ASTRONOVA, INC., 10-Q filed on 9/9/2020
Quarterly Report
v3.20.2
Cover Page - shares
6 Months Ended
Aug. 01, 2020
Sep. 04, 2020
Cover [Abstract]    
Document Type 10-Q  
Amendment Flag false  
Document Period End Date Aug. 01, 2020  
Document Fiscal Year Focus 2021  
Document Fiscal Period Focus Q2  
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   7,168,424
Entity Incorporation, State or Country Code RI  
Entity File Number 0-13200  
Entity Tax Identification Number 05-0318215  
Entity Address, Address Line One 600 East Greenwich Avenue  
Entity Address, City or Town West Warwick  
Entity Address, Postal Zip Code 02893  
City Area Code 401  
Local Phone Number 828-4000  
v3.20.2
Condensed Consolidated Balance Sheets - USD ($)
$ in Thousands
Aug. 01, 2020
Jan. 31, 2020
CURRENT ASSETS    
Cash and Cash Equivalents $ 11,235 $ 4,249
Accounts Receivable, net 14,816 19,784
Inventories, net 32,368 33,925
Prepaid Expenses and Other Current Assets 2,899 2,193
Total Current Assets 61,318 60,151
Property, Plant and Equipment, net 11,466 11,268
Intangible Assets, net 23,436 25,383
Goodwill 12,552 12,034
Deferred Tax Assets, net 5,103 5,079
Right of Use Assets 1,541 1,661
Other Assets 1,063 1,088
TOTAL ASSETS 116,479 116,664
CURRENT LIABILITIES    
Accounts Payable 5,127 4,409
Accrued Compensation 2,575 2,700
Other Liabilities and Accrued Expenses 3,637 4,711
Current Portion of Long-Term Debt 4,392 5,208
Revolving Credit Facility 2,000 6,500
Current Liability – Royalty Obligation 2,000 2,000
Current Liability – Excess Royalty Payment Due 147 773
Deferred Revenue 351 466
Total Current Liabilities 20,229 26,767
Long-Term Debt, net of current portion 9,859 7,715
Royalty Obligation, net of current portion 7,087 8,012
Long-Term Debt – PPP Loan 4,422  
Lease Liabilities, net of current portion 1,191 1,279
Other Long-Term Liabilities 652 1,081
Deferred Tax Liabilities 482 435
TOTAL LIABILITIES 43,922 45,289
SHAREHOLDERS' EQUITY    
Common Stock, $0.05 Par Value, Authorized 13,000,000 shares; Issued 10,412,254 shares and 10,343,610 shares at August 1, 2020 and January 31, 2020, respectively 520 517
Additional Paid-in Capital 57,284 56,130
Retained Earnings 49,236 49,298
Treasury Stock, at Cost, 3,295,188 and 3,281,701 shares at August 1, 2020 and January 31, 2020, respectively (33,568) (33,477)
Accumulated Other Comprehensive Loss, net of tax (915) (1,093)
TOTAL SHAREHOLDERS' EQUITY 72,557 71,375
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $ 116,479 $ 116,664
v3.20.2
Condensed Consolidated Balance Sheets (Parenthetical) - $ / shares
Aug. 01, 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 10,412,254 10,343,610
Treasury Stock, Shares 3,295,188 3,281,701
v3.20.2
Condensed Consolidated Statements of Income - USD ($)
$ in Thousands
3 Months Ended 6 Months Ended
Aug. 01, 2020
Aug. 03, 2019
Aug. 01, 2020
Aug. 03, 2019
Income Statement [Abstract]        
Revenue $ 27,658 $ 33,468 $ 58,578 $ 69,649
Cost of Revenue 17,871 21,491 37,935 43,433
Gross Profit 9,787 11,977 20,643 26,216
Operating Expenses:        
Selling and Marketing 5,555 6,413 11,481 13,178
Research and Development 1,493 1,785 3,433 3,792
General and Administrative 2,535 2,616 4,861 5,615
Operating Expenses 9,583 10,814 19,775 22,585
Operating Income 204 1,163 868 3,631
Other Income (Expense), net 328 (183) (23) (550)
Income Before Income Taxes 532 980 845 3,081
Income Tax Provision 529 29 411 429
Net Income $ 3 $ 951 $ 434 $ 2,652
Net Income per Common Share - Basic: $ 0 $ 0.14 $ 0.06 $ 0.38
Net Income per Common Share - Diluted: $ 0 $ 0.13 $ 0.06 $ 0.36
Weighted Average Number of Common Shares Outstanding—Basic 7,105,241 7,020,890 7,089,169 6,995,679
Weighted Average Number of Common Shares Outstanding—Diluted 7,122,595 7,371,202 7,113,528 7,309,541
v3.20.2
Condensed Consolidated Statements of Comprehensive Income - USD ($)
$ in Thousands
3 Months Ended 6 Months Ended
Aug. 01, 2020
Aug. 03, 2019
Aug. 01, 2020
Aug. 03, 2019
Statement of Comprehensive Income [Abstract]        
Net Income $ 3 $ 951 $ 434 $ 2,652
Other Comprehensive Income (Loss), Net of Taxes:        
Foreign Currency Translation Adjustments 351 (81) 210 (253)
Change in Value of Derivatives Designated as Cash Flow Hedge (229) (116) (270)  
Losses (Gains) from Cash Flow Hedges Reclassified to Income Statement 232 (60) 193 (204)
Cross-Currency Interest Rate Swap Termination 45   45  
Other Comprehensive Income (Loss) 399 (257) 178 (457)
Comprehensive Income $ 402 $ 694 $ 612 $ 2,195
v3.20.2
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        
Common Stock – Cash Dividend – $0.07 per share (489)     (489)    
Net Income 1,700     1,700    
Other Comprehensive Income (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, 2019 69,775 $ 511 53,568 49,511 (32,997) (818)
Beginning Balance, Shares at Jan. 31, 2019   10,218,559        
Net Income 2,652          
Other Comprehensive Income (Loss) (457)          
Ending Balance at Aug. 03, 2019 72,088 $ 516 55,121 51,180 (33,454) (1,275)
Ending Balance, Shares at Aug. 03, 2019   10,315,550        
Beginning Balance at May. 04, 2019 71,614 $ 513 54,474 50,722 (33,077) (1,018)
Beginning Balance, Shares at May. 04, 2019   10,256,071        
Share-Based Compensation 451   451      
Employee Option Exercises 199 $ 1 198      
Employee Option Exercises, Shares   13,821        
Restricted Stock Awards Vested, net (377) $ 2 (2)   (377)  
Restricted Stock Awards Vested, net, Shares   45,658        
Common Stock – Cash Dividend – $0.07 per share (493)     (493)    
Net Income 951     951    
Other Comprehensive Income (Loss) (257)         (257)
Ending Balance at Aug. 03, 2019 72,088 $ 516 55,121 51,180 (33,454) (1,275)
Ending Balance, Shares at Aug. 03, 2019   10,315,550        
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   4,456        
Restricted Stock Awards Vested, net (54) $ 1 (1)   (54)  
Restricted Stock Awards Vested, net, Shares   23,638        
Common Stock – Cash Dividend – $0.07 per share (497)     (497)    
Net Income 432     432    
Other Comprehensive Income (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        
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        
Employee Option Exercises, Shares 800          
Net Income $ 434          
Other Comprehensive Income (Loss) 178         178
Ending Balance at Aug. 01, 2020 72,557 $ 520 57,284 49,236 (33,568) (915)
Ending Balance, Shares at Aug. 01, 2020   10,412,254        
Beginning Balance at May. 02, 2020 71,562 $ 518 56,656 49,233 (33,531) (1,314)
Beginning Balance, Shares at May. 02, 2020   10,371,704        
Share-Based Compensation 601   601      
Employee Option Exercises 29   29      
Employee Option Exercises, Shares   4,874        
Restricted Stock Awards Vested, net (37) $ 2 (2)   (37)  
Restricted Stock Awards Vested, net, Shares   35,676        
Net Income 3     3    
Other Comprehensive Income (Loss) 399         399
Ending Balance at Aug. 01, 2020 $ 72,557 $ 520 $ 57,284 $ 49,236 $ (33,568) $ (915)
Ending Balance, Shares at Aug. 01, 2020   10,412,254        
v3.20.2
Consolidated Statements of Changes in Shareholders' Equity (Parenthetical) - $ / shares
3 Months Ended
May 02, 2020
Aug. 03, 2019
May 04, 2019
Statement of Stockholders' Equity [Abstract]      
Common Stock – Cash Dividend per share $ 0.07 $ 0.07 $ 0.07
v3.20.2
Condensed Consolidated Statements of Cash Flows - USD ($)
$ in Thousands
6 Months Ended
Aug. 01, 2020
Aug. 03, 2019
Cash Flows from Operating Activities:    
Net Income $ 434 $ 2,652
Adjustments to Reconcile Net Income to Net Cash Provided by Operating Activities:    
Depreciation and Amortization 3,133 3,142
Amortization of Debt Issuance Costs 24 25
Share-Based Compensation 1,096 1,052
Changes in Assets and Liabilities:    
Accounts Receivable 5,069 2,754
Inventories 1,767 (6,872)
Income Taxes 143 (2,037)
Accounts Payable and Accrued Expenses (1,244) 533
Other (1,258) (237)
Net Cash Provided by Operating Activities 9,164 1,012
Cash Flows from Investing Activities:    
Additions to Property, Plant and Equipment (1,201) (1,538)
Net Cash Used for Investing Activities (1,201) (1,538)
Cash Flows from Financing Activities:    
Net Cash Proceeds from Employee Stock Option Plans 6 443
Net Cash Proceeds from Share Purchases under Employee Stock Purchase Plan 55 53
Net Cash Used for Payment of Taxes Related to Vested Restricted Stock (91) (446)
Borrowings under Revolving Credit Facility 5,000 2,000
Repayment under Revolving Credit Facility (9,500)  
Payment of Minimum Guarantee Royalty Obligation (1,000) (875)
Proceeds from Long-Term Debt – PPP Loan 4,422  
Proceeds from Long-Term Debt Borrowings 15,232  
Payoff of Long-Term Debt (11,732)  
Principal Payments of Long-Term Debt (2,104) (2,788)
Payments of Debt Issuance Costs (89)  
Dividends Paid (497) (982)
Net Cash Used for Financing Activities (298) (2,595)
Effect of Exchange Rate Changes on Cash and Cash Equivalents (679) 110
Net Increase (Decrease) in Cash and Cash Equivalents 6,986 (3,011)
Cash and Cash Equivalents, Beginning of Period 4,249 7,534
Cash and Cash Equivalents, End of Period 11,235 4,523
Supplemental Disclosures of Cash Flow Information:    
Cash Paid During the Period for Interest 309 352
Cash Paid During the Period for Income Taxes, Net of Refunds $ 251 2,469
Schedule of Non-Cash Financing Activities:    
Value of Shares Received in Satisfaction of Option Exercise Price   $ 11
v3.20.2
Business and Basis of Presentation
6 Months Ended
Aug. 01, 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 manufacturer (“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.
v3.20.2
Summary of Significant Accounting Policies
6 Months Ended
Aug. 01, 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 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 six months of the current year, have had or are expected to have a material impact on our consolidated financial statements.
v3.20.2
Revenue Recognition
6 Months Ended
Aug. 01, 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 and airborne printers 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
    
Six Months Ended
 
(In thousands)   
August 1,
2020
    
August 3,
2019
    
August 1,
2020
    
August 3,
2019
 
United States
   $ 17,866      $ 20,648      $ 37,655      $ 42,640  
Europe
     6,314        7,473        13,764        15,349  
Canada
     1,452        1,389        2,880        2,905  
Central and South America
     914        1,325        1,868        2,213  
Asia
     831        2,218        1,841        5,667  
Other
     281        415        570        875  
  
 
 
    
 
 
    
 
 
    
 
 
 
Total Revenue
   $ 27,658      $ 33,468      $ 58,578      $ 69,649  
  
 
 
    
 
 
    
 
 
    
 
 
 
Major product types:
 
    
Three Months Ended
    
Six Months Ended
 
(In thousands)   
August 1,
2020
    
August 3,
2019
    
August 1,
2020
    
August 3,
2019
 
Hardware
   $ 8,439      $ 12,437      $ 17,354      $ 25,355  
Supplies
     17,140        18,080        36,258        37,808  
Service and Other
     2,079        2,951        4,966        6,486  
  
 
 
    
 
 
    
 
 
    
 
 
 
Total Revenue
   $ 27,658      $ 33,468      $ 58,578      $ 69,649  
  
 
 
    
 
 
    
 
 
    
 
 
 
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 $352,000 and $466,000 at August 1, 2020 and January 31, 2020, respectively, and are recorded as deferred revenue in
the
 
accompanying
condensed consolidated balance sheet
.
The decrease in the deferred revenue balance during the six months ended August 1, 2020 is primarily due to approximately $429,000 of revenue recognized during the period that was included in the deferred revenue balance at January 31, 2020, offset by cash payments received in advance of satisfying performance obligations.
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 $29,000 of direct costs for the
six-months
ended August 1, 2020 and the balance of deferred incremental direct costs net of accumulated amortization at August 1, 2020 was $915,000, of which $59,000 is reported in other current assets and $856,000 is reported in other assets in the accompanying condensed consolidated balance sheet.
v3.20.2
Net Income Per Common Share
6 Months Ended
Aug. 01, 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
    
Six Months Ended
 
    
August 1,
2020
    
August 3,
2019
    
August 1,
2020
    
August 3,
2019
 
Weighted Average Common Shares Outstanding – Basic
     7,105,241        7,020,890        7,089,169        6,995,679  
Effect of Dilutive Options, Restricted Stock Awards and Restricted Stock Units
     17,354        350,312        24,359        313,862  
  
 
 
    
 
 
    
 
 
    
 
 
 
Weighted Average Common Shares Outstanding – Diluted
     7,122,595        7,371,202        7,113,528        7,309,541  
  
 
 
    
 
 
    
 
 
    
 
 
 
For the three and six months ended August 1, 2020, the diluted per share amounts do not reflect common equivalent shares outstanding of 901,962 and 912,508
,
respectively. For the three and six months ended August 3, 2019, the diluted per share amounts do not reflect common equivalent shares outstanding of 11,560 and 218,466
,
respectively. These outstanding common equivalent shares were not included due to their anti-dilutive effect.
v3.20.2
Intangible Assets
6 Months Ended
Aug. 01, 2020
Goodwill and Intangible Assets Disclosure [Abstract]  
Intangible Assets
Note 5 – Intangible Assets
Intangible assets are as follows:
 
    
August 1, 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      $ (2,176   $ —      $ 924      $ 3,100      $ (2,021   $ —      $ 1,079  
RITEC:
                     
Customer Contract Relationships
     2,830        (1,236     —          1,594        2,830        (1,076     —          1,754  
Non-Competition
Agreement
     950        (950     —          —          950        (871     —          79  
TrojanLabel:
                     
Existing Technology
     2,327        (1,222     160        1,265        2,327        (1,053     78        1,352  
Distributor Relations
     937        (344     69        662        937        (297     27        667  
Honeywell:
                     
Customer Contract Relationships
     27,243        (8,252     —          18,991        27,243        (6,791     —          20,452  
  
 
 
    
 
 
   
 
 
    
 
 
    
 
 
    
 
 
   
 
 
    
 
 
 
Intangible Assets, net
   $ 37,387      $ (14,180   $ 229      $ 23,436      $ 37,387      $ (12,109   $ 105      $ 25,383  
  
 
 
    
 
 
   
 
 
    
 
 
    
 
 
    
 
 
   
 
 
    
 
 
 
There were no impairments to intangible assets during the periods ended August 1, 2020 and August 3, 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 August 1, 2020 and August 3, 2019, respectively. Amortization expense of $2.1 million related to the
above acquired intangibles has been included in the accompanying condensed consolidated statement of income for each of the six months ended August 1, 2020 and August 3, 2019.
Estimated amortization expense for the next five fiscal years is as follows:
 
(In thousands)
  
Remaining
2021
    
2022
    
2023
    
2024
    
2025
 
Estimated amortization expense
   $ 1,993      $ 3,969      $ 3,963      $ 3,965      $ 3,393  
v3.20.2
Inventories
6 Months Ended
Aug. 01, 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)
  
August 1, 2020
    
January 31, 2020
 
Materials and Supplies
   $ 21,287      $ 20,151  
Work-In-Process
     1,857        1,408  
Finished Goods
     16,927        17,992  
  
 
 
    
 
 
 
     40,071        39,551  
Inventory Reserve
     (7,703      (5,626
  
 
 
    
 
 
 
   $ 32,368      $ 33,925  
  
 
 
    
 
 
 
v3.20.2
Credit Agreement and Debt
6 Months Ended
Aug. 01, 2020
Debt Disclosure [Abstract]  
Credit Agreement and Debt
Note 7 – Credit Agreement and Debt
Credit Agreement
On July 30, 2020, we entered into an Amended and Restated Credit Agreement (the “A&R Credit Agreement”) with Bank of America, N.A., as lender (the “Lender”), our wholly owned subsidiary, ANI ApS, a Danish private limited liability company and TrojanLabel ApS, a Danish private limited liability company and wholly-owned subsidiary of ANI ApS(“TrojanLabel”). The A&R Credit Agreement amended and restated the Credit Agreement dated as of February 28, 2017 (the “Existing Credit Agreement”) by and among us, ANI ApS, TrojanLabel and the Lender. In connection with the A&R Credit Agreement, we entered into an Amended and Restated Security and Pledge Agreement and a mortgage in favor of the Lender with respect to our owned real property in West Warwick, Rhode Island. Under the A&R Credit Agreement, AstroNova, Inc. is the sole borrower, and its obligations are guaranteed by ANI ApS and TrojanLabel.
Immediately prior to the closing of the A&R Credit Agreement, we repaid $1.5
million in principal amount of term loans outstanding under the Existing Credit Agreement.
The A&R Credit Agreement provides for (i) a term loan in the principal amount of $15.2
 million,
which we used to refinance the outstanding term loans borrowed by us and ANI ApS under the Existing Credit Agreement and a portion of the outstanding revolving loans borrowed by us under the Existing Credit Agreement, and (ii) a $10.0
million
revolving credit facility available
to
us for general corporate purposes. 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.
At August 1, 2020,
 
the balance outstanding on the revolving line of credit is
$
2.0
 million
.
 
The outstanding balance bears interest at a weighted average annual rate of
2.78
% and $
81,000
and $
153,000
of interest has been incurred on this obligation and included in other income (expense) in the accompanying condensed consolidated income statement for the three and six month periods ended August 1, 2020, respectively. At August 1, 2020, there was
 
$
8.0
 million
remaining
available for borrowing under the revolving credit facility.
The A&R Credit Agreement was accounted for as a debt modification in a non-troubled debt restructuring
.
We incurred
$
0.2
 
million of
new debt issuance costs
related to the term loan, of which $
0.1
 
million
of new lender fees were
recorded against the debt as debt issuance costs and will be amortized over the term of the loan and
 
$
0.1
 
million
of third party fees that were
expensed as incurred. Additionally, $
0.1
 
million of unamortized debt issuance costs related to the prior term debt will be amortized over the remaining life of the new term loan. We also incurred
 
$
0.1
 
million of
new debt issuance
fees in connection with the revolving line of credit which are included as a component of prepaid expenses
and
other current assets and will be amortized over the remaining life of the A&R Credit Agreement.
Under the A&R Credit Agreement, the principal amount of each
quarterly installment
required to be paid on the last day of each of our fiscal quarters ending July 31, 2020 and October 31, 2020 is $0.8 million;
 
the principal amount of the quarterly installment required to be paid on the last day of our fiscal quarter ending January 31, 2021 is $1.1 million; the principal amount of the quarterly installment required to be paid on the last day of the our fiscal quarter ending April 30, 2021 is $1.1 million; the principal amount of each quarterly installment required to be paid on the last day of each of the our fiscal quarters ending July 31, 2021, October 31, 2021, January 31, 2022 and April 30, 2022 is $1.4 million, and the entire remaining principal balance of the term loan is required to be paid on June 15, 2022.
We may voluntarily prepay the term loan, in whole or in part, from time to time without premium or penalty (other than customary breakage costs, if applicable). We may repay borrowings under the revolving credit facility at any time without premium or penalty (other than customary breakage costs, if applicable), but in any event no later than June 15, 2022, and any outstanding revolving loans thereunder will be due and payable in full, and the revolving credit facility will terminate, on such date. We may reduce or terminate the revolving line of credit at any time, subject to certain thresholds and conditions, without premium or penalty.
Under the A&R Credit Agreement the term loan and revolving credit loans bear interest at a rate per annum equal to, at the 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
 
2.15% to 3.65%
based on our consolidated leverage ratio, or (b) a fluctuating reference rate equal to the highest of (i) the federal fund rate plus
0.50
%, (ii) Bank of America’s publicly announced prime rate, (iii) the LIBOR Rate plus
1.00% or (iv) 1.00%,
plus a margin that varies within a range of
1.15% to 2.65%
based on our consolidated leverage ratio. We are also required to pay a commitment fee on the undrawn portion of the revolving credit facility that varies within a range of
 
.25% and .675%
based on our consolidated leverage ratio.
The loans under the A&R Credit Agreement are subject to certain mandatory prepayments, subject to various exceptions, from (a) net cash proceeds from certain dispositions of property, (b) net cash proceeds from certain issuances of equity, (c) net cash proceeds from certain issuances of additional debt and (d) net cash proceeds from certain extraordinary receipts.
Amounts repaid under the revolving credit facility may be reborrowed, subject to continued compliance with the A&R Credit Agreement. No amount of the term loan that is repaid may be reborrowed.
Under the A&R Credit Agreement , we must comply with various customary financial and
non-financial
covenants including a maximum consolidated leverage ratio, a minimum consolidated fixed charge coverage ratio, a minimum level of EBITDA, a consolidated asset coverage ratio and a minimum level of liquidity. The primary
non-financial
covenants limit our and our subsidiaries’ ability to incur future indebtedness, to place liens on assets, to pay dividends or distributions on capital stock, to repurchase or acquire capital stock, to conduct mergers or acquisitions, to sell assets, to alter the capital structure, to make investments and loans, to change the nature of their business, and to prepay subordinated indebtedness, in each case subject to certain exceptions and thresholds as set forth in the A&R Credit Agreement.
The Lender is entitled to accelerate repayment of the loans and to terminate its revolving credit commitment under the A&R Credit Agreement upon the occurrence of any of various customary events of default, which include, among other events, the following (which are subject, in some cases, to certain grace periods): failure to pay when due any principal, interest or other amounts in respect of the loans, breach of any of our covenants or representations under the loan documents, default under any other of our or our subsidiaries’ significant indebtedness agreements, a bankruptcy, insolvency or similar event with respect to us or any of our subsidiaries, a significant unsatisfied judgment against us or any of our subsidiaries, or our undergoing a change of control.
In addition to the guarantees by ANI ApS and TrojanLabel, our obligations under the A&R Credit Agreement are also secured by substantially all of AstroNova, Inc.’s personal property assets (including a pledge of the equity interests it holds in ANI ApS, in our wholly-owned German subsidiary AstroNova GmbH, and in our wholly-owned French subsidiary AstroNova SAS), subject to certain exceptions, and by a mortgage on our owned real property in West Warwick, Rhode Island.
Long-Term Debt
Long-term debt in the accompanying condensed consolidated balance sheets is as follows:
 
(In thousands)
  
August 1, 2020
    
January 31, 2020
 
USD Term Loan (4.65% as of August 1, 2020); maturity date of June 15, 2022
   $ 14,430      $ —    
USD Term Loan (3.03% as of January 31, 2020)
     —          8,250  
USD Term Loan (3.03% as of January 31, 2020)
     —          4,784  
  
 
 
    
 
 
 
   $ 14,430      $ 13,034  
Debt Issuance Costs, net of accumulated amortization
     (179      (111
Current Portion of Term Loans
     (4,392      (5,208
  
 
 
    
 
 
 
Long-Term Debt
   $ 9,859      $ 7,715  
  
 
 
    
 
 
 
During the three and six months ended August 1, 2020, we recognized $82,000 and $166,000 of interest expense, respectively, which was included in other income (expense) in the accompanying condensed consolidated income statement. During the three and six months ended August 3, 2019, we recognized $117,000 and $185,000 of interest expense, respectively, which was included in other income (expense) in the accompanying condensed consolidated income statement.
The schedule of required principal payments remaining during the next five years on long-term debt outstanding as of August 1, 2020 is as follows:
 
(In thousands)
      
Fiscal 2021, remainder
   $ 1,854  
Fiscal 20
22
     5,326  
Fiscal 202
3
     7,250  
  
 
 
 
   $ 14,430  
  
 
 
 
v3.20.2
Paycheck Protection Program Loan
6 Months Ended
Aug. 01, 2020
Debt Disclosure [Abstract]  
Paycheck Protection Program Loan
Note 8 – Paycheck 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 May 6, 2022, is unsecured and bears interest at a rate of 1.0% per annum, accruing from the loan date, and is payable monthly. No
payments are due on the PPP Loan
until the date on which the lender determines the amount of the PPP Loan that is eligible
for
forgiveness, so long as we apply for forgiveness within the ten
 months from the
end of the twenty-four week period following the date of
 
loan
 
disbursement
, but interest will continue to accrue during the deferral period. We accrued interest for the PPP Loan in the amount of $
11,000
,
which is included in other income in the accompanying condensed consolidated statements of income for the three and six month periods ended August 1, 2020.
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 have fully utilized the PPP Loan proceeds for qualifying expenses and during the third quarter of this current year we expect to apply for forgiveness of the PPP Loan in accordance with the terms of the CARES Act, as amended by the PPP Flexibility Act. Whether our application for forgiveness will be granted and in what amount is subject to an application to, and approval by, the SBA and may also be subject to further requirements in any regulations and guidelines the SBA may adopt. The PPP Loan is classified as long-term debt in the condensed consolidated balance sheet until the forgiveness determination has been made by the SBA.
v3.20.2
Derivative Financial Instruments and Risk Management
6 Months Ended
Aug. 01, 2020
Derivative Instruments and Hedging Activities Disclosure [Abstract]  
Derivative Financial Instruments and Risk Management
Note
9
 – Derivative Financial Instruments and Risk Management
In February 28, 2017, as part of the Existing Credit Agreement, we entered into a cross-currency interest rate swap to manage the interest rate risk and foreign currency exchange risk associated with the floating-rate foreign currency-denominated term loan borrowing by
ANI ApS
and an interest rate swap to manage the interest rate risk associated with our variable rate term loan borrowing (the “Swaps”). Both Swaps were designated as cash flow hedges of floating-rate borrowings.
Our cross-currency interest rate swap agreement effectively modified 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 ANI ApS’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 involved the receipt of floating interest 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. 
Subsequently, concurrent with our borrowings to fund the payments for the Asset Purchase and License Agreement with Honeywell International, we entered into an interest rate swap agreement to modify our exposure to interest rate risk by effectively converting our floating-rate borrowings to fixed-rate debt over the term of the loan, thus reducing the impact of interest-rate changes on future interest expense. This swap involved the receipt of floating interest rate amounts in U.S. Dollars in exchange for fixed interest rate payments in U.S. dollars over the life of the term loan.
As a direct result of the terms of the Lender’s conditions for entry into the A&R Credit Agreement, on July 30, 2020, we terminated the two Swaps that we used to manage the interest rate and foreign currency exchange risks associated with our prior borrowings under the Existing Credit Agreement. The terms of the A&R Credit Agreement caused those swaps to cease to be effective hedges of the underlying exposures. The termination of the Swaps were contracted immediately prior to the end of the second quarter of fiscal 2021 at a cash cost of approximately $0.7 million which is included in the accounts payable balance in the accompanying condensed consolidated balance sheet at August 1, 2020 and, was settled in the third quarter. Upon termination, the remaining balance of $58,000 in accumulated other comprehensive loss related to the cross-currency interest rate swap was reclassified into earnings as the forecasted foreign currency interest payments will not occur and is included in other income (expense) in the accompanying condensed consolidated statements of income for the three and six month periods ended August 1, 2020. The balance in accumulated other comprehensive loss related to the interest rate swap of $0.2 million is being amortized into earnings through the original term of the hedge relationship as the underlying floating interest rate debt still exists.
The following table summarizes the notional amount and fair value of our derivative instruments:
 
    
August 1, 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      $ —      $ 250  
Interest Rate Swap
   $ —      $ —      $ —      $ 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 period ended January 31, 2020.
The following table presents the impact of
our
derivative instruments in our condensed consolidated financial statements for the three and six months ended August 1, 2020 and August 3, 2019:
 
    
Three Months Ended
 
    
Amount of Gain (Loss)
Recognized in OCI
on Derivative
   
Location of
Gain (Loss)
Reclassified
from Accumulated
OCI into
Income
    
Amount of Gain (Loss)
Reclassified from
Accumulated OCI
into Income
 
Cash Flow Hedge
(In thousands)
  
August 1,
2020
    
August 3,
2019
    
August 1,
2020
    
August 3,
2019
 
Swap contracts
   $ (290    $ (147     Other Income (Expense)      $ (297    $ 77  
  
 
 
    
 
 
      
 
 
    
 
 
 
    
Six Months Ended
 
    
Amount of Gain (Loss)
Recognized in OCI
on Derivative
    
Location of
Gain (Loss)
Reclassified
from Accumulated
OCI into Income
    
Amount of Gain (Loss)
Reclassified from
Accumulated OCI
into Income
 
Cash Flow Hedge
(In thousands)
  
August 1,
2020
    
August 3,
2019
    
August 1,
2020
    
August 3,
2019
 
Swap contracts
   $ (340    $ 2        Other Income (Expense)      $ (248    $ 262  
  
 
 
    
 
 
       
 
 
    
 
 
 
At August 1, 2020, we expect to reclassify approximately $0.1 million of net losses on the frozen OCI balance associated with the terminated interest rate swap from accumulated other comprehensive loss to earnings during the next 12 months due to the payment of variable interest associated with the floating
 interest
rate debt.
v3.20.2
Royalty Obligation
6 Months Ended
Aug. 01, 2020
Royalty Obligation Disclosure [Abstract]  
Royalty Obligation
Note
10
 – Royalty Obligation
In fiscal 2018, we entered into an Asset Purchase and License 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, 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 August 1, 2020, we had paid an aggregate of $4.5 million of the guaranteed minimum royalty obligation. At August 1, 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 $7.1 million is reported as a long-term liability on
our
condensed consolidated balance sheet. We did not incur any excess royalty expense for the three and
six
 
month
 periods ended August 1, 2020. We did incur excess royalty expense of $0.1
 million
 and $0.7 million, respectively, for the three and
six
 
month
periods ended August 3, 2019, which is included in cost of revenue in our consolidated statements of income. A total of $0.1 million of excess royalty is payable and reported as a current liability on our condensed consolidated balance sheet at August 1, 2020.
v3.20.2
Leases
6 Months Ended
Aug. 01, 2020
Leases [Abstract]  
Leases
Note 1
1
 – 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
  
August 1,
2020
    
January 31,
2020
 
Lease Assets
   Right of Use Assets    $ 1,541      $ 1,661  
Lease Liabilities – Current
   Other Liabilities and
 
Accrued Expenses
     394        416  
Lease Liabilities – Long Term
   Lease Liabilities      1,191        1,279  
 
Lease cost information is as follows:
 
         
Three Months Ended
    
Six Months Ended
 
Operating Leases
(In thousands)
  
Statement of Income Classification
  
August 1,
2020
    
August 1,
2020
 
Operating Lease Costs
   General and Administrative Expense    $ 122      $ 242  
         
Three Months Ended
    
Six Months Ended
 
Operating Leases
(In thousands)
  
Statement of Income Classification
  
August 3,
2019
    
August 3,
2019
 
Operating Lease Costs
   General and Administrative Expense    $ 118      $ 210  
Maturities of operating lease liabilities are as follows:
 
(In thousands)
  
August 1,
2020
 
2021
   $ 214  
2022
     363  
2023
     312  
2024
     286  
2025
     179  
Thereafter
     419  
  
 
 
 
Total Lease Payments
     1,773  
Less: Imputed Interest
     (188
  
 
 
 
Total Lease Liabilities
   $ 1,585  
  
 
 
 
As of August 1, 2020, the weighted-average remaining lease term and weighted-average discount rate for our operating leases are 5.5 years and 4.0%, 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
 
  
Six Months Ended
 
(In thousands)
  
August 1,
2020
 
  
August 1,
2020
 
Cash paid for amounts included in the measurement of lease liabilities:
  
     
  
     
Operating cash flows for operating leases
  
$
125
 
  
$
231
 
     
 
  
Three Months Ended
 
  
Six Months Ended
 
(In thousands)
  
August 3,
2019
 
  
August 3,
2019
 
Cash paid for amounts included in the measurement of lease liabilities:
  
     
  
     
Operating cash flows for operating leases
  
$
98
 
  
$
198
 
v3.20.2
Accumulated Other Comprehensive Loss
6 Months Ended
Aug. 01, 2020
Equity [Abstract]  
Accumulated Other Comprehensive Loss
Note 1
2
 – 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
     210        (270
     (60
Amounts reclassified from AOCL to Earnings
     —          193        193  
  
 
 
    
 
 
    
 
 
 
Other Comprehensive Income (Loss)
     210        (32      178  
  
 
 
    
 
 
    
 
 
 
Balance at August 1, 2020
   $ (775    $ (140    $ (915
  
 
 
    
 
 
    
 
 
 
The amounts presented above in other comprehensive loss are net of taxes except for translation adjustments associated with our German and Danish subsidiaries.
v3.20.2
Share-Based Compensation
6 Months Ended
Aug. 01, 2020
Disclosure of Compensation Related Costs, Share-based Payments [Abstract]  
Share-Based Compensation
Note 1
3
 – 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, 305,338 unvested shares of restricted stock and options to purchase an aggregate of 135,500 shares were outstanding as of August 1, 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 August 1, 2020, options to purchase an aggregate of 344,245 shares were outstanding under the 2007 Plan and 14,583 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
directors 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
    
Six Months Ended
 
(In thousands)   
August 1,
2020
    
August 3,
2019
    
August 1,
2020
    
August 3,
2019
 
Stock Options
   $ 131      $ 127      $ 264      $ 339  
Restricted Stock Awards and Restricted Stock Units
     465        320        822        704  
Employee Stock Purchase Plan
     5        4        10        9  
  
 
 
    
 
 
    
 
 
    
 
 
 
Total
   $ 601      $ 451      $ 1,096      $ 1,052  
  
 
 
    
 
 
    
 
 
    
 
 
 
Stock Options
There were no stock options granted during the six months ended August
 
1, 2020 and August 3, 2019.
Aggregated information regarding stock option activity for the six months ended August 1, 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 August 1, 2020
     628,470      $ 14.61  
  
 
 
    
 
 
 
Set forth below is a summary of options outstanding at August 1, 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        1.8        42,281      $ 7.98        1.8  
$10.01-15.00
     364,464      $ 13.63        5.4        319,166      $ 13.65        5.0  
$15.01-20.00
     221,725      $ 17.48        7.3        167,367      $ 17.22        7.2  
  
 
 
    
 
 
    
 
 
    
 
 
    
 
 
    
 
 
 
     628,470      $ 14.61        5.8        528,814      $ 14.33        5.5  
  
 
 
    
 
 
    
 
 
    
 
 
    
 
 
    
 
 
 
As of August 1,
 
2020
, there was approximately $0.5 million of unrecognized compensation expense related to stock options which is expected to be recognized over a weighted average period of approximately 1.1 years.
Restricted Stock Units (RSUs) and Restricted Stock Awards (RSAs)
Aggregated information regarding RSU and RSA activity for the six months ended August 1, 2020 is summarized below:
 
    
RSAs & RSUs
    
Weighted Average
Grant Date Fair Value
 
Outstanding at January 31, 2020
     134,634      $ 16.79  
Granted
     245,131        7.61  
Vested
     (59,314      17.66  
Forfeited
     (530      18.39  
  
 
 
    
 
 
 
Outstanding at August 1, 2020
     319,921      $ 9.59  
  
 
 
    
 
 
 
As of August 1, 2020, there was approximately $2.5 million of unrecognized compensation expense related to RSUs and RSAs which is expected to be recognized over a weighted average period of 0.9 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 six months ended August 1, 2020 and August 3, 2019, there were 8,851 and 2,796 shares, respectively, purchased under this plan. As of August 1, 2020, 16,124 shares remain available
 for purchase under our Employee Stock Purchase Plan
.
v3.20.2
Income Taxes
6 Months Ended
Aug. 01, 2020
Income Tax Disclosure [Abstract]  
Income Taxes
Note 1
4
 – Income Taxes
Our
effective tax rates for the period are as follows:
 
    
Three Months
Ended
   
Six Months
Ended
 
Fiscal 2021
     99.4     48.6
Fiscal 2020
     3.0     13.9
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 August 1, 2020, we recognized an income tax expense of approximately $529,000. The effective tax rate in this period was directly impacted by a significant increase in forecasted operating results for our fiscal 2021 as compared to operating results forecasted at the end of our first quarter of fiscal 2021, a $122,000 expense arising from a
shortfall
related to
our
stock and a $79,000 expense related to return to provision adjustments from foreign tax returns
filed
in the quarter. During the three months ended August 3, 2019,
we
recognized an income tax expense of approximately $29,000. The effective tax rate in this period was directly impacted by a significant reduction in forecasted operating results for our fiscal 2020 as compared to operating results forecasted at the end of our first quarter of fiscal 2020 and a $135,000 tax benefit arising from windfall tax benefits related to
our
stock.
During the six months ended August 1, 2020, we recognized an income tax expense of approximately $411,000. The effective tax rate in this period was directly impacted by a significant increase in forecasted operating results for our fiscal 2021 as compared to operating results forecasted at the end of our first quarter of fiscal 2021,
a
$118,000 expense arising from shortfall tax expense related to
our
stock, a $79,000 expense related to return to provision adjustments from foreign tax returns
filed
in the year and a $78,000 tax benefit related to the expiration of the statute of limitations on previously uncertain tax positions. During the six months ended August 3, 2019,
we
recognized an income tax expense of approximately $429,000. 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 $232,000 tax benefit arising from windfall tax benefits 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 August 1, 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 unrecognized tax benefits during the quarter ended August 1, 2020.
v3.20.2
Segment Information
6 Months Ended
Aug. 01, 2020
Segment Reporting [Abstract]  
Segment Information
Note 1
5
 – Segment Information
We report two segments: Product Identification (“PI”) and Test & Measurement (“T&M”). We evaluate segment performance based on the segment profit (loss) before corporate expenses.
Summarized below are the Revenue and Segment Operating Profit for each reporting segment:
 
    
Three Months Ended
   
Six Months Ended
 
    
Revenue
    
Segment Operating Profit
(Loss)
   
Revenue
    
Segment Operating Profit
(Loss)
 
(In thousands)
  
August 1,
2020
    
August 3,
2019
    
August 1,
2020
   
August 3,
2019
   
August 1,
2020
    
August 3,
2019
    
August 1,
2020
   
August 3,
2019
 
Product Identification
   $ 21,629      $ 22,144      $ 3,146     $ 2,224     $ 44,009      $ 45,735      $ 6,292     $ 5,110  
T&M
     6,029        11,324        (407     1,555       14,569        23,914        (563     4,136  
  
 
 
    
 
 
    
 
 
   
 
 
   
 
 
    
 
 
    
 
 
   
 
 
 
Total
   $ 27,658      $ 33,468        2,739       3,779     $ 58,578      $ 69,649        5,729       9,246  
  
 
 
    
 
 
        
 
 
    
 
 
      
Corporate Expenses
        2,535       2,616          4,861       5,615  
     
 
 
   
 
 
      
 
 
   
 
 
 
Operating Income
        204       1,163          868       3,631  
Other Income (Expense), Net
        328       (183        (23     (550
     
 
 
   
 
 
      
 
 
   
 
 
 
Income Before Income Taxes
        532       980          845       3,081  
Income Tax Provision
        529       29          411       429  
     
 
 
   
 
 
      
 
 
   
 
 
 
Net Income
      $ 3     $ 951        $ 434     $ 2,652  
     
 
 
   
 
 
      
 
 
   
 
 
 
v3.20.2
Fair Value
6 Months Ended
Aug. 01, 2020
Fair Value Disclosures [Abstract]  
Fair Value
Note 1
6
 – 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 August 1, 2020 and January 31, 2020:
 
Liabilities measured at fair value:
  
Fair value measurement at
August 1, 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)
   $ —        $ —        $ —        $ —      $ —      $ 250      $ —      $ 250  
Interest Rate Swap Contract (included in Other Long-Term Liabilities)
     —          —          —          —          —          96        —          96  
Earnout Liability (included in Other Long-Term Liabilities)
     —          —          —          —          —          —          14        14  
  
 
 
    
 
 
    
 
 
    
 
 
    
 
 
    
 
 
    
 
 
    
 
 
 
Total Liabilities
   $ —        $ —        $ —        $ —      $ —      $ 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:
 
    
August 1, 2020
 
    
Fair Value Measurement
        
(In thousands)
  
Level 1
    
Level 2
    
Level 3
    
Total
    
Carrying
Value
 
Long-Term debt and related current maturities
   $ —        $ —      $ 14,430      $ 14,430      $ 14,430  
 
    
January 31, 2019
 
    
Fair Value Measurement
        
(In thousands)
  
Level 1
    
Level 2
    
Level 3
    
Total
    
Carrying
Value
 
Long-Term debt and related current maturities
   $ —      $ —      $ 13,258      $ 13,258      $ 13,034  
For the period ended August 1, 2020, the fair value of our long-term debt, including the current portion, approximates carrying value. For the period ended January 31, 2020, 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.
 
v3.20.2
Summary of Significant Accounting Policies (Policies)
6 Months Ended
Aug. 01, 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 six months of the current year, have had or are expected to have a material impact on our consolidated financial statements.
v3.20.2
Revenue Recognition (Tables)
6 Months Ended
Aug. 01, 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
    
Six Months Ended
 
(In thousands)   
August 1,
2020
    
August 3,
2019
    
August 1,
2020
    
August 3,
2019
 
United States
   $ 17,866      $ 20,648      $ 37,655      $ 42,640  
Europe
     6,314        7,473        13,764        15,349  
Canada
     1,452        1,389        2,880        2,905  
Central and South America
     914        1,325        1,868        2,213  
Asia
     831        2,218        1,841        5,667  
Other
     281        415        570        875  
  
 
 
    
 
 
    
 
 
    
 
 
 
Total Revenue
   $ 27,658      $ 33,468      $ 58,578      $ 69,649  
  
 
 
    
 
 
    
 
 
    
 
 
 
Major product types:
 
    
Three Months Ended
    
Six Months Ended
 
(In thousands)   
August 1,
2020
    
August 3,
2019
    
August 1,
2020
    
August 3,
2019
 
Hardware