ASTRONOVA, INC., 10-Q filed on 9/14/2021
Quarterly Report
v3.21.2
Cover Page - shares
6 Months Ended
Jul. 31, 2021
Sep. 09, 2021
Cover [Abstract]    
Document Type 10-Q  
Amendment Flag false  
Document Period End Date Jul. 31, 2021  
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 Shell Company false  
Entity Filer Category Non-accelerated Filer  
Trading Symbol ALOT  
Entity Small Business true  
Entity Emerging Growth Company false  
Title of 12(b) Security Common Stock  
Security Exchange Name NASDAQ  
Entity Incorporation, State or Country Code RI  
Entity File Number 0-13200  
Document Quarterly Report true  
Document Transition Report false  
Entity Tax Identification Number 05-0318215  
Entity Address, Address Line One 600 East Greenwich Avenue  
Entity Address, City or Town West Warwick  
Entity Address, State or Province RI  
Entity Address, Postal Zip Code 02893  
City Area Code 401  
Local Phone Number 828-4000  
Entity Common Stock, Shares Outstanding   7,254,136
v3.21.2
Condensed Consolidated Balance Sheets - USD ($)
$ in Thousands
Jul. 31, 2021
Jan. 31, 2021
CURRENT ASSETS    
Cash and Cash Equivalents $ 11,389 $ 11,439
Accounts Receivable, net 15,603 17,415
Inventories, net 29,090 30,060
Prepaid Expenses and Other Current Assets 5,317 1,807
Total Current Assets 61,399 60,721
Property, Plant and Equipment, net 12,307 12,011
Intangible Assets, net 20,074 21,502
Goodwill 12,623 12,806
Deferred Tax Assets 5,942 5,941
Right of Use Assets 1,209 1,389
Other Assets 1,680 1,103
TOTAL ASSETS 115,234 115,473
CURRENT LIABILITIES    
Accounts Payable 6,131 5,734
Accrued Compensation 3,917 2,852
Other Liabilities and Accrued Expenses 3,666 3,939
Current Liability – Royalty Obligation 2,000 2,000
Current Portion of Long-Term Debt 875 5,326
Current Liability – Excess Royalty Payment Due 24 177
Deferred Revenue 324 285
Income Taxes Payable   655
Total Current Liabilities 16,937 20,968
NON CURRENT LIABILITIES    
Long-Term Debt, net of current portion 8,641 7,109
Royalty Obligation, net of current portion 5,261 6,161
Long-Term Debt – PPP Loan   4,422
Lease Liabilities, net of current portion 907 1,065
Other Long-Term Liabilities 557 681
Deferred Tax Liabilities 354 384
TOTAL LIABILITIES 32,657 40,790
SHAREHOLDERS' EQUITY    
Common Stock 526 521
Additional Paid-in Capital 59,078 58,049
Retained Earnings 57,697 50,085
Treasury Stock, at Cost (33,942) (33,588)
Accumulated Other Comprehensive Loss, net of tax (782) (384)
TOTAL SHAREHOLDERS' EQUITY 82,577 74,683
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $ 115,234 $ 115,473
v3.21.2
Condensed Consolidated Balance Sheets (Parenthetical) - $ / shares
Jul. 31, 2021
Jan. 31, 2021
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 10,554,475 10,425,094
Treasury Stock, Shares 3,321,955 3,297,058
v3.21.2
Condensed Consolidated Statements of Income - USD ($)
$ in Thousands
3 Months Ended 6 Months Ended
Jul. 31, 2021
Aug. 01, 2020
Jul. 31, 2021
Aug. 01, 2020
Income Statement [Abstract]        
Revenue $ 29,845 $ 27,658 $ 58,923 $ 58,578
Cost of Revenue 17,129 17,871 35,320 37,935
Gross Profit 12,716 9,787 23,603 20,643
Operating Expenses:        
Selling and Marketing 5,061 5,555 11,154 11,481
Research and Development 1,539 1,493 3,255 3,433
General and Administrative 2,664 2,535 5,008 4,861
Operating Expenses 9,264 9,583 19,417 19,775
Operating Income 3,452 204 4,186 868
Other Income (Expense), net:        
Extinguishment of Debt – PPP Loan 4,466   4,466  
Interest Expense (171) (259) (392) (490)
Gain (Loss) on Foreign Currency Transactions 50 553 (114) 399
Other, net (79) 34 (63) 68
Other Income (Expense), net 4,266 328 3,897 (23)
Income Before Income Taxes 7,718 532 8,083 845
Income Tax Provision 699 529 471 411
Net Income $ 7,019 $ 3 $ 7,612 $ 434
Net Income per Common Share—Basic: $ 0.97 $ 0.00 $ 1.06 $ 0.06
Net Income per Common Share—Diluted: $ 0.96 $ 0.00 $ 1.04 $ 0.06
Weighted Average Number of Common Shares Outstanding:        
Basic 7,208,834 7,105,241 7,176,940 7,089,169
Diluted 7,328,558 7,122,595 7,297,118 7,113,528
v3.21.2
Condensed Consolidated Statements of Comprehensive Income - USD ($)
$ in Thousands
3 Months Ended 6 Months Ended
Jul. 31, 2021
Aug. 01, 2020
Jul. 31, 2021
Aug. 01, 2020
Statement of Comprehensive Income [Abstract]        
Net Income $ 7,019 $ 3 $ 7,612 $ 434
Other Comprehensive Income (Loss), Net of Taxes:        
Foreign Currency Translation Adjustments (348) 351 (429) 210
Change in Value of Derivatives Designated as Cash Flow Hedge   (229)   (270)
Loss from Cash Flow Hedges Reclassified to Income Statement 15 232 31 193
Cross-Currency Interest Rate Swap Termination   45   45
Other Comprehensive Income (Loss) (333) 399 (398) 178
Comprehensive Income $ 6,686 $ 402 $ 7,214 $ 612
v3.21.2
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, 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 (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        
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        
Net Income 434          
Other Comprehensive Loss 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 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        
Beginning Balance at Jan. 31, 2021 74,683 $ 521 58,049 50,085 (33,588) (384)
Beginning Balance, Shares at Jan. 31, 2021   10,425,094        
Share-Based Compensation 478   478      
Employee Option Exercises 52   52      
Employee Option Exercises, Shares   5,746        
Restricted Stock Awards Vested, net (208) $ 3 (3)   (208)  
Restricted Stock Awards Vested, net, Shares   48,299        
Net Income 593     593    
Other Comprehensive Loss (65)         (65)
Ending Balance at May. 01, 2021 75,533 $ 524 58,576 50,678 (33,796) (449)
Ending Balance, Shares at May. 01, 2021   10,479,139        
Beginning Balance at Jan. 31, 2021 $ 74,683 $ 521 58,049 50,085 (33,588) (384)
Beginning Balance, Shares at Jan. 31, 2021   10,425,094        
Employee Option Exercises, Shares 4,425          
Net Income $ 7,612          
Other Comprehensive Loss (398)         (398)
Ending Balance at Jul. 31, 2021 82,577 $ 526 59,078 57,697 (33,942) (782)
Ending Balance, Shares at Jul. 31, 2021   10,554,475        
Beginning Balance at May. 01, 2021 75,533 $ 524 58,576 50,678 (33,796) (449)
Beginning Balance, Shares at May. 01, 2021   10,479,139        
Share-Based Compensation 469   469      
Employee Option Exercises 35   35      
Employee Option Exercises, Shares   3,211        
Restricted Stock Awards Vested, net (146) $ 2 (2)   (146)  
Restricted Stock Awards Vested, net, Shares   72,125        
Net Income 7,019     7,019    
Other Comprehensive Loss (333)         (333)
Ending Balance at Jul. 31, 2021 $ 82,577 $ 526 $ 59,078 $ 57,697 $ (33,942) $ (782)
Ending Balance, Shares at Jul. 31, 2021   10,554,475        
v3.21.2
Consolidated Statements of Changes in Shareholders' Equity (Parenthetical)
3 Months Ended
May 02, 2020
$ / shares
Statement of Stockholders' Equity [Abstract]  
Cash dividend per share $ 0.07
v3.21.2
Condensed Consolidated Statements of Cash Flows - USD ($)
$ in Thousands
6 Months Ended
Jul. 31, 2021
Aug. 01, 2020
Cash Flows from Operating Activities:    
Net Income $ 7,612 $ 434
Adjustments to Reconcile Net Income to Net Cash Provided by Operating Activities:    
Depreciation and Amortization 2,274 3,133
Amortization of Debt Issuance Costs 31 24
Share-Based Compensation 947 1,096
Gain on Extinguishment of Debt (4,466)  
Changes in Assets and Liabilities:    
Accounts Receivable 1,777 5,069
Other Receivable – Employee Retention Credit Receivable (3,135)  
Inventories 895 1,767
Income Taxes (1,241) 143
Accounts Payable and Accrued Expenses 1,282 (1,244)
Other (483) (1,258)
Net Cash Provided by Operating Activities 5,493 9,164
Cash Flows from Investing Activities:    
Additions to Property, Plant and Equipment (1,162) (1,201)
Net Cash Used for Investing Activities (1,162) (1,201)
Cash Flows from Financing Activities:    
Net Cash Proceeds from Employee Stock Option Plans 43 6
Net Cash Proceeds from Share Purchases under Employee Stock Purchase Plan 44 55
Net Cash Used for Payment of Taxes Related to Vested Restricted Stock (354) (91)
Borrowings under Revolving Credit Facility   5,000
Repayment under Revolving Credit Facility   (9,500)
Payment of Minimum Guarantee Royalty Obligation (1,000) (1,000)
Proceeds from Long-Term Debt – PPP Loan   4,422
Proceeds from Long-Term Debt Borrowings 10,000 15,232
Payoff of Long-Term Debt (12,576) (11,732)
Principal Payments of Long-Term Debt (375) (2,104)
Payment of Debt Issuance Costs   (89)
Dividends Paid   (497)
Net Cash Used for Financing Activities (4,218) (298)
Effect of Exchange Rate Changes on Cash and Cash Equivalents (163) (679)
Net Increase (Decrease) in Cash and Cash Equivalents (50) 6,986
Cash and Cash Equivalents, Beginning of Period 11,439 4,249
Cash and Cash Equivalents, End of Period 11,389 11,235
Supplemental Disclosures of Cash Flow Information:    
Cash Paid During the Period for Interest 209 309
Cash Paid During the Period for Income Taxes, Net of Refunds $ 1,689 $ 251
v3.21.2
Business and Basis of Presentation
6 Months Ended
Jul. 31, 2021
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.
Our business consists of two segments, Product Identification (“PI”) and Test & Measurement (“T&M”). The PI segment includes specialty printing systems and related supplies sold under the QuickLabel
®
, TrojanLabel
®
and GetLabels
brand names. 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.
Our Product Identification products are sold by direct field salespersons as well as independent dealers and representatives, while our Test & Measurement products are sold predominantly through direct sales and manufacturers’ representatives. In the United States, we have factory-trained direct field salespeople located throughout the country specializing in Product Identification products. We also have direct field sales or service centers in Canada, China, Denmark, France, Germany, Malaysia, Mexico, Singapore, and the United Kingdom staffed by our own employees and dedicated third party contractors. Additionally, we utilize over 200 independent dealers and representatives selling and marketing our products in over 60 countries.
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, 2021.
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 the continuing
COVID-19
pandemic, 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, useful lives of sales contract costs and intangibles, 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.
v3.21.2
Summary of Significant Accounting Policies Update
6 Months Ended
Jul. 31, 2021
Accounting Policies [Abstract]  
Summary of Significant Accounting Policies Update
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, 2021.
Recently Adopted Accounting Pronouncements
Income Taxes
In December 2019, the FASB issued an ASU
2019-12,
“Simplifying the Accounting for Income Taxes,” which simplifies the accounting for income taxes, eliminates certain exceptions within ASC 740, Income Taxes, and clarifies certain aspects of the current guidance to promote consistency among reporting entities. ASU
2019-12
is effective for fiscal years beginning after December 15, 2020. Most amendments within the standard are required to be applied on a prospective basis, while certain amendments must be applied on a retrospective or modified retrospective basis. We adopted ASU
2019-12
for the period beginning February 1, 2021. The adoption of this guidance did not have a material impact on our consolidated financial statements and accompanying disclosures.
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.
v3.21.2
Revenue Recognition
6 Months Ended
Jul. 31, 2021
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)   
July 31,
2021
    
August 
1
,
20
20
    
July 31,
2021
    
August 1,
2020
 
United States
   $ 17,181      $ 17,866      $ 33,874      $ 37,655  
Europe
     7,826        6,314        16,425        13,764  
Canada
     1,491        1,452        3,037        2,880  
Asia
     1,964        831        3,049        1,841  
Central and South America
     995        914        1,756        1,868  
Other
     388        281        782        570  
    
 
 
    
 
 
    
 
 
    
 
 
 
Total Revenue
   $ 29,845      $ 27,658      $ 58,923      $ 58,578  
    
 
 
    
 
 
    
 
 
    
 
 
 
Major product types:
 
    
Three Months Ended
    
Six Months Ended
 
(In thousands)   
July 31,
2021
    
August 1,
2020
    
July 31,
2021
    
August 1,
2020
 
Hardware
   $ 7,878      $ 8,439      $ 15,525      $ 17,354  
Supplies
     18,678        17,140        36,888        36,258  
Service and Other
     3,289        2,079        6,510        4,966  
    
 
 
    
 
 
    
 
 
    
 
 
 
Total Revenue
   $ 29,845      $ 27,658      $ 58,923      $ 58,578  
    
 
 
    
 
 
    
 
 
    
 
 
 
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 $324,000 and $285,000 at July 31, 2021 and January 31, 202
1
, 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 July 31, 2021 is primarily due to cash payments received in advance of satisfying performance obligations in the current period, offset by $202,000 of revenue recognized during the period that was included in the deferred revenue balance at January 31, 2021.
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. In the second quarter of the current year, we extended the remaining useful life of these deferred costs from 6 years to 20 years and changed the amortization method from units sold to the straight-line method.
We believe these changes, based on the life of the aircraft under the applicable sales contracts, appropriately reflects a more systematic and rational approach. This change is being treated as a change in accounting estimate that is effected by a change in accounting principle. The impact on net income was immaterial for the six month period ended July 31, 2021. The balance of these contract assets at January 31, 2021 was
$0.8
million and
 in the second quarter of the current year, we incurred an additional $0.4
million in contract costs which will be amortized over
 20 years. We amortized $26,000 of direct costs for the six months ended July 31, 2021, and the balance of deferred incremental direct costs net of accumulated amortization at July 31, 2021 was $1.3
milli
on
 
of which $0.1
million is reported in other current assets and $
1.2
million is reported in other assets in the accompanying condensed consolidated balance sheet.
v3.21.2
Net Income Per Common Share
6 Months Ended
Jul. 31, 2021
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
 
    
July 31,
2021
    
August 1,
2020
    
July 31,
2021
    
August 1,
2020
 
Weighted Average Common Shares Outstanding – Basic
     7,208,834        7,105,241        7,176,940        7,089,169  
Effect of Dilutive Options, Restricted Stock Awards and Restricted Stock Units
     119,724        17,354        120,178        24,359  
    
 
 
    
 
 
    
 
 
    
 
 
 
Weighted Average Common Shares Outstanding – Diluted
     7,328,558        7,122,595        7,297,118        7,113,528  
    
 
 
    
 
 
    
 
 
    
 
 
 
For the three and six months ended July 31, 2021, the diluted per share amounts do not reflect weighted average common equivalent shares outstanding
of 189,827 and 484,748
,
respectively. For the three and six months ended August 1, 2020, the diluted per share amounts do not reflect weighted average common equivalent shares outstanding of
901,962 and 912,508
,
respectively. These outstanding common equivalent shares were not included due to their anti-dilutive effect.
v3.21.2
Intangible Assets
6 Months Ended
Jul. 31, 2021
Goodwill and Intangible Assets Disclosure [Abstract]  
Intangible Assets
Note 5 – Intangible Assets
Intangible assets are as follows:
 
    
July 31, 2021
    
January 31, 2021
 
(In thousands)
  
Gross
Carrying
Amount
    
Accumulated
Amortization
   
Currency
Translation
Adjustment
    
Net
Carrying
Amount
    
Gross
Carrying
Amount
    
Accumulated
Amortization
   
Currency
Translation
Adjustment
    
Net
Carrying
Amount
 
Miltope:
                                                                     
Customer Contract Relationships
   $ 3,100      $ (2,399   $ —        $ 701      $ 3,100      $ (2,284   $ —        $ 816  
RITEC:
                                                                     
Customer Contract Relationships
     2,830        (1,523     —          1,307        2,830        (1,423     —          1,407  
TrojanLabel:
                                                                     
Existing Technology
     2,327        (1,590     174        911        2,327        (1,405     196        1,118  
Distributor Relations
     937        (448     76        565        937        (396     89        630  
Honeywell:
                                                                     
Customer Contract Relationships
     27,243        (10,653     —          16,590        27,243        (9,712     —          17,531  
    
 
 
    
 
 
   
 
 
    
 
 
    
 
 
    
 
 
   
 
 
    
 
 
 
Intangible Assets, net
   $ 36,437      $ (16,613   $ 250      $ 20,074      $ 36,437      $ (15,220   $ 285      $ 21,502  
    
 
 
    
 
 
   
 
 
    
 
 
    
 
 
    
 
 
   
 
 
    
 
 
 
In the second quarter of the current year, we extended the remaining useful life of the customer contract relationship intangibles for Honeywell International, Inc. (“Honeywell”) from 
6 years to 20 years and for the
RITEC intangibles we changed the amortization method which was based on revenue with a remaining life
of 4 years to the straight-line method with a 20
-year remaining life. We believe these changes, based on the life of the aircraft related to these intangibles, appropriately reflects a more systematic and rational approach to distributing the cost of these intangibles over their useful lives. The change in the amortization of the Honeywell customer contract relationship intangibles is being treated as a change in accounting estimate and the change in the amortization of the RITEC customer contract relationship intangibles is being treated as a change in accounting estimate that is effected by a change in accounting principle. The changes in amortization resulted in a 
$587,000 decrease in amortization expense and a $587,000, ($553,000 net of tax or $0.08
per diluted share) increase to net income for the six-month period ended July 31, 2021.
There were no impairments to intangible assets during the periods ended July 31, 2021 and August 1, 2020. With respect to the acquired intangibles included in the table above, amortization expense of $0.4 million and $1.0 million has been included in the condensed consolidated statements of income for the three months ended July 31, 2021 and August 1, 2020, respectively. Amortization expense of $1.4 million and $2.1 million related to the above acquired intangibles has been included in the accompanying condensed consolidated statement of income for the six months ended July 31, 2021 and August 1, 2020, respectively.
Estimated amortization expense for the next five fiscal years is as follows:
 
(In thousands)
  
Remaining
2022
    
2023
    
2024
    
2025
    
2026
 
Estimated amortization expense
   $ 805      $ 1,641      $ 1,702      $ 1,010      $ 1,010  
v3.21.2
Inventories
6 Months Ended
Jul. 31, 2021
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)
  
July 31, 2021
    
January 31, 2021
 
Materials and Supplies
   $ 19,609      $ 20,265  
Work-In-Process
     2,205        2,076  
Finished Goods
     15,871        16,371  
    
 
 
    
 
 
 
       37,685        38,712  
Inventory Reserve
     (8,595      (8,652
    
 
 
    
 
 
 
     $ 29,090      $ 30,060  
    
 
 
    
 
 
 
v3.21.2
Credit Agreement and Debt
6 Months Ended
Jul. 31, 2021
Debt Disclosure [Abstract]  
Credit Agreement and Debt
Note 7 – Credit Agreement and Debt
Credit Agreement
On March 24, 2021, we entered into a First Amendment to Credit Agreement (the “Amendment”) to our Amended & Restated Credit Agreement (the “A&R Credit Agreement,” as amended by the Amendment; the “Amended Credit Agreement”) with Bank of America, N.A., as lender (the “Lender”), and our subsidiaries, ANI ApS and TrojanLabel. The A&R Credit Agreement, which we entered into on July, 30, 2020, amended and restated the Credit Agreement dated as of February 28, 2017 (the “Prior Credit Agreement”) by and among us, ANI ApS, TrojanLabel and the Lender. Immediately prior to the closing of the Amendment, we repaid $2.6 million in principal amount of the term loan outstanding under the A&R Credit Agreement, resulting in an outstanding balance of the term loan of $10.0 million and no amount drawn and outstanding under the revolving credit facility under the A&R Credit Agreement.
The Amended Credit Agreement provides for (i) a term loan in the principal amount of $10.0 million, and (ii) a $22.5 million revolving credit facility available for general corporate purposes. At the closing of the Amendment, we borrowed the entire $10.0 million term loan which was used to refinance, in full, the outstanding term loan under the A&R Credit Agreement. Under the Amended Credit Agreement, revolving credit loans may continue to be borrowed, at our option, in U.S. Dollars or, subject to certain conditions, Euros, British Pounds, Canadian Dollars or Danish Kroner.
At July 31, 2021, there is no balance outstanding on the revolving line of credit and the entire $22.5 million is available for borrowing. There was no interest incurred for the three and six month period ended July 31, 2021 and $94,000 and $166,000 of interest was incurred on this obligation and included in interest expense in the accompanying condensed consolidated income statement for the three and six month periods ended August 1, 2020, respectively.
The Amended Credit Agreement requires that the term loan be paid as follows: the principal amount of each quarterly installment required to be paid on the last day of each of our fiscal quarters ending on or about April 30, 2021 through January 31, 2022 is $187,500; the principal amount of each quarterly installment required to be paid on the last day of each of our fiscal quarters ending on or about April 30, 2022 through January 31, 2023 is $250,000; the principal amount of each quarterly installment required to be paid on the last day of each of our fiscal quarters ending on or about April 30, 2023 through January 31, 2025 is $312,500; the principal amount of each quarterly installment required to be paid on the last day of each of our fiscal quarters ending on or about April 30, 2025 and July 31, 2025 is $500,000; and the entire remaining principal balance of the term loan is required to be paid on September 30, 2025. We may voluntarily prepay the term loan, in whole or in part, from time to time without premium or penalty (other than customary breakage costs, if applicable). We may repay borrowings under the revolving credit facility at any time without premium or penalty (other than customary breakage costs, if applicable), but in any event no later than September 30, 2025, at which time any outstanding revolving loans will be due and payable in full, and the revolving credit facility will terminate. We may reduce or terminate the revolving line of credit at any time, subject to certain thresholds and conditions, without premium or penalty.
The Amended Credit Agreement includes an uncommitted accordion provision under which the term loan and/or revolving credit facility commitments may be increased in an aggregate principal amount not exceeding $10.0 million, subject to obtaining the agreement of the Lender and the satisfaction of certain other conditions.
The interest rates under the A&R Credit Agreement were modified in the Amended Credit Agreement as follows: the term loan and revolving credit loans bear interest at a rate per annum equal to, at our option, either (a) the LIBOR Rate as defined in the Amended Credit Agreement (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 1.60% to 2.30% 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)
Lender’s
 
publicly announced prime rate, (iii) the LIBOR Rate plus 1.00% or (iv) 0.50%, plus a margin that varies within a range of 0.60% to 1.30% based on our consolidated leverage ratio. In addition to certain other fees and expenses that we are required to pay to the Lender, we are required to pay a commitment fee on the undrawn portion of the revolving credit facility that varies within a range of 0.15% and 0.30% based on our consolidated leverage ratio. During the quarter ended July 31, 2021, we paid $30,125 in commitment fees on the undrawn portion of our revolving credit facility, which is included in interest expense in the accompanying condensed consolidated income statement.
As under the A&R Credit Agreement, the loans under the Amended 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 Amended Credit Agreement. No amount of the term loan that is repaid may be reborrowed.
We must comply with various customary financial and
non-financial
covenants under the Amended Credit Agreement. The financial covenants under the Amended Credit Agreement consist of a maximum consolidated leverage ratio and a minimum consolidated fixed charge coverage ratio. 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 their capital stock, to repurchase or acquire their capital stock, to conduct mergers or acquisitions, to sell assets, to alter their capital structure, to make investments and loans, to change the nature of their business, and to prepay subordinated indebtedness, in each case subject to certain exceptions and thresholds as set forth in the Amended Credit Agreement, certain of which provisions were modified by the Amendment.
The Lender is entitled to accelerate repayment of the loans and to terminate its revolving credit commitment under the Amended Credit Agreement upon the occurrence of any of various customary events of default, which include, among other events, the following (which are subject, in some cases, to certain grace periods): failure to pay when due any principal, interest or other amounts in respect of the loans, breach of any of our covenants or representations under the loan documents, default under any other of our or our subsidiaries’ significant indebtedness agreements, a bankruptcy, insolvency or similar event with respect to us or any of our subsidiaries, a significant unsatisfied judgment against us or any of our subsidiaries, or a change of control.
Our obligations under the Amended Credit Agreement continue to be secured by substantially all of our personal property assets (including a pledge of the equity interests held 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)
  
July 31, 2021
    
January 31, 2021
 
USD Term Loan (2.60% as of July 31, 2021); maturity date of September 30, 2025
   $ 9,625      $ —    
USD Term Loan (4.65% as of January 31, 2021)
     —          12,576  
    
 
 
    
 
 
 
    
$
9,625      $ 12,576  
Debt Issuance Costs, net of accumulated amortization
     (109      (141
Current Portion of Term Loans
     (875      (5,326
    
 
 
    
 
 
 
Long-Term Debt
   $ 8,641      $ 7,109  
    
 
 
    
 
 
 
During the three and six months ended July 31, 2021, we recognized $65,000 and $179,000 of
interest expense on debt, respectively, which was included in interest expense in the accompanying condensed consolidated income statement. During the three and six months ended August 1, 2020, we recognized
$73,000 and $152,000 of interest expense on debt, respectively, which was included in interest 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 July 31, 2021 is as follows:
 
(In thousands)
      
Fiscal 2022, remainder
   $ 375  
Fiscal 2023
     1,000  
Fiscal 2024
     1,000  
Fiscal 2025
     1,250  
Fiscal 2026
     6,000  
    
 
 
 
    
$
 
9,625
 
    
 
 
 
v3.21.2
Paycheck Protection Program Loan
6 Months Ended
Jul. 31, 2021
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
would have been set to 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
were due on the PPP Loan until the date on which the lender determines the amount of the PPP Loan that is eligible for forgiveness. The PPP Loan is classified as long-term debt – PPP Loan in the condensed consolidated balance sheet until forgiveness is made. 
On June 15, 2021, 
Greenwood 
notified us that the SBA approved our application for forgiveness of the entire $
4.4
 million principal balance of our PPP Loan and all accrued interest thereon. As a
result
, we recorded a $4.5 million gain on extinguishment of debt in the accompanying condensed consolidated income statement for the three and six months ended July 31,2021.
v3.21.2
Derivative Financial Instruments and Risk Management
6 Months Ended
Jul. 31, 2021
Derivative Instruments and Hedging Activities Disclosure [Abstract]  
Derivative Financial Instruments and Risk Management
Note 9 – Derivative Financial Instruments and Risk Management
In 2017, 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 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 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 involved 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 effectively modified our exposure to interest rate risk by effectively converting our floating-rate term-loan debt to fixed-rate debt, thus reducing the impact of interest-rate changes on future interest expense. This swap involved 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.
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 these two swaps. 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 was contracted immediately prior to the end of the second quarter of fiscal 2021 at a cash cost of approximately $0.7 million which was settled in the third quarter of fiscal 2021. 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. The remaining 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 presents the impact of our derivative instruments in our condensed consolidated financial statements for the three and six months ended July 31, 2021 and August 1, 2020:
 
 
  
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)
  
July 31,
2021
 
  
August 1,
2020
 
 
July 31,
2021
 
 
August 1,
2020
 
Swap contracts
   $ —        $ (290  
 
Other Income (Expense )
 
 
$ (20   $ (297 )
 
    
 
 
    
 
 
   
 
   
 
 
 
   
 
 
 
 
  
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)
  
July 31,
2021
 
  
August 1,
2020
 
  
July 31,
2021
 
  
August 1,
2020
 
Swap contracts
   $ —        $ (340)     
 
Other Income (Expense)  
 
$ (40)
 
 
 
 
 
 
 
$ (248)  
    
 
 
    
 
 
    
 
   
 
 
 
   
 
 
 
At July 31, 2021, 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.
v3.21.2
Employee Retention Credit
6 Months Ended
Jul. 31, 2021
Employee Retention Credit Disclosure [Abstract]  
Employee Retention Credit
Note 10 – Employee Retention Credit 
The CARES Act provides an employee retention
credit
(“ERC”) that is a refundable tax credit against certain employer taxes. On December 27, 2020, Congress enacted the Taxpayer Certainty and Disaster Tax Relief Act of 2020, which amended and extended ERC availability under Section 2301 of the CARES Act. Before the enactment of the Taxpayer Certainty and Disaster Tax Relief Act of 2020, we were ineligible for the ERC because we
received
the PPP Loan. Following enactment of the Taxpayer Certainty and Disaster Tax Relief Act of 2020, we and other businesses that received loans under that program became retroactively eligible for the ERC.
As a result of the foregoing legislation, we are eligible to claim a refundable tax credit against the employer share of Social Security taxes equal to seventy percent (70%) of the qualified wages that we paid to our employees between December 31, 2020 and June 30, 2021. Qualified wages are limited to $10,000 per employee per calendar quarter in 2021 for a maximum ERC per employee of $7,000 per calendar quarter in 2021.
Since there is no US GAAP guidance for
for-profit
business entities that receive government assistance that is not in the form of a loan, an income tax credit or revenue from a contract with a customer, we determined the appropriate accounting treatment by analogy to other guidance. We accounted for the employee retention credit by analogy to International Accounting Standards (IAS) 20, Accounting for Government Grants and Disclosure of Government Assistance, of International Financial Reporting Standards (IFRS). Under an IAS 20 analogy, a business entity would recognize the credit on a systematic basis over the periods in which the entity recognizes the payroll expenses for which the grant (i.e., tax credit) is intended to compensate when there is reasonable assurance (i.e., it is probable) that the entity will comply with any conditions attached to the grant and the grant (i.e., tax credit) will be received, accordingly, we recognized the employee retention credit in the income statement captions from which the employee taxes were originally incurred and offset the receivable in prepaid expenses and other current assets.
We evaluated our eligibility for the ERC in the second quarter of calendar year 2021. In order to qualify for the ERC, we needed to experience a 20% reduction in gross receipts from either (1) the same quarter in calendar year 2019 or (2) the immediately preceding quarter to the corresponding calendar quarter in 2019. We determined that we qualified for the employee retention credit under the first scenario for wages paid in calendar year 2020 and the first calendar quarter of 2021. We are amending certain payroll tax filing and will apply for a refund of $3.1 million. We have recorded this amount as a receivable within the prepaid expenses and other current assets in the condensed consolidated balance sheet as of July 31, 2021.
The $3.1 million of ERCs was recognized as a reduction in employer payroll taxes and allocated to the financial statement captions from which the employee’s taxes were originally incurred. As a result, we recorded a reduction in expenses of $1.7 million in cost of revenue, $0.8 million in selling and marketing, $0.3 million in research and development and $0.3 million in general and administrative in the accompanying condensed consolidated income statement for the three and six month periods ended July 31, 2021.
v3.21.2
Royalty Obligation
6 Months Ended
Jul. 31, 2021
Royalty Obligation Disclosure [Abstract]  
Royalty Obligation
Note 11 – Royalty Obligation
In fiscal 2018, we entered
into
an Asset Purchase and License Agreement with 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 July 31, 2021, we had paid an aggregate of $6.5 million of the guaranteed minimum royalty obligation. At July 31, 2021, 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 $5.3 million is reported as a long-term liability on our condensed consolidated balance sheet. We incurred $24,000 in excess royalty expense for the three and six month periods ended July 31, 2021
,
which is included in cost of revenue in our consolidated statements of income. A total of $0.2 million in excess royalties was paid in the first quarter of the current fiscal year
,
and there are $25,000 in excess royalty payables due as a
result
of this agreement for the period ended July 31, 2021.
v3.21.2
Leases
6 Months Ended
Jul. 31, 2021
Leases [Abstract]  
Leases
Note 12 – Leases
We enter into
lease
contracts for certain of our facilities at various locations worldwide. Our leases have remaining lease terms of one to six years, some of which include
 
options to extend the lease term for periods of up to five years
when it is reasonably certain 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
 
  
July 31,
2021
 
  
January 31,
2021
 
Lease Assets
  
 
Right of Use Assets   
 
$ 1,209      $ 1,389  
Lease Liabilities
 – 
Current
  
 
Other Liabilities and Accrued Expenses   
 
  351        372  
Lease Liabilities
 – 
Long Term
  
 
Lease Liabilities   
 
  907        1,065  
Lease cost information is as follows:
 
 
  
 
  
Three Months Ended
 
  
Six Months Ended
 
Operating Leases
(In thousands)
  
Statement of Income Classification
  
July 31,
2021
 
  
July 31,
2021
 
Operating Lease Costs
  General and Administrative Expense    $ 124      $ 260  
 
 
  
 
  
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  
Maturities of operating lease liabilities are as follows:
 
(In thousands)
  
July 31,
2021
 
2022, remaining
   $ 185  
2023
     314  
2024
     287  
2025
     180  
2026
     159  
Thereafter
     265  
    
 
 
 
Total Lease Payments
     1,390  
Less: Imputed Interest
     (132
    
 
 
 
Total
Lease Liabilities
   $
 
1,258  
    
 
 
 
As of July 31, 2021, the weighted-average remaining lease
term
and weighted-average discount rate for our operating leases are 4.9 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)
  
July 31,
2021
    
July 31,
2021
 
Cash paid for amounts included in the measurement of lease liabilities:
                 
Operating cash flows for operating leases
   $ 93      $ 185  
 
    
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  
v3.21.2
Accumulated Other Comprehensive Loss
6 Months Ended
Jul. 31, 2021
Equity [Abstract]  
Accumulated Other Comprehensive Loss
Note 13 – 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, 2021
   $ (275    $ (109    $ (384
Other Comprehensive Loss before reclassification
     (429      —          (429
Amounts reclassified from AOCL to Earnings
     —          31        31  
    
 
 
    
 
 
    
 
 
 
Other Comprehensive Income (Loss)
     (429      31        (398
    
 
 
    
 
 
    
 
 
 
Balance at July 31, 2021
   $ (704    $ (78    $
 
(782
    
 
 
    
 
 
    
 
 
 
The amounts presented above in other comprehensive loss are net of taxes except for translation adjustments associated with our German, Danish and Shanghai subsidiaries.
v3.21.2
Share-Based Compensation
6 Months Ended
Jul. 31, 2021
Disclosure of Compensation Related Costs, Share-based Payments [Abstract]  
Share-Based Compensation
Note 14 – 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, there were 133,836 unvested RSUs; 65,167 unvested PSUs; 20,410 unvested RSAs and options to purchase an aggregate of 135,500 shares outstanding as of July 31, 2021.
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 July 31, 2021, options to purchase an aggregate of 326,968 shares were outstanding under the 2007 Plan and 3,750 unvested shares of restricted stock and options to purchase an aggregate of 141,175 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 20
22
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)
  
July 31,
2021
    
August 1,
2020
    
July 31,
2021
    
August 1,
2020
 
Stock Options
   $ 57      $ 131      $ 162      $ 264  
Restricted Stock Awards and Restricted Stock Units
     408        465        778        822  
Employee Stock Purchase Plan
     4        5        7        10  
    
 
 
    
 
 
    
 
 
    
 
 
 
Total
   $ 469      $ 601      $ 947      $ 1,096  
    
 
 
    
 
 
    
 
 
    
 
 
 
Stock Options
There were no stock options granted during the six months ended July 31, 2021 and August 1, 2020.
Aggregated information regarding stock option activity for the six months ended July 31, 2021 is summarized below:
 
    
Number of
Options
    
Weighted Average
Exercise Price
 
Outstanding at January 31, 2021
     622,083      $ 14.63  
Granted
     —          —    
Exercised
     (4,425      9.57  
Forfeited
     (14,015      14.96  
Canceled
     —          —    
    
 
 
    
 
 
 
Outstanding at July 31, 2021
     603,643      $ 14.66  
    
 
 
    
 
 
 
Set forth below is a summary of options outstanding at July 31, 2021:
 
Outstanding
    
Exercisable
 
Range of
Exercise prices
  
Number
of
Option
s
    
Weighted-
Average
Exercise
Price
    
Weighted-
Average
Remaining
Contractual Life
    
Number
of
Option
s
    
Weighted-
Average
Exercise
Price
    
Weighted
Average
Remaining
Contractual
Life
 
$5.00-10.00
     37,244      $ 7.97        1.0        37,244      $ 7.97        1.0  
$10.01-15.00
     348,649      $ 13.62        4.4        336,649      $ 13.61        4.3  
$15.01-20.00
     217,750      $ 17.47        6.3        210,875      $ 17.44        6.3  
    
 
 
    
 
 
    
 
 
    
 
 
    
 
 
    
 
 
 
       603,643      $ 14.66        4.9
 
 
     584,768
 
 
   $ 14.63        4.8  
    
 
 
    
 
 
    
 
 
    
 
 
    
 
 
    
 
 
 
As of July 31, 2021, there was approximately $59,000 of unrecognized compensation expense related to stock options which is expected to be recognized over a weighted average period of approximately 0.6 years.
Restricted Stock Units (RSUs) and Restricted Stock Awards (RSAs)
Aggregated information regarding RSU and RSA activity for the six months ended July 31, 2021 is summarized below:
 
 
  
RSAs & RSUs
 
  
Weighted Average
Grant Date Fair Value
 
Outstanding at January 31, 2021
     197,413     $ 9.96  
Granted
     147,006       14.43  
Vested
     (121,256     10.30  
    
 
 
   
 
 
 
Outstanding at July 31, 2021
     223,163     $ 12.72  
    
 
 
   
 
 
 
As of July 31, 2021, 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 1.0 year.
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 July 31, 2021 and August 1, 2020, there were 3,899 and 8,851 shares, respectively, purchased under this plan. As of July 31, 2021, 6,475 shares remain available for purchase under our Employee Stock Purchase Plan.
v3.21.2
Income Taxes
6 Months Ended
Jul. 31, 2021
Income Tax Disclosure [Abstract]  
Income Taxes
Note 15 – Income Taxes
Our effective tax rates for the period are as follows:
 
    
Three Months
Ended
   
Six Months
Ended
 
Fiscal 2022
     9.1     5.8
Fiscal 2021
     99.4     48.6
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 July 31, 2021, we recognized an income tax expense of
$0.7
 
million. The effective tax rate in this period was directly impacted by a
$1.1
million tax benefit from the forgiveness of the PPP Loan, a $
0.1
million tax benefit arising from a windfall related to our stock compensation and a
$32,000
tax benefit related to return to provision adjustments from foreign tax returns filed in the quarter. The PPP Loan forgiveness recognized during the three months ended July 31, 2021, is excluded from federal taxable income under Section 1106(i) of the CARES Act. During the three months ended August 1, 2020, we recognized an income tax expense of approximately
$0.5
 
million. The effective tax rate in this period was directly impacted by a significant increase in forecasted operating results for fiscal year 2021 as compared to operating results forecasted at the end of our first quarter of fiscal 2021, a
$0.1
million expense arising from a shortfall related to our stock and a $
0.1
million expense related to return to provision adjustments from foreign tax returns filed in the quarter.
During the six months ended July 31, 2021, we recognized an income tax expense of 
$0.5
 
million. The effective tax rate in this period was directly impacted by a 
$1.1
million tax benefit from the forgiveness of the PPP loan, a $
0.1
million tax benefit arising from windfall tax expense related to our stock, a 
$32,000
tax benefit related to return to provision adjustments from foreign tax returns filed in the year and a 
$0.3
million tax benefit related to the expiration of the statute of limitations on previously uncertain tax positions. The PPP loan forgiveness recognized during the six months ended
July 31, 2021, is excluded from taxable income under Section 1106(i) of the CARES Act. During the six months ended August 1, 2020, we recognized
an income tax expense of approximately 
$0.4
 
million. The effective tax rate in this period was directly impacted by a significant increase in forecasted operating results for fiscal year 2021 as compared to operating results forecasted at the end of our first quarter of fiscal year 2021, a 
$0.1
 
million expense arising from shortfall tax expense related to our stock, a 
$0.1
million expense related to return to provision adjustments from foreign tax returns filed in the year and a 
$0.1
million tax benefit related to the expiration of the statute of limitations on previously uncertain tax positions.
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 July 31, 2021, our cumulative unrecognized tax benefits totaled $221,000 compared to $384,000
as of
January 31, 2020. We established unrecognized tax benefits for certain positions taken on fiscal year 2021 Canadian tax return. There 
were no other developments affecting unrecognized tax benefits during the quarter ended July 31, 2021.
 
v3.21.2
Segment Information
6 Months Ended
Jul. 31, 2021
Segment Reporting [Abstract]  
Segment Information
Note 16 – 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)
  
July 31,
2021
    
August 1,
2020
    
July 31,
2021
    
August 1,
2020
   
July 31,
2021
    
August 1,
2020
    
July 31,
2021
    
August 1,
2020
 
Product Identification
   $ 23,492      $ 21,629      $ 4,406      $ 3,146     $ 46,590      $ 44,009      $ 7,134      $ 6,292  
T&M
     6,353        6,029        1,710        (407     12,333        14,569        2,060        (563
    
 
 
    
 
 
    
 
 
    
 
 
   
 
 
    
 
 
    
 
 
    
 
 
 
Total
   $ 29,845      $ 27,658        6,116        2,739     $ 58,923      $ 58,578        9,194        5,729  
    
 
 
    
 
 
                     
 
 
    
 
 
                   
Corporate Expenses
              2,664        2,535                5,008        4,861  
             
 
 
    
 
 
            
 
 
    
 
 
 
Operating Income
              3,452        204                4,186        868  
Other Income (Expense), Net
              4,266        328                3,897        (23
             
 
 
    
 
 
            
 
 
    
 
 
 
Income Before Income Taxes
              7,718        532                8,083        845  
Income Tax Provision
              699        529                471        411  
             
 
 
    
 
 
            
 
 
    
 
 
 
Net Income
            $ 7,019      $ 3              $ 7,612      $ 434  
             
 
 
    
 
 
            
 
 
    
 
 
 
v3.21.2
Fair Value
6 Months Ended
Jul. 31, 2021
Fair Value Disclosures [Abstract]  
Fair Value
Note 17 – Fair Value
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:
 
 
  
July 31, 2021
 
 
  
Fair Value Measurement
 
  
 
 
(In thousands)
  
Level 1
 
  
Level 2
 
  
Level 3
 
  
Total
 
  
Carrying
Value
 
Long-Term debt and related current maturities
   $ —        $ —        $ 9,633      $ 9,633      $ 9,625  
 
 
  
January 31, 2021
 
 
  
Fair Value Measurement
 
  
 
 
(In thousands)
  
Level 1
 
  
Level 2
 
  
Level 3
 
  
Total
 
  
Carrying
Value
 
Long-Term debt and related current maturities
   $ —        $ —        $ 12,586      $ 12,586      $ 12,576  
The fair value of our long-term debt, including the current portion, is estimated by discounting the future cash flows using current interest rates at which similar loans with the same maturities would be made to borrowers with similar credit ratings and is classified as Level 3.
v3.21.2
Summary of Significant Accounting Policies Update (Policies)
6 Months Ended
Jul. 31, 2021
Accounting Policies [Abstract]  
Income Taxes
Income Taxes
In December 2019, the FASB issued an ASU
2019-12,
“Simplifying the Accounting for Income Taxes,” which simplifies the accounting for income taxes, eliminates certain exceptions within ASC 740, Income Taxes, and clarifies certain aspects of the current guidance to promote consistency among reporting entities. ASU
2019-12
is effective for fiscal years beginning after December 15, 2020. Most amendments within the standard are required to be applied on a prospective basis, while certain amendments must be applied on a retrospective or modified retrospective basis. We adopted ASU
2019-12
for the period beginning February 1, 2021. The adoption of this guidance did not have a material impact on our consolidated financial statements and accompanying disclosures.
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.
v3.21.2
Revenue Recognition (Tables)
6 Months Ended
Jul. 31, 2021
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)   
July 31,
2021
    
August 
1
,
20
20
    
July 31,
2021
    
August 1,
2020
 
United States
   $ 17,181      $ 17,866      $ 33,874      $ 37,655  
Europe
     7,826        6,314        16,425        13,764  
Canada
     1,491        1,452        3,037        2,880  
Asia
     1,964        831        3,049        1,841  
Central and South America
     995        914        1,756        1,868  
Other
     388        281        782        570  
    
 
 
    
 
 
    
 
 
    
 
 
 
Total Revenue
   $ 29,845      $ 27,658      $ 58,923      $ 58,578  
    
 
 
    
 
 
    
 
 
    
 
 
 
Major product types:
 
    
Three Months Ended
    
Six Months Ended
 
(In thousands)   
July 31,
2021
    
August 1,
2020
    
July 31,
2021
    
August 1,
2020
 
Hardware
   $ 7,878      $ 8,439      $ 15,525      $ 17,354  
Supplies
     18,678        17,140        36,888        36,258  
Service and Other
     3,289        2,079        6,510        4,966  
    
 
 
    
 
 
    
 
 
    
 
 
 
Total Revenue
   $ 29,845      $ 27,658      $ 58,923      $ 58,578  
    
 
 
    
 
 
    
 
 
    
 
 
 
v3.21.2
Net Income Per Common Share (Tables)
6 Months Ended
Jul. 31, 2021
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
    
Six Months Ended
 
    
July 31,
2021
    
August 1,
2020
    
July 31,
2021
    
August 1,
2020
 
Weighted Average Common Shares Outstanding – Basic
     7,208,834        7,105,241        7,176,940        7,089,169  
Effect of Dilutive Options, Restricted Stock Awards and Restricted Stock Units
     119,724        17,354        120,178        24,359  
    
 
 
    
 
 
    
 
 
    
 
 
 
Weighted Average Common Shares Outstanding – Diluted
     7,328,558        7,122,595        7,297,118        7,113,528  
    
 
 
    
 
 
    
 
 
    
 
 
 
v3.21.2
Intangible Assets (Tables)
6 Months Ended
Jul. 31, 2021
Goodwill and Intangible Assets Disclosure [Abstract]  
Fair Value of Acquired Identifiable Intangible Assets and Related Estimated Useful Lives
Intangible assets are as follows:
 
    
July 31, 2021
    
January 31, 2021
 
(In thousands)
  
Gross
Carrying
Amount
    
Accumulated
Amortization
   
Currency
Translation
Adjustment
    
Net
Carrying
Amount
    
Gross
Carrying
Amount
    
Accumulated
Amortization
   
Currency
Translation
Adjustment
    
Net
Carrying
Amount
 
Miltope:
                                                                     
Customer Contract Relationships
   $ 3,100      $ (2,399   $ —        $ 701      $ 3,100      $ (2,284   $ —        $ 816  
RITEC:
                                                                     
Customer Contract Relationships
     2,830        (1,523     —          1,307        2,830        (1,423     —          1,407  
TrojanLabel:
                                                                     
Existing Technology
     2,327        (1,590     174        911        2,327        (1,405     196        1,118  
Distributor Relations
     937        (448     76        565        937        (396     89        630  
Honeywell:
                                                                     
Customer Contract Relationships
     27,243        (10,653     —          16,590        27,243        (9,712     —          17,531