Royalty Obligation

3 Months Ended

May 02, 2020

Royalty Obligation Disclosure [Abstract]

Note 10 – Royalty Obligation

In fiscal 2018,

entered into an Asset Purchase and License Agreement (the “Honeywell Agreement”) with Honeywell International, Inc. (“Honeywell”) to acquire an exclusive, perpetual, world-wide license to manufacture Honeywell’s narrow-format flight deck printers for two aircraft families along with certain inventory used in the manufacturing of the licensed printers. The purchase price included a guaranteed minimum royalty payment of $15.0 million, to be paid over ten years. 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 using a present value factor of 2.8%, which is based on the estimated

after-tax

cost of debt for similar companies. As of May 2, 2020,

had paid an aggregate of $4.0 million of the guaranteed minimum royalty obligation. At May 2, 2020, the current portion of the outstanding guaranteed minimum royalty obligation of $2.0 million is to be paid over the next twelve months and is reported as a current liability and the remainder of $7.5 million is reported as a long-term liability on

our

condensed consolidated balance sheet. In addition to the guaranteed minimum royalty payments,

also incur excess royalty expense in connection with the Honeywell Agreement.

We did not incur any excess royalty expense for the three-month period ended May 2, 2020. We did incur

$0.6

million of excess royalty expense for the three-month period ended May 4, 2019, which is included in cost of revenue in our condensed consolidated statements of income for that period. A tota

of $0.6 million

of exc

ess royalty is payable and reported as a current liability on our condensed consolidated balance sheet at May 2, 2020.