or replacement of component parts of units sold.
Fair value is applied to our financial assets and liabilities including money market funds, available for sale securities, derivative instruments and a contingent consideration liability relating to an earnout payment on future TrojanLabel operating results.
Assets measured at fair value: | Fair value measurement at January 31, 2019 | Fair value measurement at January 31, 2018 | ||||||||||||||||||||||||||||||
| (in thousands) | Level 1 | Level 2 | Level 3 | Total | Level 1 | Level 2 | Level 3 | Total | ||||||||||||||||||||||||
Money Market Funds (included in Cash and Cash Equivalents) | $ | — | $ | — | $ | — | $ | — | $ | 1,798 | $ | — | $ | — | $ | 1,798 | ||||||||||||||||
State and Municipal Obligations (included in Securities Available for Sale) | — | — | — | — | — | 1,511 | — | 1,511 | ||||||||||||||||||||||||
Swap Contract (include in Other Assets) | — | 85 | — | 85 | — | 101 | — | 101 | ||||||||||||||||||||||||
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|
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| |||||||||||||||||
Total assets | $ | — | $ | 85 | $ | — | $ | 85 | $ | 1,798 | $ | 1,612 | $ | — | $ | 3,410 | ||||||||||||||||
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|
| |||||||||||||||||
Liabilities measured at fair value: | Fair value measurement at January 31, 2019 | Fair value measurement at January 31, 2018 | ||||||||||||||||||||||||||||||
| (in thousands) | Level 1 | Level 2 | Level 3 | Total | Level 1 | Level 2 | Level 3 | Total | ||||||||||||||||||||||||
Swap Contract (included in Other Liabilities) | $ | — | $ | 600 | $ | — | $ | 600 | $ | — | $ | 1,513 | $ | — | $ | 1,513 | ||||||||||||||||
Earnout Liability (included in Other Liabilities) | — | — | 14 | 14 | — | — | 15 | 15 | ||||||||||||||||||||||||
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| |||||||||||||||||
Total liabilities | $ | — | $ | 600 | $ | 14 | $ | 614 | $ | — | $ | 1,513 | $ | 15 | $ | 1,528 | ||||||||||||||||
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For our money market funds and municipal obligations, we utilize the market approach to measure fair value. The market approach is based on using quoted prices for identical or similar assets.
Liabilities measured at fair value: | Fair value measurement at January 31, 2021 | Fair value measurement at January 31, 2020 | ||||||||||||||||||||||||||||||
| (in thousands) | Level 1 | Level 2 | Level 3 | Total | Level 1 | Level 2 | Level 3 | Total | ||||||||||||||||||||||||
Cross-Currency Interest Rate Swap Contract (included in Other Long-Term Liabilities) | $ | — | $ | 0— | $ | — | $ | — | $ | — | $ | 250 | $ | — | $ | 250 | ||||||||||||||||
Interest Rate Swap Contract (included in Other Long-Term Liabilities) | — | 0— | — | — | — | 96 | — | 96 | ||||||||||||||||||||||||
Earnout Liability (included in Other Liabilities) | — | — | — | — | — | — | 14 | 14 | ||||||||||||||||||||||||
Total liabilities | $ | — | $ | 0— | $ | — | $ | — | $ | — | $ | 346 | $ | 14 | $ | 360 | ||||||||||||||||
The following table presents the changes in fair value
0.0%-0.9% and (3) a risk-adjusted discount rate of approximately2.68%-4.9% used to adjust the probability-weighted earnout payments to their present value. At each reporting period, the contingent consideration liability is recorded at its fair value with changes reflected in general and administrative expense in the condensed consolidated statements of operations.
Subsequent to the acquisition of Trojan Label business, the Company restructured the operating model such that most of the sales and some of the expenses of the business would be transferred to other legal entities of the Company. This caused the expected earnings targets in the Danish entity, which were the basis upon which the contingent consideration was structured, to become unlikely to be met. As a result, during fiscal 2018, the value of the contingent consideration was reduced resulting in the Company recognizing an additional $1.4 million of income for the year which is offset in general and administrative expense on the Company’s consolidated income statement for the period ended January 31, 2018.
Long-Term Debt and Related Current Maturities Long-Term Debt and Related Current MaturitiesThe Company’s Fair Value Measurement at
January 31, 2019 (In thousands) Level 1 Level 2 Level 3 Total Carrying
Value $ — $ — $ 18,857 $ 18,857 $ 18,242 Fair Value Measurement at
January 31, 2018 (In thousands) Level 1 Level 2 Level 3 Total Carrying
Value $ — $ — $ 24,873 $ 24,873 $ 23,372
January 31, 2021 (In thousands)
Value $ — $ — $ 12,586 $ 12,586 $ 12,576
January 31, 2020 (In thousands)
Value $ — $ — $ 13,258 $ 13,258 $ 13,034 the Company’sour long-term debt, including the current portion, is estimated by discounting the future cash flows using current interest rates at which similar borrowings with the same maturities would be made to borrowers with similar credit ratings and is classified as Level 3.22—22019,2022 is $187,500; the compensation committeeprincipal amount of each quarterly installment required to be paid on the last day of each of our fiscal quarters ending on or about April 30, 2022 through January 31, 2023 is $250,000; the principal amount of each quarterly installment required to be paid on the last day of each of our fiscal quarters ending on or about April 30, 2023 through January 31, 2025 is $312,500; the principal amount of each quarterly installment required to be paid on the last day of each of our fiscal quarters ending on or about April 30, 2025 and July 31, 2025 is $500,000; and the entire remaining principal balance of the Company’s boardterm loan is required to be paid on September 30, 2025. We may voluntarily prepay the term loan, in whole or in part, from time to time without premium or penalty (other than customary breakage costs, if applicable). We may repay borrowings under the revolving credit facility at any time without premium or penalty (other than customary breakage costs, if applicable), but in any event no later than September 30, 2025, at which time any outstanding revolving loans will be due and payable in full, and the revolving credit facility will terminate. We may reduce or terminate the revolving line of directors adoptedcredit at any time, subject to certain thresholds and conditions, without premium or penalty.
Revenue Cost of Revenue Gross Profit Operating Expenses (4): Selling & Marketing Research & Development General & Administrative Total Operating Expenses Operating Income Other Income (Expense), Net Income Before Taxes Income Tax Provision Net income Net Income per Common Share—Basic Net Income per Common Share—Diluted 2019 2018 (In thousands, except per share data) Q1 (1) Q2 Q3 Q4 (2) Q1 Q2 Q3 Q4 (3) $ 31,487 $ 33,807 $ 34,196 $ 37,167 $ 24,458 $ 27,483 $ 28,760 $ 32,699 19,377 20,408 20,288 22,585 15,152 17,224 16,966 20,057 12,110 13,399 13,908 14,582 9,306 10,259 11,794 12,642 38.5 % 39.6 % 40.7 % 39.2 % 38.0 % 37.3 % 41.0 % 38.7 % $ 6,500 $ 6,397 $ 6,587 $ 6,858 $ 5,238 $ 5,187 $ 5,532 $ 6,177 1,692 2,029 2,123 1,969 1,505 1,803 2,033 2,112 2,653 2,808 2,836 2,825 1,856 2,327 2,597 2,123 10,845 11,234 11,546 11,652 8,599 9,317 10,162 10,512 1,265 2,165 2,362 2,930 707 942 1,632 2,130 4.0 % 6.4 % 6.9 % 7.9 % 2.9 % 3.4 % 5.7 % 6.5 % (270 ) (512 ) (538 ) (92 ) (48 ) 16 (12 ) (210 ) 995 1,653 1,824 2,838 659 958 1,620 1,920 181 459 407 532 147 231 201 1,292 $ 814 $ 1,194 $ 1,417 $ 2,306 $ 512 $ 727 $ 1,419 $ 628 $ 0.12 $ 0.17 $ 0.21 $ 0.33 $ 0.07 $ 0.11 $ 0.21 $ 0.09 $ 0.12 $ 0.17 $ 0.20 $ 0.32 $ 0.07 $ 0.11 $ 0.21 $ 0.09 $ 30,919 $ 27,658 $ 28,017 $ 29,438 $ 36,181 $ 33,468 $ 33,318 $ 30,479 20,064 17,871 18,282 18,456 21,942 21,491 21,021 20,234 10,855 9,787 9,735 10,982 14,239 11,977 12,297 10,245 35.1 % 35.4 % 34.7 % 37.3 % 39.4 % 35.8 % 36.9 % 33.6 % $ 5,925 $ 5,555 $ 5,553 $ 6,267 $ 6,765 $ 6,413 $ 6,944 $ 6,762 1,940 1,493 1,412 1,361 2,007 1,785 2,076 2,216 2,327 2,535 2,353 2,206 2,999 2,616 2,830 2,912 10,192 9,583 9,318 9,834 11,771 10,814 11,850 11,890 663 204 417 1,148 2,468 1,163 447 (1,645 ) 2.1 % 0.7 % 1.5 % 3.9 % 6.8 % 3.5 % 1.3 % (5.4 )% (349 ) 328 (437 ) 204 (368 ) (183 ) (238 ) (275 ) 314 532 (20 ) 1,352 2,100 980 209 (1,920 ) (118 ) 529 (32 ) 516 400 29 (247 ) (572 ) $ 432 $ 3 $ 12 $ 836 $ 1,700 $ 951 $ 456 $ (1,348 ) $ 0.06 $ 0.00 $ 0.00 $ 0.12 $ 0.24 $ 0.14 $ 0.06 $ (0.19 ) $ 0.06 $ 0.00 $ 0.00 $ 0.12 $ 0.23 $ 0.13 $ 0.06 $ (0.19 ) The first quarter of fiscal 2019 includes (a) income of $1.0 million ($0.8 million net of tax or $0.12 per diluted share) for a change in accounting estimate for product costs and operating expenses related to the Honeywell TSA and (b) income of $0.4 million ($0.3 million net of tax or $0.05 per diluted share) for change in accounting estimates for revenue subject to customer rebates under the Honeywell Agreement. Both of these changes in accounting estimates were the result of actual amounts billed and received differing from initial estimates.(2)The fourth quarter of fiscal 2019 includes $0.1 million, or $0.01 per diluted share, of tax expense related to the enactment of the Tax Act.(3)The fourth quarter of fiscal 2018 includes (a) income of $0.9 million ($0.7 million net of tax or $0.11 per diluted share) related to the change in fair value of the Company’s contingent earn out liability; (b) expense of $42,000 ($36,000 net of tax or $0.1 per diluted share) related to the correction of a prior period error in the recording of the Honeywell transaction in the third quarter fiscal 2018 and (c) $1.1 million, or $0.16 per diluted share, of tax expense related to the enactment of the Tax Act.(4)
Description | Balance at Beginning of Year | Provision/ (Benefit) Charged to Operations | Deductions(2) | Balance at End of Year | ||||||||||||
Allowance for Doubtful Accounts(1): | ||||||||||||||||
| (In thousands) | ||||||||||||||||
Year Ended January 31, | ||||||||||||||||
2019 | $ | 377 | $ | 310 | $ | (166 | ) | $ | 521 | |||||||
2018 | $ | 266 | $ | 119 | $ | (8 | ) | $ | 377 | |||||||
2017 | $ | 404 | $ | (80 | ) | $ | (58 | ) | $ | 266 | ||||||
Description | Balance at Beginning of Year | Provision/ (Benefit) Charged to Operations | Deductions(2) | Balance at End of Year | ||||||||||||
Allowance for Doubtful Accounts(1): | ||||||||||||||||
| (In thousands) | ||||||||||||||||
Year Ended January 31, | ||||||||||||||||
2021 | $ | 856 | $ | 194 | $ | 4 | $ | 1,054 | ||||||||
2020 | $ | 521 | $ | 546 | $ | (211 | ) | $ | 856 | |||||||
2019 | $ | 377 | $ | 310 | $ | (166 | ) | $ | 521 | |||||||
| (1) | The allowance for doubtful accounts has been netted against accounts receivable in the balance sheets as of the respective balance sheet dates. |
| (2) | Uncollectible accounts written off, net of recoveries. |
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