☒ | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
☐ | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
Rhode Island | 05-0318215 | |
(State or other jurisdiction of incorporation or organization) | (I.R.S. Employer Identification No.) | |
600 East Greenwich Avenue, West Warwick, Rhode Island | 02893 | |
(Address of principal executive offices) | (Zip Code) |
Title of each class | Trading Symbol | Name of each exchange on which registered | ||
Common Stock, $.05 Par Value | ALOT | NASDAQ Global Market |
Large accelerated filer | ☐ | Accelerated filer | ☒ | ||||
Non-accelerated filer | ☐ | Smaller reporting company | ☒ | ||||
Emerging growth company | ☐ |
ASTRONOVA, INC.
INDEX
Page No. | ||||||
Part I. | ||||||
Item 1. | ||||||
Unaudited Condensed Consolidated Balance Sheets – | 1 | |||||
2 | ||||||
3 | ||||||
4 | ||||||
5 | ||||||
Notes to the Condensed Consolidated Financial Statements (unaudited) | ||||||
Item 2. | ||||||
Item 3. | ||||||
Item 4. | ||||||
Part II. | ||||||
Item 1. | ||||||
Item 1A. | ||||||
Item 2. | ||||||
Item 6. | ||||||
Signatures |
Item 1. | Financial Statements |
April 30, 2022 | January 31, 2022 | |||||||
(Unaudited) | ||||||||
ASSETS | ||||||||
CURRENT ASSETS | ||||||||
Cash and Cash Equivalents | $ | 5,754 | $ | 5,276 | ||||
Accounts Receivable, net | 18,444 | 17,124 | ||||||
Inventories, net | 36,859 | 34,609 | ||||||
Employee Retention Credit Rece i vable | — | 3,135 | ||||||
Prepaid Expenses and Other Current Assets | 4,333 | 3,634 | ||||||
Total Current Assets | 65,390 | 63,778 | ||||||
Property, Plant and Equipment, net | 10,978 | 11,441 | ||||||
Intangible Assets, net | 18,737 | 19,200 | ||||||
Goodwill | 11,719 | 12,156 | ||||||
Deferred Tax Assets | 5,585 | 5,591 | ||||||
Right of Use Assets | 976 | 1,094 | ||||||
Other Assets | 1,791 | 1,695 | ||||||
TOTAL ASSETS | $ | 115,176 | $ | 114,955 | ||||
LIABILITIES AND SHAREHOLDERS’ EQUITY | ||||||||
CURRENT LIABILITIES | ||||||||
Accounts Payable | $ | 6,952 | $ | 8,590 | ||||
Accrued Compensation | 2,665 | 3,512 | ||||||
Other Liabilities and Accrued Expenses | 3,613 | 4,113 | ||||||
Revolving Line of Credit | 3,000 | — | ||||||
Current Liability – Royalty Obligation | 2,000 | 2,000 | ||||||
Current Portion of Long-Term Debt | 1,000 | 1,000 | ||||||
Current Liability – Excess Royalty Payment Due | 311 | 235 | ||||||
Income Taxes Payable | 1,637 | 323 | ||||||
Deferred Revenue | 222 | 262 | ||||||
Total Current Liabilities | 21,400 | 20,035 | ||||||
Long-Term Debt, net of current portion | 7,910 | 8,154 | ||||||
Royalty Obligation, net of current portion | 3,923 | 4,361 | ||||||
Lease Liabilities, net of current portion | 708 | 808 | ||||||
Other Long-Term Liabilities | 399 | 399 | ||||||
Deferred Tax Liabilities | 140 | 186 | ||||||
TOTAL LIABILITIES | 34,480 | 33,943 | ||||||
SHAREHOLDERS’ EQUITY | ||||||||
Common Stock, $0.05 Par Value, Authorized 13,000,000 shares; Issued 10,639,081 ares and 10,566,404 shares at April 30, 2022 and January 31, 2022, respectivelysh | 532 | 528 | ||||||
Additional Paid-in Capital | 60,113 | 59,692 | ||||||
Retained Earnings | 56,939 | 56,514 | ||||||
Treasury Stock, at Cost, 3,341,030 and 3,324,280 shares at April 30, 2022 and January 31, 2022, respectively | (34,223 | ) | (33,974 | ) | ||||
Accumulated Other Comprehensive Loss, net of tax | (2,665 | ) | (1,748 | ) | ||||
TOTAL SHAREHOLDERS’ EQUITY | 80,696 | 81,012 | ||||||
TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY | $ | 115,176 | $ | 114,955 | ||||
October 29, 2022 | January 31, 2022 | |||||||
(Unaudited) | ||||||||
ASSETS | ||||||||
CURRENT ASSETS | ||||||||
Cash and Cash Equivalents | $ | 4,496 | $ | 5,276 | ||||
Accounts Receivable, net | 21,919 | 17,124 | ||||||
Inventories, net | 49,992 | 34,609 | ||||||
Employee Retention Credit Receivable | — | 3,135 | ||||||
Prepaid Expenses and Other Current Assets | 4,682 | 3,634 | ||||||
Total Current Assets | 81,089 | 63,778 | ||||||
Property, Plant and Equipment, net | 14,041 | 11,441 | ||||||
Intangible Assets, net | 18,866 | 19,200 | ||||||
Goodwill | 17,885 | 12,156 | ||||||
Deferred Tax Assets | 5,567 | 5,591 | ||||||
Right of Use Assets | 800 | 1,094 | ||||||
Other Assets | 1,581 | 1,695 | ||||||
TOTAL ASSETS | $ | 139,829 | $ | 114,955 | ||||
LIABILITIES AND SHAREHOLDERS’ EQUITY | ||||||||
CURRENT LIABILITIES | ||||||||
Accounts Payable | $ | 9,644 | $ | 8,590 | ||||
Accrued Compensation | 2,814 | 3,512 | ||||||
Other Liabilities and Accrued Expenses | 4,006 | 4,113 | ||||||
Revolving Line of Credit | 19,900 | — | ||||||
Current Liability – Royalty Obligation | 1,750 | 2,000 | ||||||
Current Portion of Long-Term Debt | 1,800 | 1,000 | ||||||
Current Liability – Excess Royalty Payment Due | 255 | 235 | ||||||
Income Taxes Payable | 912 | 323 | ||||||
Deferred Revenue | 362 | 262 | ||||||
Total Current Liabilities | 41,443 | 20,035 | ||||||
Long-Term Debt, net of current portion | 12,732 | 8,154 | ||||||
Royalty Obligation, net of current portion | 3,298 | 4,361 | ||||||
Lease Liabilities, net of current portion | 550 | 808 | ||||||
Income Taxes Payable | 399 | 399 | ||||||
Deferred Tax Liabilities | 79 | 186 | ||||||
TOTAL LIABILITIES | 58,501 | 33,943 | ||||||
SHAREHOLDERS’ EQUITY | ||||||||
Common Stock, $0.05 Par Value, Authorized 13,000,000 shares; Issued 10,669,689 shares and 10,566,404 shares at October 29, 2022 and January 31, 2022, respectively | 534 | 528 | ||||||
Additional Paid-in Capital | 60,774 | 59,692 | ||||||
Retained Earnings | 57,812 | 56,514 | ||||||
Treasury Stock, at Cost, 3,341,354 and 3,324,280 shares at October 29, 2022 and January 31, 2022, respectively | (34,227 | ) | (33,974 | ) | ||||
Accumulated Other Comprehensive Loss, net of tax | (3,565 | ) | (1,748 | ) | ||||
TOTAL SHAREHOLDERS’ EQUITY | 81,328 | 81,012 | ||||||
TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY | $ | 139,829 | $ | 114,955 | ||||
Three Months Ended | Three Months Ended | Nine Months Ended | ||||||||||||||||||||||
April 30, 2022 | May 1, 2021 | October 29, 2022 | October 30, 2021 | October 29, 2022 | October 30, 2021 | |||||||||||||||||||
Revenue | $ | 31,010 | $ | 29,078 | $ | 39,405 | $ | 28,857 | $ | 102,674 | $ | 87,780 | ||||||||||||
Cost of Revenue | 20,281 | 18,190 | 26,923 | 18,472 | 68,080 | 53,792 | ||||||||||||||||||
Gross Profit | 10,729 | 10,888 | 12,482 | 10,385 | 34,594 | 33,988 | ||||||||||||||||||
Operating Expenses: | ||||||||||||||||||||||||
Selling and Marketing | 5,883 | 6,092 | 5,908 | 5,777 | 17,771 | 16,931 | ||||||||||||||||||
Research and Development | 1,522 | 1,717 | 1,903 | 1,948 | 5,021 | 5,203 | ||||||||||||||||||
General and Administrative | 2,560 | 2,344 | 3,325 | 2,364 | 8,456 | 7,372 | ||||||||||||||||||
Operating Expenses | 9,965 | 10,153 | 11,136 | 10,089 | 31,248 | 29,506 | ||||||||||||||||||
Operating Income | 764 | 735 | 1,346 | 296 | 3,346 | 4,482 | ||||||||||||||||||
Other Expense, net | 279 | 369 | ||||||||||||||||||||||
Other Income (Expense), net: | ||||||||||||||||||||||||
Extinguishment of Debt – PPP Loan | — | — | — | 4,466 | ||||||||||||||||||||
Loss on Disposal of Assets | — | (696 | ) | — | (696 | ) | ||||||||||||||||||
Interest Expense | (701 | ) | (135 | ) | (1,086 | ) | (526 | ) | ||||||||||||||||
Loss on Foreign Currency Transactions | (237 | ) | (117 | ) | (614 | ) | (231 | ) | ||||||||||||||||
Other, net | (17 | ) | 53 | 35 | (11 | ) | ||||||||||||||||||
Income Before Income Taxes | 485 | 366 | ||||||||||||||||||||||
Income Tax Provision ( Benefit) | 60 | (227 | ) | |||||||||||||||||||||
(955 | ) | (895 | ) | (1,665 | ) | 3,002 | ||||||||||||||||||
Net Income | $ | 425 | $ | 593 | ||||||||||||||||||||
Net Income per Common Share—Basic: | $ | 0.06 | $ | 0.08 | ||||||||||||||||||||
Income (Loss) Before Income Taxes | 391 | (599 | ) | 1,681 | 7,484 | |||||||||||||||||||
Income Tax Provision (Benefit) | 102 | (174 | ) | 383 | 297 | |||||||||||||||||||
Net Income per Common Share—Diluted: | $ | 0.06 | $ | 0.08 | ||||||||||||||||||||
Net Income (Loss) | $ | 289 | $ | (425 | ) | $ | 1,298 | $ | 7,187 | |||||||||||||||
Net Income (Loss) per Common Share—Basic: | $ | 0.04 | $ | (0.06 | ) | $ | 0.18 | $ | 1.00 | |||||||||||||||
Net Income (Loss) per Common Share—Diluted: | $ | 0.04 | $ | (0.06 | ) | $ | 0.18 | $ | 0.98 | |||||||||||||||
Weighted Average Number of Common Shares Outstanding: | ||||||||||||||||||||||||
Basic | 7,298 | 7,145 | 7,324 | 7,234 | 7,299 | 7,196 | ||||||||||||||||||
Diluted | 7,396 | 7,265 | 7,379 | 7,234 | 7,363 | 7,325 |
Three Months Ended | Nine Months Ended | |||||||||||||||
October 29, 2022 | October 30, 2021 | October 29, 2022 | October 30, 2021 | |||||||||||||
Net Income (Loss) | $ | 289 | $ | (425 | ) | $ | 1,298 | $ | 7,187 | |||||||
Other Comprehensive Loss, Net of Taxes: | ||||||||||||||||
Foreign Currency Translation Adjustments | (497 | ) | (410 | ) | (1,864 | ) | (839 | ) | ||||||||
Loss from Cash Flow Hedges Reclassified to Income Statement | 16 | 16 | 47 | 47 | ||||||||||||
Other Comprehensive Loss | (481 | ) | (394 | ) | (1,817 | ) | (792 | ) | ||||||||
Comprehensive Income (Loss) | $ | (192 | ) | $ | (819 | ) | $ | (519 | ) | $ | 6,395 | |||||
Three Months Ended | ||||||||
April 30, 2022 | May 1, 2021 | |||||||
Net Income | $ | 425 | $ | 593 | ||||
Other Comprehensive Loss, Net of Taxes: | ||||||||
Foreign Currency Translation Adjustments | (933 | ) | (81 | ) | ||||
Loss | 16 | 16 | ||||||
Other Comprehensive Loss | (917 | ) | (65 | ) | ||||
Comprehensive Income (Loss) | $ | (492 | ) | $ | 528 | |||
Common Stock | Additional Paid-in Capital | Retained Earnings | Treasury Stock | Accumulated Other Comprehensive Income (Loss) | Total Shareholders’ Equity | |||||||||||||||||||||||
Shares | Amount | |||||||||||||||||||||||||||
Balance January 31, 2022 | 10,566,404 | $ | 528 | $ | 59,692 | $ | 56,514 | $ | (33,974 | ) | $ | (1,748 | ) | $ | 81,012 | |||||||||||||
Share-Based Compensation | — | — | 337 | — | — | — | 337 | |||||||||||||||||||||
Employee Option Exercises | 11,164 | 1 | 87 | — | — | — | 88 | |||||||||||||||||||||
Restricted Stock Awards Vested, net | 61,513 | 3 | (3 | ) | — | (249 | ) | — | (249 | ) | ||||||||||||||||||
Net Income | — | — | — | 425 | — | — | 425 | |||||||||||||||||||||
Other Comprehensive Loss | — | — | — | — | — | (917 | ) | (917 | ) | |||||||||||||||||||
Balance April 30, 2022 | 10,639,081 | $ | 532 | $ | 60,113 | $ | 56,939 | $ | (34,223 | ) | $ | (2,665 | ) | $ | 80,696 | |||||||||||||
Share-Based Compensation | — | — | 235 | — | — | — | 235 | |||||||||||||||||||||
Restricted Stock Awards Vested, net | 20,410 | 1 | (1 | ) | — | — | — | — | ||||||||||||||||||||
Net Income | — | — | — | 584 | — | — | 584 | |||||||||||||||||||||
Other Comprehensive Loss | — | — | — | — | — | (419 | ) | (419 | ) | |||||||||||||||||||
Balance July 30, 2022 | 10,659,491 | $ | 533 | $ | 60,347 | $ | 57,523 | $ | (34,223 | ) | $ | (3,084 | ) | $ | 81,096 | |||||||||||||
Share-Based Compensation | — | — | 405 | — | — | — | 405 | |||||||||||||||||||||
Employee Option Exercises | 9,097 | 1 | 22 | — | — | — | 23 | |||||||||||||||||||||
Restricted Stock Awards Vested, net | 1,101 | — | — | — | (4 | ) | — | (4 | ) | |||||||||||||||||||
Net Income | — | — | — | 289 | — | — | 289 | |||||||||||||||||||||
Other Comprehensive Loss | — | — | — | — | — | (481 | ) | (481 | ) | |||||||||||||||||||
Balance October 29, 2022 | 10,669,689 | $ | 534 | $ | 60,774 | $ | 57,812 | $ | (34,227 | ) | $ | (3,565 | ) | $ | 81,328 | |||||||||||||
Common Stock | Additional Paid-in | Retained | Treasury | Accumulated Other Comprehensive | Total Shareholders’ | |||||||||||||||||||||||
Shares | Amount | Capital | Earnings | Stock | Income (Loss) | Equity | ||||||||||||||||||||||
Balance January 31, 2021 | 10,425,094 | $ | 521 | $ | 58,049 | $ | 50,085 | $ | (33,588 | ) | $ | (384 | ) | $ | 74,683 | |||||||||||||
Share-Based Compensation | — | — | 478 | — | — | — | 478 | |||||||||||||||||||||
Employee Option Exercises | 5,746 | — | 52 | — | — | — | 52 | |||||||||||||||||||||
Restricted Stock Awards Vested, net | 48,299 | 3 | (3 | ) | — | (208 | ) | — | (208 | ) | ||||||||||||||||||
Net Income | — | — | — | 593 | — | — | 593 | |||||||||||||||||||||
Other Comprehensive Loss | — | — | — | — | — | (65 | ) | (65 | ) | |||||||||||||||||||
Balance May 1, 2021 | 10,479,139 | $ | 524 | $ | 58,576 | $ | 50,678 | $ | (33,796 | ) | $ | (449 | ) | $ | 75,533 | |||||||||||||
Common Stock | Additional Paid-in | Retained | Treasury | Accumulated Other Comprehensive | Total Shareholders’ | |||||||||||||||||||||||
Shares | Amount | Capital | Earnings | Stock | Income (Loss) | Equity | ||||||||||||||||||||||
Balance January 31, 2022 | 10,566,404 | $ | 528 | $ | 59,692 | $ | 56,514 | $ | (33,974 | ) | $ | (1,748 | ) | $ | 81,012 | |||||||||||||
Share-Based Compensation | — | — | 337 | — | — | — | 337 | |||||||||||||||||||||
Employee Option Exercises | 11,164 | 1 | 87 | — | — | — | 88 | |||||||||||||||||||||
Restricted Stock Awards Vested, net | 61,513 | 3 | (3 | ) | — | (249 | ) | — | (249 | ) | ||||||||||||||||||
Net Income | — | — | — | 425 | — | — | 425 | |||||||||||||||||||||
Other Comprehensive Loss | — | — | — | — | — | (917 | ) | (917 | ) | |||||||||||||||||||
Balance April 30, 202 2 | 10,639,081 | $ | 532 | $ | 60,113 | $ | 56,939 | $ | (34,223 | ) | $ | (2,665 | ) | $ | 80,696 | |||||||||||||
Common Stock | Additional Paid-in Capital | Retained Earnings | Treasury Stock | Accumulated Other Comprehensive Income (Loss) | Total Shareholders’ Equity | |||||||||||||||||||||||
Shares | Amount | |||||||||||||||||||||||||||
Balance January 31, 2021 | 10,425,094 | $ | 521 | $ | 58,049 | $ | 50,085 | $ | (33,588 | ) | $ | (384 | ) | $ | 74,683 | |||||||||||||
Share-Based Compensation | — | — | 478 | — | — | — | 478 | |||||||||||||||||||||
Employee Option Exercises | 5,746 | — | 52 | — | — | — | 52 | |||||||||||||||||||||
Restricted Stock Awards Vested, net | 48,299 | 3 | (3 | ) | — | (208 | ) | — | (208 | ) | ||||||||||||||||||
Net Income | — | — | — | 593 | — | — | 593 | |||||||||||||||||||||
Other Comprehensive Loss | — | — | — | — | — | (65 | ) | (65 | ) | |||||||||||||||||||
Balance May 1, 2021 | 10,479,139 | $ | 524 | $ | 58,576 | $ | 50,678 | $ | (33,796 | ) | $ | (449 | ) | $ | 75,533 | |||||||||||||
Share-Based Compensation | — | — | 469 | — | — | — | 469 | |||||||||||||||||||||
Employee Option Exercises | 3,211 | — | 35 | — | — | — | 35 | |||||||||||||||||||||
Restricted Stock Awards Vested, net | 72,125 | 4 | (4 | ) | — | (146 | ) | — | (146 | ) | ||||||||||||||||||
Net Income | — | — | — | 7,019 | — | — | 7,019 | |||||||||||||||||||||
Other Comprehensive Loss | — | — | — | — | — | (333 | ) | (333 | ) | |||||||||||||||||||
Balance July 31, 2021 | 10,554,475 | $ | 528 | $ | 59,076 | $ | 57,697 | $ | (33,942 | ) | $ | (782 | ) | $ | 82,577 | |||||||||||||
Share-Based Compensation | — | — | 399 | — | — | — | 399 | |||||||||||||||||||||
Employee Option Exercises | 1,983 | — | 27 | — | — | — | 27 | |||||||||||||||||||||
Restricted Stock Awards Vested, net | 433 | — | — | — | (2 | ) | — | (2 | ) | |||||||||||||||||||
Net Loss | — | — | — | (425 | ) | — | — | (425 | ) | |||||||||||||||||||
Other Comprehensive Loss | — | — | — | — | — | (394 | ) | (394 | ) | |||||||||||||||||||
Balance October 30, 2021 | 10,556,891 | $ | 528 | $ | 59,502 | $ | 57,272 | $ | (33,944 | ) | $ | (1,176 | ) | $ | 82,182 | |||||||||||||
Nine Months Ended | ||||||||
October 29, 2022 | October 30, 2021 | |||||||
Cash Flows from Operating Activities: | ||||||||
Net Income | $ | 1,298 | $ | 7,187 | ||||
Adjustments to Reconcile Net Income to Net Cash Provided (Used) by Operating Activities: | ||||||||
Depreciation and Amortization | 2,621 | 3,070 | ||||||
Amortization of Debt Issuance Costs | 18 | 38 | ||||||
Share-Based Compensation | 977 | 1,345 | ||||||
Loss on Disposal of Assets | — | 696 | ||||||
Gain on Extinguishment of Debt | — | (4,466 | ) | |||||
Changes in Assets and Liabilities, net of impact of acquisition: | ||||||||
Accounts Receivable | (1,874 | ) | 969 | |||||
Other Receivable – Employee Retention Credit Receivable | 3,135 | (3,135 | ) | |||||
Inventories | (11,695 | ) | (1,804 | ) | ||||
Income Taxes | 142 | (1,965 | ) | |||||
Accounts Payable and Accrued Expenses | (1,207 | ) | 2,914 | |||||
Other | (870 | ) | (1,001 | ) | ||||
Net Cash Used Provided (Used) by Operating Activities | (7,455 | ) | 3,848 | |||||
Cash Flows from Investing Activities: | ||||||||
Cash Paid for Astro Machine Acquisition, net of acquired cash | (17,034 | ) | — | |||||
Additions to Property, Plant and Equipment | (222 | ) | (1,507 | ) | ||||
Net Cash Used for Investing Activities | (17,256 | ) | (1,507 | ) | ||||
Cash Flows from Financing Activities: | ||||||||
Net Cash Proceeds from Employee Stock Option Plans | 69 | 47 | ||||||
Net Cash Proceeds from Share Purchases under Employee Stock Purchase Plan | 42 | 67 | ||||||
Net Cash Used for Payment of Taxes Related to Vested Restricted Stock | (253 | ) | (356 | ) | ||||
Net Borrowings under Revolving Credit Facility | 19,900 | — | ||||||
Payment of Minimum Guarantee Royalty Obligation | (1,500 | ) | (1,500 | ) | ||||
Proceeds from Long-Term Debt Borrowings | 6,000 | 10,000 | ||||||
Payoff of Long-Term Debt | — | (12,576 | ) | |||||
Principal Payments of Long-Term Debt | (625 | ) | (563 | ) | ||||
Payment of Debt Issuance Costs | (15 | ) | — | |||||
Net Cash Provided (Used) by for Financing Activities | 23,618 | (4,881 | ) | |||||
Effect of Exchange Rate Changes on Cash and Cash Equivalents | 313 | (172 | ) | |||||
Net Decrease in Cash and Cash Equivalents | (780 | ) | (2,712 | ) | ||||
Cash and Cash Equivalents, Beginning of Period | 5,276 | 11,439 | ||||||
Cash and Cash Equivalents, End of Period | $ | 4,496 | $ | 8,727 | ||||
Supplemental Disclosures of Cash Flow Information: | ||||||||
Cash Paid During the Period for Interest | $ | 440 | $ | 268 | ||||
Cash Paid During the Period for Income Taxes, Net of Refunds | $ | 265 | $ | 2,243 |
Three Months Ended | ||||||||
April 30, 2022 | May 1, 2021 | |||||||
Cash Flows from Operating Activities: | ||||||||
Net Income | $ | 425 | $ | 593 | ||||
Adjustments to Reconcile Net Income to Net Cash Provided (Used) by Operating Activities: | ||||||||
Depreciation and Amortization | 912 | 1,425 | ||||||
Amortization of Debt Issuance Costs | 7 | 25 | ||||||
Share-Based Compensation | 337 | 478 | ||||||
Changes in Assets and Liabilities: | ||||||||
Accounts Receivable | (1,489 | ) | 2,165 | |||||
Other Receivable – Employee Retention Credit Receivable | 3,135 | — | ||||||
Inventories | (2,650 | ) | 568 | |||||
Income Taxes | 502 | (387 | ) | |||||
Accounts Payable and Accrued Expenses | (2,843 | ) | (552 | ) | ||||
Other | 50 | (406 | ) | |||||
Net Cash Provided (Used) by Operating Activities | (1,614 | ) | 3,909 | |||||
Cash Flows from Investing Activities: | ||||||||
Additions to Property, Plant and Equipment | (50 | ) | (544 | ) | ||||
Net Cash Used for Investing Activities | (50 | ) | (544 | ) | ||||
Cash Flows from Financing Activities: | ||||||||
Net Cash Proceeds from Employee Stock Option Plans | 69 | 34 | ||||||
Net Cash Proceeds from Share Purchases under Employee Stock Purchase Plan | 19 | 18 | ||||||
Net Cash Used for Payment of Taxes Related to Vested Restricted Stock | (249 | ) | (208 | ) | ||||
Borrowings under Revolving Credit Facility | 3,000 | — | ||||||
Payment of Minimum Guarantee Royalty Obligation | (500 | ) | (500 | ) | ||||
Proceeds from Long-Term Debt Borrowings | — | 10,000 | ||||||
Payoff of Long-Term Debt | — | (12,576 | ) | |||||
Principal Payments on Long-Term Debt | (250 | ) | (187 | ) | ||||
Net Cash Provided by (Used) for Financing Activities | 2,089 | (3,419 | ) | |||||
Effect of Exchange Rate Changes on Cash and Cash Equivalents | 53 | 29 | ||||||
Net Increase (Decrease) in Cash and Cash Equivalents | 478 | (25 | ) | |||||
Cash and Cash Equivalents, Beginning of Period | 5,276 | 11,439 | ||||||
Cash and Cash Equivalents, End of Period | $ | 5,754 | $ | 11,414 | ||||
Supplemental Disclosures of Cash Flow Information: | ||||||||
Cash Paid During the Period for Interest | $ | 53 | $ | 115 | ||||
Cash Paid (Received) During the Period for Income Taxes, Net of Refunds | $ | (440 | ) | $ | 131 |
(In thousands) | ||||
Cash | $ | 91 | ||
Accounts Receivable | 3,393 | |||
Inventory | 4,557 | |||
Property, Plant and Equipment | 3,867 | |||
Identifiable Intangible Assets | 1,000 | |||
Goodwill | 6,567 | |||
Accounts Payable and Other Current Liabilities | (2,350 | ) | ||
Total Purchase Price | $ | 17,125 | ||
(In thousands) | Fair Value | Useful Life (Years) | ||||||
Customer Relations | $ | 1,000 | 7 |
Three Months Ended | ||||||||
(In thousands) | April 30, 2022 | May 1, 2021 | ||||||
United States | $ | 19,651 | $ | 16,693 | ||||
Europe | 7,419 | 8,599 | ||||||
Canada | 1,854 | 1,546 | ||||||
Asia | 937 | 1,085 | ||||||
Central and South America | 888 | 760 | ||||||
Other | 261 | 395 | ||||||
Total Revenue | $ | 31,010 | $ | 29,078 | ||||
Three Months Ended | Nine Months Ended | |||||||||||||||
(In thousands) | October 29, 2022 | October 30, 2021 | October 29, 2022 | October 30, 2021 | ||||||||||||
United States | $ | 26,806 | $ | 17,280 | $ | 65,501 | $ | 51,154 | ||||||||
Europe | 7,341 | 7,163 | 22,642 | 23,588 | ||||||||||||
Canada | 2,253 | 1,724 | 6,333 | 4,761 | ||||||||||||
Asia | 1,392 | 1,473 | 4,118 | 4,523 | ||||||||||||
Central and South America | 1,311 | 814 | 3,222 | 2,569 | ||||||||||||
Other | 302 | 403 | 858 | 1,185 | ||||||||||||
Total Revenue | $ | 39,405 | $ | 28,857 | $ | 102,674 | $ | 87,780 | ||||||||
Three Months Ended | Three Months Ended | Nine Months Ended | ||||||||||||||||||||||
(In thousands) | April 30, 2022 | May 1, 2021 | October 29, 2022 | October 30, 2021 | October 29, 2022 | October 30, 2021 | ||||||||||||||||||
Hardware | $ | 9,301 | $ | 7,647 | $ | 11,947 | $ | 7,622 | $ | 29,885 | $ | 23,147 | ||||||||||||
Supplies | 17,944 | 18,211 | 22,945 | 18,055 | 60,055 | 54,944 | ||||||||||||||||||
Service and Other | 3,765 | 3,220 | 4,513 | 3,180 | 12,734 | 9,689 | ||||||||||||||||||
Total Revenue | $ | 31,010 | $ | 29,078 | $ | 39,405 | $ | 28,857 | $ | 102,674 | $ | 87,780 | ||||||||||||
Three Months Ended | Three Months Ended | Nine Months Ended | ||||||||||||||||||||||
April 30, 2022 | May 1, 2021 | October 29, 2022 | October 30, 2021 | October 29, 2022 | October 30, 2021 | |||||||||||||||||||
Weighted Average Common Shares Outstanding – Basic | 7,298,051 | 7,144,697 | 7,324,089 | 7,234,045 | 7,299,277 | 7,196,066 | ||||||||||||||||||
Effect of Dilutive Options, Restricted Stock Awards and Restricted Stock Units | 97,713 | 120,632 | 55,314 | — | 63,752 | 128,437 | ||||||||||||||||||
Weighted Average Common Shares Outstanding – Diluted | 7,395,764 | 7,265,329 | 7,379,403 | 7,234,045 | 7,363,029 | 7,324,503 | ||||||||||||||||||
April 30, 2022 | January 31, 2022 | |||||||||||||||||||||||||||||||
(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 | $ | (2,580 | ) | $ | — | $ | 520 | $ | 3,100 | $ | (2,515 | ) | $ | — | $ | 585 | ||||||||||||||
RITEC: | ||||||||||||||||||||||||||||||||
Customer Contract Relationships | 2,830 | (1,573 | ) | — | 1,257 | 2,830 | (1,557 | ) | — | 1,273 | ||||||||||||||||||||||
TrojanLabel: | ||||||||||||||||||||||||||||||||
Existing Technology | 2,327 | (1,489 | ) | (272 | ) | 566 | 2,327 | (1,767 | ) | 127 | 687 | |||||||||||||||||||||
Distributor Relations | 937 | (419 | ) | (84 | ) | 434 | 937 | (498 | ) | 46 | 485 | |||||||||||||||||||||
Honeywell: | ||||||||||||||||||||||||||||||||
Customer Contract Relationships | 27,243 | (11,283 | ) | — | 15,960 | 27,243 | (11,073 | ) | — | 16,170 | ||||||||||||||||||||||
Intangible Assets, net | $ | 36,437 | $ | (17,344 | ) | $ | (356 | ) | $ | 18,737 | $ | 36,437 | $ | (17,410 | ) | $ | 173 | $ | 19,200 | |||||||||||||
October 29, 2022 | January 31, 2022 | |||||||||||||||||||||||||||||||
(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 | $ | (2,711 | ) | $ | — | $ | 389 | $ | 3,100 | $ | (2,515 | ) | $ | — | $ | 585 | ||||||||||||||
RITEC: | ||||||||||||||||||||||||||||||||
Customer Contract Relationships | 2,830 | (1,606 | ) | — | 1,224 | 2,830 | (1,557 | ) | — | 1,273 | ||||||||||||||||||||||
TrojanLabel: | ||||||||||||||||||||||||||||||||
Existing Technology | 2,327 | (2,004 | ) | 59 | 382 | 2,327 | (1,767 | ) | 127 | 687 | ||||||||||||||||||||||
Distributor Relations | 937 | (565 | ) | (6 | ) | 366 | 937 | (498 | ) | 46 | 485 | |||||||||||||||||||||
Honeywell: | ||||||||||||||||||||||||||||||||
Customer Contract Relationships | 27,243 | (11,702 | ) | — | 15,541 | 27,243 | (11,073 | ) | — | 16,170 | ||||||||||||||||||||||
Astro Machine: | ||||||||||||||||||||||||||||||||
Customer Relationships | 1,000 | (36 | ) | — | 964 | |||||||||||||||||||||||||||
Intangible Assets, net | $ | 37,437 | $ | (18,625 | ) | $ | 53 | $ | 18,866 | $ | 36,437 | $ | (17,410 | ) | $ | 173 | $ | 19,200 | ||||||||||||||
(In thousands) | Remaining 2023 | 2024 | 2025 | 2026 | 2027 | Remaining 2023 | 2024 | 2025 | 2026 | 2027 | ||||||||||||||||||||||||||||||
Estimated amortization expense | $ | 1,303 | $ | 1,657 | $ | 1,000 | $ | 1,000 | $ | 1,000 | $ | 429 | $ | 1,778 | $ | 1,138 | $ | 1,138 | $ | 1,138 |
(In thousands) | April 30, 2022 | January 31, 2022 | October 29, 2022 | January 31, 2022 | ||||||||||||
Materials and Supplies | $ | 25,385 | $ | 22,709 | $ | 35,109 | $ | 22,709 | ||||||||
Work-In-Process | 818 | 1,489 | 1,214 | 1,489 | ||||||||||||
Finished Goods | 20,536 | 19,718 | 23,785 | 19,718 | ||||||||||||
46,739 | 43,916 | 60,108 | 43,916 | |||||||||||||
Inventory Reserve | (9,880 | ) | (9,307 | ) | (10,116 | ) | (9,307 | ) | ||||||||
$ | 36,859 | $ | 34,609 | $ | 49,992 | $ | 34,609 | |||||||||
(In thousands) | April 30, 2022 | January 31, 2022 | ||||||
USD Term Loan (2.35% as of April 30, 2022 and January 31, 2022); maturity date of September 30, 2025 | $ | 9,000 | $ | 9,250 | ||||
Debt Issuance Costs, net of accumulated amortization | (90 | ) | (96 | ) | ||||
Current Portion of Term Loans | (1,000 | ) | (1,000 | ) | ||||
Long-Term Debt | $ | 7,910 | $ | 8,154 | ||||
(In thousands) | October 29, 2022 | January 31, 2022 | ||||||
USD Term Loan (7.75% as of October 29, 2022); maturity date of August 4, 2027 | $ | 14,625 | $ | — | ||||
USD Term Loan (2.35% as of January 31, 2022); maturity date of September 30, 2025 | — | 9,250 | ||||||
14,625 | 9,250 | |||||||
Debt Issuance Costs, net of accumulated amortization | (93 | ) | (96 | ) | ||||
Current Portion of Term Loans | (1,800 | ) | (1,000 | ) | ||||
Long-Term Debt | $ | 12,732 | $ | 8,154 | ||||
(In thousands) | ||||
Fiscal 2023, remainder | $ | 375 | ||
Fiscal 2024 | 2,100 | |||
Fiscal 2025 | 2,700 | |||
Fiscal 2026 | 2,700 | |||
Fiscal 2027 | 2,700 | |||
Fiscal 2028 and beyond | 4,050 | |||
$ | 14,625 | |||
(In thousands) | ||||
Fiscal 2023, remainder | $ | 750 | ||
Fiscal 2024 | 1,000 | |||
Fiscal 2025 | 1,250 | |||
Fiscal 2026 | 6,000 | |||
$ | 9,000 | |||
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) | April 30, 2022 | May 1, 2021 | April 30, 2022 | May 1, 2021 | ||||||||||||||||
Swap contracts | $ | — | $ | — | Other Expense | $ | (20 | ) | $ | (20 | ) | |||||||||
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) | October 29, 2022 | October 30, 2021 | October 29, 2022 | October 30, 2021 | ||||||||||||||||
Swap contracts | $ | — | $ | — | Other Expense | $ | (19 | ) | $ | (20 | ) | |||||||||
Nine 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) | October 29, 2022 | October 30, 2021 | October 29, 2022 | October 30, 2021 | ||||||||||||||||
Swap contracts | $ | — | $ | — | Other Expense | $ | (59 | ) | $ | (60 | ) | |||||||||
Operating Leases (In thousands) | Balance Sheet Classification | April 30, 2022 | January 31, 2022 | Balance Sheet Classification | October 29, 2022 | January 31, 2022 | ||||||||||||||||||
Lease Assets | Right of Use Assets | $ | 976 | $ | 1,094 | Right of Use Assets | $ | 800 | $ | 1,094 | ||||||||||||||
Lease Liabilities – Current | Other Liabilities and Accrued Expenses | 311 | 327 | Other Liabilities and Accrued Expenses | 291 | 327 | ||||||||||||||||||
Lease Liabilities – Long Term | Lease Liabilities | 708 | $ | 808 | Lease Liabilities | 550 | 808 |
Three Months Ended | Three Months Ended | Nine Months Ended | ||||||||||||||||||||||
Operating Leases (In thousands) | Statement of Income Classification | April 30, 2022 | May 1, 2021 | Statement of Income Classification | October 29, 2022 | October 29, 2022 | ||||||||||||||||||
Operating Lease Costs | General and Administrative Expense | $ | 113 | $ | 136 | General and Administrative Expense | $ | 115 | $ | 350 | ||||||||||||||
Three Months Ended | Nine Months Ended | |||||||||||||||||||||||
Operating Leases (In thousands) | Statement of Income Classification | October 30, 2021 | October 30, 2021 | |||||||||||||||||||||
Operating Lease Costs | General and Administrative Expense | $ | 125 | $ | 386 |
(In thousands) | April 30, 2022 | |||||||
2023, remaining | $ | 234 | ||||||
2024 | 297 | |||||||
2025 | 195 | |||||||
2026 | 150 | |||||||
2027 | 145 | |||||||
Fiscal 2023, remaining | $ | 74 | ||||||
Fiscal 2024 | 286 | |||||||
Fiscal 2025 | 186 | |||||||
Fiscal 2026 | 142 | |||||||
Fiscal 2027 | 137 | |||||||
Thereafter | 89 | 85 | ||||||
Total Lease Payments | 1,110 | 910 | ||||||
Less: Imputed Interest | (91 | ) | (69 | ) | ||||
Total Lease Liabilities | $ | 1,019 | $ | 841 | ||||
Three Months Ended | Three Months Ended | Nine Months Ended | ||||||||||||||
(In thousands) | April 30, 2022 | May 1, 2021 | October 29, 2022 | October 29, 2022 | ||||||||||||
Cash paid for amounts included in the measurement of lease liabilities: | ||||||||||||||||
Operating cash flows for operating leases | $ | 83 | $ | 92 | $ | 74 | $ | 237 | ||||||||
Three Months Ended | Nine Months Ended | |||||||||||||||
(In thousands) | October 30, 2021 | October 30, 2021 | ||||||||||||||
Cash paid for am o unts included in the measurement of lease liabilities: | ||||||||||||||||
Operating cash flows for operating leases | $ | 85 | $ | 285 |
(In thousands) | Foreign Currency Translation Adjustments | Cash Flow Hedges | Total | |||||||||
Balance at January 31, 2022 | $ | (1,701 | ) | $ | (47 | ) | $ | (1,748 | ) | |||
Other Comprehensive Loss before reclassification | (933 | ) | — | (933 | ) | |||||||
Amounts reclassified from AOCL to Earnings | — | 16 | 16 | |||||||||
Other Comprehensive Income (Loss) | (933 | ) | 16 | (917 | ) | |||||||
Balance at April 30, 2022 | $ | (2,634 | ) | $ | (31 | ) | $ | (2,665 | ) | |||
(In thousands) | Foreign Currency Translation Adjustments | Cash Flow Hedges | Total | |||||||||
Balance at January 31, 2022 | $ | (1,701 | ) | $ | (47 | ) | $ | (1,748 | ) | |||
Other Comprehensive Loss before reclassification | (1,864 | ) | — | (1,864 | ) | |||||||
Amounts reclassified from AOCL to Earnings | — | 47 | 47 | |||||||||
Other Comprehensive Income (Loss) | (1,864 | ) | 47 | (1,817 | ) | |||||||
Balance at October 29, 2022 | $ | (3,565 | ) | $ | — | $ | (3,565 | ) | ||||
Three Months Ended | ||||||||
(In thousands) | April 30, 2022 | May 1, 2021 | ||||||
Stock Options | $ | 6 | $ | 105 | ||||
Restricted Stock Awards and Restricted Stock Units | 328 | 370 | ||||||
Employee Stock Purchase Plan | 3 | 3 | ||||||
Total | $ | 337 | $ | 478 | ||||
Three Months Ended | Nine Months Ended | |||||||||||||||
(In thousands) | October 29, 2022 | October 30, 2021 | October 29, 2022 | October 30, 2021 | ||||||||||||
Stock Options | $ | — | $ | 25 | $ | 7 | $ | 187 | ||||||||
Restricted Stock Awards and Restricted Stock Units | 401 | 369 | 963 | 1,147 | ||||||||||||
Employee Stock Purchase Plan | 4 | 4 | 7 | 11 | ||||||||||||
Total | $ | 405 | $ | 398 | $ | 977 | $ | 1,345 | ||||||||
Number of Options | Weighted Average Exercise Price | |||||||
Outstanding at January 31, 202 2 | 598,043 | $ | 14.67 | |||||
Granted | — | — | ||||||
Exercised | (11,444 | ) | 9.51 | |||||
Forfeited | (2,050 | ) | 16.66 | |||||
Canceled | (2,400 | ) | 8.09 | |||||
Outstanding at April 30, 2022 | 582,149 | $ | 14.79 | |||||
Number of Options | Weighted Average Exercise Price | |||||||
Outstanding at January 31, 2022 | 598,043 | $ | 14.67 | |||||
Exercised | (36,444 | ) | 8.41 | |||||
Forfeited | (5,100 | ) | 15.38 | |||||
Expired | (2,400 | ) | 8.09 | |||||
Outstanding at October 29, 2022 | 554,099 | $ | 15.10 | |||||
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 | 25,000 | $ | 7.91 | 0.4 | 25,000 | $ | 7.91 | 0.4 | ||||||||||||||||
$10.01-15.00 | 341,849 | $ | 13.62 | 3.6 | 342,349 | $ | 13.62 | 3.6 | ||||||||||||||||
$15.01-20.00 | 215,300 | $ | 17.46 | 5.6 | 209,200 | $ | 17.43 | 5.6 | ||||||||||||||||
582,149 | $ | 14.79 | 4.2 | 576,549 | $ | 14.75 | 4.2 | |||||||||||||||||
Outstanding | Exercisable | |||||||||||||||||||||||||
Range of Exercise prices | Number of Options | Weighted- Average Exercise Price | Weighted- Average Remaining Contractual Life | Number of Options | Weighted- Average Exercise Price | Weighted Average Remaining Contractual Life | ||||||||||||||||||||
$ | 10.01-15.00 | 339,549 | $ | 13.62 | 3.1 | 339,549 | $ | 13.62 | 3.1 | |||||||||||||||||
$ | 15.01-20.00 | 214,550 | $ | 17.45 | 5.1 | 214,550 | $ | 17.45 | 5.1 | |||||||||||||||||
554,099 | $ | 15.10 | 3.9 | 554,099 | $ | 15.10 | 3.9 | |||||||||||||||||||
RSAs & RSUs | Weighted Average Grant Date Fair Value | |||||||||||||||
RSAs & RSUs | Weighted Average Grant Date Fair Value | |||||||||||||||
Outstanding at January 31, 2022 | 199,342 | $ | 12.63 | 220,980 | $ | 12.79 | ||||||||||
Granted | 141,837 | 12.84 | 141,371 | 12.68 | ||||||||||||
Vested | (61,513 | ) | 12.78 | (83,024 | ) | 13.41 | ||||||||||
Forfeited | (1,100 | ) | 11.77 | (1,100 | ) | 11.77 | ||||||||||
Outstanding at April 30, 2022 | 278,566 | $ | 12.71 | |||||||||||||
Outstanding at October 29, 2022 | 278,227 | $ | 12.55 | |||||||||||||
Three Months Ended | Nine Months Ended | |||||||
Fiscal 2023 | 26.0 | % | 22.8 | % | ||||
Fiscal 2022 | 29.0 | % | 4.0 | % |
Three Months Ended | Nine Months Ended | |||||||||||||||||||||||||||||||
Revenue | Segment Operating Profit (Loss) | Revenue | Segment Operating Profit (Loss) | |||||||||||||||||||||||||||||
(In thousands) | October 29, 2022 | October 30, 2021 | October 29, 2022 | October 30, 2021 | October 29, 2022 | October 30, 2021 | October 29, 2022 | October 30, 2021 | ||||||||||||||||||||||||
Product Identification | $ | 29,879 | $ | 21,928 | $ | 2,960 | $ | 1,818 | $ | 74,985 | $ | 68,519 | $ | 6,019 | $ | 8,952 | ||||||||||||||||
T&M | 9,526 | 6,929 | 1,711 | 842 | 27,689 | 19,261 | 5,783 | 2,902 | ||||||||||||||||||||||||
Total | $ | 39,405 | $ | 28,857 | 4,671 | 2,660 | $ | 102,674 | $ | 87,780 | 11,802 | 11,854 | ||||||||||||||||||||
Corporate Expenses | 3,325 | 2,364 | 8,456 | 7,372 | ||||||||||||||||||||||||||||
Operating Income | 1,346 | 296 | 3,346 | 4,482 | ||||||||||||||||||||||||||||
Other Income (Expense), Net | (955 | ) | (895 | ) | (1,665 | ) | 3,002 | |||||||||||||||||||||||||
Income (Loss) Before Income Taxes | 391 | (599 | ) | 1,681 | 7,484 | |||||||||||||||||||||||||||
Income Tax Provision (Benefit) | 102 | (174 | ) | 383 | 297 | |||||||||||||||||||||||||||
Net Income (Loss) | $ | 289 | $ | (425 | ) | $ | 1,298 | $ | 7,187 | |||||||||||||||||||||||
Three Months Ended | ||||||||||||||||
Revenue | Segment Operating Profit | |||||||||||||||
(In thousands) | April 30, 2022 | May 1, 2021 | April 30, 2022 | May 1, 2021 | ||||||||||||
Product Identification | $ | 21,724 | $ | 23,098 | $ | 1,413 | $ | 2,729 | ||||||||
T&M | 9,286 | 5,980 | 1,911 | 350 | ||||||||||||
Total | $ | 31,010 | $ | 29,078 | 3,324 | 3,079 | ||||||||||
Corporate Expenses | 2,560 | 2,344 | ||||||||||||||
Operating Income | 764 | 735 | ||||||||||||||
Other Expense, Net | 279 | 369 | ||||||||||||||
Income Before Income Taxes | 485 | 366 | ||||||||||||||
Income Tax Provision (Benefit) | 60 | (227 | ) | |||||||||||||
Net Income | $ | 425 | $ | 593 | ||||||||||||
April 30, 2022 | ||||||||||||||||||||
Fair Value Measurement | ||||||||||||||||||||
(In thousands) | Level 1 | Level 2 | Level 3 | Total | Carrying Value | |||||||||||||||
Long-Term debt and related current maturities | $ | — | $ | — | $ | 9,005 | $ | 9,005 | $ | 9,000 |
October 29, 2022 | ||||||||||||||||||||
Fair Value Measurement | ||||||||||||||||||||
(In thousands) | Level 1 | Level 2 | Level 3 | Total | Carrying Value | |||||||||||||||
Long-Term debt and related current maturities | $ | — | $ | — | $ | 14,667 | $ | 14,667 | $ | 14,625 |
January 31, 2022 | ||||||||||||||||||||
Fair Value Measurement | ||||||||||||||||||||
(In thousands) | Level 1 | Level 2 | Level 3 | Total | Carrying Value | |||||||||||||||
Long-Term debt and related current maturities | $ | — | $ | — | $ | 9,255 | $ | 9,255 | $ | 9,250 |
Item 2. | MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS |
Business Overview
This section should be read in conjunction with our condensed consolidated financial statements included elsewhere herein and our Annual Report on Form
We are a multinational enterprise that leverages our proprietary data visualization technologies to design, develop, manufacture, distribute and service a broad range of products that acquire, store, analyze and present data in multiple formats. We organize our structure around a core set of competencies, including research and development, manufacturing, service, marketing and distribution. We market and sell our products and services through the following two segments:
• | Product Identification (“PI”) – offers color and monochromatic digital label printers, direct-to-package printers and custom OEM printers. PI also provides software to design, manage and print labeling and packaging images locally and across networked printing systems, as well as all related printing supplies such as pressure-sensitive labels, tags, inks, toners and thermal transfer ribbons used by digital printers. PI also provides on-site and remote service, spare parts and various service contracts. |
Test and Measurement (“T&M”) – offers a suite of products and services that acquire data from local and networked data streams and sensors as well as wired and wireless networks. The T&M segment includes a line of aerospace printers that are used to print hard copies of data required for the safe and efficient operation of aircraft including navigation maps, clearances, arrival and departure procedures, flight itineraries, weather maps, performance data, passenger data, and various air traffic control data. Aerospace products also include aircraft networking systems for high-speed onboard data transfer. T&M also provides repairs, service and spare parts.
We market and sell our products and services globally through a diverse distribution structure of direct sales personnel, manufacturers’ representatives and authorized dealers that deliver a full complement of branded products and services to customers in our respective markets. Our growth strategy centers on organic growth through product innovation made possible by research and development initiatives, as well as strategic acquisitions that fit into or complement existing core businesses.
On August 4, 2022, we completed the acquisition of Astro Machine, an Elk Grove Village, Illinois-based manufacturer of printing equipment, including labelers, tabbers, conveyors, and envelope feeders for aggregate consideration of $17.1 million. Astro Machine is reported as part of our Product Identification segment beginning with the third quarter of fiscal 2023. Refer to Note 3, “Acquisition,” in our condensed consolidated financial statements included elsewhere in this report for further details.
23
COVID-19
All of our global operations have been materially adversely affected by the worldwide
Since the
Product Identification Update
Our Product Identification business has been negatively impacted by the
Test & Measurement Update
The aerospace industry, which we serve through our aerospace product line, has also been significantly disrupted by the
24
Results of Operations
Three Months Ended April 30,October 29, 2022 vs. Three Months Ended May 1,October 30, 2021
Revenue by segment and current quarter percentage change over the prior year for the three months ended April 30,October 29, 2022 and May 1,October 30, 2021 were:
(Dollars in thousands) | April 30, 2022 | As a % of Revenue | May 1, 2021 | As a % of Revenue | % Change Compared to Prior Year | |||||||||||||||
Product Identification | $ | 21,724 | 70.1 | % | $ | 23,098 | 79.4 | % | (5.9 | )% | ||||||||||
T&M | 9,286 | 29.9 | % | 5,980 | 20.6 | % | 55.3 | % | ||||||||||||
Total | $ | 31,010 | 100.0 | % | $ | 29,078 | 100.0 | % | 6.6 | % | ||||||||||
(Dollars in thousands) | October 29, 2022 | As a % of Revenue | October 30, 2021 | As a % of Revenue | % Change Compared to Prior Year | |||||||||||||||
Product Identification | $ | 29,879 | 75.8 | % | $ | 21,928 | 76.0 | % | 36.3 | % | ||||||||||
T&M | 9,526 | 24.2 | % | 6,929 | 24.0 | % | 37.5 | % | ||||||||||||
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Total | $ | 39,405 | 100.0 | % | $ | 28,857 | 100.0 | % | 36.6 | % | ||||||||||
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Revenue for the firstcurrent quarter of the current year was $31.0$39.4 million, representing a 6.6%36.3% increase compared to the previous year firstprior year’s third quarter revenue of $29.1$28.9 million. Revenue through domestic channels for the firstthird quarter of the current year was $19.7$26.8 million, an increase of 17.7%55.1% from the prior year’s firstthird quarter. International revenue for the firstthird quarter of the current year was $11.4$12.6 million, representing 36.6%32.0% of our firstthird quarter revenue and reflecting an 8.3% decrease8.8% increase from the previous year firstyear’s third quarter. Current year firstyear’s third quarter international revenue includes an unfavorable foreign exchange rate impact of $0.5$1.3 million.
Hardware revenue in the current quarter was $9.3$11.9 million, a 21.6%56.7% increase compared to the prior year’s firstthird quarter revenue of $7.6 million. The increase isin the PI segment hardware revenue of 76.7% compared to the prior year’s third quarter, was a result of the inclusion of hardware revenue attributable to Astro Machine, and the increase in overall T&M segment ashardware revenue of 41.0% compared to the prior year’s third quarter was due to increased sales in both the aerospace printer product line sales revenue increased 91.9% compared to the first quarter of the prior year primarily attributed to growth in demand for new aircraft as air travel increased as
Supplies revenue in the current quarter was $17.9$22.9 million, a 1.5% decrease27.1% increase compared to the prior year’s firstthird quarter supplies revenue of $18.2$18.1 million. The decreaseincrease in the current quarter is primarily as a result of lower thermal film supplies sales in the QuickLabel product group and,attributable to a lesser degree, a decline in sales of certain inks and media supplies in the Trojan Label product group, both of which are in the PI segment. The overall decrease in supplies revenue was slightly offset by an increase in sales ofhigher ink jet supplies in the QuickLabel product groupsupply sales in the PI segment, and an overallwith the majority of the increase inresulting from ink jet supply sales of supplies in the T&M segment.
Service and other revenues of $3.8$4.5 million in the current quarter increased 16.9%41.9% compared to firstthird quarter revenue of $3.2 million in the prior year. The increase is due primarily to increased partspart sales and repair revenue forrelated to the aerospace printer product line in the T&M segment.
The current year’s third quarter gross profit was $10.7$12.5 million, a 1.5% decrease20.2% increase compared to the prior year’s firstthird quarter gross profit. Currentprofit of $10.4 million. Our current quarter gross profit margin of 34.6%31.7% reflects a 2.84.3 percentage point decrease from the prior year’s firstthird quarter gross profit margin of 37.4%36.0%. The lower gross profit margin for the current quarter compared to the prior year’s firstthird quarter is primarily attributable to increased manufacturing and period costs.
Operating expenses for the current quarter were $10.0$11.1 million, a 1.9% decrease10.4% increase compared to the prior year’s firstthird quarter operating expenses. Currentexpenses of $10.1 million. Specifically, current quarter selling and marketing expenses were $5.9 million, a 3.4% decrease2.3.% increase compared to the firstthird quarter of the prior year. The increase in the current quarter’s selling and marketing expenses was primarily due to an increase in travel and entertainment expenses, outside services, and employee commissions, which were partially offset by a decrease in employee benefits and advertising and trade show expenses. Current quarter general and administrative expenses were $3.3 million, a 40.7% increase compared to the third quarter of the prior year. The increase in general and administrative expenses for the current quarter was primarily due to the decrease$0.7 million in amortization expensetransaction costs related to the fiscal 2022 second quarter changeacquisition of Astro Machine and an increase in the remaining useful lives and amortization methods for certain of our customer relationship intangibles, as well as decreases in outside services for marketing activities and sales commission expenses. The decrease in current quarter selling and marketing expensesemployee wages. This increase was partially offset by increasesa decrease in employee wagesprofessional fees and benefitsadvertising and increased travel and entertainmenttrade show expenses. Current quarter general and administrative expenses were $2.6 million, a 9.2% increase compared to the first quarter of the prior year primarily due to an increase in outside service fees. Research and development (“R&D”) expenses were $1.5$1.9 million in the current quarter, an 11.3%a 2.3% decrease compared to $1.7 million in the firstthird quarter of the prior yearyear. The current quarter decrease is primarily due to decreases inlower supplies and repairs expenses and employee wageoutside service expenses. R&D spending as a percentage of revenue for the current quarter was 4.9% asis 4.8% compared to 5.9%6.8% for the same period inof the prior year.
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Other expense in the firstthird quarter of the current year was $0.3$1.0 million compared to $0.4$0.9 million forin the same period inthird quarter of the prior year. Current quarter other expense includes interest expense on our term debt and the revolving line of credit of $0.7 million and a net foreign exchange loss of $0.2 million and other expense of $0.1 million of net foreign exchange loss.million. Other expenseincome for the firstthird quarter of the prior year also consisted primarilyincluded $0.7 million related to the write-off of our Oracle EnterpriseOne enterprise resource planning (“ERP”) system and related prepaid service and maintenance contracts as a result of the full implementation of our new global ERP system, interest expense on our term debt of $0.2$0.1 million, and $0.2 million ofa net foreign exchange loss.
The provision for federal, state and foreign income tax provisiontaxes for the firstthird quarter of the current year of $60,000,is $0.1 million, resulting in an effective tax rate of 12.4%26.0%. This rate was impacted by a $38,000 tax benefit relatedcompares to the expiration of the statute of limitations on a previously uncertain tax position and a $30,000 tax benefit arising from windfall tax benefits related to the Company’s stock. During the three months ended May 1, 2021, we recognized an incomeprior year’s third quarter tax benefit of approximately $227,000. The$0.2 million, resulting in an effective tax rate in this period was directly impacted by a $276,000 tax benefit related to the expiration of the statute of limitations on a previously uncertain tax position and a $37,000 tax benefit arising from windfall tax benefits related to the Company’s stock.
We reported net income of $0.3 million or $0.04 per diluted share for the third quarter of the current year. Current quarter results were impacted by transaction costs of $0.7 million ($0.5 million net of tax or $0.07 per diluted share) related to the acquisition of Astro Machine. After taking into consideration these transaction expense and interest expense of $0.3 million attributable to the debt incurred to acquire Astro Machine, the impact of the Astro Machine acquisition on consolidated pre-tax net income was slightly positive. Net loss for the prior year’s third quarter was $0.4 million or $0.06 per diluted share. Prior year third quarter results were impacted by expense of $0.7 million ($0.5 million net of tax or $0.07 per diluted share) related to the write-off of the Oracle EnterpriseOne ERP system and related prepaid service and maintenance contracts. Return on revenue was 0.7% for the current quarter of fiscal 2023 compared to negative 1.5% for the prior year’s third quarter.
Nine Months Ended October 29, 2022 vs. Nine Months Ended October 30, 2021
Revenue by segment and current period percentage change over the prior year for the nine months ended October 29, 2022 and October 30, 2021 were:
(Dollars in thousands) | October 29, 2022 | As a % of Revenue | October 30, 2021 | As a % of Revenue | % Change Compared to Prior Year | |||||||||||||||
Product Identification | $ | 74,985 | 73.0 | % | $ | 68,519 | 78.1 | % | 9.4 | % | ||||||||||
T&M | 27,689 | 27.0 | % | 19,261 | 21.9 | % | 43.8 | % | ||||||||||||
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Total | $ | 102,674 | 100.0 | % | $ | 87,780 | 100.0 | % | 17.0 | % | ||||||||||
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Revenue for the first nine months of the current year was $102.7 million, representing a 17.0% increase compared to the previous year’s first nine months of revenue. Revenue through domestic channels for the first nine months of the current year was $65.5 million, an increase of 28.0% from prior year’s domestic revenue of $51.2 million. International revenue for the first nine months of the current year was $37.2 million, a 1.5% increase from the previous year’s international revenue of $36.6 million. International revenue for the first nine months of the current year reflected an unfavorable foreign exchange rate impact of $2.9 million.
Hardware revenue in the first nine months of the current year was $29.9 million, a 29.1% increase compared to the prior year’s first nine months of hardware revenue of $23.1 million. The increase in hardware revenue is primarily due to a 43.9% increase in hardware sales in the T&M segment primarily attributable to higher aerospace printer product line sales. The PI segment also contributed to the third quarter increase with an overall 13.2% increase in hardware revenue compared to the first nine months of the prior year, as a result of the inclusion of the hardware revenue of Astro Machine, the recent acquisition.
Supplies revenue in the first half of the current year was $60.1 million, representing a 9.3% increase over the prior year’s first nine months supplies revenue of $54.9 million. The increase in the current year’s supplies revenue is primarily attributable to the higher ink jet supply sales in the PI segment with a significant majority of the increase resulting from ink jet supply sales in the newly acquired Astro Machine, partially offset by an overall decline in sales of thermal film supplies.
Service and other revenues were $12.7 million in the first nine months of the current year, a 31.4% increase compared to the prior year’s first nine months service and other revenues of $9.7 million. The increase is due primarily to overall increased repair and parts revenue in the T&M segment.
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The current year’s first nine months gross profit was $34.6 million, a 1.8% increase from the prior year’s first nine months gross profit of $34.0 million. Our gross profit margin of 33.7% in the current year reflects a 5.0 percentage point decrease from the prior year’s first nine months gross profit margin of 38.7%. The lower gross profit margin for the current year compared to the prior year is primarily attributable to increased manufacturing and period costs and the impact of the ERC, which reduced manufacturing payroll taxes, a component of cost of revenue, in the amount of $1.7 million in the second quarter of the prior year. Gross profit margin was also reduced by the mix impact of Astro Machine’s lower gross profit margins.
Operating expenses for the first nine months of the current fiscal year were $31.2 million, a 5.9% increase compared to the prior year’s first nine months operating expenses of $29.5 million. Selling and marketing expenses for the current year of $17.8 million increased by 5.0% compared to the previous year’s first nine months primarily due to a decrease in payroll taxes in the second quarter of the prior year related to the ERC, which reduced payroll taxes in the amount of $0.8 million, as well as the current year increase in employee wages and benefits and travel and entertainment expense. The current year increase in selling and marketing expenses was partially offset by a decrease in employee bonuses and amortization expenses. General and administrative expenses increased 14.7% to $8.5 million in the first nine months of the current year compared to $7.4 million in the first nine months of the prior year, primarily due to increased outside service expenses, and an increase in payroll taxes related to the ERC, which reduced payroll taxes in the amount of $0.3 million in the second quarter of the prior year. Also contributing to the current year increase was an increase in depreciation expense, partially offset by a decrease in employee bonuses, share based compensation and advertising expenses. R&D expensein the first nine months of the current year was $5.0 million, a 3.5% decrease compared to the prior year’s first nine months R&D expense of $5.2 million. The decrease was primarily due to alower employee bonuses, share based compensation and supplies expenses partially offset by increases in employee wages and benefits, outside consulting fees and the impact of the ERC, which reduced manufacturing payroll taxes in the amount of $0.3 million in the third quarter of the prior year. Current year spending on R&D represents 4.9% of revenue compared to 5.9% in the prior year’s first nine months.
Other expense during the first nine months of the current year was $1.7 million compared to other income of $3.0 million in the first nine months of the previous year. Current year other expense includes interest expense on our term debt and line of credit of $1.1 million and net foreign exchange loss of $0.6 million. Other income for the first nine months of the prior year includes $4.5 million related to the forgiveness of our PPP Loan, partially offset by $0.7 million related to the write-off of our Oracle EnterpriseOne ERP system and related prepaid service and maintenance contracts in anticipation of the full implementation of our new global ERP system, interest expense on our term debt of $0.5 million, net foreign exchange loss of $0.2 million and other expense of $0.1 million.
We recognized $0.4 million of income tax expense for the first nine months of the current fiscal year, resulting in an effective tax rate of 22.8%. We recognized $0.3 million of income tax expense for the first nine months of the prior fiscal year, which reflects a $1.1 million tax benefit from the forgiveness of our PPP Loan, and resulted in a 4.0% effective tax rate.
We reported net income of $1.3 million, or $0.18 per diluted share, for the first quarternine months of the current year. On a comparable basis,Current quarter results were impacted by transaction costs of $0.7 million ($0.5 million net of tax or $0.07 per diluted share) related to the acquisition of Astro Machine. Net income for the prior year’s first quarternine months was $0.6$7.2 million, or $0.08$0.98 per diluted share. The results for the prior period were impacted by income of $4.5 million ($4.4 million net of tax or $0.61 per diluted share) related to the forgiveness of our PPP Loan, income of $3.1 million ($2.4 million net of tax or $0.33 per diluted share) related to the ERC and expense of $0.7 million ($0.5 million net of tax or $0.07 per diluted share) related to the write-off of the Oracle EnterpriseOne ERP system and related prepaid service and maintenance contracts. Return on revenue was 1.4%1.3% for the first quarternine months of fiscal 2023 compared to 2.0%8.2% for the first quarternine months of fiscal 2022.
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Segment Analysis
We report two segments: Product Identification and Test & Measurement and evaluate segment performance based on the segment profit before corporate and financial administration expenses. Summarized below are the Revenue and Segment Operating Profit for each reporting segment:
Three Months Ended | ||||||||||||||||
Revenue | Segment Operating Profit | |||||||||||||||
(In thousands) | April 30, 2022 | May 1, 2021 | April 30, 2022 | May 2, 2020 | ||||||||||||
Product Identification | $ | 21,724 | $ | 23,098 | $ | 1,413 | $ | 2,729 | ||||||||
T&M | 9,286 | 5,980 | 1,911 | 350 | ||||||||||||
Total | $ | 31,010 | $ | 29,078 | 3,324 | 3,079 | ||||||||||
Corporate Expenses | 2,560 | 2,344 | ||||||||||||||
Operating Income | 764 | 735 | ||||||||||||||
Other Expense, Net | 279 | 369 | ||||||||||||||
Income Before Income Taxes | 485 | 366 | ||||||||||||||
Income Tax Provision (Benefit) | 60 | (227 | ) | |||||||||||||
Net Income | $ | 425 | $ | 593 | ||||||||||||
Three Months Ended | Nine Months Ended | |||||||||||||||||||||||||||||||
Revenue | Segment Operating Profit (Loss) | Revenue | Segment Operating Profit (Loss) | |||||||||||||||||||||||||||||
(In thousands) | October 29, 2022 | October 30, 2021 | October 29, 2022 | October 30, 2021 | October 29, 2022 | October 30, 2021 | October 29, 2022 | October 30, 2021 | ||||||||||||||||||||||||
Product Identification | $ | 29,879 | $ | 21,928 | $ | 2,960 | $ | 1,818 | $ | 74,985 | $ | 68,519 | $ | 6,019 | $ | 8,952 | ||||||||||||||||
T&M | 9,526 | 6,929 | 1,711 | 842 | 27,689 | 19,261 | 5,783 | 2,902 | ||||||||||||||||||||||||
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Total | $ | 39,405 | $ | 28,857 | 4,671 | 2,660 | $ | 102,674 | $ | 87,780 | 11,802 | 11,854 | ||||||||||||||||||||
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Corporate Expenses | 3,325 | 2,364 | 8,456 | 7,372 | ||||||||||||||||||||||||||||
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Operating Income | 1,346 | 296 | 3,346 | 4,482 | ||||||||||||||||||||||||||||
Other Income (Expense), Net | (955 | ) | (895 | ) | (1,665 | ) | 3,002 | |||||||||||||||||||||||||
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Income (Loss) Before Income Taxes | 391 | (599 | ) | 1,681 | 7,484 | |||||||||||||||||||||||||||
Income Tax Provision (Benefit) | 102 | (174 | ) | 383 | 297 | |||||||||||||||||||||||||||
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Net Income (Loss) | $ | 289 | $ | (425 | ) | $ | 1,298 | $ | 7,187 | |||||||||||||||||||||||
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Product Identification
Revenue from the Product Identification segment decreased 5.9%increased 36.3% in the firstthird quarter of the current year, with revenue of $21.7$29.9 million compared to $23.1$21.9 million in the same period of the prior year. The increase in current quarter revenue is primarily due to supply sales which increased $4.9 million or 28.8% compared to the same period in the prior year. Also contributing to the current quarter increase were printer sales, which increased $2.6 million or 76.7% compared to the same period in the prior year, and to a lesser extent, service and other revenue which increased $0.4 million or 31.1% as compared to the third quarter of fiscal 2022. The increase in the components of revenue for the current quarter was attributable to the newly acquired Astro Machine, and organic growth in inkjet supply sales. The increase in current year revenue was partially offset by a small decline in organic service and other revenues. Product Identification’s current quarter segment operating profit was $3.0 million, reflecting a profit margin of 9.9% compared to the prior year’s third quarter segment profit of $1.8 million and related profit margin of 8.3%. The primary reason for the increase in operating margin is due to increased sales and the contribution of profit margin from the newly acquired Astro Machine. The increase in operating margin for the current quarter was partially offset by higher manufacturing and period costs related to higher labor and supply chain costs, higher trade show and travel expenses, increased expense provisions for printers used for product demonstrations, and higher warranty and service charges related to mitigating defective ink damage to some of our installed printers.
Revenue from the Product Identification segment increased 9.4% to $75.0 million in the first nine months of the current year from $68.5 million in the same period of the prior year. The current quarter decrease in revenueyear’s increase is primarily due to supply sales which increased $4.8 million or 9.0% compared to the same period in the prior year. Also contributing to the current year’s increase were printer sales, which increased $1.5 million or 13.2% compared to the same period in the prior year , and to a net decreaselesser extent, service and other revenue which increased $0.2 million or 4.5% as compared to the same period for fiscal 2022. The increase in both hardwarethe components of revenue for the current year was attributable to Astro Machine and organic growth in inkjet supply sales. The increase in current year revenue slightlywas partially offset by increasedan overall decline in organic sales of ink jet supplies.printers and service and other revenues. Product Identification’s current quarteryear segment operating profit was $1.4$6.0 million reflectingwith a profit margin of 6.5%. This compares8.0%, compared to the prior year’s first quarter segment operating profit of $2.7$9.0 million and related profit margin of 11.8%.13.1 %. The primary reason for the decline in operating margin is that the same period for the prior year included $1.4 million in net ERC-related payroll tax credits that reduced manufacturing and operating costs. Excluding the impact of the ERC, the current year’s third quarter segment operating margin was also lower due to a slightly unfavorable sales mix, the effect on manufacturing and period costs related to higher labor and supply chain costs, higher trade show and travel expenses, increased expense provisions for printers used for product demonstrations, and higher warranty and service charges related to mitigating defective ink damage to some of our installed printers. The decrease in Product Identification current year first quarter segment operating profit and margin is primarily due to lower revenue and higher manufacturing and operating costs.was partially offset by the contribution of profit margin from the newly acquired Astro Machine.
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Test & Measurement—T&M
Revenue from the T&M segment was $9.3$9.5 million for the firstthird quarter of the current fiscal year, representing a 55.3%37.5% increase compared to revenue of $6.0$6.9 million for the same period in the prior year. The increase in revenue for the current quarter iswas primarily attributable to strong hardwareincreased sales of aerospace cockpit printers and T&M data recorders sales, as well as, the increases in ourthe volume of aerospace product linesgroup repairs and parts revenue. These increases are due to the rebound in air travel as a resultthe impact of the recertification of the Boeing 737 MAXCOVID-19 lessens and increase inincreased demand for new aircraft due to increase in air travel as
Revenue from the T&M’s&M segment was $27.7 million for the first nine months of the current fiscal year, a 43.8% increase compared to sales of $19.3 million for the same period in the prior year. The increase in revenue for the current year was primarily attributable to higher cockpit printer revenue, significantly higher volume of aerospace product group repairs and increased parts revenue, and to a lesser extent, increased hardware sales in the T&M data acquisition product line. These increases are due to the rebound in air travel as the impact of COVID-19 lessens and increased demand for new aircraft. The segment’s first quarternine months operating profit of $5.8 million resulted in a 20.9% profit margin compared to the prior year’s segment operating profit of $2.9 million and related operating margin of 15.1%. The prior year’s operating profit included the impact of $0.8 million in net ERC-related payroll tax credits that reduced manufacturing and operating costs. Excluding the impact of the ERC, the increase in segment operating profit and margin is primarily due towas a result of slightly lower R&D costs, the impact on gross margins of increased operating leverage on higher revenuerevenues, and lower operatinga much more favorable mix of higher margin parts and repair revenues. However, these favorable impacts were negatively offset by considerably higher component costs along with a slightly betterin certain aerospace printer models and the adverse effect of relatively higher sales mix.
Financial Condition, Liquidity and Capital Resources
Overview
Historically, our primary sources of short-term liquidity have been cash generated from operating activities and borrowings under our revolving credit facility. These sources have also usually funded the majority of our capital expenditures and contractual contingent consideration obligations. We have funded acquisitions by borrowing under bank term loan facilities.
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In connection with our purchase of Astro Machine, on August 4, 2022, we entered into ana Second Amendment to Amended and Restated Credit Agreement (the “A&R Credit Agreement”“Second Amendment”) with Bank of America, N.A., as lender (the “Lender”), our wholly owned subsidiary ANI ApS, a Danish private limited liability company and ANI ApS’s wholly-owned subsidiary TrojanLabel ApS, a Danish private limited liability company (“TrojanLabel”). The A&R Credit AgreementSecond Amendment amended the Amended and restated theRestated Credit Agreement dated as of February 28, 2017,July 30, 2020, as amended by and among us, ANI ApS, TrojanLabel and the Lender. In connection with our entry into the A&R Credit Agreement, we entered into anFirst Amendment to 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. isdated as of March 24, 2021, and the sole borrower,LIBOR Transition Amendment, dated as of December 24, 2021 (the “Existing Credit Agreement,” and prior to the effectiveness of the Amendment (as defined below), its obligations were guaranteed by ANI ApS and TrojanLabel.
The Amended Credit Agreement provides for (i) a new term loan in the principal amount of $10.0$6.0 million, which term loan was in addition to the existing term loan outstanding under the Existing Credit Agreement in the principal amount of $9.0 million as of the effective date of the Second Amendment, and (ii) a $22.5 millionan increase in the aggregate principal amount of the revolving credit facility available for general corporate purposes. At the closing of the Amended Credit Agreement, we borrowed the entire $10.0from $22.5 million term loan which was used to refinance in full the outstanding term loan under the A&R Credit Agreement.$25.0 million. 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.
While we expected that as a result of the impact of the
In response to the
At April 30,October 29, 2022, our cash and cash equivalents were $5.8$4.5 million. During the first quarternine months of the current year, we borrowed $3.0a net of $19.9 million on our revolving line of credit, and at April 30,October 29, 2022, we have $19.5had $5.1 million available for borrowing under that facility. We believe that our available cash and credit facilities combined with our cash generated from operations will be sufficient to support our operating requirements including our capital expenditure commitments.
Indebtedness
Term Loan
The Amended Credit Agreement requires that the term loan be paid in quarterly installments on the last day of each of our fiscal quarters withover the final payment dueterm of the Amended Credit Agreement on Septemberthe following repayment schedule: 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 October 31, 2022 through July 31, 2023 is $375,000; and 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 October 31, 2023 through April 30, 2025.2027 is $675,000. The entire remaining principal balance of the term loan is required to be paid on August 4, 2027. 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 timeAugust 4, 2027, and any outstanding revolving loans thereunder will be due and payable in full, and the revolving credit facility will terminate.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.
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.
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.
The interest rates under the Amended Credit Agreement giving effect to the LIBOR Amendment, are as follows: the term loan and revolving credit loans bear interest at a rate per annum equal to, at our option, either (a) the BSBY Rate as defined in the LIBOR AmendmentAmended Credit Agreement (or, in the case of revolving credit loans denominated in a Pounds Sterling, Euros or another currency other than U.S. Dollars, the SONIA Rate as defined in the LIBOR Amendment, EURIOBOR Rate as defined in the LIBOR Amendment, or the applicable quoted rate, respectively)rate), plus a margin that varies within a range of 1.60% to 2.30%2.50% 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 BSBY Rate SONIA Rate, EURIBOR Rate or other applicable quoted rate plus 1.00%, or (iv) 0.50%, plus a margin that varies within a range of 0.60% to 1.30%1.50% 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%0.35% based on our consolidated leverage ratio.
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We must comply with various customary financial and
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 by our wholly-owned Danish subsidiary,we hold in ANI ApS), in our wholly-owned German subsidiaryApS, 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. PursuantIsland, and are guaranteed by, and secured by substantially all of the personal property assets of Astro Machine.
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PPP 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 Amendment,Paycheck Protection Program (the “PPP”) administered by the guaranteesUnited 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 matured on May 6, 2022, was unsecured and bore interest at a rate of 1.0% per annum, accruing from the loan date. No payments were due on the PPP Loan until the date on which the lender determined the amount of the PPP Loan that is eligible for forgiveness.
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 obligations underPPP Loan and all accrued interest thereon. As a result, we recorded a $4.5 million gain on the A&R Credit Agreement that were previously provided by ANI ApS and TrojanLabel were released.
Cash Flow
Our statements of cash flows for the threenine months ended April 30,October 29, 2022, and May 1,October 30, 2021, are included on page 5 of this report. Net cash used by operating activities was $1.6$7.5 million for the first threenine months of fiscal 2023 compared to cash provided of $3.9$3.8 million for the same period of the previous year. The decreaseincrease in net cash providedused by operations for the first threenine months of the current year is primarily due to the decrease in cash providedused by working capital. Thecapital, as the combination of changes in accounts receivable, inventory, income taxes payable, accounts payable, and accrued expenses decreased cash by $3.3$14.6 million for the first threenine months of fiscal 2023, compared to an increase to cash of $1.8$0.1 million for the same period in fiscal 2022.
Our accounts receivable balance increased to $18.4$21.9 million at the end of the firstthird quarter compared to $17.1 million at year end. Excluding the impact of the Astro Machine acquisition, accounts receivable decreased by $1.9 million from prior year end. Days sales outstanding for the first quarternine months of the current year also increased to 50 days compared tofiscal 2023 is 45 days, atconsistent with prior year end. The
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Our inventory balance was $36.9$50.0 million at the end of the firstthird quarter of fiscal 2023, an increase compared to $34.6 million at year end. Excluding the impact of the Astro Machine acquisition, inventory increased by $11.7 million from prior year end. The increase in our inventory balance is primarily due to difficulty in the supply chain environment, including long lead times to obtain components and supplies which has required us to increase our component and supply buffer stock to support the demands of our customers in our PI segment. We have also experienced increased inventory levels related to our T&M products to maintain our targeted inventory levels as a result of increased sales in that segment and part shortage issues. Inventory days on hand increased to 164167 days at the end of the current quarter from 156 days at the prior year end.
The net cash position at April 30,October 29, 2022 was $5.8$4.5 million compared to the year end balance of $5.3 million at year end.million. The increasedecrease in the cash duringbalance includes the current quarter was primarily a resultimpact of borrowings under the revolving line of credit of $3.0 million. This increase was offset by cash used from the working capital accounts, as discussed above. CashAdditional cash outflows during the quarter alsofirst nine months of fiscal 2023 included cash paid for the Astro Machine acquisition of $17.0 million ($17.1 million purchase price, less cash acquired of $0.1 million), principal payments on the long-term debt and the guaranteed royalty obligation of $0.3$0.6 million and $0.5$1.5 million, respectively.
Critical Accounting Policies, Estimates and Certain Other Matters
The preparation of our condensed consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, and disclosure of commitments and contingencies at the date of the condensed consolidated financial statements and reported amounts of revenue and expenses during the reporting period. We base these estimates and judgments on factors we believe to be relevant, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources.
The process of determining significant estimates is fact-specific and takes into account factors such as historical experience, current and expected economic conditions, product mix, and in some cases, actuarial and appraisal techniques. We constantly
While we believe that the factors considered provide a meaningful basis for the accounting policies applied in the preparation of the condensed consolidated financial statements, we cannot guarantee that our estimates and assumptions will be accurate. As the determination of these estimates requires the exercise of judgment, actual results may differ from those estimates, and such differences may be material to our condensed consolidated financial statements. There have been no material changes to the application of critical accounting policies as disclosed in our Annual Report on Form
Forward-Looking Statements
This Quarterly Report on Form
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Item 3. | Quantitative and Qualitative Disclosures About Market Risk |
Interest Rate Risk
At October 29, 2022, our total indebtedness included a $14.625 million variable-rate term loan and a $19.9 million revolving line of credit. At October 29, 2022, under the LIBOR Transition Amendment to the Amended Credit Agreement, the term loan and revolving line of credit outstanding bear interest at a BSBY (Bloomberg Short-Term Bank Yield) rate plus a margin that varies between 1.60% and 2.50% based on our consolidated leverage ratio. During fiscal 2023, the threeinterest rate on our variable rate term debt and revolving credit line ranged between 4.1 to 7.75%. The impact on our results of operations of a 100 basis point change in the interest rate on the outstanding balance of our variable-rate debt and revolving credit would range between $0.5 million to $0.7 million annually.
Other than above, during the nine months ended April 30,October 29, 2022, there were no other material changes to our market risk disclosures as set forth in Part II, Item 7A “Quantitative and Qualitative Disclosures About Market Risk” in our Annual Report on Form
Item 4. | Controls and Procedures |
Evaluation of Disclosure Controls and Procedures
Our management has evaluated, under the supervision and with the participation of our Chief Executive Officer and Chief Financial Officer, the effectiveness of our disclosure controls and procedures as of the end of the period covered by this report pursuant to
Changes in Internal Control over Financial Reporting
There have been no changes in our internal control over financial reporting that occurred during our most recent fiscal quarter that have materially affected, or are reasonably likely to have materially affected, our internal control over financial reporting.
PART II. OTHER INFORMATION
Item 1. | Legal Proceedings |
There are no pending or threatened legal proceedings against us that we believe to be material to our financial position or results of operations.
Item 1A. | Risk Factors |
This section augments and updates certain risk factors disclosed in Item 1A of Part I of our Annual Report on Form 10-K for the year ended January 31, 2022 (the “Annual Report”). We are providing the following information regarding changes that have occurred to the previously disclosed risk factors in our Annual Report on Form 10-K.In addition to the other information set forth in this Quarterly Report on Form
Other than below, there have been no material updates to the risk factors previously disclosed in the Company’sour Annual Report on
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We face risks related to recession, inflation, stagflation and other economic conditions
Customer demand for our products may be impacted by weak economic conditions, inflation, stagflation, recession, rising interest rates, equity market volatility or other negative economic factors in the U.S. or other nations. For example, under these conditions or expectation of such conditions, our customers may cancel orders, delay purchasing decisions or reduce their use of our services. In addition, these economic conditions could result in higher inventory levels and the possibility of resulting in additional charges from our suppliers if we need to slow production to reduce inventory levels. Further, in the event of a recession or threat of a recession our suppliers, distributors, and other third-party partners may suffer their own financial and economic challenges and as a result they may demand pricing accommodations, delay payment, or become insolvent, which could harm our ability to meet our customer demands or collect revenue or otherwise could harm our business. Similarly, disruptions in financial and/or credit markets may impact our ability to manage normal commercial relationships with our customers, suppliers and creditors and might cause us to not be able to continue to access preferred sources of liquidity when we would like, and our borrowing costs could increase. Thus, if general macroeconomic conditions continue to deteriorate, our business and financial results could adversely affect our business, operating results and financial condition.
In addition, we are also subject to risk from inflation and increasing market prices of certain components, supplies, and raw materials, which are incorporated into our end products or used by our suppliers to manufacture our end products. These components, supplies and other raw materials have from time to time become restricted, or general market factors and conditions have in the past and may in the future affect pricing of such components, supplies and commodities (such as inflation or supply chain constraints).
We have significant inventories on hand.
We maintain a significant amount of inventory, and as a result of recent supply chain disruption, we have further increased the amount of inventory we maintain on-hand to ensure we are able to meet market demand for our products. These increases have been concentrated in label printing machines, and supplies sold by our PI business, as well as in electronic components and assemblies in our T&M business. We maintain allowances for slow-moving and obsolete inventory that we believe are adequate but any significant unanticipated changes in future product demand or market conditions, could have an impact on the value of inventory and adversely affect our business, operating results and financial condition.
Item 2. | Unregistered Sales of Equity Securities and Use of Proceeds |
During the firstthird quarter of fiscal 2023, we made the following repurchases of our common stock:
Total Number of Shares Repurchased | Weighted Average Price paid Per Share | Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs | Maximum Number of Shares That May Be Purchased Under the Plans or Programs | |||||||||||||
February 1—February 28 | — | $ | — | — | — | |||||||||||
March 1—March 31, | 11,591 | (a)(b) | $ | 14.82 | (a) (b) | — | — | |||||||||
April 1—April 30 | 5,159 | (c) | $ | 14.92 | (c) | — | — |
Total Number of Shares Repurchased | Average Price paid Per Share | Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs | Maximum Number of Shares That May Be Purchased Under The Plans or Programs | |||||||||||||
August 1—August 31 | 120 | (a) | $ | 11.82 | (a) | — | — | |||||||||
September 1—September 30 | 204 | (b) | $ | 11.65 | (b) | — | — | |||||||||
October 1—October 31 | — | $ | — | — | — |
(a) | An executive of the Company delivered |
(b) | An executive of the Company delivered |
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Item 6. | Exhibits |
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
ASTRONOVA, INC. | ||||||
(Registrant) | ||||||
Date: | By | /s/ Gregory A. Woods | ||||
Gregory A. Woods, | ||||||
President and Chief Executive Officer | ||||||
(Principal Executive Officer) | ||||||
By | /s/ David S. Smith | |||||
David S. Smith, | ||||||
Vice President, Chief Financial Officer and Treasurer | ||||||
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