ASTRONOVA, INC., 10-Q filed on 9/13/2016
Quarterly Report
Document and Entity Information
6 Months Ended
Jul. 30, 2016
Sep. 2, 2016
Document And Entity Information [Abstract]
 
 
Document Type
10-Q 
 
Amendment Flag
false 
 
Document Period End Date
Jul. 30, 2016 
 
Document Fiscal Year Focus
2017 
 
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
Smaller Reporting Company 
 
Entity Common Stock, Shares Outstanding
 
7,465,097 
Condensed Consolidated Balance Sheets (USD $)
In Thousands, unless otherwise specified
Jul. 30, 2016
Jan. 31, 2016
CURRENT ASSETS
 
 
Cash and Cash Equivalents
$ 14,900 
$ 10,043 
Securities Available for Sale
8,864 
10,376 
Accounts Receivable, net
15,228 
15,325 
Inventories
17,566 
14,890 
Line of Credit Receivable
140 
150 
Note Receivable
 
191 
Prepaid Expenses and Other Current Assets
1,827 
3,539 
Total Current Assets
58,525 
54,514 
PROPERTY, PLANT AND EQUIPMENT
40,125 
39,713 
Less Accumulated Depreciation
(30,822)
(29,906)
Property, Plant and Equipment, net
9,303 
9,807 
OTHER ASSETS
 
 
Intangible Assets, net
5,622 
5,980 
Goodwill
4,521 
4,521 
Deferred Tax Assets
2,798 
3,049 
Other
93 
92 
Total Other Assets
13,034 
13,642 
TOTAL ASSETS
80,862 
77,963 
CURRENT LIABILITIES
 
 
Accounts Payable
5,362 
3,192 
Accrued Compensation
2,445 
3,436 
Other Liabilities and Accrued Expenses
1,922 
2,209 
Deferred Revenue
490 
529 
Income Taxes Payable
265 
182 
Total Current Liabilities
10,484 
9,548 
Deferred Tax Liabilities
99 
78 
Other Long Term Liabilities
951 
964 
TOTAL LIABILITIES
11,534 
10,590 
SHAREHOLDERS' EQUITY
 
 
Common Stock, $0.05 Par Value, Authorized 13,000,000 shares; Issued 9,799,794 shares and 9,666,290 shares at July 30, 2016 and January 31, 2016, respectively
490 
483 
Additional Paid-in Capital
46,822 
45,675 
Retained Earnings
43,487 
42,212 
Treasury Stock, at Cost, 2,365,636 and 2,323,545 shares at July 30, 2016 and January 31, 2016, respectively
(20,637)
(20,022)
Accumulated Other Comprehensive Loss, net of tax
(834)
(975)
TOTAL SHAREHOLDERS' EQUITY
69,328 
67,373 
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY
$ 80,862 
$ 77,963 
Condensed Consolidated Balance Sheets (Parenthetical) (USD $)
Jul. 30, 2016
Jan. 31, 2016
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
9,799,794 
9,666,290 
Treasury Stock, Shares
2,365,636 
2,323,545 
Condensed Consolidated Statements of Income (USD $)
In Thousands, except Per Share data, unless otherwise specified
3 Months Ended 6 Months Ended
Jul. 30, 2016
Aug. 1, 2015
Jul. 30, 2016
Aug. 1, 2015
Income Statement [Abstract]
 
 
 
 
Net Sales
$ 25,339 
$ 23,938 
$ 49,449 
$ 46,144 
Cost of Sales
15,034 
14,092 
29,671 
27,268 
Gross Profit
10,305 
9,846 
19,778 
18,876 
Operating Expenses:
 
 
 
 
Selling and Marketing
4,777 
4,664 
9,608 
8,992 
Research and Development
1,755 
1,565 
3,199 
3,361 
General and Administrative
2,025 
1,783 
3,676 
3,241 
Operating Expenses
8,557 
8,012 
16,483 
15,594 
Operating Income, net
1,748 
1,834 
3,295 
3,282 
Other Income (Expense)
40 
21 
(12)
254 
Income before Income Taxes
1,788 
1,855 
3,283 
3,536 
Income Tax Provision
496 
687 
972 
1,158 
Net Income
$ 1,292 
$ 1,168 
$ 2,311 
$ 2,378 
Net Income per Common Share-Basic:
$ 0.17 
$ 0.16 
$ 0.31 
$ 0.33 
Net Income per Common Share-Diluted:
$ 0.17 
$ 0.16 
$ 0.31 
$ 0.32 
Weighted Average Number of Common Shares Outstanding:
 
 
 
 
Basic
7,418 
7,278 
7,388 
7,269 
Diluted
7,587 
7,469 
7,560 
7,459 
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. 30, 2016
Aug. 1, 2015
Jul. 30, 2016
Aug. 1, 2015
Statement of Comprehensive Income [Abstract]
 
 
 
 
Net Income
$ 1,292 
$ 1,168 
$ 2,311 
$ 2,378 
Other Comprehensive Income (Loss), Net of Taxes and Reclassification Adjustments:
 
 
 
 
Foreign Currency Translation Adjustments
(193)
(122)
134 
(113)
Unrealized Holding Gain (Loss) on Securities Available for Sale
(15)
Other Comprehensive Income (Loss)
(184)
(118)
141 
(128)
Comprehensive Income
$ 1,108 
$ 1,050 
$ 2,452 
$ 2,250 
Condensed Consolidated Statements of Cash Flows (USD $)
In Thousands, unless otherwise specified
6 Months Ended
Jul. 30, 2016
Aug. 1, 2015
Cash Flows from Operating Activities:
 
 
Net Income
$ 2,311 
$ 2,378 
Adjustments to Reconcile Net Income to Net Cash Provided by Operating Activities:
 
 
Depreciation and Amortization
1,255 
946 
Share-Based Compensation
546 
444 
Deferred Income Tax Provision (Benefit)
270 
(18)
Changes in Assets and Liabilities, net of acquisition:
 
 
Accounts Receivable
127 
(1,067)
Inventories
(2,656)
1,646 
Income Taxes
400 
863 
Accounts Payable and Accrued Expenses
995 
(842)
Other
1,135 
(191)
Net Cash Provided by Operating Activities
4,383 
4,159 
Cash Flows from Investing Activities:
 
 
Proceeds from Sales/Maturities of Securities Available for Sale
1,921 
5,003 
Purchases of Securities Available for Sale
(400)
(3,127)
Acquisition of RITEC's Ruggedized Printer Business
 
(7,360)
Payments Received on Line of Credit and Note Receivable
188 
208 
Additions to Property, Plant and Equipment
(377)
(1,291)
Net Cash Provided (Used) by Investing Activities
1,332 
(6,567)
Cash Flows from Financing Activities:
 
 
Proceeds (Use) from Common Shares Issued Under Employee Benefit Plans and Employee Stock Option Plans, Net of Payment of Minimum Tax Withholdings
(7)
197 
Dividends Paid
(1,036)
(1,022)
Net Cash Used by Financing Activities
(1,043)
(825)
Effect of Exchange Rate Changes on Cash and Cash Equivalents
185 
331 
Net Increase (Decrease) in Cash and Cash Equivalents
4,857 
(2,902)
Cash and Cash Equivalents, Beginning of Period
10,043 
7,958 
Cash and Cash Equivalents, End of Period
14,900 
5,056 
Supplemental Disclosures of Cash Flow Information:
 
 
Cash Paid During the Period for Income Taxes, Net of Refunds
$ 314 
$ 264 
Overview
Overview

(1) Overview

On September 25, 2015, Astro-Med, Inc. announced it would immediately begin doing business as AstroNova on a worldwide basis. The name change is part of the plan to modernize the Company and effectively communicate our strategy. The AstroNova name and brand emphasizes our traditional strengths in aerospace and acknowledges our expanding presence in test & measurement, product identification and other new areas where we can apply our data visualization technology. On May 18, 2016, the name change was formally approved by the Company’s shareholders, and the Company’s Restated Articles of Incorporation were amended to officially change the Company’s name to AstroNova, Inc. The Company’s common stock trades on the NASDAQ Global Market stock exchange under its new name, AstroNova, Inc., using the ticker symbol, ALOT.

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 used 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 (previously known as our QuickLabel segment), which includes products sold under the QuickLabel® brand name, and Test & Measurement which includes products sold under the AstroNova™ brand name.

Products sold under the QuickLabel brand 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 printers for use in airborne applications.

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, 2016.

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’s 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 June 19, 2015, the Company completed the acquisition of the aerospace printer product line for civil and commercial aircraft from Rugged Information Technology Equipment Corporation (RITEC) under the terms of an Asset Purchase Agreement dated June 18, 2015. The products of RITEC consist of aerospace printers for use in commercial aircraft sold primarily to aircraft manufacturers, tier one contractors and directly to airlines around the world. AstroNova’s aerospace printer product line is part of the Test & Measurement (T&M) product group and is reported as part of the T&M segment. The Company began shipment of the RITEC products in the third quarter of fiscal 2016.

The purchase price of the acquisition was $7,360,000 which was funded using available cash and investment securities. Of the $7,360,000 purchase price, $750,000 was being held in escrow for twelve months following the acquisition date to support an indemnity to the Company in the event of any breach in the representations, warranties or covenants of RITEC. During this year’s fiscal second quarter, the Company recovered $99,000 of the escrow amount which was recorded as other income in the condensed consolidated statements of income for the three and six months period ended July 30, 2016.

The assets acquired from RITEC consist principally of accounts receivable and certain intangible assets. Acquisition related costs of approximately $109,000 were included in the general and administrative expenses in the Company’s consolidated statements of income for fiscal year ended January 31, 2016. The acquisition was accounted for under the acquisition method in accordance with the guidance provided by FASB ASC 805, “Business Combinations.”

AstroNova also entered into a Transition Services Agreement, under which RITEC will provide transition services and continue to manufacture products in the acquired product line until the Company transitions the manufacturing to its West Warwick, Rhode Island facility, which the Company anticipates will be completed by the third quarter of fiscal 2017. Upon expiration of the Transition Services Agreement, AstroNova will purchase any inventory held by RITEC at its book value (net of reserves), which the Company estimates will be approximately $200,000.

Also as part of the Asset Purchase Agreement, we entered into a 5-year License Agreement, which grants RITEC certain rights to use the intellectual property acquired by the Company in the design, development, marketing, manufacture, sale and servicing of aerospace printers for aircraft sold to the military end-user market and printers sold to other non-aircraft market segments. RITEC will pay royalties equal to 7.5% of the selling price on all products sold into the military end-user aircraft market during the License Agreement period.

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

 

(In thousands)       

Accounts Receivable

   $ 50   

Identifiable Intangible Assets

     3,780   

Goodwill

     3,530   
  

 

 

 

Total Purchase Price

   $ 7,360   
  

 

 

 

The fair value of the intangible assets acquired was estimated by applying the income approach. This fair value measurement is based on significant inputs that are not observable in the market and therefore, represent a Level 3 measurement as defined in ASC 820, “Fair Value Measurement and Disclosure,” which requires management judgment due to the absence of quoted market prices. Key assumptions include (1) a weighted average cost of capital of 15.5%; (2) a range of earnings projections from $110,000-$700,000 and (3) a range of contract renewal probability from 30%-100%.

Goodwill of $3,530,000, which is 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 from RITEC. The carrying amount of the goodwill was allocated to the T&M 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)
 

Customer Contract Relationships

   $ 2,830         10   

Non-Competition Agreement

     950         5   
  

 

 

    

Total

   $ 3,780      
  

 

 

    

Assuming the acquisition of RITEC occurred on February 1, 2015, the impact on net sales, net income and earnings per share would not have been material to the Company for the period ended August 1, 2015.

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 30,
2016
     August 1,
2015
     July 30,
2016
     August 1,
2015
 

Weighted Average Common Shares Outstanding—Basic

     7,418,312         7,278,329         7,388,123         7,268,745   

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

     168,300         190,934         172,022         190,676   
  

 

 

    

 

 

    

 

 

    

 

 

 

Weighted Average Common Shares Outstanding—Diluted

     7,586,612         7,469,263         7,560,145         7,459,421   
  

 

 

    

 

 

    

 

 

    

 

 

 

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. For the three and six months ended August 1, 2015 the diluted per share amounts do not reflect common equivalent shares outstanding of 424,100. 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 30, 2016      January 31, 2016  
(In thousands)    Gross
Carrying
Amount
     Accumulated
Amortization
    Net
Carrying
Amount
     Gross
Carrying
Amount
     Accumulated
Amortization
    Net
Carrying
Amount
 

Miltope:

               

Customer Contract Relationships

   $ 3,100       $ (933   $ 2,167       $ 3,100       $ (758   $ 2,342   

RITEC:

               

Customer Contract Relationships

     2,830         (119     2,711         2,830         (31     2,799   

Non-Competition Agreement

     950         (206     744         950         (111     839   
  

 

 

    

 

 

   

 

 

    

 

 

    

 

 

   

 

 

 

Intangible Assets, net

   $ 6,880       $ (1,258   $ 5,622       $ 6,880       $ (900   $ 5,980   
  

 

 

    

 

 

   

 

 

    

 

 

    

 

 

   

 

 

 

There were no impairments to intangible assets during the three or six months ended July 30, 2016 and August 1, 2015. Amortization expense of $179,000 and $105,000 related to the above acquired intangibles has been included in the condensed consolidated statement of income for the three months ended July 30, 2016 and August 1, 2015, respectively. Amortization expense of $358,000 and $194,000 related to the above acquired intangibles has been included in the condensed consolidated statement of income for the six months ended July 30, 2016 and August 1, 2015, respectively.

Estimated amortization expense for the next five years is as follows:

 

(In thousands)        2017            2018            2019            2020            2021      

Estimated amortization expense

   $715    $774    $769    $803    $ 706   

Share-Based Compensation
Share-Based Compensation

(7) Share-Based Compensation

AstroNova has two equity incentive plans – the 2007 Equity Incentive Plan (the “2007 Plan”) and the 2015 Equity Incentive Plan (the “2015 Plan”). Under these plans, 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. At July 30, 2016, 84,813 shares were available for grant under the 2007 Plan, of which 50,000 are reserved for stock options that the Company is obligated to issue to its CEO in fiscal 2018 pursuant to an Equity Incentive Award Agreement dated as of November 24, 2014 (the “CEO Equity Incentive Agreement”). The 2007 Plan will expire in May 2017. The 2015 Plan authorizes the issuance of up to 500,000 shares (subject to adjustment for stock dividends and stock splits) and at July 30, 2016, 159,738 shares were available for grant under the 2015 Plan. The 2015 Plan will expire in May 2025. Options granted to date to employees under both plans 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, any incentive stock options granted under the 2007 Plan, and 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.

 

Under the plans, 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 succeeding annual shareholders’ meeting. Accordingly, on May 18, 2016, 30,000 options were issued to the non-employee directors.

In addition to the plans, the Company has a Non-Employee Director Annual Compensation Program (the “Program”). Prior to August 1, 2016, this program provided that each non-employee director be entitled to an annual cash retainer of $7,000 (the “Annual Cash Retainer”), plus $500 for each Board and committee meeting attended. In addition, the Chairman of the Board received an annual retainer of $6,000, and the Chairs of the Audit and Compensation Committees each received an annual retainer of $4,000 (“Chair Retainer”). The non-employee directors could elect, for any fiscal year, to receive all or a portion of the Annual Cash Retainer and/or Chair Retainer (collectively the “Cash Retainer”) in the form of common stock of the Company, which was issued under one of the Plans. If a non-employee director elected to receive all or a portion of the Cash Retainer in the form of common stock, such shares were issued in four quarterly installments on the first day of each fiscal quarter, and the number of shares of common stock issued was based on the fair market value of the Company’s common stock on the date such installment was payable. The common stock received in lieu of such Cash Retainer was fully vested upon issuance. However, a non-employee director who received common stock in lieu of all or a portion of the Cash Retainer could not sell, transfer, assign, pledge or otherwise encumber the common stock prior to the first anniversary of the date on which such shares were issued. In the event of the death or disability of a non-employee director, or a change in control of the Company, any shares of common stock issued in lieu of the Cash Retainer would no longer be subject to such restrictions on transfer. During the first and second quarter of fiscal 2017, 567 and 601 shares were awarded to non-employee directors in lieu of the Cash Retainer. In addition, under the Program, each non-employee director received RSAs with a value equal to $20,000 (the “Equity Retainer”) upon the adjournment of each annual shareholders’ meeting. The Equity Retainer vests on the earlier of 12 months after the grant date or the date immediately prior to the next annual meeting of the shareholders following the meeting at which such RSAs were granted. However, a non-employee director could not sell, transfer, assign, pledge or otherwise encumber the vested common stock prior to the second anniversary of the vesting date. In the event of the death or disability of a non-employee director, or a change in control of the Company, the RSAs would immediately vest and would no longer be subject to such restrictions on transfer. During the second quarter of fiscal 2017, 8,262 shares were awarded as the Equity Retainer to the non-employee directors.

Effective August 1, 2016, the Non-Employee Director Annual Compensation Program was amended. Under the amended Program, and commencing on the first business day of the third fiscal quarter of fiscal 2017, each non-employee director will receive an automatic grant of RSAs on the first business day of each fiscal quarter. 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 is $55,000 for the remainder of fiscal year 2017, $65,000 for fiscal 2018, and $75,000 for fiscal 2019. 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 pursuant to the amended Program become fully vested on the first anniversary of the date of grant.

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 sales 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. 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 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.

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. The options and RSAs vest in four equal annual installments commencing on the first anniversary of the grant date.

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 net sales, if any, achieved each fiscal year relative to a three-year net sales increase goal. Performance-based 2016 RSUs that are earned based on organic revenue growth will be fully vested when earned, while those earned based on revenue growth via acquisitions will 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 2016, 15,810 of the performance based 2016 RSUs were earned in the first quarter of fiscal 2017.

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. The options and RSAs vest in four equal annual installments commencing on the first anniversary of the grant date.

In May 2016, the Company granted 37,000 options to certain key employees. The options vest in four equal installments commencing on the first anniversary of the grant date.

We account for compensation cost related to share-based payments based on the estimated fair value of the award. We have estimated the fair value of each option on the date of grant using the Black-Scholes option-pricing model. Our estimate requires a number of complex and subjective assumptions including our stock price volatility, employee exercise patterns (expected life of the options), the risk-free interest rate and the Company’s dividend yield. The stock price volatility assumption is based on the historical weekly price data of our common stock over a period equivalent to the weighted average expected life of our options. Management evaluated whether there were factors during that period which were unusual and would distort the volatility figure if used to estimate future volatility and concluded that there were no such factors. In determining the expected life of the option grants, the Company has observed the actual terms of prior grants with similar characteristics and the actual vesting schedule of the grant and has assessed the expected risk tolerance of different option groups. The risk-free interest rate is based on the actual U.S. Treasury zero coupon rate for bonds matching the expected term of the option as of the option grant date. The dividend assumption is based upon the prior year’s average dividend yield. Our accounting for share-based compensation for RSUs and RSAs is also based on the fair value method. The fair value of the RSUs and RSAs is based on the closing market price of the Company’s common stock on the date of grant. Reductions in compensation expense associated with forfeited awards are estimated at the date of grant, and this estimated forfeiture rate is adjusted periodically based on actual forfeiture experience.

Share-based compensation expense was recognized as follows:

 

     Three Months Ended      Six Months Ended  
(In thousands)    July 30,
2016
     August 1,
2015
     July 30,
2016
     August 1,
2015
 

Stock Options

   $ 87       $ 70       $ 168       $ 144   

Restricted Stock Awards and Restricted Stock Units

     142         228         372         296   

Employee Stock Purchase Plan

     3         3         6         4   
  

 

 

    

 

 

    

 

 

    

 

 

 

Total

   $ 232       $ 301       $ 546       $ 444   
  

 

 

    

 

 

    

 

 

    

 

 

 

Stock Options

The fair value of stock options granted during the six months ended July 30, 2016 and August 1, 2015 was estimated using the following weighted average assumptions:

 

     Six Months Ended  
     July 30,
2016
    August 1,
2015
 

Risk Free Interest Rate

     1.4     1.6

Expected Volatility

     28.2     22.7

Expected Life (in years)

     5.0        5.0   

Dividend Yield

     1.9     2.0

 

The weighted average fair value per share for options granted was $2.86 and $3.46 during the first and second quarters of fiscal 2017, respectively, compared to $2.43 and $2.44 during the first and second quarters of fiscal 2016.

Aggregated information regarding stock options granted under the plans for the six months ended July 30, 2016 is summarized below:

 

    Number of Options     Weighted Average
Exercise Price
    Weighted Average
Remaining
Contractual Life
(in Years)
    Aggregate Intrinsic
Value
 

Outstanding at January 31, 2016

    657,936      $ 11.00        6.1      $ 3,083,000   

Granted

    117,000        14.79       

Exercised

    (67,757     8.43       

Forfeited

    (975     13.71       

Canceled

    (3,023     8.98       
 

 

 

   

 

 

     

Outstanding at July 30, 2016

    703,181      $ 11.88        6.5      $ 2,807,040   
 

 

 

   

 

 

   

 

 

   

 

 

 

Exercisable at July 30, 2016

    437,606      $ 10.64        5.1      $ 2,298,670   
 

 

 

   

 

 

   

 

 

   

 

 

 

As of July 30, 2016, there was approximately $629,000 of unrecognized compensation expense related to stock options which is expected to be recognized over a weighted average period of approximately 2.5 years.

 

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

Aggregated information regarding RSUs and RSAs granted under the Plan for the six months ended July 30, 2016 is summarized below:

 

     RSAs & RSUs      Weighted Average
Grant Date Fair Value
 

Unvested at January 31, 2016

     293,088       $ 13.28   

Granted

     13,460         14.70   

Vested

     (62,632      12.88   

Forfeited

     (18,600      10.07   
  

 

 

    

 

 

 

Unvested at July 30, 2016

     225,316       $ 13.75   
  

 

 

    

 

 

 

As of July 30, 2016, there was approximately $1,104,000 of unrecognized compensation expense related to RSUs and RSAs which is expected to be recognized over a weighted average period of 2.4 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 originally reserved for issuance under this plan. During the quarters ended July 30, 2016 and August 1, 2015, there were 1,507 and 1,293 shares, respectively, purchased under this plan. As of July 30, 2016, 48,486 shares remain available.

Inventories
Inventories

(8) Inventories

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

 

(In thousands)    July 30, 2016      January 31, 2016  

Materials and Supplies

   $ 11,993       $ 10,197   

Work-In-Process

     1,063         1,025   

Finished Goods

     9,000         7,491   
  

 

 

    

 

 

 
     22,056         18,713   

Inventory Reserve

     (4,490      (3,823
  

 

 

    

 

 

 
   $ 17,566       $ 14,890   
  

 

 

    

 

 

 
Income Taxes
Income Taxes

(9) 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 2017

     27.7     29.6

Fiscal 2016

     37.0     32.7

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 three months ended August 1, 2015, the Company recognized income tax expense of $687,000.

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. During the six months ended August 1, 2015, the Company recognized income tax expense of $1,158,000. The effective tax rate in this period was directly impacted by a $135,000 tax benefit related to the statute of limitations expiring on a previously uncertain tax position.

 

As of July 30, 2016, the Company’s cumulative unrecognized tax benefits totaled $578,000 compared to $591,000 as of January 31, 2016. There were no other developments affecting unrecognized tax benefits during the quarter ended July 30, 2016.

Note Receivable and Line of Credit Issued
Note Receivable and Line of Credit Issued

(10) Note Receivable and Line of Credit Issued

On January 30, 2012, the Company completed the sale of its label manufacturing operations in Asheboro, North Carolina to Label Line Ltd. The net sale price of $1,000,000 was received in the form of a promissory note issued by Label Line Ltd. which was secured by a first lien on various collateral, including the Asheboro plant and plant assets. The note bears interest at 3.75% and was payable in sixteen quarterly installments of principal and interest which commenced on January 30, 2013. In February 2016, the balance remaining on this note was paid in full.

The terms of the Asheboro sale also included an agreement for AstroNova to provide Label Line Ltd. with additional financing in the form of a revolving line of credit in the amount of $600,000. This line of credit is secured by a first lien on various collateral of Label Line Ltd., including the Asheboro plant and plant assets, and bears interest at a rate equal to the United States prime rate plus an additional margin of two percent on the outstanding credit balance. The term of this revolving line of credit has been extended through January 31, 2017. As of July 30, 2016, $140,000 remains outstanding on this revolving line of credit.

Segment Information
Segment Information

(11) Segment Information

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

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

 

     Three Months Ended      Six Months Ended  
     Net Sales      Segment Operating Profit      Net Sales      Segment Operating Profit  

(In thousands)

   July 30,
2016
     August 1,
2015
     July 30,
2016
     August 1,
2015
     July 30,
2016
     August 1,
2015
     July 30,
2016
    August 1,
2015
 

Product Identification

   $ 17,628       $ 17,100       $ 2,632       $ 2,720       $ 34,234       $ 32,744       $ 4,628      $ 4,698   

T&M

     7,711         6,838         1,141         897         15,215         13,400         2,343        1,825   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

   

 

 

 

Total

   $ 25,339       $ 23,938         3,773         3,617       $ 49,449       $ 46,144         6,971        6,523   
  

 

 

    

 

 

          

 

 

    

 

 

      

Corporate Expenses

           2,025         1,783               3,676        3,241   
        

 

 

    

 

 

          

 

 

   

 

 

 

Operating Income

           1,748         1,834               3,295        3,282   

Other Income (Expense)—Net

           40         21               (12     254   
        

 

 

    

 

 

          

 

 

   

 

 

 

Income Before Income Taxes

           1,788         1,855               3,283        3,536   

Income Tax Provision

           496         687               972        1,158   
        

 

 

    

 

 

          

 

 

   

 

 

 

Net Income

         $ 1,292       $ 1,168             $ 2,311      $ 2,378   
        

 

 

    

 

 

          

 

 

   

 

 

 
Recent Accounting Pronouncements
Recent Accounting Pronouncements

(12) Recent Accounting Pronouncements

Revenue Recognition

In May 2014, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (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. The Company is currently evaluating the requirements of these ASUs along with ASU 2014-09 and has not yet determined its impact on the Company’s consolidated financial statements.

Share-Based Compensation

In March 2016, the FASB issued ASU 2016-09, “Compensation – Stock Compensation (Topic 718) – Improvements to Employee Share-Based Payment Accounting.” ASU 2016-09 simplifies several aspects of the accounting for share-based payment transactions, including the income tax consequences, classification of awards as either equity or liabilities, and classification on the statement of cash flows. For public entities, ASU 2016-09 is effective for annual periods beginning after December 15, 2016, and interim periods within those annual periods (Q1 fiscal 2018 for AstroNova). As permitted by ASU 2016-09, we adopted this guidance prospectively in fiscal 2017. The adoption of this guidance did not have a material effect on the Company’s consolidated financial statements.

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. Early adoption is permitted as of the beginning of an interim or annual reporting period. AstroNova is currently evaluating the effect of this new guidance on the Company’s consolidated financial statements.

No other new accounting pronouncements, issued or effective during the second quarter 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

(13) 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 31 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 30, 2016

   Amortized Cost      Gross Unrealized
Gains
     Gross Unrealized
Losses
    Fair Value  

State and Municipal Obligations

   $ 8,842       $ 22       $ —        $ 8,864   
  

 

 

    

 

 

    

 

 

   

 

 

 

January 31, 2016

   Amortized Cost      Gross Unrealized
Gains
     Gross Unrealized
Losses
    Fair Value  

State and Municipal Obligations

   $ 10,363       $ 15       $ (2   $ 10,376   
  

 

 

    

 

 

    

 

 

   

 

 

 
Fair Value
Fair Value

(14) Fair Value

We measure our financial 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 measured at fair value on a recurring basis are summarized below:

 

(In thousands)

July 30, 2016

   Level 1      Level 2      Level 3      Total  

Money Market Funds (included in Cash and Cash Equivalents)

   $   5,910       $ —         $     —         $ 5,910   

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

     —           8,864         —           8,864   
  

 

 

    

 

 

    

 

 

    

 

 

 

Total

   $ 5,910       $ 8,864       $ —         $ 14,774   
  

 

 

    

 

 

    

 

 

    

 

 

 

January 31, 2016

   Level 1      Level 2      Level 3      Total  

Money Market Funds (included in Cash and Cash Equivalents)

   $ 4,340       $ —         $ —         $ 4,340   

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

     —           10,376         —           10,376   
  

 

 

    

 

 

    

 

 

    

 

 

 

Total

   $ 4,340       $ 10,376       $ —         $ 14,716   
  

 

 

    

 

 

    

 

 

    

 

 

 

For our money market funds and state 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.

Accumulated Other Comprehensive Loss
Accumulated Other Comprehensive Loss

(15) 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
on Available for Sale
Securities
     Total  

Balance at January 31, 2016

   $ (983    $ 8       $ (975

Other Comprehensive Income

     134         7         141   
  

 

 

    

 

 

    

 

 

 

Balance at July 30, 2016

   $ (849    $ 15       $ (834
  

 

 

    

 

 

    

 

 

 

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

Commitments and Contingencies
Commitments and Contingencies

(16) Commitments and Contingencies

Product Replacement Program

In April 2013, tests conducted by the Company revealed that one of its suppliers had been using a non-conforming part in power supplies for certain models of AstroNova’s Test & Measurement printers. No malfunctions have been reported by customers as a result of the non-conforming material.

Upon identifying this issue, AstroNova immediately suspended production of the printers, notified all customers and contacted the supplier who confirmed the problem. AstroNova is continuing to work with its customers to replace the non-conforming material on existing printers with conforming material. The estimated costs associated with the replacement program were $672,000, which was based upon the number of printers shipped during the period the non-conforming material was used. Those estimated costs were recognized and recorded as a reserve in the first quarter of fiscal 2014. Since fiscal 2014, the Company has expended a total of $411,000 in replacement costs which have been charged against this reserve. The remaining reserve amount of $261,000 is included in other accrued expenses in the accompanying condensed consolidated balance sheet at July 30, 2016.

Since the supplier deviated from the agreed upon specifications for the power supply while providing certificates of conformance to the original specifications, in January 2014, AstroNova received a non-refundable $450,000 settlement from the supplier for recovery of the costs and expense associated with this issue. In addition to this cash settlement, the Company had received lower product prices from the supplier through the first quarter of fiscal 2017.

Line of Credit
Line of Credit

(17) Line of Credit

The Company has a $10 million revolving line of credit available for ongoing working capital requirements, business acquisitions or general corporate purposes as needed. This line of credit is scheduled to expire on August 30, 2017. Any borrowings made under this line of credit bear interest at either a fluctuating base rate equal to the highest of (i) the Prime Rate, (ii) 1.50% above the daily one month LIBOR, and (iii) the Federal Funds Rate in effect plus 1.50% or at a fixed rate of LIBOR plus an agreed upon margin of between 0% and 2.25%, based on the Company’s funded debt to EBITDA ratio as defined in the agreement. In addition, the agreement provides for two financial covenant requirements, namely, Total Funded Debt to Adjusted EBITDA (as defined) of not greater than 3 to 1 and a Fixed Charge Coverage Ratio (as defined) of not less than 1.25 to 1, both measured at the end of each quarter on a rolling four quarter basis. As of July 30, 2016, there have been no borrowings against this line of credit and the Company was in compliance with its financial covenants.

Recent Accounting Pronouncements (Policies)
Recent Accounting Pronouncements

Recent Accounting Pronouncements

Revenue Recognition

In May 2014, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (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. The Company is currently evaluating the requirements of these ASUs along with ASU 2014-09 and has not yet determined its impact on the Company’s consolidated financial statements.

Share-Based Compensation

In March 2016, the FASB issued ASU 2016-09, “Compensation – Stock Compensation (Topic 718) – Improvements to Employee Share-Based Payment Accounting.” ASU 2016-09 simplifies several aspects of the accounting for share-based payment transactions, including the income tax consequences, classification of awards as either equity or liabilities, and classification on the statement of cash flows. For public entities, ASU 2016-09 is effective for annual periods beginning after December 15, 2016, and interim periods within those annual periods (Q1 fiscal 2018 for AstroNova). As permitted by ASU 2016-09, we adopted this guidance prospectively in fiscal 2017. The adoption of this guidance did not have a material effect on the Company’s consolidated financial statements.

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. Early adoption is permitted as of the beginning of an interim or annual reporting period. AstroNova is currently evaluating the effect of this new guidance on the Company’s consolidated financial statements.

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

Acquisition (Tables) (RITEC [Member])

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

 

(In thousands)       

Accounts Receivable

   $ 50   

Identifiable Intangible Assets

     3,780   

Goodwill

     3,530   
  

 

 

 

Total Purchase Price

   $ 7,360   
  

 

 

 

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)
 

Customer Contract Relationships

   $ 2,830         10   

Non-Competition Agreement

     950         5   
  

 

 

    

Total

   $ 3,780      
  

 

 

    
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 30,
2016
     August 1,
2015
     July 30,
2016
     August 1,
2015
 

Weighted Average Common Shares Outstanding—Basic

     7,418,312         7,278,329         7,388,123         7,268,745   

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

     168,300         190,934         172,022         190,676   
  

 

 

    

 

 

    

 

 

    

 

 

 

Weighted Average Common Shares Outstanding—Diluted

     7,586,612         7,469,263         7,560,145         7,459,421   
  

 

 

    

 

 

    

 

 

    

 

 

 
Intangible Assets (Tables)

Intangible assets are as follows:

 

     July 30, 2016      January 31, 2016  
(In thousands)    Gross
Carrying
Amount
     Accumulated
Amortization
    Net
Carrying
Amount
     Gross
Carrying
Amount
     Accumulated
Amortization
    Net
Carrying
Amount
 

Miltope:

               

Customer Contract Relationships

   $ 3,100       $ (933   $ 2,167       $ 3,100       $ (758   $ 2,342   

RITEC:

               

Customer Contract Relationships

     2,830         (119     2,711         2,830         (31     2,799   

Non-Competition Agreement

     950         (206     744         950         (111     839   
  

 

 

    

 

 

   

 

 

    

 

 

    

 

 

   

 

 

 

Intangible Assets, net

   $ 6,880       $ (1,258   $ 5,622       $ 6,880       $ (900   $ 5,980   
  

 

 

    

 

 

   

 

 

    

 

 

    

 

 

   

 

 

 

Estimated amortization expense for the next five years is as follows:

 


(In thousands)        2017            2018            2019            2020            2021      

Estimated amortization expense

   $715    $774    $769    $803    $ 706
Share-Based Compensation (Tables)

Share-based compensation expense was recognized as follows:

 

     Three Months Ended      Six Months Ended  
(In thousands)    July 30,
2016
     August 1,
2015
     July 30,
2016
     August 1,
2015
 

Stock Options

   $ 87       $ 70       $ 168       $ 144   

Restricted Stock Awards and Restricted Stock Units

     142         228         372         296   

Employee Stock Purchase Plan

     3         3         6         4   
  

 

 

    

 

 

    

 

 

    

 

 

 

Total

   $ 232       $ 301       $ 546       $ 444   
  

 

 

    

 

 

    

 

 

    

 

 

 

The fair value of stock options granted during the six months ended July 30, 2016 and August 1, 2015 was estimated using the following weighted average assumptions:

 

     Six Months Ended  
     July 30,
2016
    August 1,
2015
 

Risk Free Interest Rate

     1.4     1.6

Expected Volatility

     28.2     22.7

Expected Life (in years)

     5.0        5.0   

Dividend Yield

     1.9     2.0

Aggregated information regarding stock options granted under the plans for the six months ended July 30, 2016 is summarized below:

 

    Number of Options     Weighted Average
Exercise Price
    Weighted Average
Remaining
Contractual Life
(in Years)
    Aggregate Intrinsic
Value
 

Outstanding at January 31, 2016

    657,936      $ 11.00        6.1      $ 3,083,000   

Granted

    117,000        14.79       

Exercised

    (67,757     8.43       

Forfeited

    (975     13.71       

Canceled

    (3,023     8.98       
 

 

 

   

 

 

     

Outstanding at July 30, 2016

    703,181      $ 11.88        6.5      $ 2,807,040   
 

 

 

   

 

 

   

 

 

   

 

 

 

Exercisable at July 30, 2016

    437,606      $ 10.64        5.1      $ 2,298,670   
 

 

 

   

 

 

   

 

 

   

 

 

 

Aggregated information regarding RSUs and RSAs granted under the Plan for the six months ended July 30, 2016 is summarized below:

 

     RSAs & RSUs      Weighted Average
Grant Date Fair Value
 

Unvested at January 31, 2016

     293,088       $ 13.28   

Granted

     13,460         14.70   

Vested

     (62,632      12.88   

Forfeited

     (18,600      10.07   
  

 

 

    

 

 

 

Unvested at July 30, 2016

     225,316       $ 13.75   
  

 

 

    

 

 

 
Inventories (Tables)
Components of Inventories

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

 

(In thousands)    July 30, 2016      January 31, 2016  

Materials and Supplies

   $ 11,993       $ 10,197   

Work-In-Process

     1,063         1,025   

Finished Goods

     9,000         7,491   
  

 

 

    

 

 

 
     22,056         18,713   

Inventory Reserve

     (4,490      (3,823
  

 

 

    

 

 

 
   $ 17,566       $ 14,890   
  

 

 

    

 

 

 
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 2017

     27.7     29.6

Fiscal 2016

     37.0     32.7
Segment Information (Tables)
Net Sales and Segment Operating Profit for Each Reporting Segment

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

 

     Three Months Ended      Six Months Ended  
     Net Sales      Segment Operating Profit      Net Sales      Segment Operating Profit  

(In thousands)

   July 30,
2016
     August 1,
2015
     July 30,
2016
     August 1,
2015
     July 30,
2016
     August 1,
2015
     July 30,
2016
    August 1,
2015
 

Product Identification

   $ 17,628       $ 17,100       $ 2,632       $ 2,720       $ 34,234       $ 32,744       $ 4,628      $ 4,698   

T&M

     7,711         6,838         1,141         897         15,215         13,400         2,343        1,825   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

   

 

 

 

Total

   $ 25,339       $ 23,938         3,773         3,617       $ 49,449       $ 46,144         6,971        6,523   
  

 

 

    

 

 

          

 

 

    

 

 

      

Corporate Expenses

           2,025         1,783               3,676        3,241   
        

 

 

    

 

 

          

 

 

   

 

 

 

Operating Income

           1,748         1,834               3,295        3,282   

Other Income (Expense)—Net

           40         21               (12     254   
        

 

 

    

 

 

          

 

 

   

 

 

 

Income Before Income Taxes

           1,788         1,855               3,283        3,536   

Income Tax Provision

           496         687               972        1,158   
        

 

 

    

 

 

          

 

 

   

 

 

 

Net Income

         $ 1,292       $ 1,168             $ 2,311      $ 2,378   
        

 

 

    

 

 

          

 

 

   

 

 

 
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 30, 2016

   Amortized Cost      Gross Unrealized
Gains
     Gross Unrealized
Losses
    Fair Value  

State and Municipal Obligations

   $ 8,842       $ 22       $ —        $ 8,864   
  

 

 

    

 

 

    

 

 

   

 

 

 

January 31, 2016

   Amortized Cost      Gross Unrealized
Gains
     Gross Unrealized
Losses
    Fair Value  

State and Municipal Obligations

   $ 10,363       $ 15       $ (2   $ 10,376   
  

 

 

    

 

 

    

 

 

   

 

 

 
Fair Value (Tables)
Assets Measured at Fair Value on a Recurring Basis

Assets measured at fair value on a recurring basis are summarized below:

 

(In thousands)

July 30, 2016

   Level 1      Level 2      Level 3      Total  

Money Market Funds (included in Cash and Cash Equivalents)

   $   5,910       $ —         $     —         $ 5,910   

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

     —           8,864         —           8,864   
  

 

 

    

 

 

    

 

 

    

 

 

 

Total

   $ 5,910       $ 8,864       $ —         $ 14,774   
  

 

 

    

 

 

    

 

 

    

 

 

 

January 31, 2016

   Level 1      Level 2      Level 3      Total  

Money Market Funds (included in Cash and Cash Equivalents)

   $ 4,340       $ —         $ —         $ 4,340   

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

     —           10,376         —           10,376   
  

 

 

    

 

 

    

 

 

    

 

 

 

Total

   $ 4,340       $ 10,376       $ —         $ 14,716   
  

 

 

    

 

 

    

 

 

    

 

 

 

 

 

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
on Available for Sale
Securities
     Total  

Balance at January 31, 2016

   $ (983    $ 8       $ (975

Other Comprehensive Income

     134         7         141   
  

 

 

    

 

 

    

 

 

 

Balance at July 30, 2016

   $ (849    $ 15       $ (834
  

 

 

    

 

 

    

 

 

 
Overview - Additional Information (Detail)
6 Months Ended
Jul. 30, 2016
Segments
Organization, Consolidation and Presentation of Financial Statements [Abstract]
 
Number of operating segments
Acquisition - Additional Information (Detail) (USD $)
6 Months Ended 3 Months Ended 6 Months Ended 12 Months Ended
Jul. 30, 2016
Aug. 1, 2015
Jul. 30, 2016
Minimum [Member]
Jul. 30, 2016
Maximum [Member]
Jul. 30, 2016
RITEC [Member]
Jul. 30, 2016
RITEC [Member]
Jan. 31, 2016
RITEC [Member]
Business Acquisition [Line Items]
 
 
 
 
 
 
 
Completion date of acquisition
 
 
 
 
 
Jun. 19, 2015 
 
Date of asset purchase agreement
 
 
 
 
 
Jun. 18, 2015 
 
Purchase price of the acquisition
 
$ 7,360,000 
 
 
 
$ 7,360,000 
 
Amount held in escrow related to business acquisition
 
 
 
 
750,000 
750,000 
 
Duration of escrow deposits
 
 
 
 
 
12 months 
 
Escrow amount recovered
 
 
 
 
99,000 
99,000 
 
General and administrative expenses
 
 
 
 
 
 
109,000 
Estimated inventory purchase
 
 
 
 
200,000 
200,000 
 
Percentage of royalties on sale price of products
 
 
 
 
 
7.50% 
 
Initial royalty payment period
 
 
 
 
 
5 years 
 
License agreement, Amortization period
 
 
 
 
 
5 years 
 
Fair value assumptions, Weighted average cost of capital
15.50% 
 
 
 
 
 
 
Fair value assumptions, Earnings projections
 
 
110,000 
700,000 
 
 
 
Fair value assumptions, Contract renewal probability
 
 
30.00% 
100.00% 
 
 
 
Fair value key assumptions
Key assumptions include (1) a weighted average cost of capital of 15.5%; (2) a range of earnings projections from $110,000-$700,000 and (3) a range of contract renewal probability from 30%-100%. 
 
 
 
 
 
 
Goodwill deductible for tax purposes
 
 
 
 
$ 3,530,000 
$ 3,530,000 
 
Acquisition - Purchase Price of Acquisition Allocated on Basis of Fair Value (Detail) (USD $)
In Thousands, unless otherwise specified
Jul. 30, 2016
Jan. 31, 2016
Jul. 30, 2016
RITEC [Member]
Jun. 19, 2015
RITEC [Member]
Business Acquisition [Line Items]
 
 
 
 
Accounts Receivable
 
 
 
$ 50 
Identifiable Intangible Assets
 
 
3,780 
3,780 
Goodwill
4,521 
4,521 
 
3,530 
Total Purchase Price
 
 
 
$ 7,360 
Net Income Per Common Share - Reconciliation of Shares Used in Calculating Basic and Diluted (Detail)
3 Months Ended 6 Months Ended
Jul. 30, 2016
Aug. 1, 2015
Jul. 30, 2016
Aug. 1, 2015
Earnings Per Share [Abstract]
 
 
 
 
Weighted Average Common Shares Outstanding-Basic
7,418,000 
7,278,000 
7,388,000 
7,269,000 
Effect of Dilutive Options, Restricted Stock Awards and Restricted Stock Units
168,300 
190,934 
172,022 
190,676 
Weighted Average Common Shares Outstanding-Diluted
7,587,000 
7,469,000 
7,560,000 
7,459,000 
Net Income Per Common Share - Additional Information (Detail)
3 Months Ended 6 Months Ended
Jul. 30, 2016
Aug. 1, 2015
Jul. 30, 2016
Aug. 1, 2015
Earnings Per Share [Abstract]
 
 
 
 
Number of common equivalent shares
413,121 
424,100 
468,121 
424,100 
Intangible Assets - Summary of Estimated Amortization Expense (Detail) (USD $)
In Thousands, unless otherwise specified
Jul. 30, 2016
Finite-Lived Intangible Assets, Net, Amortization Expense, Fiscal Year Maturity [Abstract]
 
2017
$ 715 
2018
774 
2019
769 
2020
803 
2021
$ 706 
Intangible Assets - Additional Information (Detail) (USD $)
3 Months Ended 6 Months Ended
Jul. 30, 2016
Aug. 1, 2015
Jul. 30, 2016
Aug. 1, 2015
Impairment of Intangible Assets (Excluding Goodwill) [Abstract]
 
 
 
 
Impairments of intangible assets
$ 0 
$ 0 
$ 0 
$ 0 
Amortization expense
$ 179,000 
$ 105,000 
$ 358,000 
$ 194,000 
Share-Based Compensation - Additional Information (Detail) (USD $)
3 Months Ended 6 Months Ended 3 Months Ended 6 Months Ended 1 Months Ended 3 Months Ended 1 Months Ended 6 Months Ended 0 Months Ended 3 Months Ended 6 Months Ended 1 Months Ended 6 Months Ended 1 Months Ended 0 Months Ended 6 Months Ended 6 Months Ended 1 Months Ended 0 Months Ended
Jul. 30, 2016
Apr. 30, 2016
Aug. 1, 2015
May 2, 2015
Jul. 30, 2016
Equity_Plan
Jul. 30, 2016
2007 Equity Incentive Plan [Member]
Jul. 30, 2016
2015 Equity Incentive Plan [Member]
Jul. 30, 2016
Employee Stock Purchase Plan [Member]
Aug. 1, 2015
Employee Stock Purchase Plan [Member]
Jul. 30, 2016
Employee Stock Purchase Plan [Member]
Jul. 30, 2016
Maximum [Member]
2015 Equity Incentive Plan [Member]
Mar. 31, 2016
Chief Executive Officer [Member]
Mar. 31, 2015
Chief Executive Officer [Member]
Jul. 30, 2016
Chief Executive Officer [Member]
2007 Equity Incentive Plan [Member]
Aug. 1, 2015
Non-Employee Director [Member]
Aug. 1, 2015
Chairman of Board [Member]
Aug. 1, 2015
Chair of Audit Committee [Member]
Aug. 1, 2015
Chair of Compensation Committee [Member]
Mar. 31, 2015
Other Key Employees [Member]
May 31, 2016
Certain Key Employees [Member]
May 31, 2016
Stock Options [Member]
Installment
Jul. 30, 2016
Stock Options [Member]
Jul. 30, 2016
Stock Options [Member]
2007 Equity Incentive Plan [Member]
Jul. 30, 2016
Stock Options [Member]
2015 Equity Incentive Plan [Member]
May 18, 2016
Equity Incentive Plan [Member]
Non-Employee Director [Member]
Jul. 30, 2016
Equity Incentive Plan [Member]
Non-Employee Director [Member]
Apr. 30, 2016
Equity Incentive Plan [Member]
Non-Employee Director [Member]
Jul. 30, 2016
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]
Jul. 30, 2016
RSA [Member]
Non-Employee Director [Member]
Mar. 31, 2016
Restricted Stock And Stock Option [Member]
Installment
Mar. 31, 2015
Restricted Stock And Stock Option [Member]
Installment
Feb. 1, 2014
2014 Restricted Stock Units (RSUs) [Member]
Jul. 30, 2016
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. 30, 2016
2014 Restricted Stock Units (RSUs) [Member]
Officer [Member]
Jul. 30, 2016
2014 Restricted Stock Units (RSUs) [Member]
Officer [Member]
Net Sales Target [Member]
Jul. 30, 2016
2014 Restricted Stock Units (RSUs) [Member]
Officer [Member]
ORONA Target [Member]
Jul. 30, 2016
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. 30, 2016
Performance Based Restricted Stock Units RSUs [Member]
Aug. 1, 2016
Subsequent Event [Member]
Non-Employee Director [Member]
Aug. 1, 2016
Subsequent Event [Member]
Chairman of Board [Member]
Aug. 1, 2016
Subsequent Event [Member]
Chairs of Audit and Compensation Committees [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Incentive plan, expiration period
 
 
 
 
 
2017-05 
2025-05 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Shares available for grant under the Plan
 
 
 
 
 
84,813 
159,738 
48,486 
 
48,486 
 
 
 
50,000 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Maximum number of shares of common stock of the Company authorized for issuance
 
 
 
 
 
 
 
 
 
 
500,000 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Number of equity incentive plan
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Award vesting period
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
4 years 
4 years 
 
 
 
 
 
 
12 months 
 
 
 
 
 
 
 
 
 
 
 
3 years 
 
 
 
 
Option expiration period
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
10 years 
10 years 
 
 
 
10 years 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Number of options, granted
 
 
 
 
117,000 
 
 
 
 
 
 
50,000 
50,000 
 
 
 
 
 
35,000 
37,000 
 
 
 
 
30,000 
 
 
5,000 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Non-employee director is entitled to an annual cash retainer
 
 
$ 7,000 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Non-employee director is entitled to an annual cash retainer additional
 
 
 
 
 
 
 
 
 
 
 
 
 
 
500 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Amount of Chair Retainer payable
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
6,000 
4,000 
4,000 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Number of stock options grant to each non-employee director
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
601 
567 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Non-employee director received restricted stock award value
 
 
 
 
20,000 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
6,000 
4,000 
Non-employee director received restricted stock award shares
8,262 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Granting percentage of shares
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
25.00% 
 
 
Director compensation amount, remainder of fiscal 2017
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
55,000 
 
 
Director compensation amount, fiscal 2018
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
65,000 
 
 
Director compensation amount, fiscal 2019
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
75,000 
 
 
Maximum disposal restricted percentage of RSU
 
 
 
 
50.00% 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Number of accelerated vesting shares
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
4,166 
 
 
 
 
 
 
 
 
 
 
 
 
 
Restricted stock unit vested percentage
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
50.00% 
25.00% 
25.00% 
 
 
 
 
 
 
Cumulative budgeted net sales target measurement period
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
2014 through 2016 
 
 
 
 
 
 
 
 
 
Number of vesting shares
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
9,300 
9,300 
 
 
 
 
 
 
15,810 
 
 
 
Restricted stocks, granted
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
4,030 
537 
 
 
 
 
 
 
 
 
 
 
 
80,000 
155,000 
 
 
 
 
Number of annual vesting installments
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Options granted weighted average fair value per share
$ 3.46 
$ 2.86 
$ 2.44 
$ 2.43 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Unrecognized compensation expense related to options
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
629,000 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Unrecognized compensation expense to be recognized, Weighted average period
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
2 years 6 months 
 
 
 
 
 
 
 
 
 
 
 
 
2 years 4 months 24 days