ASTRONOVA, INC., 10-Q filed on 9/1/2017
Quarterly Report
Document and Entity Information
6 Months Ended
Jul. 29, 2017
Aug. 30, 2017
Document And Entity Information [Abstract]
 
 
Document Type
10-Q 
 
Amendment Flag
false 
 
Document Period End Date
Jul. 29, 2017 
 
Document Fiscal Year Focus
2018 
 
Document Fiscal Period Focus
Q2 
 
Trading Symbol
ALOT 
 
Entity Registrant Name
AstroNova, Inc. 
 
Entity Central Index Key
0000008146 
 
Current Fiscal Year End Date
--01-31 
 
Entity Filer Category
Accelerated Filer 
 
Entity Common Stock, Shares Outstanding
 
6,742,366 
Condensed Consolidated Balance Sheets (USD $)
In Thousands, unless otherwise specified
Jul. 29, 2017
Jan. 31, 2017
CURRENT ASSETS
 
 
Cash and Cash Equivalents
$ 8,829 
$ 18,098 
Securities Available for Sale
5,131 
6,723 
Accounts Receivable, net
17,044 
15,702 
Inventories
20,269 
19,506 
Prepaid Expenses and Other Current Assets
1,560 
1,394 
Total Current Assets
52,833 
61,423 
PROPERTY, PLANT AND EQUIPMENT
41,541 
40,378 
Less Accumulated Depreciation
(32,090)
(31,098)
Property, Plant and Equipment, net
9,451 
9,280 
OTHER ASSETS
 
 
Intangible Assets, net
8,189 
5,264 
Goodwill
12,542 
4,521 
Deferred Tax Assets
2,808 
2,811 
Other
119 
366 
Total Other Assets
23,658 
12,962 
TOTAL ASSETS
85,942 
83,665 
CURRENT LIABILITIES
 
 
Accounts Payable
6,428 
4,957 
Accrued Compensation
2,024 
2,936 
Other Liabilities and Accrued Expenses
2,009 
2,171 
Current Portion of Long -Term Debt
1,564 
 
Deferred Revenue
335 
472 
Income Taxes Payable
1,360 
1,449 
Total Current Liabilities
13,720 
11,985 
Deferred Tax Liabilities
879 
11 
Long-Term Debt
7,202 
 
Other Liabilities
3,329 
1,132 
TOTAL LIABILITIES
25,130 
13,128 
SHAREHOLDERS' EQUITY
 
 
Common Stock, $0.05 Par Value, Authorized 13,000,000 shares; Issued 9,937,965 shares and 9,834,906 shares at July 29, 2017 and January 31, 2017, respectively
497 
492 
Additional Paid-in Capital
48,891 
47,524 
Retained Earnings
44,597 
44,358 
Treasury Stock, at Cost, 3,227,129 and 2,375,076 shares at July 29, 2017 and January 31, 2017, respectively
(32,386)
(20,781)
Accumulated Other Comprehensive Loss, net of tax
(787)
(1,056)
TOTAL SHAREHOLDERS' EQUITY
60,812 
70,537 
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY
$ 85,942 
$ 83,665 
Condensed Consolidated Balance Sheets (Parenthetical) (USD $)
Jul. 29, 2017
Jan. 31, 2017
Statement of Financial Position [Abstract]
 
 
Common Stock, Par Value
$ 0.05 
$ 0.05 
Common Stock, Shares Authorized
13,000,000 
13,000,000 
Common Stock, Shares Issued
9,937,965 
9,834,906 
Treasury Stock, Shares
3,227,129 
2,375,076 
Condensed Consolidated Statements of Income (USD $)
In Thousands, except Share data, unless otherwise specified
3 Months Ended 6 Months Ended
Jul. 29, 2017
Jul. 30, 2016
Jul. 29, 2017
Jul. 30, 2016
Income Statement [Abstract]
 
 
 
 
Revenue
$ 27,483 
$ 25,339 
$ 51,941 
$ 49,449 
Cost of Revenue
17,224 
15,034 
32,376 
29,671 
Gross Profit
10,259 
10,305 
19,565 
19,778 
Operating Expenses:
 
 
 
 
Selling and Marketing
5,315 
4,777 
10,426 
9,608 
Research and Development
1,675 
1,755 
3,307 
3,199 
General and Administrative
2,327 
2,025 
4,183 
3,676 
Operating Expenses
9,317 
8,557 
17,916 
16,483 
Operating Income, net
942 
1,748 
1,649 
3,295 
Other Income (Expense)
16 
40 
(33)
(12)
Income before Income Taxes
958 
1,788 
1,616 
3,283 
Income Tax Provision
231 
496 
378 
972 
Net Income
$ 727 
$ 1,292 
$ 1,238 
$ 2,311 
Net Income per Common Share-Basic:
$ 0.11 
$ 0.17 
$ 0.17 
$ 0.31 
Net Income per Common Share-Diluted:
$ 0.11 
$ 0.17 
$ 0.17 
$ 0.31 
Weighted Average Number of Common Shares Outstanding:
 
 
 
 
Basic
6,726,623 
7,418,312 
7,097,183 
7,388,123 
Diluted
6,837,836 
7,586,612 
7,218,421 
7,560,145 
Dividends Declared Per Common Share
$ 0.07 
$ 0.07 
$ 0.14 
$ 0.14 
Condensed Consolidated Statements of Comprehensive Income (USD $)
In Thousands, unless otherwise specified
3 Months Ended 6 Months Ended
Jul. 29, 2017
Jul. 30, 2016
Jul. 29, 2017
Jul. 30, 2016
Statement of Comprehensive Income [Abstract]
 
 
 
 
Net Income
$ 727 
$ 1,292 
$ 1,238 
$ 2,311 
Other Comprehensive Income (Loss), Net of Taxes and Reclassification Adjustments:
 
 
 
 
Foreign Currency Translation Adjustments
540 
(193)
318 
134 
Change in Value of Derivatives Designated as Cash Flow Hedge
(501)
 
(760)
 
Losses from Cash Flow Hedges Reclassified to Income Statement
492 
 
704 
 
Unrealized Holding Gain (Loss) on Securities Available for Sale
(5)
Other Comprehensive Income (Loss)
526 
(184)
269 
141 
Comprehensive Income
$ 1,253 
$ 1,108 
$ 1,507 
$ 2,452 
Condensed Consolidated Statements of Cash Flows (USD $)
In Thousands, unless otherwise specified
6 Months Ended
Jul. 29, 2017
Jul. 30, 2016
Cash Flows from Operating Activities:
 
 
Net Income
$ 1,238 
$ 2,311 
Adjustments to Reconcile Net Income to Net Cash Provided by Operating Activities:
 
 
Depreciation and Amortization
1,461 
1,255 
Amortization of Debt Issuance Costs
14 
 
Share-Based Compensation
580 
546 
Deferred Income Tax Provision
270 
Changes in Assets and Liabilities, Net of Impact of Acquisition:
 
 
Accounts Receivable
336 
127 
Inventories
221 
(2,656)
Income Taxes
(255)
400 
Accounts Payable and Accrued Expenses
(2,113)
995 
Other
193 
1,135 
Net Cash Provided by Operating Activities
1,679 
4,383 
Cash Flows from Investing Activities:
 
 
Proceeds from Sales/Maturities of Securities Available for Sale
1,601 
1,921 
Purchases of Securities Available for Sale
 
(400)
Cash Paid for TrojanLabel Acquisition, net of cash acquired
(9,007)
 
Payments Received on Line of Credit and Note Receivable
60 
188 
Additions to Property, Plant and Equipment
(983)
(377)
Net Cash Provided (Used) by Investing Activities
(8,329)
1,332 
Cash Flows from Financing Activities:
 
 
Cash (used) proceeds from Common Shares Issued Under Employee Benefit Plans and Employee Stock Option Plans, Net of Payment of Minimum Tax Withholdings
424 
(7)
Purchase of Treasury Stock
(11,238)
 
Proceeds from Issuance of Long-Term Debt
9,200 
 
Principal Payments on Long-Term Debt
(276)
 
Payments of Debt Issuance Costs
(155)
 
Dividends Paid
(997)
(1,036)
Net Cash Used by Financing Activities
(3,042)
(1,043)
Effect of Exchange Rate Changes on Cash and Cash Equivalents
423 
185 
Net Increase (Decrease) in Cash and Cash Equivalents
(9,269)
4,857 
Cash and Cash Equivalents, Beginning of Period
18,098 
10,043 
Cash and Cash Equivalents, End of Period
8,829 
14,900 
Supplemental Disclosures of Cash Flow Information:
 
 
Cash Paid During the Period for Interest
30 
 
Cash Paid During the Period for Income Taxes, Net of Refunds
$ 584 
$ 314 
Overview
Overview

(1) Overview

Headquartered in West Warwick, Rhode Island, AstroNova, Inc. leverages its expertise in data visualization technologies to design, develop, manufacture and distribute a broad range of specialty printers and data acquisition and analysis systems. Our products are distributed through our own sales force and authorized dealers in the United States. We also sell to customers outside of the United States primarily through our Company offices in Canada, China, Europe, Mexico and Southeast Asia as well as through independent dealers and representatives. AstroNova, Inc. products are employed around the world in a wide range of aerospace, apparel, automotive, avionics, chemical, computer peripherals, communications, distribution, food and beverage, general manufacturing, packaging and transportation applications.

The business consists of two segments, Product Identification, which includes specialty printing systems sold under the QuickLabel® and TrojanLabel brand names, and Test & Measurement which includes test and measurement as well as Aerospace systems sold under the AstroNova™ brand name.

Products sold under the QuickLabel and TrojanLabel brands are used in industrial and commercial product packaging and automatic identification applications to digitally print custom labels and other visual identification marks on demand. Products sold under the AstroNova Test & Measurement brand acquire and record visual and electronic signal data from local and networked data streams and sensors. The recorded data is processed and analyzed and then stored and presented in various visual output formats. In the aerospace market, the Company has a long history of using its data visualization technologies to provide high-resolution airborne printers and networking systems as well as related hardware and supplies.

Unless otherwise indicated, references to “AstroNova,” the “Company,” “we,” “our,” and “us” in this Quarterly Report on Form 10-Q refer to AstroNova, Inc. and its consolidated subsidiaries.

Basis of Presentation
Basis of Presentation

(2) Basis of Presentation

The accompanying unaudited condensed consolidated financial statements have been prepared pursuant to the rules and regulations of the Securities and Exchange Commission, and reflect all adjustments consisting of normal recurring adjustments which, in the opinion of management, are necessary for a fair presentation of the results of the interim periods included herein. These financial statements do not include all disclosures associated with annual financial statements and, accordingly, should be read in conjunction with footnotes contained in the Company’s Annual Report on Form 10-K for the fiscal year ended January 31, 2017.

Results of operations for the interim periods presented herein are not necessarily indicative of the results that may be expected for the full year.

The presentation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the amounts reported and disclosed in the condensed consolidated financial statements and accompanying notes. Some of the more significant estimates relate to the allowances for doubtful accounts and credits, inventory valuation, impairment of long-lived assets and goodwill, income taxes, share-based compensation, accrued expenses and warranty reserves. Management’s estimates are based on the facts and circumstances available at the time estimates are made, historical experience, risk of loss, general economic conditions and trends, and management’s assessments of the probable future outcome of these matters. Consequently, actual results could differ from those estimates.

Certain amounts in the prior year financial statements have been reclassified to conform to the current year’s presentation.

Principles of Consolidation
Principles of Consolidation

(3) Principles of Consolidation

The accompanying condensed consolidated financial statements include the accounts of the Company and its wholly-owned subsidiaries. All significant intercompany accounts and transactions are eliminated in consolidation.

Acquisition
Acquisition

(4) Acquisition

On February 1, 2017, our newly-formed wholly-owned Danish subsidiary, ANI ApS, completed the acquisition of the issued and outstanding equity interests of TrojanLabel ApS (TrojanLabel), a Danish private limited liability company, pursuant to the terms of a Share Purchase Agreement dated January 7, 2017. Based in Copenhagen, Denmark, TrojanLabel is a manufacturer of products including digital color label presses and specialty printing systems for a broad range of end markets. Upon consummation of the acquisition, TrojanLabel became an indirect wholly-owned subsidiary of AstroNova.

 

The purchase price of this acquisition was 62.9 million Danish Krone (approximately $9.1 million), net of cash acquired of 976,000 Danish Krone (approximately $0.1 million), of which 6.4 million Danish Krone (approximately $0.9 million) was placed in escrow to secure certain post-closing working capital adjustments and indemnification obligations of the sellers. The acquisition was funded using available cash and investment securities.

The sellers of TrojanLabel may be entitled to additional contingent consideration if 80% of specified earnings targets are achieved by TrojanLabel during the seven years following the closing, subject to certain closing working capital adjustments and potential offsets to satisfy the sellers’ indemnification obligations. The contingent consideration consists of potential earn-out payments to the sellers of between 32.5 million Danish Krone (approximately $5.0 million) if 80% of the specified earnings targets are achieved, 40.6 million Danish Krone (approximately $5.8 million) if 100% of the specified earnings targets are achieved, and a maximum of 48.7 million Danish Krone (approximately $7 million) if 120% of the specified earnings targets are achieved.

Total acquisition-related costs were approximately $0.7 million, of which $0.1 million and $0.6 million are included in the general and administrative expenses in the Company’s consolidated statements of income for the periods ending July 29, 2017 and January 31, 2017, respectively. The acquisition was accounted for under the acquisition method in accordance with the guidance provided by FASB ASC 805, “Business Combinations.”

The US dollar purchase price of the acquisition has been allocated on the basis of fair value as follows:

 

(In thousands)       

Accounts Receivable

   $ 1,322  

Inventory

     796  

Other Current Assets

     166  

Property, Plant and Equipment

     15  

Identifiable Intangible Assets

     3,264  

Goodwill

     7,388  

Accounts Payable and Other Current Liabilities

     (1,821

Other Liability

     (114

Contingent Liability (Earnout)

     (1,314

Deferred Tax Liability

     (695
  

 

 

 

Total Purchase Price

   $ 9,007  
  

 

 

 

The fair value of the intangible assets acquired was estimated by applying the income approach, and the fair value of the contingent consideration liability was estimated by applying the real options method. These fair value measurements are based on significant inputs that are not observable in the market and therefore represent a Level 3 measurement as defined in ASC 820, “Fair Value Measurement and Disclosure.” Key assumptions in estimating the fair value of the intangibles include (1) remaining life of existing technology acquired based on estimate of percentage of revenue from 0% -100% for each product, (2) the Company’s internal rate of return of 19.0% and (3) a range of earnings projections from $121,000-$1,070,000. Key assumptions in estimating the fair value of the contingent consideration liability include (1) the estimated earnout targets over the next seven years of $407,000-$1,280,000, (2) the probability of success (achievement of the various contingent events) from 1.6%-87.2% and (3) a risk-adjusted discount rate of approximately 1.77%-3.35% used to adjust the probability-weighted earnout payments to their present value. The fair value of the contingent liability will be revalued every reporting period based on updated assumptions. Refer to Note 16 “Fair Value” for further details.

Goodwill of $7.4 million, which is not deductible for tax purposes, represents the excess of the purchase price over the estimated fair value assigned to the tangible and identifiable intangible assets acquired and liabilities assumed from TrojanLabel. The goodwill recognized is attributable to synergies which are expected to enhance and expand the Company’s overall product portfolio and opportunities in new and existing markets, future technologies that have yet to be determined and TrojanLabel’s assembled work force. The carrying amount of the goodwill was allocated to the Product Identification segment of the Company.

The following table reflects the fair value of the acquired identifiable intangible assets and related estimated useful lives:

 

(In thousands)

   Fair
Value
     Useful Life
(Years)
 

Existing Technology

   $ 2,327        7  

Non-Competition Agreement

     937        10  
  

 

 

    

Total

   $ 3,264     
  

 

 

    

The Existing Technology intangible asset acquired represents the various technologies TrojanLabel has developed related to its series of printing presses, including hardware components of the presses and the software utilized to optimize their performance.

 

Beginning February 1, 2017, the results of operations for TrojanLabel have been included in the Company’s statement of income for the three and six month periods ended July 29, 2017 and are reported as part of the Product Identification segment. Assuming the acquisition of TrojanLabel had occurred on February 1, 2016, the impact on net sales, net income and earnings per share would not have been material to the Company for the three and six month periods ended July 30, 2016.

Net Income Per Common Share
Net Income Per Common Share

(5) Net Income Per Common Share

Basic net income per share is calculated by dividing net income by the weighted average number of shares outstanding during the period. Diluted net income per share is calculated by dividing net income by the weighted average number of shares and, if dilutive, common equivalent shares, determined using the treasury stock method for stock options, restricted stock awards and restricted stock units outstanding during the period. A reconciliation of the shares used in calculating basic and diluted net income per share is as follows:

 

     Three Months Ended      Six Months Ended  
     July 29,
2017
     July 30,
2016
     July 29,
2017
     July 30,
2016
 

Weighted Average Common Shares Outstanding— Basic

     6,726,623        7,418,312        7,097,183        7,388,123  

Effect of Dilutive Options, Restricted Stock Awards and Restricted Stock Units

     111,213        168,300        121,238        172,022  
  

 

 

    

 

 

    

 

 

    

 

 

 

Weighted Average Common Shares Outstanding—Diluted

     6,837,836        7,586,612        7,218,421        7,560,145  
  

 

 

    

 

 

    

 

 

    

 

 

 

For the three and six months ended July 29, 2017, the diluted per share amounts do not reflect common equivalent shares outstanding of 591,359 and 591,309, respectively. For the three and six months ended July 30, 2016 the diluted per share amounts do not reflect common equivalent shares outstanding of 413,121 and 468,121, respectively. These outstanding common equivalent shares were not included due to their anti-dilutive effect. Anti-dilutive shares consist of those common stock equivalents that have either an exercise price above the average stock price for the period, or the common stock equivalent’s related average unrecognized stock compensation expense is sufficient to “buy back” the entire amount of shares. Restricted stock units which vest based upon achievement of performance targets are excluded from the diluted shares outstanding unless the performance targets have been met as of the end of the reporting period, regardless of whether such performance targets are probable of achievement as of the end of the measurement period.

Intangible Assets
Intangible Assets

(6) Intangible Assets

Intangible assets are as follows:

 

     July 29, 2017      January 31, 2017  
(In thousands)    Gross
Carrying
Amount
     Accumulated
Amortization
    Currency
Translation
Adjustment
     Net
Carrying
Amount
     Gross
Carrying
Amount
     Accumulated
Amortization
    Net
Carrying
Amount
 

Miltope:

                  

Customer Contract Relationships

   $ 3,100      $ (1,273     —        $ 1,827      $ 3,100      $ (1,108   $ 1,992  

RITEC:

                  

Customer Contract Relationships

     2,830        (334     —          2,496        2,830        (207     2,623  

Non-Competition Agreement

     950        (396     —          554        950        (301     649  

TrojanLabel:

                  

Existing Technology

     2,327        (168     187        2,346        —          —         —    

Non-Competition Agreement

     937        (47     76        966        —          —         —    
  

 

 

    

 

 

   

 

 

    

 

 

    

 

 

    

 

 

   

 

 

 

Intangible Assets, net

   $ 10,144      $ (2,218     263      $ 8,189      $ 6,880      $ (1,616   $ 5,264  
  

 

 

    

 

 

   

 

 

    

 

 

    

 

 

    

 

 

   

 

 

 

 

There were no impairments to intangible assets during the three or six month periods ended July 29, 2017 and July 30, 2016. With respect to the acquired intangibles included in the table above, amortization expense of $304,000 and $179,000 related to the above acquired intangibles has been included in the condensed consolidated statement of income for the three months ended July 29, 2017 and July 30, 2016, respectively. Amortization expense of $603,000 and $358,000 related to the above acquired intangibles has been included in the condensed consolidated statement of income for the six months ended July 29, 2017 and July 30, 2016, respectively.

Share-Based Compensation
Share-Based Compensation

(7) Share-Based Compensation

We have one equity incentive plan pursuant to which we grant equity awards – the 2015 Equity Incentive Plan (the “2015 Plan”). Under this plan, the Company may grant incentive stock options, non-qualified stock options, stock appreciation rights, time or performance-based restricted stock units (RSUs), restricted stock awards (RSAs), and other stock-based awards to executives, key employees, directors and other eligible individuals. The 2015 Plan will expire in May 2025. Options granted to employees under the plan vest over four years and expire after ten years. The exercise price of each stock option is established at the discretion of the Compensation Committee; however, all options granted under the 2015 Plan must be issued at an exercise price of not less than the fair market value of the Company’s common stock on the date of grant. The 2015 Plan authorizes the issuance of up to 500,000 shares (subject to adjustment for stock dividends and stock splits), and at July 29, 2017, 137,430 shares were available for grant under the 2015 Plan. In addition, as of July 29, 2017, unvested shares of restricted stock granted and options to purchase an aggregate of 581,310 shares were outstanding under our 2007 Equity Incentive Plan (the “2007 Plan”). The 2007 Plan expired in May 2017 and no new awards may be issued under that plan, but outstanding awards will continue to be governed by it.

Under the plan, each non-employee director receives an automatic annual grant of ten-year options to purchase 5,000 shares of stock upon the adjournment of each annual shareholders meeting. Each such option is exercisable at the fair market value of the Company’s common stock as of the grant date, and vests immediately prior to the next annual shareholders’ meeting.    Accordingly, on May 17, 2017, 30,000 options were issued to the non-employee directors.

The Company has a Non-Employee Director Annual Compensation Program (the “Program”) under which each non-employee director receives an automatic grant of RSAs on the first business day of each fiscal quarter. Under the Program, the number of whole shares to be granted each quarter is equal to 25% of the number calculated by dividing the director compensation amount by the fair market value of the Company’s stock on such day. The director annual compensation amount was $55,000 in fiscal year 2017, and $65,000, and $75,000 for fiscal 2018 and 2019, respectively. In addition, the Chairman of the Board receives RSAs with an aggregate value of $6,000, and the Chairs of the Audit and Compensation Committees each receive RSAs with an aggregate value of $4,000, also issued in quarterly installments and calculated in the same manner as the directors’ RSA grants. RSAs granted prior to March 30, 2017 become fully vested on the first anniversary of the date of grant. RSAs granted subsequent to March 30, 2017 become vested three months after the date of grant. A total of 7,314 and 8,262 shares were awarded to the non-employee directors as compensation under the Program in the second quarter of fiscal 2018 and 2017, respectively.

In April 2013 (fiscal year 2014), the Company granted options and RSUs to officers (“2014 RSUs”). The 2014 RSUs vested as follows: twenty-five percent vested on the third anniversary of the grant date, fifty percent vested upon the Company achieving its cumulative budgeted net revenue target for fiscal years 2014 through 2016 (the “Measurement Period”), and twenty-five percent vested upon the Company achieving a target average annual ORONA (operating income return on net assets as calculated under the Domestic Management Bonus Plan) for the Measurement Period. The grantee may not sell, transfer or otherwise dispose of more than fifty percent of the common stock issued upon vesting of the 2014 RSUs until the first anniversary of the vesting date. In April 2016, 9,300 of the 2014 RSUs vested, as the Company achieved the targeted average annual ORONA, as defined in the plan, for the Measurement Period and another 9,300 vested as a result of the third year anniversary date of the grant. Additionally, on February 1, 2014, the Company accelerated the vesting of 4,166 of the 2014 RSUs held by Everett Pizzuti in connection with his retirement.

In March 2015 (fiscal year 2016), the Company granted 50,000 options and 537 RSAs to its CEO pursuant to the CEO Equity Incentive Agreement, and 35,000 options to other key employees.

In May 2015 (fiscal year 2016), the Company granted an aggregate of 80,000 time-based and 155,000 performance-based RSUs (“2016 RSUs”) to certain officers of the Company. The time-based 2016 RSUs vest in four equal annual installments commencing on the first anniversary of the grant date. The performance-based 2016 RSUs vest over three years based upon the increase in revenue, if any, achieved each fiscal year relative to a three-year revenue increase goal. Performance-based 2016 RSUs that are earned based on organic revenue growth are fully vested when earned, while those earned based on revenue growth via acquisitions vest annually over a three-year period following the fiscal year in which the revenue growth occurs. Any performance-based 2016 RSUs that have not been earned at the end of the three-year performance period will be forfeited. The expense for such shares is recognized in the fiscal year in which the results are achieved, however, the shares are not fully earned until approved by the Compensation Committee in the first quarter of the following fiscal year. Based upon revenue in fiscal 2017 and 2016, 9,025 and 15,810 shares of the performance based RSUs were earned in the first quarter of fiscal 2018 and 2017, respectively.

In March 2016 (fiscal year 2017), the Company granted 50,000 options and 4,030 RSAs to its CEO pursuant to the CEO Equity Incentive Agreement.

 

In May 2016 (fiscal year 2017) the Company granted 37,000 options to certain key employees. On August 1, 2016 (fiscal year 2017) the Company granted 5,000 options to its Chief Financial Officer.

In March 2017 (fiscal year 2018), the Company granted 50,000 options to the Chief Executive Officer pursuant to the CEO Equity Incentive Agreement and in February and April 2017 (fiscal year 2018) the Company granted 52,189 options to certain other key employees.

The options and RSAs granted March 2015 through March 2017 vest in four equal annual installments commencing on the first anniversary of the grant date.

 

Share-based compensation expense was recognized as follows:

 

     Three Months Ended      Six Months Ended  
(In thousands)    July 29,
2017
     July 30,
2016
     July 29,
2017
     July 30,
2016
 

Stock Options

   $ 117      $ 87      $ 211      $ 168  

Restricted Stock Awards and Restricted Stock Units

     289        142        363        372  

Employee Stock Purchase Plan

     3        3        6        6  
  

 

 

    

 

 

    

 

 

    

 

 

 

Total

   $ 409      $ 232      $ 580      $ 546  
  

 

 

    

 

 

    

 

 

    

 

 

 

Stock Options

The fair value of stock options granted during the six months ended July 29, 2017 and July 30, 2016 was estimated using the following weighted average assumptions:

 

     Six Months Ended  
     July 29,
2017
    July 30,
2016
 

Risk Free Interest Rate

     1.7     1.4

Expected Volatility

     37.9     28.2

Expected Life (in years)

     8.0       5.0  

Expected Dividend Yield

     2.0     1.9

The weighted average fair value per share for options granted was $5.62 and $4.46 during the three and six month periods ended July 29, 2017, compared to $2.86 and $3.20 during the three and six month periods ended July 30, 2016.

Aggregated information regarding stock options granted under the plans for the six months ended July 29, 2017, is summarized below:

 

     Number of
Options
     Weighted Average
Exercise Price
 

Outstanding at January 31, 2017

     685,456      $ 11.96  

Granted

     132,189        13.45  

Exercised

     (62,250      10.73  

Forfeited

     (7,325      14.17  

Canceled

     (24,600      11.76  
  

 

 

    

 

 

 

Outstanding at July 29, 2017

     723,470      $ 12.33  
  

 

 

    

 

 

 

Set forth below is a summary of options outstanding at July 29, 2017:

 

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

     174,831      $ 7.85        3.4        174,831      $ 7.85        3.4  

$10.01-15.00

     493,639      $ 13.61        7.9        262,600      $ 13.48        7.2  

$15.01-20.00

     55,000      $ 15.07        8.7        12,500      $ 15.01        8.6  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 
     723,470      $ 12.33        6.9        449,931      $ 11.33        5.7  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

As of July 29, 2017, there was approximately $841,000 of unrecognized compensation expense related to stock options which is expected to be recognized over a weighted average period of approximately 2.6 years.

 

Restricted Stock Units (RSUs) and Restricted Stock Awards (RSAs)

Aggregated information regarding RSUs and RSAs granted under the Plan for the three months ended July 29, 2017 is summarized below:

 

     RSAs & RSUs      Weighted Average
Grant Date Fair Value
 

Unvested at January 31, 2017

     213,868      $ 14.08  

Granted

     13,981        14.43  

Vested

     (37,692      14.07  

Forfeited

     (9,087      14.05  
  

 

 

    

 

 

 

Unvested at April 29, 2017

     181,070      $ 14.11  
  

 

 

    

 

 

 

As of July 29, 2017, there was approximately $600,000 of unrecognized compensation expense related to RSUs and RSAs which is expected to be recognized over a weighted average period of 0.7 years.

Employee Stock Purchase Plan

AstroNova has an Employee Stock Purchase Plan allowing eligible employees to purchase shares of common stock at a 15% discount from fair value on the date of purchase. A total of 247,500 shares were reserved for issuance under this plan. During the quarters ended July 29, 2017 and July 30, 2016, there were 1,390 and 1,507 shares, respectively, purchased under this plan.

Shareholders' Equity
Shareholders' Equity

(8) Shareholders’ Equity

On May 1, 2017, the Company entered into a stock repurchase agreement to repurchase 826,305 shares of the Company’s common stock held by a trust established by Albert W. Ondis at a per share price of $13.60, for an aggregate repurchase price of $11.2 million. This stock repurchase was consummated on May 2, 2017 and was funded using existing cash on hand. Following this stock repurchase, the Ondis trust owns 36,000 shares of the Company’s common stock.

April L. Ondis, a director of the Company, is a beneficiary of the trust. The stock repurchase was authorized and approved by the Company’s Audit Committee as a related party transaction. Prior to entering into the agreement, the Company obtained an opinion from an independent investment banking firm that the consideration to be paid by the Company to the trust pursuant to the stock repurchase agreement would be fair to the public stockholders of the Company, other than the trust, from a financial point of view.

Inventories
Inventories

(9) Inventories

Inventories are stated at the lower of cost (first-in, first-out) and net realizable value and include material, labor and manufacturing overhead. The components of inventories are as follows:

 

(In thousands)    July 29, 2017      January 31, 2017  

Materials and Supplies

   $ 11,884      $ 11,865  

Work-In-Process

     1,306        1,216  

Finished Goods

     11,542        10,270  
  

 

 

    

 

 

 
     24,732        23,351  

Inventory Reserve

     (4,463      (3,845
  

 

 

    

 

 

 
   $ 20,269      $ 19,506  
  

 

 

    

 

 

 
Income Taxes
Income Taxes

(10) Income Taxes

The Company’s effective tax rates for the period, which are based on the projected effective tax rate for the full year, are as follows:

 

     Three Months Ended     Six Months Ended  

Fiscal 2018

     24.1     23.4

Fiscal 2017

     27.7     29.6

 

During the three months ended July 29, 2017, the Company recognized an income tax expense of approximately $231,000. The effective tax rate in this period was impacted by updated projected forecasted income and updated lower foreign tax rates for the Company’s foreign subsidiaries, as well as a $12,000 benefit arising from windfall tax benefits related to the Company’s stock. During the three months ended July 30, 2016, the Company recognized income tax expense of $496,000. The effective tax rate in this period was directly impacted by a $97,000 tax benefit relating to the filing of amended returns and a $39,000 tax benefit related to disqualifying dispositions of Company stock.

During the six months ended July 29, 2017, the Company recognized an income tax expense of approximately $378,000. The effective tax rate in this period was impacted by updated projected forecasted income and updated lower foreign tax rates for the Company’s foreign subsidiaries, as well as a $71,000 tax benefit related to the expiration of the statute of limitations on a previously uncertain tax position and a $27,000 benefit arising from windfall tax benefits related to the Company’s stock. During the six months ended July 30, 2016, the Company recognized income tax expense of $972,000. The effective tax rate in this period was directly impacted by a $97,000 tax benefit relating to the filing of amended returns; a $52,000 tax benefit related to the statute of limitations expiring on a previously uncertain tax position and a $39,000 tax benefit related to disqualifying dispositions of Company stock.

As of July 29, 2017, the Company’s cumulative unrecognized tax benefits totaled $663,000 compared to $708,000 as of January 31, 2017. There were no other developments affecting unrecognized tax benefits during the quarter ended July 29, 2017.

Debt
Debt

(11) Debt

Long-term debt in the accompanying condensed consolidated balance sheets is as follows:

 

(In thousands)

   July 29, 2017      January 31, 2017  

USD Term Loan with a rate equal to LIBOR plus a margin of 1.0% to 1.5%, (2.03% as of July 29, 2017), and maturity date of January 31, 2022

   $ 8,924      $ —    

Less:

     

Debt Issuance Costs, net of accumulated amortization

   $ (158    $ —    

Current Portion

   $ (1,564    $ —    
  

 

 

    

 

 

 

Long-Term Debt

   $ 7,202      $ —    
  

 

 

    

 

 

 

The schedule of required principal payments remaining during the next five years on long-term debt outstanding as of July 29, 2017 is as follows:

 

(In thousands)       

Fiscal 2018

   $ 828  

Fiscal 2019

     1,472  

Fiscal 2020

     1,840  

Fiscal 2021

     2,208  

Fiscal 2022

     2,576  
  

 

 

 
   $ 8,924  
  

 

 

 

On February 28, 2017, the Company and the Company’s wholly-owned subsidiary, ANI ApS (together, the “Parties”), entered into a Credit Agreement with Bank of America, N.A. (the “Lender”). The Parties also entered into a related Security and Pledge Agreement with the Lender. The Credit Agreement provides for a term loan to the Parties in the amount of $9.2 million. The Credit Agreement also provides for a $10.0 million revolving credit facility available to the Company for general corporate purposes. Revolving credit loans may be borrowed, at the borrower’s option, in U.S. Dollars or, subject to certain conditions, Euros, British Pounds, Canadian Dollars or Danish Krone. Upon entry into the Credit Agreement, the Company’s prior credit facility with Wells Fargo Bank was terminated. No loans or other amounts were outstanding or owed under that facility at the time of termination.

The term loan bears interest under the Credit Agreement at a rate per annum equal to the LIBOR Rate plus a margin that varies within a range of 1.0% to 1.5% based on the Company’s consolidated leverage ratio. Amounts borrowed under the revolving credit facility bear interest at a rate per annum equal to, at the Company’s option, either (a) the LIBOR Rate (or in the case of revolving credit loans denominated in a currency other than U.S. Dollars, the applicable quoted rate), plus a margin that varies within a range of 1.0% to 1.5% based on the Company’s consolidated leverage ratio, or (b) a fluctuating reference rate equal to the highest of (i) the federal funds’ rate plus 0.50%, (ii) Bank of America’s publicly announced prime rate or (iii) the LIBOR Rate plus 1.00%, plus a margin that varies within a range of 0.0% to 0.5% based on the Company’s consolidated leverage ratio. In addition to certain other fees and expenses, the Company is required to pay a commitment fee on the undrawn portion of the revolving credit facility at the rate of 0.25% per annum.

In connection with the Credit Agreement, AstroNova and ANI ApS entered into certain hedging arrangements with the Lender to manage the variable interest rate risk and currency risk associated with its payments in respect of the term loan. Refer to Note 12, “Derivative Financial Instruments and Risk Management” for further information about these arrangements.

The Parties must comply with various customary financial and non-financial covenants under the Credit Agreement. The financial covenants consist of a maximum consolidated leverage ratio and a minimum consolidated fixed charge coverage ratio. The Credit Agreement contains limitations, in each case subject to various exceptions and thresholds, on the Company’s and its subsidiaries’ ability to incur future indebtedness, to place liens on assets, to conduct mergers or acquisitions, to sell assets, to alter their capital structure, to make investments and loans, to change the nature of their business, and to prepay subordinated indebtedness. The Credit Agreement permits the Company to pay cash dividends on and repurchase shares of its common stock, subject to certain limitations.

In connection with the May 1, 2017, stock repurchase (refer to Note 8, “Shareholders’ Equity”), the Company entered into a consent and amendment, dated as of May 1, 2017, relating to the Credit Agreement solely for purposes of effecting the stock repurchase. The Amendment increased the aggregate amount of certain repurchases of Company equity interests permitted to be made by the Company under the Credit Agreement in the Company’s fiscal year ending January 31, 2018, from $5,000,000 to $12,000,000, subject to certain conditions. The Amendment prohibits the Company from making other repurchases of Company equity interests under such permission in the fiscal year ending January 31, 2018. The Amendment also provides that the aggregate amount paid in cash by the Company to effect the stock repurchase shall not be deducted from the Company’s consolidated EBITDA for the purposes of calculating the consolidated fixed charge coverage ratio covenant to which the Company is subject under the Credit Agreement with respect to any trailing four-fiscal-quarter measurement period through and including the measurement period ending January 31, 2018.

The Lender is entitled to accelerate repayment of the loans and to terminate its revolving credit commitment under the Credit Agreement upon the occurrence of any of various customary events of default, which include, among other events, the following: failure to pay when due any principal, interest or other amounts in respect of the loans, breach of any of the Company’s covenants or representations under the loan documents, default under any other of the Company’s or its subsidiaries’ significant indebtedness agreements, a bankruptcy, insolvency or similar event with respect to the Company or any of its subsidiaries, a significant unsatisfied judgment against the Company or any of its subsidiaries, or a change of control of the Company.

The obligations of ANI ApS in respect of the term loan are guaranteed by the Company and TrojanLabel. The Company’s obligations in respect of the revolving credit facility and its guarantee in respect of the term loan are secured by substantially all of the assets of the Company (including a pledge of a portion of the equity interests held by the Company in ANI ApS and the Company’s wholly-owned German subsidiary Astro-Med GmbH), subject to certain exceptions.

As of July 29, 2017, there are no borrowings under the revolving credit facility, and we believe the Company is in compliance with all of the covenants in the Credit Agreement.

Derivative Financial Instruments and Risk Management
Derivative Financial Instruments and Risk Management

(12) Derivative Financial Instruments and Risk Management

As a multinational enterprise, AstroNova is exposed to certain risks relating to our ongoing business operations. We employ a number of practices to manage these risks, including operating and financing activities, and where appropriate, the use of derivative instruments. The primary risks managed by using derivative instruments are interest rate risk and foreign currency exchange rate risk.

ASC 815, “Derivatives and Hedging,” requires the Company to recognize all of its derivative instruments as either assets or liabilities in the statement of financial position at fair value. The accounting for changes in the fair value (i.e., gains or losses) of a derivative instrument depends on whether it has been designated and qualifies as part of a hedging relationship and, further, on the type of hedging relationship. For those derivative instruments that are designated and qualify as hedging instruments, a company must designate the hedging instrument, based upon the exposure being hedged, as a fair value hedge, cash flow hedge, or a hedge of a net investment in a foreign operation. For derivative instruments not designated as hedging instruments, the gain or loss is recognized in the statement of income during the current period.

 

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 (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 expense” when the hedged transactions are interest cash flows associated with floating-rate debt, or “other income (expense)” 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 (i.e., the ineffectiveness portion), or hedge components excluded from the assessment of effectiveness, are recognized in the statement of financial income during the current period.

In connection with the Credit Agreement, we entered into a cross-currency interest rate swap to manage the interest rate risk and foreign currency exchange risk associated with the floating-rate foreign currency-denominated borrowing on our Danish Subsidiary and, in accordance with the guidance in ASC 815, have designated this swap as a cash flow hedge of floating-rate borrowings. The cross-currency interest rate swap agreement utilized by the Company effectively modifies the Company’s exposure to interest rate risk and foreign currency exchange rate risk by converting approximately $8.9 million of the Company’s floating-rate debt denominated in U.S. Dollars on our Danish subsidiary’s books to a fixed-rate debt denominated in Danish Krone for the next five years, thus reducing the impact of interest-rate and foreign currency exchange rate changes on future interest expense and principal repayments. This swap involves the receipt of floating rate amounts in U.S. Dollars in exchange for fixed-rate interest payments in Danish Krone, as well as exchanges of principal at the inception spot rate, over the life of the Credit Agreement.

As of July 29, 2017, the total notional amount of the Company’s cross-currency interest rate swap was $8.4 million; the fair value was $1.1 million.

The following table presents the impact of the derivative instrument in our condensed consolidated financial statements for the six months ended July 29, 2017 and July 30, 2016:

 

     Amount of Gain
(Loss)
Recognized in OCI
on
Derivative
(Effective Portion)
    

Location of Gain (Loss)

Reclassified from

Accumulated OCI into

Income (Effective Portion)

   Amount of Gain (Loss)
Reclassified from
Accumulated OCI into
Income (Effective Portion)
 

Cash Flow Hedge

(In thousands)

   July 29,
2017
    July 30,
2016
        July 29,
2017
    July 30,
2016
 

Swap contract

   $ (1,035   $ —        Other Income (Expense)    $ (953   $ —    
  

 

 

   

 

 

       

 

 

   

 

 

 

The swap contract resulted in no ineffectiveness for the three months ended July 29, 2017, and no gains or losses were reclassified into earnings as a result of the discontinuance of the swap contract due to the original forecasted transaction no longer being probable of occurring. At July 29, 2017, the Company expects to reclassify approximately $116,000 of net gains on the swap contract from accumulated other comprehensive income to earnings during the next 12 months due to changes in foreign exchange rates and the payment of variable interest associated with the floating-rate debt.

Segment Information
Segment Information

(13) Segment Information

AstroNova reports two segments: Product Identification and Test & Measurement (T&M). The Company evaluates segment performance based on the segment profit before corporate expenses.

Summarized below are the Revenue and Segment Operating Profit for each reporting segment:

 

     Three Months Ended      Six Months Ended  
     Revenue      Segment Operating Profit      Revenue      Segment Operating Profit  

(In thousands)

   July 29,
2017
     July 30,
2016
     July 29,
2017
     July 30,
2016
     July 29,
2017
     July 30,
2016
     July 29,
2017
    July 30,
2016
 

Product Identification

   $ 20,841      $ 17,628      $ 2,612      $ 2,632      $ 39,487      $ 34,234      $ 5,104     $ 4,628  

T&M

     6,642        7,711        657        1,141        12,454        15,215        728       2,343  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

   

 

 

 

Total

   $ 27,483      $ 25,339        3,269        3,773      $ 51,941      $ 49,449        5,832       6,971  
  

 

 

    

 

 

          

 

 

    

 

 

      

Corporate Expenses

           2,327        2,025              4,183       3,676  
        

 

 

    

 

 

          

 

 

   

 

 

 

Operating Income

           942        1,748              1,649       3,295  

Other Income (Expense), Net

           16        40              (33     (12
        

 

 

    

 

 

          

 

 

   

 

 

 

Income Before Income Taxes

           958        1,788              1,616       3,283  

Income Tax Provision

           231        496              378       972  
        

 

 

    

 

 

          

 

 

   

 

 

 

Net Income

         $ 727      $ 1,292            $ 1,238     $ 2,311  
Recent Accounting Pronouncements
Recent Accounting Pronouncements

(14) Recent Accounting Pronouncements

Goodwill

In January 2017, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) 2017-04, “Intangibles—Goodwill and Other (Topic 350).” ASU 2017-14 simplifies the subsequent measurement of goodwill impairment. The new guidance eliminates the two-step process that required identification of potential impairment and a separate measure of the actual impairment. Goodwill impairment charges, if any, would be determined by reducing the goodwill balance by the difference between the carrying value and the reporting unit’s fair value (impairment loss is limited to the carrying value). This standard is effective for annual or any interim goodwill impairment tests beginning after December 15, 2019. The Company does not believe the adoption of this guidance will have a material impact on the Company’s consolidated financial statements

 

Statement of Cash Flows

In August 2016, the FASB issued ASU 2016-15, “Classification of Certain Cash Receipts and Cash Payments (Topic 230).” ASU 2016-15 addresses eight specific cash flow issues with the objective of reducing the existing diversity in practice for certain cash receipts and cash payments. The standard is effective for annual reporting periods beginning after December 15, 2017 and interim periods within those years (Q1 fiscal 2019 for AstroNova), with early adoption permitted. The Company does not believe the adoption of this guidance will have a material impact on the Company’s consolidated financial statements.

Revenue Recognition

In May 2014, the FASB issued ASU 2014-09, “Revenue from Contracts with Customers (Topic 606).” ASU 2014-09 completes the joint effort by the FASB and International Accounting Standards Board to improve financial reporting by creating common revenue recognition guidance for U.S. GAAP and International Financial Reporting Standards. ASU 2014-09 applies to all companies that enter into contracts with customers to transfer goods or services. In August 2015, the FASB modified ASU 2014-09 to be effective for annual reporting periods beginning after December 15, 2017 (Q1 fiscal 2019 for AstroNova), including interim periods within that reporting period. As modified, the FASB permits the adoption of the new revenue standard early, but not before annual periods beginning after December 15, 2016. Entities have the choice to apply ASU 2014-09 either retrospectively to each reporting period presented or by recognizing the cumulative effect of applying ASU 2014-09 at the date of initial application and not adjusting comparative information.

In March 2016, the FASB issued ASU 2016-08, “Revenue from Contracts with Customers (Topic 606)—Principal versus Agent Consideration.” In April 2016, the FASB issued ASU 2016-10, “Revenue from Contracts with Customers (Topic 606)—Identifying Performance Obligations and Licensing.” In May 2016, the FASB issued ASU 2016-11,“Revenue from Contracts with Customers (Topic 606) and Derivatives and Hedging (Topic 815)—Rescission of SEC Guidance Because of ASU 2014-09 and 2014-16” and ASU 2016-12, “Revenue from Contracts with Customers (Topic 606)—Narrow Scope Improvements and Practical Expedients.” All of these ASUs do not change the core principle of the guidance in Topic 606 (as amended by ASU 2014-09), but rather provide further guidance to improve the operability and understandability of the implementation guidance included in ASU 2014-09. The effective date for all of these ASUs is the same as the effective date of ASU 2014-09 as amended by ASU 2015-14, for annual reporting periods beginning after December 15, 2017, including interim periods within those years (Q1 fiscal 2019 for AstroNova). The Company is currently evaluating the impact and method of adopting this guidance and while we do not expect that the adoption of these ASUs will have a material impact on the Company’s consolidated financial statements, we do expect the adoption to result in a change in timing of recognizing expense for commission earned on the sales of extended service contracts. The Company has not yet decided on the method of adoption to be applied when this new guidance becomes effective.

Leases

In February 2016, the FASB issued ASU 2016-02, “Leases (Topic 842).” ASU 2016-02 supersedes current guidance related to accounting for leases and is intended to increase transparency and comparability among organizations by requiring lessees to recognize assets and liabilities in the balance sheet for operating leases with lease terms greater than twelve months. The update also requires improved disclosures to help users of financial statements better understand the amount, timing and uncertainty of cash flows arising from leases. ASU 2016-02 will be effective for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years (Q1 fiscal 2020 for AstroNova), with early adoption permitted. At adoption, this update will be applied using a modified retrospective approach. The Company is currently evaluating the effect of this new guidance on the Company’s consolidated financial statements.

Inventory

In July 2015, the FASB issued ASU 2015-11, “Inventory (Topic 330).” ASU 2015-11 requires inventory to be measured at the lower of cost and net realizable value instead of at lower of cost or market. This guidance does not apply to inventory that is measured using last-in, first out (LIFO) or the retail inventory method but applies to all other inventory, including inventory measured using first-in, first-out (FIFO) or the average cost method. ASU 2015-11 will be effective for fiscal years beginning after December 15, 2016, including interim periods within those fiscal years (Q1 fiscal 2018 for AstroNova) and should be applied prospectively. Our adoption of this guidance at the beginning of the first quarter of fiscal 2018 did not have a material effect on our consolidated financial statements.

No other new accounting pronouncements, issued or effective during the first six months of the current year, have had or are expected to have a material impact on our consolidated financial statements.

Securities Available for Sale
Securities Available for Sale

(15) Securities Available for Sale

Pursuant to our investment policy, securities available for sale include state and municipal securities with various contractual or anticipated maturity dates ranging from 1 to 15 months. Securities available for sale are carried at fair value, with unrealized gains and losses reported as a component of accumulated other comprehensive income (loss) in shareholders’ equity until realized. Realized gains and losses from the sale of available-for-sale securities, if any, are determined on a specific identification basis. A decline in the fair value of any available-for-sale security below cost that is determined to be other than temporary will result in a write-down of its carrying amount to fair value. No such impairment charges were recorded for any period presented. All short-term investment securities have original maturities greater than 90 days.

The fair value, amortized cost and gross unrealized gains and losses of securities available for sale are as follows:

 

(In thousands)

July 29, 2017

   Amortized Cost      Gross Unrealized
Gains
     Gross Unrealized
Losses
     Fair Value  

State and Municipal Obligations

   $ 5,130      $ 2      $ (1    $ 5,131  
  

 

 

    

 

 

    

 

 

    

 

 

 

January 31, 2017

   Amortized Cost      Gross Unrealized
Gains
     Gross Unrealized
Losses
     Fair Value  

State and Municipal Obligations

   $ 6,732      $ —        $ (9    $ 6,723  
  

 

 

    

 

 

    

 

 

    

 

 

 

 

Fair Value
Fair Value

(16) Fair Value

We measure our financial and nonfinancial assets at fair value on a recurring basis in accordance with the guidance provided in ASC 820, “Fair Value Measurement and Disclosures” which defines fair value as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date (exit price). In addition, ASC 820 establishes a three-tiered hierarchy for inputs used in management’s determination of fair value of financial instruments that emphasizes the use of observable inputs over the use of unobservable inputs by requiring that observable inputs be used when available. Observable inputs are inputs that reflect management’s belief about the assumptions market participants would use in pricing a financial instrument based on the best information available in the circumstances.

The fair value hierarchy is summarized as follows:

 

    Level 1—Quoted prices in active markets for identical assets or liabilities;

 

    Level 2—Inputs other than Level 1 that are observable, either directly or indirectly, such as quoted prices for similar assets or liabilities; quoted prices in markets that are not active or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities; and

 

    Level 3—Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities.

Cash and cash equivalents, accounts receivable, accounts payable, line of credit receivable, accrued compensation, other liabilities and accrued expenses and income tax payable are reflected in the condensed consolidated balance sheet at carrying value, which approximates fair value due to the short term nature of the these instruments.

Assets and Liabilities Recorded at Fair Value on a Recurring Basis

Fair value is applied to our financial assets and liabilities including money market funds, available for sale securities, derivative instruments consisting of a cross-currency interest rate swap and a contingent consideration liability relating to an earnout payment on future TrojanLabel operating results.

The following tables provide a summary of the financial assets and liabilities that are measured at fair value as of July 29, 2017 and January 31, 2017:

 

Assets measured at fair value:

  Fair value measurement at
July 29, 2017
    Fair value measurement at
January 31, 2017
 
(in thousands)   Level 1     Level 2     Level 3     Total     Level 1     Level 2     Level 3     Total  

Money Market Funds (included in Cash and Cash Equivalents)

  $ 24     $ —       $ —       $ 24     $ 2     $ —       $ —       $ 2  

State and Municipal Obligations (included in Securities Available for Sale)

    —         5,131       —         5,131       —         6,723       —         6,723  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total assets

  $ 24     $ 5,131     $ —       $ 5,155     $ 2     $ 6,723     $ —       $ 6,725  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Liabilities measured at fair value:

  Fair value measurement at
July 29, 2017
    Fair value measurement at
January 31, 2017
 
(in thousands)   Level 1     Level 2     Level 3     Total     Level 1     Level 2     Level 3     Total  

Swap Contracts (included in Other Liabilities)

  $ —       $ 1,066     $ —       $ 1,066     $ —       $ —       $ —       $ —    

Earnout Liability (included in Other Liabilities)

    —         —         1,247       1,247       —         —         —         —    
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total liabilities

  $ —       $ 1,066     $ 1,247     $ 2,313     $ —       $ —       $ —       $ —    
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

For our money market funds and municipal obligations, we utilize the market approach to measure fair value. The market approach is based on using quoted prices for identical or similar assets.

We also use the market approach to measure fair value of our derivative instruments. Our derivative liability is comprised of a cross-currency interest rate swap. This derivative instrument was measured at fair value using readily observable market inputs, such as quotations on interest rates and foreign exchange rates, and is classified as Level 2 because it is an over-the-counter contract with a bank counterparty that is not traded in an active market.

 

The fair value of the earnout liability incurred in connection with the Company’s acquisition of TrojanLabel was determined using the option approach methodology which includes using significant inputs that are not observable in the market and therefore classified as Level 3. Key assumptions in estimating the fair value of the contingent consideration liability included (1) the estimated earnout targets over the next seven years of $0.4 million-$1.3 million, (2) the probability of success (achievement of the various contingent events) from 0.0%-57.9% and (3) a risk-adjusted discount rate of approximately 1.67%-3.22% used to adjust the probability-weighted earnout payments to their present value. At each reporting period, the contingent consideration liability is recorded at its fair value with changes reflected in other income in the condensed consolidated statements of operations.

Assets and Liabilities Not Recorded at Fair Value on the Consolidated Balance Sheet

As of July 29, 2017, the Company’s 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
July 29, 2017
        
(In thousands)    Level 1      Level 2      Level 3      Total      Carrying
Value
 

Long-Term debt and related current maturities

   $ —        $ —        $ 9,953      $ 9,953      $ 8,924  

On February 28, 2017, the Company entered into a term loan in the amount of $9.2 million with the Bank of America. The fair value of the Company’s long-term debt, including the current portion of long-term debt 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 a Level 3.

Accumulated Other Comprehensive Loss
Accumulated Other Comprehensive Loss

(17) Accumulated Other Comprehensive Loss

The changes in the balance of accumulated other comprehensive loss by component are as follows:

 

(In thousands)

  Foreign Currency
Translation
Adjustments
    Unrealized Holding
Gain/(Loss)
on Available for
Sale Securities
    Net
Unrealized
Gain (Losses)
on Cash Flow
Hedges
    Total  

Balance at January 31, 2017

  $ (1,048   $ (8   $ —       $ (1,056

Other Comprehensive Income (Loss) before reclassification

    318       7       (760     (435

Amounts reclassified from AOCI to Earnings

    —         —         704       704  
 

 

 

   

 

 

   

 

 

   

 

 

 

Other Comprehensive Income (Loss)

    318       7       (56     269  
 

 

 

   

 

 

   

 

 

   

 

 

 

Balance at July 29, 2017

  $ (730   $ (1   $ (56   $ (787
 

 

 

   

 

 

   

 

 

   

 

 

 

The amounts presented above in other comprehensive income (loss) are net of any applicable taxes.

 

Credit Agreement Amendment

Recent Accounting Pronouncements (Policies)
Recent Accounting Pronouncements

Recent Accounting Pronouncements

Goodwill

In January 2017, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) 2017-04, “Intangibles—Goodwill and Other (Topic 350).” ASU 2017-14 simplifies the subsequent measurement of goodwill impairment. The new guidance eliminates the two-step process that required identification of potential impairment and a separate measure of the actual impairment. Goodwill impairment charges, if any, would be determined by reducing the goodwill balance by the difference between the carrying value and the reporting unit’s fair value (impairment loss is limited to the carrying value). This standard is effective for annual or any interim goodwill impairment tests beginning after December 15, 2019. The Company does not believe the adoption of this guidance will have a material impact on the Company’s consolidated financial statements

 

Statement of Cash Flows

In August 2016, the FASB issued ASU 2016-15, “Classification of Certain Cash Receipts and Cash Payments (Topic 230).” ASU 2016-15 addresses eight specific cash flow issues with the objective of reducing the existing diversity in practice for certain cash receipts and cash payments. The standard is effective for annual reporting periods beginning after December 15, 2017 and interim periods within those years (Q1 fiscal 2019 for AstroNova), with early adoption permitted. The Company does not believe the adoption of this guidance will have a material impact on the Company’s consolidated financial statements.

Revenue Recognition

In May 2014, the FASB issued ASU 2014-09, “Revenue from Contracts with Customers (Topic 606).” ASU 2014-09 completes the joint effort by the FASB and International Accounting Standards Board to improve financial reporting by creating common revenue recognition guidance for U.S. GAAP and International Financial Reporting Standards. ASU 2014-09 applies to all companies that enter into contracts with customers to transfer goods or services. In August 2015, the FASB modified ASU 2014-09 to be effective for annual reporting periods beginning after December 15, 2017 (Q1 fiscal 2019 for AstroNova), including interim periods within that reporting period. As modified, the FASB permits the adoption of the new revenue standard early, but not before annual periods beginning after December 15, 2016. Entities have the choice to apply ASU 2014-09 either retrospectively to each reporting period presented or by recognizing the cumulative effect of applying ASU 2014-09 at the date of initial application and not adjusting comparative information.

In March 2016, the FASB issued ASU 2016-08, “Revenue from Contracts with Customers (Topic 606)—Principal versus Agent Consideration.” In April 2016, the FASB issued ASU 2016-10, “Revenue from Contracts with Customers (Topic 606)—Identifying Performance Obligations and Licensing.” In May 2016, the FASB issued ASU 2016-11,“Revenue from Contracts with Customers (Topic 606) and Derivatives and Hedging (Topic 815)—Rescission of SEC Guidance Because of ASU 2014-09 and 2014-16” and ASU 2016-12, “Revenue from Contracts with Customers (Topic 606)—Narrow Scope Improvements and Practical Expedients.” All of these ASUs do not change the core principle of the guidance in Topic 606 (as amended by ASU 2014-09), but rather provide further guidance to improve the operability and understandability of the implementation guidance included in ASU 2014-09. The effective date for all of these ASUs is the same as the effective date of ASU 2014-09 as amended by ASU 2015-14, for annual reporting periods beginning after December 15, 2017, including interim periods within those years (Q1 fiscal 2019 for AstroNova). The Company is currently evaluating the impact and method of adopting this guidance and while we do not expect that the adoption of these ASUs will have a material impact on the Company’s consolidated financial statements, we do expect the adoption to result in a change in timing of recognizing expense for commission earned on the sales of extended service contracts. The Company has not yet decided on the method of adoption to be applied when this new guidance becomes effective.

Leases

In February 2016, the FASB issued ASU 2016-02, “Leases (Topic 842).” ASU 2016-02 supersedes current guidance related to accounting for leases and is intended to increase transparency and comparability among organizations by requiring lessees to recognize assets and liabilities in the balance sheet for operating leases with lease terms greater than twelve months. The update also requires improved disclosures to help users of financial statements better understand the amount, timing and uncertainty of cash flows arising from leases. ASU 2016-02 will be effective for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years (Q1 fiscal 2020 for AstroNova), with early adoption permitted. At adoption, this update will be applied using a modified retrospective approach. The Company is currently evaluating the effect of this new guidance on the Company’s consolidated financial statements.

Inventory

In July 2015, the FASB issued ASU 2015-11, “Inventory (Topic 330).” ASU 2015-11 requires inventory to be measured at the lower of cost and net realizable value instead of at lower of cost or market. This guidance does not apply to inventory that is measured using last-in, first out (LIFO) or the retail inventory method but applies to all other inventory, including inventory measured using first-in, first-out (FIFO) or the average cost method. ASU 2015-11 will be effective for fiscal years beginning after December 15, 2016, including interim periods within those fiscal years (Q1 fiscal 2018 for AstroNova) and should be applied prospectively. Our adoption of this guidance at the beginning of the first quarter of fiscal 2018 did not have a material effect on our consolidated financial statements.

No other new accounting pronouncements, issued or effective during the first six months of the current year, have had or are expected to have a material impact on our consolidated financial statements.

Acquisition (Tables) (TrojanLabel ApS [Member])

The US dollar purchase price of the acquisition has been allocated on the basis of fair value as follows:

 

(In thousands)       

Accounts Receivable

   $ 1,322  

Inventory

     796  

Other Current Assets

     166  

Property, Plant and Equipment

     15  

Identifiable Intangible Assets

     3,264  

Goodwill

     7,388  

Accounts Payable and Other Current Liabilities

     (1,821

Other Liability

     (114

Contingent Liability (Earnout)

     (1,314

Deferred Tax Liability

     (695
  

 

 

 

Total Purchase Price

   $ 9,007  
  

 

 

 

The following table reflects the fair value of the acquired identifiable intangible assets and related estimated useful lives:

 


(In thousands)

   Fair
Value
     Useful Life
(Years)
 

Existing Technology

   $ 2,327        7  

Non-Competition Agreement

     937        10  
  

 

 

    

Total

   $ 3,264     
  

 

 

    
Net Income Per Common Share (Tables)
Reconciliation of Shares Used in Calculating Basic and Diluted

A reconciliation of the shares used in calculating basic and diluted net income per share is as follows:

 

     Three Months Ended      Six Months Ended  
     July 29,
2017
     July 30,
2016
     July 29,
2017
     July 30,
2016
 

Weighted Average Common Shares Outstanding— Basic

     6,726,623        7,418,312        7,097,183        7,388,123  

Effect of Dilutive Options, Restricted Stock Awards and Restricted Stock Units

     111,213        168,300        121,238        172,022  
  

 

 

    

 

 

    

 

 

    

 

 

 

Weighted Average Common Shares Outstanding—Diluted

     6,837,836        7,586,612        7,218,421        7,560,145  
  

 

 

    

 

 

    

 

 

    

 

 

 

Intangible Assets (Tables)
Fair Value of Acquired Identifiable Intangible Assets and Related Estimated Useful Lives

Intangible assets are as follows:

 

     July 29, 2017      January 31, 2017  
(In thousands)    Gross
Carrying
Amount
     Accumulated
Amortization
    Currency
Translation
Adjustment
     Net
Carrying
Amount
     Gross
Carrying
Amount
     Accumulated
Amortization
    Net
Carrying
Amount
 

Miltope:

                  

Customer Contract Relationships

   $ 3,100      $ (1,273     —        $ 1,827      $ 3,100      $ (1,108   $ 1,992  

RITEC:

                  

Customer Contract Relationships

     2,830        (334     —          2,496        2,830        (207     2,623  

Non-Competition Agreement

     950        (396     —          554        950        (301     649  

TrojanLabel:

                  

Existing Technology

     2,327        (168     187        2,346        —          —         —    

Non-Competition Agreement

     937        (47     76        966        —          —         —    
  

 

 

    

 

 

   

 

 

    

 

 

    

 

 

    

 

 

   

 

 

 

Intangible Assets, net

   $ 10,144      $ (2,218     263      $ 8,189      $ 6,880      $ (1,616   $ 5,264  
  

 

 

    

 

 

   

 

 

    

 

 

    

 

 

    

 

 

   

 

 

 

 

Share-Based Compensation (Tables)

Share-based compensation expense was recognized as follows:

 

     Three Months Ended      Six Months Ended  
(In thousands)    July 29,
2017
     July 30,
2016
     July 29,
2017
     July 30,
2016
 

Stock Options

   $ 117      $ 87      $ 211      $ 168  

Restricted Stock Awards and Restricted Stock Units

     289        142        363        372  

Employee Stock Purchase Plan

     3        3        6        6  
  

 

 

    

 

 

    

 

 

    

 

 

 

Total

   $ 409      $ 232      $ 580      $ 546  
  

 

 

    

 

 

    

 

 

    

 

 

 

The fair value of stock options granted during the six months ended July 29, 2017 and July 30, 2016 was estimated using the following weighted average assumptions:

 

     Six Months Ended  
     July 29,
2017
    July 30,
2016
 

Risk Free Interest Rate

     1.7     1.4

Expected Volatility

     37.9     28.2

Expected Life (in years)

     8.0       5.0  

Expected Dividend Yield

     2.0     1.9

Aggregated information regarding stock options granted under the plans for the six months ended July 29, 2017, is summarized below:

 

     Number of
Options
     Weighted Average
Exercise Price
 

Outstanding at January 31, 2017

     685,456      $ 11.96  

Granted

     132,189        13.45  

Exercised

     (62,250      10.73  

Forfeited

     (7,325      14.17  

Canceled

     (24,600      11.76  
  

 

 

    

 

 

 

Outstanding at July 29, 2017

     723,470      $ 12.33  
  

 

 

    

 

 

 

Set forth below is a summary of options outstanding at July 29, 2017:

 

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

     174,831      $ 7.85        3.4        174,831      $ 7.85        3.4  

$10.01-15.00

     493,639      $ 13.61        7.9        262,600      $ 13.48        7.2  

$15.01-20.00

     55,000      $ 15.07        8.7        12,500      $ 15.01        8.6  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 
     723,470      $ 12.33        6.9        449,931      $ 11.33        5.7  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Aggregated information regarding RSUs and RSAs granted under the Plan for the three months ended July 29, 2017 is summarized below:

 

     RSAs & RSUs      Weighted Average
Grant Date Fair Value
 

Unvested at January 31, 2017

     213,868      $ 14.08  

Granted

     13,981        14.43  

Vested

     (37,692      14.07  

Forfeited

     (9,087      14.05  
  

 

 

    

 

 

 

Unvested at April 29, 2017

     181,070      $ 14.11  
  

 

 

    

 

 

 

Inventories (Tables)
Components of Inventories

Inventories are stated at the lower of cost (first-in, first-out) and net realizable value and include material, labor and manufacturing overhead. The components of inventories are as follows:

 

(In thousands)    July 29, 2017      January 31, 2017  

Materials and Supplies

   $ 11,884      $ 11,865  

Work-In-Process

     1,306        1,216  

Finished Goods

     11,542        10,270  
  

 

 

    

 

 

 
     24,732        23,351  

Inventory Reserve

     (4,463      (3,845
  

 

 

    

 

 

 
   $ 20,269      $ 19,506  
  

 

 

    

 

 

 
Income Taxes (Tables)
Projected Effective Tax Rate for Periods

The Company’s effective tax rates for the period, which are based on the projected effective tax rate for the full year, are as follows:

 

     Three Months Ended     Six Months Ended  

Fiscal 2018

     24.1     23.4

Fiscal 2017

     27.7     29.6

Debt (Tables)

Long-term debt in the accompanying condensed consolidated balance sheets is as follows:

 


(In thousands)

   July 29, 2017      January 31, 2017  

USD Term Loan with a rate equal to LIBOR plus a margin of 1.0% to 1.5%, (2.03% as of July 29, 2017), and maturity date of January 31, 2022

   $ 8,924      $ —    

Less:

     

Debt Issuance Costs, net of accumulated amortization

   $ (158    $ —    

Current Portion

   $ (1,564    $ —    
  

 

 

    

 

 

 

Long-Term Debt

   $ 7,202      $

The schedule of required principal payments remaining during the next five years on long-term debt outstanding as of July 29, 2017 is as follows:

 

(In thousands)       

Fiscal 2018

   $ 828  

Fiscal 2019

     1,472  

Fiscal 2020

     1,840  

Fiscal 2021

     2,208  

Fiscal 2022

     2,576  
  

 

 

 
   $ 8,924  
  

 

 

 

Derivative Financial Instruments and Risk Management (Tables)
Schedule of Impact of the Derivative Instrument in the Condensed Consolidated Financial Statements

The following table presents the impact of the derivative instrument in our condensed consolidated financial statements for the six months ended July 29, 2017 and July 30, 2016:

 

     Amount of Gain
(Loss)
Recognized in OCI
on
Derivative
(Effective Portion)
    

Location of Gain (Loss)

Reclassified from

Accumulated OCI into

Income (Effective Portion)

   Amount of Gain (Loss)
Reclassified from
Accumulated OCI into
Income (Effective Portion)
 

Cash Flow Hedge

(In thousands)

   July 29,
2017
    July 30,
2016
        July 29,
2017
    July 30,
2016
 

Swap contract

   $ (1,035   $ —        Other Income (Expense)    $ (953   $ —    
  

 

 

   

 

 

       

 

 

   

 

 

 

Segment Information (Tables)
Net Sales and Segment Operating Profit for Each Reporting Segment

Summarized below are the Revenue and Segment Operating Profit for each reporting segment:

 

     Three Months Ended      Six Months Ended  
     Revenue      Segment Operating Profit      Revenue      Segment Operating Profit  

(In thousands)

   July 29,
2017
     July 30,
2016
     July 29,
2017
     July 30,
2016
     July 29,
2017
     July 30,
2016
     July 29,
2017
    July 30,
2016
 

Product Identification

   $ 20,841      $ 17,628      $ 2,612      $ 2,632      $ 39,487      $ 34,234      $ 5,104     $ 4,628  

T&M

     6,642        7,711        657        1,141        12,454        15,215        728       2,343  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

   

 

 

 

Total

   $ 27,483      $ 25,339        3,269        3,773      $ 51,941      $ 49,449        5,832       6,971  
  

 

 

    

 

 

          

 

 

    

 

 

      

Corporate Expenses

           2,327        2,025              4,183       3,676  
        

 

 

    

 

 

          

 

 

   

 

 

 

Operating Income

           942        1,748              1,649       3,295  

Other Income (Expense), Net

           16        40              (33     (12
        

 

 

    

 

 

          

 

 

   

 

 

 

Income Before Income Taxes

           958        1,788              1,616       3,283  

Income Tax Provision

           231        496              378       972  
        

 

 

    

 

 

          

 

 

   

 

 

 

Net Income

         $ 727      $ 1,292            $ 1,238     $ 2,311  
Securities Available for Sale (Tables)
Fair Value, Amortized Cost and Gross Unrealized Gains and Losses of the Securities

The fair value, amortized cost and gross unrealized gains and losses of securities available for sale are as follows:

 

(In thousands)

July 29, 2017

   Amortized Cost      Gross Unrealized
Gains
     Gross Unrealized
Losses
     Fair Value  

State and Municipal Obligations

   $ 5,130      $ 2      $ (1    $ 5,131  
  

 

 

    

 

 

    

 

 

    

 

 

 

January 31, 2017

   Amortized Cost      Gross Unrealized
Gains
     Gross Unrealized
Losses
     Fair Value  

State and Municipal Obligations

   $ 6,732      $ —        $ (9    $ 6,723  
  

 

 

    

 

 

    

 

 

    

 

 

 

Fair Value (Tables)

The following tables provide a summary of the financial assets and liabilities that are measured at fair value as of July 29, 2017 and January 31, 2017:

 

Assets measured at fair value:

  Fair value measurement at
July 29, 2017
    Fair value measurement at
January 31, 2017
 
(in thousands)   Level 1     Level 2     Level 3     Total     Level 1     Level 2     Level 3     Total  

Money Market Funds (included in Cash and Cash Equivalents)

  $ 24     $ —       $ —       $ 24     $ 2     $ —       $ —       $ 2  

State and Municipal Obligations (included in Securities Available for Sale)

    —         5,131       —         5,131       —         6,723       —         6,723  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total assets

  $ 24     $ 5,131     $ —       $ 5,155     $ 2     $ 6,723     $ —       $ 6,725  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Liabilities measured at fair value:

  Fair value measurement at
July 29, 2017
    Fair value measurement at
January 31, 2017
 
(in thousands)   Level 1     Level 2     Level 3     Total     Level 1     Level 2     Level 3     Total  

Swap Contracts (included in Other Liabilities)

  $ —       $ 1,066     $ —       $ 1,066     $ —       $ —       $ —       $ —    

Earnout Liability (included in Other Liabilities)

    —         —         1,247       1,247       —         —         —         —    
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total liabilities

  $ —       $ 1,066     $ 1,247     $ 2,313     $ —       $ —       $ —       $ —    

As of July 29, 2017, the Company’s 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
July 29, 2017
        
(In thousands)    Level 1      Level 2      Level 3      Total      Carrying
Value
 

Long-Term debt and related current maturities

   $ —        $ —        $ 9,953      $ 9,953      $ 8,924  
Accumulated Other Comprehensive Loss (Tables)
Changes in Balance of Accumulated Other Comprehensive Loss

The changes in the balance of accumulated other comprehensive loss by component are as follows:

 

(In thousands)

  Foreign Currency
Translation
Adjustments
    Unrealized Holding
Gain/(Loss)
on Available for
Sale Securities
    Net
Unrealized
Gain (Losses)
on Cash Flow
Hedges
    Total  

Balance at January 31, 2017

  $ (1,048   $ (8   $ —       $ (1,056

Other Comprehensive Income (Loss) before reclassification

    318       7       (760     (435

Amounts reclassified from AOCI to Earnings

    —         —         704       704  
 

 

 

   

 

 

   

 

 

   

 

 

 

Other Comprehensive Income (Loss)

    318       7       (56     269  
 

 

 

   

 

 

   

 

 

   

 

 

 

Balance at July 29, 2017

  $ (730   $ (1   $ (56   $ (787
 

 

 

   

 

 

   

 

 

   

 

 

 
Overview - Additional Information (Detail)
6 Months Ended
Jul. 29, 2017
Segments
Organization, Consolidation and Presentation of Financial Statements [Abstract]
 
Number of operating segments
Acquisition - Additional Information (Detail)
0 Months Ended 6 Months Ended 0 Months Ended 6 Months Ended 6 Months Ended 12 Months Ended 0 Months Ended 0 Months Ended 0 Months Ended 0 Months Ended 6 Months Ended 0 Months Ended 6 Months Ended
Jul. 29, 2017
USD ($)
Jan. 31, 2017
USD ($)
Feb. 1, 2017
Contingent Consideration Liability [Member]
USD ($)
Jul. 29, 2017
Contingent Consideration Liability [Member]
USD ($)
Jul. 29, 2017
Intangible Assets [Member]
Jul. 29, 2017
Intangible Assets [Member]
Contingent Consideration Liability [Member]
Feb. 1, 2017
TrojanLabel ApS [Member]
USD ($)
Feb. 1, 2017
TrojanLabel ApS [Member]
DKK
Jul. 29, 2017
TrojanLabel ApS [Member]
USD ($)
Feb. 1, 2017
TrojanLabel ApS [Member]
USD ($)
Feb. 1, 2017
TrojanLabel ApS [Member]
DKK
Jul. 29, 2017
TrojanLabel ApS [Member]
General and Administrative Expense [Member]
USD ($)
Jan. 31, 2017
TrojanLabel ApS [Member]
General and Administrative Expense [Member]
USD ($)
Feb. 1, 2017
TrojanLabel ApS [Member]
Earn-Out Payments, if 80% of Specified Earnings Targets are Achieved [Member]
Feb. 1, 2017
TrojanLabel ApS [Member]
Earn-Out Payments, if 80% of Specified Earnings Targets are Achieved [Member]
USD ($)
Feb. 1, 2017
TrojanLabel ApS [Member]
Earn-Out Payments, if 80% of Specified Earnings Targets are Achieved [Member]
DKK
Feb. 1, 2017
TrojanLabel ApS [Member]
Earn-Out Payments, if 100% of Specified Earnings Targets are Achieved [Member]
Feb. 1, 2017
TrojanLabel ApS [Member]
Earn-Out Payments, if 100% of Specified Earnings Targets are Achieved [Member]
USD ($)
Feb. 1, 2017
TrojanLabel ApS [Member]
Earn-Out Payments, if 100% of Specified Earnings Targets are Achieved [Member]
DKK
Feb. 1, 2017
TrojanLabel ApS [Member]
Earn-Out Payments, if 120% of Specified Earnings Targets are Achieved [Member]
Feb. 1, 2017
TrojanLabel ApS [Member]
Earn-Out Payments, if 120% of Specified Earnings Targets are Achieved [Member]
USD ($)
Feb. 1, 2017
TrojanLabel ApS [Member]
Earn-Out Payments, if 120% of Specified Earnings Targets are Achieved [Member]
DKK
Feb. 1, 2017
Minimum [Member]
Contingent Consideration Liability [Member]
Jul. 29, 2017
Minimum [Member]
Contingent Consideration Liability [Member]
Jul. 29, 2017
Minimum [Member]
Intangible Assets [Member]
USD ($)
Feb. 1, 2017
Maximum [Member]
Contingent Consideration Liability [Member]
Jul. 29, 2017
Maximum [Member]
Contingent Consideration Liability [Member]
Jul. 29, 2017
Maximum [Member]
Intangible Assets [Member]
USD ($)
Business Acquisition [Line Items]
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Purchase price of acquisition
 
 
 
 
 
 
$ 9,100,000 
 62,900,000 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Purchase price of acquisition amount held in escrow
 
 
 
 
 
 
 
 
 
900,000 
6,400,000 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash acquired from acquisition
 
 
 
 
 
 
100,000 
976,000 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Minimum percentage required to entitle additional contingent consideration
 
 
 
 
 
 
 
 
 
 
 
 
 
80.00% 
 
 
100.00% 
 
 
120.00% 
 
 
 
 
 
 
 
 
Additional contingent consideration period
 
 
 
 
 
 
7 years 
7 years 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Business acquisition contingent consideration potential earn-out payments
 
 
 
 
 
 
 
 
 
 
 
 
 
 
5,000,000 
32,500,000 
 
5,800,000 
40,600,000 
 
7,000,000 
48,700,000 
 
 
 
 
 
 
General and administrative expense
 
 
 
 
 
 
 
 
700,000 
 
 
100,000 
600,000 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Percentage of revenue on existing technology
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
0.00% 
 
 
100.00% 
Internal rate of return
 
 
 
 
19.00% 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Fair value assumptions, Earnings projections
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
121,000 
 
 
1,070,000 
Fair value key assumptions
 
 
 
Key assumptions in estimating the fair value of the contingent consideration liability include (1) the estimated earnout targets over the next seven years of $407,000-$1,280,000, (2) the probability of success (achievement of the various contingent events) from 1.6%-87.2% and (3) a risk-adjusted discount rate of approximately 1.77%-3.35% used to adjust the probability-weighted earnout payments to their present value. 
Key assumptions in estimating the fair value of the intangibles include (1) remaining life of existing technology acquired based on estimate of percentage of revenue from 0% -100% for each product, (2) the Company's internal rate of return of 19.0% and (3) a range of earnings projections from $121,000-$1,070,000. 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Estimated target period
 
 
 
7 years 0 months 0 days 
 
7 years 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Estimated earnout targets
 
 
1,280,000 
1,300,000 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Estimated earnout targets
 
 
407,000 
400,000 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Probability of success
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
1.60% 
0.00% 
 
87.20% 
57.90% 
 
Fair value assumptions, risk-adjusted discount rate
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
1.77% 
1.67% 
 
3.35% 
3.22% 
 
Goodwill
$ 12,542,000 
$ 4,521,000 
 
 
 
 
 
 
 
$ 7,388,000 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Acquisition - Purchase Price of Acquisition Allocated on Basis of Fair Value (Detail) (USD $)
In Thousands, unless otherwise specified
Jul. 29, 2017
Jan. 31, 2017
Feb. 1, 2017
TrojanLabel ApS [Member]
Business Acquisition [Line Items]
 
 
 
Accounts Receivable
 
 
$ 1,322 
Inventory
 
 
796 
Other Current Assets
 
 
166 
Property, Plant and Equipment
 
 
15 
Identifiable Intangible Assets
 
 
3,264 
Goodwill
12,542 
4,521 
7,388 
Accounts Payable and Other Current Liabilities
 
 
(1,821)
Other Liability
 
 
(114)
Contingent Liability (Earnout)
 
 
(1,314)
Deferred Tax Liability
 
 
(695)
Total Purchase Price
 
 
$ 9,007 
Net Income Per Common Share - Reconciliation of Shares Used in Calculating Basic and Diluted (Detail)
3 Months Ended 6 Months Ended
Jul. 29, 2017
Jul. 30, 2016
Jul. 29, 2017
Jul. 30, 2016
Earnings Per Share [Abstract]
 
 
 
 
Weighted Average Common Shares Outstanding- Basic
6,726,623 
7,418,312 
7,097,183 
7,388,123 
Effect of Dilutive Options, Restricted Stock Awards and Restricted Stock Units
111,213 
168,300 
121,238 
172,022 
Weighted Average Common Shares Outstanding-Diluted
6,837,836 
7,586,612 
7,218,421 
7,560,145 
Net Income Per Common Share - Additional Information (Detail)
3 Months Ended 6 Months Ended
Jul. 29, 2017
Jul. 30, 2016
Jul. 29, 2017
Jul. 30, 2016
Earnings Per Share [Abstract]
 
 
 
 
Number of common equivalent shares
591,359 
413,121 
591,309 
468,121 
Intangible Assets - Additional Information (Detail) (USD $)
3 Months Ended 6 Months Ended
Jul. 29, 2017
Jul. 30, 2016
Jul. 29, 2017
Jul. 30, 2016
Impairment of Intangible Assets (Excluding Goodwill) [Abstract]
 
 
 
 
Impairments of intangible assets
$ 0 
$ 0 
$ 0 
$ 0 
Amortization expense
$ 304,000 
$ 179,000 
$ 603,000 
$ 358,000 
Share-Based Compensation - Additional Information (Detail) (USD $)
3 Months Ended 6 Months Ended 6 Months Ended 3 Months Ended 6 Months Ended 1 Months Ended 1 Months Ended 0 Months Ended 1 Months Ended 0 Months Ended 3 Months Ended 6 Months Ended 1 Months Ended 6 Months Ended 0 Months Ended 6 Months Ended 6 Months Ended 1 Months Ended
Jul. 29, 2017
Jul. 30, 2016
Jul. 29, 2017
Equity_Plan
Jul. 30, 2016
Apr. 29, 2017
Jul. 29, 2017
2015 Equity Incentive Plan [Member]
Jul. 29, 2017
Employee Stock Purchase Plan [Member]
Jul. 30, 2016
Employee Stock Purchase Plan [Member]
Jul. 29, 2017
Employee Stock Purchase Plan [Member]
Jul. 29, 2017
2007 Equity Incentive Plan [Member]
Jul. 29, 2017
Non-Employee Director [Member]
Jul. 29, 2017
Chairman of Board [Member]
Jul. 29, 2017
Chairs of Audit and Compensation Committees [Member]
Mar. 31, 2017
Chief Executive Officer [Member]
Mar. 31, 2016
Chief Executive Officer [Member]
Mar. 31, 2015
Chief Executive Officer [Member]
Jul. 29, 2017
Chief Executive Officer [Member]
2015 Equity Incentive Plan [Member]
Mar. 31, 2015
Other Key Employees [Member]
May 31, 2016
Certain Key Employees [Member]
Aug. 1, 2016
Chief Financial Officer [Member]
Apr. 29, 2017
Certain Other Key Employees [Member]
Feb. 28, 2017
Certain Other Key Employees [Member]
May 17, 2017
Equity Incentive Plan [Member]
Non-Employee Director [Member]
Jul. 29, 2017
Equity Incentive Plan [Member]
Non-Employee Director [Member]
Jul. 30, 2016
Equity Incentive Plan [Member]
Non-Employee Director [Member]
Jul. 29, 2017
Equity Incentive Plan [Member]
Non-Employee Director [Member]
Mar. 31, 2016
RSA [Member]
Chief Executive Officer [Member]
Mar. 31, 2015
RSA [Member]
Chief Executive Officer [Member]
Mar. 31, 2017
Restricted Stock And Stock Option [Member]
Installment
Jul. 29, 2017
Stock Options [Member]
Jul. 29, 2017
Stock Options [Member]
2015 Equity Incentive Plan [Member]
Feb. 1, 2014
2014 Restricted Stock Units (RSUs) [Member]
Jul. 29, 2017
2014 Restricted Stock Units (RSUs) [Member]
Apr. 30, 2016
2014 Restricted Stock Units (RSUs) [Member]
Apr. 30, 2016
2014 Restricted Stock Units (RSUs) [Member]
Third Anniversary [Member]
Jul. 29, 2017
2014 Restricted Stock Units (RSUs) [Member]
Officer [Member]
Jul. 29, 2017
2014 Restricted Stock Units (RSUs) [Member]
Officer [Member]
Net Sales Target [Member]
Jul. 29, 2017
2014 Restricted Stock Units (RSUs) [Member]
Officer [Member]
ORONA Target [Member]
Jul. 29, 2017
2014 Restricted Stock Units (RSUs) [Member]
Officer [Member]
Third Anniversary [Member]
May 31, 2015
Time Based RSUs [Member]
Installment
May 31, 2015
Performance Based RSUs [Member]
Apr. 29, 2017
Performance Based Restricted Stock Units RSUs [Member]
Apr. 30, 2016
Performance Based Restricted Stock Units RSUs [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Incentive plan, expiration period
 
 
 
 
 
2025-05 
 
 
 
2017-05 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Shares available for grant under the Plan
 
 
 
 
 
137,430 
 
 
 
 
 
 
 
 
 
 
500,000 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Number of equity incentive plan
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Number of shares outstanding
723,470 
 
723,470 
 
685,456 
 
 
 
 
581,310