10-Q

Large accelerated filer

Accelerated filer

Non-accelerated
filer

Smaller reporting company

Emerging growth company

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM

10-Q

(Mark One)

☒	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended April 30, 2022

☐	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from

Commission file number

0-13200

AstroNova, Inc.

(Exact name of registrant as specified in its charter)


Rhode Island		05-0318215
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification No.)

600 East Greenwich Avenue, West Warwick, Rhode Island		02893
(Address of principal executive offices)		(Zip Code)

(

401)

828-4000

(Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:


Title of each class	Trading Symbol	Name of each exchange on which registered

Common Stock, $.05 Par Value	ALOT	NASDAQ Global Market

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 ☒ 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 ☒ No ☐.

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a

non-accelerated

filer, 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.

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 is a shell company (as defined in Rule

12b-2

of the Exchange Act) Yes ☐ No ☒.

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date.

The number of shares of the registrant’s common stock, $.05 par value per share, outstanding as of June

, 2022 was 7,318,463

Table of Contents

ASTRONOVA, INC.

INDEX


		Page No.
Part I.	Financial Information
Item 1.	Financial Statements
	Unaudited Condensed Consolidated Balance Sheets – April 30, 2022 and January 31, 2022		1
	Unaudited Condensed Consolidated Statements of Income — Three Months Ended April 30, 2022 and May 1, 2021		2
	Unaudited Condensed Consolidated Statements of Comprehensive Income (Loss)— Three Months Ended April 30, 2022 and May 1, 2021		3
	Unaudited Condensed Consolidated Statements of Changes in Shareholders’ Equity — Three Months Ended April 30, 2022 and May 1, 2021		4
	Unaudited Condensed Consolidated Statements of Cash Flows — Three Months Ended April 30, 2022 and May 1, 2021		5
	Notes to the Condensed Consolidated Financial Statements (unaudited)		6-17
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations		17-23
Item 3.	Quantitative and Qualitative Disclosures about Market Risk		23
Item 4.	Controls and Procedures		24
Part II.	Other Information
Item 1.	Legal Proceedings		24
Item 1A.	Risk Factors		24
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds		24
Item 6.	Exhibits		25
Signatures			26

Table of Contents

Part I. FINANCIAL INFORMATION

Item 1.

Financial Statements

ASTRONOVA, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(In Thousands, Except Share Data)


	April 30, 2022			January 31, 2022
	(Unaudited)
ASSETS
CURRENT ASSETS
Cash and Cash Equivalents	$	5,754		$	5,276
Accounts Receivable, net		18,444			17,124
Inventories, net		36,859			34,609
Employee Retention Credit Rece i vable		—			3,135
Prepaid Expenses and Other Current Assets		4,333			3,634

Total Current Assets		65,390			63,778
Property, Plant and Equipment, net		10,978			11,441
Intangible Assets, net		18,737			19,200
Goodwill		11,719			12,156
Deferred Tax Assets		5,585			5,591
Right of Use Assets		976			1,094
Other Assets		1,791			1,695

TOTAL ASSETS	$	115,176		$	114,955

LIABILITIES AND SHAREHOLDERS’ EQUITY
CURRENT LIABILITIES
Accounts Payable	$	6,952		$	8,590
Accrued Compensation		2,665			3,512
Other Liabilities and Accrued Expenses		3,613			4,113
Revolving Line of Credit		3,000			—
Current Liability – Royalty Obligation		2,000			2,000
Current Portion of Long-Term Debt		1,000			1,000
Current Liability – Excess Royalty Payment Due		311			235
Income Taxes Payable		1,637			323
Deferred Revenue		222			262

Total Current Liabilities		21,400			20,035
Long-Term Debt, net of current portion		7,910			8,154
Royalty Obligation, net of current portion		3,923			4,361
Lease Liabilities, net of current portion		708			808
Other Long-Term Liabilities		399			399
Deferred Tax Liabilities		140			186

TOTAL LIABILITIES		34,480			33,943
SHAREHOLDERS’ EQUITY
Common Stock, $0.05 Par Value, Authorized 13,000,000 shares; Issued 10,639,081 sh ares and 10,566,404 shares at April 30, 2022 and January 31, 2022, respectively		532			528
Additional Paid-in Capital		60,113			59,692
Retained Earnings		56,939			56,514
Treasury Stock, at Cost, 3,341,030 and 3,324,280 shares at April 30, 2022 and January 31, 2022, respectively		(34,223	)		(33,974	)
Accumulated Other Comprehensive Loss, net of tax		(2,665	)		(1,748	)

TOTAL SHAREHOLDERS’ EQUITY		80,696			81,012

TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY	$	115,176		$	114,955

See Notes to condensed consolidated financial statements (unaudited).

Table of Contents

ASTRONOVA, INC.

CONDENSED CONSOLIDATED STATEMENTS OF INCOME

(In Thousands, Except Per Share Data)

(Unaudited)


	Three Months Ended
	April 30, 2022		May 1, 2021
Revenue	$	31,010	$	29,078
Cost of Revenue		20,281		18,190

Gross Profit		10,729		10,888
Operating Expenses:
Selling and Marketing		5,883		6,092
Research and Development		1,522		1,717
General and Administrative		2,560		2,344

Operating Expenses		9,965		10,153

Operating Income		764		735
Other Expense, net		279		369

Income Before Income Taxes		485		366
Income Tax Provision ( Benefi t)		60		(227	)

Net Income	$	425	$	593

Net Income per Common Share—Basic:	$	0.06	$	0.08

Net Income per Common Share—Diluted:	$	0.06	$	0.08

Weighted Average Number of Common Shares Outstanding:
Basic		7,298		7,145
Diluted		7,396		7,265

See Notes to condensed consolidated financial statements (unaudited).

Table of Contents

ASTRONOVA, INC.

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

(In Thousands)

(Unaudited)


	Three Months Ended
	April 30, 2022			May 1, 2021
Net Income	$	425		$	593
Other Comprehensive Loss, Net of Taxes:
Foreign Currency Translation Adjustments		(933	)		(81	)
Loss from Cash Flow Hedges Reclassified to Income Statement		16			16

Other Comprehensive Loss		(917	)		(65	)

Comprehensive Income (Loss)	$	(492	)	$	528

See Notes to condensed consolidated financial statements (unaudited).

Table of Contents

ASTRONOVA, INC.

CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY

($ In Thousands, Except per Share Data)

(Unaudited)


	Common Stock				Additional Paid-in			Retained		Treasury			Accumulated Other Comprehensive			Total Shareholders’
	Shares		Amount		Capital			Earnings		Stock			Income (Loss)			Equity
Balance January 31, 2021		10,425,094	$	521	$	58,049		$	50,085	$	(33,588	)	$	(384	)	$	74,683
Share-Based Compensation		—		—		478			—		—			—			478
Employee Option Exercises		5,746		—		52			—		—			—			52
Restricted Stock Awards Vested, net		48,299		3		(3	)		—		(208	)		—			(208	)
Net Income		—		—		—			593		—			—			593
Other Comprehensive Loss		—		—		—			—		—			(65	)		(65	)

Balance May 1, 2021		10,479,139	$	524	$	58,576		$	50,678	$	(33,796	)	$	(449	)	$	75,533


	Common Stock				Additional Paid-in			Retained		Treasury			Accumulated Other Comprehensive			Total Shareholders’
	Shares		Amount		Capital			Earnings		Stock			Income (Loss)			Equity
Balance January 31, 2022		10,566,404	$	528	$	59,692		$	56,514	$	(33,974	)	$	(1,748	)	$	81,012
Share-Based Compensation		—		—		337			—		—			—			337
Employee Option Exercises		11,164		1		87			—		—			—			88
Restricted Stock Awards Vested, net		61,513		3		(3	)		—		(249	)		—			(249	)
Net Income		—		—		—			425		—			—			425
Other Comprehensive Loss		—		—		—			—		—			(917	)		(917	)

Balance April 30, 202 2		10,639,081	$	532	$	60,113		$	56,939	$	(34,223	)	$	(2,665	)	$	80,696

See Notes to condensed consolidated financial statements (unaudited).

Table of Contents

ASTRONOVA, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(In Thousands)

(Unaudited)


	Three Months Ended
	April 30, 2022			May 1, 2021
Cash Flows from Operating Activities:
Net Income	$	425		$	593
Adjustments to Reconcile Net Income to Net Cash Provided (Used) by Operating Activities:
Depreciation and Amortization		912			1,425
Amortization of Debt Issuance Costs		7			25
Share-Based Compensation		337			478
Changes in Assets and Liabilities:
Accounts Receivable		(1,489	)		2,165
Other Receivable – Employee Retention Credit Receivable		3,135			—
Inventories		(2,650	)		568
Income Taxes		502			(387	)
Accounts Payable and Accrued Expenses		(2,843	)		(552	)
Other		50			(406	)

Net Cash Provided (Used) by Operating Activities		(1,614	)		3,909
Cash Flows from Investing Activities:
Additions to Property, Plant and Equipment		(50	)		(544	)

Net Cash Used for Investing Activities		(50	)		(544	)
Cash Flows from Financing Activities:
Net Cash Proceeds from Employee Stock Option Plans		69			34
Net Cash Proceeds from Share Purchases under Employee Stock Purchase Plan		19			18
Net Cash Used for Payment of Taxes Related to Vested Restricted Stock		(249	)		(208	)
Borrowings under Revolving Credit Facility		3,000			—
Payment of Minimum Guarantee Royalty Obligation		(500	)		(500	)
Proceeds from Long-Term Debt Borrowings		—			10,000
Payoff of Long-Term Debt		—			(12,576	)
Principal Payments on Long-Term Debt		(250	)		(187	)

Net Cash Provided by (Used) for Financing Activities		2,089			(3,419	)

Effect of Exchange Rate Changes on Cash and Cash Equivalents		53			29

Net Increase (Decrease) in Cash and Cash Equivalents		478			(25	)
Cash and Cash Equivalents, Beginning of Period		5,276			11,439

Cash and Cash Equivalents, End of Period	$	5,754		$	11,414

Supplemental Disclosures of Cash Flow Information:
Cash Paid During the Period for Interest	$	53		$	115
Cash Paid (Received) During the Period for Income Taxes, Net of Refunds	$	(440	)	$	131

See Notes to condensed consolidated financial statements (unaudited).

Table of Contents

ASTRONOVA, INC.

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)

Note 1 – Business and Basis of Presentation

Overview

Headquartered in West Warwick, Rhode Island, AstroNova, Inc. leverages its expertise in data visualization technologies to design, develop, manufacture and distribute a broad range of specialty printers and data acquisition and analysis systems. Our products are employed around the world in a wide range of applications in the aerospace, apparel, automotive, avionics, chemical, computer peripherals, communications, distribution, food and beverage, general manufacturing, packaging and transportation industries.

Our business consists of two segments,

Product Identification (“PI”) and Test & Measurement (“T&M”). The PI segment includes specialty printing systems and related supplies sold under the QuickLabel

, TrojanLabel

and GetLabels

™

brand names. The T&M segment consists of our line of aerospace products, including flight deck printers, networking hardware, and related accessories as well as test and measurement data acquisition systems sold under the AstroNova

brand name.

PI products sold under the QuickLabel, TrojanLabel and GetLabels brands are used in brand owner and commercial applications to provide product packaging, marketing, tracking, branding and labeling solutions to a wide array of industries. The PI segment offers a variety of digital color label tabletop printers,

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. In the T&M segment, we have a long history of using our technologies to provide networking systems and high-resolution light-weight flight deck and cabin printers as well as airborne networking hardware for the aerospace market. In addition, the T&M segment includes data acquisition recorders, sold under the AstroNova brand, to enable our customers to acquire and record visual and electronic signal data from local and networked data streams and sensors. The recorded data is processed and analyzed and then stored and presented in various visual output formats.

Our 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 200 independent dealers and representatives selling and marketing our products in over 60 countries.

Unless otherwise indicated, references to “AstroNova”, “we,” “our,” and “us” in this Quarterly Report on

Form 10-Q

refer to AstroNova, Inc. and its consolidated subsidiaries.

Basis of Presentation

The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with U.S. generally accepted accounting principles and reflect all adjustments consisting of normal recurring adjustments which, in the opinion of management, are necessary for a fair presentation of the results of the interim periods included herein. These financial statements do not include all disclosures associated with annual financial statements and, accordingly, should be read in conjunction with our Annual Report on Form

10-K

for the fiscal year ended January 31, 2022.

The presentation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the amounts reported and disclosed in the condensed consolidated financial statements and accompanying notes, including those that require consideration of forecasted financial information, in context of the unknown future impacts of

COVID-19

using information that is reasonably available to us at this time. Some of the more significant estimates relate to revenue recognition, the allowances for doubtful accounts, inventory valuation, income taxes, impairment of long-lived assets and goodwill, share-based compensation, and warranty reserves. Management’s estimates are based on the facts and circumstances available at the time estimates are made, historical experience, risk of loss, general economic conditions and trends, and management’s assessments of the probable future outcome of these matters, including our expectations at the time regarding the duration, scope and severity of the

COVID-19

pandemic. Consequently, actual results could differ from those estimates.

Results of operations for the interim periods presented herein are not necessarily indicative of the results that may be expected for the full year.

Certain amounts in the prior year financial statements have been reclassified to conform to the current year’s presentation.

Table of Contents

Principles of Consolidation

The accompanying condensed consolidated financial statements include the accounts of AstroNova, Inc. and its wholly-owned subsidiaries. All significant intercompany accounts and transactions are eliminated in consolidation.

Note 2 – Summary of Significant Accounting Policies Update

The accounting policies used in preparing the condensed consolidated financial statements in this Form

10-Q

are the same as those used in preparing our consolidated financial statements included in our Annual Report on Form

10-K

for the fiscal year ended January 31, 2022.

Recently Adopted Accounting Pronouncements

No new accounting pronouncements, issued or effective during the first three months of the current year, have had or are expected to have a material impact on our consolidated financial statements.

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 and networking hardware used in the flight deck and cabin of military, commercial and business aircraft, (ii) related supplies required in the operation of the hardware, (iii) repairs and maintenance of hardware and (iv) service agreements.

Revenues disaggregated by primary geographic markets and major product types are as follows:

Primary geographical markets:


	Three Months Ended
(In thousands)	April 30, 2022		May 1, 2021
United States	$	19,651	$	16,693
Europe		7,419		8,599
Canada		1,854		1,546
Asia		937		1,085
Central and South America		888		760
Other		261		395

Total Revenue	$	31,010	$	29,078

Major product types:


	Three Months Ended
(In thousands)	April 30, 2022		May 1, 2021
Hardware	$	9,301	$	7,647
Supplies		17,944		18,211
Service and Other		3,765		3,220

Total Revenue	$	31,010	$	29,078

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 $222,000 and $262,000

at April 30, 2022 and January 31, 2022, respectively, and are recorded as deferred revenue in the accompanying condensed consolidated balance sheet. The decrease in the deferred revenue balance during the three months ended April 30, 2022 is primarily due to

116,000

of revenue recognized during the period that was included in the deferred revenue balance at January 31, 2022, which was partially offset by the cash payments received in advance of satisfying performance obligations in the current period.

Table of Contents

Contract Costs

We recognize an asset for the incremental costs of obtaining a contract with a customer if we expect the benefit of those costs to be longer than one year. We have determined that certain costs related to obtaining sales contracts for our aerospace printer products meet the requirement to be capitalized. These costs are deferred and amortized over the remaining useful life of these contracts, which we currently estimate to be approximate

ly 19

years as of April 30, 2022. The balance of these contract assets at January 31, 2022 was

$1.3

million, and in the first quarter of the current year, we incurred an additional

$0.1

million in contract costs that will be amortized over

19 years. We amortized $7,000

of direct costs during the three months ended April 30, 2022. The balance of deferred incremental direct costs net of accumulated amortization at April 30, 2022 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 condensed consolidated balance sheet.

Note 4 – Net Income Per Common Share

Basic net income per share is calculated by dividing net income by the weighted average number of shares outstanding during the period. Diluted net income per share is calculated by dividing net income by the weighted average number of shares and, if dilutive, common equivalent shares, determined using the treasury stock method for stock options, restricted stock awards and restricted stock units outstanding during the period. A reconciliation of the shares used in calculating basic and diluted net income per share is as follows:


	Three Months Ended
	April 30, 2022		May 1, 2021
Weighted Average Common Shares Outstanding – Basic		7,298,051		7,144,697
Effect of Dilutive Options, Restricted Stock Awards and Restricted Stock Units		97,713		120,632

Weighted Average Common Shares Outstanding – Diluted		7,395,764		7,265,329

For the three months ended April 30, 2022 and May 1, 2021, the diluted per share amounts do not reflect common equivalent shares outstanding of 310,588 and 622,020, respectively, because of their anti-dilutive effect.

Table of Contents

Note 5 – Intangible Assets

Intangible assets are as follows:

April 30, 2022

January 31, 2022

(In thousands)

Gross

Carrying

Amount

Accumulated

Amortization

Currency

Translation

Adjustment

Net

Carrying

Amount

Gross

Carrying

Amount

Accumulated

Amortization

Currency

Translation

Adjustment

Net

Carrying

Amount

Miltope:

SEC Form 10-Q filed by AstroNova Inc.