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(cid:38)ear Shareholders,
Against an unprecedented macroeconomic environment,
we performed well in (cid:386)scal 2023, posting record revenue
of (cid:6)(cid:19)(cid:22)2.(cid:23) million, up 2(cid:19) percent year over year. In(cid:387)ation,
CO(cid:56)I(cid:38)(cid:15)related manufacturing disruptions, and geopolitical
tensions resulted in component shortages that delayed
shipments throughout the year. However, the AstroNova team
navigated these challenges and worked diligently to meet the
mission(cid:15)critical needs of our customers worldwide.
From a segment perspective, (cid:50)roduct Identi(cid:386)cation (cid:10)(cid:50)I(cid:11) and
Test & Measurement (cid:10)T&M(cid:11) generated an improved top(cid:15)line
performance from the previous (cid:386)scal year. (cid:50)roduct I(cid:38) was up
(cid:19)3 percent to (cid:6)(cid:19)03.(cid:19) million, while T&M grew (cid:22)(cid:27) percent to
(cid:6)3(cid:27).(cid:22) million.
At AstroNova, the foundation of our strategy is the AstroNova
Operating System (AOS), a business management process
that guides how we manage the business to achieve
continuous improvement. The elements of the AOS
are built around our core values:
• Customer First – superior customer satisfaction
driven by the voice of the customer;
• One Global Team – total employee involvement with
integrity and mutual respect for all;
•
Innovation – rapid product and process development;
• Continuous Improvement – accelerated by the use of
AOS Tools; and
• Building Value – through superior quality, delivery,
cost, and growth
AOS has played a critical role in AstroNova’s manufacturing
and operational excellence. It also has enabled us to
effectively integrate acquired businesses into our
(cid:50)roduct I(cid:38) and T&M portfolios.
Acquisition Adds New Market Adjacency to PI Segment
Our most recent acquisition was the August 2022 purchase
of Astro Machine Corporation, which added a pro(cid:386)table
and highly synergistic business. The purchase included Astro
Machine’s engineering and manufacturing center in Elk Grove
(cid:56)illage, Illinois, where the company has operated since (cid:19)(cid:27)(cid:25)(cid:26).
Astro Machine manufactures printers and media handling
equipment for label printing, overprinting, and mailing
applications, primarily for OEM customers. The acquisition
adds new market adjacencies and high recurring revenue
streams, a hallmark of our business model. In addition to
its unique product design and material handling expertise,
Astro Machine expands our U.S. manufacturing capabilities,
reducing the reliance on overseas locations. The acquisition
also adds complementary channels to the market, enhancing
our ability to scale the combined business and capitalize on
cross(cid:15)selling opportunities.
We believe adding this business creates a substantial upside
for our (cid:50)I segment. (cid:36)y applying the principles of the AOS,
we are focused on integrating our sales channels to expand
the top line and drive additional pro(cid:386)tability through better
customer focus, operational improvements, and accelerated
new product development.
(cid:43)(cid:80)(cid:2)(cid:386)(cid:85)(cid:69)(cid:67)(cid:78)(cid:2)(cid:20)(cid:18)(cid:20)(cid:22)(cid:14)(cid:2)(cid:81)(cid:87)(cid:84)(cid:2)(cid:76)(cid:81)(cid:75)(cid:80)(cid:86)(cid:2)(cid:84)(cid:71)(cid:85)(cid:71)(cid:67)(cid:84)(cid:69)(cid:74)(cid:2)(cid:67)(cid:80)(cid:70)(cid:2)(cid:70)(cid:71)(cid:88)(cid:71)(cid:78)(cid:81)(cid:82)(cid:79)(cid:71)(cid:80)(cid:86)(cid:2)(cid:86)(cid:71)(cid:67)(cid:79)(cid:85)(cid:2)
plan to introduce several new product offerings. Two of
these offerings, which target current and prospective OEM
custo(cid:79)ers, leverage technolog(cid:91) used in our popular direct(cid:15)
to(cid:15)pac(cid:77)age overprinting solutions addressing the digitall(cid:91)
printed corrugated packaging segment. According to research
(cid:386)rm (cid:53)mithers (cid:50)ira, corrugated packaging is now the largest
component in the digital printed packaging market, and the
projected growth rates outpace other packaging segments.
(cid:50)roduct innovation is central to our growth strateg(cid:91). (cid:43)n (cid:386)scal
2023 we expanded our product range into the compact
stand(cid:15)alone space with the launch of the (cid:51)(cid:46)(cid:15)E(cid:19)00, an
introductory tabletop color label printer. It is designed for
emerging businesses, entrepreneurs, and other customers
just getting started with in(cid:15)house label printing, as well as
larger enterprises that require many distributed print stations
throughout their operations.
T&M Segment Takes Off on Resurgent Aerospace Market
Fiscal 2023 saw the rebound of our T&M segment. As the
leading manufacturer of (cid:387)ight deck printers to the commercial,
defense, and business jet markets, the Aerospace portion of our
T&M segment is closely tied to the performance of the aviation
industry. In 2023, the industry continued its recovery from
(cid:37)O(cid:56)I(cid:38) and the 20(cid:15)month grounding of the (cid:36)oeing (cid:25)3(cid:25) MA(cid:58).
As a result, our T&M segment returned to a growth footing in
(cid:386)scal 2023, with revenue climbing (cid:22)(cid:27) percent from the prior
year. (cid:53)egment operating pro(cid:386)t margin grew to 22.(cid:26) percent
of revenue, compared with (cid:19)2.(cid:26) percent in (cid:386)scal 2022, driven
by higher revenues, increased manufacturing ef(cid:386)ciencies, and
favorable pricing actions. A key bene(cid:386)ciary of the resurgent
aerospace industry has been our repair and upgrade services,
which are highly correlated to aircraft utilization.
Today, we produce and market an extensive range of (cid:387)ight
deck printers, including models acquired from Miltope, RITEC,
and Honeywell, in addition to our ToughWriter family of
products. To further enhance our manufacturing ef(cid:386)ciencies,
we continue to make progress in our consolidation program to
upgrade and transition customers to our more advanced and
feature(cid:15)rich ToughWriter family of printers.
Looking Ahead to a Promising Fiscal 2024
We begin the new year con(cid:386)dent in our ability to
continue executing on our strategic priorities. We have a
solid backlog, robust product development pipeline, and a
healthy balance sheet that position us for continued growth in
(cid:386)scal 202(cid:22), with improving results in both segments. (cid:50)owered
by the AstroNova Operating System, the foundation of our
continuous improvement strategy, we are excited about
the opportunities to grow across the markets we serve.
On behalf of our Team Members and (cid:36)oard of (cid:38)irectors, thank
you for your ongoing support and con(cid:386)dence in AstroNova.
Sincerely,
Gregory A. Woods
(cid:50)resident and Chief Executive Of(cid:386)cer
FINANCIAL HIGHLIGHTS
($ in millions, except per share amounts)
(cid:36)OO(cid:45)INGS
REVENUE
GROSS PROFIT
GROSS PROFIT MARGIN
OPERATING INCOME
OPERATING MARGIN
NET INCOME (cid:15) GAAP
Years Ended January 31,
2023
2022
2021
$13(cid:26).(cid:24)
$12(cid:26).(cid:24)
$113.(cid:24)
$142.5
$11(cid:25).5
$11(cid:24).0
$4(cid:26).2
$43.(cid:25)
$41.4
33.(cid:26)(cid:7)
3(cid:25).2(cid:7)
35.(cid:24)(cid:7)
$5.4
3.(cid:26)(cid:7)
$2.(cid:25)
$4.3
3.(cid:24)(cid:7)
$(cid:24).4
$2.4
2.1(cid:7)
$1.3
NET INCOME PER SHARE (cid:15) (cid:38)I(cid:46)UTE(cid:38) (GAAP)
$0.3(cid:24)
$0.(cid:26)(cid:26)
$0.1(cid:26)
WEIGHTE(cid:38) AVERAGE NUM(cid:36)ER OF SHARES OUTSTAN(cid:38)ING (cid:15) (cid:38)I(cid:46)UTE(cid:38)
(cid:25),3(cid:25)4,000
(cid:25),33(cid:27),000
(cid:25),1(cid:24)(cid:24),000
A(cid:38)(cid:44)USTE(cid:38) E(cid:36)IT(cid:38)A(1)
A(cid:38)(cid:44)USTE(cid:38) E(cid:36)IT(cid:38)A(1) MARGIN
(1) Reconciliation of Net Income to Adjusted EBITDA:
Net Income (cid:15) GAAP
Interest Expense, net
Income Tax Provision(cid:17)((cid:36)ene(cid:386)t)
Share(cid:15)(cid:36)ased Compensation
(cid:38)epreciation and Amortization
Adjusted E(cid:36)IT(cid:38)A
$10.3
$13.2
$10.(cid:27)
(cid:25).3(cid:7)
11.2(cid:7)
(cid:27).4(cid:7)
Years Ended January 31,
2023
$2.7
1.7
0.7
1.3
3.9
2022
$6.4
0.7
0.6
1.5
4.0
2021
$1.3
0.9
0.9
1.8
6.0
$10.3
$13.2
$10.9
Use of Non-GAAP Financial Measure
T(cid:74)e non-GAAP (cid:386)nancial (cid:79)easure(cid:14) A(cid:70)(cid:76)us(cid:86)e(cid:70) (cid:39)(cid:36)IT(cid:38)A(cid:14) is (cid:70)e(cid:386)ne(cid:70) as earnin(cid:73)s (cid:68)efore in(cid:86)eres(cid:86)(cid:14) (cid:86)a(cid:90)es(cid:14) (cid:70)e(cid:82)recia(cid:86)ion(cid:14) a(cid:79)or(cid:86)i(cid:92)a(cid:86)ion an(cid:70) s(cid:74)are-(cid:68)ase(cid:70) co(cid:79)(cid:82)ensa(cid:86)ion(cid:16) As(cid:86)roNo(cid:88)a (cid:68)elie(cid:88)es (cid:86)(cid:74)a(cid:86) (cid:86)(cid:74)e inclusion of (cid:86)(cid:74)is
non-GAAP (cid:386)nancial (cid:79)easure (cid:74)el(cid:82)s in(cid:88)es(cid:86)ors (cid:73)ain a (cid:79)eanin(cid:73)ful un(cid:70)ers(cid:86)an(cid:70)in(cid:73) of c(cid:74)an(cid:73)es in (cid:86)(cid:74)e Co(cid:79)(cid:82)an(cid:91)(cid:111)s core o(cid:82)era(cid:86)in(cid:73) resul(cid:86)s(cid:14) an(cid:70) also can (cid:74)el(cid:82) in(cid:88)es(cid:86)ors (cid:89)(cid:74)o (cid:89)is(cid:74) (cid:86)o (cid:79)a(cid:77)e co(cid:79)(cid:82)arisons (cid:68)e(cid:86)(cid:89)een
As(cid:86)roNo(cid:88)a an(cid:70) o(cid:86)(cid:74)er co(cid:79)(cid:82)anies on (cid:68)o(cid:86)(cid:74) a GAAP an(cid:70) a non-GAAP (cid:68)asis(cid:16) As(cid:86)roNo(cid:88)a(cid:111)s (cid:79)ana(cid:73)e(cid:79)en(cid:86) uses A(cid:70)(cid:76)us(cid:86)e(cid:70) (cid:39)(cid:36)IT(cid:38)A(cid:14) in a(cid:70)(cid:70)i(cid:86)ion (cid:86)o o(cid:86)(cid:74)er GAAP (cid:386)nancial (cid:79)easures(cid:14) as (cid:86)(cid:74)e (cid:68)asis for (cid:79)easurin(cid:73) i(cid:86)s
core o(cid:82)era(cid:86)in(cid:73) (cid:82)erfor(cid:79)ance an(cid:70) co(cid:79)(cid:82)arin(cid:73) suc(cid:74) (cid:82)erfor(cid:79)ance (cid:86)o (cid:86)(cid:74)a(cid:86) of (cid:82)rior (cid:82)erio(cid:70)s an(cid:70) (cid:86)o (cid:86)(cid:74)e (cid:82)erfor(cid:79)ance of i(cid:86)s co(cid:79)(cid:82)e(cid:86)i(cid:86)ors(cid:16) A(cid:70)(cid:76)us(cid:86)e(cid:70) (cid:39)(cid:36)IT(cid:38)A also is use(cid:70) (cid:68)(cid:91) (cid:86)(cid:74)e Co(cid:79)(cid:82)an(cid:91)(cid:111)s (cid:79)ana(cid:73)e(cid:79)en(cid:86) (cid:86)o assis(cid:86)
(cid:89)i(cid:86)(cid:74) (cid:86)(cid:74)eir (cid:386)nancial an(cid:70) o(cid:82)era(cid:86)in(cid:73) (cid:70)ecision-(cid:79)a(cid:77)in(cid:73)(cid:16)
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
È ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended January 31, 2023
OR
‘ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from
to
Commission file number 0-13200
AstroNova, Inc.
(Exact name of registrant as specified in its charter)
Rhode Island
(State or other jurisdiction of
incorporation or organization)
600 East Greenwich Avenue,
West Warwick, Rhode Island
(Address of principal executive offices)
05-0318215
(I.R.S. Employer Identification No.)
02893
(Zip Code)
Title of each class
Registrant’s telephone number, including area code: (401) 828-4000
Securities registered pursuant to Section 12(b) of the Act:
Trading
Symbol
Common Stock, $.05 Par Value
ALOT
Securities registered pursuant to Section 12(g) of the Act: None
Name of each exchange
on which registered
NASDAQ Global Market
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes ‘ No È
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes ‘ No È
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the
preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past
90 days. Yes È No ‘
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of
Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such
files). Yes È No ‘
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging
growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of
the Exchange Act.
Large accelerated filer ‘
Non-accelerated filer
È
Accelerated filer
Smaller reporting company È
Emerging growth company ‘
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or
revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ‘
Indicate by check mark whether the registrant has filed a report on and attestation to its management’s assessment of the effectiveness of its internal control over
financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its audit
report. È
If securities are registered pursuant to Section 12(b) of the Act, indicate by check mark whether the financial statements of the registrant included in the filing
reflect the correction of an error to previously issued financial statements. ‘
Indicate by check mark whether any of those error corrections are restatements that required a recovery analysis of incentive-based compensation received by any
of the registrant’s executive officers during the relevant recovery period pursuant to §240.10D-1(b). ‘
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). ‘ Yes È No
The aggregate market value of the registrant’s voting common equity held by non-affiliates at July 30, 2022, was approximately $84,333,000 based on the closing
price on the Nasdaq Global Market on that date. The registrant has no non-voting common shares.
As of April 12, 2023, there were 7,400,560 shares of Common Stock (par value $0.05 per share) of the registrant outstanding.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the Company’s definitive Proxy Statement for the 2023 Annual Meeting of Shareholders are incorporated by reference into Part III of this Annual
Report on Form 10-K where indicated.
Auditor Firm Id:
PCAOB ID No. 392
Auditor Name:
Wolf & Company, P.C.
Auditor Location:
Boston, MA
ASTRONOVA, INC.
FORM 10-K
TABLE OF CONTENTS
PART I
Item 1.
Business . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Item 1A. Risk Factors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Item 1B. Unresolved Staff Comments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Properties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Item 2.
Item 3.
Legal Proceedings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Item 4. Mine Safety Disclosures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
PART II
Item 5. Market for the Registrant’s Common Stock, Related Stockholder Matters and Issuer Purchases
of Equity Securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Reserved . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Item 6.
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations . . . . .
Item 7A. Quantitative and Qualitative Disclosures About Market Risk . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Financial Statements and Supplementary Data . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Item 8.
Changes in and Disagreements with Accountants on Accounting and Financial Disclosure . . . .
Item 9.
Item 9A. Controls and Procedures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Item 9B. Other Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Item 9C. Disclosure Regarding Foreign Jurisdictions that Prevent Inspections . . . . . . . . . . . . . . . . . . . . . .
PART III
Item 10. Directors, Executive Officers and Corporate Governance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Item 11. Executive Compensation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder
Matters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Item 13. Certain Relationships, Related Transactions and Director Independence . . . . . . . . . . . . . . . . . . .
Item 14. Principal Accountant Fees and Services . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
PART IV
Page
1
8
22
22
23
23
24
24
24
37
38
38
38
39
39
40
40
40
40
40
Item 15. Exhibits and Financial Statement Schedule . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Item 16. Form 10-K Summary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
41
41
ASTRONOVA, INC.
Forward-Looking Statements
The information included in this Annual Report on Form 10-K may contain forward-looking statements
within the meaning of the Private Securities Litigation Reform Act of 1995. Forward-looking statements are not
statements of historical fact, but rather reflect our current expectations concerning future events and results. We
generally use the words “believes,” “expects,” “intends,” “plans,” “anticipates,” “likely,” “continues,” “may,”
“will,” and similar expressions to identify forward-looking statements. Such forward-looking statements,
including those concerning our expectations, involve risks, uncertainties and other factors, some of which are
beyond our control, which may cause our actual results, performance or achievements to be materially different
from those expressed or implied by such forward-looking statements. These risks, uncertainties and factors
include, but are not limited to, those factors set forth in this Annual Report on Form 10-K under “Item 1A. Risk
Factors.” We undertake no obligation to publicly update or revise any forward-looking statements, whether as a
result of new information, future events or otherwise. The reader is cautioned not to unduly rely on such forward-
looking statements when evaluating the information presented in this Annual Report on Form 10-K.
Item 1. Business
PART I
General
Unless otherwise indicated, references to “AstroNova,” the “Company,” “we,” “our,” and “us” in this
Annual Report on Form 10-K refer to AstroNova, Inc. and its consolidated subsidiaries.
We design, develop, manufacture and distribute a broad range of specialty printers and data acquisition and
analysis systems, including both hardware and software, which incorporate advanced technologies to acquire,
store, analyze, and present data in multiple formats. Target markets for our hardware and software products
include aerospace, apparel, automotive, avionics, chemicals, computer peripherals, communications, distribution,
food and beverage, general manufacturing, packaging and transportation.
Our products are distributed worldwide through our own sales force, authorized dealers, and independent
dealers and representatives.
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 printers, ethernet
networking products and test and measurement data acquisition systems sold under the AstroNova ® brand name.
Refer to Note 18, “Nature of Operations, Segment Reporting and Geographical Information,” in our audited
consolidated financial statements elsewhere in this report for financial information regarding our segments.
On August 4, 2022, we acquired Astro Machine LLC (“Astro Machine”), an Illinois-based manufacturer of
printing equipment, including label printers and related accessories, tabbers, conveyors, and envelope feeders.
Astro Machine is reported as a part of our PI segment beginning with the third quarter of fiscal 2023. Refer to
Note 2, “Acquisition,” in our audited consolidated financial statements included elsewhere in this report.
The following description of our business should be read in conjunction with “Management’s Discussion
and Analysis of Financial Conditions and Results of Operations” on pages 24 through 37 of this Annual Report
on Form 10-K.
1
Description of Business
Product Overview
We leverage our expertise in data visualization technologies to design, manufacture and market specialty
printing systems, test and measurement systems, and related services for select growing markets globally.
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 and light
commercial label printers, direct-to-package 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, allowing customers to mark, track, protect and enhance the
appearance of their products. PI products sold under the Astro Machine brand acquired on August 4, 2022, also
include a variety of label printers, envelope and packaging printing, and related processing and handling
equipment. In the T&M segment, we have a long history of using our technologies to provide networking
systems and high-resolution 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, analyzed, stored and presented in various visual output formats.
Product Identification
Our PI segment includes three brands: QuickLabel, TrojanLabel, and GetLabels. Additionally, PI includes
the recently acquired Astro Machine brand that is sold directly to end users though our channel partners and to
OEM customers, who generally rebrand these products for sales to their customers. The segment provides a wide
array of digital end-to-end product marking and identification solutions including hardware, software, and
supplies for OEMs, commercial printers, and brand owners. Our customers typically label or mark products on a
short- to mid-size run basis and benefit from the efficiency, flexibility, and cost-savings of digitally printing
labels or packaging in their facility, on-demand, with the ability to accommodate multiple SKUs or variable data
such as bar codes, lot numbers or expiration dates. QuickLabel brand products include tabletop printers,
production-ready digital color label printers, and specialty OEM printing systems for either standalone output or
inline integration with existing pre-processing and finishing systems. Customers use our digital printing products
in a wide variety of industries, including chemicals, cosmetics, food and beverage, medical products,
nutraceuticals, pharmaceuticals, and many others. TrojanLabel expands our customer market by providing a
range of higher volume digital color printers, OEM printing systems, and supplies that target the more
demanding needs of brand owners, commercial printers, label converters, and packaging manufacturers, giving
them the ability to digitally mark or encode products directly or to produce labels for post-printing applications.
GetLabels brand products include a full line of media supplies, including label materials, tags, inks, toners, and
thermal transfer ribbons designed for optimal performance with our printing hardware, and are also compatible
with a wide variety of competitive and third-party printing hardware.
Current QuickLabel models include a selection of professional tabletop digital color label printers. We
recently introduced the QL-E100, an entry-level, compact, full-color tabletop label printer. It delivers
professional-quality output at a lower price point, which we believe is ideal for targeting smaller businesses
entering the on-demand label market, and larger enterprises that require multiple on-demand label printers at
distributed locations throughout their facilities. The high-speed QL-120X was built on our pioneering and
successful Kiaro! platform. To expand the product line further, the QL-120Xe, a sister product to the dye ink
QL-120X, was introduced in 2021 as a lower price point option for low-volume applications and price-sensitive
customers. In 2020, we introduced the QL-120D, which features high-performance pigment inks that can produce
durable BS5609-certified labels and labels that can withstand a wide range of demanding environmental
conditions from sterilization to cryogenic freezing. Introduced early in 2019, the high-performance QL-300 was
the first 5-color toner-based electrophotographic tabletop production label printer in the market. In addition, our
2
QuickLabel line of printers includes the QL-850, our next-generation wide-format inkjet color label printer, the
QL-30 and QL-60 series, a family of high-end monochrome printers, and the QLS-4100 XE, a unique solution
with the ability to digitally print full-color labels and tags using thermal transfer ribbon technology.
Our TrojanLabel portfolio includes a range of products from professional digital color label mini-presses to
large-scale all-in-one inline specialty printing systems for both brand owners, OEMs, and commercial printers.
The T2-C, a compact, digital mini-press designed for 24/7 label production, includes numerous differentiating
features for several end-use market applications. The T2-L is a narrow-format digital press designed specifically
for flexible packaging substrates. Beyond label printing, the T3-OPX, the first of its kind direct-to-package
printer, which was introduced in late 2020, allows printing directly onto a range of flat products, including
cardboard, paper bags, flat wood planks and many other items using pigment inks that are resistant to both water
and UV exposure. A professional high-volume label press and finishing system, the T4, enables print, die-cut,
and lamination in an all-in-one machine with a much smaller footprint than others in the market.
GetLabels provides a broad range of high-quality supplies for both our printers and third-party printers,
including label and tag materials, inks, toner, and thermal transfer material, all specifically designed and
constructed for a wide variety of labeling applications. Label material and substrates are carefully qualified and
tested on-site in our Rhode Island Materials Research Laboratory to ensure durability and compatibility with our
QuickLabel and TrojanLabel branded products, along with a variety of third-party printers.
Astro Machine sells a variety of label printers, envelope and package printers and related envelope tabbers,
conveyors and feeders to OEM customers who re-label the products with their own brand.
The PI segment provides worldwide training and support as well as develops and licenses various
specialized software programs to design and manage labels, print images, manage and operate our printers and
presses, and coordinate printing on an automated basis directly over networked systems.
Test & Measurement
Products sold under our T&M segment are designed and manufactured for airborne printing and networking
solutions and data acquisition. Our aerospace products include flight deck printing solutions, networking
hardware and specialized aerospace-grade thermal paper. Our data acquisition systems are used in research and
development, flight testing, missile/rocket telemetry production monitoring, power and maintenance applications.
These products are sold to customers in various industries, including aerospace & defense, automotive,
commercial airline, energy, manufacturing and transportation, to meet their need to acquire and record data from
local and networked data streams and sensors.
Our airborne printers, which include our flagship ToughWriter® series, are used in the flight decks and
cabins of military, commercial, and business aircraft to print hard copies of data to enhance flight safety and
reduce pilot workload by providing ready access to many types of critical flight-specific information required for
the safe and efficient operation of aircraft. Examples of printed data include navigation maps, arrival and
departure information, flight itineraries, weather maps, notice to air missions or NOTAMS, performance data,
passenger data, and air traffic control data. ToughSwitch® Ethernet switches are used primarily in military
aircraft and military vehicles to connect multiple computers or Ethernet devices. The airborne printers and
Ethernet switches are ruggedized to comply with rigorous military and commercial flight-worthiness standards
for operation under extreme environmental conditions. We are currently furnishing ToughWriter printers for
various aircraft made by Airbus, Boeing, Bombardier, Lockheed, Gulfstream, and others. In addition to the
ToughWriter products, we furnish other acquired flight deck printer products, including the TP/NP series, the
RTP80 series and the PTA-45B series of airborne printers. The PTA-45B is subject to the Asset Purchase and
License Agreement with Honeywell International, Inc. (the “Honeywell Agreement”), pursuant to which in 2017
we acquired an exclusive perpetual worldwide license to manufacture and support Honeywell’s narrow-format
flight deck printers for the Boeing 737 and Airbus 320 aircraft. Over time we expect customers to replace the
3
PTA-45B and other acquired printer product lines with the AstroNova designed ToughWriter products because
of the numerous technical features, functional advantages and significant weight savings. Currently,
approximately one-third of the airborne printers sold are ToughWriter branded, and we expect the percentage of
ToughWriter products to continue to grow over the next several years, and notably in fiscal 2025.
Other T&M products include the TMX® all-in-one high-speed data acquisition system for applications
requiring high channel counts and acquisition rates; the Daxus® DXS-100 distributed data acquisition platform;
the SmartCorder® DDX-100, a portable all-in-one data acquisition system for R&D facility and field testing; and
the Everest® EV-5000 digital strip chart recording system used mainly in aerospace and defense applications.
The Daxus DXS-100 can be connected to the SmartCorder to increase channel count or networked as part of a
distributed measurement system spanning vast distances.
Technology
Our core technologies are data visualization technologies that relate to (1) acquiring data, (2) conditioning
the data, (3) displaying or printing the data on hard copy, visual displays or electronic storage media, and
(4) analyzing the data. To support our data visualization technology, we maintain technological core
competencies and trade secret know-how concerning the subject matter peculiar to each business unit. The
technological disciplines are diverse and include electronic, software, mechanical and industrial engineering
aspects. Additionally, we possess engineering expertise in digital signal processing, image processing, fluidics,
color theory, high-speed material handling, and airworthiness design.
Patents and Copyrights
We hold several product patents in the United States and in foreign countries. We rely on a combination of
copyright, patent, trademark, and trade secret laws in the United States and other jurisdictions to protect our
technology and brand names. We consider our intellectual property to be critical to the operation of our business.
In particular, we believe that the loss of the trademarks QuickLabel, TrojanLabel, ToughWriter, or ToughSwitch
or the loss of the license provided under the Honeywell Agreement could have a material adverse impact on our
business taken as a whole. Because of the OEM nature of the Astro Machine business model (and the similarity
of that brand name to the AstroNova name), its trademark and brand name, while important, are less critical.
Manufacturing and Supplies
We manufacture many of the products that we design and sell. Raw materials and supplies are typically
available from a wide variety of sources. We manufacture many sub-assemblies and parts in-house, including
certain specialty printed circuit board assemblies and harnesses, and we have extensive electronic and
mechanical final assembly and test operations. Many parts are not manufactured in-house are standard electronic
items available from multiple sources. Other printers and parts are designed or modified by us and manufactured
by outside vendors according to our specifications. We also purchase certain components, assembled products,
and supplies used to manufacture or sell with our products, from single-or limited- source suppliers. Although we
believe the majority of these sole or limited source components, assembled products, and supplies could be
sourced elsewhere with appropriate changes in the design of our products, the required design changes might not
be feasible on a timely basis, and any interruption in these components, products or supplies could adversely
affect our business. When circumstances cause us to anticipate that we may not be able to acquire such
components, products or supplies on a timely basis, our practice is to procure a sufficient quantity in advance. In
the past, we have made such advanced purchases primarily for aerospace products and in quantities that we
anticipate will suffice for the life of the aircraft program for which those printers are designed.
Marketing and Competition
We compete worldwide in multiple markets. Through our existing network of manufacturing, sales and
support facilities, we have sold our products to customers in over 150 countries.
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We believe we are a market leader in tabletop digital color label printing technology in the specialty
on-demand printing field, the market leader in flight deck printers, and an innovator in digital color mini-press
systems. In the data acquisition area, we are one of the leaders in general-purpose, portable, high-speed data
acquisition systems.
Management believes that we have a market leadership position in many of the markets we serve. We retain
our leadership position by virtue of our proprietary technology, product reputation, delivery, our channels to
market, technical assistance and service to customers. The number of competitors varies by product line. Key
competitive factors vary among our product lines but include technology, quality, service and support,
distribution network and breadth of product and service offerings.
Our PI products are sold by direct field salespersons as well as independent dealers and representatives,
while our T & M 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 PI
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 100 independent dealers and representatives selling and marketing our
products in over 60 countries.
No single customer accounted for 10% or more of our net revenue in any of the last three fiscal years.
Order Backlog
Our order backlog is predominantly but not exclusively for products that will be delivered within twelve
months, and backlog scheduled for beyond twelve months is predominantly within the T&M segment. However,
backlog varies regularly and is not a highly reliable predictive indicator of near-term future sales trends,
primarily due to the frequent longer-term original equipment and supplies orders within the T&M segment. In the
PI segment, we have multi-period (but typically not multi-year) blanket order arrangements with many customers
for labels and other supplies. Printer hardware in the PI segment is typically shipped within a short period of time
after orders are booked. Manufacturing production is designed to meet forecasted demands and built-to-order
customer requirements. Backlog at January 31, 2023 and 2022 was $35.8 million and $27.8 million, respectively.
Government Regulation
We are subject to a wide variety of laws, rules, mandates, and regulations, some of which apply or may
apply to us as a result of our business, particularly with respect to our aircraft cockpit printer business which sells
in a highly regulated industry. For example, material modifications to an airborne printer cannot be made without
having progressed through an extensive series of product qualification and certification steps that are technically
complicated, expensive to execute, typically slow the pace of product development in that industry and can
constrain our ability to quickly respond to pricing fluctuations or disruptions to our supply chain for products.
Other applicable and potentially applicable regulations and laws include regulations and laws regarding
taxation, accounting and U.S. Securities and Exchange Commission (“SEC”) reporting, privacy, data protection,
pricing, content, distribution, energy consumption, environmental regulation, competition, consumer protection,
employment, import and export matters, information reporting requirements, access to our services and facilities,
the design and operation of websites, health, safety, and sanitation standards, the characteristics and quality of
products and services, product labeling and unfair and deceptive trade practices.
Our business outside of the U.S. exposes us to foreign and additional U.S. laws and regulations, including
but not limited to, laws and regulations relating to taxation, business licensing or certification requirements,
consumer protection, intellectual property rights, consumer and data protection, privacy, encryption, restrictions
on pricing or discounts, and the U.S. Foreign Corrupt Practices Act and other applicable U.S. and foreign laws
prohibiting corrupt payments to government officials and other third parties.
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Environmental Matters
We believe that we are in compliance with all applicable federal, state, and local laws concerning the
discharge of material into the environment or otherwise relating to the protection of the environment. We have
not experienced any material costs in connection with environmental compliance and do not believe that such
compliance will have any material effect on our financial position, results of operations, cash flows, or
competitive position.
Employees
As of January 31, 2023 we employed 394 full-time employees, including 40 employees added as a result of
the Astro Machine acquisition in August 2022. Of our full-time employees, 295 were in the United States, 77 in
Europe, 10 in Canada, 10 in Asia and two in Mexico.
None of our employees are represented by a labor union or covered by a collective bargaining agreement;
except for our employees in France, where local regulations generally require collective bargaining agreements.
Successful execution of our business strategy depends on our ability to retain several key employees in both
individual contributor and management roles. We continuously assess the risk of losing our key employees
through regular communications, engagement surveys and assessments in the labor market. Our retention
strategy is focused on ensuring competitive compensation packages, career and professional development,
leadership coaching and other actions to improve overall engagement with our key employees.
Culture
We are deeply committed to and invest substantial resources in maintaining and improving a strong and
definable company culture that shapes how we operate and engage with stakeholders and employees. Our culture
consists of four key components:
• A powerful set of core values: Customer First, One Global Team, Innovation, Continuous
Improvement and Building Shareholder Value.
• The AstroNova Operating System (AOS), the comprehensive business management process which
helps us manage the business to achieve continuous improvements in quality, delivery, cost, and
growth.
• A commitment to operating with integrity and compliance to ensure our business is conducted in an
honest, legal, and environmentally responsible manner.
• A passionate commitment to quality that drives our goal to achieve zero defects and understand our
customers’ changing needs and expectations.
Our objective is for these core values to guide our employees’ behavior and direct how we conduct our
business. These core values are reinforced during new hire orientation, ongoing engagement surveys, leadership
development, and team development activities and are also demonstrated through teamwork, leadership, and
everyday interactions.
Diversity and Inclusion
We believe that our culture and core values are strengthened through diversity and inclusion. Our diversity
initiatives include—but are not limited to—our practices and policies on recruitment and selection; compensation
and benefits; professional development and training; promotions; transfers; social and recreational programs;
layoffs; terminations; and the ongoing development of a work environment built on the premise of gender and
diversity equity. These initiatives include targeted recruitment of women in technical, engineering and sales
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roles, leadership development programs for women, periodic evaluation of our workforce demographics as
compared to the demographics in the workforce market, and an affirmative effort to attract, recruit, retain and
train a diverse workforce that is representative of the populations in the regions in which we do business. Metrics
that track performance against these goals are regularly reported to and monitored by the Compensation
Committee of our Board of Directors.
Other Information
Our business is not seasonal in nature. However, our revenue is impacted by the variable size of certain
individual customer revenue transactions, which can cause fluctuations in revenue from quarter to quarter and
which may be inconsistent with the underlying business or general economic trends. For example, in our T&M
segment, government procurement and contracting practices can result in material fluctuations in our backlog
and revenues.
Information about our Executive Officers
The following sets forth certain information with respect to all executive officers of the Company. All
officers serve at the pleasure of the Board of Directors.
Name
Gregory A. Woods . . . . . . . . . .
David S. Smith . . . . . . . . . . . . .
Stephen M. Petrarca . . . . . . . . .
Michael J. Natalizia . . . . . . . . .
Age
64
66
60
59
Position
President, Chief Executive Officer and Director
Vice President, Chief Financial Officer and Treasurer
Vice President—Operations
Vice President Technology & Strategic Alliances, Chief
Technology Officer
Tom Carll . . . . . . . . . . . . . . . . .
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Vice President and General Manager—Aerospace
Mr. Woods has served as Chief Executive Officer of the Company since February 1, 2014. Mr. Woods
joined the Company in September 2012 as Executive Vice President and Chief Operating Officer and was
appointed President and Chief Operating Officer on August 29, 2013. Prior to joining the Company, Mr. Woods
served from January 2010 to August 2012 as Managing Director of Medfield Advisors, LLC, an advisory firm
located in Medfield, Massachusetts focused on providing corporate development and strategy guidance to
technology driven manufacturing firms. From 2008 to 2010, Mr. Woods served as President of Performance
Motion Devices, a specialty semiconductor and electronics manufacturer located in Lincoln, Massachusetts.
Mr. Smith was appointed Vice President, Chief Financial Officer and Treasurer of the Company effective
January 22, 2018. Prior to joining the Company, Mr. Smith served as Managing Partner of S.C. Advisors LLC, a
financial management consultancy firm from 2008 through January 2018. Mr. Smith has also held a variety of
senior finance positions at semiconductor and manufacturing companies, including Senior Vice President and
Chief Financial Officer of Standard Microsystems Corporation, a global semiconductor company, from 2005 to
2008 and Vice President, Finance and Chief Financial Officer of both Dover Corporation, a diversified global
manufacturing company, from 2000 to 2002 and Crane Company, a diversified manufacturing company from
1994 to 2000.
Mr. Petrarca was appointed Vice President—Operations in 1998. He has previously held positions as
General Manager of Manufacturing, Manager of Grass Operations and Manager of Grass Sales. He has been with
the Company since 1980.
Mr. Natalizia was appointed Vice President and Chief Technology Officer of the Company on March 9,
2012. Prior to this appointment, Mr. Natalizia held the position of Director of Product Development of the
Company since 2005.
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Mr. Carll joined the Company in 1989 and has held the position of Vice President and General Manager—
Aerospace since 2011. Previously, Mr. Carll was Product Manager and National Sales Manager of the AstroNova
Test & Measurement product group and from its formation in 2004, the AstroNova Aerospace business group.
Code of Ethics
We have adopted a Code of Conduct which applies to all of our directors, officers and employees of the
Company, including our Chief Executive Officer (“CEO”), Chief Financial Officer (“CFO”) and principal
accounting officer which meets the requirements of a “code of ethics” as defined in Item 406 of Regulation S-K.
A copy of the Code of Conduct will be provided to shareholders, without charge, upon request directed to
Investor Relations or can be obtained on our website, (www.astronovainc.com), under the heading “Investors—
Corporate Governance—Governance Documents.” We intend to disclose any amendment to, or waiver of, a
provision of the Code of Conduct for the CEO, CFO, principal accounting officer, or persons performing similar
functions by posting such information on our website.
Available Information
We make available on our website (www.astronovainc.com) our Annual Report on Form 10-K, Quarterly
Reports on Form 10-Q, Current Reports on Form 8-K and, if applicable, amendments to those reports filed or
furnished pursuant to Sections 13(a) or 15(d) of the Securities Exchange Act of 1934 as soon as reasonably
practicable after we electronically file such material with, or furnish it to, the SEC. These filings are also
accessible on the SEC’s website at http://www.sec.gov.
Item 1A. Risk Factors
The following risk factors should be carefully considered in evaluating AstroNova, because such factors
may have a significant impact on our business, operating results, liquidity and financial condition. As a result of
the risk factors set forth below, actual results could differ materially from those projected in any forward-looking
statements. Additional risks and uncertainties not presently known to us, or that we currently consider to be
immaterial, may also impact our business operations.
Business and Industry Risks:
The structural impacts on the economy as a result of the COVID-19 pandemic and its aftermath have
adversely affected and will likely continue to adversely affect our revenues, results of operations and financial
condition.
All of our global operations were materially adversely affected by the worldwide COVID-19 pandemic and
the related supply-chain disruptions. The aftermath of the immediate severe impacts of COVID-19 on our
operations and financial performance, the changes in our customers’ purchasing behavior, the post-pandemic
impact of inflation from macroeconomic factors, and the continued and lingering structural impacts on our global
supply chain, particularly with respect to the availability and costs of electronic components, have made planning
for customer demand and manufacturing production more difficult. Also, it has led to a rise in the cost of a
number of classes of acquired goods for both the T&M and PI segments. We will continue to evaluate the impact
of COVID-19 and its aftermath effects on our business, results of operations and cash flows throughout fiscal
2024, including the potential impacts on various estimates and assumptions inherent in the preparation of our
condensed consolidated financial statements.
Since the COVID-19 pandemic began we have experienced difficulties in obtaining raw materials and
components for our products. Some of the structural dislocations in the global economy that were triggered by
the pandemic are prolonging these difficulties. Particularly with respect to certain electronic components for
legacy products in our T&M segment, availability has been curtailed and may not recover, and in certain cases
we have had to accelerate product redesign efforts and quickly transition customers to products with more viable
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long-term product configurations. We expect to incur substantial costs in doing so but we are unable to
accurately estimate the financial impact due to the rapidly changing environment. We also have had to incur
additional costs, such as higher shipping fees (i.e., air rather than ocean freight) and though these have abated to
a degree, they have not returned to pre-pandemic levels. These factors negatively impacted our efficiency,
delayed shipments in each of the fiscal quarters of 2023, and caused what we believe are product shortages. We
are addressing these issues through long-range planning and procuring higher inventory levels for affected items
to help mitigate potential shortages whenever practicable. For our T&M segment, we are also monitoring and
reacting to extended lead times on electronic components, and utilizing a variety of strategies, including blanket
orders, vendor-bonded inventories, extended commitments to our supply base, and seeking alternative suppliers.
Additionally, we have taken actions to increase regular contact with our essential vendors and increased our
forecasting horizon for our products to help us better manage our supply chain. In some cases, we are working
with our vendors to help them procure components. Similarly, in our PI segment, we are increasing our inventory
levels to ensure the adequacy of the supplies we sell to customers who use our printers. Our strategies to
counteract these supply chain dislocations have significantly increased the amount of inventory we maintain to
support our product sales. We have also experienced several situations where component shortages and scarcity
have required us to pay significantly higher costs to obtain those components, particularly electronic components
and circuit board assemblies in the T&M segment and inks and printer machine parts in the PI segment. We will
continue to monitor our supply chain going forward and update our mitigation strategies as we determine
appropriate. We are not able to predict how current supply chain difficulties will develop in the future, and if the
steps we are taking are not effective, it could have a material adverse impact on our business and results of
operations.
Our PI business was impacted by the COVID-19 pandemic as it limited our ability to meet with customers
to demonstrate our products at trade shows and on-site in their facilities was curtailed. We partially countered
this through a variety of virtual, on-line selling and digital marketing strategies, a number of which we continue
to emphasize today. The degree to which post-pandemic selling practices will revert to those that were dominant
previously, and the ultimate mix of customer engagement methods of face-to-face selling versus digital selling
methods remains uncertain. For example, throughout fiscal 2023 we have attended numerous trade shows, but
demand generation through those selling methods have not fully recovered to pre-pandemic levels. We believe
that digital marketing has become a more permanent element of our go-to-market strategy. This has required us
to shift resources to those technologies. Further, in the PI segment, the timely and reliable delivery of acceptable
quality printer components from certain of our suppliers has declined post-pandemic, causing us to incur
additional direct procurement costs, to carry higher inventories to assure adequate supplies to satisfy customers,
to incur additional warranty and technical service costs to offset those impacts and to accelerate alternative
technology development.
The aerospace industry, which we serve through our aerospace product line, was significantly disrupted by
the COVID-19 pandemic, both inside and outside of the United States because of the severe decline in the
demand for air travel, demand for aircraft, and a general curtailment of aircraft production rates. This had a
material adverse impact on our financial results. Now that air travel demand and aircraft production demand have
substantially improved, the direct and secondary impacts of the demand decline have abated, but demand for our
products has not yet fully recovered to pre-pandemic levels. Our current belief is that it may take two or more
years before we reach full revenue recovery, and lingering impacts of the COVID-19 pandemic on the economic
structure of the airline industry, and general economic conditions could still become a negative factor for demand
for aircraft, which could stall or reverse current favorable trends. If this were to happen individually or in
combination, these factors would be difficult for us to respond to quickly, which could have a material adverse
impact on our business operations and financial results.
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Our operating results and financial condition could be harmed if the markets into which we sell our products
decline or do not grow as anticipated.
Any decline in our customers’ markets or their general economic conditions would likely result in a
reduction in demand for our products. For example, the 2020 grounding, suspension and subsequent slow restart
of production of the Boeing 737 MAX, coupled with the negative impact of the COVID-19 pandemic on the
demand for new aircraft and travel, reduced the demand for our airborne printers, as well as for the related
repairs and supplies which has negatively affected our results of operations. While these effects have been
abating, demand remains lower than it was pre-pandemic, and currently the outlook is uncertain. While demand
for air travel has recently increased, the impact of another viral pandemic or other widespread health emergency
could negatively impact this trend in the future. Also, we believe that the pandemic has negatively impacted our
customers’ financial capacity materially enough to alter their strategies and industry dynamics so as to make
changes in their demand more volatile. These factors may in particular cause demand for aircraft to grow slowly
or decline, which would reduce demand for our products, and in turn harm our results of operations, financial
position and cash flows.
Our future revenue growth depends on our ability to develop and introduce new products and services on a
timely basis and achieve market acceptance of these new products and services.
The markets for our products are characterized by evolving technologies which in turn effect our product
introduction cycles. Our future success depends largely upon our ability to address the rapidly changing needs of
our customers by developing and supplying high-quality, cost-effective products, product enhancements and
services on a timely basis and by keeping pace with technological developments and emerging industry
standards. The success of our new products will also depend on our ability to differentiate our offerings from our
competitors’ offerings, price our products competitively, anticipate our competitors’ development of new
products, and maintain high levels of product quality and reliability. We spend a significant amount of time and
effort on the development of our airborne and color printer products as well as our data acquisition and recorder
products. Failure to meet our customers’ changing business needs or to further develop any of our new products
and their related markets as anticipated could adversely affect our future revenue growth and operating results.
As we introduce new or enhanced products, we must also successfully manage the transition from older
products to minimize disruption in customers’ ordering patterns, avoid excessive levels of older product
inventories and provide sufficient supplies of new products to meet customer demands. The introduction of new
or enhanced products may shorten the life cycle of our existing products, or replace sales of some of our current
products, thereby offsetting the benefit of even a successful product introduction and may cause customers to
defer purchasing existing products in anticipation of the new products. Additionally, when we introduce new or
enhanced products, we face numerous risks relating to product transitions, including the inability to accurately
forecast demand, manage excess and obsolete inventories, address new or higher product cost structures, and
manage different sales and support requirements due to the type or complexity of the new products. Any
customer uncertainty regarding the timeline for rolling out new products or our plans for future support of
existing products may cause customers to delay purchase decisions or purchase competing products which would
adversely affect our business and operating results.
Operational and Business Strategy Risks:
We are dependent upon contract manufacturers for some of our products. If these manufacturers do not meet
our requirements, either in volume or quality, then we could be materially harmed.
We subcontract the manufacturing and assembly of certain of our products to independent third parties at
facilities located in various countries. Relying on subcontractors involves a number of significant risks,
including:
• Disruptions in the global supply chain;
• Limited control over the manufacturing process;
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•
•
Potential absence of adequate production capacity;
Potential delays in production lead times;
• Unavailability of certain process technologies;
• Reduced control over delivery schedules, manufacturing yields, quality and costs and
• Exposure to rapid unplanned cost increases that cannot be adequately recovered by customer price
increases due to market competition or contractual constraints.
If one of our significant subcontractors becomes unable or unwilling to continue to manufacture or provide
these products in required volumes, fails to meet our quality standards, or imposes rapid price increases that we
cannot recover in the market, we will have to identify alternate qualified subcontractors, take over the
manufacturing ourselves, or redesign our products to use components from other suppliers. Additional qualified
subcontractors may not be available or may not be available on a timely or cost-competitive basis. Any
interruption in the supply, increase in the cost of the products manufactured by a third-party subcontractor or
failure of a subcontractor to meet quality standards could have a material adverse effect on our business,
operating results and financial condition.
For certain components, assembled products and supplies, we are dependent upon single or limited source
suppliers. If these suppliers do not meet demand, either in volume or quality, then we could be materially
harmed.
Although we use standard parts and components for our products where possible, we purchase certain
components, assembled products and supplies used in the manufacture of our products from a single source or
limited supplier sources. If the supply of a key component, assembled products or certain supplies were to be
delayed or curtailed or, in the event a key manufacturing or sole supplier delays shipment of such components or
assembled products, our ability to ship products in desired quantities and in a timely manner would be adversely
affected. For example, as a result of the global COVID-19 pandemic, there was a disruption to our supply chain
due to the delays of component shipments from our vendors in China and other jurisdictions in which normal
business operations were disrupted. Our business, results of operations and financial position could also be
adversely affected, depending on the time required to obtain sufficient quantities from the original source or, if
possible, to identify and obtain sufficient quantities from an alternative source.
Additionally, if any single or limited source supplier becomes unable or unwilling to continue to supply
components, assembled products or supplies in required volumes or at acceptable prices, we will have to identify
and qualify acceptable replacements or redesign our products with different components. Alternative sources
may not be available, or product redesign may not be feasible on a timely basis. For example, in fiscal 2023, we
experienced increased difficulty in obtaining certain technology-based parts, components and supplies from the
largest single supplier of our PI segment at stable or predictable prices. Additionally, we experienced repeated
significant quality problems with that supplier. We have responded to these issues by increasing our inventories
of those products to mitigate supply risk, negotiating quality related cost reimbursements, and in some cases,
accelerating our development of PI products that rely on alternative suppliers. Any interruption in the supply of
or increase in the cost of the components, assembled products and supplies provided by single or limited source
suppliers could have a material adverse effect on our business, operating results, and financial condition.
We face significant competition, and our failure to compete successfully could adversely affect our results of
operations and financial condition.
We operate in an environment of significant competition, especially in the markets in which we sell our PI
printers and T&M data acquisition products. This competition is driven by rapid technological advances,
evolving industry standards, frequent new product introductions and the demands of customers to become more
efficient. Our competitors range from large international companies to relatively small firms. We compete based
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on technology, performance, price, quality, reliability, brand, distribution and customer service and support. Our
success in future performance is largely dependent upon our ability to compete successfully in the markets we
currently serve and to expand into additional market segments. Additionally, current competitors or new market
entrants may develop new products or services with features that could adversely affect the competitive position
of our products. To remain competitive, we must develop new products, services and applications and
periodically enhance our existing offerings. If we are unable to compete successfully, our customers could seek
alternative solutions from our competitors and we could lose market share, which could materially and adversely
affect our business, results of operations and financial position.
Our profitability is dependent upon our ability to obtain adequate pricing for our products and to control our
cost structure.
Our success depends on our ability to obtain adequate pricing for our products and services. For a variety of
complex reasons, many of which were triggered by the COVID-19 pandemic, the general economy has been
significantly impacted by supply chain disruptions. Examples of some of these impacts on us include reduced
availability of certain electronic components and the need to pay premium prices to obtain them, and noticeably
higher costs for a wide array of other parts and raw material components in both of our product segments. This
has been exacerbated by increases in the cost of transportation to expedite incoming components and supplies. In
many cases, we have had to expedite delivery of critical materials through significantly higher cost airfreight
methods. Our ability to offset these effects through pricing actions for our products and services may not prove
sufficient to offset these or further cost increases. Attempts to increase prices may not hold in the face of
customer resistance and/or competition. If we are unable to obtain adequate pricing for our products and services,
our results of operations and financial position could be materially adversely affected.
We are also continually reviewing our operations with a view towards reducing our cost structure, including
but not limited to reducing our labor cost-to-revenue ratio, improving process and system efficiencies and
outsourcing certain internal functions. From time to time, we also engage in restructuring actions to reduce our
cost structure. However, if these efforts to constrain the cost of our operations are inadequate to offset higher
product and employee wage costs, our results of operations and financial position could be materially adversely
affected.
Our inability to adequately enforce and protect our intellectual property defend against assertions of
infringement or the loss of certain licenses could prevent or restrict our ability to compete.
We rely on patents, trademarks, licenses, and proprietary knowledge and technology, both internally
developed and acquired, in order to maintain a competitive advantage. Our competitors may develop
technologies that are similar or superior to our proprietary technologies or design technologies around the
intellectual property protections or licenses that we currently own. The loss of the trademarks QuickLabel,
TrojanLabel, ToughWriter and ToughSwitch or the loss of the licenses provided under the Honeywell Agreement
could have a material adverse impact on our business. Operating outside the United States also exposes us to
additional intellectual property risk. The laws and enforcement practices of certain jurisdictions in which we
operate do not protect our intellectual property rights to the same extent as in the United States. Any diminution
in our ability to defend against the unauthorized use of these rights and assets could have an adverse effect on our
results of operations and financial condition. Litigation may be necessary to protect our intellectual property
rights or defend against claims of infringement, which could result in significant costs and divert our
management’s focus away from operations.
We have significant inventories on hand.
We maintain a significant amount of inventory, and as a result of recent supply chain disruptions and
announced or anticipated price increases from suppliers, we have further increased the amount of inventory we
maintain on hand to ensure we are able to meet market demand for our products at a reasonable price. These
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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.
We could incur liabilities as a result of installed product failures due to design or manufacturing defects.
We have incurred and could in the future incur additional liabilities because of product failures due to
design or manufacturing defects. Our products may have defects despite our internal testing or testing by
customers. These defects could result in, among other things, a delay in recognition of sales, loss of sales, loss of
market share, failure to achieve market acceptance or damage to our reputation. We could be subject to material
claims by customers and may incur substantial expenses to correct any product defects. While in the past, we
have successfully obtained partial compensation from suppliers for their contribution to product quality issues,
we may not be successful in such a recovery in the future, and these recoveries have not in the past and are not in
the future likely to fully offset the full financial impact on us. For example, in fiscal 2023, the quality of products
obtained from one of the key suppliers to our PI segment declined and we were unable to detect latent defects in
their products in a timely manner, which resulted in our incurring increased technical service and warranty
expenses. We obtained partial compensation from that supplier, but this was insufficient to fully cover all of our
costs related to this issue. We also believe we have experienced demand declines as a result of customers’
perceptions of the quality defects related to this supplier.
In addition, through our acquisitions, we have assumed, and may in the future assume, liabilities related to
products previously developed by an acquired company that may not have been subjected to adequate product
development, testing and quality control processes, and may have unknown or undetected defects. Some types of
defects may not be detected until the product is installed in a user environment. This may cause us to incur
significant warranty, repair or re-engineering costs. As such, it could also divert the attention of engineering
personnel from product development efforts, which may result in increased costs and lower profitability.
We could experience a significant disruption in or security breach of our information technology system which
could harm our business and adversely affect our results of operations.
We rely on on-premise and cloud-based information technology systems, some of which are managed by or
licensed from third parties, to support many critical aspects of our business, as well as to process, transmit and
store our own electronic proprietary or confidential information, and confidential information of customers,
employees, suppliers and others, including personally identifiable information, credit card data, and other
proprietary confidential information. These systems are vulnerable to damage, disruptions and/or shutdowns due
to attacks by cyber-criminals, data breaches, employee error, power outages, computer viruses,
telecommunication or utility failures, systems failures, natural disasters, catastrophic events or other unforeseen
events. These vulnerabilities could interfere with our operations, compromise our data processing capacity and
the security of our information and that of our customers and suppliers, and expose us to liability which could
adversely impact our business and reputation. We actively manage these risks through a variety of hardware and
software-based techniques that we own, license or otherwise procure from third parties under contract to
safeguard our systems, and we own or procure from third parties system data storage redundancy and disaster
recovery capability. In particular, we have increased our investment in tools, techniques and training that we
believe will reduce our vulnerability to attacks from cyber-criminals. However, due to the complexity of our
systems, and especially due to the ever-increasing sophistication of cyber-criminals, there is no assurance that
our efforts will be sufficient to prevent cyber-attacks, security breaches, or the other potential exploitation of
vulnerabilities or systems failures. In any such circumstance, our system redundancy and other disaster recovery
planning may be ineffective or inadequate. While we have experienced, and expect to continue to experience,
these types of threats to our information technology networks and infrastructure, none of them to date has had a
material impact. However, in the future, such events could result in legal claims or proceedings, liability or
13
penalties under privacy laws, disruption in operations, and damage to our brand and reputation, all of which
could adversely affect our business, operating results and financial condition.
We maintain insurance for a variety of cybersecurity risks to mitigate their possible impact, but because of
the prevalence of claims in the market for cybersecurity insurance, the cost for that insurance has increased and
the underwriting criteria to obtain such insurance has become far more demanding. There is no assurance that we
will be able to obtain such insurance in the future, despite our substantial investments in cybersecurity, and if we
are able to do so, it may be at substantially higher costs. In addition, in response to these higher costs, we may
choose to reduce the amount of insurance we maintain because we believe our improvements in our
cybersecurity profile have reduced our risk exposure relative to the increased cost of insurance. If our risk
assessments prove incorrect and we were to have a loss not fully covered by insurance, our financial condition
and results of operations could be materially negatively impacted.
We depend on our key employees and other highly qualified personnel and our ability to attract and develop
new, talented professionals. Our inability to attract and retain key employees, as well as challenges with
respect to the management of human capital resources, could compromise our future success and our business
could be harmed.
Our future success depends upon our ability to attract and retain, through competitive compensation and
benefits programs, professional and executive employees, including sales, operating, marketing, and financial
management personnel as well as our ability to manage human capital resources. There is substantial competition
for skilled personnel, and the failure to attract, develop, retain and motivate adequately qualified personnel could
negatively impact our business, financial condition, results of operations and prospects. In order to hire new
personnel or retain or replace our key personnel, we must maintain competitive compensation and benefits, and
we may also be required to increase compensation, which would decrease net income. Additionally, several key
employees have special knowledge of customers, supplier relationships, business processes, manufacturing
operations, regulatory and customer quality compliance management, and financial management issues. The loss
of any of these employees as the result of competitive compensation pressures or ineffective management of
human capital resources could harm our ability to perform efficiently and effectively until their knowledge and
skills are replaced, which might be difficult to do quickly, and as a result could have a material adverse effect on
our business, financial condition, and results of operations. Failure to retain or attract key personnel could
impede our ability to grow and could result in our inability to operate our business profitably.
Although we have not experienced any material disruptions due to labor shortages to date, we have observed
an overall tightening and increasingly competitive labor market, and the demand for qualified individuals is
expected to remain strong for the foreseeable future. Any sustained labor shortage or increased turnover rates
within our employee base, could lead to increased costs and lost profitability and could otherwise compromise
our ability to efficiently operate our business.
We may record future impairment charges, which could materially adversely impact our results of operations.
We test our goodwill balances annually, or more frequently if indicators are present or changes in
circumstances suggest that impairment may exist. We assess goodwill for impairment at the reporting unit level
and monitor the key drivers of fair value to detect events or other changes that would warrant an interim
impairment test of our goodwill and intangible assets. Declines in the future performance and cash flows of a
reporting unit or asset group, changes in our reporting units or in the structure of our business as a result of future
reorganizations, acquisitions or divestitures of assets or businesses, or changes in other key assumptions, may
result in the recognition of significant asset impairment charges, which could have a material adverse impact on
our results of operations.
We also review our long-lived assets including property, plant and equipment, and other intangibles assets
for impairment when events or changes in circumstances indicate the carrying value may not be recoverable.
14
Factors we consider include significant under-performance relative to expected historical or projected future
operating results, significant negative industry or economic trends and our market capitalization relative to net
book value. We may be required in the future to record a significant charge to earnings in our financial
statements during the period in which any impairment of our long-lived assets is determined. Such charges could
have a significant adverse impact on our results of operations and our financial condition.
Financial and Economic Risks:
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 the 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 additional charges if we request changes in delivery
schedules or if suppliers incur additional costs that they pass on to us. 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 customers’ demands or collect revenue or could otherwise
harm our business. Similarly, disruptions in financial 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 if at all, 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 subject to risks 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.
General market factors and conditions have in the past and may in the future affect pricing of such components,
supplies and commodities.
Economic, political and other risks associated with international sales and operations could adversely affect
our results of operations and financial position.
Because we sell our products worldwide, our business is subject to risks associated with doing business
internationally. Revenue from international operations, which includes both direct and indirect sales to customers
outside the U.S., accounted for approximately 35% of our total revenue for fiscal 2023, and we anticipate that
international sales will continue to account for a significant portion of our revenue. In addition, we have
employees, suppliers, contractors and facilities located outside the U.S. Accordingly, our business, operating
results and financial condition could be harmed by a variety of factors, including:
•
Interruption to transportation flows for delivery of parts to us and finished goods to our customers;
• Customer and vendor financial stability;
•
Fluctuations in foreign currency exchange rates;
• Changes in a specific country’s or region’s environment including political, economic, monetary,
regulatory or other conditions;
• Trade protection measures and import or export licensing requirements;
• Negative consequences from changes in tax laws;
• Difficulty in managing and overseeing operations that are distant and remote from corporate
headquarters;
15
• Difficulty in obtaining and maintaining adequate staffing;
• Differing labor regulations;
•
Failure to comply with complex and rapidly changing government economic sanctions against other
countries, especially arising from responses to armed conflict;
• Unexpected changes in regulatory requirements;
• Uncertainty surrounding the implementation and effects of the United Kingdom’s withdrawal from the
EU, commonly known as “Brexit”; and
• Geopolitical turmoil, including terrorism, war and public health disruptions, such as that caused by the
COVID-19 pandemic or Russia’s invasion of Ukraine.
To date, the impact of the Russian invasion of Ukraine and the resulting governmental sanctions and our
decision to halt all activities in the affected areas has had an immaterial direct impact on our revenues. We
believe, however, that the impact on the economies of Western Europe, especially Germany, which is the largest
non-North American market for our products, has had a negative impact on demand for our products.
Changes in our tax rates or exposure to additional income tax liabilities or assessments could affect our
profitability. In addition, audits by tax authorities could result in additional tax payments for prior periods.
As a global company, we are subject to taxation in numerous countries, states and other jurisdictions. As a
result, our effective tax rate is based on the tax rates in effect where we operate. In preparing our financial
statements, we estimate the amount of tax that will become payable in each jurisdiction. Our effective tax rate
may vary as a result of numerous factors, including changes in the mix of our profitability from jurisdiction to
jurisdiction, the results of examinations and audits of our tax filings, whether we secure or sustain acceptable
arrangements with tax authorities, adjustments to the value of our uncertain tax positions, changes in accounting
for income taxes and changes in tax laws. Any of these factors could cause us to experience an effective tax rate
significantly different from previous periods or our current expectations.
Changes to tax laws and regulations or changes to the interpretation thereof, the ambiguity of tax laws and
regulations, the subjectivity of factual interpretations, uncertainties regarding the geographic mix of earnings in
any particular period, and other factors, could have a material impact on our estimates of our effective tax rate
and our deferred tax assets and liabilities. The impact of these factors may be substantially different
from period-to-period. In addition, the amount of income taxes we pay is subject to ongoing audits by U.S.
federal, state and local tax authorities. If audits result in payments or assessments different from our reserves, our
future results may include unfavorable adjustments to our tax liabilities and our financial statements could be
adversely affected. Any further significant changes to the tax system in the United States or in other jurisdictions
(including changes in the taxation of international income as further described below) could adversely affect our
financial statements.
We may have exposure to additional tax liabilities, which could negatively impact our income tax expense, net
income and cash flow.
We are subject to income and other taxes in both the U.S. and the foreign jurisdictions in which we operate.
The determination of our worldwide provision for income taxes and current and deferred tax assets and liabilities
requires judgment and estimation. In the ordinary course of our business, there are many transactions and
calculations where the ultimate tax determination is uncertain. We are subject to regular review and audit by both
domestic and foreign tax authorities and to the prospective and retrospective effects of changing tax regulations
and legislation. Although we believe our tax estimates are reasonable, the ultimate tax outcome may materially
differ from the amounts recorded in our consolidated financial statements and may materially affect our income
tax benefit or expense, net loss or income, and cash flows in the period in which such determination is made.
16
Deferred tax assets are recognized for the expected future tax consequences of temporary differences
between the carrying amount for financial reporting purposes and the tax bases of assets and liabilities, and for
net operating losses and tax credit carry forwards. In some cases, we may record a valuation allowance to reduce
our deferred tax assets to estimated realizable value. We review our deferred tax assets and valuation allowance
requirements quarterly. If we are unable to demonstrate that it is more likely than not that we will not be able to
generate sufficient future taxable income to realize the net carrying value of deferred tax assets, we will record a
valuation allowance to reduce the deferred tax assets to estimated realizable value, which could result in a
material income tax charge. As part of our review, we consider positive and negative evidence, including
cumulative results of recent years.
If we are unable to successfully comply with our credit agreement with Bank of America or secure alternative
financing, our business and financial condition could be materially adversely affected.
Our credit agreement with Bank of America requires us, among other things, to satisfy certain financial
ratios on an ongoing basis, consisting of a maximum consolidated leverage ratio, a minimum consolidated fixed
charge coverage ratio and an asset coverage ratio. We are also required to comply with other covenants and
conditions, set forth in the credit agreement, including, among others, limitations on 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 credit
agreement. If we were to violate the terms of the credit agreement and we were unable to renegotiate its terms at
that time or secure alternative financing, it could have a material adverse impact on us.
The agreements governing our indebtedness subject us to various restrictions that limit our ability to pursue
business opportunities.
The credit agreement governing our credit facility with Bank of America, N.A., as amended, contains, and
any future debt agreements may include, several restrictive covenants that impose significant operating and
financial restrictions on us and our subsidiaries. Such restrictive covenants may significantly limit our ability to:
•
•
•
Incur future indebtedness;
Place liens on assets;
Pay dividends or distributions on our and our subsidiaries’ capital stock;
• Repurchase or acquire our capital stock;
• Conduct mergers or acquisitions;
•
Sell assets; and/or
• Alter our or our subsidiaries’ capital structure, to make investments and loans, to change the nature of
their business, and to prepay subordinated indebtedness.
We may not realize the anticipated benefits of past or future acquisitions, divestitures and strategic
partnerships, and integration of acquired companies or divestiture of businesses may negatively impact our
overall business.
We have made strategic investments in other companies, products and technologies, including our August
2022 acquisition of Astro Machine LLC and 2017 acquisition of TrojanLabel. We will continue to identify and
pursue acquisitions of complementary companies and strategic assets, such as customer bases, products and
technology. However, there can be no assurance that we will be able to identify suitable acquisition
opportunities. In any acquisition that we complete, we cannot be certain that:
• We will successfully integrate the operations of the acquired business with our own;
17
• All the benefits expected from such integration will be realized;
• Management’s attention will not be diverted or divided, to the detriment of current operations;
• Amortization of acquired intangible assets or possible impairment of acquired intangibles will not have
a negative impact on operating results or other aspects of our business;
• Delays or unexpected costs related to the acquisition will not have a detrimental impact on our
business, operating results and financial condition;
• Customer dissatisfaction with, or performance problems at, an acquired company will not have an
adverse impact on our reputation; and
• Respective operations, management and personnel will be compatible.
For example, in the recently acquired Astro Machine business, revenues are concentrated in a relatively
small number of customers. Failure to satisfy the delivery requirements of those customers or to adequately
respond to their evolving product requirements could cause us to lose one or more customers which would have a
material adverse impact on our financial condition and results of operation due to lower revenue and could result
in intangible asset impairment.
In certain instances, as permitted by applicable law and NASDAQ rules, acquisitions, such as the Astro
Machine acquisition, may be consummated without seeking and obtaining shareholder approval, in which case
shareholders will not have an opportunity to consider and vote upon the merits of such an acquisition. Although
we will endeavor to evaluate the risks inherent in an acquisition, there can be no assurance that we will properly
ascertain or assess such risks.
We may also divest certain businesses from time to time. Divestitures will likely involve risks, such as
difficulty splitting up businesses, distracting employees, potential loss of revenue and negatively impacting
margins, and potentially disrupting customer relationships. A successful divestiture depends on various factors,
including our ability to:
• Effectively transfer assets, liabilities, contracts, facilities and employees to the purchaser;
•
Identify and separate the intellectual property to be divested from the intellectual property that we wish
to keep; and
• Reduce fixed costs previously associated with the divested assets or business.
All of these efforts require varying levels of management resources, which may divert our attention from
other business operations. Further, if market conditions or other factors lead us to change our strategic direction,
we may not realize the expected value from such transactions.
If we are not able to successfully integrate or divest businesses, products, technologies or personnel that we
acquire or divest, or able to realize the expected benefits of our acquisitions, divestitures or strategic partnerships,
our business, results of operations and financial condition could be adversely affected.
Changes in our business strategy or restructuring of our businesses may increase our costs or otherwise
affect the profitability of our businesses.
We continually review our operations with a view toward reducing our cost structure, including but not
limited to reducing our labor cost-to-revenue ratio, improving process and system efficiencies and increasing our
revenues and operating margins. As changes in our business environment occur, we may need to adjust our
business strategies to meet these changes, or we may otherwise find it necessary to restructure our operations or
particular businesses or assets. When these changes or events occur, we may incur costs to change our business
strategy and may need to write down the value of assets or sell certain assets. In any of these events our costs
may increase, and we may have significant charges or losses associated with the write-down or divestiture of
assets.
18
Adverse conditions in the global banking industry and credit markets could impair our liquidity or interrupt
our access to capital markets, borrowings or financial transactions to hedge certain risks.
At the end of fiscal 2023, we had approximately $3.9 million of cash and cash equivalents. Our cash and
cash equivalents are held in bank demand deposit accounts and foreign bank accounts. Disruptions in the
financial markets may, in some cases, result in an inability to access assets such as money market funds that
traditionally have been viewed as highly liquid. Any failure of our counterparty financial institutions or funds in
which we have invested may adversely impact our cash and cash equivalent positions and, in turn, our financial
position.
To date, we have been able to access financing that has allowed us to make investments in growth
opportunities and fund working capital requirements as needed. In addition, we occasionally enter into financial
transactions to hedge certain foreign exchange and interest rate risks. Our continued access to capital markets, the
stability of our lenders and their willingness to support our needs, and the stability of the counterparties to our
financial transactions that hedge risks are essential for us to meet our current and long-term obligations, fund
operations, and fund our future strategic initiatives. An interruption in our access to external financing or
financial transactions to hedge risk could materially and adversely affect our business and financial condition.
Inadequate self-insurance accruals or insurance coverage for employee healthcare benefits could have an
adverse effect on our business, financial results or financial condition.
In the U.S., we maintain an employee health insurance coverage plan on a self-insured basis backed by stop-
loss coverage which sets a limit on our liability for both individual and aggregate claim costs. We record
expenses based on actual claims incurred and estimates of the costs of expected claims, administrative costs, and
stop-loss insurance premiums.
We record a liability for our estimated cost of U.S. claims incurred and unpaid as of each balance sheet date.
Our estimated liability is recorded on an undiscounted basis and is based on historical trends and data provided
by our insurance broker. Our history of claims activity is closely monitored, and liabilities are adjusted as
warranted based on changing circumstances. It is possible, however, that our actual liabilities may exceed our
estimates of losses. We may also experience an unexpectedly large number of claims that result in costs or
liabilities in excess of our projections, which could cause us to record additional expenses, which could adversely
impact our business, financial condition, results of operations and cash flow.
Legal and Regulatory Risks:
Certain of our products require certifications by customers, regulators or standards organizations, and our
failure to obtain or maintain such certifications could negatively impact our business.
In certain industries and for certain products, such as those used in aircraft, we must obtain certifications for
our products by customers, regulators or standards organizations. If we fail to obtain required certifications for
our products, or if we fail to maintain such certifications on our products after they have been certified, our
business, financial condition, results of operations and cash flows could be materially and adversely affected.
We are subject to laws and regulations; failure to address or comply with these laws and regulations could
harm our business and adversely affect our results of operations.
Our operations are subject to laws, rules, regulations, including environmental regulations, government
policies and other requirements in each of the jurisdictions in which we conduct business. Changes in laws, rules,
regulations, policies or requirements could result in the need to modify our products and could affect the demand
for our products, which may have an adverse impact on our future operating results. In addition, we must comply
with regulations restricting our ability to include lead and certain other substances in our products. If we do not
comply with applicable laws, rules and regulations we could be subject to costs and liabilities and our business
may be adversely impacted.
19
We are subject to regulatory constraints and compliance requirements due to our status as a publicly held
company. Public company compliance costs are increasing due to the increase in SEC regulations and
enforcement actions, and the heightened scrutiny that we and the public accounting industry face from the Public
Companies Accounting Oversight Board. Additionally, certain new and proposed regulations in the State of
Rhode Island, where we are headquartered, are likely to increase compliance costs. In some instances, the
regulations may mandate action on our part for which, to our knowledge, no current technical means to comply
exist. If enacted, the costs to comply with these regulations could have a material adverse impact on our business.
Our business outside of the United States exposes us to foreign and additional U.S. laws and regulations,
including but not limited to, laws and regulations relating to taxation, business licensing or certification
requirements, employee rights and protection, consumer protection, intellectual property rights, consumer and
data protection, privacy, encryption, restrictions on pricing or discounts, and the U.S. Foreign Corrupt Practices
Act and other applicable U.S. and foreign laws prohibiting corrupt payments to government officials and other
third parties. For example, the increased use of sanctions in U.S. international relations recently has increased our
cost of compliance with the regulations intended to enforce them.
Section 404 of the Sarbanes-Oxley Act of 2002 requires that companies evaluate and report on the
effectiveness of their internal control over financial reporting and any inability to achieve and maintain
effective disclosure controls and procedures and internal control over financial reporting, could adversely
affect our results of operations, our stock price and investor confidence in our company.
We have identified a material weakness in our internal control over financial reporting and that weakness
has led to a conclusion that our internal control over financial reporting and disclosure controls and procedures
were not effective as of January 31, 2023. The material weakness related to our inability to maintain effective
controls to properly identify and assess significant non-routine transactions. Management is taking action to
remediate the deficiencies in its internal controls over financial reporting by augmenting resources in our
financial organization.
If action to remediate this material weakness is not completed on a timely basis, or if other remediation
efforts are not successful, we may, in the future, identify additional internal control deficiencies that could rise to
the level of a material weakness or uncover other errors in financial reporting.
Failure to have effective internal control over financial reporting and disclosure controls and procedures
could impair our ability to produce accurate financial statements on a timely basis, or provide reliable financial
statements needed for business decision processes, and our business and results of operations could be harmed.
Additionally, investors could lose confidence in our reported financial information and our ability to obtain
additional financing, or additional financing on favorable terms, could be adversely affected. Also, failure to
maintain effective internal control over financial reporting could result in sanctions by regulatory authorities.
Certain of our operations and products are subject to environmental, health and safety laws and regulations,
which may result in substantial compliance costs or otherwise adversely affect our business.
Our operations are subject to numerous federal, state, local and foreign laws and regulations relating to
protection of the environment, including those that impose limitations on the discharge of pollutants into the air
and water, establish standards for the use, treatment, storage and disposal of solid and hazardous materials and
wastes, and govern the cleanup of contaminated sites. As such, our business is subject to and may be materially
and adversely affected by compliance obligations and other liabilities under those environmental, health and
safety laws and regulations. Certain of our products contain, and some of manufacturing operations use various
substances which have been or may be deemed to be hazardous or dangerous. Thus, we have and will continue to
generate a generally limited amounts of hazardous waste in our operations. We manage our compliance with laws
and regulations and the proper mitigation of risks internally and through the input of external consultants and
outside service providers and we believe we are in material compliance with all applicable environmental laws
and regulations. We desire to reduce and ultimately eliminate any adverse environmental impact of our
20
business and to comply with relevant laws and regulations. We expect this effort to affect our ongoing operations
and require additional capital and operating expenditures. If we were to fail to manage our environmental
compliance effectively, we could suffer economic or reputational harm.
Our operations are subject to anti-corruption laws, including the U.S. Foreign Corrupt Practices Act, and any
determination that we or any of our subsidiaries has violated the Foreign Corrupt Practices Act could have a
material adverse effect on our business.
The U.S. Foreign Corrupt Practices Act (FCPA), the UK Bribery Act and similar worldwide anti-corruption
laws generally prohibit companies and their intermediaries from making improper payments to government
officials and others for the purpose of obtaining or retaining business. Our internal policies mandate compliance
with these anti-corruption laws. We operate in parts of the world that have experienced governmental corruption
to some degree, and in certain circumstances, strict compliance with anti-corruption laws may conflict with local
customs and practices. Despite our training and compliance programs, there can be no assurance that our internal
control policies and procedures will protect us from reckless or criminal acts committed by those of our
employees or agents who violate our policies.
Unauthorized access to personal data could give rise to liabilities as a result of governmental regulation,
conflicting legal requirements or differing views of personal privacy rights and compliance with laws designed
to prevent unauthorized access of personal data could be costly.
We collect and store certain data, including proprietary business information, and may have access to
confidential or personal information that is subject to privacy and security laws, regulations and customer-
imposed controls. Security breaches or other unauthorized access to, or the use or transmission of, personal user
information could result in a variety of claims against us, including privacy-related claims. There are numerous
federal, state, local, and international laws and regulations regarding privacy and the storage, sharing, use,
processing, disclosure and protection of this kind of information, the scope of which are changing, inconsistent
and conflicting and subject to differing interpretations.
We also expect that there will continue to be new laws, regulations, and industry standards concerning
privacy, data protection, and information security proposed and enacted in various jurisdictions. For example, in
2016 the European Commission adopted the General Data Protection Regulation (GDPR), a comprehensive
privacy and data protection reform that became effective in May 2018. The GDPR, which is applicable to all
companies processing data of European Union residents, imposes significant fines and sanctions for violations.
These requirements are complicated and compliance is technically complex to maintain. We contract with
outside experts to advise us, conduct internal and external compliance training, and believe we are currently in
compliance, however, maintaining compliance has increased costs and diverted resources. Similarly, the
California Consumer Privacy Act of 2018, which was enacted in June 2018 and came into effect on January 1,
2020, provides a new private right of action for data breaches and requires companies that process information on
California residents to make new disclosures to consumers about their data collection, use and sharing practices
and allow consumers to opt out of certain data sharing with third parties.
Additionally, other jurisdictions have enacted or are enacting data localization laws that require data
generated in or relating to the residents of those jurisdictions to be physically stored within those jurisdictions. In
many cases, these laws and regulations apply not only to transfers between unrelated third parties but also to
transfers between us and our subsidiaries. All these evolving compliance and operational requirements impose
significant costs that are likely to increase over time.
While we continue to assess these requirements and the ways they may impact the conduct of our business, we
believe that we materially comply with applicable laws and industry codes of conduct relating to privacy and data
protection. There is no assurance that we will not be subject to claims that we have violated applicable laws or codes
of conduct, that we will be able to successfully defend against such claims or that we will not be subject to
significant fines and penalties in the event we are found not to be in compliance with such laws or codes of conduct.
21
Any failure or perceived failure by us (or any third parties with whom we have contracted to store such
information) to comply with applicable privacy and security laws, policies or related contractual obligations or
any compromise of security that results in unauthorized access to personal information may result in
governmental enforcement actions, significant fines, litigation, claims of breach of contract and indemnity by
third parties and adverse publicity. In the case of such an event, our reputation may be harmed, we could lose
current and potential users and the competitive positions of our various brands could be diminished, any or all of
which could adversely affect our business, financial condition and results of operations.
Changes in accounting standards and subjective assumptions, estimates, and judgments by management
related to complex accounting matters could significantly affect our financial results or financial condition.
Generally accepted accounting principles and related accounting pronouncements, implementation
guidelines, and interpretations with regard to a wide range of matters that are relevant to our business, such as
revenue recognition, asset impairment and fair value determinations, inventories, business combinations and
intangible asset valuations, income taxes, and warranties, are highly complex and involve many subjective
assumptions, estimates and judgments. Changes in these rules or their interpretation or changes in underlying
assumptions, estimates, or judgments could significantly change our reported or expected financial performance
or financial condition.
Item 1B. Unresolved Staff Comments
None.
Item 2. Properties
The following table sets forth information regarding our principal owned properties. The West Warwick
property is subject to a security agreement and a mortgage in favor of the lender under our credit facility.
Location
Approximate
Square
Footage
West Warwick, Rhode Island, United
135,500
States . . . . . . . . . . . . . . . . . . . . . . . . .
Elk Grove Village, Illinois . . . . . . . . . .
Principal Use
Corporate headquarters, research and
development, manufacturing, sales and service
34,460 Astro Machine principal place of business
We also lease facilities in various other locations. The following information pertains to each location:
Location
Dietzenbach, Germany . . . . . . . . . . . . .
Copenhagen, Denmark . . . . . . . . . . . . .
Brossard, Quebec, Canada . . . . . . . . . .
Elancourt, France . . . . . . . . . . . . . . . . .
Irvine, California, United States . . . . . .
Shah Alam, Selangor, Malaysia . . . . . .
Guangzhou, China . . . . . . . . . . . . . . . . .
Maidenhead, England . . . . . . . . . . . . . .
Shanghai, China . . . . . . . . . . . . . . . . . .
Mexico City, Mexico . . . . . . . . . . . . . .
Approximate
Square
Footage
Principal Use
18,630 Manufacturing, sales and service
4,800
R&D, sales and service
4,500 Manufacturing, sales and service
4,150
3,100
2,067
1,253
1,021
425
97
Sales and service
Sales
Sales
Sales and service
Sales and service
Sales
Sales
The West Warwick facility is used by both of our business segments, but the Elk Grove facility and leased
locations are primarily used by the PI segment. We believe our facilities are well maintained, in good operating
condition and generally adequate to meet our needs for the foreseeable future.
22
Item 3. Legal Proceedings
We are party to various legal proceedings arising from normal business activities. Management believes that
the ultimate resolution of these matters will not have a material adverse effect on our financial position, results of
operations or cash flows. Additionally, because of the nature of our business, we may be subject in the future to
lawsuits or other claims, including those pertaining to product liability, patent infringement, commercial,
employment, employee benefits, environmental and stockholder matters and an unfavorable resolution of any of
these matters could materially affect our future results of operations, cash flows or financial position.
Item 4. Mine Safety Disclosures
Not applicable.
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PART II
Item 5. Market for the Registrant’s Common Stock, Related Stockholder Matters and Issuer Purchases of
Equity Securities
Our common stock trades on the NASDAQ Global Market under the symbol “ALOT.”
We had approximately 390 shareholders of record as of April 10, 2023, which does not reflect shareholders
with beneficial ownership in shares held in nominee name.
Stock Repurchases
During the fourth quarter of fiscal 2023, we made the following repurchases of our common stock:
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
November 1 – November 30 . . . .
December 1 – December 31 . . . .
January 1 – January 31 . . . . . . . .
—
678 (a)(b)
—
—
11.70 (a)(b)
—
—
—
—
—
—
—
(a) An executive of the company delivered 442 shares of our common stock toward the satisfaction of taxes due
in connection with the vesting of restricted shares. The shares delivered were valued at a market value of
$11.67 per share and are included with treasury stock in the consolidated balance sheet.
(b) An executive of the company delivered 236 shares of our common stock toward the satisfaction of taxes due
in connection with the vesting of restricted shares. The shares delivered were valued at a market value of
$11.75 per share and are included with treasury stock in the consolidated balance sheet.
Item 6. [Reserved]
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations
The following discussion and analysis are meant to provide material information relevant to an assessment
of the financial condition and results of operations of our company, including an evaluation of the amounts of
cash flows from operations and outside resources, liquidity and certain other factors that may affect future
results so as to allow investors to better view our company from management’s perspective. The following
discussion and analysis of our financial condition and results of operations should be read together with our
financial statements and the related notes and other financial information included elsewhere in this annual
report on Form 10-K. Some of the information contained in this discussion and analysis or set forth elsewhere in
this annual report on Form 10-K, including information with respect to our plans and strategy for our business
and financing, includes forward-looking statements that involve risks and uncertainties. Carefully review the
“Forward-Looking Statements” and “Risk Factors” sections of this annual report on Form 10-K for a
discussion of important factors that could cause actual results to differ materially from the results described in
or implied by the forward-looking statements contained in the following discussion and analysis.
Overview
We are a multi-national enterprise that leverages its 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
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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, over-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 used to print hard copies of data required for the safe and efficient
operation of aircraft, including navigation maps, clearances, arrival and departure procedures,
NOTAMS, 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.
On August 4, 2022, we completed the acquisition of Astro Machine, an Illinois-based manufacturer of
printing equipment, including label printers, tabbers, conveyors, and envelope feeders, for aggregate
consideration of $17.1 million. Astro Machine is reported as part of our PI segment beginning with the third
quarter of fiscal 2023. Refer to Note 2, “Acquisition,” in our consolidated financial statements included
elsewhere in this report for further details.
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. In fiscal 2023, 2022, and 2021, revenue from
customers in various geographic areas outside the United States, primarily in Western Europe, Canada and Asia,
amounted to $50.6 million, $49.3 million, and $45.1 million, respectively.
We maintain an active program of product research and development. We spent approximately $6.8 million
in both fiscal 2023 and 2022, and $6.2 million in fiscal 2021 on Company-sponsored product development. We
are committed to continuous product development as essential to our organic growth and expect to continue our
focus on research and development efforts in fiscal 2024 and beyond.
We also continue to invest in sales and marketing initiatives by expanding and improving the existing sales
force and using various marketing campaigns to achieve our goals of sales growth and increased profitability.
COVID-19 Update
All of our global operations were materially adversely affected by the worldwide COVID-19 pandemic and the
related supply-chain disruptions. In the aftermath of the immediate severe impacts of COVID-19 on our operations and
financial performance the changes in our customers’ purchasing behavior, the post-pandemic impact of inflation from
macroeconomic factors, and the continued and lingering structural impacts on our global supply chain, particularly
with respect to the availability and costs of electronic components, have made planning for customer demand and
manufacturing production more difficult. Also, it has led to a rise in the cost of a number of classes of acquired goods
for both the T&M and PI segments. We will continue to evaluate the impact of COVID-19 and its aftermath effects on
our business, results of operations and cash flows throughout fiscal 2024, including the potential impacts on various
estimates and assumptions inherent in the preparation of the consolidated financial statements.
Since the COVID-19 pandemic began we have experienced difficulties in obtaining raw materials and
components for our products. Some of the structural dislocations in the global economy that were triggered by the
pandemic are prolonging these difficulties. Particularly with respect to certain electronic components for legacy
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products in our T&M segment, availability has been curtailed and may not recover, and as a result we have had to
accelerate product redesign and as quickly transition customers to products with more viable long-term product
configurations. We expect to incur substantial costs in doing so but are unable to accurately estimate the financial
impact due to the rapidly changing environment. We also have had to incur additional costs, such as higher shipping
fees (i.e., air rather than ocean freight) and though these have abated to a degree, they have not returned to
pre-pandemic levels. These factors have negatively impacted our efficiency, have delayed shipments for each of the
fiscal quarters of fiscal 2023, and have caused what we believe are product shortages. We are addressing these
issues through long-range planning and procuring higher inventory levels for the affected items to help mitigate
potential shortages whenever practicable. For our T&M segment, we are also monitoring and reacting to extended
lead times on electronic components, and utilizing a variety of strategies, including blanket orders, vendor-bonded
inventories, extended commitments to our supply base, and seeking alternative suppliers. Additionally, we have
taken actions to increase regular contact with our essential vendors and increased our forecasting horizon for our
products to help us better manage our supply chain. In some cases, we are working with our vendors to help them
procure components. Similarly, in our PI segment, we are increasing our inventory levels to ensure the adequacy of
the supplies we sell to customers who use the printers we have sold to them. Our strategies to counteract these
supply chain dislocations have significantly increased the amount of inventory we maintain to support our product
sales. We have also experienced several situations where component shortages and scarcity have required us to pay
significantly higher costs to obtain those components, particularly electronic components and circuit board
assemblies in the T&M segment and inks and printer machine parts in the PI segment. We will continue to monitor
our supply chain going forward and update our mitigation strategies as we determine appropriate. We are not able to
predict how current supply chain difficulties will develop in the future, and if the steps we are taking are not
effective, it could have a material adverse impact on our business and results of operations.
Product Identification Update
The COVID-19 pandemic impacted our PI business by limiting our ability to meet with customers to
demonstrate our products at trade shows and on-site in their facilities was curtailed. We partially countered this
through a variety of virtual, on-line selling and digital marketing strategies, a number of which we continue to
emphasize today. The degree to which post-pandemic selling practices will revert to traditional practices, and the
ultimate mix of customer engagement methods of face-to-face selling versus digital selling methods are just
starting to recover. For example, throughout fiscal 2023 we attended numerous trade shows, but demand
generation through those selling methods has not fully recovered and digital marketing has, we believe, become a
more permanent element of our go-to-market strategy. This has required us to shift resources to those
technologies. Further, the reliability of timely delivery of acceptable quality printer components from one of our
suppliers has deteriorated post-pandemic causing us to incur additional direct procurement costs to carry higher
inventories to assure adequate supplies to satisfy customers, as well as causing us to incur additional warranty
and technical service costs to offset those impacts and to invest considerable time and resources with that
supplier to improve their performance.
Test & Measurement Update
The aerospace industry, which we serve through our aerospace product line, was significantly disrupted by
the COVID-19 pandemic, because of the severe decline in the demand for air travel, demand for aircraft, and a
general curtailment of aircraft production rates. This had a material adverse impact on our financial results.
Although air travel demand and aircraft production demand have improved, the direct and secondary impacts of
the demand decline have somewhat abated, they have not recovered completely. As a result, demand for our
products has not fully recovered to pre-pandemic levels. We believe that it will be at least another two or more
years before we reach full revenue recovery due to the lingering impacts of the pandemic era on the economic
structure of the airline industry. General economic conditions could also still become a negative factor impacting
demand for new aircraft, which could potentially stall or reverse current favorable trends. If this were to happen
individually or in combination, these factors would be difficult to respond to, which could have a material
adverse impact on our business operations and financial results.
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Results of Operations
Fiscal 2023 compared to Fiscal 2022
The following table presents the revenue of each of our segments, as well as the percentage of total revenue
and change from the prior year.
($ in thousands)
2023
Revenue
As a % of
Total Revenue
% Change
Over Prior Year
P I . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $103,089
39,438
T&M . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
72.3%
27.7%
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $142,527
100.0%
13.4%
48.5%
21.3%
2022
As a % of
Total Revenue
77.4%
22.6%
Revenue
$ 90,915
26,565
$117,480
100.0%
Net revenue in fiscal 2023 was $142.5 million, a 21.3% increase compared to net revenue of $117.5 million
for fiscal 2022. Current year revenue through domestic channels was $91.8 million, an increase of 34.8% from
prior year domestic revenue of $68.2 million. International revenue of $50.6 million for fiscal 2023 increased
2.7% compared to prior year international revenue of $49.3 million. Fiscal 2023 international revenue reflects an
unfavorable foreign exchange rate impact of $3.5 million, compared to a favorable foreign exchange rate impact
of $1.1 million in fiscal 2022.
Hardware revenue in fiscal 2023 was $42.4 million, an $11.0 million or 34.8% increase compared to fiscal
2022 hardware revenue of $31.5 million due to increased hardware sales in both the T&M and PI segments.
T&M hardware sales increased 44.2% or $7.5 million compared to the prior year primarily due to increased sales
in our aerospace printer product line. Current year hardware sales in the PI segment increased 23.9% or
$3.5 million compared to the prior year, predominately as a result of the August 2022 acquisition of Astro
Machine. The increase in PI hardware sales for the current year was slightly offset by a decline in sales of our
TrojanLabel product line printers.
Revenue from supplies in fiscal 2023 was $82.1 million, a 12.1% or $8.8 million increase compared to fiscal
2022 supplies revenue of $73.2 million. Supplies revenue increased in both the PI and T&M segment in the
current year, with the increase primarily due to the contribution of $6.7 million of supply sales from the newly
acquired Astro Machine in the PI segment. Also contributing to the increase in current year supply revenue was
the increase in paper supply revenue for the aerospace printers in the T&M segment and the increased sales of
supplies in our TrojanLabel product line in the PI segment.
Service and other revenue in fiscal 2023 was $18.0 million, a 41.3% increase compared to fiscal 2022
service and other revenue of $12.7 million. The increase is due primarily to significantly increased repair and
parts revenue for aerospace printer products in the T&M segment due to the impact of increased flight hour usage
and pricing increases. Also contributing to the current year increase was Astro Machine parts revenues included
since the acquisition, offset by modest declines in aftermarket parts sales for Quick Label related products in the
PI segment.
Gross profit was $48.2 million for fiscal 2023, reflecting a 10.1% increase compared to fiscal 2022 gross
profit of $43.7 million. Our gross profit margin of 33.8% in fiscal 2023 reflects a 3.4 percentage point decrease
compared to fiscal 2022 gross profit margin of 37.2%. The lower gross profit margin for the current year
compared to the prior year is primarily attributable to the inclusion of Astro Machine for the six months since its
acquisition, because of the impact of its lower gross margin business model, plus the impact of the employment
retention tax credit (“ERC”) in the prior year, 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. Lastly, excess royalties (above the
minimum guaranteed royalty amount), which are payable in connection with our license from Honeywell to
produce aircraft cockpit printers for two narrow-body aircraft programs increased due to higher volumes of sales.
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Operating expenses for the current year were $42.7 million, representing an 8.2% increase from the prior
year’s operating expenses of $39.5 million. Specifically, selling and marketing expenses of $24.5 million in
fiscal 2023 increased 5.5% from the prior year amount of $23.2 million. The increase in selling and marketing
expenses for the current year is 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 travel and entertainment expenses. The current year increase in selling and
marketing expenses was partially offset by a decrease in commissions and advertising and trade show expenses.
General and administrative expenses increased 19.7% to $11.4 million in the current year compared to
$9.6 million in the prior year, primarily due to an increase in outside service fees and employee wages, 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, partially offset by a decrease in bonus and advertising and trade show expenses. Research &
development (“R&D”) costs in fiscal 2023 of $6.8 million remained relatively unchanged from fiscal 2022, as
increases in wages and benefits were substantially offset by decreases in bonus and supplies and repair expenses.
The R&D spending level for fiscal 2023 represents 4.8% of net revenue, compared to the prior year level
of 5.7%.
Other expense in fiscal 2023 was $2.0 million compared to other income of $2.8 million in fiscal 2022.
Current year expense includes $1.7 million of interest expense on our debt and revolving line of credit and
$0.4 million of net foreign exchange loss, offset by net other income of $0.1 million. Prior year other income
includes $4.5 million related to the forgiveness of the loan we received under the Paycheck Protection Program
(the “PPP”), partially offset by $0.7 million related to the write-off of our Oracle EnterpriseOne ERP system and
related prepaid service and maintenance contracts as a result of the full implementation of a new ERP system in
our US-based operations in the fourth quarter of fiscal 2022, interest expense on debt of $0.7 million, and net
foreign exchange loss of $0.3 million.
We recognized $0.7 million of income tax expense for the current fiscal year, resulting in an effective tax
rate of 22.0% compared to 8.6% in fiscal 2022. The increase in the effective tax rate in fiscal 2023 from fiscal
2022 is primarily related to the absence of the impact of the PPP loan forgiveness, which is tax-exempt income
that was a one-time item that reduced the rate in fiscal 2022. Specific items increasing the effective tax rate in
fiscal 2023 include the change in reserves related to uncertain tax positions under ASC 740 and an increase in the
valuation allowance recorded on our China net operating losses. This increase was offset by state taxes, return to
provision adjustments, share-based compensation, R&D tax credits, and foreign derived intangible income
(“FDII”) deduction. During fiscal 2022, we recognized $0.6 million of income tax expense for the prior fiscal
year, resulting in an effective tax rate of 8.6%. Specific items decreasing the effective tax rate include PPP loan
forgiveness tax-exempt income, R&D tax credits, foreign derived intangible income (“FDII”) deductions, and a
change in reserves related to ASC 740 liabilities. This decrease was offset by state taxes, return to provision
adjustments, and taxes on foreign earnings. The PPP loan forgiveness is excluded from taxable income.
Net income for fiscal 2023 was $2.7 million, or $0.36 per diluted share. Net income for fiscal 2022 was
$6.4 million, or $0.88 per diluted share. The results for the current year were impacted by expenses of
$0.7 million ($0.5 million net of tax, or $0.07 per diluted share) related to transaction costs of the Astro Machine
acquisition. The results for the prior period were impacted by income of $4.5 million ($4.4 million net of tax, or
$0.60 per diluted share) related to the forgiveness of our PPP loan, income of $2.1 million ($1.6 million net of
tax, or $0.22 per diluted share) related to the net ERC and expense of $0.7 million ($0.5 million net of tax, or
$0.07 per diluted share) related to the write-off of our Oracle EnterpriseOne ERP system and related prepaid
service and maintenance contracts.
Fiscal 2022 compared to Fiscal 2021
For a comparison of our results of operations for the fiscal years ended January 31, 2022, and January 31,
2021, see “Part II, Item 7. Management’s Discussion and Analysis of Financial Condition and Results of
Operations” of our annual report on Form 10-K for the fiscal year ended January 31, 2022, filed with the SEC on
April 18, 2022.
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Segment Analysis
We report two segments consistent with our product revenue groups: PI and T&M. Segment performance is
evaluated based on the operating segment’s profit (loss) before corporate and financial administration expenses.
The following table summarizes selected financial information by segment.
($ in thousands)
Revenue
Segment Operating Profit
(Loss)
Segment Operating Profit (Loss)
as a % of Revenue
2023
2022
2021
2023
2022
2021
2023
2022
2021
P I . . . . . . . . . . . . . . . . . $103,089 $ 90,915 $ 90,268 $ 7,889 $10,411 $12,885
26,565
T&M . . . . . . . . . . . . . .
39,438
25,765
8,989
3,398
(1,032) 22.8% 12.8%
7.7% 11.5% 14.3%
(4.0)%
Total . . . . . . . . . . . . . . . $142,527 $117,480 $116,033 16,878 13,809 11,853
11.8% 11.8% 10.2%
Corporate Expenses . . .
Operating Income . . . .
Other Income
(Expense), Net . . . . .
Income Before Income
Taxes . . . . . . . . . . . .
Income Tax
Provision . . . . . . . . .
Net Income . . . . . . . . . .
Product Identification
11,435
9,553
9,420
5,443
4,256
2,433
(2,033)
2,778
(254)
3,410
7,034
2,179
749
605
895
$ 2,661 $ 6,429 $ 1,284
Revenue from the PI segment increased 13.4% in fiscal 2023, with revenue of $103.1 million compared to
revenue of $90.9 million in the prior year. The current year increase is attributable to the contribution of the
newly acquired Astro Machine, which provided revenue of $12.5 million for the current year. Trojan Label
related product supply revenue also grew in fiscal 2023 compared to the prior year due to the larger installed base
of these printers. The current year increase in PI revenue was slightly offset by declines in the sales of Trojan
label hardware products resulting from the market reaction to quality problems caused by quality and reliability
issues we faced from one supplier. Quick Label revenues were essentially flat as compared to the prior year. At
the current time, we expect PI revenue to increase in fiscal 2024 due to the impact of a full year of Astro
Machine revenue and recovery in both hardware and supplies in the other product lines, partly as the result of
new product introductions. PI current year segment operating profit was $7.9 million with a profit margin of
7.7%, compared to the prior year segment operating profit of $10.4 million and related profit margin of 11.5%.
Despite the inclusion of $1.6 million in operating profit contribution from Astro Machine, the primary reason for
the decline in operating profit and margin was the inclusion in fiscal 2022 of $1.4 million of net benefit from the
ERC, which reduced payroll taxes in the segment. The decrease in current year segment operating profit and
margin, was also due to the result of a higher relative mix of lower gross profit product sales, higher travel and
trade show expense, and increased warranty expenses.
Test & Measurement
Revenue from the T&M product group was $39.4 million for fiscal 2023, a 48.5% increase compared to
revenue of $26.6 million in the prior year. The current year increase in T&M revenue is primarily due to a 44.2%
or $7.5 million increase in hardware sales resulting primarily from increased aerospace printer product unit
volume. Demand for printers, especially for narrow body aircraft, has increased due to the post-pandemic
recovery in air travel demand and new orders of airplanes and the corresponding increase in production rates.
The sales of printers for wide-body aircraft have increased but at much slower rates compared with narrow body
demand. Sales of ToughSwitch ethernet products also recovered to levels consistent with the fiscal 2019 through
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fiscal 2021 period after a large decline in fiscal 2022, and we currently expect comparable revenue from those
products in fiscal 2024. Our current expectation is that printers narrow-body aircraft will continue to recover to
pre-pandemic levels over the next two years, although at a slower rate than the recovery in fiscal 2023. We
believe any recovery in shipments for larger wide-body aircraft will take longer. The increase in fiscal 2023
hardware revenue in the T&M segment was also impacted by $1.1 million in revenue recognized in the fourth as
the result of successful claims for component cost increases for printer shipments to one customer throughout
most of fiscal 2023 as described in Note 3, “Revenue Recognition,” in our consolidated financial statements
included elsewhere in this report. In the fourth quarter, we recognized revenue of $0.8 million in connection with
a new Asset Purchase and License Agreement with Honeywell Inc. (“New HW Agreement”) as described in
Note 12, “Royalty Obligation,” in our consolidated financial statements included elsewhere in this report.
The current year increase in T&M revenue was additionally favorably impacted by increased repair, parts
and paper supply revenue related to aerospace printers, as flight hours and product utilization increased. At this
time, we believe the outlook for T&M supplies, service and other revenue is favorable as the expected higher
flight hours in commercial aviation should correlate favorably to higher aerospace printer supplies, parts and
repair revenue. T&M current year segment operating profit was $9.0 million resulting in a 22.8% profit margin
compared to the prior year segment operating profit of $3.4 million and related operating margin of 12.8%. The
increased profit and margins were primarily attributable to the robust turnaround in revenue, particularly in
repair, parts and supplies revenues at high margins, and were offset by the impact of higher components costs, as
well as the fact that prior year’s operating profit included the impact of $0.8 million in net employee retention tax
credits that reduced manufacturing and operating costs. Also contributing to the increase was the favorable
impact in the fourth quarter of the receipt of improved pricing on certain contracts that related to the entire year
and the impact of the New HW Agreement. Selling, marketing and administrative expense grew in total by
$0.6 million in support of the revenue growth, which was a significantly lower rate than revenue growth,
demonstrating favorable operating leverage.
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. In fiscal 2023, we used our credit facilities, as further
described below, to acquire Astro Machine. We also used our credit facilities and operating cash flow to fund
increases in inventories. Substantial increases in inventories were the result of the need to support higher levels
of shipments in the aerospace product lines within our T&M segment, and the buildup of inventory buffers to
respond to supply chain risks. In the fourth quarter of fiscal 2023, we were able to reduce our outstanding line of
credit balance by $4.0 million. Capital spending was very low in fiscal 2023 compared to our historical levels of
spending.
We believe that in the coming year, cash flow generation from operations and available unused credit
capacity under our credit facility will support our anticipated needs. In fiscal 2024 (after required debt
amortization and payment of minimum guaranteed royalty payments to Honeywell), we will be focused on
inventory reduction and reduction of debt outstanding under our revolving credit facility, to the degree possible
as constrained by supply chain management challenges. We also anticipate that we will have the capacity to
spend $1.5 million to $2.0 million in capital to upgrade production machinery to support planned revenue growth
and cost reduction objectives. Finally, if further acquisition opportunities develop that would require additional
cash above our current available capacity, based on regular communication with our lender, we believe that our
current operating performance and the reduction in leverage ratios as measured by the covenants within our
credit facilities since the acquisition of Astro Machine would permit us to obtain sufficient additional debt
financing, barring any unforeseen changes in the credit and capital markets.
.
30
In connection with our purchase of Astro Machine on August 4, 2022, we entered into a Second
Amendment to Amended and Restated Credit Agreement (the “Second Amendment”) with Bank of America,
N.A., as lender (the “Lender”). The Second Amendment amended the Amended and Restated Credit Agreement
dated as of July 30, 2020, as amended by the First Amendment to Amended and Restated Credit Agreement,
dated as of March 24, 2021, and the LIBOR Transition Amendment, dated as of December 24, 2021 (the
“Existing Credit Agreement,” and the Existing Credit Agreement as amended by the Second Amendment, the
“Amended Credit Agreement”), between the Company and the Lender.
The Amended Credit Agreement provides for (i) a new term loan in the principal amount of $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) an increase in the
aggregate principal amount of the revolving credit facility available thereunder from $22.5 million to
$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 COVID-19 pandemic, some of our customers would
experience liquidity pressure and be unable to pay us for products on a timely basis, in general, our recent
receivables collection experience has been consistent with our historical experience and a significant
deterioration in receivables collection has not occurred.
In response to the COVID-19 pandemic and related economic dislocation, we have implemented and will
continue to implement a variety of expense reduction and cash preservation initiatives. On April 27, 2020, our
board of directors suspended our quarterly cash dividend beginning with the second quarter of our fiscal year
2021.
At January 31, 2023, our cash and cash equivalents were $3.9 million. During fiscal 2023, we borrowed a
net of $15.9 million on our revolving line of credit, and at January 31, 2023, we had $9.1 million available for
borrowing under that facility.
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 over the term of the Amended Credit Agreement on the 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, 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 August 4, 2027, and any outstanding revolving loans
thereunder will be due and payable in full, and the revolving credit facility will terminate, on such date. We may
reduce or terminate the revolving line of credit at any time, subject to certain thresholds and conditions, without
premium or penalty.
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.
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Amounts repaid under the revolving credit facility may be reborrowed, subject to our 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 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
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 2.50% 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 plus 1.00%, or (iv) 0.50%,
plus a margin that varies within a range of 0.60% to 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 0.35% based
on our consolidated leverage ratio.
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, a minimum consolidated fixed charge coverage ratio and a minimum consolidated asset 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 our or our subsidiaries’ capital stock, to repurchase or
acquire our or our subsidiaries’ capital stock, to conduct mergers or acquisitions, to sell assets, to alter our or our
subsidiaries’ capital structure, to make investments and loans, to change the nature of our or our subsidiaries’
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 Second
Amendment. As of January 31, 2023, we believe we are in compliance with all of the covenants in the Credit
Agreement.
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 we hold in ANI ApS, AstroNova GmbH and
AstroNova SAS), subject to certain exceptions, and by a mortgage on our owned real property in West Warwick,
Rhode Island, and are guaranteed by, and secured by substantially all of the personal property assets of Astro
Machine.
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 Paycheck Protection Program (the “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 matured on May 6, 2022, was unsecured and bore interest at a rate of
1.0% per annum, accruing from the loan date.
32
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 the extinguishment of debt in Other Income (Expense) in our condensed consolidated
income statement for the year ended January 31, 2022.
Cash Flow
The statements of cash flows for the years ended January 31, 2023, 2022, and 2021 are included on page F-9
of this Form 10-K. Net cash used by operating activities was $2.9 million in fiscal 2023 compared to net cash
provided by operating activities of $1.4 million in the previous year. The increase in net cash used by operations
for the current year is primarily due to an $11.5 million increase in cash used for working capital. The changes in
accounts receivable, inventory, income taxes, accounts payable and accrued expenses for the current year
decreased cash by $14.3 million in fiscal 2023 compared to $2.8 million in the prior year. The increase in cash
used for operations for fiscal 2023 was partially offset by the $3.1 million of ERC receivable received in the first
quarter of the current year. Cash from operations for fiscal 2022 was also impacted by the $3.1 million ERC
receivable and the $4.5 million gain on the forgiveness of the PPP Loan.
The accounts receivable balance increased to $21.6 million at January 31, 2023, compared to $17.1 million
at January 31, 2022. The increase in the accounts receivable balance is related to sales product mix in fiscal 2023
compared to the prior year, as well as the addition of Astro Machine. The days sales outstanding increased to 49
days at year end compared to 45 days at the end of fiscal 2022 contributing to the higher receivables balance at
January 31, 2023. The days sales outstanding increase in the current year is due to customer mix, as aerospace
receivables typically take longer to collect.
The year-end inventory balance increased to $51.3 million at January 31, 2023 versus $34.6 million at
January 31, 2022, a $16.7 million increase from the prior year end. The increase in our inventory balance is
primarily due to difficulty in the supply chain environment, including increased pricing and 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 parts shortage issues. In addition, the acquisition of Astro Machine resulted in increased levels of
inventory to support their operations. Inventory days on hand increased to 176 days at the end of the current
quarter from 156 days at the prior year end. This increase in working capital has been funded in part by
borrowings under our credit facilities and has increased our interest expense.
Net cash used by investing activities for fiscal 2023 was $17.2 million, which includes $17.0 million related
to the acquisition of Astro Machine and $0.2 million for capital expenditures.
Net cash provided by financing activities for fiscal 2023 was $18.8 million. Cash provided from financing
activities for fiscal 2023 includes $15.9 million for borrowings under the revolving line of credit and $6.0 million
of proceeds from long term borrowings. Cash outflows for financing activities for fiscal 2022 include principal
payments on long-term debt and the guaranteed royalty obligation of $1.0 million and $2.0 million, respectively.
Fiscal 2022 compared to Fiscal 2021
For a comparison of our cash flow for the fiscal years ended January 31, 2022 and January 31, 2021, see
“Part II, Item 7. Management’s Discussion and Analysis of Liquidity and Capital Resources” in our annual report
on Form 10-K for the fiscal year ended January 31, 2022, filed with the SEC on April 18, 2022.
Contractual Obligations, Commitments and Contingencies
As of January 31, 2023, we had contractual obligations related to lease arrangements, debt and royalty
obligation arrangements and purchase commitments.
33
The lease arrangements are for certain of our facilities at various locations worldwide. As of January 31,
2023, we had fixed lease payment obligations of $0.8 million, with $0.3 million due within 12 months. Refer to
Note 13, “Leases,” in our audited consolidated financial statements included in this Annual Report on Form 10-K
for further details.
Debt arrangements under our Amended Credit Agreement with Bank of America, N.A., consist of the
balance due of $14.3 million at January 31, 2023, with $2.1 million due within 12 months. For additional details
regarding our long-term debt obligations, see Note 8, “Debt,” in our audited consolidated financial statements
included in this Annual Report on Form 10-K.
We are subject to a guaranteed minimum royalty payment obligation over the next five years pursuant to the
Honeywell Agreements, which, at January 31, 2023 included a balance due of $5.1 million, with $1.7 million due
within 12 months. Refer to Note 2 “Acquisitions” and Note 12, “Royalty Obligation,” in our audited consolidated
financial statements included in this Annual Report on Form 10-K for further details.
In order to meet our manufacturing demands and, in some cases, lock in particular pricing structures for
specific goods used in manufacturing, we enter into purchase commitments with our suppliers. At January 31,
2023 our purchase commitments totaled $25.8 million, with $22.8 million due within 12 months, some of which
are non-cancelable.
We are also subject to contingencies, including legal proceedings and claims arising out of our business that
cover a wide range of matters, such as: contract and employment claims; workers’ compensation claims; product
liability claims; warranty claims; and claims related to modification, adjustment or replacement of component
parts of units sold. While it is impossible to ascertain the ultimate legal and financial liability with respect to
contingent liabilities, including lawsuits, we believe that the aggregate amount of such liabilities, if any, in excess
of amounts provided, or covered by insurance, will not have a material adverse effect on our consolidated
financial position or results of operations. It is possible, however, that our results of operations for any future
period could be materially affected by changes in our assumptions or strategies related to these contingencies or
changes out of our control.
Critical Accounting Policies and Estimates
Our discussion and analysis of financial condition and results of operations are based upon our consolidated
financial statements, which have been prepared in accordance with accounting principles generally accepted in
the United States. Certain of our accounting policies require the application of judgment in selecting the
appropriate assumptions for calculating financial estimates. By their nature, these judgments are subject to an
inherent degree of uncertainty. We periodically evaluate the judgments and estimates used for our critical
accounting policies to ensure that such judgments and estimates are reasonable for our interim and year-end
reporting requirements. These judgments and estimates are based on our historical experience, current trends and
information available from other sources, as appropriate. We do not believe there is a great likelihood that
materially different amounts would be reported using different assumptions pertaining to the accounting policies
described below, however, if actual conditions differ from the assumptions used in our judgments, our financial
results could be materially different from our estimates.
We believe the following critical accounting policies require significant judgments and estimates in the
preparation of our consolidated financial statements:
Revenue Recognition: We recognize revenue in accordance with Accounting Standards Codification
(ASC) 606, “Revenue from Contracts with Customers.” Under ASC 606, based on the nature of our contracts, we
recognize most of our revenue upon shipment, which is when the performance obligation has been satisfied.
Our accounting policies relating to the recognition of revenue under ASC 606 require management to make
estimates, determinations and judgments based on historical experience and on various other assumptions, which
34
include (i) the existence of a contract with the customer, (ii) the identification of the performance obligations in
the contract, (iii) the value of any variable consideration in the contract, (iv) the standalone selling price of
multiple obligations in the contract, for the purpose of allocating the consideration in the contract, and
(v) determining when a performance obligation has been met. Recognition of revenue based on incorrect
judgments, including the identification of performance obligation arrangements as well as the pattern of delivery
for those services, could result in inappropriate recognition of revenue, or incorrect timing of revenue
recognition, which could have a material effect on our financial condition and results of operations.
We recognize revenue for non-recurring engineering (NRE) fees, as necessary, for product modification
orders upon completion of agreed-upon milestones. Revenue is deferred for any amounts received prior to
completion of milestones. Certain of our NRE arrangements include formal customer acceptance provisions. In
such cases, we determine whether we have obtained customer acceptance for the specific milestone before
recognizing revenue.
Infrequently, we receive requests from customers to hold product being purchased from us for the
customers’ convenience. We recognize revenue for such bill and hold arrangements in accordance with the
guidance provided by ASC 606, which requires the transaction to meet the following criteria in order to
determine that the customer has obtained control: (a) the reason for the bill and hold is substantive, (b) the
product has separately been identified as belonging to the customer, (c) the product is currently ready for
physical transfer to the customer, and (d) we do not have the ability to use the product or direct it to another
customer.
Allowance for Doubtful Accounts: Accounts receivable consists primarily of receivables from our customers
arising from the sale of our products. We actively monitor our exposure to credit risk through the use of credit
approvals and credit limits. Accounts receivable is presented net of reserves for doubtful accounts.
We estimate the collectability of our receivables and establish allowances for accounts receivable that we
estimate to be uncollectible. We base these allowances on our historical collection experience, the length of time
our accounts receivable are outstanding and the financial condition of individual customers. In situations where
we are aware of a specific customer’s inability to meet its financial obligation, such as in the case of a
bankruptcy filing, we assess the need for a specific reserve for bad debts. We believe that our procedure for
estimating such amounts is reasonable and historically has not resulted in material adjustments in subsequent
periods. Bad debt expense was less than 1% of net sales in each of fiscal 2023 and 2022.
Warranty Claims: We offer warranties on some of our products. We establish a reserve for estimated costs
of warranties at the time the product revenue is recognized. This reserve requires us to make estimates regarding
the amounts necessary to settle future and existing claims using historical data on products sold as of the balance
sheet date. The length of the warranty period, the product’s failure rates, and the customer’s usage affect
estimated warranty cost. If actual warranty costs differ from our estimated amounts, future results of operations
could be affected adversely. Warranty cost is recorded as cost of revenue, and the reserve balance recorded as an
accrued expense. While we maintain product quality programs and processes, our warranty obligation is affected
by product failure rates and the related corrective costs. If actual product failure rates and/or corrective costs
differ from the estimates, we revise our estimated warranty liability accordingly.
Inventories: Inventories are stated at the lower of average and standard cost or net realizable value. The
process for evaluating and recording obsolete and excess inventory provisions consists of analyzing the inventory
supply on hand and estimating the net realizable value of the inventory based on historical experience, current
business conditions and anticipated future revenue. We believe that our procedures for estimating such amounts
are reasonable and historically have not resulted in material adjustments in subsequent periods when the
estimates are adjusted to actual experience.
Income Taxes: A valuation allowance is established when it is “more-likely-than-not” that all or a portion of
deferred tax assets will not be realized. A review of all available positive and negative evidence must be
35
considered, including our performance, the market environment in which we operate, length of carryforward
periods, existing revenue backlog and future revenue projections. If actual factors and conditions differ
materially from the estimates made by management, the actual realization of the net deferred tax assets or
liabilities could vary materially from the amounts previously recorded. At January 31, 2023, we had provided
valuation allowances for future tax benefits resulting from certain domestic R&D tax credits, foreign tax credit
carryforwards, and China net operating losses, all of which are expected to expire unused.
The calculation of tax liabilities involves significant judgment in estimating the impact of uncertainties in
the application of complex tax laws and regulations in a multitude of jurisdictions. Although guidance on the
accounting for uncertain income taxes prescribes the use of a recognition and measurement model, the
determination of whether an uncertain tax position has met those thresholds will continue to require significant
judgment by management. If the ultimate resolution of tax uncertainties is different from what we have
estimated, our income tax expense could be materially impacted.
Business Combinations: We account for business acquisitions under the acquisition method of accounting in
accordance with ASC 805, ‘‘Business Combinations,’’ where the total purchase price is allocated to the tangible
and identified intangible assets acquired and liabilities assumed based on their estimated fair values. The
purchase price is allocated using the information currently available, and may be adjusted, up to one year from
acquisition date, after obtaining more information regarding, among other things, asset valuations, liabilities
assumed and revisions to preliminary estimates that, if known, would have affected the measurement of the
amounts recognized as of the acquisition date. The purchase price in excess of the fair value of the tangible and
identified intangible assets acquired less liabilities assumed is recognized as goodwill. Determining the fair value
of assets acquired and liabilities assumed requires management to use significant judgment and estimates,
including the selection of valuation methodologies, estimates of future revenue, costs and cash flows, discount
rates, and selection of comparable companies. Management’s estimates of fair value are based upon assumptions
believed to be reasonable, but which are inherently uncertain and unpredictable. As a result, actual results may
differ from these estimates. During the measurement period, we may record adjustments to acquired assets and
assumed liabilities, with corresponding offsets to goodwill. Upon the conclusion of a measurement period, any
subsequent adjustments are recorded to earnings.
Goodwill and Intangible Assets: We recognize goodwill in accordance with ASC 350, Intangibles—Goodwill
and Other (“ASC 350”). Goodwill is the excess of cost of an acquired entity over the fair value amounts assigned
to assets acquired and liabilities assumed in a business combination and is not amortized.
Goodwill is tested for impairment at the reporting unit. A reporting unit is an operating segment or a
business unit one level below an operating segment if discrete financial information for that business is prepared
and regularly reviewed by segment management. However, components within an operating segment are
aggregated as a single reporting unit if they have similar economic characteristics. Management evaluates the
recoverability of goodwill annually or more frequently if events or changes in circumstances, such as declines in
revenue, earnings or cash flows, or material adverse changes in the business climate, indicate that the carrying
value of an asset might be impaired. Goodwill is first qualitatively assessed to determine whether it is more likely
than not that the fair value of a reporting unit is less than its carrying value. Factors that management considers in
this assessment include macroeconomic conditions, industry and market considerations, overall financial
performance (both current and projected), changes in management and strategy and changes in the composition
or carrying amount of net assets. If this qualitative assessment indicates that it is more likely than not that the fair
value of a reporting unit is less than its carrying value, then a quantitative assessment is required for the reporting
unit. The quantitative assessment compares the fair value of the reporting unit with its carrying value. If a
quantitative assessment is required, we estimate the fair value of our reporting units using the income approach
based upon a discounted cash flow model. We believe that this approach is appropriate because it provides a fair
value estimate based upon the reporting unit’s expected long-term operating cash flow performance. In addition,
we use the market approach, which compares the reporting unit to publicly traded companies and transactions
involving similar business, to support the conclusions based upon the income approach. The income approach
36
requires the use of many assumptions and estimates including future revenue, expenses, capital expenditures, and
working capital, as well as discount factors and income tax rates. If the fair value of the reporting unit exceeds
the carrying value of the net assets including goodwill assigned to that unit, goodwill is not impaired. If the
carrying value of the reporting unit’s net assets including goodwill exceeds the fair value of the reporting unit,
then we record an impairment charge based on that difference. No goodwill impairment was identified for the
years ended January 31, 2023 or January 31, 2022.
We recognize intangibles assets in accordance with ASC 350. Acquired intangible assets subject to
amortization are stated at fair value and are amortized using the straight-line method over the estimated useful
lives of the assets. Intangible assets that are subject to amortization are reviewed for impairment whenever events
or changes in circumstances indicate that the carrying amount of such assets may not be recoverable.
Determination of recoverability is based on an estimate of undiscounted future cash flows resulting from the use
of the asset and its eventual disposition. If the projected undiscounted cash flows are less than the carrying value,
then an impairment charge would be recorded for the excess of the carrying value over the fair value, which is
determined by the discounting of future cash flows. No impairment of intangible assets was identified for the
years ended January 31, 2023 or January 31, 2022.
Share-Based Compensation: Compensation expense for time-based restricted stock units is measured at the
grant date and recognized ratably over the vesting period. We determine the fair value of time-based and
performance-based restricted stock units based on the closing market price of our common stock on the grant
date. The recognition of compensation expense associated with performance-based restricted stock units requires
judgment in assessing the probability of meeting the performance goals, as well as defined criteria for assessing
achievement of the performance-related goals. For purposes of measuring compensation expense, the number of
shares ultimately expected to vest is estimated at each reporting date based on management’s expectations
regarding the relevant performance criteria. The performance shares begin vesting only upon the achievement of
the performance criteria. The achievement of the performance goals can impact the valuation and associated
expense of the restricted stock units. The assumptions used in accounting for the share-based payment awards
represent management’s best estimates, but these estimates involve inherent uncertainties and the application of
management judgment. As a result, if circumstances change and we use different assumptions, our stock-based
compensation expense could be materially different in the future.
Recent Accounting Pronouncements
Reference is made to Note 1 of our audited consolidated financial statements included elsewhere in this
report.
Item 7A. Quantitative and Qualitative Disclosures about Market Risk
Our primary financial market risks consist of foreign currency exchange rates risk and the impact of changes
in interest rates that fluctuate with the market on our variable rate credit borrowings under our existing credit
agreement.
Financial Exchange Risk
The functional currencies of our foreign subsidiaries and branches are the local currencies—the British
Pound in the U.K., the Canadian Dollar in Canada, the Danish Kroner in Denmark, the Chinese Yuan in China,
and the Euro in France and Germany. We are exposed to foreign currency exchange risk as the functional
currency financial statements of foreign subsidiaries are translated to U.S. dollars. The assets and liabilities of
our foreign subsidiaries having a functional currency other than the U.S. dollar are translated into U.S. dollars at
the exchange rate prevailing at the balance sheet date, and at an average exchange rate for the reporting period
for revenue and expense accounts. The cumulative foreign currency translation adjustment is recorded as a
component of accumulated other comprehensive loss in shareholders’ equity. The reported results of our foreign
37
subsidiaries will be influenced by their translation into U.S. dollars by currency movements against the U.S.
dollar. Our primary currency translation exposure is related to our subsidiaries that have functional currencies
denominated in Danish Kroner and the Euro. A hypothetical 10% change in the rates used to translate the results
of our foreign subsidiaries would result in an increase or decrease in our consolidated net income of
approximately $0.2 million for the year ended January 31, 2023.
Transactional exposure arises where transactions occur in currencies other than the functional currency.
Transactions in foreign currencies are recorded at the exchange rate prevailing at the date of the transaction. The
resulting monetary assets and liabilities are translated into the appropriate functional currency at exchange rates
prevailing at the balance sheet date and the resulting gains and losses are reported as foreign exchange gain (loss)
in the consolidated statements of income. Foreign exchange losses resulting from transactional exposure were
$0.5 million for the year ended January 31, 2023.
Interest Rate Risk
At January 31, 2023, our total indebtedness included $14.25 million of term loan variable-rate debt and
$15.9 million outstanding balance on our revolving line of credit. At January 31, 2023, under the LIBOR
Transition Amendment to the Amended Credit Agreement, the term loan bears interest at a BSBY (Bloomberg
Short-Term Bank Yield) rate plus a margin that varies between 1.60% and 2.30% based on our consolidated
leverage ratio. During fiscal 2023, the weighted average interest rate on our variable rate debt was 4.77% and the
weighted average interest rate on our revolving line of credit was 6.71% The impact on our results of operations
of a 100 basis point change in the interest rates on the outstanding balance of our variable-rate debt and revolving
line of credit would be approximately $0.2 million annually.
Item 8. Financial Statements and Supplementary Data
The consolidated financial statements required under this item are submitted as a separate section of this
report on the pages indicated at Item 15(a)(1).
Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
None.
Item 9A. Controls and Procedures
Evaluation of Disclosure Controls and Procedures
Our management has evaluated, under the supervision and with the participation of our Principal Executive
Officer and Principal Financial Officer, the effectiveness of our disclosure controls and procedures as of the end
of the period covered by this Annual Report on Form 10-K pursuant to Rules 13a-15(e) and 15d-15(e) under the
Securities Exchange Act of 1934, as amended (the “Exchange Act”). The term “disclosure controls and
procedures,” as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act means controls and other
procedures of a company that are designed to ensure that information required to be disclosed by a company in
the reports that it files or submits under the Exchange Act is recorded, processed, summarized and reported,
within the time periods specified in the rules and forms promulgated by the SEC. Disclosure controls and
procedures include, without limitation, controls and procedures designed to ensure that information required to
be disclosed by a company in the reports that it files or submits under the Exchange Act is accumulated and
communicated to the company’s management, including its principal executive and principal financial officers,
as appropriate to allow timely decisions regarding required disclosure. Management recognizes that any controls
and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving
their objectives and management necessarily applies its judgment in evaluating the cost-benefit relationship of
possible controls and procedures. Based on that evaluation, our Principal Executive Officer and our Principal
Financial Officer have concluded that our disclosure controls and procedures were not effective at January 31,
2023 because of the material weaknesses in our internal control over financial reporting described below.
38
Management’s Annual Report on Internal Control over Financial Reporting
Our management is responsible for establishing and maintaining adequate internal control over financial
reporting (as such term is defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act). Our internal control
over financial reporting is designed to provide reasonable assurance regarding the reliability of its financial
reporting and the preparation of published financial statements in accordance with generally accepted accounting
principles.
Because of the inherent limitations, internal control over financial reporting may not prevent or detect
misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to risk that
controls may become inadequate because of changes in conditions, or the degree of compliance may deteriorate.
Management conducted its evaluation of the effectiveness of its internal control over financial reporting as
of January 31, 2023. In making this assessment, management used the criteria set forth in the Internal Control-
Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway
Commission (“COSO”). The scope of management’s assessment of the effectiveness of its disclosure controls
and procedures did not include the internal controls over financial reporting at Astro Machine, which was
acquired effective August 4, 2022. Our consolidated total assets as of January 31, 2023 include $20.2 million
from Astro Machine and our consolidated revenue for the year ended January 31, 2023 includes $12.5 million
from Astro Machine. This exclusion is consistent with the SEC Staff’s guidance that an assessment of a recently
acquired business may be omitted from the scope of management’s assessment of the effectiveness of disclosure
controls and procedures that are also part of internal control over financial reporting in the year of
acquisition. Based on this assessment, the principal executive officer and principal financial officer believe that
as of January 31, 2023, our internal control over financial reporting was not effective based on criteria set forth
by COSO in “Internal Control-Integrated Framework.”
A material weakness is a deficiency, or combination of deficiencies, in internal control over financial
reporting, such that there is a reasonable possibility that a material misstatement of the Company’s annual or
interim financial statements will not be prevented or detected on a timely basis. We did not maintain effective
controls to properly identify and assess significant non-routine transactions and management concluded that this
material weakness continued to exist as of January 31, 2023.
Management is taking action to remediate this deficiency in its internal controls over financial reporting by
augmenting personnel and resources in its finance and accounting organization. We anticipate that these actions
and resulting improvements in controls will strengthen our internal control over financial reporting and will
address the related material weakness.
The effectiveness of our internal control over financial reporting as of January 31, 2023 has been audited by
Wolf & Company, P.C., an independent registered public accounting firm, as stated in their report, which is
included herein.
Changes in Internal Controls over Financial Reporting
There have been no changes in our internal control over financial reporting during our most recently
completed fiscal quarter that have materially affected, or are reasonably likely to materially affect, our internal
control over financial reporting.
Item 9B. Other Information
None.
Item 9C. Disclosure Regarding Foreign Jurisdictions that Prevent Inspections
Not applicable.
39
PART III
Item 10. Directors, Executive Officers and Corporate Governance
The information required by this item is incorporated herein by reference to our definitive proxy statement
to be filed for our 2023 Annual Meeting of Shareholders, which will be filed with the SEC no later than 120 days
after the end of our fiscal year (our “Proxy Statement”). Certain other information relating to our executive
officers appears in Part I of this Annual Report on Form 10-K under the heading “Information about our
Executive Officers.”
Item 11. Executive Compensation
The information required by this item is incorporated herein by reference to our Proxy Statement.
The information set forth under the heading “Compensation Committee Report” in our Proxy Statement is
furnished and shall not be deemed filed for purposes of Section 18 of the Exchange Act, nor be incorporated by
reference in any filing under the Securities Act of 1933, as amended.
Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters
The information required by this item is incorporated herein by reference to our Proxy Statement.
Item 13. Certain Relationships, Related Transactions and Director Independence
The information required by this item is incorporated herein by reference to our Proxy Statement.
Item 14. Principal Accountant Fees and Services
The information required by this item is incorporated herein by reference to our Proxy Statement.
40
Item 15. Exhibits and Financial Statement Schedule
(a)(1) Financial Statements:
PART IV
The following documents are included as part of this Annual Report filed on Form 10-K:
Reports of Independent Registered Public Accounting Firm . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Consolidated Balance Sheets as of January 31, 2023 and 2022 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Consolidated Statements of Income—Years Ended January 31, 2023, 2022, and 2021 . . . . . . . . . . . . . . . .
Consolidated Statements of Comprehensive Income—Years Ended January 31, 2023, 2022, and 2021 . . .
Consolidated Statements of Changes in Shareholders’ Equity—Years Ended January 31, 2023, 2022, and
F-8
2021 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Consolidated Statements of Cash Flows—Years Ended January 31, 2023, 2022, and 2021 . . . . . . . . . . . . .
F-9
Notes to Consolidated Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . F-10
F-1
F-5
F-6
F-7
Page
(a)(2) Financial Statement Schedule:
Schedule II—Valuation and Qualifying Accounts and Reserves—Years Ended January 31, 2023, 2022,
and 2021 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . F-38
All other schedules for which provision is made in the applicable accounting regulations of the Securities
and Exchange Commission are not required under the related instructions or are inapplicable, and therefore, have
been omitted.
Item 16. Form 10-K Summary
Not Applicable.
(a)(3) Exhibits:
Exhibit
Number
(2.1)
(3A)
(3B)
(4.1)
(4.2)
Share Purchase Agreement, dated January 7, 2017, as amended, by and among ANI ApS, Trojan
Holding ApS, as a Seller and as the Sellers’ Representative, and Li Wei Chong filed as Exhibit 2.1 to
our Annual Report on Form 10-K for the year ended January 31, 2017 and incorporated by reference
herein*
Restated Articles of Incorporation of the Company and all amendments thereto filed as Exhibit 3A to
our Quarterly Report on Form 10-Q for the quarter ended April 30, 2016 and incorporated by
reference herein.
By-laws of the Company as amended to date filed as Exhibit 3B to our Annual Report on Form 10-K
for the fiscal year ended January 31, 2008 (File No. 000-13200) and incorporated by reference
herein.
Specimen form of common stock certificate of the Company filed as Exhibit 4 to our Quarterly
Report on Form 10-Q for the quarter ended April 30, 2016 and incorporated by reference herein.
Description of securities registered pursuant to Section 12 of the Exchange Act filed as Exhibit 4.2 to
our Annual Report on Form 10-K for the fiscal year ended January 31, 2020 (File No. 000-13200)
and incorporated by reference herein.
(10.1)
Astro-Med, Inc. 2007 Equity Incentive Plan as filed as Appendix A to the Definitive Proxy Statement
filed on April 25, 2007 on Schedule 14A (File No. 000-13200) for the 2007 annual shareholders
meeting and incorporated by reference herein.**
41
Exhibit
Number
(10.2)
(10.3)
(10.4)
(10.5)
(10.6)
(10.7)
(10.8)
(10.9)
(10.10)
(10.11)
(10.12)
(10.13)
(10.14)
(10.15)
Change in Control Agreement dated as of November 24, 2014 by and between the Company and
Gregory A. Woods filed as Exhibit 10.13 to our Annual Report on Form 10-K for the year ended
January 31, 2015 and incorporated by reference herein.**
AstroNova Inc. 2015 Equity Incentive Plan filed as Exhibit A to the Definitive Proxy Statement filed
on April 21, 2015 (File No. 000-13200) for the 2015 annual shareholders meeting and incorporated
by reference herein.**
Form of Indemnification Agreement for directors and officers filed as Exhibit 10.1 to our Quarterly
Report on Form 10-Q for the period ended October 31, 2015 and incorporated by reference herein.**
Form of Restricted Stock Agreement granted under the Amended and Restated Non-Employee
Director Annual Compensation Program filed as Exhibit 10.2 to the Company’s Quarterly Report on
Form 10-Q for the period ended July 30, 2016 and incorporated by reference herein.**
Form of Incentive Stock Option Agreement granted under the 2015 Equity Incentive Plan filed as
Exhibit 10.3 to the Company’s Quarterly Report on Form 10-Q for the period ended July 30, 2016
and incorporated by reference herein.**
Form of Non-Statutory Stock Option Agreement granted under the 2015 Equity Incentive Plan filed
as Exhibit 10.4 to the Company’s Quarterly Report on Form 10-Q for the period ended July 30, 2016
and incorporated by reference herein.**
Form of Non-Employee Director Non-Statutory Stock Option Agreement granted under the 2015
Equity Incentive Plan filed as Exhibit 10.5 to the Company’s Quarterly Report on Form 10-Q for the
period ended July 30, 2016 and incorporated by reference herein.**
Form of Restricted Stock Agreement granted under the 2015 Equity Incentive Plan filed as
Exhibit 10.6 to the Company’s Quarterly Report on Form 10-Q for the period ended July 30, 2016
and incorporated by reference herein.**
Form of Non-Employee Director Restricted Stock Agreement granted under the 2015 Equity
Incentive Plan filed as Exhibit 10.7 to the Company’s Quarterly Report on Form 10-Q for the period
ended July 30, 2016 and incorporated by reference herein.**
Form of Time-Based Restricted Stock Unit Agreement granted under the 2015 Equity Incentive Plan
filed as Exhibit 10.8 to the Company’s Quarterly Report on Form 10-Q for the period ended July 30,
2016 and incorporated by reference herein.**
Form of Performance Restricted Stock Unit Agreement granted under the 2015 Equity Incentive Plan
filed as Exhibit 10.9 to the Company’s Quarterly Report on Form 10-Q for the period ended July 30,
2016 and incorporated by reference herein.**
Asset Purchase and License Agreement, dated September 28, 2017, by and between AstroNova, Inc.
and Honeywell International, Inc. filed as Exhibit 10.1 to the Company’s Current Report on
Form 8-K, event date September 28, 2017, filed with the SEC on October 4, 2017 and incorporated
by reference herein.
Form of Performance-based Restricted Stock Unit Award Agreement filed as Exhibit 10.1 to the
Company’s Current Report on Form 8-K, event date June 4, 2018, filed with the SEC on June 4,
2018 and incorporated by reference herein.**
Form of Restricted Stock Unit Agreement (time-based vesting) filed as Exhibit 10.2 to the
Company’s Current Report on Form 8-K, event date June 4, 2018, filed with the SEC on June 4,
2018 and incorporated by reference herein.**
(10.16)
Form of Incentive Stock Option filed as Exhibit 10.3 to the Company’s Current Report on Form 8-K,
event date June 4, 2018, filed with the SEC on June 4, 2018 and incorporated by reference herein.**
42
Exhibit
Number
(10.17)
(10.18)
(10.19)
(10.20)
(10.21)
(10.22)
(10.23)
(10.24)
(10.25)
(10.26)
(10.27)
(10.28)
(10.29)
Form of Non-statutory Stock Option filed as Exhibit 10.4 to the Company’s Current Report on
Form 8-K, event date June 4, 2018, filed with the SEC on June 4, 2018 and incorporated by reference
herein.**
Form of Non-statutory Stock Option (Non-employee Director) filed as Exhibit 10.5 to the
Company’s Current Report on Form 8-K, event date June 4, 2018, filed with the SEC on June 4,
2018 and incorporated by reference herein.**
Form of Restricted Stock Agreement filed as Exhibit 10.6 to the Company’s Current Report on
Form 8-K, event date June 4, 2018, filed with the SEC on June 4, 2018 and incorporated by reference
herein.**
Form of Non-employee Director Restricted Stock Agreement filed as Exhibit 10.7 to the Company’s
Current Report on Form 8-K , event date June 4, 2018, filed with the SEC on June 4, 2018 and
incorporated by reference herein.**
AstroNova, Inc. Amended and Restated Non-Employee Director Annual Compensation Program
filed as Exhibit 10.1 to the Company’s Current Report on Form 8-K, event date January 31, 2019,
filed with the SEC on February 4, 2019 and incorporated by reference herein.**
AstroNova, Inc. 2018 Equity Incentive Plan Non-Employee Director Restricted Stock Agreement
filed as Exhibit 10.41 to the Company’s Annual Report on Form 10-K for the fiscal year ended
January 31, 2019 and incorporated by reference herein.*
AstroNova, Inc. 2018 Equity Incentive Plan, as amended, filed as Appendix A to the Company’s
Definitive Proxy Statement filed with the SEC on May 25, 2019 on Schedule 14A and incorporated
by reference herein.*
Amended and Restated Credit Agreement dated as of July 30, 2020 among AstroNova, Inc., ANI
ApS, TrojanLabel ApS, and Bank of America, N.A. filed as Exhibit 10.4 to the Company’s Quarterly
Report on Form 10-Q for the quarter ended August 1, 2020 and incorporated by reference herein.
Amended and Restated Security and Pledge Agreement dated as of July 30, 2020 among AstroNova,
Inc. and Bank of America, N.A., filed as Exhibit 10.2 to the Company’s Current Report on
Form 8-K, event date July 30, 2020, filed with the SEC on August 5, 2020 and incorporated by
reference herein.
Open-End Mortgage Deed to Secure Present and Future Loans under Chapter 25 of Title 34 of the
Rhode Island General Laws, Assignment of Leases and Rents, Security Agreement and Fixture Filing
dated as of July 30, 2020 among AstroNova, Inc. and Bank of America, N.A., filed as Exhibit 10.3 to
the Company’s Current Report on Form 8-K, event date July 30, 2020, filed with the SEC on
August 5, 2020 and incorporated by reference herein.
Change in Control Agreement dated September 8, 2020 by and between AstroNova, Inc. and
David S. Smith filed as Exhibit 10.7 to the Company’s Quarterly Report on Form 10-Q for the
quarter ended August 1, 2020 and incorporated by reference herein.**
First Amendment to Credit Agreement dated as of March 24, 2021 among AstroNova, Inc. ANI ApS,
TrojanLabel ApS and Bank of America, N.A., filed as Exhibit 10.34 to the Company’s Annual
Report on Form 10-K for the period ended January 31, 2021, and incorporated by reference herein.
First Amendment to Open-End Mortgage Deed to Secure Present and Future Loans under Chapter 25
of Title 34 of the Rhode Island General Laws, Assignment of Leases and Rents, Security Agreement
and Fixture Filing dated as of March 24, 2021 among AstroNova, Inc. and Bank of America, N.A.,
filed as Exhibit 10.35 to the Company’s Annual Report on Form 10-K for the period ended
January 31, 2021, and incorporated by reference herein.
43
Exhibit
Number
(10.30)
(10.31)
(10.32)
(10.33)
(10.34)
(10.35)
(21)
(23.1)
(31.1)
(31.2)
(32.1)
(32.2)
Form of Indemnification Agreement for directors and officers, filed as Exhibit 10.1 to the
Company’s Quarterly Report on Form 10-Q for the period ended October 30, 2021, and
incorporated by reference herein.**
LIBOR Transition Amendment dated as of December 14, 2021 among AstroNova, Inc. and Bank
of America, N.A., filed as Exhibit 10.33 to the Company’s Annual Report on Form 10-K for the
period ended January 31, 2022, and incorporated by reference herein.
AstroNova, Inc. 2022 Employee Stock Purchase Plan, filed as Annex A to the AstroNova, Inc.
Definitive Proxy Statement on Schedule 14A filed with the SEC on April 29, 2022 and
incorporated by reference herein.**
Equity Interest Purchase Agreement, dated as of August 4, 2022, by and among AstroNova, Inc.,
Astro Machine LLC and GSND Holding Corporation, filed as Exhibit 10.1 to the Company’s
Current Report on Form 8-K, event date August 4, 2022, filed with the SEC on August 9, 2022
and incorporated by reference herein.
Purchase and Sale Agreement, dated as of August 4, 2022, between Astro Machine LLC and
Selak Real Estate Limited Partnership, filed as Exhibit 10.2 to the Company’s Current Report on
Form 8-K, event date August 4, 2022, filed with the SEC on August 9, 2022 and incorporated by
reference herein.
Second Amendment to Amended and Restated Credit Agreement, dated as of August 4, 2022, by
and among AstroNova, Inc. and Bank of America, N.A. , filed as Exhibit 10.3 to the Company’s
Current Report on Form 8-K, event date August 4, 2022, filed with the SEC on August 9, 2022
and incorporated by reference herein.
List of Subsidiaries of the Company.
Consent of Wolf & Company, P.C.
Certification of Chief Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of
2002.
Certification of Chief Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of
2002.
Certification of Chief Executive Officer Pursuant to 18 U.S.C. Section 1350, as adopted pursuant
to Section 906 of the Sarbanes-Oxley Act of 2002.
Certification of Chief Financial Officer Pursuant to 18 U.S.C. Section 1350, as adopted pursuant
to Section 906 of the Sarbanes-Oxley Act of 2002.
(101.INS)
XBRL Instance Document—the instance document does not appear in the Interactive Data File
because its XBRL tags are embedded within the Inline XBRL document
(101.SCH)
Inline XBRL Taxonomy Extension Schema Document
(101.CAL)
Inline XBRL Taxonomy Extension Calculation Linkbase Document
(101.DEF)
Inline XBRL Taxonomy Extension Definition Linkbase Document
(101.LAB)
Inline XBRL Taxonomy Extension Label Linkbase Document
(101.PRE)
Inline XBRL Taxonomy Extension Presentation Linkbase Document
(104)
Cover Page Interactive Data File (embedded within the Inline XBRL document).
*
Schedules to this Exhibit have been omitted in reliance on Item 601(b)(2) of Regulation S-K. The Company
will furnish copies of any such schedules to the SEC upon request.
** Management contract or compensatory plan or arrangement.
44
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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: April 17, 2023
By:
/S/ GREGORY A. WOODS
(Gregory A. Woods, Chief Executive Officer)
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed
below by the following persons on behalf of the registrant and in the capacities and on the date indicated.
Name
Title
Date
/S/ GREGORY A. WOODS
Gregory A. Woods
President, Chief Executive Officer and
Director (Principal Executive Officer)
/S/ DAVID S. SMITH
David S. Smith
Vice President, Chief Financial Officer and
Treasurer (Principal Accounting and
Financial Officer)
/s/ Alex P. Michas
Alexis P. Michas
/S/ MITCHELL I. QUAIN
Mitchell I. Quain
/S/ YVONNE E. SCHLAEPPI
Yvonne E. Schlaeppi
/S/ RICHARD S. WARZALA
Richard S. Warzala
Director
Director
Director
Director
April 17, 2023
April 17, 2023
April 17, 2023
April 17, 2023
April 17, 2023
April 17, 2023
[THIS PAGE INTENTIONALLY LEFT BLANK]
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
The Shareholders and Board of Directors of
AstroNova, Inc.
Opinion on the Financial Statements
We have audited the accompanying consolidated balance sheets of AstroNova, Inc. (the “Company”) as of
January 31, 2023 and 2022, and the related consolidated statements of income, comprehensive income, changes
in shareholders’ equity and cash flows for each of the years in the three-year period ended January 31, 2023, and
the related notes and the financial statement schedule listed in Item 15(a)(2) (collectively, the “financial
statements”). In our opinion, the financial statements present fairly, in all material respects, the financial position
of the Company as of January 31, 2023 and 2022, and the results of its operations and its cash flows for each of
the three years in the period ended January 31, 2023, in conformity with accounting principles generally accepted
in the United States of America.
We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board
(United States) (PCAOB), the Company’s internal control over financial reporting as of January 31, 2023, based
on criteria established in Internal Control—Integrated Framework issued by the Committee of Sponsoring
Organizations of the Treadway Commission in 2013. Our report dated April 17, 2023 expressed an opinion that
the Company had not maintained effective internal control over financial reporting as of January 31, 2023, based
on criteria established in Internal Control—Integrated Framework issued by the Committee of Sponsoring
Organizations of the Treadway Commission in 2013.
Basis for Opinion
These financial statements are the responsibility of the Company’s management. Our responsibility is to express
an opinion on the Company’s financial statements based on our audits. We are a public accounting firm
registered with the PCAOB and are required to be independent with respect to the Company in accordance with
U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission
and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan
and perform the audits to obtain reasonable assurance about whether the financial statements are free of material
misstatement, whether due to error or fraud. Our audits included performing procedures to assess the risks of
material misstatement of the financial statements, whether due to error or fraud, and performing procedures that
respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and
disclosures in the financial statements. Our audits also included evaluating the accounting principles used and
significant estimates made by management, as well as evaluating the overall presentation of the financial
statements. We believe that our audits provide a reasonable basis for our opinion.
Critical Audit Matters
The critical audit matters communicated below are matters arising from the current period audit of the financial
statements that were communicated or required to be communicated to the audit committee and that: (1) relate to
accounts or disclosures that are material to the financial statements and (2) involved our especially challenging,
subjective or complex judgments. The communication of critical audit matters does not alter in any way our
opinion on the financial statements, taken as a whole, and we are not, by communicating the critical audit matters
below, providing separate opinions on the critical audit matters or on the accounts or disclosures to which they
relate.
F-1
Valuation of Intangible Assets in the Astro Machine Acquisition
As described in Note 2 to the consolidated financial statements, the Company completed an acquisition of Astro
Machine for consideration of $17.1 million in the year ended January 31, 2023. The Company accounted for this
acquisition as a business combination.
Auditing the accounting for the acquisition was complex due to the significant estimation uncertainty in
determining the fair values of identified assets, including the customer relationship intangible asset of
$3.06 million. The significant estimation uncertainty was primarily due to the sensitivity of the respective fair
values to underlying assumptions about future performance of the acquired business and due to the limited
historical data on which to base these assumptions. The significant assumptions used to form the basis of the
forecasted results included customer attrition rates and forecasted revenues and expenditures. These significant
assumptions were forward-looking and could be affected by future economic and market conditions.
Addressing the matter involved performing procedures and evaluating audit evidence in connection with forming
our overall opinion on the financial statements. These procedures included, among others (i) obtaining an
understanding of management’s process for accounting for the transaction; (ii) evaluating the qualifications of
the third-party expert engaged by management; (iii) testing management’s, and the third-party expert’s, process
for developing the valuation models, and (iv) evaluating the significant assumptions used in developing the
valuation models. In evaluating management’s assumptions used in the development of the valuation models we
considered (i) whether these assumptions were consistent with evidence obtained in other areas of the audit and
(ii) the sensitivity to change of the assumptions used.
/s/ Wolf & Company, P.C.
We have served as the Company’s auditor since 2013.
Boston, Massachusetts
April 17, 2023
F-2
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
The Shareholders and Board of Directors of
AstroNova, Inc.
Opinion on the Internal Control Over Financial Reporting
We have audited AstroNova, Inc.’s (the Company) internal control over financial reporting as of January 31,
2023, based on criteria established in Internal Control—Integrated Framework issued by the Committee of
Sponsoring Organizations of the Treadway Commission in 2013. In our opinion, because of the effect of the
material weakness described below on the achievement of the objectives of the control criteria, the Company has
not maintained effective internal control over financial reporting as of January 31, 2023, based on criteria
established in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of
the Treadway Commission in 2013.
We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board
(United States) (PCAOB), the consolidated financial statements of the Company and our report dated April 17,
2023 expressed an unqualified opinion.
As described in Management’s Annual Report on Internal Control over Financial Reporting, management has
excluded Astro Machine from its assessment of internal control over financial reporting as of January 31, 2023,
because it was acquired by the Company in a purchase business combination in the third quarter of fiscal 2023.
We have also excluded Astro Machine from our audit of internal control over financial reporting. Astro Machine
is a wholly owned subsidiary whose total assets and revenues represent approximately 15% and 9%, respectively,
of the related consolidated financial statement amounts as of and for the year ended January 31, 2023.
A material weakness is a deficiency, or a combination of deficiencies, in internal control over financial reporting,
such that there is a reasonable possibility that a material misstatement of the company’s annual or interim
financial statements will not be prevented or detected on a timely basis. The following material weakness has
been identified and included in management’s assessment.
The Company’s controls over the accounting for significant non-routine transactions include management’s
review of the transaction to ensure the appropriate accounting treatment in accordance with accounting principles
generally accepted in the United States of America. During the year ended January 31, 2023, for certain
significant non-routine transactions, this control did not operate effectively.
This material weakness was considered in determining the nature, timing and extent of audit tests applied in our
audit of the 2023 financial statements, and this report does not affect our report dated April 17, 2023 on those
financial statements.
Basis for Opinion
The Company’s management is responsible for maintaining effective internal control over financial reporting and
for its assessment of the effectiveness of internal control over financial reporting in the accompanying
Management’s Annual Report on Internal Control over Financial Reporting. Our responsibility is to express an
opinion on the Company’s internal control over financial reporting based on our audit. We are a public
accounting firm registered with the PCAOB and are required to be independent with respect to the Company in
accordance with U.S. federal securities laws and the applicable rules and regulations of the Securities and
Exchange Commission and the PCAOB.
We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether effective internal control over financial
F-3
reporting was maintained in all material respects. Our audit included obtaining an understanding of internal
control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the
design and operating effectiveness of internal control based on the assessed risk. Our audit also included
performing such other procedures as we considered necessary in the circumstances. We believe that our audit
provides a reasonable basis for our opinion.
Definition and Limitations of Internal Control Over Financial Reporting
A company’s internal control over financial reporting is a process designed to provide reasonable assurance
regarding the reliability of financial reporting and the preparation of financial statements for external purposes in
accordance with generally accepted accounting principles. A company’s internal control over financial reporting
includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail,
accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable
assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance
with generally accepted accounting principles, and that receipts and expenditures of the company are being made
only in accordance with authorizations of management and directors of the company; and (3) provide reasonable
assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of the
company’s assets that could have a material effect on the financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect
misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that
controls may become inadequate because of changes in conditions, or that the degree of compliance with the
policies or procedures may deteriorate.
/s/ Wolf & Company, P.C.
We have served as the Company’s auditor since 2013.
Boston, Massachusetts
April 17, 2023
F-4
ASTRONOVA, INC.
CONSOLIDATED BALANCE SHEETS
As of January 31
(In Thousands, Except Share Data)
2023
2022
CURRENT ASSETS
ASSETS
Cash and Cash Equivalents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Accounts Receivable, net of reserves of $731 in 2023 and $826 in 2022 . . . . . . . . . . . . . . . . . . . .
Inventories . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Employee Retention Credit Receivable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Prepaid Expenses and Other Current Assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total Current Assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Property, Plant and Equipment, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Identifiable Intangibles, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Goodwill . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Deferred Tax Assets, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Right of Use Asset . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other Assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$
3,946 $
21,598
51,324
—
2,894
79,762
14,288
21,232
14,658
6,907
794
1,566
5,276
17,124
34,609
3,135
3,634
63,778
11,441
19,200
12,156
5,591
1,094
1,695
TOTAL ASSETS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$139,207 $114,955
CURRENT LIABILITIES
LIABILITIES AND SHAREHOLDERS’ EQUITY
Accounts Payable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Accrued Compensation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other Accrued Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Revolving Line of Credit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Current Portion of Long-Term Debt . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Current Liability—Royalty Obligation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Current Liability—Excess Royalty Payment Due . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Income Taxes Payable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Deferred Revenue . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$
8,618 $
2,750
3,308
15,900
2,100
1,725
423
786
1,888
8,590
3,512
4,113
—
1,000
2,000
235
323
262
Total Current Liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
37,498
20,035
NON-CURRENT LIABILITIES
Long-Term Debt, net of current portion . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Royalty Obligation, net of current portion . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Lease Liabilities, net of current portion . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Income Taxes Payable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Deferred Revenue . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Deferred Tax Liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
TOTAL LIABILITIES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
12,040
3,415
555
491
674
167
54,840
8,154
4,361
808
399
—
186
33,943
Commitments and Contingencies (See Note 22)
SHAREHOLDERS’ EQUITY
Preferred Stock, $10 Par Value, Authorized 100,000 shares, None Issued . . . . . . . . . . . . . . . . . . .
Common Stock, $0.05 Par Value, Authorized 13,000,000 shares; Issued 10,676,851 shares in
2023 and 10,566,404 shares in 2022 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Additional Paid-in Capital . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Retained Earnings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Treasury Stock, at Cost, 3,342,032 shares in 2023 and 3,324,280 shares in 2022 . . . . . . . . . . . . . .
Accumulated Other Comprehensive Loss, net of tax . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
—
—
534
61,131
59,175
(34,235)
(2,238)
528
59,692
56,514
(33,974)
(1,748)
TOTAL SHAREHOLDERS’ EQUITY . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
84,367
81,012
TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY . . . . . . . . . . . . . . . . . . . . . . . . .
$139,207 $114,955
See Notes to the Consolidated Financial Statements.
F-5
ASTRONOVA, INC.
CONSOLIDATED STATEMENTS OF INCOME
For the years ended January 31
(In Thousands, Except Per Share Data)
2023
2022
2021
Revenue . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Cost of Revenue . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$142,527 $117,480 $116,033
74,673
73,741
94,371
Gross Profit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Costs and Expenses:
48,156
43,739
41,360
Selling and Marketing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Research and Development . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
General and Administrative . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
24,456
6,822
11,435
23,177
6,753
9,553
23,301
6,206
9,420
Operating Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
42,713
39,483
38,927
Operating Income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other Income (Expense):
Interest Expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Gain (Loss) on Foreign Currency Transactions . . . . . . . . . . . . . . . . . . . . .
Gain on Extinguishment of Debt – PPP Loan . . . . . . . . . . . . . . . . . . . . . .
Loss on Disposal of Assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Income before Income Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Income Tax Provision . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net Income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net Income Per Common Share—Basic . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net Income Per Common Share—Diluted . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Weighted Average Number of Common Shares Outstanding—Basic . . . . . . .
Dilutive Effect of Common Stock Equivalents . . . . . . . . . . . . . . . . . . . . . . . . .
Weighted Average Number of Common Shares Outstanding—Diluted . . . . . .
5,443
4,256
2,433
(1,678)
(474)
—
—
119
(2,033)
3,410
749
(677)
(288)
4,466
(696)
(27)
2,778
7,034
605
(955)
590
—
—
111
(254)
2,179
895
$
$
$
2,661 $
6,429 $ 1,284
0.36 $
0.89 $
0.18
0.36 $
0.88 $
0.18
7,307
67
7,374
7,207
132
7,339
7,104
62
7,166
See Notes to the Consolidated Financial Statements.
F-6
ASTRONOVA, INC.
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
For the years ended January 31
(In Thousands)
Net Income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other Comprehensive Income (Loss), net of taxes and reclassification adjustments:
Foreign Currency Translation Adjustments . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Change in Value of Derivatives Designated as Cash Flow Hedge . . . . . . . . . . . .
(Gains) Losses from Cash Flow Hedges Reclassified to Income Statement . . . .
Cross-Currency Interest Rate Swap Terminations . . . . . . . . . . . . . . . . . . . . . . . .
2023
2022
2021
$2,661 $ 6,429 $1,284
(537)
—
47
—
(1,426)
—
62
—
710
(239)
193
45
Other Comprehensive Income (Loss) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(490)
(1,364)
709
Comprehensive Income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$2,171 $ 5,065 $1,993
See Notes to the Consolidated Financial Statements.
F-7
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY
ASTRONOVA, INC.
($ In Thousands)
Common Stock
Shares
Amount
Additional
Paid-in
Capital
Retained
Earnings
Treasury
Stock
Accumulated
Other
Comprehensive
Income (Loss)
Total
Shareholders’
Equity
Balance January 31, 2020 . . . . . . . . . . . 10,343,610 $517
— —
1
Share-Based Compensation . . . . . .
Employee Option Exercises . . . . . .
Restricted Stock Awards Vested,
16,487
$56,130 $49,298 $(33,477)
—
—
1,819
103
—
—
net . . . . . . . . . . . . . . . . . . . . . . .
64,997
3
(3)
—
(111)
Common Stock—Cash
Dividend—$0.07 per share . . . .
Net Income . . . . . . . . . . . . . . . . . .
Other Comprehensive Income . . . .
— —
— —
— —
—
—
—
(497)
1,284
—
—
—
—
Balance January 31, 2021 . . . . . . . . . . . 10,425,094 $521
— —
1
Share-Based Compensation . . . . . .
Employee Option Exercises . . . . . .
Restricted Stock Awards Vested,
14,371
$58,049 $50,085 $(33,588)
—
—
1,493
156
—
—
net . . . . . . . . . . . . . . . . . . . . . . .
Net Income . . . . . . . . . . . . . . . . . .
Other Comprehensive Loss . . . . . .
126,939
6
— —
— —
(6)
—
—
—
6,429
—
(386)
—
—
Balance January 31, 2022 . . . . . . . . . . . 10,566,404 $528
— —
2
Share-Based Compensation . . . . . .
Employee Option Exercises . . . . . .
Restricted Stock Awards Vested,
25,123
$59,692 $56,514 $(33,974)
—
—
1,290
153
—
—
$(1,093)
—
—
—
—
—
709
$ (384)
—
—
—
—
(1,364)
$(1,748)
—
—
net . . . . . . . . . . . . . . . . . . . . . . .
Net Income . . . . . . . . . . . . . . . . . .
Other Comprehensive Loss . . . . . .
85,324
4
— —
— —
(4)
—
—
—
2,661
—
(261)
—
—
—
—
(490)
$71,375
1,819
104
(111)
(497)
1,284
709
$74,683
1,493
157
(386)
6,429
(1,364)
$81,012
1,290
155
(261)
2,661
(490)
Balance January 31, 2023 . . . . . . . . . . . 10,676,851 $534
$61,131 $59,175 $(34,235)
$(2,238)
$84,367
See Notes to the Consolidated Financial Statements.
F-8
ASTRONOVA, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
For the years ended January 31
(In Thousands)
Cash Flows from Operating Activities:
Net Income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Adjustments to Reconcile Net Income to Net Cash (Used) Provided By Operating
$ 2,661 $ 6,429 $ 1,284
Activities:
2023
2022
2021
Depreciation and Amortization . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Amortization of Debt Issuance Costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Share-Based Compensation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Loss on Disposal of Assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Gain on Extinguishment of Debt . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Deferred Income Tax Provision (Benefit) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Changes in Assets and Liabilities, net of impact of acquisition:
Accounts Receivable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other Receivable – Employee Retention Credit Receivable . . . . . . . . .
Inventories . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Accounts Payable and Accrued Expenses . . . . . . . . . . . . . . . . . . . . . . . .
Income Taxes Payable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
3,916
25
1,290
—
—
(1,336)
(1,234)
3,135
(11,581)
(3,236)
1,710
1,714
3,994
44
1,493
696
(4,466)
210
77
(3,135)
(4,883)
4,052
(2,043)
(1,074)
5,983
75
1,819
—
—
(1,021)
2,702
—
4,247
(57)
1,482
(970)
Net Cash Provided (Used) by Operating Activities . . . . . . . . . . . . . . . . . . . . . . . .
(2,936)
1,394
15,544
Cash Flows from Investing Activities:
Cash Paid for Astro Machine Acquisition, net of cash acquired . . . . . . . . . . . . . . . . . .
Additions to Property, Plant and Equipment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(17,034)
(229)
—
(1,796)
—
(2,587)
Net Cash Used by Investing Activities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(17,263)
(1,796)
(2,587)
Cash Flows from Financing Activities:
Net Cash Proceeds from Employee Stock Option Plans . . . . . . . . . . . . . . . . . . . . . . . . .
Net Cash Proceeds from Share Purchases under Employee Stock Purchase Plan . . . . .
Net Cash Used for Payment of Taxes Related to Vested Restricted Stock . . . . . . . . . . .
Net (Repayments)/Borrowings under Revolving Credit Facility . . . . . . . . . . . . . . . . . .
Payment of Minimum Guarantee Royalty Obligation . . . . . . . . . . . . . . . . . . . . . . . . . .
Proceeds from Long-Term Debt – PPP Loan . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Proceeds from Long-Term Debt Borrowings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Payoff of Long-Term Debt . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Principal Payments on Long-Term Debt . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Payments of Debt Issuance Costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Dividends Paid . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
85
70
(261)
15,900
(2,000)
—
6,000
—
(1,000)
(39)
—
60
96
(386)
—
(2,000)
—
10,000
(12,576)
(750)
—
—
9
95
(111)
(6,500)
(2,000)
4,422
15,232
(11,732)
(3,958)
(100)
(497)
Net Cash Provided (Used) by Financing Activities . . . . . . . . . . . . . . . . . . . . . . . .
18,755
(5,556)
(5,140)
Effect of Foreign Exchange Rate Changes on Cash and Cash Equivalents . . . . . . . . . . . . . .
114
(205)
(627)
Net Increase (Decrease) in Cash and Cash Equivalents . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Cash and Cash Equivalents, Beginning of Year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(1,330)
5,276
(6,163)
11,439
7,190
4,249
Cash and Cash Equivalents, End of Year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$ 3,946 $ 5,276 $ 11,439
Supplemental Information:
Cash Paid During the Period for:
Interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Income Taxes, Net of Refunds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Non-Cash Transactions:
Reclassifcation of Inventories to Property, Plant and Equipment . . . . . . . . . . . . . . . . . . . . . .
Recognize intangible asset and royalty payable related to Honeywell Asset Purchase and
License Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$
$
$
$
791 $
342 $
311 $ 2,414 $
677
446
348 $ — $ —
530 $ — $ —
See Notes to the Consolidated Financial Statements.
F-9
ASTRONOVA, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
January 31, 2023, 2022, and 2021
Note 1—Summary of Significant Accounting Policies
Basis of Presentation: The accompanying financial statements and accompanying notes have been prepared
by us pursuant to the rules and regulations of the U.S. Securities and Exchange Commission (“SEC”) and are
presented in conformity with U.S. generally accepted accounting principles (“U.S. GAAP”). Our fiscal year end
is January 31. Unless otherwise stated, all years and dates refer to our fiscal year.
Principles of Consolidation: The consolidated financial statements include the accounts of AstroNova, Inc.
and its subsidiaries. All material intercompany accounts and transactions are eliminated in consolidation.
Reclassification: Certain amounts in prior year’s financial statements have been reclassified to conform to
the current year’s presentation.
Use of Estimates: The preparation of financial statements in conformity with U.S. GAAP requires
management to make estimates and assumptions that affect these financial statements and accompanying notes
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; valuation of long-
lived assets, intangible assets and goodwill; share-based compensation; 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 ongoing impact from the
COVID-19 pandemic. Consequently, actual results could differ from those estimates.
Cash and Cash Equivalents: Highly liquid investments with an original maturity of 90 days or less are
considered to be cash equivalents. At January 31, 2023 and 2022, $3.2 million and $3.7 million, respectively,
was held in foreign bank accounts.
Inventories: Inventories are stated at the lower of standard and average cost or net realizable value and
include material, labor and manufacturing overhead.
Property, Plant and Equipment: Property, plant and equipment are stated at cost less accumulated
depreciation. Depreciation is provided on the straight-line basis over the estimated useful lives of the assets (land
improvements—10 to 20 years; buildings and leasehold improvements—10 to 45 years; machinery and
equipment—3 to 10 years and computer equipment and software—3 to 10 years).
Revenue Recognition: We recognize revenue in accordance with Accounting Standards Codification
(“ASC”) 606 “Revenue from Contracts with Customers (“ASC 606”).” The core principle of ASC 606 is to
recognize revenue when promised goods or services are transferred to customers in an amount that reflects the
consideration that is expected to be received for those goods or services. ASC 606 defines a five-step process to
recognize revenue and requires judgment and estimates within the revenue recognition process, including
identifying contracts with customers, identifying performance obligations in the contract, determining and
estimating the amount of any variable consideration to include in the transaction price and allocating the
transaction price to each separate performance obligation and recognizing revenue when the entity satisfies each
performance obligation.
The vast majority of our revenue is generated from the sale of distinct products. Revenue is measured as the
amount of consideration we expect to receive in exchange for such products, which is generally at the
contractually stated prices, and is recognized when we satisfy a performance obligation by transferring control of
F-10
a product to a customer. The transfer of control generally occurs at one point in time, upon shipment, when title
and risk of loss pass to the customer. Returns and customer credits are infrequent and are recorded as a reduction
to revenue. Sales taxes and value added taxes collected concurrently with revenue generating activities are
excluded from revenue.
Many of the contracts entered into with customers are commonly comprised of a combination of equipment,
supplies, installation and/or training services. We determine performance obligations by assessing whether the
products or services are distinct from other elements of the contract. In order to be distinct, the product must
perform either on its own or with readily available resources and must be separate within the context of the
contract.
Most of our hardware products contain embedded operating systems and data management software which
is included in the purchase price of the equipment. The software is deemed incidental to the systems as a whole,
as it is not sold or marketed separately, and its production costs are minor compared to those of the hardware
system. Hardware and software elements are typically delivered at the same time and are accounted for as a
single performance obligation for which revenue is recognized at the point in time when ownership is transferred
to the customer.
Installation and training services vary based on certain factors such as the complexity of the equipment,
staffing availability in a geographic location and customer preferences, and can range from a few days to a few
months. The delivery of installation and training services are not assessed to determine whether they are separate
performance obligations, as the amounts are not material to the contract.
Shipping and handling activities that occur after control over a product has transferred to a customer are
accounted for as fulfillment activities rather than performance obligations, as allowed under a practical expedient
provided by ASC 606. The shipping and handling fees charged to customers are recognized as revenue and the
related costs are included in cost of revenue at the point in time when ownership of the product is transferred to
the customer.
We may perform services at the request of the customer, generally for the repair and maintenance of
products previously sold. These services are short in duration and total approximately 5.0% and 4.4% of revenue
for the years ended January 31, 2023 and 2022, respectively. Revenue is recognized as services are rendered and
accepted by the customer. We also provide service agreements on certain of our Product Identification
equipment. Service agreements are purchased separately from the equipment and provide for the right to obtain
service and maintenance on the equipment for a period of typically one to two years. Accordingly, revenue on
these agreements is recognized over the term of the agreements. The portion of service agreement contracts that
are uncompleted at the end of any reporting period are included in deferred revenue.
We generally provide warranties for our products. The standard warranty period is typically 12 months for
most hardware products except for airborne printers, which typically have warranties that extend for 3-5 years,
consistent with industry practice. Such assurance-type warranties are not deemed to be separate performance
obligations from the hardware product and costs associated with providing the warranties are accrued in
accordance with ASC 450, “Contingencies,” as we have the ability to ascertain the likelihood of the liability and
can reasonably estimate the amount of the liability. Our estimate of costs to service the warranty obligations is
based on historical experience and expectations of future conditions. To the extent that our experience in
warranty claims or costs associated with servicing those claims differ from the original estimates, revisions to the
estimated warranty liability are recorded at that time, with an offsetting adjustment to cost of revenue. On
occasion, customers request a warranty period longer than our standard warranty. In those instances, in which
extended warranty services are separately quoted to the customer, an additional performance obligation is
created, and the associated revenue is deferred and recognized as service revenue ratably over the term of the
extended warranty period. The portion of service contracts and extended warranty services agreements that are
uncompleted at the end of any reporting period are included in deferred revenue.
F-11
We recognize and subsequently amortize an asset for the incremental direct costs of obtaining a contract
with a customer if we expect the benefit of those costs to be longer than one year (Refer to Note 3, “Revenue
Recognition” included in our notes to the consolidated financial statement). We apply the practical expedient to
expense costs incurred for costs to obtain a contract when the amortization period would have been less than a
year. These costs include sales commissions paid to the internal direct sales team as well as to third-party
representatives and distributors. Contractual agreements with each of these parties outline commission structures
and rates to be paid. Generally speaking, the contracts are all individual procurement decisions by the customers
and do not include renewal provisions and, as such, the majority of the contracts have an economic life of
significantly less than a year.
Accounts Receivables and Allowance for Doubtful Accounts: Standard payment terms are typically 30 days
after shipment but vary by type and geographic location of our customer. Credit is extended based upon an
evaluation of the customer’s financial condition. In circumstances where we are aware of a customer’s inability
to meet its financial obligations, an allowance is established. The remainder of the allowance established is based
on a variety of factors, including the age of amounts outstanding relative to their contractual due date, historical
write-off experience and current market assessments. Accounts receivable are stated at their estimated net
realizable value.
Business Combinations: We account for business acquisitions under the acquisition method of accounting in
accordance with ASC 805, ‘‘Business Combinations,’’ where the total purchase price is allocated to the tangible
and identified intangible assets acquired and liabilities assumed based on their estimated fair values. The
purchase price is allocated using the information currently available, and may be adjusted, up to one year from
acquisition date, after obtaining more information regarding, among other things, asset valuations, liabilities
assumed and revisions to preliminary estimates. The purchase price in excess of the fair value of the tangible and
identified intangible assets acquired less liabilities assumed is recognized as goodwill. Determining the fair value
of assets acquired and liabilities assumed requires management to use significant judgment and estimates,
including the selection of valuation methodologies, estimates of future revenue, costs and cash flows, discount
rates, and selection of comparable companies. Management’s estimates of fair value are based upon assumptions
believed to be reasonable, but which are inherently uncertain and unpredictable. As a result, actual results may
differ from these estimates. During the measurement period, we may record adjustments to acquired assets and
assumed liabilities, with corresponding offsets to goodwill. Upon the conclusion of a measurement period, any
subsequent adjustments are recorded to earnings.
At the acquisition date, the Company measures the fair values of all assets acquired and liabilities assumed
that arise from contractual contingencies. The Company also measures the fair values of all non-contractual
contingencies if, as of the acquisitions date, it is more likely than not that the contingencies will give rise to
assets or liabilities.
Acquisition related costs not considered part of the considerations are expensed as incurred and recorded in
Acquisition costs within the consolidated statement of operations.
Research and Development Costs: We charge costs to expense in the period incurred, and these expenses
are presented in the consolidated statement of income. The following costs are included in research and
development expense: salaries and benefits, external engineering service costs, engineering related information
costs and supplies.
Foreign Currency Translation: The financial statements of foreign subsidiaries and branches are measured
using the local currency as the functional currency. Foreign currency-denominated assets and liabilities are
translated into U.S. dollars at year-end exchange rates with the translation adjustment recorded as a component of
accumulated comprehensive income (loss) in shareholders’ equity. Revenues and expenses are translated at the
average monthly exchange rates in effect during the related period. We do not provide for U.S. income taxes on
foreign currency translation adjustments associated with our subsidiaries in Germany, Denmark and China since
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their undistributed earnings are considered to be permanently invested. Included in our consolidated statements
of income was a net transaction foreign exchange loss of $0.5 million and $0.3 million in fiscal 2022 and 2023,
respectively, and a net transaction foreign exchange gain of $0.6 million in fiscal 2021.
Advertising: We expense advertising costs as incurred. Advertising costs including advertising production,
trade shows and other activities are designed to enhance demand for our products and amounted to approximately
$1.6 million, $1.3 million, and $0.9 million in fiscal years 2023, 2022, and 2021, respectively.
Long-Lived Assets: Long-lived assets to be held and used are reviewed for impairment whenever events or
changes in circumstances indicate that the carrying amount of such assets may not be recoverable. Determination
of recoverability is based on an estimate of undiscounted future cash flows resulting from the use of the asset and
its eventual disposition. If the projected undiscounted cash flows are less than the carrying value, then an
impairment charge would be recorded for the excess of the carrying value over the fair value, as determined by
the discounting of future cash flows. There were no impairment charges for our long-lived assets in fiscal years
2023, 2022, or 2021.
Intangible Assets: Intangible assets include the value of customer and distributor relationships, trademarks
and existing technology acquired in connection with business and asset acquisitions and are stated at cost (fair
value at acquisition) less accumulated amortization. These intangible assets have a definite life and are amortized
over the assets’ useful lives using a systematic and rational basis which is representative of the assets’ use.
Intangible assets with a definite life are tested for impairment whenever events or circumstances indicate that the
carrying amount of an asset (asset group) may not be recoverable. If necessary, an impairment loss is recognized
when the carrying amount of an asset exceeds the estimated undiscounted cash flows used in determining the fair
value of the asset. The amount of the impairment loss recorded is calculated by the excess of the asset’s carrying
value over its fair value. Fair value is generally determined using a discounted cash flow analysis. There were no
impairment charges for our intangible assets in fiscal years 2023, 2022, or 2021.
Goodwill: Goodwill represents the excess of the aggregate purchase price over the fair value of the net
assets acquired in a purchase business combination. Management evaluates the recoverability of goodwill
annually or more frequently if events or changes in circumstances, such as declines in revenue, earnings or cash
flows, or material adverse changes in the business climate indicate that the carrying value of an asset might be
impaired. Goodwill is tested for impairment at the reporting unit level. A reporting unit is an operating segment,
or a business unit one level below an operating segment if discrete financial information for that business is
prepared and regularly reviewed by segment management. However, components within an operating segment
are aggregated as a single reporting unit if they have similar economic characteristics. We determined that each
of our operating segments (Product Identification (“PI”) and Test & Measurement (“T&M”) represents a
reporting unit for purposes of goodwill impairment testing.
The accounting guidance related to goodwill impairment testing allows for the performance of an optional
qualitative assessment of whether it is more likely than not that the fair value of a reporting unit is less than its
carrying value. Factors that management considers in this qualitative assessment include macroeconomic
conditions, industry and market considerations, overall financial performance (both current and projected),
changes in management and strategy and changes in the composition or carrying amount of net assets. If this
qualitative assessment indicates that it is more likely than not that the fair value of a reporting unit is less than its
carrying value, then a quantitative assessment is required for the reporting unit. Additionally, we can elect to
forgo the qualitative assessment and perform the quantitative test. The quantitative assessment compares the fair
value of the reporting unit with its carrying value. If the quantitative assessment is performed, we estimate the
fair value of our reporting units using a blended income and market approach. The income approach is based on a
discounted cash flow model and provides a fair value estimate based upon the reporting unit’s expected long-
term operating cash flow performance. The market approach compares the reporting unit to publicly traded
companies and transactions involving similar business, and requires the use of many assumptions and estimates
including future revenue, expenses, capital expenditures, and working capital, as well as discount factors and
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income tax rates. If the fair value of the reporting unit exceeds the carrying value of the net assets
including goodwill assigned to that unit, goodwill is not impaired. If the carrying value of the reporting unit’s net
assets including goodwill exceeds the fair value of the reporting unit, then we record an impairment charge based
on that difference. We performed a qualitative assessment for our fiscal 2023 analysis of goodwill. Based on this
assessment, management does not believe that it is more likely than not that the carrying values of the reporting
units exceed their fair values. Accordingly, no quantitative assessment was performed. There were no
impairment charges for our goodwill in fiscal years 2023, 2022, or 2021.
Leases: We account for our leases in accordance with ASC 842, “Leases” (“ASC 842”). ASC 842 requires a
lessee to recognize assets and liabilities on the balance sheet for all leases, with the result being the recognition of
a right of use (“ROU”) asset and a lease liability. The lease liability is equal to the present value of the minimum
lease payments for the term of the lease, including any optional renewal periods determined to be reasonably
certain to be exercised, using a discount rate determined at lease commencement. This discount rate is the rate
implicit in the lease, if known; otherwise, the incremental borrowing rate for the expected lease term is used. Our
incremental borrowing rate approximates the rate we would have to pay to borrow on a collateralized basis over a
similar term at lease inception. The value of the ROU asset is equal to the initial measurement of the lease
liability plus any lease payments made to the lessor at or before the commencement date and any unamortized
initial direct costs incurred by the lessee, less any unamortized lease incentives received. Several of our lease
contracts include options to extend the lease term and we include the renewal options for these leases in the
determination of the ROU asset and lease liability when the likelihood of renewal is determined to be reasonably
certain.
We enter into lease contracts for certain of our facilities at various locations worldwide. At inception of a
contract, we determine whether the contract is or contains a lease. If we have a right to obtain substantially all of
the economic benefits from the use of the identified asset and the right to direct the use of the asset, then the
contract contains a lease.
There are two types of leases, operating leases and finance leases. Lease classification is determined at lease
commencement. We have made an accounting policy election to apply the short-term exception, which does not
require the capitalization of leases with terms of 12 months or less. All of our leases are classified as operating
leases. Operating lease expense is recognized on a straight-line basis over the lease term and included in general
and administrative expense on the consolidated statement of income. ROU assets are classified as such on the
consolidated balance sheet, short-term lease liabilities are classified in accrued expenses, and long-term lease
liabilities are classified as such in the consolidated balance sheet. In the statement of cash flow, payments for
operating leases are classified as operating activities.
In addition, several of our lease agreements include non-lease components for items such as common area
maintenance and utilities which are accounted for separately from the lease component.
Income Taxes: We use the liability method of accounting for income taxes. Under this method, deferred tax
assets and liabilities are determined based on the differences between the financial reporting basis and tax basis
of the assets and liabilities and are measured using statutory tax rates that will be in effect when the differences
are expected to reverse. Our deferred taxes are presented as non-current in the accompanying consolidated
balance sheet. An allowance against deferred tax assets is recognized when it is more-likely-than-not that some
portion or all of the deferred tax assets will not be realized. At January 31, 2023, a valuation allowance was
provided for deferred tax assets attributable to certain domestic R&D, foreign tax credit carryforwards and China
net operating losses, all of which are expected to expire unused. At January 31, 2022, a valuation allowance was
provided for deferred tax assets attributed to certain domestic R&D and foreign tax credit carryforwards.
We account for uncertain tax positions in accordance with the guidance provided in ASC 740, “Accounting
for Income Taxes.” This guidance describes a recognition threshold and measurement attribute for the financial
statement disclosure of tax positions taken or expected to be taken in a tax return and requires recognition of tax
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benefits that satisfy a more-likely-than-not threshold. ASC 740 also provides guidance on de-recognition,
classification, interest and penalties, accounting in interim periods and disclosure.
On March 27, 2020, the Coronavirus Aid, Relief, and Economic Security Act (“CARES Act”) was signed
into law. The legislation had sweeping effects including various types of economic relief for impacted businesses
and industries. One such relief provision was the Paycheck Protection Program, which provided short-term cash
flow assistance to finance employee payroll and qualified expenses. 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”). On December 27, 2020, the Consolidated Appropriations
Act, 2021, H.R. 133 was signed into law. The legislation permits the deductibility of expenses to the extent that
the payment of such expenses results (or is expected to result) in the forgiveness of a loan (covered loan)
guaranteed under the Paycheck Protection Program. We have fully utilized the PPP Loan proceeds for qualifying
expenses and applied for forgiveness of the PPP Loan. Consistent with the legislation, we deducted the full
$4.4 million of qualified expenses on our 2020 federal tax return. On June 15, 2021, Greenwood notified us that
the United States Small Business Administration (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, in the second
quarter of fiscal 2022, we recorded a $4.5 million gain on extinguishment of debt. The PPP loan forgiveness is
excluded from taxable income under Section 1106(i) of the CARES Act.
Net Income Per Common Share: Basic net income per share is based on the weighted average number of
shares outstanding during the period. Diluted net income per share is based on the basic weighted average
number of shares and potential common equivalent shares for stock options, restricted stock awards and
restricted stock units outstanding during the period using the treasury stock method. In fiscal years 2023, 2022,
and 2021, there were 685,667; 345,085; and 642,623, respectively, common equivalent shares that were not
included in the computation of diluted net income per common share because their inclusion would be anti-
dilutive.
Fair Value Measurement: We measure our assets and liabilities at fair value on a recurring and
non-recurring basis in accordance with the guidance provided in ASC 820, “Fair Value Measurement and
Disclosures,” which defines fair value as the price that would be received to sell an asset or paid to transfer a
liability in an orderly transaction between market participants at the measurement date. In addition, ASC 820
establishes a three-tiered hierarchy for inputs used in management’s determination of fair value of financial
instruments that emphasizes the use of observable inputs over the use of unobservable inputs by requiring that
observable inputs be used when available. Observable inputs are inputs that reflect management’s belief about
the assumptions market participants would use in pricing a financial instrument based on the best information
available in the circumstances.
The fair value hierarchy is summarized as follows:
• Level 1—Quoted prices in active markets for identical assets or liabilities;
• Level 2—Inputs other than Level 1 that are observable, either directly or indirectly, such as quoted
prices for similar assets or liabilities; quoted prices in markets that are not active or other inputs that
are observable or can be corroborated by observable market data for substantially the full term of the
assets or liabilities; and
• Level 3—Unobservable inputs that are supported by little or no market activity and that are significant
to the fair value of the assets or liabilities
Cash and cash equivalents, accounts receivable, accounts payable, accrued compensation, other accrued
expenses and income tax payable are reflected in the consolidated balance sheet at carrying value, which
approximates fair value due to the short-term nature of these instruments.
F-15
Self-Insurance: We are self-insured for U.S. medical and dental benefits for qualifying employees and
maintain stop-loss coverage from a third party which limits our exposure to large claims. We record a liability
associated with these benefits that includes an estimate of both claims filed and losses incurred but not yet
reported based on historical claims experience. In estimating this accrual, we utilize an independent third-party
broker to estimate a range of expected losses, which are based on analyses of historical data. Assumptions are
closely monitored and adjusted when warranted by changing circumstances. Our liability for self-insured claims
is included within accrued compensation in our consolidated balance sheets and was $0.3 million and
$0.2 million at January 31, 2023 and 2022, respectively.
Share-Based Compensation: Compensation expense for time-based restricted stock units is measured at the
grant date and recognized ratably over the vesting period. We determine the fair value of time-based and
performance-based restricted stock units based on the closing market price of our common stock on the grant
date. The recognition of compensation expense associated with performance-based restricted stock units requires
judgment in assessing the probability of meeting the performance goals, as well as defined criteria for assessing
achievement of the performance-related goals. For purposes of measuring compensation expense, the number of
shares ultimately expected to vest is estimated at each reporting date based on management’s expectations
regarding the relevant performance criteria. The performance shares begin vesting only upon the achievement of
the performance criteria. The achievement of the performance goals can impact the valuation and associated
expense of the restricted stock units. The assumptions used in accounting for the share-based payment awards
represent management’s best estimates, but these estimates involve inherent uncertainties and the application of
management judgment. As a result, if circumstances change and we use different assumptions, our stock-based
compensation expense could be materially different in the future.
Share-based compensation becomes deductible for determining income taxes when the related award vests,
is exercised, or is forfeited depending on the type of share-based award and subject to relevant tax law.
Derivative Financial Instruments: We occasionally use derivative instruments as part of our overall strategy
to manage exposure to market risks primarily associated with fluctuations in foreign currency exchange rates and
interest rates. Derivative instruments are recognized as either assets or liabilities in the balance sheet at fair value.
The accounting for changes in the fair value (i.e., gains or losses) of a derivative instrument depends on whether
it has been designated and qualifies as part of a hedging relationship and, further, on the type of hedging
relationship. For derivative instruments not designated as hedging instruments, the gain or loss is recognized in
the statement of income during the current period. For those derivative instruments that are designated and
qualify as hedging instruments, a company must designate the hedging instrument, based upon the exposure
being hedged, as a fair value hedge, cash flow hedge, or a hedge of a net investment in a foreign operation.
For derivative instruments that are designated and qualify as a cash flow hedge, the gain or loss on the
derivative instrument is reported as a component of other comprehensive income/(loss) and reclassified into
earnings in the same line item associated with the forecasted transaction, and in the same period or periods
during which the hedged transaction affects earnings (e.g., in “Interest Expense” when the hedged transactions
are interest cash flows associated with floating-rate debt, or “Other, Net” for portions reclassified relating to the
remeasurement of the debt). The remaining gain or loss on the derivative instrument in excess of the cumulative
change in the present value of future cash flows of the hedged item, if any, are recognized in the statement of
income during the current period.
Recent Accounting Pronouncements
There were no new accounting pronouncements, issued or effective during fiscal 2023, that have had or are
expected to have a material impact on our consolidated financial statements.
F-16
Note 2 – Acquisitions
Astro Machine
On August 4, 2022, we acquired Astro Machine LLC (“Astro Machine”), an Illinois-based manufacturer of
printing equipment, including label printers, tabbers, conveyors, and envelope feeders, for aggregate
consideration of $17.1 million.
The acquisition was accomplished pursuant to an Equity Interest Purchase Agreement dated as of August 4,
2022 (the “Purchase Agreement”) by and among us, GSND Holding Corporation (“GSND”), the parent company
of Astro Machine, and Astro Machine. Pursuant to the Purchase Agreement, we purchased 100% of the issued
and outstanding equity interests of Astro Machine from GSND for a purchase price of $15.6 million. The
acquisition was funded using borrowings under our credit facility. We obtained a representation and warranty
insurance policy and placed $300,000 of the purchase price into an escrow account, which pursuant to the terms
and conditions of the Purchase Agreement, are our sole recourse for breaches of representations and warranties
by GSND. Upon the closing of the transaction, Astro Machine became a wholly owned subsidiary of AstroNova,
Inc.
Concurrently with the signing of the Purchase Agreement, our newly acquired subsidiary, Astro Machine,
entered into a Purchase and Sale Agreement with Selak Real Estate Limited Partnership (“SRE”), pursuant to
which Astro Machine purchased certain real property assets of SRE for a purchase price, paid in cash, of
$1.5 million. These real estate assets are comprised of a 34,460 square foot industrial manufacturing building
(including offices) on 1.26 acres of land, which is Astro Machine’s principal place of business.
This transaction is a business combination and was accounted for using the acquisition method of
accounting prescribed by ASC 805, “Business Combinations” (“ASC 805”), whereby the results of operations,
including the revenues and earnings of Astro Machine, are included in our financial statements from the date of
acquisition. The purchase price of Astro Machine was allocated to the tangible and intangible assets acquired and
liabilities assumed and recognized at their fair value based on widely accepted valuation techniques in
accordance with ASC 820, “Fair Value Measurement,” as of the acquisition date. The process for estimating fair
values requires the use of significant estimates, assumptions and judgments, including determining the timing
and estimates of future cash flows and developing appropriate discount rates. The excess of the purchase price
over the fair value of the net identified assets acquired and liabilities assumed was recorded as goodwill. ASC
805 establishes a measurement period to provide companies with a reasonable amount of time to obtain the
information necessary to identify and measure various items in a business combination and cannot extend beyond
one year from the acquisition date.
We completed our final fair value determination of the assets acquired and liabilities assumed during the
fourth quarter of fiscal 2023. Since the initial preliminary estimates reported in the third quarter of fiscal 2023,
we have adjusted certain amounts for the fair value of the assets acquired and liabilities assumed as a result of
obtaining additional information that allowed us to determine the final purchase price allocation, as summarized
in the table below. Measurement period adjustments were recognized in the reporting period in which the
adjustments were determined and calculated as if the accounting had been completed at the acquisition date.
Total acquisition-related costs of $0.7 million are included in the general and administrative expenses in our
consolidated statement of income for the year ended January 31, 2023.
F-17
The following table sets forth the final purchase price allocation of the Astro Machine acquisition for the
estimated fair value of the net asset acquired and liabilities assumed as of the date of acquisition:
(In thousands)
Cash . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Accounts Receivable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Inventory . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Property, Plant and Equipment . . . . . . . . . . . . . . . . . . . . . . . . .
Identifiable Intangible Assets . . . . . . . . . . . . . . . . . . . . . . . . . .
Goodwill . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Accounts Payable and Other Current Liabilities . . . . . . . . . . .
$
91
3,393
5,715
4,200
3,480
2,730
(2,484)
Total Purchase Price . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$17,125
The fair value of the intangible assets acquired was estimated by applying the income approach. This fair
value measurement is based on significant inputs that are not observable in the market and therefore represent a
Level 3 measurement as defined in ASC 820, “Fair Value Measurement.” Key assumptions in estimating the fair
value of the intangibles include (1) remaining useful life of the tradename/trademarks and customer relations
(2) the royalty rate of 0.75%, (3) customer attrition rate of 18.0%, (4) discount rate of 19.0% and (5) a range of
revenue and net income projections for the fiscal years 2023-2026.
The following table sets forth the fair value of the acquired identifiable intangible assets and related
estimated useful lives:
(In thousands)
Fair
Value
Useful Life
(years)
Customer Relations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Trademarks/Tradenames . . . . . . . . . . . . . . . . . . . . . . . . . . .
$3,060
420
5
5
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$3,480
The Customer Relations intangible asset represents the relationships that will be maintained with certain
historical customers of Astro Machine. The trademark/tradename intangible assets reflect the industry reputation
of the Astro Machine name recognition and the registered trademarks for the use of several marks and logos held
by Astro Machine.
Goodwill of $2.73 million, which is not deductible for tax purposes, represents the excess of the purchase
price over the estimated fair value assigned to the tangible and identifiable intangible assets acquired and
liabilities assumed from Astro Machine. The goodwill recognized under ASC 805 is attributable to synergies
which are expected to enhance and expand our overall product portfolio, opportunities in new and existing
markets, future technologies that have yet to be determined and Astro Machine’s assembled work force. The
carrying amount of the goodwill was allocated to the Product Identification (“PI”) segment.
The amounts of revenue and earnings before taxes included in our consolidated statement of income from
the period August 4, 2022 (acquisition date) through January 31, 2023 are as follows:
(In thousands)
2023
Revenue . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Earnings before Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$12,515
1,571
Astro Machine results are reported as part of the PI segment. Proforma results are not provided, as
disclosure of such amounts was impractical to determine as the acquired business had insufficient financial
records and no audit history prior to the transaction.
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Honeywell Asset Purchase and License Agreement
On June 30, 2022, AstroNova Inc. entered into an Asset Purchase and License Agreement with Honeywell
Inc. (“New HW Agreement”) to acquire an exclusive, perpetual, world-wide license to manufacture Honeywell’s
flight deck printers for the Boeing 787 aircraft. The New HW Agreement provides for royalty payments to
Honeywell based on gross revenues from the sales of the printers, paper and repair services of the licensed
products in perpetuity. The royalty rates vary based on the year in which they are paid or earned and as products
are sold or as services provided and range from single-digit to mid-double-digit percentages of gross revenue.
The New HW Agreement included a provision for guaranteed minimum royalty payments to be paid in the event
that the royalties earned by Honeywell do not meet the minimum for the preceding calendar year as follows:
$100,000 in 2024, $200,000 in 2025, $233,000 in 2026 and 2027, and $234,000 in 2028.
This transaction was evaluated under ASC 805, “Business Combinations,” and was accounted for as an asset
acquisition.
The purchase price was allocated to the customer relationship intangible, which was the only asset acquired
as a result of this transaction. This asset will be amortized over the useful life of the intangible. The minimum
royalty payment obligation and related customer relation intangible were recorded at the present value of the
minimum royalty payments.
The acquired identifiable intangible asset is as follows:
(In thousands)
Fair
Value
Useful Life
(Years)
Customer Contract Relationships . . . . . . . . . . . . . . . . . . . . . . .
$530
20
The minimum royalty payment due was discounted based on the payment schedule and applicable discount
rate, resulting in an outstanding royalty obligation of $0.5 million as of January 31, 2023, including $0.1 million
recorded as a current liability.
Additional royalties based on sales activity will be recorded in the period that the associated revenue is
earned. During the fourth quarter of 2023, we incurred $0.1 million in excess royalty expense, which is included
in cost of revenue in our consolidated statement of income for the year ended January 31, 2023.
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 interior of
commercial, business and military aircraft, (ii) related consumable supplies including paper, labels, tags, inks,
toners and ribbons, (iii) repairs and maintenance of equipment and (iv) service agreements.
Revenues disaggregated by primary geographic markets and major product types are as follows:
Primary geographical markets:
(In thousands)
2023
2022
2021
United States . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Europe . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Canada . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Asia . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Central and South America . . . . . . . . . . . . . . . . . . . . .
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$ 91,917
31,021
8,393
5,345
4,589
1,262
$ 68,185
31,922
6,519
5,926
3,271
1,657
$ 70,911
29,029
5,574
5,105
3,950
1,464
Total Revenue . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$142,527
$117,480
$116,033
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Major product types:
(In thousands)
2023
2022
2021
Hardware . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Supplies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Service and Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$ 42,445
82,072
18,010
$ 31,492
73,244
12,744
$ 34,111
71,772
10,150
Total Revenue . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$142,527
$117,480
$116,033
In December 2022, we entered into an amended contract with one of our T&M customers that provided for a
total payment of $3.25 million to be received as a result of our claims allowable under French law relating to
additional component costs we have incurred and will continue to incur in order to supply aerospace printers
under the contract for the period beginning in April 2022 and continuing through 2025. As of January 31, 2023,
$1.1 million was recognized as revenue in the consolidated income statement for the period ended January 31,
2023, in proportion to the total estimated shipments through the end of the contract period. The balance is
recorded within deferred revenue, both current and non-current, and will be recognized into revenue based on
shipments made of the printers during fiscal years 2024 and 2025.
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 $412,000 and
$262,000 at January 31, 2023 and January 31, 2022, respectively, and are recorded as current deferred revenue in
the accompanying consolidated balance sheet. The decrease in the deferred revenue balance during the year
ended January 31, 2023 is primarily due to $248,000 of revenue recognized during the period that was included
in the deferred revenue balance at January 31, 2023 offset by cash payments received in advance of satisfying
performance obligations.
Contract Costs
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 fiscal 2022, 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 was treated as a change in
accounting estimate that is affected by a change in accounting principle. The impact on net income was
immaterial for the period ended January 31, 2022. The balance of these contract assets at January 31, 2022, was
$1.3 million, and in the first quarter of fiscal 2023 we incurred an additional $0.1 million in contract costs that
will be amortized over 19 years. For the years ended January 31, 2023, 2022 and 2021, we amortized contract
costs of $75,000, $60,000 and $27,000, respectively. The balance of deferred incremental direct costs net of
accumulated amortization at January 31, 2023, was $1.4 million, of which $0.1 million is reported in other
current assets and $1.3 million is reported in other assets in the accompanying consolidated balance sheet.
F-20
Note 4—Intangible Assets
Intangible assets are as follows:
January 31, 2023
January 31, 2022
Gross
Carrying
Amount
Accumulated
Amortization
Currency
Translation
Adjustment
Net
Carrying
Amount
Gross
Carrying
Amount
Accumulated
Amortization
Currency
Translation
Adjustment
Net
Carrying
Amount
(In thousands)
Miltope:
Customer Contract
Relationships . . . . . . . $ 3,100
$ (2,777)
$—
$
323 $ 3,100
$ (2,515)
$—
$
585
RITEC:
Customer Contract
Relationships . . . . . . .
2,830
(1,623)
—
1,207
2,830
(1,557)
TrojanLabel:
Existing Technology . . .
Distributor Relations . . .
2,327
937
(2,087)
(588)
94
27
334
376
2,327
937
(1,767)
(498)
—
127
46
1,273
687
485
Honeywell:
Customer Contract
Relationships . . . . . . .
27,773
(11,913)
—
15,860
27,243
(11,073)
—
16,170
Astro Machine:
Customer Contract
Relationships . . . . . . .
Trademarks . . . . . . . . . .
3,060
420
(306)
(42)
—
—
2,754
378
—
—
—
—
—
—
—
—
Intangible Assets, net . . . . . . . $40,447
$(19,336)
$121
$21,232 $36,437
$(17,410)
$173
$19,200
In the second quarter of 2022, we extended the remaining useful life of the pre-existing 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 in 2022 and the change in the
amortization of the RITEC customer contract relationship intangibles is being treated as a change in accounting
estimate in 2022 that is effected by a change in accounting principle. The changes in amortization resulted in a
$1.8 million decrease in amortization expense and a $1.8 million increase to net income for the period ended
January 31, 2022.
There were no impairments to intangible assets during the periods ended January 31, 2023 and 2022.
Amortization expense of $1.9 million, $2.2 million, and $4.1 million with regard to acquired intangibles has been
included in the consolidated statements of income for the years ended January 31, 2023, 2022 and 2021,
respectively.
Estimated amortization expense for the next five fiscal years is as follows:
(In thousands)
2024
2025
2026
2027
2028
Estimated amortization expense . . . . . . . . . . . . . . . . . . . . . . . . . . .
$2,378 $1,719 $1,718 $1,7192 $1,281
F-21
Note 5—Inventories
The components of inventories are as follows:
(In thousands)
Materials and Supplies . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Work-in-Progress . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Finished Goods . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Inventory Reserve . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
January 31,
2023
2022
$ 38,387
1,146
23,221
$22,709
1,489
19,718
62,754
(11,430)
43,916
(9,307)
$ 51,324
$34,609
Finished goods inventory includes $2.3 million and $3.4 million of demonstration equipment at January 31,
2023 and 2022, respectively.
Note 6—Property, Plant and Equipment
Property, plant and equipment consist of the following:
(In thousands)
Land and Land Improvements . . . . . . . . . . . . . . . . . . . . . .
Buildings and Leasehold Improvements . . . . . . . . . . . . . .
Machinery and Equipment . . . . . . . . . . . . . . . . . . . . . . . . .
Computer Equipment and Software . . . . . . . . . . . . . . . . . .
January 31,
2023
2022
$ 2,304
14,158
24,960
13,972
$ 1,004
12,666
23,238
13,913
Gross Property, Plant and Equipment
. . . . . . . . . . . .
Accumulated Depreciation . . . . . . . . . . . . . . . . . . . . . . . . .
55,394
(41,106)
50,821
(39,380)
Net Property Plant and Equipment . . . . . . . . . . . . . . .
$ 14,288
$ 11,441
Depreciation expense on property, plant and equipment was $2.0 million for the year ended January 31,
2023 and $1.7 million and $1.9 million for the years ended January 31, 2022 and 2021, respectively.
During fiscal 2022, we wrote-off our Oracle EnterpriseOne enterprise resource planning (“ERP”) system
due to the full implementation of a new ERP system in our US operations. The book value and related
accumulated depreciation of the Oracle EnterpriseOne ERP system along with the balance of the related prepaid
service and maintenance contracts were removed from the accompanying consolidated balance sheet at
January 31, 2022, and we have recorded a net loss on the disposal of $696,000, which is included in other income
(expense) in the accompanying consolidated income statement for the year ended January 31, 2022.
F-22
Note 7—Accrued Expenses
Accrued expenses consist of the following:
January 31,
(In thousands)
Warranty . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Professional Fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Freight . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Lease Liability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Accrued Property & Sales Tax . . . . . . . . . . . . . . . . . . . . . . . . .
Stockholder Relation Fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Dealer Commissions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other Accrued Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2023
$1,072
311
—
275
187
86
78
1,299
2022
$ 834
411
347
327
316
102
139
1,637
$3,308
$4,113
Note 8—Credit Agreement and Long-Term Debt
Credit Agreement
In connection with the purchase of Astro Machine, on August 4, 2022, we entered into a Second
Amendment to Amended and Restated Credit Agreement (the “Second Amendment”) with Bank of America,
N.A., as lender (the “Lender”). The Second Amendment amended the Amended and Restated Credit Agreement
dated as of July 30, 2020, as amended by the First Amendment to Amended and Restated Credit Agreement,
dated as of March 24, 2021, and the LIBOR Transition Amendment, dated as of December 24, 2021 (the
“Existing Credit Agreement,” and the Existing Credit Agreement as amended by the Second Amendment, the
“Amended Credit Agreement”), between the Company and the Lender.
The Amended Credit Agreement provides for (i) a new term loan in the principal amount of $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) an increase in the
aggregate principal amount of the revolving credit facility available thereunder from $22.5 million to
$25.0 million. At the closing of the Second Amendment, we borrowed the entire $6.0 million term loan and
$12.4 million under the revolving credit facility, and the proceeds of such borrowings were used in part to pay
the purchase price payable under the Purchase Agreement and certain related transaction costs. The revolving
credit facility may otherwise be used for corporate purposes.
The Amended Credit Agreement requires that the term loan be paid in quarterly installments on the last day
of each of our fiscal quarters over the term of the Amended Credit Agreement on the 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, 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 August 4, 2027, and any outstanding revolving loans
thereunder will be due and payable in full, and the revolving credit facility will terminate, on such date. We may
reduce or terminate the revolving line of credit at any time, subject to certain thresholds and conditions, without
premium or penalty.
The interest rates under the Amended Credit Agreement 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
F-23
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 2.50% 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 plus 1.00%, or (iv) 0.50%,
plus a margin that varies within a range of 0.60% to 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 0.35% based
on our consolidated leverage ratio. 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 our 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, a minimum consolidated fixed charge coverage ratio and a minimum consolidated asset 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 our or our subsidiaries’ capital stock, to repurchase or
acquire our or our subsidiaries’ capital stock, to conduct mergers or acquisitions, to sell assets, to alter our or our
subsidiaries’ capital structure, to make investments and loans, to change the nature of our or our subsidiaries’
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 Second
Amendment. As of January 31, 2023, we believe we are in compliance with all of the covenants in the Credit
Agreement.
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 we hold in ANI ApS, AstroNova GmbH and
AstroNova SAS), subject to certain exceptions, and by a mortgage on our owned real property in West Warwick,
Rhode Island, and are guaranteed by, and secured by substantially all of the personal property assets of Astro
Machine.
Summary of Outstanding Debt
Revolving Credit Facility
During fiscal 2023 we borrowed a net of $15.9 million on our revolving line of credit. The balance
outstanding under the revolving line of credit bore interest at a weighted average rate of 6.71% and 4.10% for the
years ended January 31, 2023 and January 31, 2022, respectively, and we incurred $752,000 and $4,000 for
interest on this obligation during the years ended January 31, 2023 and January 31, 2022, respectively.
Commitment fees on the undrawn portion of our revolving credit facility of $30,000 and $50,000 were incurred
for the years ended January 31, 2023 and January 31, 2022, respectively. Both the interest expense and
commitment fees are included as interest expense in the accompanying consolidated income statement for all
periods presented. At January 31, 2023, $9.1 million remains available for borrowing under our revolving line of
credit.
F-24
Long-Term Debt
Long-term debt in the accompanying condensed consolidated balance sheets under the Amended Credit
Agreement is as follows:
(In thousands)
January 31,
2023
2022
USD Term Loan (6.78% as of January 31, 2023); maturity
date of August 4, 2027 . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$14,250
$ —
USD Term Loan (2.35% as of January 31, 2022); maturity
date of September 30, 2025 . . . . . . . . . . . . . . . . . . . . . . . .
—
$ 9,250
Debt Issuance Costs, net of accumulated
amortization . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Current Portion of Term Loan . . . . . . . . . . . . . . . . . . . .
(110)
(2,100)
(96)
(1,000)
Long-Term Debt . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$12,040
$ 8,154
14,250
9,250
During the years ended January 31, 2023, 2022 and 2021, we recognized $0.6 million, $0.3 million and
$0.5 million of interest expense on our long-term debt, respectively, which was included in interest expense in
the accompanying consolidated income statement for all periods presented.
The schedule of required principal payments remaining on our long-term debt outstanding as of January 31,
2023 is as follows:
(In thousands)
Fiscal 2024 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Fiscal 2025 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Fiscal 2026 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Fiscal 2027 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Fiscal 2028 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$ 2,100
2,700
2,700
2,700
4,050
$14,250
Note 9—Paycheck Protection Program Loan
On May 6, 2020, we entered into a loan agreement with, and executed a promissory note in favor of
Greenwood pursuant to which we borrowed $4.4 million (the “PPP Loan”) from Greenwood under the Paycheck
Protection Program (“PPP”) administered by the SBA and authorized by the CARES Act.
The PPP Loan, originally scheduled to mature on May 6, 2022, was unsecured and bore interest at a rate of
1.0% per annum, accruing from the loan date.
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, in the second
quarter of fiscal 2022, we recorded a $4.5 million gain on extinguishment of debt, which is included in the
accompanying consolidated income statement for the period ended January 31, 2022.
Note 10—Derivative Financial Instruments and Risk Management
In 2017, we entered into a cross-currency interest rate swap and an interest rate swap to manage the interest
rate risk.
F-25
On July 30, 2020, we terminated these two swaps. The terms of the Amended and Restated Credit
Agreement dated as of July 30, 2020, 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 $0.2 million remaining balance in accumulated other comprehensive loss related to the interest rate
swap was amortized into earnings through the original term of the hedge relationship as the underlying floating
interest rate debt still exists.
At January 31, 2023, we have fully reclassified all of the net losses on the frozen other comprehensive
income balance from accumulated other comprehensive loss to earnings associated with the terminated interest
rate swap due to the payment of variable interest associated with the floating interest rate debt.
The following tables present the impact of the derivative instruments in our consolidated financial
statements for the years ended January 31, 2023 and 2022:
Cash Flow Hedge
(In thousands)
Years Ended
Amount of Gain(Loss)
Recognized in OCI
on
Derivative
January 31,
2023
January 31,
2022
Location of Gain (Loss)
Reclassified from
Accumulated OCI into
Income
Amount of Gain (Loss)
Reclassified from
Accumulated OCI into
Income
January 31,
2023
January 31,
2022
Swap contracts . . . . . . . . . . . . . . . . . . . .
$—
$—
Other Income
$(59)
$(79)
Note 11—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 were 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.
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. In the second quarter of the current year, we amended certain
payroll tax filings and applied for a refund of $3.1 million. 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
F-26
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.
We recorded a $3.1 million receivable in the second quarter of fiscal 2022 for the ERC receivable, which
was outstanding as of January 31, 2022 and is included as such in the accompanying consolidated balance sheet.
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 which is reflected in the accompanying
consolidated income statement for the year ended January 31, 2022. On March 22, 2022, we received the
$3.1 million for the ERC.
Note 12—Royalty Obligation
In fiscal 2018, AstroNova, Inc. entered into an Asset Purchase and License Agreement with Honeywell
International, Inc. 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 in quarterly installments over a ten-year period. Royalty payments are based on gross revenues from the
sales of the printers, paper and repair services of the licensed products. The royalty rates vary based on the year
in which they are paid or earned and product sold or service provided, and range from single-digit to mid double-
digit percentages of gross revenue.
The guaranteed minimum royalty payment obligation was recorded at the present value of the minimum
annual royalty payments. As of January 31, 2023, we had paid an aggregate of $9.5 million of the guaranteed
minimum royalty obligation. At January 31, 2023, the current portion of the outstanding guaranteed minimum
royalty obligation of $1.6 million is to be paid over the next twelve months and is reported as a current liability
and the remainder of $3.0 million is reported as a long-term liability on our consolidated balance sheet. In
addition to the guaranteed minimum royalty payments, for the periods ended January 31, 2023 and January 31,
2022, we also incurred excess royalty expense of $1.3 million and $0.5 million, respectively, which is included in
cost of revenue in our consolidated statements of income. A total of $0.4 million of excess royalty is payable and
reported as a current liability on our consolidated balance sheet at January 31, 2023.
In fiscal 2023, AstroNova, Inc. entered into a second Asset Purchase and License Agreement with
Honeywell International, Inc. as further discussed in Note 2.
Note 13—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
January 31,
2023
January 31,
2022
Lease Assets . . . . . . . . . . . . . . . . . . .
Lease Liabilities—Current . . . . . . . .
Lease Liabilities—Long Term . . . . .
Right of Use Assets
Other Accrued Expenses
Lease Liabilities
$794
$275
$555
$1,094
$ 327
$ 808
F-27
Lease cost information is as follows:
Operating Leases
(In thousands)
Statement of Income Classification
2023
2022
Operating Lease Costs . . . . . . . . . .
General and Administrative Expense
$460
$510
At January 31, 2023, maturities of operating lease liabilities are as follows:
(In thousands)
2024 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2025 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2026 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2027 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2028 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Thereafter . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$302
199
154
149
92
—
Total Lease Payments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Less: Imputed Interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
896
(66)
Total Lease Liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$830
As of January 31, 2023, the weighted-average remaining lease term and weighted-average discount rate for
our operating leases are 3.8 years and 3.87%, 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:
(In thousands)
2023
2022
Cash paid for operating lease liabilities . . . . . . . . . . . . .
$314
$372
Note 14—Accumulated Other Comprehensive Loss
The changes in the balance of accumulated other comprehensive loss by component are as follows:
(In thousands)
Balance at January 31, 2020 . . . . . . . . . . . . . . . . . . . . . . .
Other Comprehensive Income (Loss) before
reclassification . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Amounts Reclassified from AOCI to Earnings . . . . . . . .
Cross-Currency Interest Rate Swap Termination . . . . . . .
Other Comprehensive Income (Loss) . . . . . . . . . . . . . . . .
Balance at January 31, 2021 . . . . . . . . . . . . . . . . . . . . . . .
Other Comprehensive Loss before reclassification . . . . .
Amounts Reclassified from AOCI to Earnings . . . . . . . .
Other Comprehensive Income (Loss) . . . . . . . . . . . . . . . .
Balance at January 31, 2022 . . . . . . . . . . . . . . . . . . . . . . .
Other Comprehensive Income (Loss) before
reclassification . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Amounts reclassified from AOCI to Earnings . . . . . . . . .
Other Comprehensive Income (Loss) . . . . . . . . . . . . . . . .
Foreign Currency
Translation
Adjustments
Net
Unrealized
Gain (Losses)
on Cash Flow
Hedges
Total
$ (985)
$(108)
$(1,093)
710
—
—
710
$ (275)
(1,426)
—
(1,426)
$(1,701)
(537)
—
(537)
(239)
193
45
(1)
$(109)
—
62
62
471
193
45
709
$ (384)
(1,426)
62
(1,364)
$ (47)
$(1,748)
—
47
47
(537)
47
(490)
Balance at January 31, 2023 . . . . . . . . . . . . . . . . . . . . . . .
$(2,238)
$ —
$(2,238)
F-28
The amounts presented above in other comprehensive income (loss) are net of taxes except for translation
adjustments associated with our German, Danish and Shanghai subsidiaries.
Note 15—Shareholders’ Equity
During fiscal years 2023 and 2022, certain of our employees delivered a total of 17,752 and 27,222 shares,
respectively, of our common stock to satisfy the exercise price and related taxes for stock options exercised and
restricted stock vesting. The shares delivered were valued at a total of $0.3 million and $0.4 million, respectively,
and are included in treasury stock in the accompanying consolidated balance sheets at January 31, 2023 and
2022. These transactions did not impact the number of shares authorized for repurchase under our current
repurchase program.
Note 16—Share-Based Compensation
The Company maintains the following share-based compensation plans:
Stock Plans:
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 the 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 124,962 unvested RSUs; 128,793 unvested PSUs; 21,172 unvested RSAs
and options to purchase an aggregate of 135,500 shares outstanding as of January 31, 2023.
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 January 31,
2023, options to purchase an aggregate of 276,574 shares were outstanding under the 2007 Plan and options to
purchase an aggregate of 135,125 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 2023 was
$65,000. 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.
F-29
Share-Based Compensation:
Share-based compensation expense has been recognized as follows:
Years Ended January 31
2022
2021
2023
(In thousands)
Stock Options . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Restricted Stock Awards and Restricted Stock Units . . . . . . .
Employee Stock Purchase Plan . . . . . . . . . . . . . . . . . . . . . . . .
$
7
1,271
12
$ 210
1,266
17
$ 517
1,285
17
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$1,290
$1,493
$1,819
Stock Options:
Aggregated information regarding stock options granted under the plans is summarized below:
Options Outstanding, January 31, 2020 . . . . . . . . . . . . . . .
Options Granted . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Options Exercised . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Options Forfeited . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Options Cancelled . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Options Outstanding, January 31, 2021 . . . . . . . . . . . . . . .
Options Granted . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Options Exercised . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Options Forfeited . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Options Cancelled . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Options Outstanding, January 31, 2022 . . . . . . . . . . . . . . .
Options Granted . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Options Exercised . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Options Forfeited . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Options Cancelled . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Weighted-
Average
Exercise
Price Per
Share
$14.46
—
7.60
12.89
7.36
$14.63
—
9.34
15.09
—
$14.67
—
8.74
15.42
8.09
Number
of Shares
679,044
—
(1,200)
(54,361)
(1,400)
622,083
—
(6,425)
(17,615)
—
598,043
—
(42,944)
(5,500)
(2,400)
Options Outstanding, January 31, 2023 . . . . . . . . . . . . . . .
547,199
$15.16
Set forth below is a summary of options outstanding at January 31, 2023:
Range of
Exercise prices
$5.00-10.00 . . . . . . . . . . . . .
$10.01-15.00 . . . . . . . . . . . .
$15.01-20.00 . . . . . . . . . . . .
Outstanding
Number of
Shares
—
332,849
214,350
547,199
Weighted-
Average
Exercise Price
Weighted-
Average
Remaining
Contractual Life
$ —
13.68
17.45
$15.16
—
2.9
4.8
3.7
Number of
Shares
—
332,849
214,350
547,199
Exercisable
Weighted-
Average
Exercise Price
Weighted
Average
Remaining
Contractual
Life
$ —
13.68
17.45
$15.16
—
2.9
4.8
3.7
No options were granted during fiscal 2023 or fiscal 2022. As of January 31, 2023, there was no
unrecognized compensation expense related to the unvested stock options granted under the plans.
F-30
As of January 31, 2023, the aggregate intrinsic value (the aggregate difference between the closing stock
price of our common stock on January 31, 2023, and the exercise price of the outstanding options) that would
have been received by the option holders if all options had been exercised was $50,000 for all exercisable options
and all options outstanding. The total aggregate intrinsic value of options exercised during fiscal 2023, 2022 and
2021 was $200,000, $26,000, and $4,000, respectively.
Restricted Stock Units, Performance-Based Restricted Stock Units and Restricted Stock Awards :
Aggregated information regarding RSUs, PSUs and RSAs granted under the Plan is summarized below:
RSUs, PSUs &
RSAs
Weighted-Average
Grant Date Fair Value
Outstanding at January 31, 2020 . . . . . . . . .
Granted . . . . . . . . . . . . . . . . . . . . . . . .
Vested . . . . . . . . . . . . . . . . . . . . . . . . .
Forfeited . . . . . . . . . . . . . . . . . . . . . . .
Outstanding at January 31, 2021 . . . . . . . . .
Granted . . . . . . . . . . . . . . . . . . . . . . . .
Vested . . . . . . . . . . . . . . . . . . . . . . . . .
Forfeited . . . . . . . . . . . . . . . . . . . . . . .
Outstanding at January 31, 2022 . . . . . . . . .
Granted . . . . . . . . . . . . . . . . . . . . . . . .
Vested . . . . . . . . . . . . . . . . . . . . . . . . .
Forfeited . . . . . . . . . . . . . . . . . . . . . . .
134,634
245,131
(64,997)
(117,355)
197,413
151,406
(126,939)
(900)
220,980
141,371
(85,324)
(2,100)
Outstanding at January 31, 2023 . . . . . . . . .
274,927
$16.79
7.61
17.28
8.83
$ 9.96
14.51
10.43
14.26
$13.23
12.70
13.45
13.25
$12.82
As of January 31, 2023, there was $2.0 million of unrecognized compensation expense related to unvested
RSUs, PSUs and RSAs. This expense is expected to be recognized over a weighted average period of 1.3 years.
Employee Stock Purchase Plan (ESPP):
On June 7, 2022, we adopted the AstroNova Inc. 2022 Employee Stock Purchase Plan (“2022 ESPP”) to
replace our previous Employee Stock Purchase Plan (the “Prior ESPP”). The 2022 ESPP allows 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 40,000 shares were reserved for issuance under this plan and 5,045
shares were purchased under the 2022 ESSP during the year ended January 31, 2023. During the periods ended
January 31, 2023 and January 31, 2022, there were 1,550 and 8,092 shares, respectively, purchased under the
Prior ESPP, and no additional purchases may be made under the Prior ESPP. As of January 31, 2023, 34,955
shares remain available for purchase under the 2022 ESPP.
Note 17—Income Taxes
The components of income (loss) before income taxes are as follows:
(In thousands)
Domestic . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Foreign . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2023
2022
2021
$1,773
1,637
$5,046
1,988
$(1,193)
3,372
$3,410
$7,034
$ 2,179
F-31
The components of the provision for income taxes are as follows:
2023
2022
2021
(In thousands)
Current:
Federal . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
State . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Foreign . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$
902
313
870
$(183) $ 1,272
224
420
76
501
2,085
394
1,916
Deferred:
Federal . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
State . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Foreign . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$(1,053) $ 180
177
(146)
(315)
32
$ (910)
(189)
78
(1,336)
211
(1,021)
$
749
$ 605
$
895
Total income tax provision differs from the expected tax provision as a result of the following:
(In thousands)
Income Tax Provision at Statutory Rate . . . . . . . . . . . . . . . . . . .
Change in Valuation Allowance . . . . . . . . . . . . . . . . . . . . . . . . .
Foreign Rate Differential . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Change in Reserves Related to ASC 740 Liability . . . . . . . . . . .
Denmark Statutory Audit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Meals and Entertainment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Canada Withholding Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Global Intangible Low Taxed Income . . . . . . . . . . . . . . . . . . . . .
Foreign Derived Intangible Income . . . . . . . . . . . . . . . . . . . . . . .
R&D Credits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Share Based Compensation . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Return to Provision Adjustment . . . . . . . . . . . . . . . . . . . . . . . . .
State Taxes, Net of Federal Tax Effect . . . . . . . . . . . . . . . . . . . .
PPP Loan Forgiveness . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2023
2022
2021
$ 716
182
157
93
—
—
—
—
(180)
(160)
(52)
(22)
(2)
—
17
$ 458
$1,477
(81)
57
197
61
(10)
(245)
341
—
11
9
62
—
14
—
(150)
(55)
(157)
(180)
171
(95)
(2)
368
28
143
(937) —
13
2
$ 749
$ 605
$ 895
Our effective tax rate for fiscal 2023 was 22.0% compared to 8.6% in fiscal 2022 and 41.1% in fiscal 2021.
The increase in the effective tax rate in fiscal 2023 from fiscal 2022 is primarily related to the absence of the PPP
loan forgiveness which is tax-exempt income that was a one-time item that reduced the rate in fiscal 2022.
Specific items increasing the effective tax rate in fiscal 2023 include the change in reserves related to ASC 740
liability and the increase in the valuation allowance recorded on China net operating losses. This increase was
offset by state taxes, return to provision adjustments, share-based compensation, R&D tax credits, and foreign
derived intangible income (“FDII”) deduction.
The decrease in the effective tax rate in fiscal 2022 from fiscal 2021 is primarily related to the one-time
impact of the PPP loan forgiveness tax-exempt income. Specific items decreasing the effective tax rate include
PPP loan forgiveness tax-exempt income, R&D tax credits, foreign derived intangible income (“FDII”) deduction
and change in reserves related to ASC 740 liabilities. This decrease was offset by state taxes, return to provision
adjustments, and taxes on foreign earnings.
F-32
The components of deferred income tax expense arise from various temporary differences and relate to
items included in the statement of income. The tax effects of temporary differences that gave rise to significant
portions of the deferred tax assets and liabilities are as follows:
(In thousands)
Deferred Tax Assets:
Inventory . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Honeywell Royalty Liability . . . . . . . . . . . . . . . . . . . . .
State R&D Credits . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Share-Based Compensation . . . . . . . . . . . . . . . . . . . . . .
Bad Debt . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Warranty Reserve . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Compensation Accrual . . . . . . . . . . . . . . . . . . . . . . . . . .
Net Operating Loss . . . . . . . . . . . . . . . . . . . . . . . . . . . .
ASU 842 Adjustment – Lease Liability . . . . . . . . . . . . .
Unrecognized State Tax Benefits . . . . . . . . . . . . . . . . . .
Foreign Tax Credit . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Deferred Service Contract Revenue . . . . . . . . . . . . . . . .
Section 174 Capitalization* . . . . . . . . . . . . . . . . . . . . . .
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
January 31,
2023
2022
$ 2,710
3,008
1,851
620
180
258
248
135
53
58
154
90
1,175
281
$ 2,159
2,655
1,925
593
213
198
322
152
93
64
154
61
—
224
10,821
8,813
Deferred Tax Liabilities:
Accumulated Tax Depreciation in Excess of Book
Depreciation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Intangibles . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
ASU 842 Adjustment – Lease Liability . . . . . . . . . . . . .
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
1,037
694
50
180
1,961
Subtotal . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Valuation Allowance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
8,860
(2,120)
455
767
90
318
1,630
7,183
(1,778)
Net Deferred Tax Assets . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$ 6,740
$ 5,405
* Beginning in fiscal 2023, changes to Section 174 of the Internal Revenue Code made by the Tax Cuts and Jobs
Act of 2017 no longer permit an immediate deduction for research and development expenditures in the tax
year that such costs are incurred. These costs are capitalized resulting in an increase in deferred tax assets of
$1.2 million.
Deferred taxes are reflected in the consolidated balance sheet as follows:
Deferred Tax Assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Deferred Tax Liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
6,907
(167)
5,591
(186)
Total Net Deferred Tax Assets . . . . . . . . . . . . . . . . . . . . . . . . .
$6,740
$5,405
January 31,
2023
2022
The valuation allowances of $2.1 million at January 31, 2023 and $1.8 million at January 31, 2022, relate to
Rhode Island research and development tax credit carryforwards, foreign tax credit carryforwards, and China’s
net operating losses that are expected to expire unutilized.
F-33
At January 31, 2023, we had net operating loss carryforwards of $0.1 million in China, which expire in 2024
through 2028. We have net operating loss carryforwards of less than $0.1 million in France, which can be carried
forward indefinitely. We expect to utilize the net operating loss carryforwards in France before in future tax
periods.
At January 31, 2023, we had state research credit carryforwards of approximately $1.9 million which expire
in 2023 through 2030. Additionally, we had $0.2 million of foreign tax credits. We maintain a full valuation
allowance against these credits as we expect these credits to expire unused.
We believe that it is reasonably possible that some unrecognized tax benefits, accrued interest and penalties
could decrease income tax expense in the next year due to either the review of previously filed tax returns or the
expiration of certain statutes of limitation. The changes in the balances of unrecognized tax benefits, excluding
interest and penalties are as follows:
(In thousands)
Balance, beginning of the year . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Increases in prior period tax positions . . . . . . . . . . . . . . . . . . . . . . .
Increases in current period tax positions . . . . . . . . . . . . . . . . . . . . .
Reductions related to lapse of statutes of limitations . . . . . . . . . . .
2023
2022
2021
$303
24
136
(49)
$ 384
63
67
(211)
$362
59
5
(42)
Balance, end of the year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$414
$ 303
$384
During fiscal 2023 and 2022, we released $49,000 and $211,000, respectively, of uncertain tax positions
including accrued interest and penalties relating to a change in various unrecognized tax positions. The Company
has accrued potential interest and penalties of $77,000 included in income taxes payable in the accompanying
consolidated balance sheet at the end of January 31, 2023.
The Company and its subsidiaries file income tax returns in U.S. federal jurisdictions, various state
jurisdictions, and various foreign jurisdictions. In fiscal 2023, we released $27,000 related to a federal tax
exposure for the fiscal 2019 tax year and $22,000 of state nexus positions as a result of the expiration of the
statute of limitations.
U.S. income taxes have not been provided on $8.5 million of undistributed earnings of our foreign
subsidiaries since it is our intention to permanently reinvest such earnings offshore. If the earnings were
distributed in the form of dividends, the Company would not be subject to U.S. tax as a result of the Tax Act but
could be subject to foreign income and withholding taxes. Determination of the amount of this unrecognized
deferred income tax liability is not practical.
Note 18—Nature of Operations, Segment Reporting and Geographical Information
Our operations consist of the design, development, manufacture and sale of specialty printers and data
acquisition and analysis systems, including both hardware and software and related consumable supplies. We
organize and manage our business as a portfolio of products and services designed around a common theme of
data acquisition and information output. We have two reporting segments consistent with our revenue product
groups: Product Identification (“PI”) and Test & Measurement (“T&M”).
Our PI segment produces an array of high-technology digital color and monochrome label printers and mini
presses, labeling software and supplies for a variety of commercial industries worldwide and includes our newly
acquired Astro Machine. AstroNova’s T&M segment produces data acquisition systems used worldwide for a
variety of recording, monitoring and troubleshooting applications for many industries including aerospace,
automotive, defense, rail, energy, industrial and general manufacturing. The T&M segment also includes our line
of aerospace flight deck and cabin printers.
F-34
Business is conducted in the United States and through foreign branch offices and subsidiaries in Canada,
Europe, China, Southeast Asia and Mexico. Manufacturing activities are primarily conducted in the United
States. Revenue and service activities outside the United States are conducted through wholly owned entities and,
to a lesser extent, through authorized distributors and agents. Transfer prices are intended to produce gross profit
margins as would be associated with an arms-length transaction.
The accounting policies of the reporting segments are the same as those described in the summary of
significant accounting policies herein. We evaluate segment performance based on the segment profit before
corporate and financial administration expenses.
Summarized below are the revenue and segment operating profit (loss) (both in dollars and as a percentage
of revenue) for each reporting segment:
($ in thousands)
Revenue
Segment Operating Profit
(Loss)
Segment Operating Profit (Loss)
as a % of Revenue
2023
2022
2021
2023
2022
2021
2023
2022
2021
Product Identification . . . . . . $103,089 $ 90,915 $ 90,268 $ 7,889 $10,411 $12,885
T&M . . . . . . . . . . . . . . . . . . .
26,565
25,765
39,438
3,398
8,989
(1,032) 22.8% 12.8%
7.7% 11.5% 14.3%
(4.0)%
Total . . . . . . . . . . . . . . . . . . . $142,527 $117,480 $116,033 16,878 13,809 11,853 11.8% 11.8% 10.2%
Corporate Expenses . . . . . . .
Operating Income . . . . . . . . .
Other Income (Expense),
Net . . . . . . . . . . . . . . . . . .
Income Before Income
Taxes . . . . . . . . . . . . . . . .
Income Tax Provision . . . . .
Net Income . . . . . . . . . . . . . .
11,435
9,553
9,420
5,443
4,256
2,433
(2,033) 2,778
(254)
3,410
749
7,034
605
2,179
895
$ 2,661 $ 6,429 $ 1,284
No customer accounted for greater than 10% of net revenue in fiscal 2023, 2022 or 2021.
Other information by segment is presented below:
(In thousands)
Assets
January 31,
2023
2022
Product Identification . . . . . . . . . . . . . . . . . . . . . . . . . . . .
T&M . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Corporate* . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$ 69,607
60,730
8,870
$ 51,732
50,374
12,849
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$139,207
$114,955
* Corporate assets consist principally of cash, cash equivalents, deferred tax assets and refunds, and certain
prepaid corporate assets.
(In thousands)
Product Identification . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
T&M . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Depreciation and
Amortization
Capital Expenditures
2023
2022
2021
2023
2022
2021
$2,219 $1,157 $1,835 $121 $ 847 $1,563
1,024
1,697
2,837
4,148
949
108
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$3,916 $3,994 $5,983 $229 $1,796 $2,587
F-35
Geographical Data
Presented below is selected financial information by geographic area:
(In thousands)
United States . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Europe . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Canada . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Asia . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Central and South America . . . . . . . . . . . . . . . . . . . . . . .
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2023
Revenue
2022
Long-Lived Assets*
January 31,
2021
2023
2022
$ 91,917 $ 68,185 $ 70,911 $34,277 $29,131
1,486
9
15
—
—
31,021
8,393
5,345
4,589
1,262
29,029
5,574
5,105
3,950
1,464
31,922
6,519
5,926
3,271
1,657
1,230
4
9
—
—
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$142,527 $117,480 $116,033 $35,520 $30,641
* Long-lived assets exclude goodwill assigned to the T&M segment of $4.5 million at both January 31, 2023 and
2022 and $10.1 million and $7.6 million assigned to the PI segment at January 31, 2023 and 2022,
respectively.
Note 19—Employee Benefit Plans
We sponsor a Profit-Sharing Plan (the “Plan”) which provides retirement benefits to all eligible domestic
employees. The Plan allows participants to defer a portion of their cash compensation and contribute such
deferral to the Plan through payroll deductions. The Company makes matching contributions up to specified
levels. The deferrals are made within the limits prescribed by Section 401(k) of the Internal Revenue Code.
All contributions are deposited into trust funds. It is our policy to fund any contributions accrued. Our
annual contribution amounts are determined by the Board of Directors. Contributions paid or accrued amounted
to $0.5 million in fiscal 2023, $0.5 million in fiscal 2022 and $0.4 million in fiscal 2021.
Note 20—Product Warranty Liability
We offer a manufacturer’s warranty for the majority of our hardware products. The specific terms and
conditions of warranty vary depending upon the products sold and the country in which we do business. We
estimate the warranty costs based on historical claims experience and record a liability in the amount of such
estimates at the time product revenue is recognized. We regularly assess the adequacy of our recorded warranty
liabilities and adjust the amounts as necessary. Activity in the product warranty liability, which is included in
other accrued expenses in the accompanying consolidated balance sheet, is as follows:
(In thousands)
2023
2022
2021
Balance, beginning of the year . . . . . . . . . . . . . . . . . . . . . . . .
Provision for Warranty Expense . . . . . . . . . . . . . . . . . . . . . . .
Cost of Warranty Repairs . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$
834
2,077
(1,839)
$
730
2,174
(2,070)
$ 850
855
(975)
Balance, end of the year . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$ 1,072
$
834
$ 730
During fiscal 2022, we incurred incremental costs because of a product quality issue with one of our
vendors. As the result of discussions with the vendor, which was responsible for the product quality issue, we
entered into an agreement whereby the vendor paid us $975,000 as partial reimbursement of the costs we
incurred in supporting our customers with respect to the product quality issue. For the period ended January 31,
2022, we recorded this payment to offset cost of goods in our PI segment for the product lines effected to
partially reverse the accounting impact when the original costs of the quality issues were incurred.
F-36
Note 21—Concentration of Risk
Credit is generally extended on an uncollateralized basis to almost all customers after review of credit
worthiness. Concentration of credit and geographic risk with respect to accounts receivable is limited due to the
large number and general dispersion of accounts, which constitute our customer base. We periodically perform
on-going credit evaluations of our customers. We have not historically experienced significant credit losses on
collection of our accounts receivable.
During the years ended January 31, 2023, 2022 and 2021, one vendor accounted for 18.7%, 23.3% and
23.2% of purchases, respectively, and 16.2%, 15.4% and 28.3% of accounts payable, respectively, as of
January 31, 2023, 2022 and 2021.
Note 22—Commitments and Contingencies
In order to meet our manufacturing demands and, in some cases, lock in particular pricing structures for
specific goods used in manufacturing, we enter into purchase commitments with our suppliers. At January 31,
2023, our purchase commitments totaled $25.8 million, with $22.8 million due within 12 months, some of which
are non-cancelable.
We are also subject to contingencies, including legal proceedings and claims arising in the normal course of
business that cover a wide range of matters including, among others, contract and employment claims; workers
compensation claims; product liability; warranty and modification; and adjustment or replacement of component
parts of units sold.
Direct costs associated with the estimated resolution of contingencies are accrued at the earliest date at
which it is deemed probable that a liability has been incurred and the amount of such liability can be reasonably
estimated. While it is impossible to ascertain the ultimate legal and financial liability with respect to contingent
liabilities, including lawsuits, we believe that the aggregate amount of such liabilities, if any, in excess of
amounts provided or covered by insurance, will not have a material adverse effect on the consolidated financial
position or results of operations. It is possible, however, that future results of operations for any particular future
period could be materially affected by changes in our assumptions or strategies related to these contingencies or
changes out of our control.
Note 23—Fair Value Measurements
Assets and Liabilities Not Recorded at Fair Value on the Consolidated Balance Sheet
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:
(In thousands)
Fair Value Measurement at
January 31, 2023
Level 1 Level 2
Level 3
Total
Carrying
Value
Long-Term Debt and Related Current Maturities . . . . . . . . . . . .
$—
$— $14,310 $14,310 $14,250
(In thousands)
Fair Value Measurement at
January 31, 2022
Level 1 Level 2
Level 3
Total
Carrying
Value
Long-Term Debt and Related Current Maturities . . . . . . . . . . . .
$—
$— $ 9,255 $ 9,255 $ 9,250
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 borrowings with the same maturities would be made to
borrowers with similar credit ratings and is classified as Level 3.
F-37
SCHEDULE II—VALUATION AND QUALIFYING ACCOUNTS AND RESERVES
ASTRONOVA, INC.
Description
Allowance for Doubtful Accounts (1):
(In thousands)
Year Ended January 31,
Balance at
Beginning
of Year
Provision/
(Benefit)
Charged to
Operations Deductions(2)
Balance
at End
of Year
2023 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2022 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2021 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$ 826
$1,054
$ 856
$100
$ 50
$194
$(195)
$(278)
4
$
$ 731
$ 826
$1,054
(1) The allowance for doubtful accounts has been netted against accounts receivable in the balance sheets as of
the respective balance sheet dates.
(2) Uncollectible accounts written off, net of recoveries.
F-38
C(cid:49)(cid:52)P(cid:49)(cid:52)AT(cid:39) AN(cid:38) SHA(cid:52)(cid:39)H(cid:49)L(cid:38)(cid:39)(cid:52) INF(cid:49)(cid:52)MATI(cid:49)N
(cid:37)(cid:49)(cid:52)(cid:50)(cid:49)(cid:52)(cid:35)(cid:54)(cid:39) (cid:42)(cid:39)(cid:35)(cid:38)(cid:51)(cid:55)(cid:35)(cid:52)(cid:54)(cid:39)(cid:52)(cid:53)
(cid:24)00 East Greenwich Avenue
West Warwick, Rhode Island 02(cid:26)(cid:27)3 USA
(cid:26)00(cid:15)343(cid:15)403(cid:27)
(cid:37)(cid:49)(cid:47)(cid:47)(cid:49)(cid:48) (cid:53)(cid:54)(cid:49)(cid:37)(cid:45)
AstroNova, Inc. common stock is listed on the Nasdaq
Global Market.
Ticker Symbol: A(cid:46)OT
The closing price on April 13, 2023 was $15.00
(cid:43)(cid:48)(cid:56)(cid:39)(cid:53)(cid:54)(cid:49)(cid:52) (cid:43)(cid:48)(cid:51)(cid:55)(cid:43)(cid:52)(cid:43)(cid:39)(cid:53)
Securities analysts, portfolio managers and
other interested investors seeking information
about the Company may visit our website at:
(cid:89)(cid:89)(cid:89)(cid:16)(cid:67)(cid:85)(cid:86)(cid:84)(cid:81)(cid:80)(cid:81)(cid:88)(cid:67)(cid:75)(cid:80)(cid:69)(cid:16)(cid:69)(cid:81)(cid:79) or send inquiries to:
(cid:75)(cid:80)(cid:88)(cid:71)(cid:85)(cid:86)(cid:81)(cid:84)(cid:84)(cid:71)(cid:78)(cid:67)(cid:86)(cid:75)(cid:81)(cid:80)(cid:85)(cid:34)(cid:67)(cid:85)(cid:86)(cid:84)(cid:81)(cid:80)(cid:81)(cid:88)(cid:67)(cid:75)(cid:80)(cid:69)(cid:16)(cid:69)(cid:81)(cid:79)
(cid:50)(cid:52)(cid:49)(cid:38)(cid:55)(cid:37)(cid:54) (cid:43)(cid:48)(cid:40)(cid:49)(cid:52)(cid:47)(cid:35)(cid:54)(cid:43)(cid:49)(cid:48)
For information about AstroNova products and
services, please call us at (cid:26)00(cid:15)343(cid:15)403(cid:27) or
401(cid:15)(cid:26)2(cid:26)(cid:15)4000
or visit our websites:
(cid:89)(cid:89)(cid:89)(cid:16)(cid:67)(cid:85)(cid:86)(cid:84)(cid:81)(cid:80)(cid:81)(cid:88)(cid:67)(cid:75)(cid:80)(cid:69)(cid:16)(cid:69)(cid:81)(cid:79)
(cid:89)(cid:89)(cid:89)(cid:16)(cid:67)(cid:85)(cid:86)(cid:84)(cid:81)(cid:80)(cid:81)(cid:88)(cid:67)(cid:82)(cid:84)(cid:81)(cid:70)(cid:87)(cid:69)(cid:86)(cid:75)(cid:70)(cid:16)(cid:69)(cid:81)(cid:79)
(cid:89)(cid:89)(cid:89)(cid:16)(cid:86)(cid:79)(cid:16)(cid:67)(cid:85)(cid:86)(cid:84)(cid:81)(cid:80)(cid:81)(cid:88)(cid:67)(cid:75)(cid:80)(cid:69)(cid:16)(cid:69)(cid:81)(cid:79)
(cid:89)(cid:89)(cid:89)(cid:16)(cid:67)(cid:71)(cid:84)(cid:81)(cid:85)(cid:82)(cid:67)(cid:69)(cid:71)(cid:16)(cid:67)(cid:85)(cid:86)(cid:84)(cid:81)(cid:80)(cid:81)(cid:88)(cid:67)(cid:75)(cid:80)(cid:69)(cid:16)(cid:69)(cid:81)(cid:79)
(cid:89)(cid:89)(cid:89)(cid:16)(cid:73)(cid:71)(cid:86)(cid:78)(cid:67)(cid:68)(cid:71)(cid:78)(cid:85)(cid:16)(cid:69)(cid:81)(cid:79)
(cid:38)(cid:43)(cid:52)(cid:39)(cid:37)(cid:54)(cid:49)(cid:52)(cid:53)
(cid:41)(cid:84)(cid:71)(cid:73)(cid:81)(cid:84)(cid:91) (cid:35)(cid:16) (cid:57)(cid:81)(cid:81)(cid:70)(cid:85)
President and Chief Executive Of(cid:386)cer, AstroNova, Inc.
(cid:35)(cid:78)(cid:71)(cid:90)(cid:75)(cid:85) (cid:50)(cid:16) (cid:47)(cid:75)(cid:69)(cid:74)(cid:67)(cid:85)
Managing Partner, (cid:44)uniper Investment Company, (cid:46)(cid:46)C
(cid:47)(cid:75)(cid:86)(cid:69)(cid:74)(cid:71)(cid:78)(cid:78) (cid:43)(cid:16) (cid:51)(cid:87)(cid:67)(cid:75)(cid:80)
Executive Council, American Securities, Inc.
(cid:59)(cid:88)(cid:81)(cid:80)(cid:80)(cid:71) (cid:39)(cid:16) (cid:53)(cid:69)(cid:74)(cid:78)(cid:67)(cid:71)(cid:82)(cid:82)(cid:75)
Managing Partner, Stratevise (cid:46)(cid:46)C
(cid:52)(cid:75)(cid:69)(cid:74)(cid:67)(cid:84)(cid:70) (cid:53)(cid:16) (cid:57)(cid:67)(cid:84)(cid:92)(cid:67)(cid:78)(cid:67)(cid:12)
Chairman of the (cid:36)oard, President and
Chief Executive Of(cid:386)cer, Allied Motion Technologies, Inc.
(cid:12) (cid:46)ead Independent (cid:38)irector
(cid:41)(cid:39)(cid:48)(cid:39)(cid:52)(cid:35)(cid:46) (cid:37)(cid:49)(cid:55)(cid:48)(cid:53)(cid:39)(cid:46)
(cid:40)(cid:81)(cid:78)(cid:71)(cid:91) (cid:42)(cid:81)(cid:67)(cid:73) (cid:46)(cid:46)(cid:50)
(cid:36)oston, Massachusetts 02210
(cid:52)(cid:39)(cid:41)(cid:43)(cid:53)(cid:54)(cid:39)(cid:52)(cid:39)(cid:38) (cid:50)(cid:55)(cid:36)(cid:46)(cid:43)(cid:37) (cid:35)(cid:37)(cid:37)(cid:49)(cid:55)(cid:48)(cid:54)(cid:43)(cid:48)(cid:41) (cid:40)(cid:43)(cid:52)(cid:47)
(cid:57)(cid:81)(cid:78)(cid:72) (cid:8) (cid:37)(cid:81)(cid:79)(cid:82)(cid:67)(cid:80)(cid:91)(cid:14) (cid:50)(cid:16)(cid:37)(cid:16)
(cid:36)oston, Massachusetts 02110
(cid:54)(cid:52)(cid:35)(cid:48)(cid:53)(cid:40)(cid:39)(cid:52) (cid:35)(cid:41)(cid:39)(cid:48)(cid:54) (cid:35)(cid:48)(cid:38) (cid:52)(cid:39)(cid:41)(cid:43)(cid:53)(cid:54)(cid:52)(cid:35)(cid:52)
(cid:37)(cid:81)(cid:79)(cid:82)(cid:87)(cid:86)(cid:71)(cid:84)(cid:85)(cid:74)(cid:67)(cid:84)(cid:71) (cid:54)(cid:84)(cid:87)(cid:85)(cid:86) (cid:37)(cid:81)(cid:79)(cid:82)(cid:67)(cid:80)(cid:91)(cid:14) (cid:48)(cid:16)(cid:35)(cid:16)
P.O. (cid:36)ox 301(cid:25)0
College Station, T(cid:58) (cid:25)(cid:25)(cid:26)42
(cid:26)(cid:25)(cid:25)(cid:15)3(cid:25)3(cid:15)(cid:24)3(cid:25)4
www.computershare.com
(cid:35)(cid:48)(cid:48)(cid:55)(cid:35)(cid:46) (cid:47)(cid:39)(cid:39)(cid:54)(cid:43)(cid:48)(cid:41)
The Annual Meeting of Shareholders will be
conducted in a virtual(cid:15)only format on Tuesday,
(cid:44)une (cid:24), 2023, at (cid:27):00 a.m. Eastern (cid:38)aylight time at
www.proxydocs(cid:17)A(cid:46)OT. The webcast will open for
shareholders at approximately (cid:26):45 a.m. Eastern
(cid:38)aylight time and begin promptly at (cid:27):00 a.m.
Eastern (cid:38)aylight time.
(cid:57)ORL(cid:38) (cid:42)(cid:39)A(cid:38)(cid:51)(cid:55)ART(cid:39)RS
(cid:24)00 East Greenwich Ave.A
West Warwick, RI 02(cid:26)(cid:27)3 USA
(cid:39)M(cid:39)A (cid:42)(cid:39)A(cid:38)(cid:51)(cid:55)ART(cid:39)RS
Waldstra(cid:187)e (cid:25)0
(cid:38)(cid:15)(cid:24)312(cid:26) (cid:38)ietzenbach, Germany
CANA(cid:38)A
3505 Rue Isabelle, Suite O
(cid:36)rossard, (cid:51)C (cid:44)4(cid:59) 2R2
Canada
LATIN AM(cid:39)RICA
WeWork (cid:36)uilding, Floor 11th – Of(cid:386)ce 120
(cid:46)ago Alberto 3(cid:25)5
An(cid:189)huac I Secc, Miguel Hidalgo
11320 Ciudad de M(cid:197)xico, C(cid:38)M(cid:58)
C(cid:42)INA
AstroNova (Shanghai) Trading Co., (cid:46)td.
Part (cid:38), (cid:36)uilding No. (cid:26) Plot Section
No. (cid:26)1 Meiyue Road
Pilot Free Trade (cid:60)one, Shanghai 200131
China
SINGAPOR(cid:39)
1 Scott Road (cid:5)24(cid:15)10
Shaw Centre
Singapore, 22(cid:26)20(cid:26)
(cid:40)(cid:81)(cid:84) (cid:47)(cid:81)(cid:84)(cid:71) (cid:43)(cid:80)(cid:72)(cid:81)(cid:84)(cid:79)(cid:67)(cid:86)(cid:75)(cid:81)(cid:80)(cid:28) (cid:89)(cid:89)(cid:89)(cid:16)(cid:89) (cid:67)(cid:85)(cid:86)(cid:84)(cid:81)(cid:80)(cid:81)(cid:88)(cid:67)(cid:75)(cid:80)(cid:69)(cid:16)(cid:69)(cid:81)(cid:79)
FRANC(cid:39)
10A Rue (cid:36)laise Pascal
(cid:25)(cid:26)(cid:27)(cid:27)0 Elancourt, France
(cid:55)NIT(cid:39)(cid:38) (cid:45)ING(cid:38)OM
A5 Westacott (cid:36)usiness Centre
Westacott Way, Maidenhead
(cid:36)erkshire, S(cid:46)(cid:24) 3RT, United (cid:45)ingdom
(cid:38)(cid:39)NMAR(cid:45)
Marielundvej 4(cid:24)A, 2.
2(cid:25)30 Herlev, (cid:38)enmark
MALA(cid:59)SIA
(cid:45)03(cid:15)03A(cid:15)0(cid:27), (cid:46)evel 3A, Tower 3
UOA (cid:36)usiness Park
1, (cid:44)alan Pengaturcara U1(cid:17)51A
Seksyen U1
40150 Shah Alam
Selangor
(cid:55)NIT(cid:39)(cid:38) STAT(cid:39)S
ASTRO MAC(cid:42)IN(cid:39)
(cid:24)30 (cid:46)ively (cid:36)oulevard
Elk Grove Village, I(cid:46) (cid:24)000(cid:25)
ASC(cid:65)(cid:18)(cid:22)(cid:20)(cid:24)(cid:20)(cid:21)