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 29, 2023

☐	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 2, 2023 was 7,417,715.

ASTRONOVA, INC.

INDEX


		Page No.
Part I.	Financial Information
Item 1.	Financial Statements
	Unaudited Condensed Consolidated Balance Sheets – April 29, 2023 and January 31, 2023		1
	Unaudited Condensed Consolidated Statements of Income – Three Months Ended April 29, 2023 and April 30, 2022		2
	Unaudited Condensed Consolidated Statements of Comprehensive Income (Loss) – Three Months Ended April 29, 2023 and April 30, 2022		3
	Unaudited Condensed Consolidated Statements of Changes in Shareholders’ Equity – Three Months Ended April 29, 2023 and April 30, 2022		4
	Unaudited Condensed Consolidated Statements of Cash Flows – Three Months Ended April 29, 2023 and April 30, 2022		5
	Notes to the Condensed Consolidated Financial Statements (unaudited)		6-18
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations		19-25
Item 3.	Quantitative and Qualitative Disclosures about Market Risk		25
Item 4.	Controls and Procedures		25-26
Part II.	Other Information
Item 1.	Legal Proceedings		26
Item 1A.	Risk Factors		26
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds		27
Item 6.	Exhibits		27
Signatures			28

Part I. FINANCIAL INFORMATION

Item 1.

Financial Statements

ASTRONOVA, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(In Thousands, Except Share Data)


	April 29, 2023			January 31, 2023

	(Unaudited)
ASSETS
CURRENT ASSETS
Cash and Cash Equivalents	$	5,413		$	3,946
Accounts Receivable, net		19,285			21,598
Inventories, net		53,126			51,324
Prepaid Expenses and Other Current Assets		2,678			2,894

Total Current Assets		80,502			79,762
Property, Plant and Equipment, net		13,918			14,288
Identifiable Intangibles, net		20,630			21,232
Goodwill		14,760			14,658
Deferred Tax Assets, net		6,907			6,907
Right of Use Asset		858			794
Other Assets		1,621			1,566

TOTAL ASSETS	$	139,196		$	139,207

LIABILITIES AND SHAREHOLDERS’ EQUITY
CURRENT LIABILITIES
Accounts Payable	$	8,000		$	8,479
Accrued Compensation		3,267			2,750
Other Accrued Expenses		3,484			3,308
Revolving Line of Credit		15,900			15,900
Current Portion of Long-Term Debt		2,100			2,100
Current Liability—Royalty Obligation		1,600			1,725
Current Liability—Excess Royalty Payment Due		379			562
Income Taxes Payable		730			786
Deferred Revenue		1,971			1,888

Total Current Liabilities		37,431			37,498
NON-CURRENT LIABILITIES
Long-Term Debt, net of current portion		11,678			12,040
Royalty Obligation, net of current portion		3,102			3,415
Lease Liabilities, net of current portion		581			555
Income Taxes Payable		491			491
Deferred Revenue		267			674
Deferred Tax Liabilities		172			167

TOTAL LIABILITIES		53,722			54,840
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 10,780,934 and 10,676,851 shares at April 29, 2023 and January 31, 2023, respectively		538			534
Additional Paid-in Capital		61,526			61,131
Retained Earnings		60,023			59,175
Treasury Stock, at Cost, 3,368,219 and 3,342,032 shares at April 29, 2023 and January 31, 2023, respectively		(34,585	)		(34,235	)
Accumulated Other Comprehensive Loss, net of tax		(2,028	)		(2,238	)

TOTAL SHAREHOLDERS’ EQUITY		85,474			84,367

TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY	$	139,196		$	139,207

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 29, 2023			April 30, 2022

Revenue	$	35,419		$	31,010
Cost of Revenue		23,034			20,281

Gross Profit		12,385			10,729
Operating Expenses:
Selling and Marketing		6,010			5,883
Research and Development		1,788			1,522
General and Administrative		3,126			2,560

Operating Expenses		10,924			9,965

Operating Income		1,461			764
Other Income (Expense)
Interest Expense		(615	)		(175	)
Gain (Loss) on Foreign Currency Transaction		186			(135	)
Other, net		(5	)		31

		(434	)		(279	)

Income Before Income Taxes		1,027			485
Income Tax Provision		179			60

Net Income	$	848		$	425

Net Income per Common Share—Basic:	$	0.12		$	0.06

Net Income per Common Share—Diluted:	$	0.11		$	0.06

Weighted Average Number of Common Shares Outstanding:
Basic		7,370			7,263
Diluted		7,450			7,361

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 29, 2023		April 30, 2022

Net Income	$	848	$	425
Other Comprehensive Income (Loss), Net of Taxes:
Foreign Currency Translation Adjustments		210		(933	)
Loss from Cash Flow Hedges Reclassified to Income Statement		—		16

Other Comprehensive Income (Loss)		210		(917	)

Comprehensive Income (Loss)	$	1,058	$	(492	)

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, 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		61,513		3		(3	)		—		(249	)		—			(249	)
Net Income		—		—		—			425		—			—			425
Other Comprehensive Loss		—		—		—			—		—			(917	)		(917	)

Balance April 30, 2022		10,639,081	$	532	$	60,113		$	56,939	$	(34,223	)	$	(2,665	)	$	80,696


Balance January 31, 2023		10,676,851	$	534	$	61,131		$	59,175	$	(34,235	)	$	(2,238	)	$	84,367
Share-Based Compensation		—		—		356			—		—			—			356
Employee Option Exercises		4,094		—		43			—		—			—			43
Restricted Stock Awards		99,989		4		(4	)		—		(350	)		—			(350	)
Net Income		—		—		—			848		—			—			848
Other Comprehensive Income		—		—		—			—		—			210			210

Balance April 29, 2023		10,780,934	$	538	$	61,526		$	60,023	$	(34,585	)	$	(2,028	)	$	85,474

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 29, 2023			April 30, 2022
Cash Flows from Operating Activities:
Net Income	$	848		$	425
Adjustments to Reconcile Net Income to Net Cash Provided (Used) by Operating Activities:
Depreciation and Amortization		1,055			912
Amortization of Debt Issuance Costs		6			7
Share-Based Compensation		356			337
Changes in Assets and Liabilities:
Accounts Receivable		2,324			(1,489	)
Other Receivable – Employee Retention Credit Receivable		—			3,135
Inventories		(1,756	)		(2,650	)
Income Taxes		38			502
Accounts Payable and Accrued Expenses		8			(2,843	)
Other		(237	)		50

Net Cash Provided (Used) by Operating Activities		2,642			(1,614	)
Cash Flows from Investing Activities:
Additions to Property, Plant and Equipment		(48	)		(50	)

Net Cash Used for Investing Activities		(48	)		(50	)
Cash Flows from Financing Activities:
Net Cash Proceeds from Employee Stock Option Plans		18			69
Net Cash Proceeds from Share Purchases under Employee Stock Purchase Plan		25			19
Net Cash Used for Payment of Taxes Related to Vested Restricted Stock		(350	)		(249	)
Net Borrowings under Revolving Credit Facility		—			3,000
Payment of Minimum Guarantee Royalty Obligation		(500	)		(500	)
Principal Payments on Long-Term Debt		(375	)		(250	)

Net Cash Provided (Used) by Financing Activities		(1,182	)		2,089

Effect of Exchange Rate Changes on Cash and Cash Equivalents		55			53

Net Increase in Cash and Cash Equivalents		1,467			478
Cash and Cash Equivalents, Beginning of Period		3,946			5,276

Cash and Cash Equivalents, End of Period	$	5,413		$	5,754

Supplemental Disclosures of Cash Flow Information:
Cash Paid During the Period for Interest	$	538		$	53
Cash Paid (Received) During the Period for Income Taxes, Net of Refunds	$	235		$	(440	)

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 T&M data acquisition systems sold under the AstroNova

brand name.

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. We reported Astro Machine as a part of our PI segment beginning in the third quarter of fiscal 2023.

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 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.

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.

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, 2023.

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 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.

Table of Contents

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’s financial statements have been reclassified to conform to the current year’s presentation.

Principles of Consolidation

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

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, 2023.

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 – 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 was a business combination and 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.

Table of Contents

The following table sets forth the final purchase price allocation of the Astro Machine acquisition for the estimated fair value of the net assets acquired and liabilities assumed as of the date of acquisition:


(In thousands)
Cash	$	91
Accounts Receivable		3,393
Inventory		5,715
Property, Plant and Equipment		4,200
Identifiable Intangible Assets		3,480
Goodwill		2,730
Accounts Payable and Other Current Liabilities		(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 represents 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) 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 fiscal years 2023 through 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	$	3,060		5
Trademarks/Tradenames		420		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 and the registered trademarks held by Astro Machine for the use of several marks and logos.

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 workforce. The carrying amount of the goodwill was allocated to the PI segment.

Total acquisition-related costs of $0.7 million were included in general and administrative expenses in our consolidated statement of income for the year ended January 31, 2023.

The amounts of revenue and earnings before taxes included in our consolidated statement of income for the quarter ended April 29, 2023:


(In thousands)
Revenue	$	4,229
Earnings before Taxes		689

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.

Table of Contents

Honeywell Asset Purchase and License Agreement

On June 30, 2022, we entered into an Asset Purchase and License Agreement with Honeywell International 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 are provided and range from single-digit to

mid-double-digit

percentages of gross revenue. The New HW Agreement includes 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 relationships 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. As of April 29, 2023, the current outstanding royalty obligation remains $0.5 million, including $0.1 million recorded as a current liability in the accompanying balance sheet.

Additional royalties based on sales activity will be recorded in the period that the associated revenue is earned. During fiscal 2023, we incurred $0.1

million in excess royalty expense, which was recorded as a current liability in our consolidated balance sheet at January 31, 2023 and was paid in the first quarter of the current fiscal year.

Note 4 – 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 29, 2023		April 30, 2022
United States	$	22,834	$	19,651
Europe		7,964		7,419
Canada		1,825		1,854
Asia		1,294		937
Central and South America		1,199		888
Other		303		261

Total Revenue	$	35,419	$	31,010

Table of Contents

Major product types:


	Three Months Ended
(In thousands)	April 29, 2023		April 30, 2022
Hardware		11,667	$	9,301
Supplies		19,070		17,944
Service and Other		4,682		3,765

Total Revenue	$	35,419	$	31,010

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 us 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. Revenue from this arrangement will be recognized in proportion to the total estimated shipments through the end of the contract period. As of January 31, 2023, we have recognized $

1.1

million in revenue and the remainder $

2.15

million balance was recorded as deferred revenue. During the first quarter of fiscal 2024, we recognized an additional $

0.4

million in revenue which is included in the condensed consolidated statement of income for the quarter ended April 29, 2023. The remaining revenue to be recognized will be based on our shipments of the printers during the remainder of 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 $443,000 and $412,000 at April 29, 2023 and January 31, 2023, respectively, and are recorded as deferred revenue in the accompanying condensed consolidated balance sheet. The increase in the deferred revenue balance during the three months ended April 29, 2023 is due to cash payments received in advance of satisfying performance obligations in the current period which was partially offset by $143,000 of revenue recognized during the period that was included in the deferred revenue balance at January 31, 2023.

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 approximately 18 years as of April 29, 2023. The balance of these contract assets at January 31, 2023 was $1.4 million. We amortized $19,000 and $16,000 of direct costs during the three months ended April 29, 2023 and April 30, 2022, respectively. The balance of deferred incremental direct costs net of accumulated amortization at April 29, 2023 was $1.3 million, of which $0.1 million is reported in other current assets and $1.2 million is reported in other assets in the accompanying condensed consolidated balance sheet.

Note 5 – 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 29, 2023		April 30, 2022
Weighted Average Common Shares Outstanding – Basic		7,369,930		7,262,797
Effect of Dilutive Options, Restricted Stock Awards and Restricted Stock Units		80,122		97,713

Weighted Average Common Shares Outstanding – Diluted		7,450,052		7,360,510

Table of Contents

For the three months ended April 29, 2023 and April 30, 2022, the diluted per share amounts do not reflect common equivalent shares outstanding of 656,554 and 310,588, respectively, because of their anti-dilutive effect.

Note 6 – Intangible Assets

Intangible assets are as follows:

April 29, 2023

January 31, 2023

(In thousands)

Gross
Carrying
Amount

Accumulated
Amortization

Currency
Translation
Adjustment

Net
Carrying
Amount

Gross
Carrying
Amount

Accumulated
Amortization

Currency
Translation
Adjustment

Net
Carrying
Amount

Miltope:

Customer Contract Relationships

SEC Form 10-Q filed by AstroNova Inc.