UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM
☒ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended January 31 2022
OR
☐TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from ____________ to
Commission file number
AstroNova, Inc.
(Exact name of registrant as specified in its charter)
Rhode Island | 05-0318215 | |
(State or other jurisdiction of incorporation or organization) | (I.R.S. Employer Identification No.) | |
600 East Greenwich Avenue , West Warwick, Rhode Island | 02893 | |
(Address of principal executive offices) | (Zip Code) |
Registrant’s telephone number, including area code:(401) (401) 828-4000
Securities registered pursuant to Section 12(b) of the Act:
Title of each class | Trading | Name of each exchange on which registered | ||
Common Stock, $.05 Par Value | ALOT | NASDAQ Global Market |
Securities registered pursuant to Section 12(g) of the Act: None
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes ☐No☒
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes ☐No☒
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes☒ No ☐
Indicate by check mark whether the registrant has(§ (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes☒ No ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a
Large accelerated filer | ☐ | Accelerated filer | ☒ | |||
Non-accelerated filer | ☐ | SSmaller Reporting Company | ☒ | |||
Emerging growth company | ☐ |
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant has filed a report on and attestation to its management’s assessment of the effectiveness of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its audit report. ☒
If securities are registered pursuant to Section 12(b) of the Act, indicate by check mark whether the financial statements of the registrant included in the filing reflect the correction of an error to previously issued financial statements. ☐
Indicate by check mark whether any of those error corrections are restatements that required a recovery analysis of incentive-based compensation received by any of the registrant’s executive officers during the relevant recovery period pursuant to §240.10D-1(b). ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule
The aggregate market value of the registrant’s voting common equity held by31, 202128, 2023, was approximately $109,942,000$102,820,000 based on the closing price on the Nasdaq Global Market on that date.
As of April 13, 2022,5, 2024, there were 7,315,1687,743,140 shares of Common Stock (par value $0.05 per share) of the registrant outstanding.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the Company’s definitive Proxy Statement for the 20222024 Annual Meeting of Shareholders are incorporated by reference into Part III of this Annual Report on Form
Auditor Firm Id: | PCAOB ID No. 392 | Auditor Name: | Wolf & Company, | Auditor Location: | Boston, MA |
ASTRONOVA, INC.
FORM
TABLE OF CONTENTS
Page | ||||||
PART I | ||||||
Item 1. | 2 | |||||
Item 1A. | 7 | |||||
Item 1B. | 17 | |||||
Item 1C. | 17 | |||||
Item 2. | 18 | |||||
Item 3. | 19 | |||||
Item 4. | 19 | |||||
PART II | ||||||
Item 5. | 20 | |||||
Item 6. | 20 | |||||
Item 7. | 21 | |||||
Item 7A. | 29 | |||||
Item 8. | 30 | |||||
Item 9. | 30 | |||||
Item 9A. | 30 | |||||
Item 9B. | 31 | |||||
Item 9C. | 31 | |||||
PART III | ||||||
Item 10. | 32 | |||||
Item 11. | 32 | |||||
Item 12. | 32 | |||||
Item 13. | 32 | |||||
Item 14. | 32 | |||||
PART IV | ||||||
Item 15. | 33 | |||||
Item 16. | 33 | |||||
ASTRONOVA, INC.
Forward-Looking Statements
The information included in this Annual Report on 1 PART I Item 1 General Unless otherwise indicated, references to “AstroNova,” the “Company,” “we,” “our,” and “us” in this Annual Report on Form We design, develop, manufacture, and distribute a broad range of specialty printers and data acquisition and analysis systems, including both hardware and software, which incorporate advanced technologies to acquire, store, analyze, and present data in multiple formats. Target markets for our hardware and software products include aerospace, apparel, automotive, avionics, chemicals, computer peripherals, communications, distribution, food and beverage, general manufacturing, packaging, and transportation. Our products are distributed worldwide through our own sales force, authorized dealers, and independent dealers and representatives. Our business consists of two segments, Product Identification (“PI”) and Test & Measurement (“T&M”). The PI segment includes specialty printing systems and related supplies sold under the QuickLabel On August 4, 2022, we acquired Astro Machine LLC (“Astro Machine”), an Illinois-based manufacturer of printing equipment, including label printers and related accessories, tabbers, conveyors, and envelope feeders. Astro Machine is reported as a part of our PI segment beginning with the third quarter of fiscal 2023. Refer to Note 2, “Acquisitions,” in our audited consolidated financial statements included elsewhere in this report. The following description of our business should be read in conjunction with “Management’s Discussion and Analysis of Financial Conditions and Results of Operations” Description of Business Product Overview We leverage our expertise in data visualization technologies to design, manufacture and market specialty printing systems, test and measurement systems, and related services for select growing markets globally. PI products sold under the QuickLabel, TrojanLabel and GetLabels brands are used in brand owner and commercial applications to provide product packaging, marketing, tracking, branding, and17,16, “Nature of Operations, Segment Reporting and Geographical Information,” in our audited consolidated financial statements elsewhere in this report for financial information regarding our segments.on pages 21 through 34 ofincluded elsewhere in this Annual Report onProduct Identification3
Product Identification
Our PI segment includes three brands: QuickLabel, TrojanLabel, and GetLabels. Additionally, PI also includes the Astro Machine brand that is sold directly to end users though our channel partners and to OEM customers, which generally rebrand these products for sales to their customers. The segment provides a wide array of digitalshortshort- to
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labels or packaging in their facility,chemical,chemicals, cosmetics, food and beverage, medical products, nutraceutical, pharmaceutical,nutraceuticals, pharmaceuticals, and 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, whileand are also being compatible with a wide variety of competitive and third-party printing hardware.
Current QuickLabel models include a selection of professional tabletop digital color label printers. We recently introduced the QL-E100, an entry-level, compact, full-color tabletop label printer. It delivers professional-quality output at a lower price point, which we believe is ideal for targeting smaller businesses entering the on-demand label market, and larger enterprises that require multiple on-demand label printers at distributed locations throughout their facilities. The high-speedin 2021, thelow-volumeapplications and price-sensitive customers. In 2020, we introduced theBS5609 certifiedBS5609-certified labels and labels that can withstand a wide range of demanding environmental conditions from sterilization to cryogenic freezing. Introduced early in 2019, the high-performanceIn addition, our QuickLabel line of printers includes theQL-850,our next-generation wide-format inkjet color label printer, theseries, a family ofand theQLS-4100XE,which print a unique solution with the ability to digitally print full-colorvariety of labels and tags using direct thermal or thermal transfer ribbon technology.
Our TrojanLabel portfolio includes a range of products from professional digital color label mini-presses to large-scale both brand owners, OEMs, and commercial printers. The TheT2-Lis a narrow format digital press designed specifically for flexible packaging substrates. Beyond label printing, the2019,2020, allows printing directly onto a range of flat products, including cardboard, paper bags, flat wood planks and many other items using pigment inks that are resistant to both water and UV exposure. A professional label pressIn fiscal 2024, we launched two new products: the T2-PRO and finishing system, the T4, enablesT3-PRO, both of which have wide-format printdie-cut,and lamination in anall-in-onemachine with a much smaller footprint than others in the market.
GetLabels provides a broad range of high-quality supplies for both our printers and third-party printers, including label and tag materials, inks, toner, and thermal transfer material, all specifically designed and
Astro Machine is a U.S.-based manufacturer and engineering development company providing inkjet printers, conveyors, tabbers, software, and various components to the mail and addressing markets, as well as the label and packaging markets. Astro Machine serves OEMs and value-added resellers.
The PI segment alsoprovides worldwide training and support as well as develops and licenses various specialized software programs to design and manage labels, print images, manage and operate our printers and presses, and coordinate printing on an automated basis directly over networked systems. PI also provides worldwide training and support.
Test &Measurement
Products sold under our T&M segment are designed and manufactured for airborne printing and networking solutions and data acquisition. Our aerospace products include flight deck printing solutions, networking hardware and specialized aerospace-grade thermal paper. Our data acquisition systems are used in research and development,development; flight testing,testing; missile/rocket telemetrytelemetry; and production monitoring and power and maintenance applications. These products are sold to customers in various industries, including aerospace &and defense, automotive, commercial airline, energy, manufacturing and transportation, to meet their need to acquire and record data from local and networked data streams and sensors.
Our airborne printers, which include our flagship ToughWriter
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performance data, passenger data, and air traffic control data. ToughSwitchTheOur ToughWriter airborne printers and EthernetToughSwitch ethernet switches are ruggedized to comply with rigorous military and commercial flight worthinessflight-worthiness standards for operation under extreme environmental conditions. We are currently furnishing ToughWriter airborne printers for manyvarious aircraft made by Airbus, Boeing, Bombardier, Lockheed, Gulfstream, and others. In addition to theour ToughWriter products, we manufacturefurnish other acquired flight deck printers,printer products, including the TP/NP series, the RTP80 series and thethean Asset Purchase and License Agreement with Honeywell International, Inc. (the “Honeywell Agreement”), pursuant to which in 2017 we acquired an exclusive perpetual world-wideworldwide license to manufacture and support Honeywell’s narrow-format flight deck printers for the Boeing 737B737 and Airbus 320A320 aircraft. Over time we expect customers to replace theprinters and other acquired printer product lines with the AstroNova designed ToughWriter products because they haveof its numerous technical features, and functional advantages and significant weight savings.
Other T&M products include the TMX maintenance and field testing; and the Everesttelemetryaerospace and defense applications. The Daxus
Technology
Our core technologies are data visualization technologies that relate to (1) acquiring data,data; (2) conditioning the data,data; (3) displaying or printing the data on hard copy, monitorvisual displays or electronic storage media,media; and (4) analyzing the data. To servicesupport our data visualization technology, we maintain technological core competencies and trade
Intellectual Property
We rely on a combination of copyright, patent, trademark, and trade secret laws in the United States and other jurisdictions to protect our
Manufacturing and Supplies
We manufacture many of the products that we design and sell. Raw materials and supplies are typically available from a wide variety of sources. We manufacture manya singlesingle-or limited- source or limited supplier sources.suppliers. Although we believe the majority of these sole or limited source components, assembled products, and supplies could be sourced elsewhere with appropriate changes in the design of our products, suchthe required design changes might not be feasible on a timely basis, and any interruption in these components, products or supplies could adversely affect our business. When circumstances cause us to anticipate that we may not be able to acquire such components, products or supplies on a timely basis, our practice is to procure a sufficient quantity in advance. In the past, we have made such advanceadvanced purchases primarily for aerospace products and in quantities that we anticipate will suffice for the life of the aircraft program for which those printers are designed.
Marketing and Competition
We compete worldwide in multiple markets. Through our expandingexisting network of manufacturing, sales and support facilities, during fiscal 2024, we do businesssold our products to customers in over 150approximately 100 countries.
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We believe we are a market leader in tabletop digital color label printing technology in the specialty on-demand printing field, athe market leader in flight deck printers, and an innovator in digital color mini-press systems. In the data acquisition area, we are one of the leaders in general-purpose, portable, high-speed data acquisition systems.
We retain our leadership position in the markets we serve by virtue of our proprietary technology, product reputation, delivery, our channels to market, technical assistance, and service to customers. The number of competitors we face in any given market varies by product line. Key competitive factors vary among our product lines but include technology, quality, service and support, distribution network and breadth of product and service offerings.
Our Product IdentificationPI products are sold by direct field salespersons, as well asOEMs, and independent dealers and representatives, while our TestT & MeasurementM products are sold predominantly through direct sales and manufacturers’independent representatives. In the United States, we have factory-trained direct fielddirect-field salespeople located throughout the country specializing in Product IdentificationPI products. We also have direct field sales or service centers in Canada, China, Denmark, France, Germany, Malaysia, Mexico, Singapore, and the United Kingdom staffed by our own employees and dedicated third-party contractors. Additionally, we utilize approximately 200over 100 independent dealers and representatives selling and marketing our products in over 60 countries.
No single customer accounted for 10% or more of our net revenue in any of the last three fiscal years.
Order Backlog
Our order backlog is predominantly but not exclusively for products that will be delivered within twelve months, and backlog scheduled for beyond twelve months is predominantly within the T&M segment. However, backlog varies regularly. It consistsregularly and is not a highly reliable predictive indicator of a blend of orders forend-usercustomers, as well asnear-term future sales trends, primarily due to the frequent longer-term original equipment manufacturer customers.and supplies orders within the T&M segment. In the PI segment, we have multi-period (but typically not multi-year) blanket order arrangements with many customers for labels and other supplies. Printer hardware in the PI segment is typically shipped within a short period of time after orders are booked. Manufacturing production is designed to meet forecasted demands and Accordingly, the amount of order backlog may not indicate future sales trends. Backlog at January 31, 20222024 and 20212023 was $27.8$31.4 million and $22.5$35.8 million, respectively.
Government Regulation
We are subject to a wide variety of laws, rules, mandates, and regulations, some of which apply or may apply to us as a result of our business, particularly with respect to our aircraft cockpit printer business which sells in a highly regulated industry. For example, material modifications to an airborne printer cannot be made without having progressed through an extensive series of product qualification and certification steps that are technically complicated, expensive to execute, typically slow the pace of product development in that industry and others of which applycan constrain our ability to usquickly respond to pricing fluctuations or disruptions to our supply chain for other reasons, such as our status as a publicly held company or the places in which we sell certain types or amounts of products. Existing and future laws and regulations may result in increasing expense and may impede our growth. Applicable
Other applicable and potentially applicable regulations and laws include regulations and laws regarding taxation, accounting and U.S. Securities and Exchange Commission (“SEC”) reporting, privacy, data protection, pricing, content, distribution, energy consumption, environmental regulation, competition, consumer protection, employment, import and export matters, information reporting requirements, access to our services and facilities, the design and operation of websites, health, safety, and sanitation standards, the characteristics and quality of products and services, product labeling and unfair and deceptive trade practices.
Our business outside of the U.S. exposes us to foreign and additional U.S. laws and regulations, including but not limited to, laws and regulations relating to taxation, business licensing or certification requirements, consumer protection, intellectual property rights, consumer and data protection, privacy, encryption, restrictions on pricing or discounts, and the U.S. Foreign Corrupt Practices Act and other applicable U.S. and foreign laws prohibiting corrupt payments to government officials and other third parties.
Environmental Matters
We believe that we are in compliance with all applicable federal, state, and local laws concerning the discharge of material into the environment or otherwise relating to the protection of the environment. We have not experienced any material costs in connection with environmental compliance and do not believe that such compliance will have any material effect upon theon our financial position, results of operations, cash flows, or competitive position of the Company.position.
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Employees
As of January 31, 2022,2024 we employed 339365 full-time employees. Of our full-time employees, 238276 were in the United States, 8069 were in Europe, 1011 were in Canada, nineseven were in Asia, and two were in Mexico.
None of our employees are represented by a labor union or covered by a collective bargaining agreement;agreement, except for our employees in France, where local regulations generally require collective bargaining agreements.
Successful execution of our business strategy depends on our ability to retain several key employees in both individual contributor and management roles. We continuously assess the risk of losing our key employees through regular communications, engagement surveys and assessments inof the labor market. Our retention strategy is focused on ensuring competitive compensation packages, career and professional development, leadership coaching and other actionsinitiatives to improve overall engagement with our key employees.
Culture
We have ingrainedare deeply committed to and invest substantial resources in maintaining and improving a strong and definable company culture that shapes how we operate and engage with stakeholders and employees. Our culture consists of four key components:
Our objective is for these core values to guide our employees’ behavior and dictatedirect how we conduct our business is conducted.business. These core values are reinforced during new hire orientation, ongoing engagement surveys, leadership development, and team development activities and are also demonstrated through teamwork, leadership, and everyday interactions.
Diversity and Inclusion
We believe that our culture and core values are 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 targeted recruitment of women in technical, engineering and sales roles, leadership development programs for women, 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.
Other Information
Our business is not seasonal in nature. However, our revenue is impacted by the variable size of certain individual customer revenue transactions, which can cause fluctuations in revenue from quarter to quarter.quarter and which may be inconsistent with the underlying business or general economic trends. For example, in our T&M segment, government procurement and contracting practices can result in material fluctuations in our backlog and revenues.
Information about Our Executive Officers
The following sets forth certain information with respect to all executive officers of the Company. All officers serve at the pleasure of the Board of Directors.
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Name | Age | Position | ||
Gregory A. Woods | 65 | President, Chief Executive Officer and Director | ||
David S. Smith | 67 | Vice President, Chief Financial Officer and Treasurer | ||
Stephen M. Petrarca | 61 | Vice President—Operations | ||
Michael J. Natalizia | 60 | Vice President Technology & Strategic Alliances, Chief Technology Officer | ||
Tom W. Carll | 57 | Vice President and General Manager—Aerospace |
Mr. Woods has served as Chief Executive Officer of the Company since February 1, 2014. Mr. Woods joined the Company in September 2012 as Executive Vice President and Chief Operating Officer and was appointed President and Chief Operating Officer on August 29, 2013.
Mr. Smith was appointed Vice President, Chief Financial Officer and Treasurer of the Company effective January 22, 2018. Prior to joining the Company, Mr. Smith served as Managing Partner of S.C. Advisors LLC, a financial management consultancy firm from 2008 through January 2018.
Mr. Petrarca was appointed Vice President—Operations in 1998. He has previously held positions as General Manager of Manufacturing, Manager of Grass Operations and Manager of Grass Sales. He has been with the Company since 1980.
Mr. Natalizia was appointed Vice President and Chief Technology Officer of the Company on March 9, 2012. Prior to this appointment, Mr. Natalizia had held the position of Director of Product Development of the Company since 2005.
Mr. Carll joined the Company in 1989 and has held the position of Vice President and General Manager—Aerospace since 2011. Previously, Mr. Carll was Product Manager and National Sales Manager of the AstroNova Test & Measurement product group and, from its formation in 2004, the AstroNova Aerospace business group.
Code of Ethics
We have adopted a Code of Conduct which applies to all of our directors, officers and employees of the Company, including our Chief Executive Officer (“CEO”), Chief Financial Officer (“CFO”), and principal accounting officer which meets the requirements of a “code of ethics” as defined in Item 406 of Regulation S-K. A copy of the Code of Conduct will be provided to shareholders, without charge, upon request directed to Investor Relations or can be obtained on our website, (www.astronovainc.com), under the heading “Investors—Corporate Governance—Governance Documents.” We intend to disclose any amendment to, or waiver of, a provision of the Code of Conduct for the CEO, CFO, principal accounting officer, or persons performing similar functions by posting such information on our website.
Available Information
We make available on our website (www.astronovainc.com) our Annual Report on FormSecurities and Exchange Commission (SEC).SEC. These filings are also accessible on the SEC’s website at http://www.sec.gov.
Item 1A.
The following risk factors should be carefully considered in evaluating AstroNova, because such factors may have a significant impact on our business, operating results, liquidity and financial condition. As a result of the risk factors set forth below, actual results could differ materially from those projected in any forward-looking statements. Additional risks and uncertainties not presently known to us, or that we currently consider to be immaterial, may also impact our business operations.
Business and Industry Risks:
Our operating results and financial condition could be harmed if the markets into which we sell our products decline or do not grow as anticipated.
Any decline in our customers’ markets or their general economic conditions would likely result in a reduction in demand for our products. For example, the 2020 grounding, suspension and subsequent slow restart of productionthe Boeing B737 MAX, coupled with the
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impact of the Boeing 737 MAX,COVID-19 pandemic reduced the demand for our airborne printers, as well as for the related repairs and thensupplies, which negatively affected our business. Although we have experienced a significant recovery in the effectdemand for our airborne printers following the negative impact of thereduced demand for our airborne printers that are installed on that aircraft, as well as the related repairs and supplies, which has negatively affected our results of operations. While these effects have begun to abate,travel, demand remains lower than it was beforehand,pre-pandemic, and currently the outlook is uncertain. Some of our customers have been and may remain reluctant to make capital equipment purchases and may continue to defer certain of these purchases to future periods. While demand for air travel has recently increased, the impact of air-safety incidents or of another period ofCOVID-19infectionsviral pandemic or other widespread health emergency could negatively impact this trend in the future. Also, we believe that the pandemic negatively impacted our customers’ markets have declined and the impact on their financial capacity has been materialmaterially enough to alter their strategies and industry dynamics. These factorsdynamics, but the increase in travel demand has caused the industry profitability to rebound. Production or supply chain issues experienced by any aircraft manufacturer may cause demand for aircraft deliveries to grow more slowly or decline, which would reduce demand for our demand,products, and in turn which could harm our results of operations, financial position and cash flows.
Our future revenue growth depends on our ability to develop and introduce new products and services on a timely basis and achieve market acceptance of these new products and services.
The markets for our products are characterized by evolving technologies which in turn effectaffect our product introduction cycles. Our future success depends largely upon our ability to address the rapidly changing needs of our customers by developing and supplying high-quality, cost-effective products, product enhancements and services on a timely basis and by keeping pace with technological developments and emerging industry standards. The success of our new products will also depend on our ability to differentiate our offerings from our competitors’ offerings, price our products competitively, anticipate our competitors’ development of new products, and maintain high levels of product quality and reliability. We spend a significant amount of time and effort on the development of our airborne and color printer products as well as our data acquisition and data recorder products. Failure to meet our customers’ changing business needs or to further develop any of our new products and their related markets as anticipated could adversely affect our future revenue growth and operating results.
As we introduce new or enhanced products, we must also successfully manage the transition from older products to minimize disruption in customers’ ordering patterns, avoid excessive levels of older product inventories and provide sufficient supplies of new products to meet customer demands. The introduction of new or enhanced products may shorten the life cycle of our existing products, or replace sales of some of our current products, thereby offsetting the benefit of even a successful product introduction and may cause customers to defer purchasing existing products in anticipation of the new products. Additionally, when we introduce new or enhanced products, we face numerous risks relating to product transitions, including the inability to accurately forecast demand, manage excess and obsolete inventories, address new or higher product cost structures, and manage different sales and support requirements due to the type or complexity of the new products. Any customer uncertainty regarding the timeline for rolling out new products or our plans for future support of existing products may cause customers to delay purchase decisions or purchase competing products which would adversely affect our business and operating results.
Operational and Business Strategy Risks:
We are dependent upon contract manufacturers for some of our products. If these manufacturers do not meet our requirements, either in volume or quality, then we could be materially harmed.
We subcontract the manufacturing and assembly of certain of our products to independent third parties at facilities located in various countries. Relying on subcontractors involves a number of significant risks, including:
If one of our significant subcontractors becomes unable or unwilling to continue to manufacture or provide these products in required volumes, or fails to meet our quality standards, or imposes rapid price increases that we cannot recover in the market, we will have to identify alternate qualified alternate subcontractors, or take over the manufacturing ourselves.ourselves, or redesign our products to use components from other suppliers. Additional qualified subcontractors may not be available or may not be available on a timely or cost competitive cost-competitive
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basis. Any interruption in the supply, increase in the cost of the products manufactured by a third-party subcontractor, or failure of a subcontractor to meet quality standards could have a material adverse effect on our business, operating results and financial condition.
For certain components, assembled products and supplies, we are dependent upon single or limited source suppliers. If these suppliers do not meet demand, either in volume or quality, then we could be materially harmed.
Although we use standard parts and components for our products where possible, we purchase certain components, assembled products and supplies used in the manufacture of our products from a single source or limited supplier sources. If the supply of a key component, assembled products, or certain supplies were to be delayed or curtailed or, in the event a key manufacturing or sole supplier delays shipment of such components or assembled products, our ability to ship products in desired quantities and in a timely manner would be adversely affected. For example, due toas a result of the continued globalhas been and likely will continue to bewas a disruption to our supply chain due to the delays of component shipments from our vendors in China and other jurisdictions in which normal business operations arewere disrupted. The supply chain disruption continues to affect our business as it has become difficult to ramp up production as quickly as needed to respond to the post-COVID increase in customer demand. Our business, results of operations and financial position could also be adversely affected, depending on the time required to obtain sufficient quantities from the original source or, if possible, to identify and obtain sufficient quantities from an alternative source. source as well as incurring higher costs to obtain needed components.
Additionally, if any single or limited source supplier becomes unable or unwilling to continue to supply these components, assembled products, or supplies in required volumes or at acceptable prices, we will have to identify and qualify acceptable replacements or redesign our products with different components. Alternative sources may not be available, or product redesign may not be feasible on a timely basis. For example, in fiscal 2023, we experienced increased difficulty in obtaining certain technology-based parts, components and supplies from the largest single supplier of our PI segment at stable or predictable prices. Additionally, we experienced repeated significant quality problems with that supplier. We have responded to these issues by increasing our inventories of those products to mitigate supply risk, negotiating quality related cost reimbursements, and in some cases, accelerating our development of PI products that rely on alternative suppliers. In fiscal 2024, we incurred $0.6 million of incremental expense relating to warranty services and implementation of corrective retrofits resulting from these issues. Any interruption in the supply of or increase in the cost of the components, assembled products and supplies provided by single or limited source suppliers could have a material adverse effect on our business, operating results, and financial condition.
We face significant competition, and our failure to compete successfully could adversely affect our results of operations and financial condition.
We operate in an environment of significant competition, especially in the markets in which we sell our PI printers and T&M data acquisition products. This competition is driven by rapid technological advances, evolving industry standards, frequent new product introductions and the demands of customers to become more efficient. Our competitors range from large international companies to relatively small firms. We compete based on technology, performance, price, quality, reliability, brand, distribution and customer service and support. Our success in future performance is largely dependent upon our ability to compete successfully in the markets we currently serve and to expand into additional market segments. Additionally, current competitors or new market entrants may develop new products or services with features that could adversely affect the competitive position of our products. To remain competitive, we must develop new products, services and applications and periodically enhance our existing offerings. If we are unable to compete successfully, our customers could seek alternative solutions from our competitors and we could lose market share, which could materially and adversely affect our business, results of operations and financial position.
Our profitability is dependent upon our ability to obtain adequate pricing for our products and to control our cost structure
Our success depends on our ability to obtain adequate pricing for our products and services. For a variety of complex reasons, many of which were triggered by theThis hasThe supply chain disruptions have been exacerbated by significant increases in the cost of transportation to expedite incoming components and supplies. In many cases, we have had to expedite delivery of critical materials through significantly higher cost airfreight methods. Our ability to offset these effects through pricing actions for our products and services may not prove sufficient to offset these or further cost increases. Attempts to increase prices may not hold in the face of customer resistance and/or competition. If we are unable to obtain adequate pricing for our products and services, our results of operations and financial position could be materially adversely affected.
We are also continually reviewing our operations with a view towards reducing our cost structure, including but not limited to reducing our labor
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Our inability to adequately enforce and protect our intellectual property defend against assertions of infringement or losethe loss of certain licenses could prevent or restrict our ability to compete.
We rely on patents, trademarks, licenses, and proprietary knowledge and technology, both internally developed and acquired, in order to maintain a competitive advantage. Our competitors may develop technologies that are similar or superior to our proprietary technologies or design technologies around the intellectual property protections or licenses that we currently own. The loss of the trademarks QuickLabel, TrojanLabel, ToughWriter and ToughSwitch or the loss of the licenses provided under theour Honeywell Agreementlicense agreement could have a material adverse impact on our business taken as a whole.business. Operating outside the United States also exposes us to additional intellectual property risk. The laws and enforcement practices of certain jurisdictions in which we operate do not protect our intellectual property rights to the same extent as in the United States. Any diminution in our ability to defend against the unauthorized use of these rights and assets could have an adverse effect on our results of operations and financial condition. Litigation may be necessary to protect our intellectual property rights or defend against claims of infringement, which could result in significant costs and divert our management’s focus away from operations.
We have significant inventories on hand.
We maintain a significant amount of inventory, and as a result of recent supply chain disruption expect to increasedisruptions and announced or anticipated price increases from suppliers, we have further increased the amount of inventory we maintainon-hand.Although on hand to ensure we are able to meet market demand for our products at a reasonable price. These increases have provided an allowancebeen concentrated in label printing machines and supplies sold by our PI business, as well as in electronic components and assemblies in our T&M business. We maintain allowances for slow-moving and obsolete inventory that we believe are adequate, but any significant unanticipated changes in future product demand or market conditions, including obsolescence or the uncertainty in the global market, as well as continued reduced demand for our products if theCOVID-19pandemic is further prolonged, could have an impact on the value of inventory and adversely affect our business, operating results and financial condition.
We could incur liabilities as a result of installed product failures due to design or manufacturing defects.
We have incurred and could in the future incur additional liabilities because of product failures due to design or manufacturing defects. Our products may have defects despite our internal testing or testing by customers. These defects could result in, among other things, increased warranty provisions, a delay in recognition of sales, loss of sales, loss of market share, failure to achieve market acceptance, or damage to our reputation. We could be subject to material claims by customers and may incur substantial expenses to correct any product defects. While in the past, we have successfully obtained partial compensation from suppliers for their contribution to product quality issues, we may not be successful in such a recovery in the future, and these recoveries have not in the past and are not in the future likely to fully offset the full financial impact on us.
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 may not have not been subjected to adequate product development, testing and quality control processes, and may have unknown or undetected defects. Some types of defects may not be detected until the product is installed in a user environment. This may cause us to incur significant warranty, repair, or
We could experience a significant disruption in or security breach of our information technology system, which could harm our business and adversely affect our results of operations.
We rely onon-premises
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breaches, or the other potential exploitation of vulnerabilities or systems failures. In any such circumstance, our system redundancy and other disaster recovery planning may be ineffective or inadequate. While we have experienced, and expect to continue to experience, these types of threats to our information technology networks and infrastructure, none of them to date has had a material impact. However, in the future, such events could result in legal claims or proceedings, liability or penalties under privacy laws, disruption in operations, and damage to our brand and reputation, all of which could adversely affect our business, operating results and financial condition.
We maintain insurance for a variety of cybersecurity risks to mitigate their possible impact, but because of the prevalence of claims in the market for cybersecurity insurance, the cost for that insurance has increased and the underwriting criteria to obtain such insurance has become far more demanding. There is no assurance that we will be able to obtain such insurance in the future, despite our substantial investments in cybersecurity, and if we are able to do so, it may be at substantially higher costs. In addition, in response to these higher costs, we may choose to reduce the amount of insurance we maintain because we believe our improvements in our cybersecurity profile have reduced our risk exposure relative to the increased cost of insurance. If our risk assessments prove incorrect and we were to have a loss not fully covered by insurance, our financial condition and results of operations could be materially negatively impacted.
We depend on our key employees and other highly qualified personnel and our ability to attract and develop new, talented professionals. Our inability to attract and retain key employees, as well as challenges with respect to the management of human capital resources, could compromise our future success and our business could be harmed.
Our future success depends upon our ability to attract and retain, through competitive compensation and benefits programs, professional and executive employees, including sales, operating, marketing, and financial management personnel as well as our ability to manage human capital resources. There is substantial competition for skilled personnel, and the failure to attract, develop, retain and motivate adequately qualified personnel could negatively impact our business, financial condition, results of operations and prospects. In order to hire new personnel or retain or replace our key personnel, we must maintain competitive compensation and benefits, and we may also be required to increase compensation, which would decrease net income. Additionally, several key employees have special knowledge of customers, supplier relationships, business processes, manufacturing operations, regulatory and customer quality compliance management, and financial management issues. The loss of any of these employees as the result of competitive compensation pressures or ineffective management of human capital resources could harm our ability to perform efficiently and effectively until their knowledge and skills are replaced, which might be difficult to do quickly, and as a result could have a material adverse effect on our business, financial condition, and results of operations. Failure to retain or attract key personnel could impede our ability to grow and could result in our inability to operate our business profitably.
Although we have not experienced any material disruptions due to labor shortages to date, we have observed an overall tightening and increasingly competitive labor market, and the demand for qualified individuals is expected to remain strong for the foreseeable future. Any sustained labor shortage or increased turnover rates within our employee base, whether caused byCOVID-19or as a result of general macroeconomic factors or wage competition, could lead to increased costs and lost profitability and could otherwise compromise us inour ability to efficiently operatingoperate our business.
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
We also review our long-lived assets including property, plant and equipment, and other intangiblesintangible 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.
Financial and Economic Risks:
We face risks related to recession, inflation, stagflation and other economic conditions.
Customer demand for our products may be impacted by weak economic conditions, inflation, stagflation, recession, rising interest rates, equity market volatility or other negative economic factors in the U.S. or other nations. For example, under these conditions or the expectation of such conditions, our customers may cancel orders, delay purchasing decisions, or reduce their use of
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our services. In addition, these economic conditions could result in higher inventory levels and the possibility of additional charges if we request changes in delivery schedules or if suppliers incur additional costs that they pass on to us. Further, in the event of a recession or threat of a recession, our suppliers, distributors, and other third-party partners may suffer their own financial and economic challenges and, as a result, they may demand pricing accommodations, delay payment, or become insolvent, which could harm our ability to meet our customers’ demands or collect revenue or could otherwise harm our business. Similarly, disruptions in financial or credit markets may impact our ability to manage normal commercial relationships with our customers, suppliers and creditors and might cause us to not be able to continue to access preferred sources of liquidity when we would like if at all, and our borrowing costs could increase. Thus, if general macroeconomic conditions continue to deteriorate, our business and financial results could adversely affect our business, operating results and financial condition.
In addition, we are subject to risks from inflation and increasing market prices of certain components, supplies, and raw materials, which are incorporated into our end products or used by our suppliers to manufacture our end products. These components, supplies and other raw materials have from time to time become restricted. General market factors and conditions have in the past and may in the future affect pricing of such components, supplies, and commodities.
Economic, political and other risks associated with international sales and operations could adversely affect our 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 approximately 40%43% of our total revenue for fiscal year 2022,2024, and we anticipate that international sales will continue to account for a significant portion of our revenue. In addition, we have employees, suppliers, contractors and facilities located outside the U.S. Accordingly, our business, operating results and financial condition could be harmed by a variety of factors, including:
To date, the impact of the Russian invasion of Ukraine and the resulting governmental sanctions and our decision to halt all activities in the affected areas has had an immaterial direct impact on our revenues.
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
As a global company, we are subject to taxation in numerous countries, states and other jurisdictions. As a result, our effective tax rate is based on the tax rates in effect where we operate. In preparing our financial statements, we estimate the amount of tax that will become payable in each jurisdiction. Our effective tax rate may vary as a result of numerous factors, including changes in the mix of our profitability from jurisdiction to jurisdiction, the results of examinations and audits of our tax filings, whether we secure or sustain acceptable arrangements with tax authorities, adjustments to the value of our uncertain tax positions, changes in accounting for income taxes and changes in tax laws. Any of these factors could cause us to experience an effective tax rate significantly different from previous periods or our current expectations.
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Changes to tax laws and regulations or changes to the interpretation thereof, (including regulations and interpretations pertaining to the 2017 Tax Cuts and Jobs 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 differentperiod-to-period.
We may have exposure to additional tax liabilities, which could negatively impact our income tax expense, net income and cash flow.
We are subject to income and other taxes in both the U.S. and the foreign jurisdictions in which we operate. The determination of our worldwide provision for income taxes and current and deferred tax assets and liabilities requires judgment and estimation. In the ordinary course of our business, there are many transactions and calculations where the ultimate tax determination is uncertain. We are subject to regular review and audit by both domestic and foreign tax authorities and to the prospective and retrospective effects of changing tax regulations and legislation. Although we believe our tax estimates are reasonable, the ultimate tax outcome may materially differ from the amounts recorded in our consolidated financial statements and may materially affect our income tax benefit or expense, net loss or income, and cash flows in the period in which such determination is made.
Deferred tax assets are recognized for the expected future tax consequences of temporary differences between the carrying amount for financial reporting purposes and the tax bases of assets and liabilities, and for net operating losses and tax credit carry forwards. In some cases, we may record a valuation allowance to reduce our deferred tax assets to estimated realizable value. We review our deferred tax assets and valuation allowance requirements quarterly. If we are unable to demonstrate that it is more likely than not that we will not be able to generate sufficient future taxable income to realize the net carrying value of deferred tax assets, we will record a valuation allowance to reduce the deferred tax assets to estimated realizable value, which could result in a material income tax charge. As part of our review, we consider positive and negative evidence, including cumulative results of recent years.
If we are unable to successfully comply with our credit agreement with Bank of America or secure alternative financing, our business and financial condition could be materially adversely affected.
Our credit agreement with Bank of America, N.A. requires us, among other things, to satisfy certain financial ratios on an ongoing basis, consisting of a maximum consolidated leverage ratio, and a minimum consolidated fixed charge coverage ratio and an asset coverage ratio. We are also required to comply with other covenants and conditions, set forth in the credit agreement, including, among others, limitations on our and our subsidiaries’ ability to incur future indebtedness, to place liens on assets, to pay dividends or distributions on their capital stock, to repurchase or
The agreements governing our indebtedness subject us to various restrictions that limit our ability to pursue business opportunities.
The credit agreement governing our credit facility with Bank of America, N.A., as amended, contains, and any future debt agreements may include several restrictive covenants that impose significant operating and financial restrictions on us and our subsidiaries. Such restrictive covenants may significantly limit our ability to:
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We 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 our overall business.
We have made strategic investments in other companies, products and technologies.technologies, including our August 2022 acquisition of Astro Machine LLC. We will 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:
For example, in the recently acquired Astro Machine business, revenues are concentrated in a relatively small number of customers. Failure to satisfy the delivery requirements of those customers or to adequately respond to their evolving product requirements could cause us to lose one or more customers which would have a material adverse impact on our financial condition and results of operation due to lower revenue and could result in intangible asset impairment.
In certain instances, as permitted by applicable law and NASDAQ rules, acquisitions, such as the Astro Machine acquisition, 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 an 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:
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 the expected benefits of our acquisitions, divestitures or strategic partnerships, our business, results of operations and financial condition could be adversely affected.
Changes in our business strategy or restructuring of our businesses may increase our costs or otherwise affect the profitability of our businesses.
We continually review our operations with a view toward reducing our cost structure, including but not limited to reducing our labor cost-to-revenue ratio, improving process and system efficiencies and increasing our revenues and operating margins. For example, in fiscal 2024 we implemented a restructuring plan in our PI segment to reduce operating costs within that segment. As changes in our business environment occur, we may need to adjust our business strategies to meet these changes, or we may otherwise find it necessary to restructure our operations or particular businesses or assets. When these changes or events occur, we may incur costs to change our business strategy and may need to write down the value of assets or sell certain assets. In any of these events our costs may increase, and we may have significant charges or losses associated with the write-down or divestiture of assets.
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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 2022,2024, we had approximately $5.3$4.5 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 such as those caused by the currentCOVID-19pandemic 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-partiescounterparties 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.
Inadequate self-insurance accruals or insurance coverage for employee health carehealthcare benefits could have an adverse effect on our business, financial results or financial condition.
In the U.S., we maintain an employee health insurance coverage plan on a self-insured basis backed by stop-loss coverage which sets a limit on our liability for both individual and aggregate claim costs. We record expenses based on actual claims incurred and estimates of the costs of expected claims, administrative costs, and stop-loss insurance premiums.
We record a liability for our estimated cost of U.S. claims incurred and unpaid as of each balance sheet date. Our estimated liability is recorded on an undiscounted basis and is based on historical trends.trends and data provided by our insurance broker. Our history of claims activity is closely monitored, and liabilities are adjusted as warranted based on changing circumstances. It is possible, however, that our actual liabilities may exceed our estimates of loss.losses. We may also experience an unexpectedly large number of claims that result in costs or liabilities in excess of our projections, which could cause us to record additional expenses, which could adversely impact our business, financial condition, results of operations and cash flow. We believe that the liabilities we have recorded to date will be sufficient to provide for losses we may incur due to increasedCOVID-19related employee health care insurance costs. However, the ultimate amount of these costs cannot be estimated at this time, and a prolonged period of spread of the disease could further increase our costs and liabilities, the impact of which may be material.
Legal and Regulatory Risks:
Certain of our products require certifications by customers, 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 customers, 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.
We are subject to laws and regulations; failure to address or comply with these laws and regulations could harm our business and adversely affect our results of operations.
Our operations are subject to laws, rules, regulations, including environmental regulations, government policies and other requirements in each of the jurisdictions in which we conduct business. Changes in laws, rules, regulations, policies or requirements could result in the need to modify our products and could affect the demand for our products, which may have an adverse impact on our future operating results. In addition, we must comply with regulations restricting our ability to include lead and certain other substances in our products. If we do not comply with applicable laws, rules and regulations we could be subject to costs and liabilities and our business may be adversely impacted.
We are subject to regulatory constraints and compliance requirements due to our status as a publicly held company. Public company compliance costs are increasing due to the increase in SEC regulations and enforcement actions, and the heightened scrutiny that we and the public accounting industry face from the Public Companies Accounting Oversight Board. Additionally, certain new and proposed regulations in the State of Rhode Island, where we are headquartered, are likely to increase compliance costs. In some instances, the regulations may mandate action on our part for which, to our knowledge, no current technical means to comply exist. If enacted, the costs of complying with these regulations could have a material adverse impact on our business.
Our business outside of the United States exposes us to foreign and additional U.S. laws and regulations, including but not limited to, laws and regulations relating to taxation, business licensing or certification requirements, employee rights and protection, consumer protection, intellectual property rights, consumer and data protection, privacy, encryption, restrictions on pricing or discounts, and the U.S. Foreign Corrupt Practices Act and other applicable U.S. and foreign laws prohibiting corrupt payments to
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government officials and other third parties. For example, the increased use of sanctions in U.S. international relations recently has increased our cost of compliance with the regulations intended to enforce them.
Section 404 of the Sarbanes-Oxley Act of 2002 requires that companies evaluate and report on the effectiveness of their internal control over financial reporting and any inability to achieve and maintain effective disclosure controls and procedures and internal control over financial reporting, could adversely affect our results of operations, our stock price and investor confidence in our company.
We have identified a material weakness in our internal control over financial reporting and that weakness has led to a conclusion that our internal control over financial reporting and disclosure controls and procedures were not effective as of January 31, 2024. The material weakness related to our failure to design and maintain an effective control environment at our Astro Machine subsidiary, which was acquired in August of 2022. Management is taking action to remediate this material weakness in its internal controls over financial reporting by designing an effective control environment and expanding our existing enterprise resource planning system to include the Astro Machine subsidiary.
If action to remediate this material weakness is not completed on a timely basis, or if other remediation efforts are not successful, we may, in the future, identify additional internal control deficiencies that could rise to the level of a material weakness or uncover other errors in financial reporting.
Failure to have effective internal control over financial reporting and disclosure controls and procedures could impair our ability to produce accurate financial statements on a timely basis, or provide reliable financial statements needed for business decision processes, and our business and results of operations could be harmed. Additionally, investors could lose confidence in our reported financial information and our ability to obtain additional financing, or additional financing on favorable terms, could be adversely affected. Also, failure to maintain effective internal control over financial reporting could result in sanctions by regulatory authorities.
Certain of our operations and products are subject to environmental, health and safety laws and regulations, which may result in substantial compliance costs or otherwise adversely affect our business.
Our operations are subject to numerous federal, state, local and foreign laws and regulations relating to protection of the environment, including those that impose limitations on the discharge of pollutants into the air and water, establish standards for the use, treatment, storage and disposal of solid and hazardous materials and wastes, and govern the cleanup of contaminated sites. As such, our business is subject to and may be materially and adversely affected by compliance obligations and other liabilities under those environmental, health and safety laws and regulations. Certain of our products contain, and some of manufacturing operations use various substances which have been or may be deemed to be hazardous or dangerous. Thus, we have and will continue to generate a generally limited amounts of hazardous wasteswaste in our operations. We manage our compliance with laws and regulations and the proper mitigation of risks internally and through the input orof external consultants and outside service providers and we believe we are in material compliance with all applicable environmental laws and regulations. We desire to reduce and ultimately eliminate any adverse environmental impact of our business and to comply with relevant laws and regulations. We expect this effort to affect our ongoing operations and require additional capital and operating expenditures. If we were to fail to manage our environmental compliance effectively, we could suffer economic or reputational harm.
Our operations are subject to anti-corruption laws, including the U.S. Foreign Corrupt Practices Act, and any determination that we or any of our subsidiaries has violated the Foreign Corrupt Practices Act could have a material adverse effect on our business.
The U.S. Foreign Corrupt Practices Act (FCPA), the UK Bribery Act and similar worldwide anti-corruption laws generally prohibit companies and their intermediaries from making improper payments to government 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
Unauthorized access to personal data could give rise to liabilities as a result of governmental regulation, conflicting legal requirements or differing views of personal privacy rights and compliance with laws designed to prevent unauthorized access of personal data could be costly.
We collect and store certain data, including proprietary business information, and may have access to confidential or personal information that is subject to privacy and security laws, regulations and customer-imposed controls. Security breaches or other unauthorized access to, or the use or transmission of, personal user information could result in a variety of claims against us, including privacy-related claims. There are numerous federal, state, local, and international laws and regulations regarding privacy and the
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storage, sharing, use, processing, disclosure and protection of this kind of information, the scope of which are changing, inconsistent and conflicting and subject to differing interpretations.
We also expect that there will continue to be new laws, regulations, and industry standards concerning privacy, data protection, and information security proposed and enacted in various jurisdictions. For example, in 2016 the European Commission adopted the General Data Protection Regulation (GDPR), a comprehensive privacy and data protection reform that became effective in May 2018. The GDPR, which is applicable to all companies processing data of European Union residents, imposes significant fines and sanctions for violations. These requirements are complicated, and compliance is technically complex to maintain. We contract with outside experts to advise us, conduct internal and external compliance training, and believe we are currently in compliance, however, maintaining compliance has increased costs and diverted resources. Similarly, the California Consumer Privacy Act of 2018, which was enacted in June 2018 and came into effect on January 1, 2020, provides a new private right of action for data breaches and requires companies that process information on California residents to make new disclosures to consumers about their data collection, use and sharing practices and allow consumers to opt out of certain data sharing with third parties.
Additionally, other jurisdictions have enacted or are enacting data localization laws that require data generated in or relating to the residents of those jurisdictions to be physically stored within those jurisdictions. In many cases, these laws and regulations apply not only to transfers between unrelated third parties but also to transfers between us and our subsidiaries. All these evolving compliance and operational requirements impose significant costs that are likely to increase over time.
While we continue to assess these requirements and the ways they may impact the conduct of our business, we believe that we materially comply with applicable laws and industry codes of conduct relating to privacy and data protection. There is no assurance that we will not be subject to claims that we have violated applicable laws or codes of conduct, that we will be able to successfully defend against such claims or that we will not be subject to significant fines and penalties in the event we are found not to be in compliance with such laws or codes of conduct.
Any failure or perceived failure by us (or any third parties with whom we have contracted to store such information) to comply with applicable privacy and security laws, policies or related contractual obligations or any compromise of security that results in unauthorized access to personal information may result in governmental enforcement actions, significant fines, litigation, claims of breach of contract and indemnity by third parties and adverse publicity. In the case of such an event, our reputation may be harmed, we could lose current and potential users and the competitive positions of our various brands could be diminished, any or all of which could adversely affect our business, financial condition and results of operations.
Changes in accounting standards and subjective assumptions, estimates, and judgments by management related to complex accounting matters could significantly affect our financial results or financial condition.
Generally accepted accounting principles and related accounting pronouncements, implementation guidelines, and interpretations with regard to a wide range of matters that are relevant to our business, such as
Item 1B. Unresolved Staff Comments
None.
Item 1C. Cybersecurity
Cybersecurity Risk Management and Strategy
We have made substantial investments in cybersecurity risk management, and it is an integral part of our overall enterprise risk management program. We have implemented a variety of tools and a process designed to identify, monitor, evaluate and respond to cybersecurity threats and incidents, including those associated with our use of third-party vendors and service providers. Our process consists of steps for identifying the source of a cybersecurity threat or incident, including whether such cybersecurity threat or incident is associated with a third-party vendor or service provider; implementing cybersecurity countermeasures and mitigation strategies, and informing management and our board of directors of potentially material cybersecurity threats and incidents or other significant changes in the evolving cybersecurity threat landscape. We intend to continue to make substantial investments in cybersecurity risk management to improve our tools and processes because the cybersecurity threat continues to evolve. While we continue to invest in our infrastructure environment and monitoring capability, and in due diligence with respect to the third parties with whom we interact, there can be no assurance that we can prevent, mitigate, or remediate the risk of any compromise or failure in the cybersecurity infrastructure owned or controlled by us or any third-party vendor or service providers that we use.
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Our Information Technology team reports to senior management and is responsible for assessing and maintaining our cybersecurity risk management program. In addition, they collaborate with third-party security specialists as necessary, aiming for thorough risk assessments and system improvements. Together with our third-party security service providers, the Information Technology team oversees our processes for the prevention, detection, mitigation, and resolution of cybersecurity incidents. Throughout the year, we regularly train our employees on cybersecurity awareness and confidential information protection. We review or update our cybersecurity policies and the effectiveness of our programs to manage cybersecurity risk on a continuing basis, to account for changes in the evolving cybersecurity threat landscape, as well as for any related legal and regulatory developments that may occur.
Cybersecurity threats have the potential to materially affect our company, including our business strategy, results of operations, and financial condition. While we have not experienced material adverse effects from cybersecurity threats to date, we recognize the evolving nature of these risks and remain vigilant in our efforts to mitigate potential impacts. Refer to “Item 1A. - Risk Factors” in this annual report on Form 10-K, including, “We could experience a significant disruption in or security breach of our information technology system which could harm our business and adversely affect our results of operations,” for additional discussion on our cybersecurity related risks.
Cybersecurity Governance
Our management, including our Chief Executive Officer (“CEO”) and Chief Financial Officer (“CFO”), and Information Technology team are responsible for identifying and assessing cybersecurity risks on an ongoing basis, establishing processes designed to provide reasonable assurance that such potential cybersecurity risk exposures are monitored, instituting appropriate mitigation and remediation measures, and maintaining cybersecurity programs. Additionally, since we do not have a full time Chief Information Security Officer, we obtain additional domain expertise from third party outside resources. Our cybersecurity programs are managed under the direction of our CFO, who receives reports from our Information Technology team and third-party resources to monitor the prevention, detection, mitigation, and remediation of cybersecurity risks.
Our board of directors has oversight responsibility for our overall enterprise risk management and directly oversees our cybersecurity risk management. As part of its enterprise risk management efforts, our board of directors regularly receives reports from management on our cybersecurity programs with regard to any risks that may arise from specific cybersecurity threats and incidents. The board of directors oversees management’s programs, policies and processes in place that identify, monitor, assess, and respond to cybersecurity, data privacy, and other information technology risks to which we are exposed.
Item 2.
The following table sets forth information regarding our principal owned property. Thisproperties. The West Warwick property is subject to a security agreement and a mortgage in favor of the lender under our credit facility.
Location | Approximate | Principal Use | ||||
West Warwick, Rhode Island, United States | 135,500 | Corporate headquarters, research and development, | ||||
Elk Grove Village, Illinois | 34,460 | Astro Machine principal place of business | ||||
The West Warwick facility is used by both of our business segments, while the Elk Grove Village facility is exclusively used by the PI segment.
We also lease facilities in various other locations. The following information pertains to each location:
Location | Approximate | Principal Use | ||||
Dietzenbach, Germany | 18,630 | Manufacturing, sales and service (PI segment) | ||||
Copenhagen, Denmark | 4,800 | R&D, sales and service (PI segment) | ||||
Brossard, Quebec, Canada | 4,500 | Manufacturing, sales and service (PI segment) | ||||
Elancourt, France | 4,150 | Sales and service (PI segment) | ||||
Shah Alam, Selangor, Malaysia | 2,067 | Sales (PI segment) | ||||
Singapore | 2,400 | Sales | ||||
Shanghai, China | 425 | Sales | ||||
Mexico City, Mexico | 97 | Sales (PI segment) | ||||
We believe all our facilities are well maintained in good operating condition and generally adequate to meet our needs for the foreseeable future.
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Item 3.
We are not a party to any pending,various legal proceedings arising from normal business activities. Management believes that the ultimate resolution of these matters will not have a material legal proceedings. However,adverse effect on our financial position, results of operations or cash flows. Additionally, because of the 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 4.
Not applicable.
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PART II
Item 5. Market for the Registrant’s Common Stock, Related Stockholder Matters and Issuer Purchases of Contents
Our common stock trades on the NASDAQ Global Market under the symbol “ALOT.”
As of April 5, 2024, we had approximately 214370 shareholders, of record as of April 12, 2022, which does not reflect shareholders with beneficial ownership in shares held in nominee name.
Stock Repurchases
During the fourth quarter of fiscal 2022,2024, we made the following repurchases of our common stock:
Total Number | Average | Total Number of | Maximum Number | |||||||||||||
November 1 – November 30 | — | — | — | — | ||||||||||||
December 1 – December 31 | 309(a) | 15.16(a) | — | — | ||||||||||||
January 1 – January 31 | — | — | — | — | ||||||||||||
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 | 483 | (a) | 15.88 | (a) | — | — | ||||||||||
January 1 – January 31 | 1,682 | (b) | 13.10 | (b) | — | — | ||||||||||
Item 6. (Reserved)[Reserved]
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Item 7.
The following discussion and analysis are meant to provide material information relevant to an assessment of the financial condition and results of operations of our company, including an evaluation of the amounts of cash flows from operations and outside resources, liquidity and certain other factors that may affect future results so as to allow investors to better view our company from management’s perspective. The following discussion and analysis of our financial condition and results of operations should be read together with our financial statements and the related notes and other financial information included elsewhere in this annual report on Form
Overview
We are a multi-national enterprise that leverages itsour proprietary data visualization technologies to design, develop, manufacture, distribute and service a broad range of products that acquire, store, analyze and present data in multiple formats. We organize our structure around a core set of competencies, including research and development, manufacturing, service, marketing and distribution. We market and sell our products and services through the following two segments:
On August 4, 2022, we completed the acquisition of Astro Machine, an Illinois-based manufacturer of printing equipment, including label printers, tabbers, conveyors, and envelope feeders, for aggregate consideration of $17.1 million. Astro Machine is reported as part of our PI segment beginning with the third quarter of fiscal 2023. Refer to Note 2, “Acquisition,” in our consolidated financial statements included elsewhere in this report for further details.
On July 26, 2023, we adopted a restructuring plan (the “2024 Restructuring Plan”) for our PI segment that transitioned a portion of the printer manufacturing within that segment from our facility in Rhode Island to our Astro Machine facility located in Illinois. Additionally, we ceased selling certain of our older, lower-margin or low-volume PI segment products and made targeted reductions to our workforce. As part of the 2024 Restructuring Plan, we also consolidated certain of our international PI sales and distribution facilities and streamlined our channel partner network. The total cost of this plan was $2.5 million, comprised primarily of non-cash charges related to inventory write-offs and facility exit costs, and cash charges related to severance-related costs. As of January 31, 2024, we have completed the 2024 Restructuring Plan. Refer to Note 19, “Restructuring,” in our consolidated financial statements included elsewhere in this report for further details.
In connection with our 2024 Restructuring Plan, we identified the need to address quality and reliability issues in certain models of our PI printers as a result of faulty ink provided by one of our larger suppliers. We identified approximately 150 printers sold to our customers that were affected by the faulty ink. In order to remedy these issues and maintain solid customer relationships, during the second quarter of fiscal 2024, we initiated a program to retrofit all of the affected printers sold to our customers (the “2024 Product Retrofit Program”). The costs associated with this program, which included the cost of parts, labor and travel, were $0.6 million and were included in cost of revenue in our consolidated income statement for the year ended January 31, 2024. During fiscal 2024, we worked with our customers to either repair or replace the affected printers and at the end of the fourth quarter of fiscal 2024, the 2024 Product Retrofit Program was concluded. Refer to Note 19, “Restructuring,” in our consolidated financial statements included elsewhere in this report for further details.
We market and sell our products and services globally through a diverse distribution structure of direct sales personnel, manufacturers’ representatives, OEMs, and authorized dealers that deliver a full complement of branded products and services to customers in our respective markets. Our growth strategy centers on organic growth through product innovation made possible by research and development initiatives, as well as strategic acquisitions that fit into or complement existing core businesses. In fiscal 2022, 20212024, 2023, and 2020,2022, revenue from customers in various geographic areas outside the United States, primarily in Western Europe, Canada and Asia, amounted to $63.3 million, $59.0 million, and $49.3 million, $45.1 million and $49.8 million, respectively.
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We maintain an active program of product research and development. DuringWe spent approximately $6.9 million in fiscal 2022, 20212024 and 2020, we spent $6.8 million $6.2 millionin both fiscal 2023 and $8.1 million, respectively,2022, on Company-sponsored product development. We are committed to continuous product development as essential to our organic growth and expect to continue our focus on research and development efforts in fiscal 20222025 and beyond.
We also continue to invest in sales and marketing initiatives by expanding and improving the existing sales force and using various marketing campaigns to achieve our goals of sales growth and increased profitability notwithstanding the challenging economic environment.
Impact of our global operations have been materially adversely affected by the worldwidepandemic during the past two years. We expect this adverse impact to continue to a degree that we cannot predict.
The lingering impact of the COVID-19 pandemic and the related supply chain dislocations have increased the amount of inventory we maintaincontinues to supportaffect our product sales. We have also experienced several situations where component shortages and scarcity have required us to pay significantly higher costs to obtain those components. We will continue to monitorbusiness, most notably in our supply chain going forward and update our mitigation strategies as we determine appropriate. We are not able to predict how current supply chain difficulties will developT&M segment. While sales demand in this segment has largely recovered in the future, and ifcurrent year due to the steps we are taking are not effective, it could have a material adverse impact on our results of operations.
Results of Operations
Fiscal 20222024 compared to Fiscal 2021
The following table presents the revenue of each of our segments, as well as the percentage of total revenue and change from the prior year.
| ($ in thousands) | 2022 | 2021 | ||||||||||||||||||
Revenue | As a % of Total Revenue | % Change Over Prior Year | Revenue | As a % of Total Revenue | ||||||||||||||||
Product Identification | $ | 90,915 | 77.4 | % | 0.7 | % | $ | 90,268 | 77.8 | % | ||||||||||
T&M | 26,565 | 22.6 | % | 3.1 | % | 25,765 | 22.2 | % | ||||||||||||
Total | $ | 117,480 | 100.0 | % | 1.2 | % | $ | 116,033 | 100.0 | % | ||||||||||
($ in thousands) |
| 2024 |
|
| 2023 |
| ||||||||||||||
| Revenue |
|
| As a % of |
|
| % Change |
|
| Revenue |
|
| As a % of |
| ||||||
PI |
| $ | 104,041 |
|
|
| 70.3 | % |
|
| 0.9 | % |
| $ | 103,089 |
|
|
| 72.3 | % |
T&M |
|
| 44,045 |
|
|
| 29.7 | % |
|
| 11.7 | % |
|
| 39,438 |
|
|
| 27.7 | % |
Total |
| $ | 148,086 |
|
|
| 100.0 | % |
|
| 3.9 | % |
| $ | 142,527 |
|
|
| 100.0 | % |
Net revenue in fiscal 20222024 was $117.5$148.1 million, a 1.2%3.9% increase compared to net revenue of $116.0$142.5 million for fiscal 2021.2023. Current year revenue through domestic channels was $68.2$84.8 million, a declinean increase of 3.8%1.4% from prior year domestic revenue of $70.9$83.6 million. International revenue of $49.3$63.3 million for fiscal 20222024 increased 9.2%7.4% compared to prior year international revenue of $45.1$59.0 million. Fiscal 20222024 international revenue reflects a favorable foreign exchange rate impact of $1.1$0.4 million, compared to a favorablean unfavorable foreign exchange rate impact of $0.8$3.5 million in fiscal 2021.
Hardware revenue in fiscal 20222024 was $31.5$49.4 million, a $2.6$7.0 million or 7.7%16.5% increase compared to fiscal 2023 hardware revenue of $42.4 million due to increased hardware sales in both the T&M and PI segments. T&M hardware sales increased 15.8% or $3.8 million compared to the prior year primarily due to increased sales in our aerospace printer product line. Current year hardware sales in the PI segment increased 17.4% or $3.1 million compared to the prior year, predominately as a result of the August 2022 acquisition of Astro Machine which contributed a full year of revenue for fiscal 2024, compared to six months in fiscal 2023. The increase in PI hardware sales for the current year was slightly offset by a decline in sales of our QuickLabel and TrojanLabel product line printers.
Revenue from supplies in fiscal 2024 was $79.3 million, a 3.4% or $2.8 million decrease compared to fiscal 2021 hardware2023 supplies revenue of $34.1$82.1 million. The current year decrease in hardwaresupplies revenue iswas primarily due to lower sales of ink jet supply products in the PI segment, which declined $3.3 million or 5.2% from the prior year. Also contributing to the decrease in current year supply revenue was the decline in hardwarethermal film supplies in the PI segment. The overall decline in supplies sales in the current year was partially offset by increased sales of toner and media supplies in our PI segment and an increase in paper supply revenue for the aerospace printers in our T&M segment.
Service and other revenue in both the PIfiscal 2024 was $19.4 million, a 7.7% or $1.4 million increase compared to fiscal 2023 service and T&M segments.other revenue of $18.0 million. The decrease in hardware revenueincrease is primarily due to the inclusion of a 10.1% decline in hardware salesfull year of Astro Machine parts revenue in the T&MPI segment resulting from overall lower aerospace printer product line sales in the T&M segment as a result of the continuing effects of the Boeing 737 MAX grounding and the impact of the sharp decline in air travel due toCOVID-19.T&M hardware revenue for the current year, was also negatively impacted by a decline in sales of data recorders. Also contributingcompared to the overall decline in hardware revenue for the current year was a more modest decline in sales in the PI segment of QuickLabel model printers which was partially offset by sales related to printers in the TrojanLabel product group.
Gross profit was $43.7$51.6 million for fiscal 2022,2024, reflecting a 5.8%7.2% increase compared to fiscal 20212023 gross profit of $41.4$48.2 million. Our gross profit margin of 37.2%34.9% in fiscal 20222024 reflects a 2.41.1 percentage point increase compared to fiscal 20212023 gross profit margin of 35.6%33.8%. The higherincreased gross profit and related profit margin for the current year compared to the prior year is primarily attributable to increased revenue and the impact of the ERC, which reduced manufacturing payroll taxes in the amount of $1.7 million in the second quarter of the current year.higher margins on a favorable product mix.
22
Operating expenses for the current year were $39.5$42.8 million, representing a 1.4%0.3% increase from the prior year’s operating expenses of $38.9$42.7 million. Specifically, selling and marketing expenses of $23.2$24.4 million in fiscal 20222024 decreased 0.5%0.1% from the prior year amount of $23.3$24.5 million. The slight decrease in selling and marketing expenses for the current year is primarily due to a decrease in payroll taxes in the second quarter of the current year related to the ERC,wages and benefits as well as a decrease in amortizationmaintenance contract fees. Current year selling and marketing expense was also impacted by $0.4 million in restructuring costs related to the second quarter’s change in the remaining useful lives and amortization methods for certain of our customer relationship intangibles.2024 Restructuring Plan. The current year declinedecrease in selling and marketing expenses was partially offset by an increase in employee wagesamortization expense related to the customer relationship and bonusestrademark intangibles acquired as well as increased travel and entertainment, commissions, and advertising expenses.part of the Astro Machine acquisition. General and administrative expenses increased 1.4%0.5% to $9.6$11.5 million in the current year compared to $9.4$11.4 million in the prior year, primarily due to an increaseas increases in professional fees, wages, and bonuses were largely offset by decreases in outside service fees,and employee wages, bonusesfees. Current year general and fees, partially offsetadministrative expense was also impacted by a decrease in payroll taxes$0.1 million of restructuring costs related to the ERC.2024 Restructuring Plan. Research & development (“R&D”) costs in fiscal 20222024 of $6.8$6.9 million increased 8.8%1.2% from $6.2 millionfiscal 2023, as increases in fiscal 2021, primarily due to an increaseoutside consulting and service expenses were substantially offset by decreases in employee wageswage and bonus and outside consulting fees. The current year increase in R&D costs was partially offset by a decline in payroll taxes related to the ERC.expenses. The R&D spending level for fiscal 20222024 represents 5.7%4.7% of net revenue, compared to the prior year level of 5.3%4.8%.
Other incomeexpense in fiscal 20222024 was $2.8$2.7 million compared to other expense of $0.3$2.0 million in fiscal 2021.2023. Current year other incomeexpense includes $4.5$2.7 million related to the forgiveness of interest expense on our PPP Loan, partiallydebt and revolving credit facility and $0.1 million of net foreign exchange loss, offset by $0.7 million related to thewrite-offour Oracle EnterpriseOne ERP system and related prepaid service and maintenance contracts as a result of the full implementation of a new ERP system in our US based operations in the fourth quarter of fiscal 2022,$0.1 million. Prior year other expense included interest expense on debt and revolving credit facility of $0.7$1.7 million, and net foreign exchange loss of $0.3 million. Prior year other expense includes $1.0$0.5 million, of interest expense on debt and revolving line of credit, offset by a net foreign exchange gain of $0.6 million and other income of $0.1 million.
We recognized $0.6$1.4 million of income tax expense for the current fiscal year, resulting in an effective tax rate of 8.6%.22.7% compared to 22.0% in fiscal 2023. The decreaseincrease in the effective tax rate in 2022fiscal 2024 from 2021fiscal 2023 is primarily related to the PPP loan forgivenesstax-exemptincome. Specific itemsimpact of the valuation allowance recorded on China net operating losses, the increase in the current provision for state and local taxes, and the change in the foreign rate differential. This increase was partially offset by other factors decreasing the effective tax rate include PPP loan forgivenesstax-exemptincome, R&D tax credits, foreign derived intangible income (“FDII”) deductions, and a change in reserves related to ASC 740 liabilities. This decrease was offset by state taxes, return to provision adjustments, and taxes on foreign earnings. The PPP Loan forgiveness is excluded from taxable income under Section 1106(i) of the CARES Act. During fiscal 2021 we recognized a $0.9 million income tax expense, or a 41.1% effective tax rate. The effective tax rate in this period was directly impacted by the change in mix of income between relevant jurisdictions in which we are subject to income taxes. Specific items increasing the fiscal 2021 effective tax rate include foreign rate differential, Denmark statutory audit adjustments, stock-based compensation, and Canada withholding taxes. This increase was offset by thesuch as foreign derived intangible income deduction, share based compensation, and the release of a valuation allowance in China, and R&D tax credits expected to be utilized.
Net income for fiscal 20222024 was $6.4$4.7 million, or $0.88$0.63 per diluted share. The results for this period were impacted by expense of $2.6 million ($2.0 million net of tax or $0.27 per diluted share) related to the 2024 Restructuring Plan and expense of $0.6 million ($0.5 million net of tax or $0.07 per diluted share) related to the 2024 Product Retrofit Program. Net income for fiscal 2023 was $2.7 million, or $0.36 per diluted share. The results for the current periodfiscal 2023 year were impacted by income of $4.5 million ($4.4 million net of tax or $0.60 per diluted share) related to the forgiveness of our PPP Loan, income of $2.1 million ($1.6 million net of tax or $0.22 per diluted share) related to the net ERC and expenseexpenses of $0.7 million ($0.5 million net of tax, or $0.07 per diluted share) related to thewrite-offour Oracle EnterpriseOne ERP system and related prepaid service and maintenance contracts. Net income for the prior year was $1.3 million or $0.18 per diluted share. Return on revenue was 5.5% for fiscal 2022 compared to 1.1% for fiscal 2021.
Fiscal 20212023 compared to Fiscal 2020
For a comparison of our results of operations for the fiscal years ended January 31, 2021,2023, and January 31, 2020,2022, see “Part II, Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations” of our annual report on Form2021,2023, filed with the SEC on April 13, 2021.
Segment Analysis
We report two segments consistent with our product revenue groups: PI and T&M. Segment performance is evaluated based on the operating segment’s profit (loss) before corporate and financial administration expenses. The following table summarizes selected financial information by segment.
| ($ in thousands) | Revenue | Segment Operating Profit (Loss) | Segment Operating Profit (Loss) as a % of Revenue | |||||||||||||||||||||||||||||||||
2022 | 2021 | 2020 | 2022 | 2021 | 2020 | 2022 | 2021 | 2020 | ||||||||||||||||||||||||||||
PI | $ | 90,915 | $ | 90,268 | $ | 88,116 | $ | 10,411 | $ | 12,885 | $ | 7,509 | 11.5 | % | 14.3 | % | 8.5 | % | ||||||||||||||||||
T&M | 26,565 | 25,765 | 45,330 | 3,398 | (1,032 | ) | 6,281 | 12.8 | % | (4.0 | )% | 13.9 | % | |||||||||||||||||||||||
Total | $ | 117,480 | $ | 116,033 | $ | 133,446 | 13,809 | 11,853 | 13,790 | 11.8 | % | 10.2 | % | 10.3 | % | |||||||||||||||||||||
Corporate Expenses | 9,553 | 9,420 | 11,357 | |||||||||||||||||||||||||||||||||
Operating Income | 4,256 | 2,433 | 2,433 | |||||||||||||||||||||||||||||||||
Other Expense, Net | 2,778 | (254 | ) | (1,063 | ) | |||||||||||||||||||||||||||||||
Income Before Income Taxes | 7,034 | 2,179 | 1,370 | |||||||||||||||||||||||||||||||||
Income Tax Provision (Benefit) | 605 | 895 | (389 | ) | ||||||||||||||||||||||||||||||||
Net Income | $ | 6,429 | $ | 1,284 | $ | 1,759 | ||||||||||||||||||||||||||||||
($ in thousands) |
| Revenue |
|
| Segment Operating Profit |
|
| Segment Operating Profit |
| |||||||||||||||||||||||||||
| 2024 |
|
| 2023 |
|
| 2022 |
|
| 2024 |
|
| 2023 |
|
| 2022 |
|
| 2024 |
|
| 2023 |
|
| 2022 |
| ||||||||||
P I |
| $ | 104,041 |
|
| $ | 103,089 |
|
| $ | 90,915 |
|
| $ | 10,087 |
|
| $ | 7,889 |
|
| $ | 10,411 |
|
|
| 9.7 | % |
|
| 7.7 | % |
|
| 11.5 | % |
T&M |
|
| 44,045 |
|
|
| 39,438 |
|
|
| 26,565 |
|
|
| 10,200 |
|
|
| 8,989 |
|
|
| 3,398 |
|
|
| 23.2 | % |
|
| 22.8 | % |
|
| 12.8 | % |
Total |
| $ | 148,086 |
|
| $ | 142,527 |
|
| $ | 117,480 |
|
|
| 20,287 |
|
|
| 16,878 |
|
|
| 13,809 |
|
|
| 13.7 | % |
|
| 11.8 | % |
|
| 11.8 | % |
Corporate Expenses |
|
|
|
|
|
|
|
|
|
|
| 11,491 |
|
|
| 11,435 |
|
|
| 9,553 |
|
|
|
|
|
|
|
|
|
| ||||||
Operating Income |
|
|
|
|
|
|
|
|
|
|
| 8,796 |
|
|
| 5,443 |
|
|
| 4,256 |
|
|
|
|
|
|
|
|
|
| ||||||
Other Income (Expense), Net |
|
|
|
|
|
|
|
|
|
|
| (2,723 | ) |
|
| (2,033 | ) |
|
| 2,778 |
|
|
|
|
|
|
|
|
|
| ||||||
Income Before Income Taxes |
|
|
|
|
|
|
|
|
|
|
| 6,073 |
|
|
| 3,410 |
|
|
| 7,034 |
|
|
|
|
|
|
|
|
|
| ||||||
Income Tax Provision |
|
|
|
|
|
|
|
|
|
|
| 1,379 |
|
|
| 749 |
|
|
| 605 |
|
|
|
|
|
|
|
|
|
| ||||||
Net Income |
|
|
|
|
|
|
|
|
|
| $ | 4,694 |
|
| $ | 2,661 |
|
| $ | 6,429 |
|
|
|
|
|
|
|
|
|
| ||||||
Product Identification
Revenue from the PI segment increased 0.7%0.9% in fiscal 2022,2024, with revenue of $90.9$104.0 million compared to revenue of $90.3$103.1 million in the prior year. The current year increase is primarily attributable to growththe contribution of a full year of revenue from the fiscal 2023 acquisition of Astro Machine, compared to six months in demand for ink jet and media supplies for the prior year. Trojan Label related product line,supplies and part revenues also grew in fiscal 2024 compared to the prior year due to the larger installed base of these printers. The current year increase in current year sales of QuickLabel’s ink jet printerPI
23
revenue was largely offset by declines in the revenue from inkjet supplies and an increasecertain tabletop label hardware sales, particularly in parts and repairs revenue in bothNorth America resulting primarily from the QuickLabel and Trojan Label product groups. Also contributingcontinued adverse market reaction to the increase in revenue fordeterioration of certain label printers due to the current year was an increase in hardware sales in the Trojan Label product group for certain new products such as the Trojan Two Compact printer and theT3-OPXlabel press.ink quality issues related to one of our larger suppliers. PI current year segment operating profit was $10.4$10.1 million with a profit margin of 11.5%9.7%, compared to the prior year segment operating profit of $12.9$7.9 million and related profit margin of 14.3%7.7%. The decreaseincrease in the current year PI segment operating profit and margin is primarily due to increasedthe inclusion of Astro Machine for the full twelve months of fiscal 2024, lower manufacturing and operating expenses.
Test & Measurement
Revenue from the T&M product group was $26.6$44.0 million for fiscal 2022, a 3.1%2024, an 11.7% increase compared to revenue of $25.8$39.4 million in the prior year. The increase in revenue for the current year iswas primarily attributable to the increasestrong hardware sales in repairs and parts sales for theour aerospace product lines as a result of increased aerospace printer product lines. Tounit volume. Demand for printers has increased due to the post-pandemic recovery in air travel demand, which has driven new orders for airplanes and a lesser degree, thecorresponding increase in production rates. Also contributing to the current year increase in revenue were increased sales of ToughSwitch ethernet products, which continue to recover to levels consistent with the fiscal 2019 through 2021 period after a large decline in fiscal 2022, and we currently expect comparable revenue from those products in fiscal 2025. T&M revenue in fiscal 2024 and 2023 was also impacted by $1.3 million and $1.1 million, respectively, of revenue recognized as the result of successful claims for component cost increases for printer shipments to one customer as described in Note 3, “Revenue Recognition,” in our consolidated financial statements included elsewhere in this report. The current year increase in suppliesT&M revenue was additionally favorably impacted by increased repair, parts and paper supply revenue related to aerospace printers, as flight hours and product utilization increased. The current year T&M segment revenue increase was partially offset by a decline in T&M hardware sales in the data recorder product line. At this time, we believe the outlook for T&M supplies, service and other revenue is favorable as the expected higher flight hours in commercial aviation should correlate favorably to higher aerospace product lines.printer supplies, parts and repair revenue. T&M current year segment operating profit was $3.4$10.2 million resulting in a 12.8%23.2% profit margin compared to the prior year segment operating lossprofit of $1.0$9.0 million and related negative operating margin of 4.0%22.8%. The increased profit and margins are a result of increased sales and lower manufacturing and operating costs.
Liquidity and Capital Resources
Overview
Historically, our primary sources of short-term liquidity have been cash generated from operating activities and borrowings under our revolving credit facility.These sources have also historically funded a portionthe majority of our capital expenditures and contractual contingent consideration obligations. We have typicallyIn fiscal 2024, we financed, under our secured equipment loan facility agreement, $0.8 million of capital investments to upgrade production machinery to support planned revenue growth and cost reduction objectives. In fiscal 2023, we funded acquisitionsthe acquisition of Astro Machine in part by borrowing under bankour credit facilities, as further described below.
We believe that in the coming year and in the longer term, loan facilities.
In connection with our purchase of Astro Machine on August 4, 2022, we entered into ana Second Amendment to Amended and Restated Credit Agreement (the “A&R Credit Agreement”“Second Amendment”) with Bank of America, N.A., as lender (the “Lender”), our wholly owned subsidiary ANI ApS, a Danish private limited liability company and ANI ApS’s wholly-owned subsidiary TrojanLabel ApS, a Danish private limited liability company (“TrojanLabel”). The A&R Credit AgreementSecond Amendment amended the Amended and restated theRestated Credit Agreement dated as of February 28, 2017,July 30, 2020, as amended by and among us, ANI ApS, TrojanLabel and the Lender. In connection with our entry into the A&R Credit Agreement, we entered into anFirst Amendment to Amended and Restated Security and Pledge Agreement and a mortgage in favor of the Lender with respect to our owned real property in West Warwick, Rhode Island. Under the A&R Credit Agreement, AstroNova, Inc. is the sole borrower, and, prior to the effectivenessdated as of the Amendment (as defined below), its obligations were guaranteed by ANI ApS and TrojanLabel.
The Amended Credit Agreement provides for (i) a new term loan in the principal amount of $10.0$6.0 million, which term loan was in addition to the existing term loan outstanding under the Existing Credit Agreement in the principal amount of $9.0 million as of the effective date of the Second Amendment, and (ii) a $22.5 millionan increase in the aggregate principal amount of the revolving credit facility available for general corporate purposes. At the closing of the Amended Credit Agreement, we borrowed the entire $10.0thereunder from $22.5 million term loan which was used to refinance in full the outstanding term loan under the A&R Credit Agreement.$25.0 million. Under the Amended Credit Agreement, revolving credit loans may continue
24
to be borrowed, at our option, in U.S. Dollars or, subject to certain conditions, Euros, British Pounds, Canadian Dollars or Danish Kroner.
At January 31, 2022,2024, our cash and cash equivalents were $5.3 million. There was no$4.5 million and we had an outstanding balance onof $8.9 million drawn and outstanding under our revolving line of credit atfacility. At January 31, 2022 and2024, we have $22.5had $16.1 million available for borrowing under that facility. We believe that our available cash and credit facilities combined with our cash generated from operations will be sufficient to support our operating requirements including our capital expenditure commitments.
Indebtedness
Term Loan
The Amended Credit Agreement requires that the term loan be paid as follows:in quarterly installments on the last day of each of our fiscal quarters over the term of the Amended Credit Agreement on the following repayment schedule: 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, 2021 through JanuaryOctober 31, 2022 through July 31, 2023 is $187,500;$375,000; and 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 October 31, 2023 through April 30, 2022 through January 31, 20232027 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$675,000. The entire remaining principal balance of the term loan is required to be paid on September 30, 2025.August 4, 2027. 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 timeAugust 4, 2027, and any outstanding revolving loans thereunder will be due and payable in full, and the revolving credit facility will terminate.terminate on such date. We may reduce or terminate the revolving line of credit facility at any time, subject to certain thresholds and conditions, without premium or penalty.
The Amended Credit Agreement includes an uncommitted accordion provision under which the term loan and/or revolving credit facility commitments may be increased in an aggregate principal amount not exceeding $10.0 million, subject to obtaining the agreement of the Lender and the satisfaction of certain other conditions.
Amounts repaid under the revolving credit facility may be reborrowed, subject to our continued compliance with the Amended Credit Agreement. No amount of the term loan that is repaid may be reborrowed.
The LIBOR Amendment, among other things, (i) changes the rateinterest rates under the Amended Credit Agreement for borrowings denominated in U.S. Dollars from a LIBOR-based rate to a BSBY (Bloomberg Short-Term Bank Yield Index)-based rate, subject to certain adjustments, (ii) changes the rate under the Amended Credit Agreement for borrowings denominated in British Pounds Sterling from a LIBOR-based rate to a SONIA (Sterling Overnight Index Average)-based rate, subject to certain adjustments, (iii) changes the rate under the Amended Credit Agreement for borrowings denominated in Euros from a LIBOR-based rate to a EURIBOR (Euro Interbank Offered Rate)-based rate, subject to certain adjustments, and (iv) updates certain other provisions of the Amended Credit Agreement regarding successor interest rates to LIBOR.
We must comply with various customary financial andand a minimum consolidated fixed charge coverage ratio. The minimum EBITDA,ratio and a minimum consolidated asset coverage ratio, minimum liquidity and maximum capital expenditures covenants with which we were required to comply under the A&R Credit Agreement were eliminated by the Amendment.ratio. The primarytheirour or our subsidiaries’ capital stock, to repurchase or acquire theirour or our subsidiaries’ capital stock, to conduct mergers or acquisitions, to sell assets, to alter theirour or our subsidiaries’ capital structure, to make investments and loans, to change the nature of theirour or our subsidiaries’ business, and to prepay subordinated indebtedness, in each case subject to certain exceptions and thresholds as set forth in the Amended Credit Agreement, certain of which provisions were modified by the Second Amendment.
The Lender is entitled to accelerate repayment of the loans and to terminate its revolving credit commitment under the Amended Credit Agreement upon the occurrence of any of various customary events of default, 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.
Our obligations under the Amended Credit Agreement continue to be secured by substantially all of our personal property assets (including a pledge of the equity interests held by uswe hold in ANIAstroNova Scandinavia 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 toIsland, and are guaranteed and secured by substantially all of the Amendment, the guaranteespersonal property assets of our obligations under the A&R Credit Agreement that were previously provided by ANI ApS and TrojanLabel were released.Astro Machine.
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Equipment Loan
In January 2024, we entered into a Loan Agreementsecured equipment loan facility agreement with Banc of America Leasing & Capital, LLC and executed a promissory note in favorborrowed the principal amount of Greenwood Credit Union pursuant to which we borrowed $4.4$0.8 million from Greenwood pursuant tothereunder for the Paycheck Protection Program administered by the United States Small Business Administration (the “SBA”)financing of our purchase of production equipment. The loan matures on January 23, 2029, and authorized by the CARES Act enacted on March 27, 2020. The terms of the PPP Loan were subsequently revised in accordance with the provisions of the Paycheck Protection Flexibility Act of 2020, which was enacted on June 5, 2020. We believe that our obtaining 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.
Cash Flow
The statements of cash flows for the years ended January 31, 2022, 20212024, 2023, and 20202022 are included on page 50F-7 of this Form$1.4$12.4 million in fiscal 20222024 compared to net cash providedused by operating activities of $15.5$2.9 million in the previous year. The decreaseincrease in net cash provided by operations for the current year is primarily due to a decreasethe impact of changes in cash provided by working capital of $11.3 million from fiscal 2021. Theitems. Specifically, the changes in accounts receivable, inventory, income taxes, accounts payable and accrued expenses for the current year decreasedincreased cash by $3.9$1.0 million in fiscal 20222024 compared to an increase toa decrease in cash of $7.4$14.3 million in the prior year. The decrease in cash from operations for fiscal 2022 was also impacted by the $3.1 million ERC receivable and the $4.5 million gain on the forgiveness of the PPP Loan.
Our accounts receivable balance decreasedincreased to $17.1$23.1 million at January 31, 2022,2024, compared to $17.4$21.6 million at January 31, 2021.2023. The slight decreaseincrease in the accounts receivable balance is related to sales product mix in fiscal 20222024 compared to the prior year.year, as well as the addition of Astro Machine for a full year in fiscal 2024. The days sales outstanding droppedincreased to 4552 days at year end compared to 5149 days at the end of fiscal 20212023 contributing to the lowerhigher receivables balance at January 31, 2022.2024. The days sales outstanding decreaseincrease in the current year is due to customer mix, as aerospace receivables typically take longer to collect, and these revenues continued to represent a lesser percentage of total sales in fiscal 2022.
Theincreaseddecreased to $34.6$46.4 million at January 31, 20222024 versus $30.1$51.3 million at January 31, 2021, and2023, a $5.0 million decrease from the prior year end. The decrease in our inventory balance is primarily due to the write-down of inventory of $2.0 million related to the 2024 Restructuring Plan. Also contributing to the current year reduction in inventory is usage of safety stock we had accumulated in prior years as a result of supply chain issues we were experiencing at that time. Inventory days inventory on hand increaseddecreased to 156 days at the end of fiscal 2022 as compared to 147168 days at the end of the fiscal 2021. The current period increase in inventory is due to increased production demand.
Net cash used by investing activities for fiscal 20222024 was $1.8$0.9 million for capital expenditures, compared to fiscal 2023 cash used of $17.2 million, which $1.6includes $17.0 million related to the capitalizationacquisition of our new ERP systemAstro Machine and the related hardware, and the remaining $0.2 million was for machinery and tools.
Net cash used by financing activities for fiscal 20222024 was $5.6$11.0 million. Cash outflows forused by financing activities for fiscal 2022 included2024 includes $7.0 million of net repayment activity under the refinancingrevolving credit facility, $2.1 million of debt, which resulted in a net outflow of cash of $2.6 million, and principal payments on the new long-termour long term debt and the guaranteed royalty obligation payments of $0.8$1.7 million. Cash provided from financing activities for fiscal 2023 includes $15.9 million for borrowings under the revolving credit facility and $6.0 million of proceeds from long term borrowings, which were partially offset by $2.0 million respectively.
Fiscal 20212023 compared to Fiscal 2020
For a comparison of our cash flow for the fiscal years ended January 31, 20212023, and January 31, 2020,2022, see “Part II, Item 7. Management’s Discussion and Analysis of Liquidity and Capital Resources” in our annual report on Form2021,2023, filed with the SEC on April 13, 2021.
Contractual Obligations, Commitments and Contingencies
As of January 31, 2022,2024, we had contractual obligations related to lease arrangements, debt and royalty obligation arrangements and purchase commitments.
The lease arrangements are for certain of our facilities at various locations worldwide. As of January 31, 2022,2024, we had fixed lease payment obligations of $1.1$0.6 million, with $0.3$0.2 million due within 12 months. Refer to Note 12,11, “Leases,” in our audited consolidated financial statements included in this Annual Report on Form
Debt arrangements under our Amended Credit Agreement with Bank of America, N.A., consist of thea term loan with an outstanding principal balance due of $9.3$12.2 million at January 31, 2022.2024, of which $2.7 million is due within the 12 months after that date. Additionally, in January 2024, we entered into a secured equipment loan facility agreement and borrowed the principal amount of $0.8 million thereunder to finance our purchase of production equipment, of which $0.1 million is due within the 12 months after such date. For additional details regarding our long-term debt obligations, see Note 7, “Debt,8, “Credit Agreement and Long Term Debt,” in our audited consolidated financial statements included in this Annual Report on Form
We are subject to a guaranteed minimum royalty payment obligation over the next sixfive years pursuant to the Honeywell Agreement,Agreements, which, at January 31, 2022,2024 included a balance due of $6.4$4.7 million, with $2.0$2.6 million due within 12 months. Refer to Note 11,2 “Acquisitions” and Note 10, “Royalty Obligation,” in our audited consolidated financial statements included in this Annual Report on Form
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In order to meet our manufacturing demands and, in some cases, lock in particular pricing structures for specific goods used in manufacturing, we enter into purchase commitments with our suppliers. At January 31, 20222024, our purchase commitments totaled $37.5$25.8 million, with $35.4$23.1 million due within 12 months, mostsome of which are
We are also subject to contingencies, including legal proceedings and claims arising out of its businessesour business that cover a wide range of matters, such as: contract and employment claims; workersworkers’ compensation claims; product liability claims; warranty claims; and claims related to modification, adjustment or replacement of component parts of units sold. While it is impossible to ascertain the ultimate legal and financial liability with respect to contingent liabilities, including lawsuits, we believe that the aggregate amount of such liabilities, if any, in excess of amounts provided, or covered by insurance, will not have a material adverse effect on our consolidated financial position or results of operations. It is possible, however, that our results of operations for any future period could be materially affected by changes in our assumptions or strategies related to these contingencies or changes out of our control.
Critical Accounting Policies and Estimates
Our discussion and analysis of financial condition and results of operations are based upon our 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 and
We believe the following critical accounting policies require significant judgments and estimates in the preparation of our consolidated financial statements:
Revenue Recognition
Our accounting policies relating to the recognition of revenue under TopicASC 606 require management to make estimates, determinations and judgments based on historical experience and on various other assumptions, which include (i) the existence of a contract with the customer, (ii) the identification of the performance obligations in the contract, (iii) the value of any variable consideration in the contract, (iv) the stand alonestandalone selling price of multiple obligations in the contract, for the purpose of allocating the consideration in the contract, and (v) determining when a performance obligation has been met. Recognition of revenue based on incorrect judgments, including the identification of performance obligation arrangements as well as the pattern of delivery
We recognize revenue for
Infrequently, we receive requests from customers to hold product beingproducts purchased from us for the customers’ convenience. We recognize revenue for such bill and hold arrangements in accordance with the guidance provided by TopicASC 606, which requires the transaction to meet the following criteria in order to determine that the customer has obtained control: (a) the reason for the bill and hold is substantive, (b) the product has separately been identified as belonging to the customer, (c) the product is currently ready for physical transfer to the customer, and (d) we do not have the ability to use the product or direct it to another customer.
Allowance for Doubtful Accounts:
We estimate the collectability of our receivables and establish allowances for accounts receivable that we estimate to be uncollectible. We base these allowances on our historical collection experience, the length of time our accounts receivable are outstanding and the financial condition of individual customers. In situations where we are aware of a specific customer’s inability to meet its financial obligation, such as in the case of a bankruptcy filing, we assess the need for a specific reserve for bad debts. We believe that our procedure for estimating such amounts is reasonable and historically havehas not resulted in material adjustments in subsequent periods. Bad debt expense was less than 1% of net sales in each of fiscal 20222024 and 2021.2023.
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Warranty Claims:
Inventories:
Income Taxes:
The calculation of tax liabilities involves significant judgment in estimating the impact of uncertainties in the application of complex tax laws and regulations in a multitude of jurisdictions. Although guidance on the accounting for uncertain income taxes prescribes the use of a recognition and measurement model, the determination of whether an uncertain tax position has met those thresholds will continue to require significant judgment by management. If the ultimate resolution of tax uncertainties is different from what we have estimated, our income tax expense could be materially impacted.
Business Combinations: We account for impacted businesses and industries. One such relief provision was the Paycheck Protection Program (”PPP”), which provided short-term cash flow assistance to finance employee payroll and qualified expenses. On May 6, 2020, we entered into a loan agreement with, and executed a promissory note in favor of Greenwood pursuant to which we borrowed $4.4 million. On December 27, 2020, the Consolidated Appropriations Act, 2021, H.R. 133 was signed into law. The legislation permits the deductibility of expenses to the extent that the payment of such expenses results (or is expected to result) in the forgiveness of a loan (covered loan) guaranteedbusiness acquisitions under the PPP. We have fully utilized the PPP Loan proceeds for qualifying expenses and subsequent to year end have applied for forgivenessacquisition method of the PPP Loan (including all associated accrued interest)accounting in accordance with ASC 805, “Business Combinations,” where the termstotal purchase price is allocated to the tangible and identified intangible assets acquired and liabilities assumed based on their estimated fair values. The purchase price is allocated using the information currently available, and may be adjusted, up to one year from acquisition date, after obtaining more information regarding, among other things, asset valuations, liabilities assumed and revisions to preliminary estimates that, if known, would have affected the measurement of the CARES Act,amounts recognized as amended by the PPP Flexibility Act. Consistent with the legislation, we deducted the full $4.4 million of qualified expenses on our 2020 federal tax return. On June 15, 2021, Greenwood notified us that the SBA approved our application for forgiveness of the entire $4.4 million principal balanceacquisition date. The purchase price in excess of our PPP Loanthe fair value of the tangible and all accrued interest thereon.identified intangible assets acquired less liabilities assumed is recognized as goodwill. Determining the fair value of assets acquired and liabilities assumed requires management to use significant judgment and estimates, including the selection of valuation methodologies, estimates of future revenue, costs and cash flows, discount rates, and selection of comparable companies. Management’s estimates of fair value are based upon assumptions believed to be reasonable, but which are inherently uncertain and unpredictable. As a result, inactual results may differ from these estimates. During the second quarter of fiscal 2022,measurement period, we recorded a $4.5 million gain on extinguishment of debt. The PPP loan forgiveness recognized in the second quarter of fiscal 2022 is excluded from taxable income under Section 1106(i) of the CARES Act.
Goodwill and equipment, are reviewed for impairment whenever events or changesIntangible Assets: We recognize goodwill in circumstances indicate that the carrying amount of such assets may not be recoverable. Determination of recoverabilityaccordance with ASC 350, Intangibles—Goodwill and Other (“ASC 350”). Goodwill is based on an estimate of undiscounted future cash flows resulting from the use of the asset and its eventual disposition. If the projected undiscounted cash flows are less than the carrying value, then an impairment charge would be recorded for the excess of the carrying valuecost of an acquired entity over the fair value whichamounts assigned to assets acquired and liabilities assumed in a business combination and is determined by the discounting of future cash flows.
Goodwill is tested for impairment at the reporting unit. A reporting unit is an operating segment or a business unit one level below an operating segment if discrete financial information for that business is prepared and regularly reviewed by segment management. However, components within an operating segment are aggregated as a single reporting unit if they have similar economic characteristics. Management evaluates the recoverability of goodwill annually or more frequently if events or changes in circumstances, such as declines in revenue, earnings or cash flows, or material adverse changes in the business climate, indicate that the carrying value of an asset might be impaired. Goodwill is first qualitatively assessed to determine whether it is more likely than not that the fair value of a reporting unit is less than its carrying value. Factors that management considers in this assessment include macroeconomic conditions, industry and market considerations, overall financial performance (both current and projected), changes in management and strategy and changes in the composition or carrying amount of net assets. If this qualitative assessment indicates that it is more likely than not that the fair value of a reporting unit is less than its carrying value, then a quantitative assessment is required for the reporting unit. The quantitative assessment compares the fair value of the reporting unit with its carrying value. If a quantitative assessment is required, we estimate the fair value of our reporting units using the income approach based upon a discounted cash flow model. We believe that this approach is appropriate because it provides a fair value estimate based upon the reporting unit’s expected long-term operating cash flow performance. In addition, we use the market approach, which compares the
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reporting unit to publicly traded companies and transactions involving similar business, to support the conclusions based upon the income approach. The income approach requires the use of many 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
We recognize intangibles assets in accordance with ASC 350. Acquired intangible assets subject to amortization are stated at fair value and are amortized using the straight-line method over the estimated useful lives of the assets. Intangible assets that are subject to amortization are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of such assets may not be recoverable. Determination of recoverability is based on an estimate of undiscounted future cash flows resulting from the use of the asset and its eventual disposition. If the projected undiscounted cash flows are less than the carrying value, then an impairment charge would be recorded for the excess of the carrying value over the fair value, which is determined by the discounting of future cash flows. No impairment of intangible assets was identified for the years ended January 31, 2024 or January 31, 2023.
Share-Based Compensation:
Recent Accounting Pronouncements
Reference is made to Note 1, “Summary of Significant Accounting Policies,” in our audited consolidated financial statements included elsewhere in this report.
Item 7A.
Our primary financial market risks consist of foreign currency exchange rates risk and the impact of changes in interest rates that fluctuate with the market on our variable rate credit borrowings under our existing credit agreement.
Foreign Currency Exchange Risk
The functional currencies of our foreign subsidiaries and branches are the local currencies—the British Pound in the U.K., the Canadian Dollar in Canada, the Danish Kroner in Denmark, the Chinese Yuan in China, and the Euro in France and Germany. We are exposed to foreign currency exchange risk as the functional currency financial statements of foreign subsidiaries are translated to U.S. dollars. The assets and liabilities of our foreign subsidiaries having a functional currency other than the U.S. dollar are translated into U.S. dollars at the exchange rate prevailing at the balance sheet date, and at an average exchange rate for the reporting period for revenue and expense accounts. The cumulative foreign currency translation adjustment is recorded as a component of accumulated other comprehensive loss in shareholders’ equity. The reported results of our foreign subsidiaries will be influenced by their translation into U.S. dollars by currency movements against the U.S. dollar. Our primary currency translation exposure is related to our subsidiaries that have functional currencies denominated in Danish Kroner and the Euro. A hypothetical 10% change in the rates used to translate the results of our foreign subsidiaries would result in an increase or decrease in our consolidated net income of approximately $0.2less than $0.1 million for the year ended January 31, 2022.
Transactional exposure arises where transactions occur in currencies other than the functional currency. Transactions in foreign currencies are recorded at the exchange rate prevailing at the date of the transaction. The resulting monetary assets and liabilities are translated into the appropriate functional currency at exchange rates prevailing at the balance sheet date and the resulting gains and losses are reported as foreign exchange gain (loss) in the consolidated statements of income. Foreign exchange losses resulting from transactional exposure were $0.3$0.1 million for the year ended January 31, 2022.
Interest Rate Risk
At January 31, 2022,2024, our total indebtedness included $9.25an outstanding principal amount of $12.2 million of term loan variable-rate debt.debt and an outstanding principal balance of $8.9 million under our revolving credit facility. At January 31, 2022, under the LIBOR Transition Amendment to the Amended Credit Agreement,2024, the term loan bears interest at a BSBY (Bloomberg Short-Term Bank Yield) rate plus a margin that varies between 1.60% and 2.30% based on our
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consolidated leverage ratio. During fiscal 2022,2024, the weighted average interest rate on our variable rate debt ranged between 2.35% to 4.65% was 7.54% and the weighted average interest rate on our revolving credit facility was 7.70%. The impact on our results of operations of a 100 basis point change in the interest raterates on the outstanding balance of our variable-rate debt and revolving credit facility would be approximately $0.1$0.3 million annually.
Item 8.
The consolidated financial statements required under this item are submitted as a separate section of this report on the pages indicated at Item 15(a)(1).
Item 9.
None.
Item 9A.
Evaluation of Disclosure Controls and Procedures
Our management has evaluated, under the supervision and with the participation of our ChiefPrincipal Executive Officer and ChiefPrincipal Financial Officer, the effectiveness of our disclosure controls and procedures as of the end of the period covered by this Annual Report on Form(Exchange Act)(the “Exchange Act”). The term “disclosure controls and procedures,” as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act means controls and other procedures of a company that are designed to ensure that information required to be disclosed by a company in the reports that it files or submits under the Exchange Act is recorded, processed, summarized and reported, within the time periods specified in the rules and forms promulgated by the SEC. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by a company in the reports that it files or submits under the Exchange Act is accumulated and communicated to the company’s management, including its principal executive and principal financial officers, as appropriate to allow timely decisions regarding required disclosure. Management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving their objectives and management necessarily applies its judgment in evaluating the cost-benefit relationship of possible controls and procedures. Based on that evaluation, our ChiefPrincipal Executive Officer and our ChiefPrincipal Financial Officer have concluded that our disclosure controls and procedures were not effective atas of January 31, 2022 to ensure that2024, because of the information required to be disclosedmaterial weakness 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.
Management’s Annual Report on Internal Control over Financial Reporting
Our management is responsible for establishing and maintaining adequate internal control over financial reporting (as such term is defined in Rules
Because of the inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to risk that controls may become inadequate because of changes in conditions, or the degree of compliance may deteriorate.
Management conducted its evaluation of the effectiveness of its internal control over financial reporting as of January 31, 2022.2024. In making this assessment, management used the criteria set forth in the Internal Control-
A material weakness is a deficiency, or combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of the Company’s annual or interim financial statements will not be prevented or detected on a timely basis. As of January 31, 2024, we did not design or maintain an effective control environment to ensure the accurate and timely reporting of transactions related to our Astro Machine subsidiary, which was acquired August 4, 2022.
Management is taking action to remediate this deficiency in its internal controls over financial reporting by designing an effective control environment and expanding our existing enterprise resource planning system to include the Astro Machine subsidiary. We anticipate that these actions and resulting improvements in controls will strengthen our internal control over financial reporting and will address the related material weakness.
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The effectiveness of our internal control over financial reporting as of January 31, 2024 has been audited by Wolf & Company, P.C., an independent registered public accounting firm, as stated in their attestation report, which is included herein.
Changes in Internal Controls over Financial Reporting
There have been no changes in our internal control over financial reporting during our most recently completed fiscal quarter that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
Item 9B.
None.
Item 9C.
Not applicable.
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PART III
Item 10.
The information required by this item is incorporated herein by reference to our definitive proxy statement to be filed for our 20222024 Annual Meeting of Shareholders.
Item 11.
The information required by this item is incorporated herein by reference to our definitive Proxy Statement to be filed for our 2022 Annual Meeting of Shareholders.
The information set forth under the heading “Compensation Committee Report” in our definitive Proxy Statement is furnished and shall not be deemed filed for purposes of Section 18 of the Exchange Act, nor be incorporated by reference in any filing under the Securities Act of 1933, as amended.
Item 12.
The information required by this item is incorporated herein by reference to our definitive Proxy Statement to be filed for our 2022 Annual Meeting of Shareholders.
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 | 776,975 | (1) | $ | 14.67 | (2) | 401,893 | (3) | |||||
Equity Compensation Plans Not Approved by Shareholders | — | — | — | |||||||||
Total | 776,975 | (1) | $ | 14.67 | (2) | 401,893 | (3) | |||||
Item 13.
The information required by this item is incorporated herein by reference to our definitive Proxy Statement for our 2022 Annual Meeting of Shareholders.
Item 14.
The information required by this item is incorporated herein by reference to our definitive Proxy Statement for our 2022 Annual Meeting of Shareholders.
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PART IV
Item 15. Exhibits and Financial Statement Schedule
(a)(1) Financial Statements:
The following documents are included as part of this Annual Report filed on Form
Page | ||
F-1 | ||
F-3 | ||
F-4 | ||
F-5 | ||
F-6 | ||
F-7 | ||
F-8 | ||
(a)(2) Financial Statement Schedule: | ||
F-32 | ||
All other schedules for which provision is made in the applicable accounting regulations of the Securities and Exchange Commission are not required under the related instructions or are inapplicable, and therefore, have been omitted.
Item 16. Form
Not Applicable.
(a)(3) Exhibits:
Exhibit Number | ||||
(2.1) | ||||
(3A) | ||||
(3B) | ||||
(4.1) | ||||
(4.2) | ||||
(10.1) |
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Exhibit Number | ||||
(10.2) | ||||
(10.3) | ||||
(10.4) | ||||
| Form of Incentive Stock Option Agreement granted under the 2015 Equity Incentive Plan filed as Exhibit 10.3 to the Company’s Quarterly Report on Form 10-Q for the period ended July 30, 2016 and incorporated by reference herein.** | ||||
(10.5) | ||||
(10.6) | ||||
(10.7) | ||||
(10.8) | ||||
(10.9) | ||||
(10.10) | ||||
(10.11) | ||||
(10.12) | ||||
| Form of Performance-based Restricted Stock Unit Award Agreement filed as Exhibit 10.1 to the Company’s Current Report on Form 8-K, event date June 4, 2018, filed with the SEC on June 4, 2018 and incorporated by reference herein.** | ||||
(10.13) | ||
(10.14) |
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Exhibit Number | ||
(10.15) | ||
(10.16) | ||
(10.17) | ||
(10.18) | ||
(10.19) | ||
(10.20) | ||
(10.21) | ||
(10.22) | ||
(10.23) | ||
(10.24) | ||
(10.25) |
(10.26) | ||
(10.27) |
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Exhibit Number | ||
(10.28) | ||
(10.29) | ||
(10.30) | ||
(10.31) | ||
(21) | ||
(23.1) | ||
(31.1) | Certification of Chief Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. | |
(31.2) | Certification of Chief Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. | |
(32.1) | ||
(32.2) | ||
(97) | ||
(101.INS) | XBRL Instance Document—the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document | |
(101.SCH) | Inline XBRL Taxonomy Extension Schema Document | |
(104) | ||
Cover Page Interactive Data File (embedded within the Inline XBRL document). | ||
* Schedules to this Exhibit have been omitted in reliance on Item 601(b)(2) of Regulation S-K. The Company will furnish copies of any such schedules to the SEC upon request.
** Management contract or compensatory plan or arrangement.
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SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
ASTRONOVA, INC. (Registrant) | |||||||
/s/ Gregory A. Woods | |||||||
Date: April | By: | ||||||
(Gregory A. Woods, Chief Executive Officer) | |||||||
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the date indicated.
Name | Title | Date | ||
/s/ Gregory A. Woods Gregory A. Woods | President, Chief Executive Officer and Director (Principal Executive Officer) | April | ||
/s/ David S. Smith | ||||
David S. Smith | Vice President, Chief Financial Officer and Treasurer (Principal Accounting and Financial Officer) | April | ||
/s/ Alexis P. Michas | ||||
Alexis P. Michas | Director | April | ||
/s/ Mitchell I. Quain | ||||
Mitchell I. Quain | Director | April 12, 2024 | ||
/s/ | ||||
Yvonne E. Schlaeppi | Director | April 12, 2024 | ||
/s/ Richard S. Warzala | ||||
Richard S. Warzala | Director | April | ||
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
The Shareholders and Board of Directors of
AstroNova, Inc.
Opinion on the Financial Statements and Internal Control Over Financial Reporting
We have audited the accompanying consolidated balance sheets of AstroNova, Inc. (the “Company”) as of January 31, 20222024 and 2021,2023, and the related consolidated statements of income, comprehensive income, changes in shareholders’stockholders' equity and cash flows for each of the three years in the period ended January 31, 20222024, and the related notes to the consolidated financial statements and the financial statement schedule listed in Item 15(a)(2) (collectively, the “financial statements”). We also have audited the Company’s internal control over financial reporting as of January 31, 2022, based on criteria established inInternal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission in 2013.
We have also audited, in our opinion,accordance with the standards of the Public Company maintained, in all material respects, effectiveAccounting Oversight Board (United States) (PCAOB), the Company's internal control over financial reporting as of January 31, 2022,2024, based on criteria established inControl—Control — Integrated Framework
Basis for Opinion
These financial statements are the responsibility of internal control over financial reporting included in the accompanying Management’s Annual Report on Internal Control over Financial Reporting.Company’s management. Our responsibility is to express an opinion on the Company’s financial statements and an opinion on the Company’s internal control over financial reporting based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (“PCAOB”)PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the auditsaudit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud, and whether effective internal control over financial reporting was maintained in all material respects.
Critical Audit Matters
Critical audit matters are matters arising from the current period audit of the financial statements that were communicated or required to be communicated to the audit committee and that: (1) relate to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective or complex judgments. We determined that there are no critical audit matters.
/s/ Wolf & Company, P.C.
We have served as the Company’s auditor since 2013.
Boston, Massachusetts
April 12, 2024
F-1
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
The Shareholders and Board of Directors of
AstroNova, Inc.
Opinion on the Internal Control Over Financial Reporting
We have audited AstroNova, Inc.’s (the Company) internal control over financial reporting as of January 31, 2024, based on criteria established in Internal Control — Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission in 2013. In our opinion, because of the effect of the material weakness described below on the achievement of the objectives of the control criteria, the Company has not maintained effective internal control over financial reporting as of January 31, 2024, based on criteria established in Internal Control — Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission in 2013.
We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the consolidated financial statements of the Company and our report dated April 12, 2024 expressed an unqualified opinion.
A material weakness is a deficiency, or a combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of the company's annual or interim financial statements will not be prevented or detected on a timely basis. The following material weakness has been identified and included in management's assessment.
As of January 31, 2024, management did not design or maintain an effective control environment to ensure the accurate and timely reporting of transactions related to the Company’s Astro Machine subsidiary.
This material weakness was considered in determining the nature, timing and extent of audit tests applied in our audit of the 2024 financial statements, and this report does not affect our report dated April 12, 2024 on those financial statements.
Basis for Opinion
The Company’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting in the accompanying Management’s Annual Report on Internal Control over Financial Reporting. Our responsibility is to express an opinion on the Company’s internal control over financial reporting based on our audit. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. Our auditsaudit also included performing such other procedures as we considered necessary in the circumstances. We believe that our audits provideaudit provides a reasonable basis for our opinions.
Definition and Limitations of Internal Control Over Financial Reporting
A company’scompany'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
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
/s/ Wolf & Company, P.C.
We have served as the Company’s auditor since 2013.
Boston, Massachusetts
April 18, 2022
F-2
ASTRONOVA, INC.
CONSOLIDATED BALANCE SHEETS
As of January 31
(In Thousands, Except Share Data)
2022 | 2021 | |||||||
ASSETS | ||||||||
CURRENT ASSETS | ||||||||
Cash and Cash Equivalents | $ | 5,276 | $ | 11,439 | ||||
Accounts Receivable, net of reserves of $826 in 2022 and $1,054 in 2021 | 17,124 | 17,415 | ||||||
Inventories | 34,609 | 30,060 | ||||||
Employee Retention Credit Receivable | 3,135 | — | ||||||
Prepaid Expenses and Other Current Assets | 3,634 | 1,807 | ||||||
Total Current Assets | 63,778 | 60,721 | ||||||
Property, Plant and Equipment, net | 11,441 | 12,011 | ||||||
Identifiable Intangibles, net | 19,200 | 21,502 | ||||||
Goodwill | 12,156 | 12,806 | ||||||
Deferred Tax Assets, net | 5,591 | 5,941 | ||||||
Right of Use Asset | 1,094 | 1,389 | ||||||
Other | 1,695 | 1,103 | ||||||
TOTAL ASSETS | $ | 114,955 | $ | 115,473 | ||||
LIABILITIES AND SHAREHOLDERS’ EQUITY | ||||||||
CURRENT LIABILITIES | ||||||||
Accounts Payable | $ | 8,590 | $ | 5,734 | ||||
Accrued Compensation | 3,512 | 2,917 | ||||||
Other Accrued Expenses | 4,113 | 3,874 | ||||||
Current Portion of Long-Term Debt | 1,000 | 5,326 | ||||||
Current Liability—Royalty Obligation | 2,000 | 2,000 | ||||||
Current Liability—Excess Royalty Payment Due | 235 | 177 | ||||||
Income Taxes Payable | 323 | 655 | ||||||
Deferred Revenue | 262 | 285 | ||||||
Total Current Liabilities | 20,035 | 20,968 | ||||||
NON - CURRENT LIABILITIES | ||||||||
Long-Term Debt, net of current portion | 8,154 | 7,109 | ||||||
Royalty Obligation, net of current portion | 4,361 | 6,161 | ||||||
Long-Term Debt—PPP Loan | — | 4,422 | ||||||
Lease Liabilities, net of current portion | 808 | 1,065 | ||||||
Income Taxes Payable | 399 | 681 | ||||||
Deferred Tax Liabilities | 186 | 384 | ||||||
TOTAL LIABILITIES | 33,943 | 40,790 | ||||||
Commitments and Contingencies (See Note 22) | 0 | 0 | ||||||
SHAREHOLDERS’ EQUITY | ||||||||
Preferred Stock, $10 Par Value, Authorized 100,000 shares, NaN Issued | 0 | 0 | ||||||
Common Stock, $0.05 Par Value, Authorized 13,000,000 shares; Issued 10,566,404 shares in 2022 and 10,425,094 shares in 2021 | 528 | 521 | ||||||
Additional Paid-in Capital | 59,692 | 58,049 | ||||||
Retained Earnings | 56,514 | 50,085 | ||||||
Treasury Stock, at Cost, 3,324,280 shares in 2022 and 3,297,058 shares in 2021 | (33,974 | ) | (33,588 | ) | ||||
Accumulated Other Comprehensive Loss, net of tax | (1,748 | ) | (384 | ) | ||||
TOTAL SHAREHOLDERS’ EQUITY | 81,012 | 74,683 | ||||||
TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY | $ | 114,955 | $ | 115,473 | ||||
| 2024 |
|
| 2023 |
| |||
ASSETS |
|
|
|
|
|
| ||
CURRENT ASSETS |
|
|
|
|
|
| ||
Cash and Cash Equivalents |
| $ | 4,527 |
|
| $ | 3,946 |
|
Accounts Receivable, net of reserves of $618 in 2024 and $731 in 2023 |
|
| 23,056 |
|
|
| 21,598 |
|
Inventories |
|
| 46,371 |
|
|
| 51,324 |
|
Prepaid Expenses and Other Current Assets |
|
| 2,720 |
|
|
| 2,894 |
|
Total Current Assets |
|
| 76,674 |
|
|
| 79,762 |
|
Property, Plant and Equipment, net |
|
| 14,185 |
|
|
| 14,288 |
|
Identifiable Intangibles, net |
|
| 18,836 |
|
|
| 21,232 |
|
Goodwill |
|
| 14,633 |
|
|
| 14,658 |
|
Deferred Tax Assets, net |
|
| 6,882 |
|
|
| 6,907 |
|
Right of Use Asset |
|
| 603 |
|
|
| 794 |
|
Other Assets |
|
| 1,438 |
|
|
| 1,566 |
|
TOTAL ASSETS |
| $ | 133,251 |
|
| $ | 139,207 |
|
LIABILITIES AND SHAREHOLDERS’ EQUITY |
|
|
|
|
|
| ||
CURRENT LIABILITIES |
|
|
|
|
|
| ||
Accounts Payable |
| $ | 8,068 |
|
| $ | 8,479 |
|
Accrued Compensation |
|
| 2,923 |
|
|
| 2,750 |
|
Other Accrued Expenses |
|
| 2,706 |
|
|
| 3,308 |
|
Revolving Credit Facility |
|
| 8,900 |
|
|
| 15,900 |
|
Current Portion of Long-Term Debt |
|
| 2,842 |
|
|
| 2,100 |
|
Current Liability—Royalty Obligation |
|
| 1,700 |
|
|
| 1,725 |
|
Current Liability—Excess Royalty Payment Due |
|
| 935 |
|
|
| 562 |
|
Income Taxes Payable |
|
| 349 |
|
|
| 786 |
|
Deferred Revenue |
|
| 1,338 |
|
|
| 1,888 |
|
Total Current Liabilities |
|
| 29,761 |
|
|
| 37,498 |
|
NON-CURRENT LIABILITIES |
|
|
|
|
|
| ||
Long-Term Debt, net of current portion |
|
| 10,050 |
|
|
| 12,040 |
|
Royalty Obligation, net of current portion |
|
| 2,093 |
|
|
| 3,415 |
|
Lease Liabilities, net of current portion |
|
| 415 |
|
|
| 555 |
|
Income Taxes Payable |
|
| 551 |
|
|
| 491 |
|
Deferred Revenue |
|
| — |
|
|
| 674 |
|
Deferred Tax Liabilities |
|
| 99 |
|
|
| 167 |
|
TOTAL LIABILITIES |
|
| 42,969 |
|
|
| 54,840 |
|
Commitments and Contingencies (See Note 21) |
|
|
|
|
|
| ||
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 10,812,137 |
|
| 541 |
|
|
| 534 |
|
Additional Paid-in Capital |
|
| 62,684 |
|
|
| 61,131 |
|
Retained Earnings |
|
| 63,869 |
|
|
| 59,175 |
|
Treasury Stock, at Cost, 3,368,763 shares in 2024 and 3,342,032 shares in 2023 |
|
| (34,593 | ) |
|
| (34,235 | ) |
Accumulated Other Comprehensive Loss, net of tax |
|
| (2,219 | ) |
|
| (2,238 | ) |
TOTAL SHAREHOLDERS’ EQUITY |
|
| 90,282 |
|
|
| 84,367 |
|
TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY |
| $ | 133,251 |
|
| $ | 139,207 |
|
See Notes to the Consolidated Financial Statements.
F-3
ASTRONOVA, INC.
CONSOLIDATED STATEMENTS OF INCOME
For the years ended January 31
(In Thousands, Except Per Share Data)
2022 | 2021 | 2020 | ||||||||||
Revenue | $ | 117,480 | $ | 116,033 | $ | 133,446 | ||||||
Cost of Revenue | 73,741 | 74,673 | 84,688 | |||||||||
Gross Profit | 43,739 | 41,360 | 48,758 | |||||||||
Costs and Expenses: | ||||||||||||
Selling and Marketing | 23,177 | 23,301 | 26,884 | |||||||||
Research and Development | 6,753 | 6,206 | 8,084 | |||||||||
General and Administrative | 9,553 | 9,420 | 11,357 | |||||||||
Operating Expenses | 39,483 | 38,927 | 46,325 | |||||||||
Operating Income | 4,256 | 2,433 | 2,433 | |||||||||
Other Income (Expense): | ||||||||||||
Gain on Extinguishment of Debt – PPP Loan | 4,466 | — | — | |||||||||
Loss on Disposal of Assets | (696 | ) | — | — | ||||||||
Interest Expense | (677 | ) | (955 | ) | (682 | ) | ||||||
Gain (Loss) on Foreign Currency Transactions | (288 | ) | 590 | (448 | ) | |||||||
Other, net | (27 | ) | 111 | 67 | ||||||||
| 2,778 | (254 | ) | (1,063 | ) | ||||||||
Income before Income Taxes | 7,034 | 2,179 | 1,370 | |||||||||
Income Tax Provision (Benefit) | 605 | 895 | (389 | ) | ||||||||
Net Income | $ | 6,429 | $ | 1,284 | $ | 1,759 | ||||||
Net Income Per Common Share—Basic | $ | 0.89 | $ | 0.18 | $ | 0.25 | ||||||
Net Income Per Common Share—Diluted | $ | 0.88 | $ | 0.18 | $ | 0.24 | ||||||
Weighted Average Number of Common Shares Outstanding—Basic | 7,207 | 7,104 | 7,024 | |||||||||
Dilutive Effect of Common Stock Equivalents | 132 | 62 | 214 | |||||||||
Weighted Average Number of Common Shares Outstanding—Diluted | 7,339 | 7,166 | 7,238 | |||||||||
| 2024 |
|
| 2023 |
|
| 2022 |
| ||||
Revenue |
| $ | 148,086 |
|
| $ | 142,527 |
|
| $ | 117,480 |
|
Cost of Revenue |
|
| 96,465 |
|
|
| 94,371 |
|
|
| 73,741 |
|
Gross Profit |
|
| 51,621 |
|
|
| 48,156 |
|
|
| 43,739 |
|
Costs and Expenses: |
|
|
|
|
|
|
|
|
| |||
Selling and Marketing |
|
| 24,428 |
|
|
| 24,456 |
|
|
| 23,177 |
|
Research and Development |
|
| 6,906 |
|
|
| 6,822 |
|
|
| 6,753 |
|
General and Administrative |
|
| 11,491 |
|
|
| 11,435 |
|
|
| 9,553 |
|
Operating Expenses |
|
| 42,825 |
|
|
| 42,713 |
|
|
| 39,483 |
|
Operating Income |
|
| 8,796 |
|
|
| 5,443 |
|
|
| 4,256 |
|
Other Income (Expense): |
|
|
|
|
|
|
|
|
| |||
Interest Expense |
|
| (2,697 | ) |
|
| (1,678 | ) |
|
| (677 | ) |
Loss on Foreign Currency Transactions |
|
| (83 | ) |
|
| (474 | ) |
|
| (288 | ) |
Gain on Extinguishment of Debt – PPP Loan |
|
| — |
|
|
| — |
|
|
| 4,466 |
|
Loss on Disposal of Assets |
|
| — |
|
|
| — |
|
|
| (696 | ) |
Other, net |
|
| 57 |
|
|
| 119 |
|
|
| (27 | ) |
Total Other Income (Expense) |
|
| (2,723 | ) |
|
| (2,033 | ) |
|
| 2,778 |
|
Income before Income Taxes |
|
| 6,073 |
|
|
| 3,410 |
|
|
| 7,034 |
|
Income Tax Provision |
|
| 1,379 |
|
|
| 749 |
|
|
| 605 |
|
Net Income |
| $ | 4,694 |
|
| $ | 2,661 |
|
| $ | 6,429 |
|
Net Income Per Common Share—Basic |
| $ | 0.63 |
|
| $ | 0.36 |
|
| $ | 0.89 |
|
Net Income Per Common Share—Diluted |
| $ | 0.63 |
|
| $ | 0.36 |
|
| $ | 0.88 |
|
Weighted Average Number of Common Shares Outstanding—Basic |
|
| 7,415 |
|
|
| 7,307 |
|
|
| 7,207 |
|
Dilutive Effect of Common Stock Equivalents |
|
| 81 |
|
|
| 67 |
|
|
| 132 |
|
Weighted Average Number of Common Shares Outstanding—Diluted |
|
| 7,496 |
|
|
| 7,374 |
|
|
| 7,339 |
|
See Notes to the Consolidated Financial Statements.
F-4
ASTRONOVA, INC.
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
For the years ended January 31
(In Thousands)
2022 | 2021 | 2020 | ||||||||||
Net Income | $ | 6,429 | $ | 1,284 | $ | 1,759 | ||||||
Other Comprehensive Income (Loss), net of taxes and reclassification adjustments: | ||||||||||||
Foreign Currency Translation Adjustments | (1,426 | ) | 710 | (133 | ) | |||||||
Change in Value of Derivatives Designated as Cash Flow Hedge | 0 | (239 | ) | 122 | ||||||||
(Gains) Losses from Cash Flow Hedges Reclassified to Income Statement | 62 | 193 | (264 | ) | ||||||||
Cross-Currency Interest Rate Swap Terminations | 0 | 45 | 0 | |||||||||
Other Comprehensive Income (Loss) | (1,364 | ) | 709 | (275 | ) | |||||||
Comprehensive Income | $ | 5,065 | $ | 1,993 | $ | 1,484 | ||||||
| 2024 |
|
| 2023 |
|
| 2022 |
| ||||
Net Income |
| $ | 4,694 |
|
| $ | 2,661 |
|
| $ | 6,429 |
|
Other Comprehensive Income (Loss), net of taxes and reclassification |
|
|
|
|
|
|
|
|
| |||
Foreign Currency Translation Adjustments |
|
| 19 |
|
|
| (537 | ) |
|
| (1,426 | ) |
Loss from Cash Flow Hedges Reclassified to Income Statement |
|
| — |
|
|
| 47 |
|
|
| 62 |
|
Other Comprehensive Income (Loss) |
|
| 19 |
|
|
| (490 | ) |
|
| (1,364 | ) |
Comprehensive Income |
| $ | 4,713 |
|
| $ | 2,171 |
|
| $ | 5,065 |
|
See Notes to the Consolidated Financial Statements.
F-5
ASTRONOVA, INC.
($ In Thousands)
Common Stock | Additional Paid-in Capital | Retained Earnings | Treasury Stock | Accumulated Other Comprehensive Income (Loss) | Total Shareholders’ Equity | |||||||||||||||||||||||
Shares | Amount | |||||||||||||||||||||||||||
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 O ptionE xercises | 65,121 | 3 | 790 | — | (11 | ) | — | 782 | ||||||||||||||||||||
| Restricted Stock Awards Vested, net | 59,930 | 3 | (3 | ) | — | (469 | ) | — | (469 | ) | ||||||||||||||||||
Common Stock— C ividend—$0.28 per shareash D | — | — | — | (1,972 | ) | — | — | (1,972 | ) | |||||||||||||||||||
Net I ncome | — | — | — | 1,759 | — | — | 1,759 | |||||||||||||||||||||
Other C omprehensive L oss | — | — | — | — | — | (275 | ) | (275 | ) | |||||||||||||||||||
Balance January 31, 2020 | 10,343,610 | $ | 517 | $ | 56,130 | $ | 49,298 | $ | (33,477 | ) | $ | (1,093 | ) | $ | 71,375 | |||||||||||||
Share- B asedC ompensation | — | — | 1,819 | — | — | — | 1,819 | |||||||||||||||||||||
Employee O ptionE xercises | 16,487 | 1 | 103 | — | — | — | 104 | |||||||||||||||||||||
Restricted S tockA wardsV ested, net | 64,997 | 3 | (3 | ) | — | (111 | ) | — | (111 | ) | ||||||||||||||||||
Common Stock— C ashD ividend—$0.07 per share | — | — | — | (497 | ) | — | — | (497 | ) | |||||||||||||||||||
Net I ncome | — | — | — | 1,284 | — | — | 1,284 | |||||||||||||||||||||
Other C omprehensive I ncome | — | — | — | — | — | 709 | 709 | |||||||||||||||||||||
Balance January 31, 2021 | 10,425,094 | $ | 521 | $ | 58,049 | $ | 50,085 | $ | (33,588 | ) | $ | (384 | ) | $ | 74,683 | |||||||||||||
Share-Based Compensation | — | — | 1,493 | — | — | — | 1,493 | |||||||||||||||||||||
Employee Option Exercises | 14,371 | 1 | 156 | — | — | — | 157 | |||||||||||||||||||||
Restricted Stock Awards Vested, net | 126,939 | 6 | (6 | ) | — | (386 | ) | — | (386 | ) | ||||||||||||||||||
Net Income | — | — | — | 6,429 | — | — | 6,429 | |||||||||||||||||||||
Other Comprehensive Loss | — | — | — | — | — | (1,364 | ) | (1,364 | ) | |||||||||||||||||||
Balance January 31, 2022 | 10,566,404 | $ | 528 | $ | 59,692 | $ | 56,514 | $ | (33,974 | ) | $ | (1,748 | ) | $ | 81,012 | |||||||||||||
| Common Stock |
|
| Additional |
|
| Retained |
|
| Treasury |
|
| Accumulated |
|
| Total |
| |||||||||||
| Shares |
|
| Amount |
|
| Capital |
|
| Earnings |
|
| Stock |
|
| Income (Loss) |
|
| Equity |
| ||||||||
Balance January 31, 2021 |
|
| 10,425,094 |
|
| $ | 521 |
|
| $ | 58,049 |
|
| $ | 50,085 |
|
| $ | (33,588 | ) |
| $ | (384 | ) |
| $ | 74,683 |
|
Share-Based Compensation |
|
| — |
|
|
| — |
|
|
| 1,493 |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 1,493 |
|
Employee Option Exercises |
|
| 14,371 |
|
|
| 1 |
|
|
| 156 |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 157 |
|
Restricted Stock Awards Vested, net |
|
| 126,939 |
|
|
| 6 |
|
|
| (6 | ) |
|
| — |
|
|
| (386 | ) |
|
| — |
|
|
| (386 | ) |
Net Income |
|
| — |
|
|
| — |
|
|
| — |
|
|
| 6,429 |
|
|
| — |
|
|
| — |
|
|
| 6,429 |
|
Other Comprehensive Loss |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| (1,364 | ) |
|
| (1,364 | ) |
Balance January 31, 2022 |
|
| 10,566,404 |
|
| $ | 528 |
|
| $ | 59,692 |
|
| $ | 56,514 |
|
| $ | (33,974 | ) |
| $ | (1,748 | ) |
| $ | 81,012 |
|
Share-Based Compensation |
|
| — |
|
|
| — |
|
|
| 1,290 |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 1,290 |
|
Employee Option Exercises |
|
| 25,123 |
|
|
| 2 |
|
|
| 153 |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 155 |
|
Restricted Stock Awards Vested, net |
|
| 85,324 |
|
|
| 4 |
|
|
| (4 | ) |
|
| — |
|
|
| (261 | ) |
|
| — |
|
|
| (261 | ) |
Net Income |
|
| — |
|
|
| — |
|
|
| — |
|
|
| 2,661 |
|
|
| — |
|
|
| — |
|
|
| 2,661 |
|
Other Comprehensive Loss |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| (490 | ) |
|
| (490 | ) |
Balance January 31, 2023 |
|
| 10,676,851 |
|
| $ | 534 |
|
| $ | 61,131 |
|
| $ | 59,175 |
|
| $ | (34,235 | ) |
| $ | (2,238 | ) |
| $ | 84,367 |
|
Share-Based Compensation |
|
| — |
|
|
| — |
|
|
| 1,347 |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 1,347 |
|
Employee Option Exercises |
|
| 18,998 |
|
|
| 1 |
|
|
| 212 |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 213 |
|
Restricted Stock Awards Vested, net |
|
| 116,288 |
|
|
| 6 |
|
|
| (6 | ) |
|
| — |
|
|
| (358 | ) |
|
| — |
|
|
| (358 | ) |
Net Income |
|
| — |
|
|
| — |
|
|
| — |
|
|
| 4,694 |
|
|
| — |
|
|
| — |
|
|
| 4,694 |
|
Other Comprehensive Income |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 19 |
|
|
| 19 |
|
Balance January 31, 2024 |
|
| 10,812,137 |
|
| $ | 541 |
|
| $ | 62,684 |
|
| $ | 63,869 |
|
| $ | (34,593 | ) |
| $ | (2,219 | ) |
| $ | 90,282 |
|
See Notes to the Consolidated Financial Statements.
F-6
ASTRONOVA, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
For the years ended January 31
(In Thousands)
2022 | 2021 | 2020 | ||||||||||
Cash Flows from Operating Activities: | ||||||||||||
Net Income | $ | 6,429 | $ | 1,284 | $ | 1,759 | ||||||
Adjustments to Reconcile Net Income to Net Cash Provided By Operating Activities: | ||||||||||||
Depreciation and Amortization | 3,994 | 5,983 | 6,284 | |||||||||
Amortization of Debt Issuance Costs | 44 | 75 | 49 | |||||||||
Share-Based Compensation | 1,493 | 1,819 | 1,775 | |||||||||
Loss on Disposal of Assets | 696 | — | — | |||||||||
Gain on Extinguishment of Debt | (4,466 | ) | — | — | ||||||||
Deferred Income Tax Provision (Benefit) | 210 | (1,021 | ) | (1,638 | ) | |||||||
Changes in Assets and Liabilities: | ||||||||||||
Accounts Receivable | 77 | 2,702 | 3,594 | |||||||||
Other Receivable – Employee Retention Credit Receivable | (3,135 | ) | — | — | ||||||||
Inventories | (4,883 | ) | 4,247 | (3,938 | ) | |||||||
Accounts Payable and Accrued Expenses | 4,052 | (57 | ) | (2,732 | ) | |||||||
Income Taxes Payable | (2,043 | ) | 1,482 | (1,773 | ) | |||||||
Other | (1,074 | ) | (970 | ) | (156 | ) | ||||||
Net Cash Provided by Operating Activities | 1,394 | 15,544 | 3,224 | |||||||||
Cash Flows from Investing Activities: | ||||||||||||
Additions to Property, Plant and Equipment | (1,796 | ) | (2,587 | ) | (2,906 | ) | ||||||
Net Cash Used by Investing Activities | (1,796 | ) | (2,587 | ) | (2,906 | ) | ||||||
Cash Flows from Financing Activities: | ||||||||||||
Net Cash Proceeds from Employee Stock Option Plans | 60 | 9 | 654 | |||||||||
Net Cash Proceeds from Share Purchases under Employee Stock Purchase Plan | 96 | 95 | 128 | |||||||||
Net Cash Used for Payment of Taxes Related to Vested Restricted Stock | (386 | ) | (111 | ) | (469 | ) | ||||||
Net (Repayments)/Borrowings under Revolving Credit Facility | — | (6,500 | ) | 5,000 | ||||||||
Payment of Minimum Guarantee Royalty Obligation | (2,000 | ) | (2,000 | ) | (1,875 | ) | ||||||
Proceeds from Long-Term Debt – PPP Loan | — | 4,422 | — | |||||||||
Proceeds from Long-Term Debt Borrowings | 10,000 | 15,232 | — | |||||||||
Payoff of Long-Term Debt | (12,576 | ) | (11,732 | ) | — | |||||||
Principal Payments on Long-Term Debt | (750 | ) | (3,958 | ) | (5,208 | ) | ||||||
Payments of Debt Issuance Costs | — | (100 | ) | — | ||||||||
Dividends Paid | — | (497 | ) | (1,972 | ) | |||||||
Net Cash Used by Financing Activities | (5,556 | ) | (5,140 | ) | (3,742 | ) | ||||||
Effect of Foreign Exchange Rate Changes on Cash and Cash Equivalents | (205 | ) | (627 | ) | 139 | |||||||
Net Increase (Decrease) in Cash and Cash Equivalents | (6,163 | ) | 7,190 | (3,285 | ) | |||||||
Cash and Cash Equivalents, Beginning of Year | 11,439 | 4,249 | 7,534 | |||||||||
Cash and Cash Equivalents, End of Year | $ | 5,276 | $ | 11,439 | $ | 4,249 | ||||||
Supplemental Information: | ||||||||||||
Cash Paid During the Period for: | ||||||||||||
Interest | $ | 342 | $ | 677 | $ | 531 | ||||||
Income Taxes, Net of Refunds | $ | 2,414 | $ | 446 | $ | 2,913 | ||||||
|
| 2024 |
|
| 2023 |
|
| 2022 |
| |||
Cash Flows from Operating Activities: |
|
|
|
|
|
|
|
|
| |||
Net Income |
| $ | 4,694 |
|
| $ | 2,661 |
|
| $ | 6,429 |
|
Adjustments to Reconcile Net Income to Net Cash Provided (Used) By |
|
|
|
|
|
|
|
|
| |||
Depreciation and Amortization |
|
| 4,266 |
|
|
| 3,916 |
|
|
| 3,994 |
|
Amortization of Debt Issuance Costs |
|
| 23 |
|
|
| 25 |
|
|
| 44 |
|
Restructuring Cost |
|
| 2,040 |
|
|
| — |
|
|
| — |
|
Share-Based Compensation |
|
| 1,347 |
|
|
| 1,290 |
|
|
| 1,493 |
|
Loss on Disposal of Assets |
|
| — |
|
|
| — |
|
|
| 696 |
|
Gain on Extinguishment of Debt |
|
| — |
|
|
| — |
|
|
| (4,466 | ) |
Deferred Income Tax Provision (Benefit) |
|
| (78 | ) |
|
| (1,336 | ) |
|
| 210 |
|
Changes in Assets and Liabilities, net of impact of acquisition: |
|
|
|
|
|
|
|
|
| |||
Accounts Receivable |
|
| (1,486 | ) |
|
| (1,234 | ) |
|
| 77 |
|
Other Receivable – Employee Retention Credit Receivable |
|
| — |
|
|
| 3,135 |
|
|
| (3,135 | ) |
Inventories |
|
| 2,910 |
|
|
| (11,581 | ) |
|
| (4,883 | ) |
Accounts Payable and Accrued Expenses |
|
| (46 | ) |
|
| (3,236 | ) |
|
| 4,052 |
|
Income Taxes Payable |
|
| (343 | ) |
|
| 1,710 |
|
|
| (2,043 | ) |
Other |
|
| (973 | ) |
|
| 1,714 |
|
|
| (1,074 | ) |
Net Cash Provided (Used) by Operating Activities |
|
| 12,354 |
|
|
| (2,936 | ) |
|
| 1,394 |
|
Cash Flows from Investing Activities: |
|
|
|
|
|
|
|
|
| |||
Cash Paid for Astro Machine Acquisition, net of cash acquired |
|
| — |
|
|
| (17,034 | ) |
|
| — |
|
Additions to Property, Plant and Equipment |
|
| (875 | ) |
|
| (229 | ) |
|
| (1,796 | ) |
Net Cash Used by Investing Activities |
|
| (875 | ) |
|
| (17,263 | ) |
|
| (1,796 | ) |
Cash Flows from Financing Activities: |
|
|
|
|
|
|
|
|
| |||
Net Cash Proceeds from Employee Stock Option Plans |
|
| 105 |
|
|
| 85 |
|
|
| 60 |
|
Net Cash Proceeds from Share Purchases under Employee Stock |
|
| 107 |
|
|
| 70 |
|
|
| 96 |
|
Net Cash Used for Payment of Taxes Related to Vested Restricted Stock |
|
| (358 | ) |
|
| (261 | ) |
|
| (386 | ) |
Net (Repayments)/Borrowings under Revolving Credit Facility |
|
| (7,000 | ) |
|
| 15,900 |
|
|
| — |
|
Payment of Minimum Guarantee Royalty Obligation |
|
| (1,725 | ) |
|
| (2,000 | ) |
|
| (2,000 | ) |
Proceeds from Long-Term Debt Borrowings |
|
| — |
|
|
| 6,000 |
|
|
| 10,000 |
|
Payoff of Long-Term Debt |
|
| — |
|
|
| — |
|
|
| (12,576 | ) |
Principal Payments on Long-Term Debt |
|
| (2,100 | ) |
|
| (1,000 | ) |
|
| (750 | ) |
Payments of Debt Issuance Costs |
|
| — |
|
|
| (39 | ) |
|
| — |
|
Net Cash Provided (Used) by Financing Activities |
|
| (10,971 | ) |
|
| 18,755 |
|
|
| (5,556 | ) |
Effect of Foreign Exchange Rate Changes on Cash and Cash Equivalents |
|
| 73 |
|
|
| 114 |
|
|
| (205 | ) |
Net Increase (Decrease) in Cash and Cash Equivalents |
|
| 581 |
|
|
| (1,330 | ) |
|
| (6,163 | ) |
Cash and Cash Equivalents, beginning of year |
|
| 3,946 |
|
|
| 5,276 |
|
|
| 11,439 |
|
Cash and Cash Equivalents, end of year |
| $ | 4,527 |
|
| $ | 3,946 |
|
| $ | 5,276 |
|
Supplemental Information: |
|
|
|
|
|
|
|
|
| |||
Cash Paid During the Period for: |
|
|
|
|
|
|
|
|
| |||
Interest |
| $ | 2,343 |
|
| $ | 791 |
|
| $ | 342 |
|
Income Taxes, net of refunds |
| $ | 1,694 |
|
| $ | 311 |
|
| $ | 2,414 |
|
Non-Cash Transactions: |
|
|
|
|
|
|
|
|
| |||
Financed Equipment Purchase |
| $ | 822 |
|
| $ | — |
|
| $ | — |
|
Reclassification of Inventories to Property, Plant and Equipment |
| $ | — |
|
| $ | 348 |
|
| $ | — |
|
Recognize intangible asset and royalty payable related to Honeywell |
| $ | — |
|
| $ | 530 |
|
| $ | — |
|
See Notes to the Consolidated Financial Statements.
F-7
ASTRONOVA, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
January 31, 2022, 20212024, 2023, and 2020
Note 1—Summary of Significant Accounting Policies
Basis of Presentation:
Principles of Consolidation:
Reclassification:
Use of Estimates:
Cash and Cash Equivalents:
Inventories:
Property, Plant and Equipment:
Revenue Recognition:
The vast majority of our revenue is generated from the sale of distinct products. Revenue is measured as the amount of consideration we expect to receive in exchange for such products, which is generally at the contractually stated prices, and is recognized when we satisfy a performance obligation by transferring control of a product to a customer. The transfer of control generally occurs at one point in time, upon shipment, when title and risk of loss pass to the customer. Returns and customer credits are infrequent and are recorded as a reduction to revenue. Sales taxes and value added taxes collected concurrently with revenue generating activities are excluded from revenue.
Many of the contracts entered into with customers are commonly comprised of a combination of equipment, supplies, installation and/or training services. We determine performance obligations by assessing whether the products or services are distinct from other elements of the contract. In order to be distinct, the product must perform either on its own or with readily available resources and must be separate within the context of the contract.
F-8
Most of our hardware products contain embedded operating systems and data management software which is included in the purchase price of the equipment. The software is deemed incidental to the systems as a whole, as it is not sold or marketed separately, and its production costs are minor compared to those of the hardware system. Hardware and software elements are typically delivered at the same time and are accounted for as a single performance obligation for which revenue is recognized at the point in time when ownership is transferred to the customer.
Installation and training services vary based on certain factors such as the complexity of the equipment, staffing availability in a geographic location and customer preferences, and can range from a few days to a few months. The delivery of installation and training services are not assessed to determine whether they are separate performance obligations, as the amounts are not material to the contract.
Shipping and handling activities that occur after control over a product has transferred to a customer are accounted for as fulfillment activities rather than performance obligations, as allowed under a practical expedient provided by TopicASC 606. The shipping and handling fees charged to customers are recognized as revenue and the related costs are included in cost of revenue at the point in time when ownership of the product is transferred to the customer.
We may perform serviceservices at the request of the customer, generally for the repair and maintenance of products previously sold. These services are short in duration and total less than 11% and 9%approximately 5.0% of revenue for each of the years ended January 31, 20222024 and 2021, respectively.2023. Revenue is recognized as services are rendered and accepted by the customer. We also provide service agreements on certain of our Product Identification equipment. Service agreements are purchased separately from the equipment and provide for the right to obtain service and maintenance on the equipment for a period of typically one to two years. Accordingly, revenue on these agreements is recognized over the term of the agreements. The portion of service agreement contracts that are uncompleted at the end of any reporting period areis included in deferred revenue.
We generally provide warranties for our products. The standard warranty period is typically3-5
We recognize and subsequently amortize an asset for the incremental direct costs of obtaining a contract with a customer if we expect the benefit of those costs to be longer than one year. Costs relatedyear (Refer to obtaining sales contracts forNote 3, “Revenue Recognition” included in our aerospace printer products have been capitalized and are being amortized based onnotes to the forecasted number of units sold over the estimated benefit term.consolidated financial statements). We apply the practical expedient to expense costs incurred for costs to obtain a contract when the amortization period would have been less than a year. These costs include sales commissions paid to the internal direct sales team as well as to third-party representatives and distributors. Contractual
Accounts Receivables and Allowance for Doubtful Accounts:
Business Combinations: We account for business acquisitions under the acquisition method of accounting in accordance with ASC 805, ‘‘Business Combinations,’’ where the total purchase price is allocated to the tangible and identified intangible assets acquired and liabilities assumed based on their estimated fair values. The purchase price is allocated using the information currently available, and may be adjusted, up to one year from acquisition date, after obtaining more information regarding, among other things, asset valuations, liabilities assumed and revisions to preliminary estimates. The purchase price in excess of the fair value of the tangible and identified intangible assets acquired less liabilities assumed is recognized as goodwill. Determining the fair value of assets acquired and liabilities assumed requires management to use significant judgment and estimates, including the selection of valuation methodologies, estimates of future revenue, costs and cash flows, discount rates, and selection of comparable companies. Management’s estimates of fair value are based upon assumptions believed to be reasonable, but which are inherently uncertain and
F-9
unpredictable. As a result, actual results may differ from these estimates. During the measurement period, we may record adjustments to acquired assets and assumed liabilities, with corresponding offsets to goodwill. Upon the conclusion of a measurement period, any subsequent adjustments are recorded to earnings.
At the acquisition date, the Company measures the fair values of all assets acquired and liabilities assumed that arise from contractual contingencies. The Company also measures the fair values of all non-contractual contingencies if, as of the acquisition date, it is more likely than not that the contingencies will give rise to assets or liabilities.
Acquisition-related costs not considered part of the considerations are expensed as incurred and recorded in acquisition costs within the consolidated statement of operations.
Research and Development Costs:
Foreign Currency Translation:
Advertising:
Long-Lived Assets:
Intangible Assets:
Goodwill:
F-10
The accounting guidance related to goodwill impairment testing allows for the performance of an optional qualitative assessment of whether it is more likely than not that the fair value of a reporting unit is less than its carrying value. Factors that management considers in this qualitative assessment include macroeconomic conditions, industry and market considerations, overall financial performance (both current and projected), changes in management and strategy and changes in the composition or carrying amount of net assets. If this qualitative assessment indicates that it is more likely than not that the fair value of a reporting unit is less than its carrying value, then a quantitative assessment is required for the reporting unit. Additionally, we can elect to forgo the qualitative assessment and perform the quantitative test. The quantitative assessment compares the fair value of the reporting unit with its carrying value. If the quantitative assessment is performed, we estimate the fair value of our reporting units using a blended income and market approach. The income approach is based on a discounted cash flow model and provides a fair value estimate based upon the reporting unit’s expected long-term operating cash flow performance. The market approach compares the reporting unit to publicly traded companies and transactions involving similar business, and requires the use of many 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 performed a qualitative assessment for our fiscal 20222024 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 their fair values. Accordingly, no quantitative assessment was performed. There were no impairment charges for our goodwill in fiscal years 2022, 20212024, 2023, or 2020.
Leases:
We enter into lease contracts for certain of our facilities at various locations worldwide. At inception of a contract, we determine whether the contract is or contains a lease. If we have a right to obtain substantially all of the economic benefits from the use of the identified asset and the right to direct the use of the asset, then the contract contains a lease.
There are two types of leases, operating leases and finance leases. Lease classification is determined at lease commencement. We have made an accounting policy election to apply the short-term exception, which does not require the capitalization of leases with terms of 12 months or less. All of our leases are classified as operating leases. Operating lease expense is recognized on a straight-line basis over the lease term and included in general
In addition, several of our facility lease agreements include
Income Taxes:
We account for uncertain tax positions in accordance with the guidance provided in ASC 740, “Accounting for Income Taxes.” This guidance describes a recognition threshold and measurement attribute for the financial statement disclosure of tax positions taken or expected to be taken in a tax return and requires recognition of tax benefits that satisfy a
Net Income Per Common Share:
F-11
equivalent shares for stock options, restricted stock awards and restricted stock units outstanding during the period using the treasury stock method. In fiscal years 2022, 20212024, 2023, and 2020,2022, there were 345,085; 642,623295,370; 685,667; and 202,187,345,085, respectively, of common equivalent shares that were not included in the computation of diluted net income per common share because their inclusion would be anti-dilutive.
Fair Value Measurement:
The fair value hierarchy is summarized as follows:
Cash and cash equivalents, accounts receivable, accounts payable, accrued compensation, other accrued expenses and income tax payable are reflected in the consolidated balance sheet at carrying value, which approximates fair value due to the short-term nature of these instruments.
Self-Insurance:
Share-Based Compensation:
Share-based compensation becomes deductible for determining income taxes when the related award vests, is exercised, or is forfeited depending on the type of share-based award and subject to relevant tax law.
Derivative Financial Instruments:
For derivative instruments that are designated and qualify as a cash flow hedge, the effective portion of the gain or loss on the derivative instrument is reported as a component of other comprehensive income income/(loss) (OCI) and reclassified into earnings in the same line item associated with the forecasted transaction, and in the same period or periods during which the hedged transaction affects earnings (e.g., in “Interest
F-12
Expense” when the hedged transactions are interest cash flows associated with floating-rate debt, or “Other, Net” for portions reclassified relating to the remeasurement of the debt). The remaining gain or loss on the derivative instrument in excess of the cumulative change in the present value of future cash flows of the hedged item, if any, are recognized in the statement of income during the current period.
Recent Accounting Pronouncements
In December 2019,2023, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update No. 2023-09, “Income Taxes (Topic 740): Improvements to Income Tax Disclosures” (“ASU 2023-09”) to enhance the transparency and decision usefulness of income tax disclosures primarily related to the rate reconciliation and income taxes paid information. ASU 2023-09 modifies the requirement for income tax disclosures to include (1) specific categories in the rate reconciliation, (2) the income or loss from continuing operations before income tax expense or benefit (separated between domestic and foreign) and (3) income tax expense or benefit from continuing operations (separated by federal, state and foreign). ASU 2023-09 also requires entities to disclose their income tax payments to international, federal, state and local jurisdictions. The guidance is effective for annual periods beginning after December 15, 2024. Early adoption is permitted for annual financial statements that have not yet been issued or made available for issuance. ASU 2023-09 should be applied on a prospective basis, but retrospective application is permitted. We will adopt this standard beginning with our fiscal year ending January 31, 2025. We are currently evaluating the potential impact of adopting this new guidance on our consolidated financial statements and related disclosures.
In November 2023, the FASB issued Accounting Standards Update No. 2023-07, Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures (“ASU2019-12,“Simplifying 2023-07”), which requires disclosures, on an annual and interim basis, of significant segment expenses that are regularly provided to the Accounting for Income Taxes,” which simplifieschief operating decision maker (CODM), as well as the accounting for income taxes, eliminates certain exceptions within ASC 740, Income Taxes,aggregate amount of other segment items included in the reported measure of segment profit or loss. ASU 2023-07 also requires that a public entity disclose the title and clarifies certain aspectsposition of the current guidanceCODM and an explanation of how the CODM uses the reported measure(s) of segment profit or loss. Public entities will be required to promote consistency among reporting entities.provide all annual disclosures currently required by ASU2019-122020. Most amendments within2023, with early adoption permitted. We will adopt this standard beginning with our fiscal year ending January 31, 2025, and for interim periods beginning with our first quarter of fiscal 2026. We are currently evaluating the standard are required to be applied on a prospective basis, while certain amendments must be applied on a retrospective or modified retrospective basis. Thenew disclosure requirements of ASU 2023-07 and do not expect the adoption of this guidance did notto have a material impact on our consolidated financial statements or disclosures.
In October 2023, the FASB issued Accounting Standard Update 2023-06, “Disclosure Improvements: Codification Amendments in Response to the SEC’s Disclosure Updated and accompanyingSimplification Initiative” (“ASU 2023-06”), which amends the disclosure or presentation requirements related to various subtopics in the FASB Accounting Standards Codification. ASU 2023-06 was issued in response to the U.S. Securities and Exchange Commission’s (the “SEC”) August 2018 final rule that updated and simplified disclosure requirements and is intended to align U.S. GAAP requirements with those of the SEC and to facilitate the application of U.S. GAAP for all entities. For entities subject to the SEC’s existing disclosure requirements and for entities required to file or furnish financial statements with or to the SEC in preparation for the sale of or for purposes of issuing securities that are not subject to contractual restrictions on transfer, the effective date for each amendment will be the date on which the SEC removes that related disclosure from its rules. For all other entities, the amendments will be effective two years later. However, if by June 30, 2027, the SEC has not removed the related disclosure from its regulations, the amendments will be removed from the Codification and not become effective for any entity. We are currently assessing potential impacts of ASU 2023-06 and do not expect the adoption of this guidance to have a material impact on our condensed consolidated financial statements and disclosures.
There were no other new accounting pronouncements, issued or effective during fiscal 2022,2024, that have had or are expected to have a material impact on our consolidated financial statements.
Note 2—Acquisitions
Astro Machine
On August 4, 2022, we acquired Astro Machine LLC (“Astro Machine”), an Illinois-based manufacturer of printing equipment, including label printers, tabbers, conveyors, and envelope feeders, for aggregate consideration of $17.1 million.
The acquisition was accomplished pursuant to an Equity Interest Purchase Agreement dated as of August 4, 2022 (the “Purchase Agreement”) by and among us, GSND Holding Corporation (“GSND”), the parent company of Astro Machine, and Astro Machine. Pursuant to the Purchase Agreement, we purchased 100% of the issued and outstanding equity interests of Astro Machine from GSND for a purchase price of $15.6 million. The acquisition was funded using borrowings under our credit facility. We obtained a representation and warranty insurance policy and placed $300,000 of the purchase price into an escrow account, which pursuant to the terms and conditions of the Purchase Agreement, are our sole recourse for breaches of representations and warranties by GSND. Upon the closing of the transaction, Astro Machine became a wholly owned subsidiary of AstroNova, Inc.
F-13
Concurrently with the signing of the Purchase Agreement, our newly acquired subsidiary, Astro Machine, entered into a Purchase and Sale Agreement with Selak Real Estate Limited Partnership (“SRE”), pursuant to which Astro Machine purchased certain real property assets of SRE for a purchase price, paid in cash, of $1.5 million. These real estate assets are comprised of a 34,460 square foot industrial manufacturing building (including offices) on 1.26 acres of land, which is Astro Machine’s principal place of business.
This transaction is a business combination and was accounted for using the acquisition method of accounting prescribed by ASC 805, “Business Combinations” (“ASC 805”), whereby the results of operations, including the revenues and earnings of Astro Machine, are included in our financial statements from the date of acquisition. The purchase price of Astro Machine was allocated to the tangible and intangible assets acquired and liabilities assumed and recognized at their fair value based on widely accepted valuation techniques in accordance with ASC 820, “Fair Value Measurement,” as of the acquisition date. The process for estimating fair values requires the use of significant estimates, assumptions and judgments, including determining the timing and estimates of future cash flows and developing appropriate discount rates. The excess of the purchase price over the fair value of the net identified assets acquired and liabilities assumed was recorded as goodwill. ASC 805 establishes a measurement period to provide companies with a reasonable amount of time to obtain the information necessary to identify and measure various items in a business combination and cannot extend beyond one year from the acquisition date.
The following table sets forth the final purchase price allocation of the Astro Machine acquisition for the estimated fair value of the net asset acquired and liabilities assumed as of the date of acquisition:
(In thousands) |
|
|
| |
Cash |
| $ | 91 |
|
Accounts Receivable |
|
| 3,393 |
|
Inventory |
|
| 5,715 |
|
Property, Plant and Equipment |
|
| 4,200 |
|
Identifiable Intangible Assets |
|
| 3,480 |
|
Goodwill |
|
| 2,730 |
|
Accounts Payable and Other Current Liabilities |
|
| (2,484 | ) |
Total Purchase Price |
| $ | 17,125 |
|
The fair value of the intangible assets acquired was estimated by applying the income approach. This fair value measurement is 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.” Key assumptions in estimating the fair value of the intangibles include (1) remaining useful life of the tradename/trademarks and customer relations (2) the royalty rate of 0.75%, (3) customer attrition rate of 18.0%, (4) discount rate of 19.0% and (5) a range of revenue and net income projections for the fiscal years 2023 through 2026.
The following table sets forth the fair value of the acquired identifiable intangible assets and related estimated useful lives:
(In thousands) |
| Fair |
|
| Useful Life |
| ||
Customer Relations |
| $ | 3,060 |
|
|
| 5 |
|
Trademarks/Tradenames |
|
| 420 |
|
|
| 5 |
|
Total |
| $ | 3,480 |
|
|
|
| |
The Customer Relations intangible asset represents the relationships that will be maintained with certain historical customers of Astro Machine. The trademark/tradename intangible assets reflect the industry reputation of the Astro Machine name recognition and the registered trademarks for the use of several marks and logos held by Astro Machine.
Goodwill of $2.7 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 Astro Machine. The goodwill recognized under ASC 805 is attributable to synergies which are expected to enhance and expand our overall product portfolio, opportunities in new and existing markets, future technologies that have yet to be determined and Astro Machine’s assembled work force. The carrying amount of the goodwill was allocated to the PI segment.
Total acquisition-related costs of $0.7 million are included in general and administrative expenses in our consolidated statement of income for the year ended January 31, 2023.
F-14
The amounts of revenue and earnings before taxes attributable to Astro Machine and included in our consolidated statement of income were as follows:
(In thousands) |
| 2024 |
|
| 2023 |
| ||
Revenue |
| $ | 18,147 |
|
| $ | 12,515 |
|
Earnings before Taxes |
| $ | 2,616 |
|
| $ | 1,571 |
|
Astro Machine results are reported as part of the PI segment. Proforma results are not provided, as disclosure of such amounts was impractical to determine as the acquired business had insufficient financial records and no audit history prior to the transaction.
Honeywell Asset Purchase and License Agreement
On June 30, 2022, we entered into an Asset Purchase and License Agreement with Honeywell Inc. (“New HW Agreement”) to acquire an exclusive, perpetual, world-wide license to manufacture Honeywell’s flight deck printers for the Boeing 787 aircraft. The New HW Agreement provides for royalty payments to Honeywell based on gross revenues from the sales of the printers, paper and repair services of the licensed products in perpetuity. The royalty rates vary based on the year in which they are paid or earned and as products are sold or as services provided and range from single-digit to mid-double-digit percentages of gross revenue. The New HW Agreement included a provision for guaranteed minimum royalty payments to be paid in the event that the royalties earned by Honeywell do not meet the minimum for the preceding calendar year as follows: $100,000 in 2024, $200,000 in 2025, $233,000 in 2026 and 2027, and $234,000 in 2028.
This transaction was evaluated under ASC 805, “Business Combinations,” and was accounted for as an asset acquisition.
The purchase price was allocated to the customer relationship intangible, which was the only asset acquired as a result of this transaction. This asset will be amortized over the useful life of the intangible. The minimum royalty payment obligation and related customer relation intangible were recorded at the present value of the minimum royalty payments.
The acquired identifiable intangible asset is as follows:
(In thousands) |
| Fair |
|
| Useful Life |
| ||
Customer Contract Relationships |
| $ | 530 |
|
|
| 20 |
|
The minimum royalty payment due was discounted based on the payment schedule and applicable discount rate, resulting in an outstanding royalty obligation of $0.5 million as of January 31, 2023, including $0.1 million recorded as a current liability. Additional royalties based on sales activity will be recorded in the period that the associated revenue is earned. During the fourth quarter of fiscal 2023, we incurred $0.1 million in excess royalty expense, which was paid in the first quarter of the current fiscal year. As of the end of fiscal 2024, we incurred $0.2 million in additional royalties payable to Honeywell. As of January 31, 2024, the outstanding royalty obligation is $0.6 million, including $0.2 million recorded as a current liability in the accompanying consolidated balance sheet.
Note 3—Revenue Recognition
We derive revenue from the sale of (i) hardware, including digital color label printers and specialty OEM printing systems, portable data acquisition systems and airborne printers used in the flight deck and in the cabininterior of military, commercial, business and businessmilitary aircraft, (ii) related consumable supplies including paper, labels, tags, inks, toners and ribbons, (iii) repairs and maintenance of equipment and (iv) service agreements.
Revenues disaggregated by primary geographic markets and major product types are as follows:
Primary geographical markets:
(In thousands) |
| 2024 |
|
| 2023* |
|
| 2022 |
| |||
United States |
| $ | 84,757 |
|
| $ | 83,559 |
|
| $ | 68,185 |
|
Europe |
|
| 41,761 |
|
|
| 38,859 |
|
|
| 31,922 |
|
Canada |
|
| 8,742 |
|
|
| 8,690 |
|
|
| 6,519 |
|
Asia |
|
| 7,216 |
|
|
| 5,547 |
|
|
| 5,926 |
|
Central and South America |
|
| 4,221 |
|
|
| 4,589 |
|
|
| 3,271 |
|
Other |
|
| 1,389 |
|
|
| 1,283 |
|
|
| 1,657 |
|
Total Revenue |
| $ | 148,086 |
|
| $ | 142,527 |
|
| $ | 117,480 |
|
*Certain amounts have been reclassified to conform to the current year's presentation.
(In thousands) | 2022 | 2021 | 2020 | |||||||||
United States | $ | 68,185 | $ | 70,911 | $ | 83,671 | ||||||
Europe | 31,922 | 29,029 | 29,617 | |||||||||
Canada | 6,519 | 5,574 | 5,719 | |||||||||
Asia | 5,926 | 5,105 | 8,316 | |||||||||
Central and South America | 3,271 | 3,950 | 4,145 | |||||||||
Other | 1,657 | 1,464 | 1,978 | |||||||||
Total Revenue | $ | 117,480 | $ | 116,033 | $ | 133,446 | ||||||
F-15
Major product types:
(In thousands) |
| 2024 |
|
| 2023 |
|
| 2022 |
| |||
Hardware |
| $ | 49,440 |
|
| $ | 42,445 |
|
| $ | 31,492 |
|
Supplies |
|
| 79,252 |
|
|
| 82,072 |
|
|
| 73,244 |
|
Service and Other |
|
| 19,394 |
|
|
| 18,010 |
|
|
| 12,744 |
|
Total Revenue |
| $ | 148,086 |
|
| $ | 142,527 |
|
| $ | 117,480 |
|
(In thousands) | 2022 | 2021 | 2020 | |||||||||
Hardware | $ | 31,492 | $ | 34,111 | $ | 48,959 | ||||||
Supplies | 73,244 | 71,772 | 71,838 | |||||||||
Service and Other | 12,744 | 10,150 | 12,649 | |||||||||
Total Revenue | $ | 117,480 | $ | 116,033 | $ | 133,446 | ||||||
In December 2022, we entered into an amended contract with one of our T&M customers that provided for a total payment of $3.25 million to be received as a result of our claims allowable under French law relating to additional component costs we have incurred and will continue to incur in order to supply aerospace printers under the contract for the period beginning in April 2022 and continuing through 2025. As of January 31, 2023, we recognized $1.1 million in revenue as a result of this arrangement and the $2.15 million balance was recorded as deferred revenue in the accompanying consolidated balance sheet. During fiscal 2024, we recognized an additional $1.3 million which is included in revenue in the consolidated statement of income for the period ended January 31, 2024, and at January 31, 2024, the remaining balance to be received of $0.8 million is included in deferred revenue in the accompanying consolidated balance sheet. The remaining revenue to be recognized will be based on our shipments of the printers during fiscal 2025.
Contract Assets and Liabilities
We normally do not have contract assets, which are primarily unbilled accounts receivable that are conditional on something other than the passage of time.
Our contract liabilities, which represent billings in excess of revenue recognized, are related to advanced billings for purchased service agreements and extended warranties. Contract liabilities were $262,000$530,000 and $285,000$412,000 at January 31,2022 2024 and January 31, 2021,2023, respectively, and are recorded as current deferred revenue in the accompanying consolidated balance sheet. The decreaseincrease in the deferred revenue balance duringfor the periodyear ended January 31,2022 2024 is primarily due to $269,000cash payments received in advance of satisfying performance obligations, offset by $704,000 of revenue recognized during the period that was included in the deferred revenue balance at January 31, 2021 offset by cash payments received in advance2023.
Contract Costs
We recognize an asset for the incremental costs of satisfying performance obligations.
Note 3—4—Intangible Assets
Intangible assets are as follows:
| January 31, 2024 |
|
| January 31, 2023 |
| |||||||||||||||||||||||||||
(In thousands) |
| Gross |
|
| Accumulated |
|
| Currency |
|
| Net |
|
| Gross |
|
| Accumulated |
|
| Currency |
|
| Net |
| ||||||||
Miltope: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||
Customer Contract Relationships |
| $ | 3,100 |
|
| $ | (3,100 | ) |
| $ | — |
|
| $ | — |
|
| $ | 3,100 |
|
| $ | (2,777 | ) |
| $ | — |
|
| $ | 323 |
|
RITEC: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||
Customer Contract Relationships |
|
| 2,830 |
|
|
| (1,689 | ) |
|
| — |
|
|
| 1,141 |
|
|
| 2,830 |
|
|
| (1,623 | ) |
|
| — |
|
|
| 1,207 |
|
TrojanLabel: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||
Existing Technology |
|
| 2,327 |
|
|
| (2,420 | ) |
|
| 93 |
|
|
| — |
|
|
| 2,327 |
|
|
| (2,087 | ) |
|
| 94 |
|
|
| 334 |
|
Distributor Relations |
|
| 937 |
|
|
| (686 | ) |
|
| 30 |
|
|
| 281 |
|
|
| 937 |
|
|
| (588 | ) |
|
| 27 |
|
|
| 376 |
|
Honeywell: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||
Customer Contract Relationships |
|
| 27,773 |
|
|
| (12,795 | ) |
|
| — |
|
|
| 14,978 |
|
|
| 27,773 |
|
|
| (11,913 | ) |
|
| — |
|
|
| 15,860 |
|
Astro Machine: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||
Customer Contract Relationships |
|
| 3,060 |
|
|
| (918 | ) |
|
| — |
|
|
| 2,142 |
|
|
| 3,060 |
|
|
| (306 | ) |
|
| — |
|
|
| 2,754 |
|
Trademarks |
|
| 420 |
|
|
| (126 | ) |
|
| — |
|
|
| 294 |
|
|
| 420 |
|
|
| (42 | ) |
|
| — |
|
|
| 378 |
|
Intangible Assets, net |
| $ | 40,447 |
|
| $ | (21,734 | ) |
| $ | 123 |
|
| $ | 18,836 |
|
| $ | 40,447 |
|
| $ | (19,336 | ) |
| $ | 121 |
|
| $ | 21,232 |
|
F-16
January 31, 2022 | January 31, 2021 | |||||||||||||||||||||||||||||||
(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 | $ | (2,515 | ) | $ | — | $ | 585 | $ | 3,100 | $ | (2,284 | ) | $ | — | $ | 816 | ||||||||||||||
RITEC: | ||||||||||||||||||||||||||||||||
Customer Contract Relationships | 2,830 | (1,557 | ) | — | 1,273 | 2,830 | (1,423 | ) | — | 1,407 | ||||||||||||||||||||||
TrojanLabel: | ||||||||||||||||||||||||||||||||
Existing Technology | 2,327 | (1,767 | ) | 127 | 687 | 2,327 | (1,405 | ) | 196 | 1,118 | ||||||||||||||||||||||
Distributor Relations | 937 | (498 | ) | 46 | 485 | 937 | (396 | ) | 89 | 630 | ||||||||||||||||||||||
Honeywell: | ||||||||||||||||||||||||||||||||
Customer Contract Relationships | 27,243 | (11,073 | ) | — | 16,170 | 27,243 | (9,712 | ) | — | 17,531 | ||||||||||||||||||||||
Intangible Assets, net | $ | 36,437 | $ | (17,410 | ) | $ | 173 | $ | 19,200 | $ | 36,437 | $ | (15,220 | ) | $ | 285 | $ | 21,502 | ||||||||||||||
There were 0no impairments to intangible assets during the periods ended January 31, 20222024 and 2021.2023. Amortization expense of $2.2$2.4 million,, $4.1 $1.9 million, and $4.2$2.2 million with regard to acquired intangibles has been included in the consolidated statements of income for2021 and 2020, respectively.
Estimated amortization expense for the next five fiscal years is as follows:
(In thousands) |
| 2025 |
|
| 2026 |
|
| 2027 |
|
| 2028 |
|
| 2029 |
| |||||
Estimated amortization expense |
| $ | 1,723 |
|
| $ | 1,723 |
|
| $ | 1,723 |
|
| $ | 1,723 |
|
| $ | 1,281 |
|
| (In thousands) | 2023 | 2024 | 2025 | 2026 | 2027 | |||||||||||||||
Estimated amortization expense | $ | 1,632 | $ | 1,693 | $ | 1,008 | $ | 1,008 | $ | 1,008 | ||||||||||
Note 4—5—Inventories
The components of inventories are as follows:
| January 31, |
| ||||||
| 2024 |
|
| 2023 |
| |||
(In thousands) |
|
|
|
|
|
| ||
Materials and Supplies |
| $ | 39,078 |
|
| $ | 38,387 |
|
Work-in-Progress |
|
| 1,054 |
|
|
| 1,146 |
|
Finished Goods |
|
| 15,645 |
|
|
| 23,221 |
|
|
| 55,777 |
|
|
| 62,754 |
| |
Inventory Reserve |
|
| (9,406 | ) |
|
| (11,430 | ) |
| $ | 46,371 |
|
| $ | 51,324 |
| |
January 31, | ||||||||
2022 | 2021 | |||||||
| (In thousands) | ||||||||
Materials and Supplies | $ | 22,709 | $ | 20,265 | ||||
Work-in-Progress | 1,489 | 2,076 | ||||||
Finished Goods | 19,718 | 16,371 | ||||||
| 43,916 | 38,712 | |||||||
Inventory Reserve | (9,307 | ) | (8,652 | ) | ||||
| $ | 34,609 | $ | 30,060 | |||||
Note 5—6—Property, Plant and Equipment
Property, plant and equipment consist of the following:
| January 31, |
| ||||||
| 2024 |
|
| 2023 |
| |||
(In thousands) |
|
|
|
|
|
| ||
Land and Land Improvements |
| $ | 2,304 |
|
| $ | 2,304 |
|
Buildings and Leasehold Improvements |
|
| 14,381 |
|
|
| 14,158 |
|
Machinery and Equipment |
|
| 26,123 |
|
|
| 24,960 |
|
Computer Equipment and Software |
|
| 14,238 |
|
|
| 13,972 |
|
Gross Property, Plant and Equipment |
|
| 57,046 |
|
|
| 55,394 |
|
Accumulated Depreciation |
|
| (42,861 | ) |
|
| (41,106 | ) |
Net Property Plant and Equipment |
| $ | 14,185 |
|
| $ | 14,288 |
|
January 31, | ||||||||
2022 | 2021 | |||||||
| (In thousands) | ||||||||
Land and Land Improvements | $ | 1,004 | $ | 1,004 | ||||
Buildings and Leasehold Improvements | 12,666 | 12,642 | ||||||
Machinery and Equipment | 23,238 | 23,346 | ||||||
Computer Equipment and Software | 13,913 | 13,847 | ||||||
Gross Property, Plant and Equipment | 50,821 | 50,839 | ||||||
Accumulated Depreciation | (39,380) | (38,828) | ||||||
Net Property Plant and Equipment | $ | 11,441 | $ | 12,011 | ||||
Depreciation expense on property, plant and equipment was $1.7$1.8 million, for the year ended January 31,2022 and $1.9$2.0 million and $2.0$1.7 million for the years ended January 31, 20202024, 2023 and 2019,2022, respectively.
During the current fiscal year,2022, weOracle EnterpriseOne ERP system along with the balance of the related prepaid service and maintenance contracts have beenwere removed from the accompanying consolidated balance sheet at January 31, 2022, and we have recorded a net loss on the disposal
F-17
Note 6—7—Accrued Expenses
Accrued expenses consist of the following:
| January 31, |
| ||||||
(In thousands) |
| 2024 |
|
| 2023 |
| ||
Warranty |
| $ | 711 |
|
| $ | 1,072 |
|
Professional Fees |
|
| 375 |
|
|
| 311 |
|
Current portion of Lease Liability |
|
| 233 |
|
|
| 275 |
|
Accrued Property & Sales Tax |
|
| 209 |
|
|
| 187 |
|
Stockholder Relation Fees |
|
| 94 |
|
|
| 86 |
|
Dealer Commissions |
|
| 64 |
|
|
| 78 |
|
Other Accrued Expenses |
|
| 1,020 |
|
|
| 1,299 |
|
| $ | 2,706 |
|
| $ | 3,308 |
| |
January 31, | ||||||||
2022 | 2021 | |||||||
| (In thousands) | ||||||||
Warranty | $ | 834 | $ | 730 | ||||
Professional Fees | 411 | 546 | ||||||
Freight | 347 | 57 | ||||||
Lease Liability | 327 | 372 | ||||||
Accrued Property & Sales Tax | 316 | 443 | ||||||
Stockholder Relation Fees | 102 | 91 | ||||||
Dealer Commissions | 139 | 57 | ||||||
Other Accrued Expenses | 1,637 | 1,578 | ||||||
| $ | 4,113 | $ | 3,874 | |||||
Note 7—8—Credit Agreement and Long-Term Debt
Credit Agreement
In connection with the purchase of Astro Machine, on August 4, 2022, we entered into a FirstSecond Amendment to Credit Agreement (the “Amendment”) to our Amended &and Restated Credit Agreement (the “A&R Credit Agreement,” as amended by the Amendment; the “Amended Credit Agreement”“Second Amendment”) with Bank of America, N.A., as lender (the “Lender”),. The Second Amendment amended the Amended and our subsidiaries, ANI ApS and TrojanLabel. The A&R Credit Agreement, which we entered into on July, 30, 2020, amended and restated theRestated Credit Agreement dated as of February 28, 2017July 30, 2020, as amended by the First Amendment to Amended and Restated Credit Agreement, dated as of March 24, 2021, and the LIBOR Transition Amendment, dated as of December 24, 2021 (the “Prior“Existing Credit Agreement,” and the Existing Credit Agreement as amended by the Second Amendment, the “Amended Credit Agreement”) by and among us, ANI ApS, TrojanLabel, between the Company and the Lender. Immediately prior to the closing of the Amendment, we repaid
The Amended Credit Agreement provides for (i) a new term loan in the principal amount of $10.0$6.0 million, which term loan was in addition to the existing term loan outstanding under the Existing Credit Agreement in the principal amount of $9.0 million as of the effective date of the Second Amendment, and (ii) a $22.5 millionan increase in the aggregate principal amount of the revolving credit facility available for general corporate purposes.thereunder from $22.5 million to $25.0 million. At the closing of the Second Amendment, we borrowed the entire $10.0
The Amended Credit Agreement requires that the term loan be paid in quarterly installments on the last day of each of our fiscal quarters withover the final payment dueterm of the Amended Credit Agreement on Septemberthe following repayment schedule: 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 October 31, 2022 through July 31, 2023 is $375,000; and 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 October 31, 2023 through April 30, 2025.2027 is $675,000. The entire remaining principal balance of the term loan is required to be paid on August 4, 2027. 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
The Amended Credit Agreement includes an uncommitted accordion provision under which the term loan and/or revolving credit facility commitments may be increased in an aggregate principal amount not exceeding $10.0 million, subject to obtaining the agreement of the Lender and the satisfaction of certain other conditions.
Amounts repaid under the revolving credit facility may be reborrowed, subject to our continued compliance with the Amended Credit Agreement. No amount of the term loan that is repaid may be reborrowed.
F-18
We must comply with various customary financial andand a minimum consolidated fixed charge coverage ratio and a minimum consolidated asset coverage ratio. The primarytheirour or our subsidiaries’ capital stock, to repurchase or acquire theirour or our subsidiaries’ capital stock, to conduct mergers or acquisitions, to sell assets, to alter theirour or our subsidiaries’ capital structure, to make investments and loans, to change the nature of theirour or our subsidiaries’ business, and to prepay subordinated indebtedness, in each case subject to certain exceptions and thresholds as set forth in the Amended Credit Agreement, certain of which provisions were modified by the Second Amendment.
The Lender is entitled to accelerate repayment of the loans and to terminate its revolving credit commitment under the Amended Credit Agreement upon the occurrence of any of various customary events of default, 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.
Our obligations under the Amended Credit Agreement continue to be secured by substantially all of our personal property assets (including a pledge of the equity interests heldwe hold in ANIAstroNova Scandinavia 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.
Equipment Financing
In January 2024, we entered into a secured equipment loan facility agreement with Banc of America Leasing & Capital, LLC and borrowed a principal amount of $0.8 million thereunder for the purpose of financing our purchase of production equipment. This loan matures on January 23, 2029, and bears interest at a fixed rate of 7.06%. Under this loan agreement, equal monthly payments including principal and interest of $16,296 will commence on February 23, 2024, and will continue through the maturity of the equipment loan facility on January 23, 2029.
Summary of Outstanding Debt
Revolving Credit Facility
At January 31, 2024, we had a principal balance of $8.9 million outstanding on our revolving credit facility. The balance outstanding under the revolving credit facility bore interest at a weighted average rate of 7.70% and 6.35% for the years ended January 31, 2024 and January 31, 2023, respectively, and we incurred $1.2 million and $0.8 million for interest on this obligation during the years ended January 31, 2024 and January 31, 2023, respectively. Commitment fees on the undrawn portion of our revolving credit facility of $30,000 were incurred for each of the years ended January 31, 2024 and January 31, 2023, respectively. Both the interest expense and commitment fees are included as interest expense in the accompanying consolidated income statement for all periods presented. At January 31, 2024, $16.1 million remained available for borrowing under our revolving credit facility.
Long-Term Debt
Long-term debt in the accompanying condensed consolidated balance sheets under the Amended Credit Agreement is as follows:
| January 31, |
| ||||||
(In thousands) |
| 2024 |
|
| 2023 |
| ||
Term Loan (7.56% as of January 31, 2024 and 6.78% as of January 31, |
| $ | 12,150 |
|
| $ | 14,250 |
|
Equipment Loan - 7.06% Fixed Rate; maturity date of January 23, |
|
| 822 |
|
|
| — |
|
Total Long Term Debt |
| $ | 12,972 |
|
| $ | 14,250 |
|
Less: Debt Issuance Costs, net of accumulated amortization |
|
| 80 |
|
|
| 110 |
|
Current Portion of Long Term Debt |
|
| 2,842 |
|
|
| 2,100 |
|
Long-Term Debt, net of current portion |
| $ | 10,050 |
|
| $ | 12,040 |
|
January 31, | ||||||||
| (In thousands) | 2022 | 2021 | ||||||
USD Term Loan (2.35% as of January 31, 2022); maturity date of September 30, 2025 | $ | 9,250 | $ | — | ||||
USD Term Loan (4.65% as of January 31, 2021) | — | 12,576 | ||||||
| 9,250 | 12,576 | |||||||
Debt Issuance Costs, net of accumulated amortization | (96 | ) | (141 | ) | ||||
Current Portion of Term Loan | (1,000 | ) | (5,326 | ) | ||||
Long-Term Debt | $ | 8,154 | $ | 7,109 | ||||
During the years ended January 31, 2022, 20212024, 2023 and 2020,2022, we recognized $0.3$1.0 million, $0.5$0.6 million and $0.4$0.3 million of interest expense
F-19
The schedule of required principal payments remaining under the Amended Credit Agreement on our long-term debt outstanding as of January 31, 20222024 is as follows:
(In thousands) |
|
|
| |
Fiscal 2025 |
| $ | 2,842 |
|
Fiscal 2026 |
|
| 2,852 |
|
Fiscal 2027 |
|
| 2,864 |
|
Fiscal 2028 |
|
| 4,226 |
|
Fiscal 2029 |
|
| 188 |
|
| $ | 12,972 |
| |
| (In thousands) | ||||
Fiscal 2023 | $ | 1,000 | ||
Fiscal 2024 | 1,000 | |||
Fiscal 2025 | 1,250 | |||
Fiscal 2026 | 6,000 | |||
| $9,250 | ||||
Note 8—9—Paycheck Protection Program Loan
On May 6, 2020, we entered into a loan agreement with, and executed a promissory note in favor of Greenwood pursuant to which we borrowed
The PPP Loan, originally scheduled to mature on May 6, 2022, was unsecured and bore interest at a rate of 1.0%1.0% per annum, accruing from the loan date. NaN payments were due on the PPP Loan until the date on which
On June 15,, Greenwood notified us that the SBA approved our application for forgiveness of the entire $4.4$4.4 million principal balance of our PPP Loan and all accrued interest thereon. As a result, in the second quarter of fiscal 2022, we recorded a $4.5$4.5 million gain on extinguishment of debt, which is included in the accompanying consolidated income statement for the period ended January 31, 2022.
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, 2022 | January 31, 2021 | January 31, 2022 | January 31, 2021 | |||||||||||||||||
Swap contracts | $ | — | $ | (360 | ) | Other Income | $ | (79 | ) | $ | (288 | ) | ||||||||
Note 10—Employee Retention Credit
In fiscal 2018, AstroNova, Inc.we entered into an Asset Purchase and License Agreement with Honeywell International, Inc. to acquire an exclusive, perpetual, world-wide license to manufacture Honeywell’s narrow-format flight deck printers for two aircraft families along with certain inventory used in the manufacturing of the licensed printers. The purchase price included a guaranteed minimum royalty payment of $15.0$15.0 million, to be paid in quarterly installments over a
The guaranteed minimum royalty payment obligation was recorded at the present value of the minimum annual royalty payments using a present value factor of 2.8%, which is based on the estimatedafter-taxcost ofdebt for similarcompanies.payments. As of January 31, 2022,2024, we had paid an aggregate of $7.52022,2024, the current portion of the outstanding guaranteed minimum royalty obligation of $2.0$4.420222024, 2023 and January 31, 2021,2022, we also incurred excess royalty expense of $0.5 $31 thousand,$0.5 million, respectively, which is included in cost of revenue in our consolidated statements of income.income for those periods. A total of $0.22022.
In fiscal 2023, we entered into a second Asset Purchase and License Agreement with Honeywell International, Inc. as further discussed in Note 2.
Note 12—11—Leases
We enter into lease contracts for certain of our facilities at various locations worldwide. Our leases have remaining lease terms of one to six years, some of which include options to extend the lease term for periods of up to five years when it is reasonably certain
Balance sheet and other information related to our leases is as follows:
Operating Leases |
| Balance Sheet Classification |
| January 31, |
|
| January 31, |
| ||
Lease Assets |
| Right of Use Assets |
| $ | 603 |
|
| $ | 794 |
|
Lease Liabilities—Current |
| Other Accrued Expenses |
| $ | 233 |
|
| $ | 275 |
|
Lease Liabilities—Long Term |
| Lease Liabilities |
| $ | 415 |
|
| $ | 555 |
|
F-20
Operating Leases (In thousands) | Balance Sheet Classification | January 31, 2022 | January 31, 2021 | |||||||
Lease Assets | Right of Use Assets | $ | 1,094 | $ | 1,389 | |||||
Lease Liabilities—Current | Other Accrued Expenses | 327 | 372 | |||||||
Lease Liabilities—Long Term | Lease Liabilities | $ | 808 | $ | 1,065 | |||||
Lease cost information is as follows:
Operating Leases |
| Statement of Income Classification |
| 2024 |
|
| 2023 |
| ||
Operating Lease Costs |
| General and Administrative Expense |
| $ | 470 |
|
| $ | 460 |
|
Operating Leases (In thousands) | Statement of Income Classification | 2022 | 2021 | |||||||||
Operating Lease Costs | General and Administrative Expense | $ | 510 | $ | 485 | |||||||
At January 31, 2022,2024, maturities of operating lease liabilities are as follows:
(In thousands) |
|
|
| |
2025 |
| $ | 256 |
|
2026 |
|
| 197 |
|
2027 |
|
| 148 |
|
2028 |
|
| 92 |
|
2029 |
|
| — |
|
Thereafter |
|
| — |
|
Total Lease Payments |
|
| 693 |
|
Less: Imputed Interest |
|
| (45 | ) |
Total Lease Liabilities |
| $ | 648 |
|
| (In thousands) | ||||
2023 | $ | 327 | ||
2024 | 308 | |||
2025 | 203 | |||
2026 | 159 | |||
2027 | 153 | |||
Thereafter | 91 | |||
Total Lease Payments | 1,241 | |||
Less: Imputed Interest | (106 | ) | ||
Total Lease Liabilities | $ | 1,135 | ||
As of January 31, 2022,2024, the weighted-average remaining lease term and weighted-average discount rate for our operating leases are 4.53.1 years and 3.85%4.38%, respectively. We calculated the weighted-average discount rate using incremental borrowing rates, which equal the rates of interest that we would pay to borrow funds on a fully collateralized basis over a similar term.
Supplemental cash flow information related to leases is as follows:
(In thousands) |
| 2024 |
|
| 2023 |
| ||
Cash paid for operating lease liabilities |
| $ | 350 |
|
| $ | 314 |
|
(In thousands) | 2022 | 2021 | ||||||
Cash paid for operating lease liabilities | $ | 372 | $ | 429 | ||||
Note 13—12—Accumulated Other Comprehensive Income (Loss)
The changes in the balance of accumulated other comprehensive income (loss)loss by component are as follows:
(In thousands) |
| Foreign Currency |
|
| Net |
|
| Total |
| |||
Balance at January 31, 2021 |
| $ | (275 | ) |
| $ | (109 | ) |
| $ | (384 | ) |
Other Comprehensive Loss before reclassification |
|
| (1,426 | ) |
|
| — |
|
|
| (1,426 | ) |
Amounts Reclassified from AOCI to Earnings |
|
| — |
|
|
| 62 |
|
|
| 62 |
|
Other Comprehensive Income (Loss) |
|
| (1,426 | ) |
|
| 62 |
|
|
| (1,364 | ) |
Balance at January 31, 2022 |
| $ | (1,701 | ) |
| $ | (47 | ) |
| $ | (1,748 | ) |
Other Comprehensive Income (Loss) before reclassification |
|
| (537 | ) |
|
| — |
|
|
| (537 | ) |
Amounts reclassified from AOCI to Earnings |
|
| — |
|
|
| 47 |
|
|
| 47 |
|
Other Comprehensive Income (Loss) |
|
| (537 | ) |
|
| 47 |
|
|
| (490 | ) |
Balance at January 31, 2023 |
| $ | (2,238 | ) |
| $ | — |
|
| $ | (2,238 | ) |
Other Comprehensive Income (Loss) before reclassification |
|
| 19 |
|
|
| — |
|
|
| 19 |
|
Amounts reclassified from AOCI to Earnings |
|
| — |
|
|
| — |
|
|
| — |
|
Other Comprehensive Income (Loss) |
|
| 19 |
|
|
| — |
|
|
| 19 |
|
Balance at January 31, 2024 |
| $ | (2,219 | ) |
| $ | — |
|
| $ | (2,219 | ) |
| (In thousands) | Foreign Currency Translation Adjustments | Net Unrealized Gain (Losses) on Cash Flow Hedges | Total | |||||||||
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 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, 202 1 | $ | (275 | ) | $ | (109 | ) | $ | (384 | ) | |||
Other Comprehensive Loss before reclassificatio n | (1,426 | ) | — | (1,426 | ) | |||||||
Amounts Reclassified from AOCI to Earning s | — | 62 | 62 | |||||||||
Other Comprehensive Income (Loss ) | (1,426 | ) | 62 | (1,364 | ) | |||||||
Balance at January 31, 202 2 | $ | (1,701 | ) | $ | (47 | ) | $ | (1,748 | ) | |||
The amounts presented above in other comprehensive income (loss) are net of taxes except for translation adjustments associated with our German, Danish and DanishShanghai subsidiaries.
F-21
Note 14—13—Shareholders’ Equity
During fiscal 2022years 2024 and 2021,2023, certain of our employees delivered a total of 27,22226,731 and 15,35717,752 shares, respectively, of our common stock to satisfy the exercise price and related taxes for stock options exercised and restricted stock vesting. The shares delivered were valued at a total of $0.4$0.4 million and $0.1$0.3 million, respectively, and are included in treasury stock in the accompanying consolidated balance sheets at January 31, 20222024 and 2021.2023. These transactions did not impact the number of shares authorized for repurchase under our current repurchase program.
Note 15—14—Share-Based Compensation
The Company maintains the following share-based compensation plans:
Stock Plans:
We have one equity incentive plan from which we are authorized to grant equity awards, the AstroNova, Inc. 2018 Equity Incentive Plan (the “2018 Plan”). The 2018 Plan provides for, among other things, the issuance of awards, including incentive stock options,(RSAs)(“RSAs”). The 2018 Plan authorizes the issuance of up to
In addition to the 2018 Plan, we previously granted equity awards under our 2015 Equity Incentive Plan (the “2015 Plan”) and our 2007 Equity Incentive Plan (the “2007 Plan”). No new awards may be issued under either the 2007 or 2015 Plans, but outstanding awards will continue to be governed by those plans. As of January 31, 2022,2024, options to purchase an aggregate of 323,468260,249 shares were outstanding under the 2007 Plan and options to purchase an aggregate of 139,075127,600 shares were outstanding under the 2015 Plan.
We also have a
Share-Based Compensation:
Share-based compensation expense has been recognized as follows:
| Years Ended January 31 |
| ||||||||||
| 2024 |
|
| 2023 |
|
| 2022 |
| ||||
(In thousands) |
|
|
|
|
|
|
|
|
| |||
Stock Options |
| $ | — |
|
| $ | 7 |
|
| $ | 210 |
|
Restricted Stock Awards and Restricted Stock Units |
|
| 1,322 |
|
|
| 1,271 |
|
|
| 1,266 |
|
Employee Stock Purchase Plan |
|
| 25 |
|
|
| 12 |
|
|
| 17 |
|
Total |
| $ | 1,347 |
|
| $ | 1,290 |
|
| $ | 1,493 |
|
| (In thousands) | ||||||||||||
Stock Options | $ | 210 | $ | 517 | $ | 616 | ||||||
Restricted Stock Awards and Restricted Stock Units | 1,266 | 1,285 | 1,136 | |||||||||
Employee Stock Purchase Plan | 17 | 17 | 23 | |||||||||
Total | $ | 1,493 | $ | 1,819 | $ | 1,775 | ||||||
F-22
Stock Options:
Aggregated information regarding stock options granted under the plans is summarized below:
| Number |
|
| Weighted- |
| |||
Options Outstanding, January 31, 2021 |
|
| 622,083 |
|
| $ | 14.63 |
|
Options Granted |
|
| — |
|
|
| — |
|
Options Exercised |
|
| (6,425 | ) |
|
| 9.34 |
|
Options Forfeited |
|
| (17,615 | ) |
|
| 15.09 |
|
Options Cancelled |
|
| — |
|
|
| — |
|
Options Outstanding, January 31, 2022 |
|
| 598,043 |
|
| $ | 14.67 |
|
Options Granted |
|
| — |
|
|
| — |
|
Options Exercised |
|
| (42,944 | ) |
|
| 8.74 |
|
Options Forfeited |
|
| (5,500 | ) |
|
| 15.42 |
|
Options Cancelled |
|
| (2,400 | ) |
|
| 8.09 |
|
Options Outstanding, January 31, 2023 |
|
| 547,199 |
|
| $ | 15.16 |
|
Options Granted |
|
| — |
|
|
| — |
|
Options Exercised |
|
| (9,100 | ) |
|
| 11.54 |
|
Options Forfeited |
|
| (10,525 | ) |
|
| 15.20 |
|
Options Cancelled |
|
| (4,225 | ) |
|
| 10.50 |
|
Options Outstanding, January 31, 2024 |
|
| 523,349 |
|
| $ | 15.26 |
|
Number of Shares | Weighted- Average Exercise Price Per Share | |||||||
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 | 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 | |||||
Options Granted | 0 | 0 | ||||||
Options Exercised | (6,425 | ) | 9.34 | |||||
Options Forfeited | (17,615 | ) | 15.09 | |||||
Options Cancelled | 0 | 0 | ||||||
Options Outstanding, January 31, 2022 | 598,043 | $ | 14.67 | |||||
Set forth below is a summary of options outstanding at January 31, 2022:2024:
Outstanding |
|
| Exercisable |
| ||||||||||||||||||||
Range of |
| Number of |
|
| Weighted- |
|
| Weighted- |
|
| Number of |
|
| Weighted- |
|
| Weighted |
| ||||||
$10.01-15.00 |
|
| 311,874 |
|
| $ | 13.78 |
|
|
| 2.0 |
|
|
| 311,874 |
|
| $ | 13.78 |
|
|
| 2.0 |
|
$15.01-20.00 |
|
| 211,475 |
|
|
| 17.44 |
|
|
| 3.8 |
|
|
| 211,475 |
|
|
| 17.44 |
|
|
| 3.8 |
|
|
| 523,349 |
|
| $ | 15.26 |
|
|
| 2.7 |
|
|
| 523,349 |
|
| $ | 15.26 |
|
|
| 2.7 |
| |
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 | 35,844 | $ | 7.97 | 0.5 | 35,844 | $ | 7.97 | 0.5 | ||||||||||||||||
| $10.01-15.00 | 345,749 | 13.62 | 3.9 | 345,749 | 13.62 | 3.9 | ||||||||||||||||||
| $15.01-20.00 | 216,450 | 17.48 | 5.8 | 209,900 | 17.43 | 5.8 | ||||||||||||||||||
| 598,043 | $ | 14.67 | 4.4 | 591,493 | $ | 14.63 | 4.3 | |||||||||||||||||
No options were granted during fiscal 20222024 or fiscal 2021.2023. As of January 31, 2022,2024, there was $8,000 ofno unrecognized compensation expense related to the unvested stock options granted under the plans. This expense is expected to be recognized over a weighted-average period of 0.3 years.
As of January 31, 2022,2024, the aggregate intrinsic value (the aggregate difference between the closing stock price of our common stock on January 31, 2022,2024, and the exercise price of the outstanding options) that would have been received by the option holders if all options had been exercised was $0.3$1.3 million for all exercisable options and $0.3 million for all options outstanding. The total aggregate intrinsic value of options exercised during fiscal 2024, 2023 and 2022 2021was $32,000, $200,000, and 2020 was $26,000, $4,000 and $0.5 million,$26,000, respectively.
F-23
Restricted Stock Units, (RSUs)Performance-Based Restricted Stock Units and Restricted Stock Awards (RSAs):
Aggregated information regarding RSUs, PSUs and RSAs granted under the Plan is summarized below:
| RSUs, PSUs & |
|
| Weighted-Average |
| |||
Outstanding at January 31, 2021 |
|
| 197,413 |
|
| $ | 9.96 |
|
Granted |
|
| 151,406 |
|
|
| 14.51 |
|
Vested |
|
| (126,939 | ) |
|
| 10.43 |
|
Forfeited |
|
| (900 | ) |
|
| 14.26 |
|
Outstanding at January 31, 2022 |
|
| 220,980 |
|
| $ | 13.23 |
|
Granted |
|
| 141,371 |
|
|
| 12.70 |
|
Vested |
|
| (85,324 | ) |
|
| 13.45 |
|
Forfeited |
|
| (2,100 | ) |
|
| 13.25 |
|
Outstanding at January 31, 2023 |
|
| 274,927 |
|
| $ | 12.82 |
|
Granted |
|
| 157,643 |
|
|
| 12.64 |
|
Vested |
|
| (116,288 | ) |
|
| 12.29 |
|
Forfeited |
|
| (15,577 | ) |
|
| 13.37 |
|
Outstanding at January 31, 2024 |
|
| 300,705 |
|
| $ | 12.90 |
|
RSAs & RSUs | Weighted-Average Grant Date Fair Value | |||||||
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 | |||||
Granted | 151,406 | 14.51 | ||||||
Vested | (126,939 | ) | 10.43 | |||||
Forfeited | (22,538 | ) | 14.26 | |||||
Outstanding at January 31, 2022 | 199,342 | $ | 12.63 | |||||
As of January 31, 2022,2024, there was $1.7$2.1 million of unrecognized compensation expense related to unvested RSUs, PSUs and RSAs. This expense is expected to be recognized over a weighted average period of 1.01.5 years.
Employee Stock Purchase Plan (ESPP):
On June 7, 2022, we adopted the AstroNova Inc. 2022 Employee Stock Purchase Plan (“2022 ESPP”) to replace our previous Employee Stock Purchase Plan (the “Prior ESPP”). The 2022 ESPP allows eligible employees to purchase shares of common stock at a 15%15% discount from fair market value on the datefirst or last day of purchase.an offering period, whichever is less. A total of 247,50040,000 shares were initially reserved for issuance under this plan. Summarized plan activity is as follows:
2022 | 2021 | 2020 | ||||||||||
Shares Reserved, Beginning | 10,374 | 24,974 | 33,853 | |||||||||
Shares Purchased | (8,092 | ) | (14,600 | ) | (8,879 | ) | ||||||
Shares Reserved, Ending | 2,282 | 10,374 | 24,974 | |||||||||
Note 16—15—Income Taxes
The components of income (loss) before income taxes are as follows:
|
| 2024 |
|
| 2023 |
|
| 2022 |
| |||
(In thousands) |
|
|
|
|
|
|
|
|
| |||
Domestic |
| $ | 5,448 |
|
| $ | 1,773 |
|
| $ | 5,046 |
|
Foreign |
|
| 625 |
|
|
| 1,637 |
|
|
| 1,988 |
|
| $ | 6,073 |
|
| $ | 3,410 |
|
| $ | 7,034 |
| |
2022 | 2021 | 2020 | ||||||||||
| (In thousands) | ||||||||||||
Domestic | $ | 5,046 | $ | (1,193 | ) | $ | 1,930 | |||||
Foreign | 1,988 | 3,372 | (560 | ) | ||||||||
| $ | 7,034 | $ | 2,179 | $ | 1,370 | |||||||
The components of the provision/(benefit)provision for income taxes are as follows:
|
| 2024 |
|
| 2023 |
|
| 2022 |
| |||
(In thousands) |
|
|
|
|
|
|
|
|
| |||
Current: |
|
|
|
|
|
|
|
|
| |||
Federal |
| $ | 966 |
|
| $ | 902 |
|
| $ | (183 | ) |
State |
|
| 71 |
|
|
| 313 |
|
|
| 76 |
|
Foreign |
|
| 420 |
|
|
| 870 |
|
|
| 501 |
|
|
| 1,457 |
|
|
| 2,085 |
|
|
| 394 |
| |
Deferred: |
|
|
|
|
|
|
|
|
| |||
Federal |
| $ | (32 | ) |
| $ | (1,053 | ) |
| $ | 180 |
|
State |
|
| 2 |
|
|
| (315 | ) |
|
| 177 |
|
Foreign |
|
| (48 | ) |
|
| 32 |
|
|
| (146 | ) |
|
| (78 | ) |
|
| (1,336 | ) |
|
| 211 |
| |
| $ | 1,379 |
|
| $ | 749 |
|
| $ | 605 |
| |
F-24
2022 | 2021 | 2020 | ||||||||||
| (In thousands) | ||||||||||||
Current: | ||||||||||||
Federal | $ | (183 | ) | $ | 1,272 | $ | 660 | |||||
State | 76 | 224 | 221 | |||||||||
Foreign | 501 | 420 | 368 | |||||||||
| 394 | 1,916 | 1,249 | ||||||||||
Deferred: | ||||||||||||
Federal | $ | 180 | $ | (910 | ) | $ | (1,364 | ) | ||||
State | 177 | (189 | ) | (282 | ) | |||||||
Foreign | (146 | ) | 78 | 8 | ||||||||
| 211 | (1,021 | ) | (1,638 | ) | ||||||||
| $ | 605 | $ | 895 | $ | (389 | ) | ||||||
Total income tax provision/(benefit)provision differs from the expected tax provision/(benefit)provision as a result of the following:
|
| 2024 |
|
| 2023 |
|
| 2022 |
| |||
(In thousands) |
|
|
|
|
|
|
|
|
| |||
Income Tax Provision at Statutory Rate |
| $ | 1,275 |
|
| $ | 716 |
|
| $ | 1,477 |
|
Foreign Rate Differential |
|
| 197 |
|
|
| 157 |
|
|
| 61 |
|
Change in Valuation Allowance |
|
| 73 |
|
|
| 182 |
|
|
| 57 |
|
Change in Reserves Related to ASC 740 Liability |
|
| 60 |
|
|
| 93 |
|
|
| (245 | ) |
State Taxes, Net of Federal Tax Effect |
|
| 56 |
|
|
| (2 | ) |
|
| 143 |
|
Meals and Entertainment |
|
| 14 |
|
|
| — |
|
|
| 9 |
|
Return to Provision Adjustment |
|
| 12 |
|
|
| (22 | ) |
|
| 368 |
|
R&D Credits |
|
| (160 | ) |
|
| (160 | ) |
|
| (180 | ) |
Foreign Derived Intangible Income |
|
| (98 | ) |
|
| (180 | ) |
|
| (55 | ) |
Share Based Compensation |
|
| (43 | ) |
|
| (52 | ) |
|
| (95 | ) |
PPP Loan Forgiveness |
|
| — |
|
|
| — |
|
|
| (937 | ) |
Other |
|
| (7 | ) |
|
| 17 |
|
|
| 2 |
|
| $ | 1,379 |
|
| $ | 749 |
|
| $ | 605 |
| |
2022 | 2021 | 2020 | ||||||||||
| (In thousands) | ||||||||||||
Income Tax Provision at Statutory Rate | $ | 1,477 | $ | 458 | $ | 288 | ||||||
Return to Provision Adjustment | 368 | (2 | ) | (207 | ) | |||||||
State Taxes, Net of Federal Tax Effect | 143 | 28 | (48 | ) | ||||||||
Denmark Statutory Audit | 0 | 341 | 0 | |||||||||
Foreign Rate Differential | 61 | 197 | 315 | |||||||||
Change in Valuation Allowance | 57 | (81 | ) | 256 | ||||||||
Meals and Entertainment | 9 | 11 | 31 | |||||||||
Canada Withholding Taxes | 0 | 62 | 0 | |||||||||
Global Intangible Low Taxed Income | 0 | 14 | 107 | |||||||||
Foreign Tax Credits | 0 | 0 | (344 | ) | ||||||||
Foreign Derived Intangible Income | (55 | ) | (150 | ) | (107 | ) | ||||||
Share Based Compensation | (95 | ) | 171 | (145 | ) | |||||||
R&D Credits | (180 | ) | (157 | ) | (209 | ) | ||||||
Change in Reserves Related to ASC 740 Liability | (245 | ) | (10 | ) | (352 | ) | ||||||
PPP Loan Forgiveness | (937 | ) | 0 | 0 | ||||||||
Other | 2 | 13 | 26 | |||||||||
| $ | 605 | $ | 895 | $ | (389 | ) | ||||||
Our effective tax rate for 2022fiscal 2024 was 8.6%22.7% compared to 41.1% in 2021 and (28.4)22.0% in 2020.fiscal 2023 and 8.6% in fiscal 2022. The decreaseincrease in the effective tax rate in 2022fiscal 2024 from 2021fiscal 2023 is primarily related to the PPP loan forgivenesstax-exemptincome. Specific itemsimpact of the valuation allowance recorded on China net operating losses, the increase in the current provision for state and local taxes, and the change in the foreign rate differential. This increase was partially offset by other factors decreasing the effective tax rate include PPP loan forgivenesstax-exemptincome, R&D tax credits,such as foreign derived intangible income (“FDII”) deduction, share based compensation, and the R&D tax credit.
The increase in the effective tax rate in fiscal 2023 from fiscal 2022 is primarily related to the absence of the PPP loan forgiveness which is tax-exempt income that was a one-time item that reduced the rate in fiscal 2022. Specific items increasing the effective tax rate in fiscal 2023 include the change in reserves related to ASC 740 liabilities.liability and the increase in the valuation allowance recorded on China net operating losses. This decreaseincrease was partially offset by state taxes, return to provision adjustments, and taxes on foreign earnings.
F-25
The components of deferred income tax expense arise from various temporary differences and relate to items included in the statement of income. The tax effects of temporary differences that gave rise to significant portions of the deferred tax assets and liabilities are as follows:
|
| January 31, |
| |||||
(In thousands) |
| 2024 |
|
| 2023 |
| ||
Deferred Tax Assets: |
|
|
|
|
|
| ||
Inventory |
| $ | 2,242 |
|
| $ | 2,710 |
|
Honeywell Royalty Liability |
|
| 3,561 |
|
|
| 3,008 |
|
State R&D Credits |
|
| 2,160 |
|
|
| 1,851 |
|
Share-Based Compensation |
|
| 590 |
|
|
| 620 |
|
Bad Debt |
|
| 134 |
|
|
| 180 |
|
Warranty Reserve |
|
| 171 |
|
|
| 258 |
|
Compensation Accrual |
|
| 276 |
|
|
| 248 |
|
Net Operating Loss |
|
| 199 |
|
|
| 135 |
|
ASC 842 Adjustment – Lease Liability |
|
| 38 |
|
|
| 53 |
|
Unrecognized State Tax Benefits |
|
| 49 |
|
|
| 58 |
|
Foreign Tax Credit |
|
| 154 |
|
|
| 154 |
|
Deferred Service Contract Revenue |
|
| 100 |
|
|
| 90 |
|
Section 174 Capitalization* |
|
| 1,981 |
|
|
| 1,175 |
|
Other |
|
| 381 |
|
|
| 281 |
|
|
| 12,036 |
|
|
| 10,821 |
| |
Deferred Tax Liabilities: |
|
|
|
|
|
| ||
Accumulated Tax Depreciation in Excess of Book Depreciation |
|
| 1,491 |
|
|
| 1,037 |
|
Intangibles |
|
| 989 |
|
|
| 694 |
|
ASC 842 Adjustment – Lease Liability |
|
| 33 |
|
|
| 50 |
|
Other |
|
| 206 |
|
|
| 180 |
|
|
| 2,719 |
|
|
| 1,961 |
| |
Subtotal |
|
| 9,317 |
|
|
| 8,860 |
|
Valuation Allowance |
|
| (2,534 | ) |
|
| (2,120 | ) |
Net Deferred Tax Assets |
| $ | 6,783 |
|
| $ | 6,740 |
|
* Beginning in fiscal 2023, changes to Section 174 of the Internal Revenue Code made by the Tax Cuts and Jobs Act of 2017 (“TCJA”) no longer permit an immediate deduction for research and development expenditures in the tax year that such costs are incurred. These costs are capitalized resulting in an increase in deferred tax assets of $0.8 million from fiscal 2023 to fiscal 2024.
Deferred taxes are reflected in the consolidated balance sheet as follows:
|
| January 31, |
| |||||
(In thousands) |
| 2024 |
|
| 2023 |
| ||
Deferred Tax Assets |
|
| 6,882 |
|
|
| 6,907 |
|
Deferred Tax Liabilities |
|
| (99 | ) |
|
| (167 | ) |
Total Net Deferred Tax Assets |
| $ | 6,783 |
|
| $ | 6,740 |
|
January 31, | ||||||||
2022 | 2021 | |||||||
| (In thousands) | ||||||||
Deferred Tax Assets: | ||||||||
Inventory | $ | 2,159 | $ | 2,700 | ||||
Honeywell Royalty Liability | 2,655 | 2,590 | ||||||
State R&D Credits | 1,925 | 1,546 | ||||||
Share-Based Compensation | 593 | 600 | ||||||
Bad Debt | 213 | 245 | ||||||
Warranty Reserve | 198 | 176 | ||||||
Compensation Accrual | 322 | 159 | ||||||
Net Operating Loss | 152 | 154 | ||||||
ASU 842 Adjustment – Lease Liability | 93 | 125 | ||||||
Unrecognized State Tax Benefits | 64 | 101 | ||||||
Foreign Tax Credit | 154 | 83 | ||||||
Deferred Service Contract Revenue | 61 | 68 | ||||||
Other | 224 | 308 | ||||||
| 8,813 | 8,855 | |||||||
Deferred Tax Liabilities: | ||||||||
Accumulated Tax Depreciation in Excess of Book Depreciation | 455 | 752 | ||||||
Intangibles | 767 | 399 | ||||||
ASU 842 Adjustment – Lease Liability | 90 | 119 | ||||||
Other | 318 | 307 | ||||||
| 1,630 | 1,577 | |||||||
Subtotal | 7,183 | 7,278 | ||||||
Valuation Allowance | (1,778 | ) | (1,721 | ) | ||||
Net Deferred Tax Assets | $ | 5,405 | $ | 5,557 | ||||
Deferred taxes are reflected in the consolidated balance sheet as follows: | ||||||||
January 31, | ||||||||
2022 | 2021 | |||||||
Deferred Tax Assets | 5,651 | 5,941 | ||||||
Deferred Tax Liabilities | (246 | ) | (384 | ) | ||||
Total Net Deferred Tax Assets | $ | 5,405 | $ | 5,557 | ||||
The valuation allowances of $1.8$2.5 million at January 31, 20222024 and $1.7$2.1 million at January 31, 2021,2023, relate to domesticRhode Island research and development tax credit carryforwards, and foreign tax credit carryforwards, whichand China’s net operating losses that are expected to expire unused.
At January 31, 2022,2024, we had net operating loss carryforwards of $0.6$0.2 million in China, which expire in 20232024 through 2027. We have net operating loss carryforwards of less than $0.1 million in France, which can be carried forward indefinitely. We expect to utilize the net operating loss carryforwards in China and France before expiration.
At January 31, 2022,2024, we had state research credit carryforwards of approximately $1.6$2.2 million which expire in 20222025 through 2029.2031. Additionally, we had $0.2$0.2 million of foreign tax credits.credits. We maintain a full valuation allowance against these credits as we expect these credits to expire unused.
F-26
We believe that it is reasonably possible that some unrecognized tax benefits, accrued interest and penalties could decrease income tax expense in the next year due to either the review of previously filed tax returns or the expiration of certain statutes of limitation. The changes in the balances of unrecognized tax benefits, excluding interest and penalties are as follows:
|
| 2024 |
|
| 2023 |
|
| 2022 |
| |||
(In thousands) |
|
|
|
|
|
|
|
|
| |||
Balance, beginning of the year |
| $ | 414 |
|
| $ | 303 |
|
| $ | 384 |
|
Increases in prior period tax positions |
|
| — |
|
|
| 24 |
|
|
| 63 |
|
Increases in current period tax positions |
|
| 162 |
|
|
| 136 |
|
|
| 67 |
|
Reductions related to lapse of statutes of limitations |
|
| (71 | ) |
|
| (49 | ) |
|
| (211 | ) |
Balance, end of the year |
| $ | 505 |
|
| $ | 414 |
|
| $ | 303 |
|
2022 | 2021 | 2020 | ||||||||||
| (In thousands) | ||||||||||||
Balance , beginning of the year | $ | 384 | $ | 362 | $ | 618 | ||||||
Increases in prior period tax positions | 63 | 59 | 0 | |||||||||
Increases in current period tax positions | 67 | 5 | 2 | |||||||||
Reductions related to lapse of statutes of limitations | (211 | ) | (42 | ) | (26 | ) | ||||||
Reductions related to settlement with tax authorities | 0 | 0 | (232 | ) | ||||||||
| Balance, end of the year | $ | 303 | $ | 384 | $ | 362 | ||||||
During fiscal 20222024 and 2021,2023, we released $211,000$71,000 and $50,000,$49,000, respectively, of uncertain tax positions including accrued interest and penalties relating to a change in various unrecognized tax positions. We have accrued potential interest and penalties of $95,000$46,000 included in Income Taxes Payableincome taxes payable in the accompanying consolidated balance sheet at January 31, 2022.
The Company and its subsidiaries file income tax returns in U.S. federal jurisdictions, various state jurisdictions, and various foreign jurisdictions. The Company was previously under audit by the IRS for the tax years ended January 31, 2015, 2016, and 2017, but on June 6, 2019, we received formal communication regarding the close of the audit with no additional changes made by the IRS. Therefore, the reserves for federal uncertain tax positions relating to the years in question have been released. In fiscal 2020,2024, we released $232,000 relating$33,000 related to thea federal tax exposure for the years previously under auditfiscal 2020 tax year and $74,000$39,000 of related interest (netstate nexus positions as a result of federal benefit) and penalties.
U.S. income taxes have not been provided on $7.3$10.0 million of undistributed earnings of our foreign subsidiaries since it is our intention to permanently reinvest such earnings offshore. If the earnings were distributed in the form of dividends, the Companywe would not be subject to U.S. tax as a result of the Tax ActTCJA but, could be subject to foreign income and withholding taxes. Determination of the amount of this unrecognized deferred income tax liability is not practical.
Note 17—16—Nature of Operations, Segment Reporting and Geographical Information
Our operations consist of the design, development, manufacture and sale of specialty printers and data acquisition and analysis systems, including both hardware and software and related consumable supplies. We organize and manage our business as a portfolio of products and services designed around a common theme of data acquisition and information output. We have 2two reporting segments consistent with our revenue product groups: Product Identification (“PI”) and Test & Measurement (“T&M”).
Our PI segment produces an array of high-technology digital color and monochrome label printers and mini presses, labeling software and supplies for a variety of commercial industries worldwide. AstroNova’sworldwide and includes our fiscal 2023 acquisition of Astro Machine. Our T&M segment produces data acquisition systems used worldwide for a variety of recording, monitoring and troubleshooting applications for many industries including aerospace, automotive, defense, rail, energy, industrial and general manufacturing. The T&M segment also includes our line of aerospace flight deck and cabin printers.
Business is conducted in the United States and through foreign branch offices and subsidiaries in Canada, Europe, China, Southeast Asia and Mexico. Manufacturing activities are primarily conducted in the United States. Revenue and service activities outside the United States are conducted through wholly-ownedwholly owned entities and, to a lesser extent, through authorized distributors and agents. Transfer prices are intended to produce gross profit margins as would be associated with an arms-length transaction.
The accounting policies of the reporting segments are the same as those described in the summary of significant accounting policies herein. We evaluate segment performance based on the segment profit before corporate and financial administration expenses.
Summarized below are the revenue and segment operating profit (loss) (both in dollars and as a percentage of revenue) for each reporting segment:
|
| Revenue |
|
| Segment Operating Profit |
|
| Segment Operating Profit |
| |||||||||||||||||||||||||||
($ in thousands) |
| 2024 |
|
| 2023 |
|
| 2022 |
|
| 2024 |
|
| 2023 |
|
| 2022 |
|
| 2024 |
|
| 2023 |
|
| 2022 |
| |||||||||
Product Identification |
| $ | 104,041 |
|
| $ | 103,089 |
|
| $ | 90,915 |
|
| $ | 10,087 |
|
| $ | 7,889 |
|
| $ | 10,411 |
|
|
| 9.7 | % |
|
| 7.7 | % |
|
| 11.5 | % |
T&M |
|
| 44,045 |
|
|
| 39,438 |
|
|
| 26,565 |
|
|
| 10,200 |
|
|
| 8,989 |
|
|
| 3,398 |
|
|
| 23.2 | % |
|
| 22.8 | % |
|
| 12.8 | % |
Total |
| $ | 148,086 |
|
| $ | 142,527 |
|
| $ | 117,480 |
|
|
| 20,287 |
|
|
| 16,878 |
|
|
| 13,809 |
|
|
| 13.7 | % |
|
| 11.8 | % |
|
| 11.8 | % |
Corporate Expenses |
|
|
|
|
|
|
|
|
|
|
| 11,491 |
|
|
| 11,435 |
|
|
| 9,553 |
|
|
|
|
|
|
|
|
|
| ||||||
Operating Income |
|
|
|
|
|
|
|
|
|
|
| 8,796 |
|
|
| 5,443 |
|
|
| 4,256 |
|
|
|
|
|
|
|
|
|
| ||||||
Other Income (Expense), Net |
|
|
|
|
|
|
|
|
|
|
| (2,723 | ) |
|
| (2,033 | ) |
|
| 2,778 |
|
|
|
|
|
|
|
|
|
| ||||||
Income Before Income Taxes |
|
|
|
|
|
|
|
|
|
|
| 6,073 |
|
|
| 3,410 |
|
|
| 7,034 |
|
|
|
|
|
|
|
|
|
| ||||||
Income Tax Provision |
|
|
|
|
|
|
|
|
|
|
| 1,379 |
|
|
| 749 |
|
|
| 605 |
|
|
|
|
|
|
|
|
|
| ||||||
Net Income |
|
|
|
|
|
|
|
|
|
| $ | 4,694 |
|
| $ | 2,661 |
|
| $ | 6,429 |
|
|
|
|
|
|
|
|
|
| ||||||
| ($ in thousands) | Revenue | Segment Operating Profit (Loss) | Segment Operating Profit (Loss) as a % of Revenue | |||||||||||||||||||||||||||||||||
2022 | 2021 | 2020 | 2022 | 2021 | 2020 | 2022 | 2021 | 2019 | ||||||||||||||||||||||||||||
Product Identification | $ | 90,915 | $ | 90,268 | $ | 88,116 | $ | 10,411 | $ | 12,885 | $ | 7,509 | 11.5 | % | 14.3 | % | 8.5 | % | ||||||||||||||||||
T&M | 26,565 | 25,765 | 45,330 | 3,398 | (1,032 | ) | 6,281 | 12.8 | % | (4.0 | )% | 13.9 | % | |||||||||||||||||||||||
Total | $ | 117,480 | $ | 116,033 | $ | 133,446 | 13,809 | 11,853 | 13,790 | 11.8 | % | 10.2 | % | 10.3 | % | |||||||||||||||||||||
Corporate Expenses | 9,553 | 9,420 | 11,357 | |||||||||||||||||||||||||||||||||
Operating Income | 4,256 | 2,433 | 2,433 | |||||||||||||||||||||||||||||||||
Other Income (Expense), Net | 2,778 | (254) | (1,063) | |||||||||||||||||||||||||||||||||
Income Before Income Taxes | 7,034 | 2,179 | 1,370 | |||||||||||||||||||||||||||||||||
Income Tax Provision (Benefit) | 605 | 895 | (389 | ) | ||||||||||||||||||||||||||||||||
Net Income | $ | 6,429 | $ | 1,284 | $ | 1,759 | ||||||||||||||||||||||||||||||
No customer accounted for greater than 10% of net revenue in fiscal 2022, 20212024, 2023 or 2020.2022.
F-27
Other information by segment is presented below:
| (In thousands) | Assets | |||||||
January 31, | ||||||||
2022 | 2021 | |||||||
Product Identification | $ | 51,732 | $ | 50,047 | ||||
T&M | 50,374 | 51,262 | ||||||
Corporate* | 12,849 | 14,164 | ||||||
Total | $ | 114,955 | $ | 115,473 | ||||
* Corporate assets consist principally | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| (In thousands) | Depreciation and Amortization | Capital Expenditures | ||||||||||||||||||||||
2022 | 2021 | 2020 | 2022 | 2021 | 2020 | |||||||||||||||||||
Product Identification | $ | 1,157 | $ | 1,835 | $ | 1,928 | $ | 847 | $ | 1,563 | $ | 2,001 | ||||||||||||
T&M | 2,837 | 4,148 | 4,356 | 949 | 1,024 | 905 | ||||||||||||||||||
Total | $ | 3,994 | $ | 5,983 | $ | 6,284 | $ | 1,796 | $ | 2,587 | $ | 2,906 | ||||||||||||
|
| Depreciation and Amortization |
|
| Capital Expenditures |
| ||||||||||||||||||
(In thousands) |
| 2024 |
|
| 2023 |
|
| 2022 |
|
| 2024 |
|
| 2023 |
|
| 2022 |
| ||||||
Product Identification |
| $ | 2,572 |
|
| $ | 2,219 |
|
| $ | 1,157 |
|
| $ | 1,686 |
|
| $ | 121 |
|
| $ | 847 |
|
T&M |
|
| 1,694 |
|
|
| 1,697 |
|
|
| 2,837 |
|
|
| 10 |
|
|
| 108 |
|
|
| 949 |
|
Total |
| $ | 4,266 |
|
| $ | 3,916 |
|
| $ | 3,994 |
|
| $ | 1,696 |
|
| $ | 229 |
|
| $ | 1,796 |
|
Geographical Data
Presented below is selected financial information by geographic area:
|
|
|
|
|
|
|
|
|
|
| Long-Lived Assets (2) |
| ||||||||
|
| Revenue (1) |
|
| January 31, |
| ||||||||||||||
(In thousands) |
| 2024 |
|
| 2023 |
|
| 2022 |
|
| 2024 |
|
| 2023 |
| |||||
United States |
| $ | 84,757 |
|
| $ | 83,559 |
|
| $ | 68,185 |
|
| $ | 32,090 |
|
| $ | 34,277 |
|
Europe |
|
| 41,761 |
|
|
| 38,859 |
|
|
| 31,922 |
|
|
| 754 |
|
|
| 1,230 |
|
Canada |
|
| 8,742 |
|
|
| 8,690 |
|
|
| 6,519 |
|
|
| 171 |
|
|
| 4 |
|
Asia |
|
| 7,216 |
|
|
| 5,547 |
|
|
| 5,926 |
|
|
| 6 |
|
|
| 9 |
|
Central and South America |
|
| 4,221 |
|
|
| 4,589 |
|
|
| 3,271 |
|
|
| — |
|
|
| — |
|
Other |
|
| 1,389 |
|
|
| 1,283 |
|
|
| 1,657 |
|
|
| — |
|
|
| — |
|
Total |
| $ | 148,086 |
|
| $ | 142,527 |
|
| $ | 117,480 |
|
| $ | 33,021 |
|
| $ | 35,520 |
|
(1) Certain amounts have been reclassified to conform to the current year's presentation.
(2) Long-lived assets exclude goodwill assigned to the T&M segment of $4.5 million at both January 31, 2024 and 2023 and $10.1 million assigned to the PI segment at both January 31, 2024 and 2023.
Long-Lived Assets* | ||||||||||||||||||||
| (In thousands) | Revenue | January 31, | ||||||||||||||||||
2022 | 2021 | 2020 | 2022 | 2021 | ||||||||||||||||
United States | $ | 68,185 | $ | 70,911 | $ | 83,671 | $ | 29,131 | $ | 31,226 | ||||||||||
Europe | 31,922 | 29,029 | 29,617 | 1,486 | 2,274 | |||||||||||||||
Canada | 6,519 | 5,574 | 5,719 | 9 | 13 | |||||||||||||||
Asia | 5,926 | 5,105 | 8,316 | 15 | — | |||||||||||||||
Central and South America | 3,271 | 3,950 | 4,145 | — | — | |||||||||||||||
Other | 1,657 | 1,464 | 1,978 | — | — | |||||||||||||||
Total | $ | 117,480 | $ | 116,033 | $ | 133,446 | $ | 30,641 | $ | 33,513 | ||||||||||
Note 18—17—Employee Benefit Plans
We sponsor a Profit-Sharing Plan (the “Plan”) which provides retirement benefits to all eligible domestic employees. The Plan allows participants to defer a portion of their cash compensation and contribute such deferral to the Plan through payroll deductions. The Company makes matching contributions up to specified levels. The deferrals are made within the limits prescribed by Section 401(k) of the Internal Revenue Code.
All contributions are deposited into trust funds. It is our policy to fund any contributions accrued. Our annual contribution amounts are determined by the Board of Directors. Contributions paid or accrued amounted to $0.5$0.5 million in each of fiscal 2022, $0.4 million in2024, fiscal 20212023 and $0.5 million in fiscal 2020.
Note 19—18—Product Warranty Liability
We offer a manufacturer’s warranty for the majority of our hardware products. The specific terms and conditions of warranty vary depending upon the products sold and the country in which we do business. We estimate the warranty costs based on historical claims experience and record a liability in the amount of such estimates at the time product revenue is recognized. We regularly assess
F-28
the adequacy of our recorded warranty liabilities and adjust 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:
(In thousands) |
| 2024 |
|
| 2023 |
|
| 2022 |
| |||
Balance, beginning of the year |
| $ | 1,072 |
|
| $ | 834 |
|
| $ | 730 |
|
Provision for Warranty Expense |
|
| 1,181 |
|
|
| 2,077 |
|
|
| 2,174 |
|
Cost of Warranty Repairs |
|
| (1,542 | ) |
|
| (1,839 | ) |
|
| (2,070 | ) |
Balance, end of the year |
| $ | 711 |
|
| $ | 1,072 |
|
| $ | 834 |
|
2022 | 2021 | 2020 | ||||||||||
| (In thousands) | ||||||||||||
Balance, beginning of the year | $ | 730 | $ | 850 | $ | 832 | ||||||
Provision for Warranty Expense | 2,174 | 855 | 1,733 | |||||||||
Cost of Warranty Repairs | (2,070 | ) | (975 | ) | (1,715 | ) | ||||||
Balance, end of the year | $ | 834 | $ | 730 | $ | 850 | ||||||
During fiscal 2022, we incurred incremental costs because of a product quality issue with one of our vendors. As the result of discussions with the vendor, which was responsible for the product quality issue, we entered into an agreement whereby the vendor paid us $975,000$975,000 as partial reimbursement of the costs we incurred in supporting our customers with respect to the product quality issue. We haveFor the period ended January 31, 2022, we recorded this payment to offset cost of goodsrevenue in our Product IdentificationPI segment for the product lines effected by the product quality issue to partially reverse the accounting impact when the original costs of the quality issues were incurredincurred.
Note 19—Restructuring
On July 26, 2023, we adopted a restructuring plan for our PI segment that transitioned a portion of the printer manufacturing within that segment from our facility in Rhode Island to our Astro Machine facility located in Illinois. Additionally, we ceased selling certain of our older, lower-margin or low-volume PI segment products and made targeted reductions to our workforce. As part of the restructuring plan, we also consolidated certain of our international PI sales and distribution facilities and streamlined our channel partner network. As of January 31, 2024, we have completed this plan.
As a result of the adoption and implementation of our PI segment restructuring plan, in the second quarter of fiscal 2024 we recognized a pre-tax restructuring charge of $2.7 million, comprised primarily of non-cash charges related to inventory write-offs associated with product curtailment and discontinuation and facility exit related costs, and cash charges related to severance-related costs. The following table is a summary of the restructuring costs by type for the year ended January 31, 2024:
(In thousands) |
| Inventory Write-Off |
|
| Severance and Employee Related Costs |
|
| Facility Exit and Other Restructuring Costs |
|
| Total |
| ||||
Restructuring Charges |
| $ | 1,991 |
|
| $ | 611 |
|
| $ | 49 |
|
| $ | 2,651 |
|
Change in Estimates (1) |
|
| — |
|
|
| (75 | ) |
|
| — |
|
|
| (75 | ) |
Total |
| $ | 1,991 |
|
| $ | 536 |
|
| $ | 49 |
|
| $ | 2,576 |
|
(1)During the fourth quarter of fiscal 2024, we recorded a $75,000 net reversal to our restructuring charge, which was attributed to lower than anticipated severance charges due to retaining and re-assigning certain employees.
F-29
The following table summarizes restructuring costs included in the accompanying consolidated statement of income as of January 31, 2024:
(In thousands) |
|
|
| |
Cost of Revenue |
| $ | 2,064 |
|
Operating Expenses: |
|
|
| |
Selling & Marketing |
|
| 400 |
|
Research & Development |
|
| 29 |
|
General & Administrative |
|
| 83 |
|
Total |
| $ | 2,576 |
|
The following table presents the details of liability for Severance and Employee Related Cost:
(In thousands) | ||||
Balance January 31, 2023 | $ | — | ||
Restructuring Charges | 611 | |||
Cash Paid | (524 | ) | ||
Effects of Foreign Exchange | (12 | ) | ||
Change in Estimates | (75 | ) | ||
Balance January 31, 2024 | $ | — | ||
Product Retrofit Program
In connection with our restructuring plan, we identified the need to address quality and reliability issues in certain models of our PI printers as a result of faulty ink provided by one of our larger suppliers. We identified approximately 150 printers sold to our customers that were affected by the faulty ink. In order to remedy these issues and maintain solid customer relationships, during the year.second quarter of fiscal 2024, we initiated a program to retrofit all of the printers sold to our customers that were affected by the faulty ink.
The initial estimated costs associated with this program were $0.9 million, which included the cost of parts, labor and travel. During fiscal 2024, we worked with our customers to either repair or replace the affected printers. At the end of the fourth quarter of fiscal 2024, we adjusted our estimate of costs for this program as we determined not all customers wanted to retrofit their printers and consequently the program was concluded. As a result, at the end of the fourth quarter of fiscal 2024, we reversed $0.2 million of charges for this program. Total costs of this program as of January 31, 2024, as summarized below, were $0.6 million and are included in cost of revenue in the accompanying consolidated statement of income for the year ended January 31, 2024.
(In thousands) |
|
|
| |
Provision for Product Retrofit Program |
| $ | 852 |
|
Cost of Repairs and Replacements incurred through January 31, 2024 |
|
| (642 | ) |
Changes in Estimate (1) |
|
| (210 | ) |
Balance at January 31, 2024 |
| $ | — |
|
(1) During the fourth quarter of fiscal 2024, we recorded a $210,000 net reversal to our retrofit program, which was attributed to lower than anticipated participation by customers in this program and ultimate conclusion of the program as of January 31, 2024.
There is no balance in the related liability for this program at January 31, 2024.
Note 20—Concentration of Risk
Credit is generally extended on an uncollateralized basis to almost all customers after review of credit worthiness. Concentration of credit and geographic risk with respect to accounts receivable is limited due to the large number and general dispersion of accounts, which constitute our customer base. We periodically perform
During the year ended January 31, 2024, we had two vendors that accounted for 23.5% of purchases, and for the years ended January 31, 2023 and 2022, 2021 and 2020,we had one vendor that accounted for 23.3%, 23.2%18.7% and 21.2%23.3% of purchases, respectively. We had one vendor that accounted for 46.9%, 16.2% and 15.4%15.4%, 28.3% and 28.0%respectively, of accounts payable respectively, as of January 31, 2022, 20212024, 2023 and 2020.
F-30
Note 21
In order to meet our manufacturing demands and, in some cases, lock in particular pricing structures for specific goods used in manufacturing, we enter into purchase commitments with our suppliers. At January 31, 2024, our purchase commitments totaled $25.8 million, with $23.1 million due within 12 months, some of which are non-cancelable.
We are also 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.
Direct costs associated with the estimated resolution of contingencies are accrued at the earliest date at which it is deemed probable that a liability has been incurred and the amount of such liability can be reasonably estimated. While it is impossible to ascertain the ultimate legal and financial liability with respect to contingent liabilities, including lawsuits, we believe that the aggregate amount of such liabilities, if any, in excess of amounts provided or covered by insurance, will not have a material adverse effect on the consolidated financial position or results of operations. It is possible, however, that future 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 our control.
Note 22—22—Fair Value Measurements
Assets and Liabilities Not Recorded at Fair Value on the Consolidated Balance Sheet
Our long-term debt, including the current portion, of long-term debt not reflected in the financial statements at fair value, is reflected in the table below:
| Fair Value Measurement at |
|
|
|
| |||||||||||||||
(In thousands) |
| Level 1 |
|
| Level 2 |
|
| Level 3 |
|
| Total |
|
| Carrying |
| |||||
Long-Term Debt and Related Current Maturities |
| $ | — |
|
| $ | — |
|
| $ | 13,026 |
|
| $ | 13,026 |
|
| $ | 12,972 |
|
| Fair Value Measurement at |
|
|
|
| |||||||||||||||
(In thousands) |
| Level 1 |
|
| Level 2 |
|
| Level 3 |
|
| Total |
|
| Carrying |
| |||||
Long-Term Debt and Related Current Maturities |
| $ | — |
|
| $ | — |
|
| $ | 14,310 |
|
| $ | 14,310 |
|
| $ | 14,250 |
|
Fair Value Measurement at January 31, 2022 | ||||||||||||||||||||
| (In thousands) | Level 1 | Level 2 | Level 3 | Total | Carrying Value | |||||||||||||||
Long-Term Debt and Related Current Maturities | $ | — | $ | — | $ | 9,255 | $ | 9,255 | $ | 9,250 | ||||||||||
Fair Value Measurement at January 31, 2021 | ||||||||||||||||||||
| (In thousands) | Level 1 | Level 2 | Level 3 | Total | Carrying Value | |||||||||||||||
Long-Term Debt and Related Current Maturities | $ | — | $ | — | $ | 12,586 | $ | 12,586 | $ | 12,576 | ||||||||||
The fair value of our 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.
F-31
ASTRONOVA, INC.
SCHEDULE II—VALUATION AND QUALIFYING ACCOUNTS AND RESERVES
Description |
| Balance at |
|
| Provision/ |
|
| Deductions(2) |
|
| Balance |
| ||||
Allowance for Doubtful Accounts (1): |
|
|
|
|
|
|
|
|
|
|
|
| ||||
(In thousands) |
|
|
|
|
|
|
|
|
|
|
|
| ||||
Year Ended January 31, |
|
|
|
|
|
|
|
|
|
|
|
| ||||
2024 |
| $ | 731 |
|
| $ | (113 | ) |
| $ | — |
|
| $ | 618 |
|
2023 |
| $ | 826 |
|
| $ | 100 |
|
| $ | (195 | ) |
| $ | 731 |
|
2022 |
| $ | 1,054 |
|
| $ | 50 |
|
| $ | (278 | ) |
| $ | 826 |
|
F-32
Description | Balance at Beginning of Year | Provision/ (Benefit) Charged to Operations | Deductions(2) | Balance at End of Year | ||||||||||||
Allowance for Doubtful Accounts | ||||||||||||||||
| (In thousands) | ||||||||||||||||
Year Ended January 31, | ||||||||||||||||
2022 | $ | 1,054 | $ | 50 | $ | (278 | ) | $ | 826 | |||||||
2021 | $ | 856 | $ | 194 | $ | 4 | $ | 1,054 | ||||||||
2020 | $ | 521 | $ | 546 | $ | (211 | ) | $ | 856 | |||||||