ASTRONOVA, INC., 10-Q filed on 6/26/2020
Quarterly Report
v3.20.1
Cover Page - shares
3 Months Ended
May 02, 2020
Jun. 23, 2020
Cover [Abstract]    
Document Type 10-Q  
Amendment Flag false  
Document Period End Date May 02, 2020  
Document Fiscal Year Focus 2021  
Document Fiscal Period Focus Q1  
Entity Registrant Name AstroNova, Inc.  
Entity Central Index Key 0000008146  
Current Fiscal Year End Date --01-31  
Entity Current Reporting Status Yes  
Entity Interactive Data Current Yes  
Entity Filer Category Accelerated Filer  
Trading Symbol ALOT  
Entity Shell Company false  
Entity Small Business true  
Entity Emerging Growth Company false  
Title of 12(b) Security Common Stock  
Security Exchange Name NASDAQ  
Document Quarterly Report true  
Document Transition Report false  
Entity Address, State or Province RI  
Entity Common Stock, Shares Outstanding   7,163,293
v3.20.1
Condensed Consolidated Balance Sheets - USD ($)
$ in Thousands
May 02, 2020
Jan. 31, 2020
CURRENT ASSETS    
Cash and Cash Equivalents $ 11,091 $ 4,249
Accounts Receivable, net 18,473 19,784
Inventories, net 32,557 33,925
Prepaid Expenses and Other Current Assets 2,489 2,193
Total Current Assets 64,610 60,151
Property, Plant and Equipment, net 11,377 11,268
Intangible Assets, net 24,328 25,383
Goodwill 11,988 12,034
Deferred Tax Assets, net 5,073 5,079
Right of Use Assets 1,553 1,661
Other Assets 1,071 1,088
TOTAL ASSETS 120,000 116,664
CURRENT LIABILITIES    
Accounts Payable 4,282 4,409
Accrued Compensation 2,893 2,700
Other Accrued Expenses 3,697 4,711
Revolving Credit Facility 11,500 6,500
Current Portion of Long-Term Debt 6,602 5,208
Current Liability – Royalty Obligation 2,000 2,000
Current Liability – Excess Royalty Payment Due 586 773
Deferred Revenue 375 466
Total Current Liabilities 31,935 26,767
Long-Term Debt, net of current portion 6,334 7,715
Royalty Obligation, net of current portion 7,550 8,012
Lease Liabilities, net of current portion 1,199 1,279
Deferred Tax Liabilities 378 435
Other Long-Term Liabilities 1,042 1,081
TOTAL LIABILITIES 48,438 45,289
SHAREHOLDERS' EQUITY    
Common Stock, $0.05 Par Value, Authorized 13,000,000 shares; Issued 10,371,704 shares and 10,343,610 shares at May 2, 2020 and January 31, 2020, respectively 518 517
Additional Paid-in Capital 56,656 56,130
Retained Earnings 49,233 49,298
Treasury Stock, at Cost, 3,287,271 and 3,281,701 shares at May 2, 2020 and January 31, 2020, respectively (33,531) (33,477)
Accumulated Other Comprehensive Loss, net of tax (1,314) (1,093)
TOTAL SHAREHOLDERS' EQUITY 71,562 71,375
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $ 120,000 $ 116,664
v3.20.1
Condensed Consolidated Balance Sheets (Parenthetical) - $ / shares
May 02, 2020
Jan. 31, 2020
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 10,371,704 10,343,610
Treasury Stock, Shares 3,287,271 3,281,701
v3.20.1
Condensed Consolidated Statements of Income - USD ($)
shares in Thousands, $ in Thousands
3 Months Ended
May 02, 2020
May 04, 2019
Income Statement [Abstract]    
Revenue $ 30,919 $ 36,181
Cost of Revenue 20,064 21,942
Gross Profit 10,855 14,239
Operating Expenses:    
Selling and Marketing 5,925 6,765
Research and Development 1,940 2,007
General and Administrative 2,327 2,999
Operating Expenses 10,192 11,771
Operating Income 663 2,468
Other Expense, net (349) (368)
Income Before Income Taxes 314 2,100
Income Tax (Benefit) Provision (118) 400
Net Income $ 432 $ 1,700
Net Income Per Common Share—Basic: $ 0.06 $ 0.24
Net Income Per Common Share—Diluted: $ 0.06 $ 0.23
Weighted Average Number of Common Shares Outstanding—Basic 7,073 6,971
Weighted Average Number of Common Shares Outstanding—Diluted 7,105 7,248
v3.20.1
Condensed Consolidated Statements of Comprehensive Income - USD ($)
$ in Thousands
3 Months Ended
May 02, 2020
May 04, 2019
Statement of Comprehensive Income [Abstract]    
Net Income $ 432 $ 1,700
Other Comprehensive Loss, Net of Taxes    
Foreign Currency Translation Adjustments (142) (172)
Change in Value of Derivatives Designated as Cash Flow Hedge (46) 116
(Gains) Losses from Cash Flow Hedges Reclassified to Income Statement (33) (144)
Other Comprehensive Loss (221) (200)
Comprehensive Income $ 211 $ 1,500
v3.20.1
Condensed Consolidated Statements of Changes in Shareholders' Equity - USD ($)
$ in Thousands
Total
Common Stock [Member]
Additional Paid-in Capital [Member]
Retained Earnings [Member]
Treasury Stock [Member]
Accumulated Other Comprehensive Income (Loss) [Member]
Beginning Balance at Jan. 31, 2019 $ 69,775 $ 511 $ 53,568 $ 49,511 $ (32,997) $ (818)
Beginning Balance, Shares at Jan. 31, 2019   10,218,559        
Share-Based Compensation 601   601      
Employee Option Exercises 296 $ 1 306   (11)  
Employee Option Exercises, Shares   27,990        
Restricted Stock Awards Vested, net (69) $ 1 (1)   (69)  
Restricted Stock Awards Vested, net, Shares   9,522        
Cash Dividend—$0.07 per share (489)     (489)    
Net Income 1,700     1,700    
Other Comprehensive Loss (200)         (200)
Ending Balance at May. 04, 2019 71,614 $ 513 54,474 50,722 (33,077) (1,018)
Ending Balance, Shares at May. 04, 2019   10,256,071        
Beginning Balance at Jan. 31, 2020 71,375 $ 517 56,130 49,298 (33,477) (1,093)
Beginning Balance, Shares at Jan. 31, 2020   10,343,610        
Share-Based Compensation 495   495      
Employee Option Exercises $ 32   32      
Employee Option Exercises, Shares 800 4,456        
Restricted Stock Awards Vested, net $ (54) $ 1 (1)   (54)  
Restricted Stock Awards Vested, net, Shares   23,638        
Cash Dividend—$0.07 per share (497)     (497)    
Net Income 432     432    
Other Comprehensive Loss (221)         (221)
Ending Balance at May. 02, 2020 $ 71,562 $ 518 $ 56,656 $ 49,233 $ (33,531) $ (1,314)
Ending Balance, Shares at May. 02, 2020   10,371,704        
v3.20.1
Condensed Consolidated Statements of Changes in Shareholders' Equity (Parenthetical) - $ / shares
3 Months Ended
May 02, 2020
May 04, 2019
Statement of Stockholders' Equity [Abstract]    
Cash dividend per share $ 0.07 $ 0.07
v3.20.1
Condensed Consolidated Statements of Cash Flows - USD ($)
$ in Thousands
3 Months Ended
May 02, 2020
May 04, 2019
Cash Flows from Operating Activities:    
Net Income $ 432 $ 1,700
Adjustments to Reconcile Net Income to Net Cash Provided by Operating Activities:    
Depreciation and Amortization 1,568 1,584
Amortization of Debt Issuance Costs 12 13
Share-Based Compensation 495 601
Changes in Assets and Liabilities:    
Accounts Receivable 1,220 1,439
Inventories 1,237 (2,001)
Income Taxes (90) 263
Accounts Payable and Accrued Expenses (1,140) (2,796)
Other (314) 184
Net Cash Provided by Operating Activities 3,420 987
Cash Flows from Investing Activities:    
Additions to Property, Plant and Equipment (626) (586)
Net Cash Used by Investing Activities (626) (586)
Cash Flows from Financing Activities:    
Net Cash Proceeds from Employee Stock Option Plans 6 270
Net Cash Proceeds from Share Purchases under Employee Stock Purchase Plan 26 26
Net Cash Used for Payment of Taxes Related to Vested Restricted Stock (54) (69)
Borrowings under Revolving Credit Facility 5,000  
Payment of Minimum Guarantee Royalty Obligation (500) (375)
Principal Payments of Long-Term Debt   (1,578)
Dividends Paid (497) (489)
Net Cash Provided (Used) by Financing Activities 3,981 (2,215)
Effect of Exchange Rate Changes on Cash and Cash Equivalents 67 49
Net Increase (Decrease) in Cash and Cash Equivalents 6,842 (1,765)
Cash and Cash Equivalents, Beginning of Period 4,249 7,534
Cash and Cash Equivalents, End of Period 11,091 5,769
Supplemental Disclosures of Cash Flow Information:    
Cash Paid During the Period for Interest 124 110
Cash Paid During the Period for Income Taxes, Net of Refunds $ 128 142
Schedule of Non-Cash Financing Activities:    
Value of Shares Received in Satisfaction of Option Exercise Price   $ 11
v3.20.1
Business and Basis of Presentation
3 Months Ended
May 02, 2020
Business and Basis Of Presentation [Abstract]  
Business and Basis of Presentation
Note 1 – Business and Basis of Presentation
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 employed around the world in a wide range of applications in the aerospace, apparel, automotive, avionics, chemical, computer peripherals, communications, distribution, food and beverage, general manufacturing, packaging and transportation industries. In the United States, we have factory-trained direct field salespeople located in major cities from coast to coast. We also have direct field sales or service centers in Canada, China, Denmark, France, Germany, Malaysia, Mexico, Singapore, and the United Kingdom staffed by our own employees and dedicated third-party contractors. Additionally, we utilize over 225 independent dealers and representatives selling and marketing our products in over 60 countries.
Our business consists
of two
segments, Product Identification (“PI”) and Test & Measurement (“T&M”). The PI segment includes specialty printing systems and related supplies sold under the brand names QuickLabel
®
, TrojanLabel
®
and GetLabels
. The T&M segment includes our line of aerospace flight deck printers and test and measurement data acquisition systems sold under the AstroNova
®
brand name.
PI products sold under the QuickLabel, TrojanLabel and GetLabels brands are used in brand owner and commercial applications to provide product packaging, marketing, tracking, branding and labeling solutions to a wide array of industries. The PI segment offers a variety of digital color label tabletop printers, high-volume presses and specialty original equipment manufacture
r
(“OEM”) printing systems, as well as a wide range of label, tag and flexible packaging material substrates and other supplies, including ink and toner, that allow customers to mark, track, protect and enhance the appearance of their products. In the T&M segment, we have a long history of using our technologies to provide networking systems and high-resolution light-weight flight deck and cabin printers for the aerospace market. In addition, the T&M segment includes data acquisition recorders, sold under the AstroNova brand, to enable our customers to 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.
Unless otherwise indicated, references to “AstroNova, “we,” “our,” and “us” in this Quarterly Report on
Form 10-Q
refer to AstroNova, Inc. and its consolidated subsidiaries.
Basis of Presentation
The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with U.S. generally accepted accounting principles 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 our Annual Report on Form
10-K
for the fiscal year ended January 31, 2020.
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 , including those that require consideration of forecasted financial information, in context of the unknown future impacts of
COVID-19
using information that is reasonably available to us at this time. Some of the more significant estimates relate to revenue recognition, the allowances for doubtful accounts, inventory valuation, income taxes, impairment of long-lived assets and goodwill, share-based compensation, accrued expenses, self-insurance liability accrual 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, including our expectations at the time regarding the duration, scope and severity of the
COVID-19
pandemic. Consequently, actual results could differ from those estimates.
Results of operations for the interim periods presented herein are not necessarily indicative of the results that may be expected for the full year.
 
Certain amounts in the prior year financial statements have been reclassified to conform to the current year’s presentation.
Principles of Consolidation
The accompanying condensed consolidated financial statements include the accounts of AstroNova, Inc. and its wholly-owned subsidiaries. All significant intercompany accounts and transactions are eliminated in consolidation.
v3.20.1
Summary of Significant Accounting Policies
3 Months Ended
May 02, 2020
Accounting Policies [Abstract]  
Summary of Significant Accounting Policies
Note 2 – Summary of Significant Accounting Policies Update
The accounting polices used in preparing the condensed consolidated financial statements in this Form
10-Q
are the same as those used in preparing
our
consolidated financial statements as of and for the year ended January 31, 2020 and included in our Annual Report on Form
10-K
for the fiscal year ended January 31, 2020.
Recently Adopted Accounting Pronouncements
Fair Value Measurement
In August 2018, the Financial Accounting Standards Board (“FASB”) issued Accounting Standard Update (“ASU”)
2018-13, “Fair
Value Measurement (Topic 820), Disclosure Framework-Changes to the Disclosure Requirements for Fair Value Measurement.” ASU
2018-13
modifies the disclosure requirements for fair value measurements by removing, modifying or adding certain disclosures. The provisions of ASU
2018-13
relating to changes in unrealized gains and losses, the range and weighted average of significant unobservable inputs used to develop Level 3 fair value measurements, and the narrative description of measurement uncertainty should be applied prospectively for only the most recent interim or annual period presented in the initial fiscal year of adoption. The remaining provisions should be applied retrospectively to all periods presented upon their effective date. We adopted the provisions of this guidance effective February 1, 2020. The adoption of this guidance did not have a material impact on our consolidated financial statements and related disclosures.
Recent Accounting Standards Not Yet Adopted
Reference Rate Reform
In March 2020, the FASB issued ASU
2020-04,
“Reference Rate Reform (Topic 848), Facilitation of the Effects of Reference Rate Reform on Financial Reporting.” ASU
2020-04
provides optional expedients and exceptions for applying U.S. GAAP to contracts, hedging relationships, and other transactions affected by the discontinuation of the London Interbank Offered Rate (“LIBOR”) or by another reference rate expected to be discontinued. The amendments are effective for all entities as of March 12, 2020 through December 31, 2022. We are currently in the process of evaluating the impact of the transition from LIBOR to an alternative reference rate, but we do not expect that to have a material impact on our consolidated financial statements.
No other new accounting pronouncements, issued or effective during the first three months of the current fiscal year, have had or are expected to have a material impact on our consolidated financial statements. 
v3.20.1
Revenue Recognition
3 Months Ended
May 02, 2020
Revenue from Contract with Customer [Abstract]  
Revenue Recognition
Note 3 – Revenue Recognition
We derive revenue from the sale of (i) hardware, including digital color label printers and specialty OEM printing systems, portable data acquisition systems, airborne printers and networking systems used in the flight deck and cabin of military, commercial and business aircraft, (ii) related supplies required in the operation of the hardware, (iii) repairs and maintenance of hardware and (iv) service agreements.
 
Revenues disaggregated by primary geographic markets and major product types are as follows:
Primary geographical markets:
 
   
Three Months Ended
 
(In thousands)
  
May 2,
2020
   
May 4,
2019
 
United States
  $19,789   $21,992 
Europe
   7,450    7,875 
Canada
   1,428    1,516 
Asia
   1,009    3,450 
Central and South America
   954    888 
Other
   289    460 
  
 
 
   
 
 
 
Total Revenue
  $30,919   $36,181 
  
 
 
   
 
 
 
Major product types:
 
   
Three Months Ended
 
(In thousands)
  
May 2,
2020
   
May 4,
2019
 
Hardware
  $8,914   $12,918 
Supplies
   19,118    19,727 
Service and Other
   2,887    3,536 
  
 
 
   
 
 
 
Total Revenue
  $30,919   $36,181 
  
 
 
   
 
 
 
Contract Assets and Liabilities
We normally do not have contract assets, which are primarily unbilled accounts receivable that are conditional on something other than the passage of time. Our contract liabilities, which represent billings in excess of revenue recognized, are related to advanced billings for purchased service agreements and extended warranties. Contract liabilities were $375,000 and $466,000 at May 2, 2020 and January 31, 2020, respectively, and are recorded as deferred revenue in the condensed consolidated balance sheet.
We
recognized $225,000 of revenue during the three
-
month period ended May 2, 2020, related to the deferred revenue balance at January 31, 2020.
Contract Costs
We recognize an asset for the incremental costs of obtaining a contract with a customer if we expect the benefit of those costs to be longer than one year. We have determined that certain costs related to obtaining sales contracts for our aerospace printer products meet the requirement to be capitalized. These costs are deferred and amortized based on the forecasted number of units sold over the remaining benefit term, which we currently estimate to be
approximately 6 years. The balance of these contract assets at January 31, 2020 was $944,000. 
We
amortized $15,000 of direct costs for the three months ended May 2, 2020 and the balance of deferred incremental direct costs net of accumulated amortization at May 2, 2020 was $929,000, of which $59,000 is reported in other current assets and $870,000 is reported in other assets in the accompanying condensed consolidated balance sheet.
v3.20.1
Net Income Per Common Share
3 Months Ended
May 02, 2020
Earnings Per Share [Abstract]  
Net Income Per Common Share
Note 4 – 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
 
   
May 2,
2020
   
May 4,
2019
 
Weighted Average Common Shares Outstanding – Basic
   7,073,278    6,970,914 
Effect of Dilutive Options, Restricted Stock Awards and Restricted Stock Units
   31,365    277,412 
  
 
 
   
 
 
 
Weighted Average Common Shares Outstanding – Diluted
   7,104,643    7,248,326 
  
 
 
   
 
 
 
For the three months ended May 2, 2020 and May 4, 2019, the diluted per share amounts do not reflect common equivalent shares outstanding of 865,157 and 260,422
,
respectively, because their effect would have been anti-dilutive.
v3.20.1
Intangible Assets
3 Months Ended
May 02, 2020
Goodwill and Intangible Assets Disclosure [Abstract]  
Intangible Assets
Note 5 – Intangible Assets
Intangible assets are as follows:
 
   
May 2, 2020
   
January 31, 2020
 
(In thousands)
  
Gross
Carrying
Amount
   
Accumulated
Amortization
  
Currency
Translation
Adjustment
   
Net
Carrying
Amount
   
Gross
Carrying
Amount
   
Accumulated
Amortization
  
Currency
Translation
Adjustment
   
Net
Carrying
Amount
 
Miltope:
              
Customer Contract Relationships
  $3,100   $(2,098 $—    $1,002   $3,100   $(2,021 $—    $1,079 
RITEC:
              
Customer Contract Relationships
   2,830    (1,156  —      1,674    2,830    (1,076  —      1,754 
Non-Competition
Agreement
   950    (918  —      32    950    (871  —      79 
TrojanLabel:
              
Existing Technology
   2,327    (1,136  68    1,259    2,327    (1,053  78    1,352 
Distributor Relations
   937    (320  22    639    937    (297  27    667 
Honeywell:
              
Customer Contract Relationships
   27,243    (7,521  —      19,722    27,243    (6,791  —      20,452 
  
 
 
   
 
 
  
 
 
   
 
 
   
 
 
   
 
 
  
 
 
   
 
 
 
Intangible Assets, net
  $37,387   $(13,149 $90   $24,328   $37,387   $(12,109 $105   $25,383 
  
 
 
   
 
 
  
 
 
   
 
 
   
 
 
   
 
 
  
 
 
   
 
 
 
There were no impairments to intangible assets during the periods ended May 2, 2020 and May 
4
, 2019. With respect to the acquired intangibles included in the table above, amortization expense of $1.0 million and $1.1 million has been included in the condensed consolidated statements of income for the three months ended May 2, 2020 and May 4, 2019, respectively.
Estimated amortization expense for the next five fiscal years is as follows:
 
(In thousands)
  
Remaining
2021
   
2022
   
2023
   
2024
   
2025
 
Estimated amortization expense
  $3,018   $3,964   $3,957   $3,960   $3,392 
v3.20.1
Inventories
3 Months Ended
May 02, 2020
Inventory Disclosure [Abstract]  
Inventories
Note 6 – 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)
  
May 2, 2020
   
January 31, 2020
 
Materials and Supplies
  $20,793   $20,151 
Work-In-Process
   1,684    1,408 
Finished Goods
   16,781    17,992 
  
 
 
   
 
 
 
   39,258    39,551 
Inventory Reserve
   (6,701   (5,626
  
 
 
   
 
 
 
  $32,557   $33,925 
  
 
 
   
 
 
 
v3.20.1
Revolving Line of Credit
3 Months Ended
May 02, 2020
Debt Disclosure [Abstract]  
Revolving Line of Credit
Note 7 – Revolving Line of Credit
At May 2, 2020, we have a revolving line of credit under our existing credit agreement with Bank of America (the “Credit Agreement”). Revolving credit loans may be borrowed, at our option, in U.S. Dollars or, subject to certain conditions, Euros, British Pounds, Canadian Dollars or Danish Kroner. Amounts borrowed under the revolving credit facility bear interest at a rate
per annum
equal to, at our 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 our 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 our consolidated leverage ratio.
At May 2, 2020, $11.5 million
was
drawn on the revolving line of credit. The outstanding balance bears interest at a weighted average annual rate of 2.52% and $73,000 and $19,000 of interest has been incurred on this obligation and included in other expense in the accompanying condensed consolidated income statement for the three
-
month periods ended May 2, 2020 and May 4, 2019, respectively. At May 2, 2020, there was $6.0 million available for borrowing under the revolving credit facility.
 Pursuant to the terms of the Fourth Amendment to our Credit Agreement, which we and Bank of America entered into in December 2019, the aggregate amount available for borrowings under the revolving line of credit will decrease to $10.0 million at the end of the third quarter of fiscal year 2021.
We are
 
required to pay a commitment fee on the undrawn portion of the revolving credit facility at the rate of 0.25%
per annum
.
See Note 17–Subsequent Events–Letter Agreement with Bank of America for a discussion of the letter agreement we entered
into with Bank of America on June
22
, 2020, which, among other things, suspends our access to the revolving line of credit under the Credit Agreement on the terms described therein.
 
v3.20.1
Debt
3 Months Ended
May 02, 2020
Debt Disclosure [Abstract]  
Debt
Note 8 – Debt
Long-term debt in the accompanying condensed consolidated balance sheets is as follows:
 
(In thousands)
  
May 2, 2020
   
January 31, 2020
 
USD Term Loan (2.24% as of May 2, 2020 and 3.03% as of January 31, 2020); maturity date of November 30, 2022
  $8,250   $8,250 
USD Term Loan (2.24% as of May 2, 2020 and 3.03% as of January 31, 2020); maturity date of January 31, 2022
   4,784    4,784 
  
 
 
   
 
 
 
  $13,034   $13,034 
Debt Issuance Costs, net of accumulated amortization
   (98   (111
Current Portion of Term Loans
   (6,602   (5,208
  
 
 
   
 
 
 
Long-Term Debt
  $6,334   $7,715 
  
 
 
   
 
 
 
The schedule of required principal payments remaining during the next five years on long-term debt outstanding as of May 2, 2020 is as follows:
 
(In thousands)
    
Fiscal 2021, remainder
  $5,208 
Fiscal 2022
   5,576 
Fiscal 2023
   2,250 
  
 
 
 
  $13,034 
  
 
 
 
v3.20.1
Derivative Financial Instruments and Risk Management
3 Months Ended
May 02, 2020
Derivative Instruments and Hedging Activities Disclosure [Abstract]  
Derivative Financial Instruments and Risk Management
Note 9 – Derivative Financial Instruments and Risk Management
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 term loan borrowing by our Danish Subsidiary and an interest rate swap to manage the interest rate risk associated with our variable rate term loan borrowing. Both swaps have been designated as cash flow hedges of floating-rate borrowings.
Our cross-currency interest rate swap agreement effectively modifies our exposure to interest rate risk and foreign currency exchange rate risk by converting our floating-rate debt denominated in U.S. Dollars on our Danish subsidiary’s books to a fixed-rate debt denominated in Danish Kroner for the term of the loan, thus reducing the impact of interest-rate and foreign currency exchange rate changes on future interest expense and principal repayments. This swap involves the receipt of floating rate amounts in U.S. Dollars in exchange for fixed-rate interest payments in Danish Kroner, as well as exchanges of principal at the inception spot rate, over the life of the term loan.
The interest rate swap agreement we utilize on our term loan effectively modifies our exposure to interest rate risk by converting our floating-rate debt to fixed-rate debt for the
next five years,
thus reducing the impact of interest-rate changes on future interest expense. This swap involves the receipt of floating rate amounts in U.S. Dollars in exchange for fixed rate payments in U.S. dollars over the life of the term loan.
The following table summarizes the notional amount and fair value of our derivative instruments:
 
 
  
May 2, 2020
 
  
January 31, 2020
 
Cash Flow Hedges
  
 
 
  
Fair Value Derivatives
 
  
 
 
  
Fair Value Derivatives
 
(In thousands)       
  
Notional Amount
 
  
Asset
 
  
Liability
 
  
Notional Amount
 
  
Asset
 
  
Liability
 
Cross-currency Interest Rate Swap
  $4,489   $—    $192   $4,489   $—    $250 
Interest Rate Swap
  $8,250   $—    $202   $8,250   $—     $96
 
The fair value of both the Cross-currency Interest Rate Swap and the Interest Rate swap are included in other long-term liabilities on the condensed consolidated balance sheets for the periods ended May 2, 2020 and January 31, 2020.
 
The following table presents the impact of our derivative instruments in our condensed consolidated financial statements for the three months ended May 2, 2020 and May 4, 2019:
 
 
  
Amount of Gain (Loss)

Recognized in OCI

on Derivative
 
  
Location of

Gain (Loss)

Reclassified

from Accumulated

OCI into

Income (Expense)
 
 
Amount of Gain (Loss)

Reclassified from

Accumulated OCI

into Income (Expense)
 
Cash Flow Hedge
(In thousands)
  
May 2,

2020
 
 
May 4,

2019
 
 
May 2,

2020
 
  
May 4,

2019
 
Swap Contracts
  
$
(58
 
$
149
 
  
 
Other Income (Expense
 
$
43
 
  
$
185
 
 
  
 
 
 
 
 
 
 
  
   
 
 
 
 
  
 
 
At May 2, 2020, 
we
expect to reclassify approximately $30 thousand of net gains on the swap contracts from accumulated other comprehensive loss to earnings during the next 12 months due to changes in foreign exchange rates and the payment of variable interest associated with the floating-rate debt.
v3.20.1
Royalty Obligation
3 Months Ended
May 02, 2020
Royalty Obligation Disclosure [Abstract]  
Royalty Obligation
Note 10 – Royalty Obligation
In fiscal 2018,
we
entered into an Asset Purchase and License Agreement (the “Honeywell Agreement”) with Honeywell International, Inc. (“Honeywell”) to acquire an exclusive, perpetual, world-wide license to manufacture Honeywell’s narrow-format flight deck printers for two aircraft families along with certain inventory used in the manufacturing of the licensed printers. The purchase price included a guaranteed minimum royalty payment of $15.0 million, to be paid over ten years. Royalty payments are based on gross revenues from the sales of the printers, paper and repair services of the licensed products. The royalty rates vary based on the year in which they are paid or earned and product sold or service provided, and range from single-digit to mid double-digit percentages of gross revenue.
The guaranteed minimum royalty payment obligation was recorded at the present value of the minimum annual royalty payments using a present value factor of 2.8%, which is based on the estimated
after-tax
cost of debt for similar companies. As of May 2, 2020,
we
had paid an aggregate of $4.0 million of the guaranteed minimum royalty obligation. At May 2, 2020, the current portion of the outstanding guaranteed minimum royalty obligation of $2.0 million is to be paid over the next twelve months and is reported as a current liability and the remainder of $7.5 million is reported as a long-term liability on
our
condensed consolidated balance sheet. In addition to the guaranteed minimum royalty payments,
we
also incur excess royalty expense in connection with the Honeywell Agreement.
We did not incur any excess royalty expense for the three-month period ended May 2, 2020. We did incur
 $0.6 
million of excess royalty expense for the three-month period ended May 4, 2019, which is included in cost of revenue in our condensed consolidated statements of income for that period. A tota
l
of $0.6 million
of exc
ess royalty is payable and reported as a current liability on our condensed consolidated balance sheet at May 2, 2020.
v3.20.1
Leases
3 Months Ended
May 02, 2020
Leases [Abstract]  
Leases
Note 11 – Leases
We enter
into lease contracts for certain of
our
facilities at various locations worldwide. Our leases have remaining lease terms of 1 to 8 years, some of which include options to extend the lease term for periods of up to five years when it is reasonably certain
that we
will exercise such options.
Balance sheet and other information related to our leases is as follows:
 
Operating Leases
(In thousands)
  
Balance Sheet Classification
  
May 2,

2020
 
  
January 31,

2020
 
Lease Assets
  
Right of Use Assets
  
$
1,553
 
  
$
1,661
 
Lease Liabilities – Current
  
Other Accrued Expenses
  
 
391
 
  
 
416
 
Lease Liabilities – Long Term
  
Lease Liabilities
  
 
1,199
 
  
 
1,279
 
 
Lease cost information is as follows:
 
  
          
  
          
   
          
 
 
  
 
  
Three Months Ended
 
Operating Leases
(In thousands)
  
Statement of Income Classification
  
May 2,

2020
 
  
May 4,

2019
 
Operating Lease Costs
  
General and Administrative Expense
  
$
120
 
  
$
92
 
 
 
Maturities of operating lease liabilities are as follows:
 
(In thousands)
  
May
2
,
2020
 
2021
  $305 
2022
   348 
2023
   298 
2024
   272 
2025
   168 
Thereafter
   391 
  
 
 
 
Total Lease Payments
   1,782 
Less: Imputed Interest
   (192
  
 
 
 
Total Lease Liabilities
  $1,590 
  
 
 
 
As of May 2, 2020, the weighted-average remaining lease term and weighted-average discount rate for our operating leases are 5.6 years and 3.99%, respectively. We calculated the weighted-average discount rate using incremental borrowing rates, which equal the rates of interest that we would pay to borrow funds on a fully collateralized basis over a similar term.
Supplemental cash flow information related to leases is as follows:
 
   
          
   
          
 
 
  
Three Months Ended
 
(In thousands)
  
May 2,

2020
 
  
May 4,

2019
 
Cash paid for amounts included in the measurement of lease liabilities:
  
$
106
 
  
$
100
 
 
v3.20.1
Accumulated Other Comprehensive Loss
3 Months Ended
May 02, 2020
Equity [Abstract]  
Accumulated Other Comprehensive Loss
Note 12 – Accumulated Other Comprehensive Loss
The changes in the balance of accumulated other comprehensive loss (“AOCL”) by component are as follows:
 
(In thousands)
  
Foreign Currency
Translation
Adjustments
   
Cash
Flow
Hedges
   
Total
 
Balance at January 31, 2020
  $(985  $(108  $(1,093
Other Comprehensive Loss before reclassification
   (142   (46   (188
Amounts reclassified from AOCL to Earnings
       (33   (33
  
 
 
   
 
 
   
 
 
 
Other Comprehensive Loss
   (142   (79   (221
  
 
 
   
 
 
   
 
 
 
Balance at May 2, 2020
  $(1,127  $(187  $(1,314
  
 
 
   
 
 
   
 
 
 
The amounts presented above in other comprehensive loss are net of taxes except for translation adjustments associated with our German and Danish subsidiaries.
v3.20.1
Share-Based Compensation
3 Months Ended
May 02, 2020
Disclosure of Compensation Related Costs, Share-based Payments [Abstract]  
Share-Based Compensation
Note 13 – Share-Based Compensation
We have one equity incentive plan from which we are authorized to grant equity awards, the AstroNova, Inc. 2018 Equity Incentive Plan (the “2018 Plan”). The 2018 Plan provides for, among other things, the issuance of awards, including incentive stock options,
non-qualified
stock options, stock appreciation rights, time
-
based restricted stock units
 
(“RSUs”),
or performance-based restricted stock units
(“PSUs”)
and restricted stock awards (RSAs). The 2018 Plan authorizes the issuance of up to 950,000 shares of common stock, plus an additional number of shares equal to the number of shares subject to awards granted under previous equity incentive plans that are forfeited, cancelled, satisfied without the issuance of stock, otherwise terminated (other than by exercise), or, for shares of stock issued pursuant to any unvested award,
that are
reacquired by
us
at not more than the grantee’s purchase price (other than by exercise). Under the 2018 Plan, all awards to employees generally have a minimum vesting period of one year. Options granted under the 2018 Plan must be issued at an exercise price of not less than the fair market value of
our
common stock on the date of grant and expire after ten years.
Under the 2018 Plan,
293,014
of
unvested shares of restricted stock and options to purchase an aggregate of 135,500
shares were outstanding as of May 2, 2020
.
In addition to the 2018 Plan, we previously granted equity awards under our 2015 Equity Incentive Plan (the “2015 Plan”) and our 2007 Equity Incentive Plan (the “2007 Plan”).
No new awards may be issued under either the 2007 or 2015 plans,
but outstanding awards will continue to be governed by those plans. As of May 2, 2020,
options to purchase an aggregate of 344,245 shares were outstanding under the 2007 Plan and
 
15,113 unvested shares of restricted stock and options to purchase an aggregate of 148,725 shares were outstanding under the 2015 Plan.
We also have a
Non-Employee
Director Annual Compensation Program (the “Program”), under which each of our
non-employee
director
s
automatically receives a grant of restricted stock on the date of their
re-election
to our board of directors. The number of whole shares granted is equal to the number calculated by dividing the stock component of the director compensation amount determined by the compensation committee for that year by the fair market value of our stock on that day. The value of the restricted stock award for fiscal 2021 is $60,000. Shares of restricted stock granted under the Program become vested on the first anniversary of the date of grant, conditioned upon the recipient’s continued service on
our board of directors through that date
.
Share-based compensation expense was recognized as follows:
 
   
Three Months Ended
 
(In thousands)
  
May 2,
2020
   
May 4,
2019
 
Stock Options
  $133   $212 
Restricted Stock Awards and Restricted Stock Units
   357    384 
Employee Stock Purchase Plan
   5    5 
  
 
 
   
 
 
 
Total
  $495   $601 
  
 
 
   
 
 
 
 
Stock Options
There were no stock options granted during the three
-
month period
s
ended
May 2, 2020 and May 4, 2019.
Aggregated information regarding stock option activity for the three months ended May 2, 2020 is summarized below:
 
   
Number of
Options
   
Weighted Average
Exercise Price
 
Outstanding at January 31, 2020
   679,044   $14.46 
Granted
        
Exercised
   (800   7.36 
Forfeited
   (48,374   12.83 
Canceled
   (1,400   7.36 
  
 
 
   
 
 
 
Outstanding at May 2, 2020
   628,470   $14.61 
  
 
 
   
 
 
 
Set forth below is a summary of options outstanding at May 2, 2020:
 
   
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
   42,281   $7.98    2.0    42,281   $7.98    2.0 
$10.01-15.00
   364,464   $13.63    5.5    319,166   $13.65    5.3 
$15.01-20.00
   221,725   $17.48    7.5    128,871   $16.92    7.1 
  
 
 
   
 
 
   
 
 
   
 
 
   
 
 
   
 
 
 
   628,470   $14.61    6.0    490,318   $14.02    5.5 
  
 
 
   
 
 
   
 
 
   
 
 
   
 
 
   
 
 
 
As of May 2, 2020, there was approximately $0.6 million of unrecognized compensation expense related to stock options which is expected to be recognized over a weighted average period of approximately 1.3 years.
Restricted Stock Units, Performance Based Restricted Stock Units and Restricted Stock Awards
Aggregated information regarding RSU, PSU and RSA activity for the three months ended May 2, 2020 is summarized below:
 
   
RSUs, PSUs &
RSAs
   
Weighted Average
Grant Date Fair Value
 
Outstanding at January 31, 2020
   134,634   $16.79 
Granted
   197,131    7.94 
Vested
   (23,638   13.00 
  
 
 
   
 
 
 
Outstanding at May 2, 2020
   308,127   $11.42 
  
 
 
   
 
 
 
 
As of May 2, 2020, there was approximately $2.7 million of unrecognized compensation expense related to RSUs and RSAs which is expected to be recognized over a weighted average period of 1.1 years.
Employee Stock Purchase Plan
We have
 
an Employee Stock Purchase Plan allowing eligible employees to purchase shares of common stock at a 15% discount from fair value on the first or last day of an offering period, whichever is less. A total of 247,500 shares were reserved for issuance under this plan. During the three months ended May 2, 2020 and May 4, 2019, there were 3,755 and 1,571 shares, respectively, purchased under this plan. As of May 2, 2020, 21,219 shares remain
available under our Employee Stock Purchase Plan.
v3.20.1
Income Taxes
3 Months Ended
May 02, 2020
Income Tax Disclosure [Abstract]  
Income Taxes
Note 14 – Income Taxes
Our effective tax rates for the period are as follows:
 
 
  
Three Months

Ended
 
Fiscal 2021
  
 
(37.6
)% 
Fiscal 2020
  
 
19.0
We determine our estimated annual effective tax rate at the end of each interim period based on full-year forecasted
pre-tax
income and facts known at that time. The estimated annual effective tax rate is applied to the
year-to-date
pre-tax
income at the end of each interim period with the cumulative effect of any changes in the estimated annual effective tax rate being recorded in the fiscal quarter in which the change is determined. The tax effect of significant unusual items is reflected in the period in which they occur.
During the three months ended May 2, 2020,
we
recognized an income tax benefit of approximately $118,000.
The effective tax rate in this period was directly impacted by a reduction in our forecasted operating results for fiscal 2021 and a
$78,000
tax benefit related to the expiration of the statute of limitations on previously uncertain tax positions
. During the three months ended May 4, 2019,
we
recognized an income tax expense of approximately $400,000. The effective tax rate in this period was directly impacted by a $53,000 tax benefit related to the expiration of the statute of limitations on a previously uncertain tax position and a $97,000 windfall tax benefit related to
our
stock.
We maintain a valuation allowance on some of our deferred tax assets in certain jurisdictions. A valuation allowance is required when, based upon an assessment of various factors, including recent operating loss history, anticipated future earnings, and prudent and reasonable tax planning strategies, it is more likely than not that some portion of the deferred tax assets will not be realized.
Unrecognized tax benefits represent the difference between tax positions taken or expected to be taken in a tax return and the benefits recognized for financial reporting purposes. As of May 2, 2020,
our
 
cumulative unrecognized tax benefits totaled $319,000 compared to $362,000 as of January 31, 2020. Besides the expiration of the statute of limitations on a previously uncertain tax position, there were no other developments affecting
our
unrecognized tax benefits during the quarter ended May 2, 2020.
 
v3.20.1
Segment Information
3 Months Ended
May 02, 2020
Segment Reporting [Abstract]  
Segment Information
Note 15 – Segment Information
We report two segments: Product Identification (“PI”) and Test & Measurement (“T&M”). We evaluat
e
segment performance based on the segment profit (loss) before corporate expenses.
Summarized below are the Revenue and Segment Operating Profit (Loss) for each reporting segment:
 
   
Three Months Ended
 
   
Revenue
   
Segment Operating Profit
 
(Loss)
 
(In thousands)
  
May 2,
2020
   
May 4,
2019
   
May 2,
2020
  
May 4,
2019
 
PI
  $22,380   $23,591   $3,146  $2,886 
T&M
   8,539    12,590    (156  2,581 
  
 
 
   
 
 
   
 
 
  
 
 
 
Total
  $30,919   $36,181    2,990   5,467 
  
 
 
   
 
 
    
Corporate Expenses
       2,327   2,999 
      
 
 
  
 
 
 
Operating Income
       663   2,468 
Other Expense, Net
       (349  (368
      
 
 
  
 
 
 
Income Before Income Taxes
       314   2,100 
Income Tax (Benefit) Provision
       (118  400 
      
 
 
  
 
 
 
Net Income
      $432  $1,700 
      
 
 
  
 
 
 
v3.20.1
Fair Value
3 Months Ended
May 02, 2020
Fair Value Disclosures [Abstract]  
Fair Value
Note 16 – Fair Value
Assets and Liabilities Recorded at Fair Value on a Recurring Basis
The following tables provide a summary of the financial liabilities that are measured at fair value as of May 2, 2020 and January 31, 2020:
 
 
Liabilities measured at fair value:
  
Fair value measurement at
May 2, 2020
   
Fair value measurement at
January 31, 2020
 
(In thousands)
  
Level 1
   
Level 2
   
Level 3
   
Total
   
Level 1
   
Level 2
   
Level 3
   
Total
 
Cross-Currency Interest Rate Swap Contract (included in Other Long-Term Liabilities)
  $—    $192   $—    $192   $—    $250   $—    $250 
Interest Rate Swap Contract (included in Other Long-Term Liabilities)
   —      202    —      202    —      96   —      96
Earnout Liability (included in Other Long-Term Liabilities)
   —      —      —      —      —      —      14    14 
  
 
 
   
 
 
   
 
 
   
 
 
   
 
 
   
 
 
   
 
 
   
 
 
 
Total Liabilities
  $—    $394   $—     $394   $—    $346   $14   $360 
  
 
 
   
 
 
   
 
 
   
 
 
   
 
 
   
 
 
   
 
 
   
 
 
 
We use the market approach to measure fair value of our derivative instruments. Derivative instruments were measured at fair value using readily observable market inputs, such as quotations on interest rates and foreign exchange rates, and are classified as Level 2 because they are
over-the-counter
contracts with a bank counterparty that are not traded in an active market.
 
Assets and Liabilities Not Recorded at Fair Value
Our
long-term debt, including the current portion of long-term debt not reflected in the financial statements at fair value, is reflected in the table below:
 
   
May 2, 2020
 
   
Fair Value Measurement
   
Carrying
Value
 
(In thousands)
  
Level 1
   
Level 2
   
Level 3
   
Total
 
Long-Term Debt and related current maturities
  $—    $—    $13,227   $13,227   $13,034 
 
   
January 31, 2020
 
   
Fair Value Measurement
   
Carrying
Value
 
(In thousands)
  
Level 1
   
Level 2
   
Level 3
   
Total
 
Long-Term Debt and related current maturities
  $—    $—    $13,258   $13,258   $13,034 
The fair value of
our
long-term debt, including the current portion, is estimated by discounting the future cash flows using current interest rates at which similar loans with the same maturities would be made to borrowers with similar credit ratings and is classified as Level 3.
v3.20.1
Subsequent Events
3 Months Ended
May 02, 2020
Subsequent Events [Abstract]  
Subsequent Event
Note 17 – Subsequent Events
Payroll Protection Program Loan
On May 6, 2020, we entered into a loan agreement with
,
and executed a promissory note in favor of Greenwood Credit Union (“Greenwood”) pursuant to which we
borrowed
$4.4 
million
(the “ PPP Loan”) from Greenwood pursuant to the Paycheck Protection Program (“PPP”) administered by the United States Small Business Administration (the “SBA”) and authorized by the Coronavirus Aid, Relief, and Economic Security Act (the “CARES Act”), enacted on March 27, 2020.
The terms of the PPP Loan were subsequently revised in accordance with the provisions of the Paycheck Protection Flexibility Act of 2020 (the “PPP Flexibility Act”)
which
was enacted on June 5, 2020.
The PPP Loan, which will mature on the fifth anniversary of
the
date on which we submit our request for forgiveness with respect to the PPP Loan, is unsecured and bears interest at a rate
of 1.0%
per annum. The PPP Loan may be prepaid at any time without penalty. The Loan Agreement and Promissory Note include customary provisions for a loan of this type, including prohibitions on our payment of dividends or repurchase of shares of our stock while the PPP Loan remains outstanding. The Loan Agreement and Promissory Note also include events of default relating to, among other things, payment defaults, breaches of the provisions of the Loan Agreement or the Promissory Note, and cross-defaults on other loans.
Subject to the limitations and conditions set forth in the CARES Act, the PPP Flexibility Act, and the regulations and guidance provided by the SBA with respect to the PPP, a portion of the PPP Loan in an amount up to the amount of the PPP Loan proceeds that we spend on payroll, rent, utilities and interest on certain debt during the twenty-four-week period following incurrence of the PPP Loan, may be forgiven under the PPP. The amount of the PPP Loan to be forgiven in respect of rent, utilities and interest on certain debt will be capped at
40%
of the forgiven amount, with the remaining forgiven amount allocated to payroll costs. We intend to utilize the proceeds of the PPP Loan in a manner which will enable us to qualify for forgiveness of the PPP Loan. However, no assurance can be provided that all or any portion of the PPP Loan will be forgiven.
Letter Agreement with Bank of America
On June 22, 2020, we entered into a Letter Agreement with Bank of America, N.A. Pursuant to that agreement, Bank of
America agreed to waive compliance with certain financial covenants in our Credit Agreement related to our consolidated leverage ratio and consolidated EBITDA (as defined in the Credit Agreement) for the measurement period ending May 2, 2020. The Letter Agreement imposes an additional financial covenant that requires us to have, as of June 30, 2020, consolidated EBITDA of not less than
$9.5 
million on a trailing twelve-months basis, and to report our compliance with such covenant on or before August 15, 2020. The Letter Agreement provides that such covenant will not be tested until August 15, 2020 and we do not expect to be in compliance with the covenants at the time, hence constituting an immediate event of default under the Credit Agreement. However, we and Bank of America are actively negotiating the terms of an amendment to restructure the Credit Agreement that would provide for mutually acceptable revised financial and operational covenants and other mutually acceptable revised terms and we both fully expect that amendment to be executed prior to August 15, 2020. The effect of the Letter Agreement therefore is to give both parties sufficient time to complete the relevant documentation and also enable us to execute the amendment by that deadline.
v3.20.1
Summary of Significant Accounting Policies (Policies)
3 Months Ended
May 02, 2020
Accounting Policies [Abstract]  
Recent Accounting Pronouncements
Recently Adopted Accounting Pronouncements
Fair Value Measurement
In August 2018, the Financial Accounting Standards Board (“FASB”) issued Accounting Standard Update (“ASU”)
2018-13, “Fair
Value Measurement (Topic 820), Disclosure Framework-Changes to the Disclosure Requirements for Fair Value Measurement.” ASU
2018-13
modifies the disclosure requirements for fair value measurements by removing, modifying or adding certain disclosures. The provisions of ASU
2018-13
relating to changes in unrealized gains and losses, the range and weighted average of significant unobservable inputs used to develop Level 3 fair value measurements, and the narrative description of measurement uncertainty should be applied prospectively for only the most recent interim or annual period presented in the initial fiscal year of adoption. The remaining provisions should be applied retrospectively to all periods presented upon their effective date. We adopted the provisions of this guidance effective February 1, 2020. The adoption of this guidance did not have a material impact on our consolidated financial statements and related disclosures.
Recent Accounting Standards Not Yet Adopted
Reference Rate Reform
In March 2020, the FASB issued ASU
2020-04,
“Reference Rate Reform (Topic 848), Facilitation of the Effects of Reference Rate Reform on Financial Reporting.” ASU
2020-04
provides optional expedients and exceptions for applying U.S. GAAP to contracts, hedging relationships, and other transactions affected by the discontinuation of the London Interbank Offered Rate (“LIBOR”) or by another reference rate expected to be discontinued. The amendments are effective for all entities as of March 12, 2020 through December 31, 2022. We are currently in the process of evaluating the impact of the transition from LIBOR to an alternative reference rate, but we do not expect that to have a material impact on our consolidated financial statements.
No other new accounting pronouncements, issued or effective during the first three months of the current fiscal year, have had or are expected to have a material impact on our consolidated financial statements. 
v3.20.1
Revenue Recognition (Tables)
3 Months Ended
May 02, 2020
Revenue from Contract with Customer [Abstract]  
Summary of Revenues Disaggregated by Primary Geographic Markets and Major Product Type
Primary geographical markets:
 
   
Three Months Ended
 
(In thousands)
  
May 2,
2020
   
May 4,
2019
 
United States
  $19,789   $21,992 
Europe
   7,450    7,875 
Canada
   1,428    1,516 
Asia
   1,009    3,450 
Central and South America
   954    888 
Other
   289    460 
  
 
 
   
 
 
 
Total Revenue
  $30,919   $36,181 
  
 
 
   
 
 
 
Major product types:
 
   
Three Months Ended
 
(In thousands)
  
May 2,
2020
   
May 4,
2019
 
Hardware
  $8,914   $12,918 
Supplies
   19,118    19,727 
Service and Other
   2,887    3,536 
  
 
 
   
 
 
 
Total Revenue
  $30,919   $36,181 
  
 
 
   
 
 
 
v3.20.1
Net Income Per Common Share (Tables)
3 Months Ended
May 02, 2020
Earnings Per Share [Abstract]  
Summary of Basic and Diluted Net Income Per Share A reconciliation of the shares used in calculating basic and diluted net income per share is as follows:
   
Three Months Ended
 
   
May 2,
2020
   
May 4,
2019
 
Weighted Average Common Shares Outstanding – Basic
   7,073,278    6,970,914 
Effect of Dilutive Options, Restricted Stock Awards and Restricted Stock Units
   31,365    277,412 
  
 
 
   
 
 
 
Weighted Average Common Shares Outstanding – Diluted
   7,104,643    7,248,326 
  
 
 
   
 
 
 
v3.20.1
Intangible Assets (Tables)
3 Months Ended
May 02, 2020
Goodwill and Intangible Assets Disclosure [Abstract]  
Fair Value of Acquired Identifiable Intangible Assets and Related Estimated Useful Lives
Intangible assets are as follows:
 
   
May 2, 2020
   
January 31, 2020
 
(In thousands)
  
Gross
Carrying
Amount
   
Accumulated
Amortization
  
Currency
Translation
Adjustment
   
Net
Carrying
Amount
   
Gross
Carrying
Amount
   
Accumulated
Amortization
  
Currency
Translation
Adjustment
   
Net
Carrying
Amount
 
Miltope:
              
Customer Contract Relationships
  $3,100   $(2,098 $—    $1,002   $3,100   $(2,021 $—    $1,079 
RITEC:
              
Customer Contract Relationships
   2,830    (1,156  —      1,674    2,830    (1,076  —      1,754 
Non-Competition
Agreement
   950    (918  —      32    950    (871  —      79 
TrojanLabel:
              
Existing Technology
   2,327    (1,136  68    1,259    2,327    (1,053  78    1,352 
Distributor Relations
   937    (320  22    639    937    (297  27    667 
Honeywell:
              
Customer Contract Relationships
   27,243    (7,521  —      19,722    27,243    (6,791  —      20,452 
  
 
 
   
 
 
  
 
 
   
 
 
   
 
 
   
 
 
  
 
 
   
 
 
 
Intangible Assets, net
  $37,387   $(13,149 $90   $24,328   $37,387   $(12,109 $105   $25,383 
  
 
 
   
 
 
  
 
 
   
 
 
   
 
 
   
 
 
  
 
 
   
 
 
 
Summary of Estimated Amortization Expense
Estimated amortization expense for the next five fiscal years is as follows:
 
(In thousands)
  
Remaining
2021
   
2022
   
2023
   
2024
   
2025
 
Estimated amortization expense
  $3,018   $3,964   $3,957   $3,960   $3,392 
v3.20.1
Inventories (Tables)
3 Months Ended
May 02, 2020
Inventory Disclosure [Abstract]  
Components of Inventories The components of inventories are as follows:
 
(In thousands)
  
May 2, 2020
   
January 31, 2020
 
Materials and Supplies
  $20,793   $20,151 
Work-In-Process
   1,684    1,408 
Finished Goods
   16,781    17,992 
  
 
 
   
 
 
 
   39,258    39,551 
Inventory Reserve
   (6,701   (5,626
  
 
 
   
 
 
 
  $32,557   $33,925 
  
 
 
   
 
 
 
v3.20.1
Debt (Tables)
3 Months Ended
May 02, 2020
Debt Disclosure [Abstract]  
Schedule of Long Term Debt in the Accompanying Condensed Consolidated Balance Sheets
Long-term debt in the accompanying condensed consolidated balance sheets is as follows:
 
(In thousands)
  
May 2, 2020
   
January 31, 2020
 
USD Term Loan (2.24% as of May 2, 2020 and 3.03% as of January 31, 2020); maturity date of November 30, 2022
  $8,250   $8,250 
USD Term Loan (2.24% as of May 2, 2020 and 3.03% as of January 31, 2020); maturity date of January 31, 2022
   4,784    4,784 
  
 
 
   
 
 
 
  $13,034   $13,034 
Debt Issuance Costs, net of accumulated amortization
   (98   (111
Current Portion of Term Loans
   (6,602   (5,208
  
 
 
   
 
 
 
Long-Term Debt
  $6,334   $7,715 
  
 
 
   
 
 
 
Schedule of Required Principal Payments Remaining on Long Term Debt Outstanding
The schedule of required principal payments remaining during the next five years on long-term debt outstanding as of May 2, 2020 is as follows:
 
(In thousands)