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Table of Contents
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM
10-K

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

For the fiscal year ended January 31, 2022
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 |  | 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)

Registrant’s telephone number, including area code:
(401) 828-4000
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

Securities registered pursuant to Section 12(g) of the Act: None
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes ☐ No ☒
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 ☒
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, 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 ☐ |  | Accelerated filer ☒ |  | Non-accelerated filer |  | Smaller reporting company ☒
|  |  |  |  |  | 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. ☒
Indicate by check mark whether the registrant is a shell company (as defined in Rule
12b-2
of the Act). ☐ Yes ☒ No
The aggregate market value of the registrant’s voting common equity held by
non-affiliates
at July 31, 2021 was approximately $109,942,000 based on the closing price on the Nasdaq Global Market on that date.
As of April
1
3
, 2022, there were 7,315,168 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 2022 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 |

Table of Contents
FORM
10-K
ANNUAL REPORT
TABLE OF CONTENTS

|  |  |  | Page |
PART I |  |  |  |  |  |
Item 1. |  | Business |  |  | 3-8 |
Item 1A. |  | Risk Factors |  |  | 8-20 |
Item 1B. |  | Unresolved Staff Comments |  |  | 20 |
Item 2. |  | Properties |  |  | 20 |
Item 3. |  | Legal Proceedings |  |  | 20 |
Item 4. |  | Mine Safety Disclosures |  |  | 20 |
PART II |  |  |  |  |  |
Item 5. |  | Market for the Registrant’s Common Stock, Related Stockholder Matters and Issuer Purchases of Equity Securities |  |  | 21 |
Item 6. |  | Reserved |  |  | 21 |
Item 7. |  | Management’s Discussion and Analysis of Financial Condition and Results of Operations |  |  | 21-34 |
Item 7A. |  | Quantitative and Qualitative Disclosures About Market Risk |  |  | 34-35 |
Item 8. |  | Financial Statements and Supplementary Data |  |  | 35 |
Item 9. |  | Changes in and Disagreements with Accountants on Accounting and Financial Disclosure |  |  | 35 |
Item 9A. |  | Controls and Procedures |  |  | 35-36 |
Item 9B. |  | Other Information |  |  | 36 |
Item 9C. |  | Disclosure Regarding Foreign Jurisdictions that Prevent Inspections |  |  | 36 |
PART III |  |  |  |  |  |
Item 10. |  | Directors, Executive Officers and Corporate Governance |  |  | 37 |
Item 11. |  | Executive Compensation |  |  | 38 |
Item 12. |  | Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters |  |  | 38 |
Item 13. |  | Certain Relationships, Related Transactions and Director Independence |  |  | 38 |
Item 14. |  | Principal Accountant Fees and Services |  |  | 38 |
PART IV |  |  |  |  |  |
Item 15. |  | Exhibits and Financial Statement Schedule |  |  | 39 |
Item 16. |  | Form 10-K Summary |  |  | 39 |

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ASTRONOVA, INC.
Forward-Looking Statements
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.
PART I
Item 1
. Business
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 and test and measurement data acquisition systems sold under the AstroNova
®
brand name. Refer to Note 17, “Nature of Operations, Segment Reporting and Geographical Information,” in our audited consolidated financial statements elsewhere in this report for financial information regarding our segments.
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 21 through 34 of this Annual Report on
Form 10-K.
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.
Product Identification 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
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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 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 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 and stored and presented in various visual output formats.
Product Identification
Our PI segment includes three brands: QuickLabel, TrojanLabel, and GetLabels. 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 chemical, cosmetics, food and beverage, medical products, nutraceutical, pharmaceutical, 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, while also being 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. The high-speed
QL-120X
was built on our pioneering and successful Kiaro! platform. To expand the product line further, in 2021, 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 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 2019, 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 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
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constructed for a wide variety of labeling applications. Label material and substrates are carefully qualified and tested 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.
The PI segment also 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. PI also provides worldwide training and support.
Test &Measurement
Products sold under our T&M segment are designed and manufactured for airborne printing 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.
Airborne printers include our flagship ToughWriter
®
series used in the flight decks and cabins of military, commercial, and business aircraft to print hard copies of data required for the safe and efficient operation of aircraft. Examples of printed data include navigation maps, arrival and departure information, flight itineraries, weather maps, 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 airborne printers for many aircraft made by Airbus, Boeing, Bombardier, Lockheed, Gulfstream, and others. In addition to the ToughWriter products, we manufacture other flight deck printers, 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 world-wide 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
PTA-45B
printers with ToughWriter products because they have numerous technical features and functional advantages and significant weight savings.
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 facility maintenance and field testing; and the Everest
®
EV-5000
digital strip chart recording system used mainly in telemetry 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, monitor or electronic storage media, and (4) analyzing the data. To service data visualization, we maintain technological core competencies and trade
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
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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.
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 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 purchase certain components, assembled products, and supplies used to manufacture our products from a single source or limited supplier sources. 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, such design 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 advance 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 expanding network of manufacturing, sales and support facilities, we do business in over 150 countries.
We believe we are a market leader in tabletop digital color label printing technology in the specialty printing field, a 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 Product Identification products are sold by direct field salespersons as well as independent dealers and representatives, while our Test & Measurement 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 Product Identification 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 approximately 200 independent dealers and representatives selling and marketing our products in 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 backlog varies regularly. It consists of a blend of orders for
end-user
customers, as well as original equipment manufacturer customers. Manufacturing production is designed to meet forecasted demands and
built-to-order
customer requirements. Accordingly, the amount of order backlog may not indicate future sales trends. Backlog at January 31, 2022 and 2021 was $27.8 million and $22.5 million, respectively.
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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, and others of which apply to us for other reasons, such as our status as a publicly held company or the places in which we sell certain types or amounts of products. Existing and future laws and regulations may result in increasing expense and may impede our growth. Applicable and potentially applicable regulations and laws include regulations and laws regarding taxation, 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.
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 upon the financial position, results of operations, cash flows, or competitive position of the Company.
Employees
As of January 31, 2022, we employed 339 full-time employees. Of our full-time employees, 238 were in the United States, 80 in Europe, 10 in Canada, nine 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 have ingrained 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.

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Our core values guide our employees’ behavior and dictate how our business is conducted. 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 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.
Other Information
Our business is not seasonal in nature. However, our revenue is impacted by the size of certain individual transactions, which can cause fluctuations in revenue from quarter to quarter.
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 Securities and Exchange Commission (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 ongoing
COVID-19
pandemic has adversely affected and will likely continue to adversely affect our revenues, results of operations and financial condition.
All of our global operations have been materially adversely affected by the worldwide
COVID-19
pandemic during the past two years. We expect this adverse impact to continue to a degree that we cannot predict.
We made significant modifications to our global
pre-pandemic
operations because of the
COVID-19
pandemic. We initially required most
non-production
related team members to work remotely. Although this no longer is required for health and safety reasons, for many of our team members, remote work has become a preference and we believe we have to a large degree successfully adapted to it through the use of technology and changed management practices, but further adaptations, unknown at this time, may be required. As the result of the changes that have been required by the response to the
COVID-19
pandemic, we expect that the mix of
on-site
and remote work will be permanently changed, as will our increased safety protocols and the other adaptations undertaken during the pandemic, but our practices and plans are still developing, and we cannot predict the result yet.
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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 caused by the pandemic are deepening and prolonging these difficulties. We have had to incur additional costs, such as expedited and express shipping fees (i.e., air rather than ocean freight.) These difficulties have also negatively impacted our efficiency, delayed shipments and caused product shortages
.
We are currently monitoring the world-wide delays in transit time, as freight carriers continue to experience significant delays in overseas shipments. We are addressing these issues through long range planning and procuring higher inventory on severely allocated items to help mitigate potential shortages whenever practicable. 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. Our strategies to counteract the impact of the pandemic and the related supply chain dislocations have 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. 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 results of operations.
Our Product Identification business has been negatively impacted by the
COVID-19
pandemic because our ability to meet with customers to demonstrate our products at trade shows and
on-site
in their facilities has been curtailed. We have partially countered this through a variety of virtual,
on-line
selling and digital marketing strategies, but the degree to which this will be successful to mitigate the lack of
face-to-face
selling is unclear.
The aerospace industry, which we serve through our aerospace product line, has also been 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 has had a material adverse impact on our financial results. While air travel demand and aircraft production demand has recovered to some extent, it remains unclear whether these demand factors will continue to recover, and to what extent. The secondary impacts of the demand decline and resulting financial losses on the economic structure of the airline industry could become a negative factor for demand for aircraft due to industry consolidation. Individually or in combination, these factors may continue to have a material adverse impact on our business operations and financial results.
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, and then the effect of the
COVID-19
pandemic on the demand for new aircraft, reduced demand for our airborne printers that are installed on that aircraft, as well as the related repairs and supplies, which has negatively affected our results of operations. While these effects have begun to abate, demand remains lower than it was beforehand, and the outlook is uncertain. Some of our customers have been and may remain reluctant to make capital equipment purchases and may continue to defer certain of these purchases to future periods. While demand for air travel has recently increased, the impact of another period of
COVID-19
infections could negatively impact this trend in the future. Also, we believe our customers’ markets have declined and the impact on their financial capacity has been material enough to alter their strategies and industry dynamics. These factors may cause demand for aircraft to grow slowly or decline, which would reduce our demand, and in turn which could harm our results of operations, financial position and cash flows.
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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 acquisition and data 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;

| • |  | Potential absence of adequate production capacity;

| • |  | Potential delays in production lead times;

| • |  | Unavailability of certain process technologies; and

| • |  | Reduced control over delivery schedules, manufacturing yields, quality and costs.

If one of our significant subcontractors becomes unable or unwilling to continue to manufacture or provide these products in required volumes or fails to meet our quality standards, we will have to identify qualified alternate subcontractors or take over the manufacturing ourselves. 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.
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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, due to the continued global
COVID-19
pandemic, there has been and likely will continue to be 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 are 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 these components, assembled products or supplies in required volumes, 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. 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 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. This has been exacerbated by significant 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
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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 lose 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 taken as a whole. 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 a result of recent supply chain disruption expect to increase the amount of inventory we maintain
on-hand.
Although we have provided an allowance for slow-moving and obsolete inventory, any significant unanticipated changes in future product demand or market conditions, including obsolescence or the uncertainty in the global market, as well as continued reduced demand for our products if the
COVID-19
pandemic is further prolonged, 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.
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 have not 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-premises
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
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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 attack 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 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 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 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, 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, whether caused by
COVID-19
or as a result of general macroeconomic factors or wage competition, could lead to increased costs and lost profitability and could otherwise compromise us in efficiently operating 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
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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. 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:
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 40% of our total revenue for fiscal year 2022, 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;

| • |  | Difficulty in obtaining and maintaining adequate staffing;

| • |  | Differing labor regulations;

| • |  | Failure to comply with complex and rapidly changing government economic sanctions measures 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 current COVID-19 pandemic.

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 impact on revenues.
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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 (including regulations and interpretations pertaining to the 2017 Tax Cuts and Jobs Act), 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.
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 and a minimum consolidated fixed charge 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
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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. 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;

| • |  | 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.

In certain instances, as permitted by applicable law and NASDAQ rules, acquisitions 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.
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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 expected benefits of our acquisitions, divestitures or strategic partnerships, our business, results of operations and financial condition could be adversely affected.
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 2022, we had approximately $5.3 million of cash and cash equivalents. Our cash and cash equivalents are held in a mix of money market funds, bank demand deposit accounts and foreign bank accounts. Disruptions in the financial markets such as those caused by the current
COVID-19
pandemic 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 counter-parties 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 health care 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. 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 loss. 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. We believe that the liabilities we have recorded to date will be sufficient to provide for losses we may incur due to increased
COVID-19
related employee health care insurance costs. However, the ultimate amount of these costs cannot be estimated at this time, and a prolonged period of spread of the disease could further increase our costs and liabilities, the impact of which may be material.
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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.
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 wastes in our operations. We manage our compliance with laws and regulations and the proper mitigation of risks internally and through the input or 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 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.
As the result of the
COVID-19
pandemic crisis, we have been required by U.S. federal and state governmental authorities and governmental authorities in
non-U.S.
jurisdictions, as well as our own desire to adhere to best health and safety practices, and have implemented new policies and procedures to reduce infection risk in our operations. These initiatives have increased our costs and added complexity and inefficiency to our manufacturing operations and all administrative and office-based functions.
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
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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. 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.
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
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revenue recognition, asset impairment and fair value determinations, inventories, business combinations and intangible asset valuations, leases, and litigation, 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 property. This property is subject to a security agreement and a mortgage in favor of the lender under our credit facility.

Location |  | Approximate Square Footage |  |  | Principal Use
West Warwick, Rhode Island, United States |  |  | 135,500 |  |  | Corporate headquarters, research and development, manufacturing, sales and service

We also lease facilities in various other locations. The following information pertains to each location:

Location |  | Approximate Square Footage |  |  | Principal Use
Dietzenbach, Germany |  |  | 18,630 |  |  | Manufacturing, sales and service
Copenhagen, Denmark |  |  | 4,800 |  |  | R&D, sales and service
Brossard, Quebec, Canada |  |  | 4,500 |  |  | Manufacturing, sales and service
Elancourt, France |  |  | 4,150 |  |  | Sales and service
Schaumburg, Illinois, United States |  |  | 3,428 |  |  | Sales
Irvine, California, United States |  |  | 3,100 |  |  | Sales
Shah Alam, Selangor, Malaysia |  |  | 2,067 |  |  | Sales
Guangzhou, China |  |  | 1,252 |  |  | Sales and service
Maidenhead, England |  |  | 1,021 |  |  | Sales and service
Shanghai, China |  |  | 425 |  |  | Sales
Mexico City, Mexico |  |  | 97 |  |  | Sales

The West Warwick facility is used by both of our business segments, but the leased locations are primarily used by the Product Identification segment. We believe our facilities are well maintained, in good operating condition and generally adequate to meet our needs for the foreseeable future.
Item 3.
Legal Proceedings
We are not a party to any pending, material legal proceedings. However, 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
.
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 214 shareholders of record as of April 12, 2022, which does not reflect shareholders with beneficial ownership in shares held in nominee name.
Stock Repurchases
During the fourth quarter of fiscal 2022, 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 |  |  | 483 | (a) |  |  | 15.88 | (a) |  |  | — |  |  |  | — |
January 1 – January 31 |  |  | 1,682 | (b) |  |  | 13.10 | (b) |  |  | — |  |  |  | — |

(a) An executive of the company delivered 483 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 $15.88 per share and are included with treasury stock in the consolidated balance sheet.
(b) An executive of the company delivered 1,682 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 $13.10 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 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

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| 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, flight itineraries, weather maps, performance data, passenger data, and various air traffic control data. Aerospace products also include aircraft networking systems for high-speed onboard data transfer. T&M also provides repairs, service and spare parts.

We market and sell our products and services globally through a diverse distribution structure of direct sales personnel, manufacturers’ representatives and authorized dealers that deliver a full complement of branded products and services to customers in our respective markets. Our growth strategy centers on organic growth through product innovation made possible by research and development initiatives, as well as strategic acquisitions that fit into or complement existing core businesses. In fiscal 2022, 2021 and 2020, revenue from customers in various geographic areas outside the United States, primarily in Western Europe, Canada and Asia, amounted to $49.3 million, $45.1 million and $49.8 million, respectively.
We maintain an active program of product research and development. During fiscal 2022, 2021 and 2020, we spent $6.8 million, $6.2 million and $8.1 million, respectively, 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 2022 and beyond.
We also continue to invest in sales and marketing initiatives by expanding the existing sales force and using various marketing campaigns to achieve our goals of sales growth and increased profitability notwithstanding the challenging economic environment.
COVID-19
Update
All of our global operations have been materially adversely affected by the worldwide
COVID-19
pandemic during the past two years. We expect this adverse impact to continue to a degree that we cannot predict.
We made significant modifications to our global
pre-pandemic
operations because of the
COVID-19
pandemic. We initially required most
non-production
related team members to work remotely. Although this is no longer required for health and safety reasons, for many of our team members, remote work has become a preference and we believe we have to a large degree successfully adapted to it through the use of technology and changed management practices, but further adaptations, unknown at this time, may be required. We expect that our operations and modalities of
on-site
and remote work will be impacted permanently, as will our increased safety protocols and the other adaptations undertaken during the pandemic, but our practices and plans are still developing and we cannot predict the results yet.
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 caused by the pandemic are deepening and prolonging these difficulties. We have had to incur additional costs, such as expedited and express shipping fees (i.e., air rather than ocean freight). These difficulties have also negatively impacted our efficiency, delayed shipments and caused product shortages
.
We are currently monitoring the world-wide delays in transit time, as freight carriers continue to experience significant delays in overseas shipments. We are addressing these issues through long range planning and procuring higher inventory on severely allocated items to help mitigate potential shortages whenever practicable. 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
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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. Our strategies to counteract the impact of the pandemic and the related supply chain dislocations have 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. 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 results of operations.
Product Identification Update
Our Product Identification business has been negatively impacted by the
COVID-19
pandemic because our ability to meet with customers to demonstrate our products at trade shows and
on-site
in their facilities has been curtailed. We have partially countered this through a variety of virtual,
on-line
selling and digital marketing strategies, but the degree to which this will be successful to mitigate the lack of
face-to-face
selling is unclear.
Test & Measurement Update
The aerospace industry, which we serve through our aerospace product line, has also been 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 and aircraft, and a general curtailment of aircraft production rates. This has had a material adverse impact on our financial results. While air travel demand and aircraft production demand has recovered to some extent, it remains unclear whether these demand factors will continue to recover and to what extent. The secondary impacts of the demand decline and resulting financial losses on the economic structure of the airline industry could become a negative factor for demand for aircraft due to industry consolidation. Individually or in combination, these factors may continue to have a material adverse impact on our business operations and financial results.
PPP Loan Forgiveness
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 (“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.
On June 15, 2021, 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 extinguishment of debt, which is included in the accompanying consolidated income statement for the period ended January 31, 2022.
Employee Retention Credits
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.
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In the second quarter of fiscal 2022, we determined that we qualified for an employee retention credit of $3.1 million for wages paid in calendar year 2020 and the first calendar quarter of 2021. We recorded a receivable in the second quarter of fiscal 2022 within prepaid expenses and other current assets in the condensed consolidated balance sheet. Such amount remains outstanding as of January 31, 2022 and was received subsequent to year end on March 22, 2022.
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 employer’s payroll 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 included in the accompanying condensed consolidated income statement for the period ended January 31, 2022.
Results of Operations
Fiscal 2022 compared to Fiscal 2021
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) |  | 2022 |  |  | 2021 |
|  | Revenue |  |  | As a % of Total Revenue |  |  | % Change Over Prior Year |  |  | Revenue |  |  | As a % of Total Revenue |
Product Identification |  | $ | 90,915 |  |  |  | 77.4 | % |  |  | 0.7 | % |  | $ | 90,268 |  |  |  | 77.8 | %
T&M |  |  | 26,565 |  |  |  | 22.6 | % |  |  | 3.1 | % |  |  | 25,765 |  |  |  | 22.2 | %
Total |  | $ | 117,480 |  |  |  | 100.0 | % |  |  | 1.2 | % |  | $ | 116,033 |  |  |  | 100.0 | %

Net revenue in fiscal 2022 was $117.5 million, a 1.2% increase compared to net revenue of $116.0 million for fiscal 2021. Current year revenue through domestic channels was $68.2 million, a decline of 3.8% from prior year domestic revenue of $70.9 million. International revenue of $49.3 million for fiscal 2022 increased 9.2% compared to prior year international revenue of $45.1 million. Fiscal 2022 international revenue reflects a favorable foreign exchange rate impact of $1.1 million, compared to a favorable impact of $0.8 million in fiscal 2021.
Hardware revenue in fiscal 2022 was $31.5 million, a $2.6 million or 7.7% decrease compared to fiscal 2021 hardware revenue of $34.1 million. The current year decrease in hardware revenue is due to the decline in hardware revenue in both the PI and T&M segments. The decrease in hardware revenue is primarily due to a 10.1% decline in hardware sales in the T&M segment resulting from overall lower aerospace printer product line sales in the T&M segment as a result of the continuing effects of the Boeing 737 MAX grounding and the impact of the sharp decline in air travel due to
COVID-19.
T&M hardware revenue for the current year was also negatively impacted by a decline in sales of data recorders. Also contributing to the overall decline in hardware revenue for the current year was a more modest decline in sales in the PI segment of QuickLabel model printers which was partially offset by sales related to printers in the TrojanLabel product group.
Revenue from supplies in fiscal 2022 was $73.2 million, a 2.1% increase compared to fiscal 2021 supplies revenue of $71.8 million. Supplies revenue increased in both the PI and T&M segment in the current year, with the increase primarily due to increased demand for Trojan Label product supplies due to increased market penetration of these printers. Also contributing to the current year increase in supplies revenue was the increase in sales of supplies in both our aerospace printer and data recorder product lines, and a slight increase in ink jet supply sales in the QuickLabel product group. The current year increase was offset to a large extent by a decline in sales of EP and Thermal film supplies in the QuickLabel product group due to a shift from legacy thermal transfer and electrophotographic products to newer ink jet products.
Service and other revenue in fiscal 2022 was $12.7 million, a 25.6% increase compared to fiscal 2021 service and other revenue of $10.2 million. The increase is due primarily to overall increased repair and parts revenue in both the T&M and PI segments.
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Gross profit was $43.7 million for fiscal 2022, reflecting a 5.8% increase compared to fiscal 2021 gross profit of $41.4 million. Our gross profit margin of 37.2% in fiscal 2022 reflects a 2.4 percentage point increase compared to fiscal 2021 gross profit margin of 35.6%. The higher profit and related margin for the current year compared to the prior year is primarily attributable to increased revenue and the impact of the ERC, which reduced manufacturing payroll taxes in the amount of $1.7 million in the second quarter of the current year.
Operating expenses for the current year were $39.5 million, representing a 1.4% increase from the prior year’s operating expenses of $38.9 million. Specifically, selling and marketing expenses of $23.2 million in fiscal 2022 decreased 0.5% from the prior year amount of $23.3 million. The decrease in selling and marketing expenses for the current year is primarily due to a decrease in payroll taxes in the second quarter of the current year related to the ERC, as well as a decrease in amortization expense related to the second quarter’s change in the remaining useful lives and amortization methods for certain of our customer relationship intangibles. The current year decline in selling and marketing expenses was partially offset by an increase in employee wages and bonuses as well as increased travel and entertainment, commissions, and advertising expenses. General and administrative expenses increased 1.4% to $9.6 million in the current year compared to $9.4 million in the prior year, primarily due to an increase in outside service fees, employee wages, bonuses and fees, partially offset by a decrease in payroll taxes related to the ERC. Research & development (“R&D”) costs in fiscal 2022 of $6.8 million increased 8.8% from $6.2 million in fiscal 2021, primarily due to an increase in employee wages and bonus and outside consulting fees. The current year increase in R&D costs was partially offset by a decline in payroll taxes related to the ERC. The R&D spending level for fiscal 2022 represents 5.7% of net revenue, compared to the prior year level of 5.3%.
Other income in fiscal 2022 was $2.8 million compared to other expense of $0.3 million in fiscal 2021. Current year other income includes $4.5 million related to the forgiveness of our PPP Loan, partially offset by $0.7 million related to the
write-off
of our Oracle EnterpriseOne ERP system and related prepaid service and maintenance contracts 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. Prior year other expense includes $1.0 million of interest expense on debt and revolving line of credit, offset by a net foreign exchange gain of $0.6 million and other income of $0.1 million.
We recognized $0.6 million of income tax expense for the current fiscal year, resulting in an effective tax rate of 8.6%. The decrease in the effective tax rate in 2022 from 2021 is primarily related to 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”) 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 under Section 1106(i) of the CARES Act. During fiscal 2021 we recognized a $0.9 million income tax expense, or a 41.1% effective tax rate. The effective tax rate in this period was directly impacted by the change in mix of income between relevant jurisdictions in which we are subject to income taxes. Specific items increasing the fiscal 2021 effective tax rate include foreign rate differential, Denmark statutory audit adjustments, stock-based compensation, and Canada withholding taxes. This increase was offset by the foreign derived intangible income deduction, the release of a valuation allowance in China, and R&D tax credits expected to be utilized.
Net income for fiscal 2022 was $6.4 million, or $0.88 per diluted share. The results for the current 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. Net income for the prior year was $1.3 million or $0.18 per diluted share. Return on revenue was 5.5% for fiscal 2022 compared to 1.1% for fiscal 2021.
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Fiscal 2021 compared to Fiscal 2020
For a comparison of our results of operations for the fiscal years ended January 31, 2021, and January 31, 2020, 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, 2021, filed with the SEC on April 13, 2021.
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 |
|  | 2022 |  |  | 2021 |  |  | 2020 |  |  | 2022 |  |  | 2021 |  |  | 2020 |  |  | 2022 |  |  | 2021 |  |  | 2020 |
PI |  | $ | 90,915 |  |  | $ | 90,268 |  |  | $ | 88,116 |  |  | $ | 10,411 |  |  | $ | 12,885 |  |  | $ | 7,509 |  |  |  | 11.5 | % |  |  | 14.3 | % |  |  | 8.5 | %
T&M |  |  | 26,565 |  |  |  | 25,765 |  |  |  | 45,330 |  |  |  | 3,398 |  |  |  | (1,032 | ) |  |  | 6,281 |  |  |  | 12.8 | % |  |  | (4.0 | )% |  |  | 13.9 | %
Total |  | $ | 117,480 |  |  | $ | 116,033 |  |  | $ | 133,446 |  |  |  | 13,809 |  |  |  | 11,853 |  |  |  | 13,790 |  |  |  | 11.8 | % |  |  | 10.2 | % |  |  | 10.3 | %
Corporate Expenses |  |  |  |  |  |  |  |  |  |  |  |  |  |  | 9,553 |  |  |  | 9,420 |  |  |  | 11,357 |  |  |  |  |  |  |  |  |  |  |  |  |
Operating Income |  |  |  |  |  |  |  |  |  |  |  |  |  |  | 4,256 |  |  |  | 2,433 |  |  |  | 2,433 |  |  |  |  |  |  |  |  |  |  |  |  |
Other Expense, Net |  |  |  |  |  |  |  |  |  |  |  |  |  |  | 2,778 |  |  |  | (254 | ) |  |  | (1,063 | ) |  |  |  |  |  |  |  |  |  |  |  |
Income Before Income Taxes |  |  |  |  |  |  |  |  |  |  |  |  |  |  | 7,034 |  |  |  | 2,179 |  |  |  | 1,370 |  |  |  |  |  |  |  |  |  |  |  |  |
Income Tax Provision (Benefit) |  |  |  |  |  |  |  |  |  |  |  |  |  |  | 605 |  |  |  | 895 |  |  |  | (389 | ) |  |  |  |  |  |  |  |  |  |  |  |
Net Income |  |  |  |  |  |  |  |  |  |  |  |  |  | $ | 6,429 |  |  | $ | 1,284 |  |  | $ | 1,759 |  |  |  |  |  |  |  |  |  |  |  |  |

Product Identification
Revenue from the PI segment increased 0.7% in fiscal 2022, with revenue of $90.9 million compared to revenue of $90.3 million in the prior year. The current year increase is primarily attributable to growth in demand for ink jet and media supplies for the Trojan Label product line, the increase in current year sales of QuickLabel’s ink jet printer supplies and an increase in parts and repairs revenue in both the QuickLabel and Trojan Label product groups. Also contributing to the increase in revenue for the current year was an increase in hardware sales in the Trojan Label product group for certain new products such as the Trojan Two Compact printer and the
T3-OPX
label press. PI current year segment operating profit was $10.4 million with a profit margin of 11.5%, compared to the prior year segment operating profit of $12.9 million and related profit margin of 14.3%. The decrease in current year segment operating profit and margin is primarily due to increased operating expenses.
Test & Measurement
Revenue from the T&M product group was $26.6 million for fiscal 2022, a 3.1% increase compared to revenue of $25.8 million in the prior year. The increase in revenue for the current year is primarily attributable to the increase in repairs and parts sales for the aerospace printer product lines. To a lesser degree, the increase in the current year revenue was also impacted by the increase in supplies revenue in the aerospace product lines. T&M current year segment operating profit was $3.4 million resulting in a 12.8% profit margin compared to the prior year segment operating loss of $1.0 million and related negative operating margin of 4.0%. The increased profit and margins are a result of increased sales and lower manufacturing and operating costs.
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Liquidity and Capital Resources
Overview
Historically, our primary sources of short-term liquidity have been cash generated from operating activities and borrowings under our revolving credit facility. These sources have also funded a portion of our capital expenditures and contractual contingent consideration obligations. We have typically funded acquisitions by borrowing under bank term loan facilities.
On July 30, 2020, we entered into an Amended and Restated Credit Agreement (the “A&R Credit Agreement”) with Bank of America, N.A. (the “Lender”), our wholly owned subsidiary ANI ApS, a Danish private limited liability company and ANI ApS’s wholly-owned subsidiary TrojanLabel ApS, a Danish private limited liability company (“TrojanLabel”). The A&R Credit Agreement amended and restated the Credit Agreement dated as of February 28, 2017, by and among us, ANI ApS, TrojanLabel and the Lender. In connection with our entry into the A&R Credit Agreement, we entered into an Amended and Restated Security and Pledge Agreement and a mortgage in favor of the Lender with respect to our owned real property in West Warwick, Rhode Island. Under the A&R Credit Agreement, AstroNova, Inc. is the sole borrower, and, prior to the effectiveness of the Amendment (as defined below), its obligations were guaranteed by ANI ApS and TrojanLabel.
On March 24, 2021, we entered into a First Amendment to Credit Agreement (the “Amendment”) to our A&R Credit Agreement (the “A&R Credit Agreement amended by the Amendment, the “Amended Credit Agreement”) with the Lender, ANI ApS and TrojanLabel. Immediately prior to the closing of the Amendment, we repaid $2.6 million in principal amount of the term loan outstanding under the A&R Credit Agreement, resulting in an outstanding balance of the term loan of $10.0 million and no amount drawn and outstanding under the revolving credit facility under the Amended Credit Agreement.
The Amended Credit Agreement expires on September 30, 2025, a significant extension of tenor. It also eliminated a minimum adjusted EBITDA covenant, an asset coverage covenant and a minimum liquidity covenant, and, subject to ongoing covenant compliance, significantly reduced limitations on restricted payments such as dividends, eliminated restrictions on capital expenditures and increased operating flexibility with respect to funding our global operations.
The Amended Credit Agreement provides for (i) a term loan in the principal amount of $10.0 million, and (ii) a $22.5 million revolving credit facility available for general corporate purposes. At the closing of the Amended Credit Agreement, we borrowed the entire $10.0 million term loan which was used to refinance in full the outstanding term loan under the A&R Credit Agreement. 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, 2022, our cash and cash equivalents were $5.3 million. There was no outstanding balance on our revolving line of credit at January 31, 2022 and we have $22.5 million available for borrowing under that facility. We believe that our available cash and credit facilities combined with our cash generated from operations will be sufficient to support our operating requirements including our capital expenditure commitments.
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Indebtedness
Term Loan
The Amended Credit Agreement requires that the term loan be paid as follows: 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 April 30, 2021 through January 31, 2022 is $187,500; 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 April 30, 2022 through January 31, 2023 is $250,000; 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 April 30, 2023 through January 31, 2025 is $312,500; 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 April 30, 2025 and July 31, 2025 is $500,000; and the entire remaining principal balance of the term loan is required to be paid on September 30, 2025. We may voluntarily prepay the term loan, in whole or in part, from time to time without premium or penalty (other than customary breakage costs, if applicable). We may repay borrowings under the revolving credit facility at any time without premium or penalty (other than customary breakage costs, if applicable), but in any event no later than September 30, 2025, at which time any outstanding revolving loans will be due and payable in full, and the revolving credit facility will terminate. We may reduce or terminate the revolving line of credit at any time, subject to certain thresholds and conditions, without premium or penalty.
The Amended Credit Agreement includes an uncommitted accordion provision under which the term loan and/or revolving credit facility commitments may be increased in an aggregate principal amount not exceeding $10.0 million, subject to obtaining the agreement of the Lender and the satisfaction of certain other conditions.
As under the A&R Credit Agreement, 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 continued compliance with the Amended Credit Agreement. No amount of the term loan that is repaid may be reborrowed.
On December 14, 2021, we and Bank of America, N.A. entered into a LIBOR Transition Amendment (the “LIBOR Amendment”) with regard to the Amended Credit Agreement. The LIBOR Amendment, among other things, (i) changes the rate under the Amended Credit Agreement for borrowings denominated in U.S. Dollars from a LIBOR-based rate to a BSBY (Bloomberg Short-Term Bank Yield Index)-based rate, subject to certain adjustments, (ii) changes the rate under the Amended Credit Agreement for borrowings denominated in British Pounds Sterling from a LIBOR-based rate to a SONIA (Sterling Overnight Index Average)-based rate, subject to certain adjustments, (iii) changes the rate under the Amended Credit Agreement for borrowings denominated in Euros from a LIBOR-based rate to a EURIBOR (Euro Interbank Offered Rate)-based rate, subject to certain adjustments, and (iv) updates certain other provisions of the Amended Credit Agreement regarding successor interest rates to LIBOR.
Prior to giving effect to the LIBOR Amendment, the interest rates under Amended Credit Agreement were as follows: the term loan and revolving credit loans bore interest at a rate per annum equal to, at our option, either (a) the LIBOR Rate as defined in the A&R 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 varied within a range of 1.60% to 2.30% 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 LIBOR Rate plus 1.00% or (iv) 0.50%, plus a margin that varied within a range of 0.60% to 1.30% based on our consolidated leverage ratio. In addition to certain other fees and expenses that we are required to pay to the Lender, we are required to pay a commitment fee on the undrawn portion of the revolving credit facility that varies within a range of 0.15% and 0.30% based on our consolidated leverage ratio.
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The interest rates under the Amended Credit Agreement, giving effect to the LIBOR Amendment, are as follows: the term loan and revolving credit loans bear interest at a rate per annum equal to, at our option, either (a) the BSBY Rate as defined in the LIBOR Amendment (or in the case of revolving credit loans denominated in a Pounds Sterling, Euros or another currency other than U.S. Dollars, the SONIA Rate as defined in the LIBOR Amendment, EURIOBOR Rate as defined in the LIBOR Amendment, or the applicable quoted rate, respectively), plus a margin that varies within a range of 1.60% to 2.30% based on our consolidated leverage ratio, or (b) a fluctuating reference rate equal to the highest of (i) the federal fund rate plus 0.50%, (ii) Bank of America’s publicly announced prime rate, (iii) the BSBY Rate, SONIA Rate, EURIBOR Rate or other applicable quoted rate plus 1.00% or (iv) 0.50%, plus a margin that varies within a range of 0.60% to 1.30% based on our consolidated leverage ratio. In addition to certain other fees and expenses that we are required to pay to the Lender, we are required to pay a commitment fee on the undrawn portion of the revolving credit facility that varies within a range of 0.15% and 0.30% 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 and a minimum consolidated fixed charge coverage ratio. The minimum EBITDA, minimum consolidated asset coverage ratio, minimum liquidity and maximum capital expenditures covenants with which we were required to comply under the A&R Credit Agreement were eliminated by the Amendment. 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 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 Amended Credit Agreement, certain of which provisions were modified by the Amendment.
The Lender is entitled to accelerate repayment of the loans and to terminate its revolving credit commitment under the Amended Credit Agreement upon the occurrence of any of various customary events of default, which include, among other events, the following (which are subject, in some cases, to certain grace periods): failure to pay when due any principal, interest or other amounts in respect of the loans, breach of any of our covenants or representations under the loan documents, default under any other of our or our subsidiaries’ significant indebtedness agreements, a bankruptcy, insolvency or similar event with respect to us or any of our subsidiaries, a significant unsatisfied judgment against us or any of our subsidiaries, or a change of control.
Our obligations under the Amended Credit Agreement continue to be secured by substantially all of our personal property assets (including a pledge of the equity interests held by us in ANI ApS, in our wholly-owned German subsidiary AstroNova GmbH, and in our wholly-owned French subsidiary AstroNova SAS), subject to certain exceptions, and by a mortgage on our owned real property in West Warwick, Rhode Island. Pursuant to the Amendment, the guarantees of our obligations under the A&R Credit Agreement that were previously provided by ANI ApS and TrojanLabel were released.
PPP Loan
On May 6, 2020, we entered into a Loan Agreement with and executed a promissory note in favor of Greenwood Credit Union pursuant to which we borrowed $4.4 million from Greenwood pursuant to the Paycheck Protection Program administered by the United States Small Business Administration (the “SBA”) and authorized by 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, which was enacted on June 5, 2020. We believe that our obtaining the PPP Loan and suspending the payment of dividends on our common stock were instrumental in our ability to successfully negotiate the A&R Credit Agreement.
The PPP Loan, which would have matured on May 6, 2022, was unsecured and bore interest at a rate of 1.0% per annum, accruing from the loan date. No payments would have been due on the PPP Loan until the date on which the lender determined the amount of the PPP Loan that was eligible for forgiveness.
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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 extinguishment of debt in other income (expense) which is included in our consolidated income statement for the period ended January 31, 2022.
Cash Flow
The statements of cash flows for the years ended January 31, 2022, 2021 and 2020 are included on page 50 of this Form
10-K.
Net cash provided by operating activities was $1.4 million in fiscal 2022 compared to net cash provided by operating activities of $15.5 million in the previous year. The decrease in net cash provided by operations for the current year is primarily due to a decrease in cash provided by working capital of $11.3 million from fiscal 2021. The changes in accounts receivable, inventory, income taxes, accounts payable and accrued expenses for the current year decreased cash by $3.9 million in fiscal 2022 compared to an increase to cash of $7.4 million in the prior year. The decrease in 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 decreased to $17.1 million at January 31, 2022, compared to $17.4 at January 31, 2021. The slight decrease in the accounts receivable balance is related to sales product mix in fiscal 2022 compared to the prior year. The days sales outstanding dropped to 45 days at year end compared to 51 days at the end of fiscal 2021 contributing to the lower receivables balance at January 31, 2022. The days sales outstanding decrease in the current year is due to customer mix, as aerospace receivables typically take longer to collect, and these revenues continued to represent a lesser percentage of total sales in fiscal 2022.
The
year-end
inventory balance increased to $34.6 million at January 31, 2022 versus $30.1 million at January 31, 2021, and the days inventory on hand increased to 156 days at the end of fiscal 2022 as compared to 147 days at the end of the fiscal 2021. The current period increase in inventory is due to increased production demand.
Net cash used by investing activities for fiscal 2022 was $1.8 million for capital expenditures, of which $1.6 million related to the capitalization of our new ERP system and the related hardware, and the remaining $0.2 million was for machinery and tools.
Net cash used by financing activities for fiscal 2022 was $5.6 million. Cash outflows for financing activities for fiscal 2022 included the refinancing of debt, which resulted in a net outflow of cash of $2.6 million, and principal payments on the new long-term debt and the guaranteed royalty obligation of $0.8 million and $2.0 million, respectively.
Fiscal 2021 compared to Fiscal 2020
For a comparison of our cash flow for the fiscal years ended January 31, 2021 and January 31, 2020, 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, 2021, filed with the SEC on April 13, 2021.
Contractual Obligations, Commitments and Contingencies
As of January 31, 2022, we had contractual obligations related to lease arrangements, debt and royalty obligation arrangements and purchase commitments.
The lease arrangements are for certain of our facilities at various locations worldwide. As of January 31, 2022, we had fixed lease payment obligations of $1.1 million, with $0.3 million due within 12 months. Refer to Note 12, “Leases,” in our audited consolidated financial statements included in this Annual Report on Form
10-K
for further details.
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Debt arrangements under our Amended Credit Agreement with Bank of America, N.A., consist of the balance due of $9.3 million at January 31, 2022. For additional details regarding our long-term debt obligations, see Note 7, “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 six years pursuant to the Honeywell Agreement, which, at January 31, 2022, included a balance due of $6.4 million, with $2.0 million due within 12 months. Refer to Note 11, “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, 2022 our purchase commitments totaled $37.5 million, with $35.4 million due within 12 months, most of which are
non-cancelable.
We are also subject to contingencies, including legal proceedings and claims arising out of its businesses 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 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 Update
(ASU) 2014-9, Revenue
from Contracts with Customers (also referred to as Topic 606). Under Topic 606, based on the nature of our contracts and consistent with prior practice, 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 Topic 606 require management to make estimates, determinations and judgments based on historical experience and on various other assumptions, which 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 stand alone 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
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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 Topic 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 have not resulted in material adjustments in subsequent periods. Bad debt expense was less than 1% of net sales in each of fiscal 2022 and 2021.
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 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 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, 2022, we had provided valuation allowances for future tax benefits resulting from certain domestic R&D tax credits and foreign tax credit carryforwards, both of which could expire unused.
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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.
On March 27, 2020, the 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 (”PPP”), 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 pursuant to which we borrowed $4.4 million. 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 PPP. We have fully utilized the PPP Loan proceeds for qualifying expenses and subsequent to year end have applied for forgiveness of the PPP Loan (including all associated accrued interest) in accordance with the terms of the CARES Act, as amended by the PPP Flexibility Act. 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 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 recognized in the second quarter of fiscal 2022 is excluded from taxable income under Section 1106(i) of the CARES Act.
Intangible and Long-Lived Assets:
Long-lived assets, such as definite-lived intangible assets and property, plant and equipment, 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.
Goodwill:
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 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
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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.
Share-Based Compensation:
Share-based compensation expense is measured based on the estimated fair value of the share-based award when granted and is recognized as an expense over the requisite service period (generally the vesting period of the equity grant). We have estimated the fair value of each option on the date of grant using the Black-Scholes option-pricing model. Our estimate of share-based compensation requires several complex and subjective assumptions including our stock price volatility, employee exercise patterns (expected life of the options), the risk-free interest rate and our dividend yield. The stock price volatility assumption is based on the historical weekly price data of our common stock over a period equivalent to the weighted-average expected life of our options. Management evaluated whether there were factors during that period which were unusual and would distort the volatility figure if used to estimate future volatility and concluded that there were no such factors. In determining the expected life of the option grants, we have observed the actual terms of prior grants with similar characteristics and the actual vesting schedule of the grants and assessed the expected risk tolerance of different option groups. The risk-free interest rate used in the model is based on the actual U.S. Treasury zero coupon rates for bonds matching the expected term of the option as of the option grant date. The dividend assumption is based upon the prior year’s average dividend yield. No compensation expense is recognized for options that are forfeited for which the employee does not render the requisite service. Our accounting for share-based compensation for restricted stock awards (“RSAs”) and restricted stock units (“RSUs”) is also based on the fair value method. The fair value of the RSUs and RSAs is based on the closing market price of our common stock on the date of grant. Reductions in compensation expense associated with forfeited awards are estimated at the date of grant, and this estimated forfeiture rate is adjusted periodically based on actual forfeiture experience.
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 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, 2022.
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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 $0.3 million for the year ended January 31, 2022.
Interest Rate Risk
At January 31, 2022, our total indebtedness included $9.25 million of term loan variable-rate debt. At January 31, 2022, 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 2022, the interest rate on our variable rate debt ranged between 2.35% to 4.65% . The impact on our results of operations of a 100 basis point change in the interest rate on the outstanding balance of our variable-rate debt, would be approximately $0.1 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 Chief Executive Officer and Chief Financial Officer, the effectiveness of our disclosure controls and procedures as of the end of the period covered by this 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 (Exchange Act). Based on that evaluation, our Chief Executive Officer and our Chief Financial Officer have concluded that our disclosure controls and procedures were effective at January 31, 2022 to ensure that the information required to be disclosed in our Exchange Act reports is (1) recorded, processed, summarized and reported in a timely manner and (2) accumulated and communicated to our management, including our Chief Executive Officer and our Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure.
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, 2022. In making this assessment, management used the criteria set forth in the Internal Control-
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Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”). Based on this assessment, the principal executive officer and principal financial officer believe that as of January 31, 2022, our internal control over financial reporting was effective based on criteria set forth by COSO in “Internal Control-Integrated Framework.”
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.
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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 2022 Annual Meeting of Shareholders.
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 |  | Age |  |  | Position
Gregory A. Woods |  |  | 63 |  |  | President, Chief Executive Officer and Director
David S. Smith |  |  | 65 |  |  | Vice President, Chief Financial Officer and Treasurer
Stephen M. Petrarca |  |  | 59 |  |  | Vice President—Operations
Michael J. Natalizia |  |  | 58 |  |  | Chief Technology Officer and Vice President of Strategic Technical Alliances
Tom Carll |  |  | 55 |  |  | 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.
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
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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.
Item 11.
Executive Compensation
The information required by this item is incorporated herein by reference to our definitive Proxy Statement to be filed for our 2022 Annual Meeting of Shareholders.
The information set forth under the heading “Compensation Committee Report” in our definitive 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 definitive Proxy Statement to be filed for our 2022 Annual Meeting of Shareholders.
Equity Compensation Plan Information
The following table sets forth information about our equity compensation plans as of January 31, 2022:

Plan Category |  | Number of Securities to be Issued Upon Exercise of Outstanding Options, Warrants and Rights |  |  | Weighted- Average Exercise Price of Outstanding Options, Warrants and Rights |  |  | Number of Securities Remaining Available for Future Issuance Under Equity Compensation Plans |
Equity Compensation Plans Approved by Shareholders |  |  | 776,975 | (1) |  | $ | 14.67 | (2) |  |  | 401,893 | (3)
Equity Compensation Plans Not Approved by Shareholders |  |  | — |  |  |  | — |  |  |  | — |
Total |  |  | 776,975 | (1) |  | $ | 14.67 | (2) |  |  | 401,893 | (3)

(1) | Includes 323,468 shares issuable upon exercise of outstanding options granted under our 2007 Equity Incentive Plan; 139,075 shares issuable upon exercise of outstanding options granted under our 2015 Equity Incentive Plan; and 135,500 shares issuable upon exercise of outstanding options granted, 135,403 restricted stock units and 43,529 unvested performance stock units outstanding under our 2018 Equity Incentive Plan. This balance does not include 20,410 of unvested restricted stock which are subject to forfeiture.

(2) | Does not include restricted stock units.

(3) | Represents 399,611 shares available for grant under the AstroNova, Inc. 2018 Equity Incentive Plan and 2,282 shares available for purchase under the Employee Stock Purchase Plan.

Additional information regarding these equity compensation plans is contained in Note 15, “Share-Based Compensation,” in our audited consolidated financial statements included in this Annual Report on Form
10-K.
Item 13.
Certain Relationships, Related Transactions and Director Independence
The information required by this item is incorporated herein by reference to our definitive Proxy Statement for our 2022 Annual Meeting of Shareholders.
Item 14.
Principal Accountant Fees and Services
The information required by this item is incorporated herein by reference to our definitive Proxy Statement for our 2022 Annual Meeting of Shareholders.
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PART IV
Item 15. Exhibits and Financial Statement Schedule
(a)(1) Financial Statements:
The following documents are included as part of this Annual Report filed on Form
10-K:

|  | Page
Report of Independent Registered Public Accounting Firm |  | 44-45
Consolidated Balance Sheets as of January 31, 2022 and 2021 |  | 46
Consolidated Statements of Income—Years Ended January 31, 2022, 2021 and 2020 |  | 47
Consolidated Statements of Comprehensive Income—Years Ended January 31, 2022, 2021 and 2020 |  | 48
Consolidated Statements of Changes in Shareholders’ Equity—Years Ended January 31, 2022, 2021 and 2020 |  | 49
Consolidated Statements of Cash Flows—Years Ended January 31, 2022, 2021 and 2020 |  | 50
Notes to Consolidated Financial Statements |  | 51-75
(a)(2) Financial Statement Schedule: |  |
Schedule II—Valuation and Qualifying Accounts and Reserves—Years Ended January 31, 2022, 2021 and 2020 |  | 76

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) |  |  | 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*
| (3A) |  |  | 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.
| (3B) |  |  | 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.
| (4.1) |  |  | 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.
| (4.2) |  |  | 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) |  |  | 2. 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.**

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Exhibit Number |  |  |
| (10.2) |  |  | 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.**
| (10.3) |  |  | 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.**
| (10.4) |  |  | 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.**
| (10.5) |  |  | 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.**
| (10.6) |  |  | 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.**
| (10.7) |  |  | 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.**
| (10.8) |  |  | 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.**
| (10.9) |  |  | 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.**
| (10.10) |  |  | 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.**
| (10.11) |  |  | 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.**
| (10.12) |  |  | 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.**
| (10.13) |  |  | 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.
| (10.14) |  |  | Amended and Restated AstroNova, Inc. Employee Stock Purchase Plan filed as Exhibit 10.1 to the Company’s Current Report on Form 8-K/A, event date November 20, 2017, filed with the SEC on December 28, 2017 and incorporated by reference herein.
| (10.16) |  |  | 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.**

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Exhibit Number |  |
(10.17) |  | 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.**
(10.18) |  | 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.**
(10.19) |  | 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.**
(10.20) |  | 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.**
(10.21) |  | 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.**
(10.22) |  | Form of Non-employee Director Restricted Stock Agreement filed as Exhibit 10.7 to the Company’s Current Report on Form 8-K filed, event date June 4, 2018, filed with the SEC on June 4, 2018 and incorporated by reference herein.**
(10.23) |  | 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 filed, event date January 31, 2019, filed with the SEC on February 4, 2019 and incorporated by reference herein.**
(10.24) |  | 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 to herein.*
(10.25) |  | 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.*
(10.26) |  | 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.
(10.27) |  | 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, and incorporated by reference herein.
(10.28) |  | 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, and incorporated by reference herein.
(10.29) |  | 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.**

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Exhibit Number |  |
(10.30) |  | 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.
(10.31) |  | 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.
(10.32) |  | 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.**
(10.33)† |  | LIBOR Transition Amendment dated as of December 14, 2021 among AstroNova, Inc. and Bank of America, N.A.
(21) |  | List of Subsidiaries of the Company.
(23.1) |  | Consent of Wolf & Company, P.C.
(31.1) |  | Certification of Chief Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
(31.2) |  | Certification of Chief Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
(32.1) |  | 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.
(32.2) |  | 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.

† | Filed herewith.

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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 18, 2022 |  |  |  | By: |  | /S/ G REGORY A. W OODS
|  |  |  |  |  | (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/ G REGORY A. W OODS Gregory A. Woods |  | President, Chief Executive Officer and Director (Principal Executive Officer) |  | April 18, 2022
/s/ D AVID S. S MITH David S. Smith |  | Vice President, Chief Financial Officer and Treasurer (Principal Accounting and Financial Officer) |  | April 18, 2022
/s/ J EAN A. B UA Jean A. Bua |  | Director |  | April 18, 2022
/s/ M ITCHELL I. Q UAIN Mitchell I. Quain |  | Director |  | April 18, 2022
/s/ Y VONNE E. S CHLAEPPI Yvonne E. Schlaeppi |  | Director |  | April 18, 2022
/s/ H AROLD S CHOFIELD Harold Schofield |  | Director |  | April 18, 2022
/s/ R ICHARD S. W ARZALA Richard S. Warzala |  | Director |  | April 18, 2022

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REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
The Shareholders and Board of Directors of
AstroNova, Inc.
Opinions on the Financial Statements and Internal Control Over Financial Reporting
We have audited the accompanying consolidated balance sheets of AstroNova, Inc. (the “Company”) as of January 31, 2022 and 2021, and the related consolidated statements of income, comprehensive income, changes in shareholders’ equity and cash flows for each of the three years in the period ended January 31, 2022 and the related notes and the financial statement schedule listed in Item 15(a)(2) (collectively, the “financial statements”). We also have audited the Company’s internal control over financial reporting as of January 31, 2022, 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, the financial statements referred to above present fairly, in all material respects, the financial position of the Company as of January 31, 2022 and 2021, and the results of its operations and its cash flows for each of the years in the three-year period ended January 31, 2022, in conformity with accounting principles generally accepted in the United States of America. Also, in our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of January 31, 2022, based on criteria established in
Internal Control—Integrated Framework
issued by the Committee of Sponsoring Organizations of the Treadway Commission in 2013.
Basis for Opinions
The Company’s management is responsible for these financial statements, for maintaining effective internal control over financial reporting, and for its assessment of the effectiveness of internal control over financial reporting included in the accompanying Management’s Annual Report on Internal Control over Financial Reporting. Our responsibility is to express an opinion on the Company’s financial statements and an opinion on the Company’s internal control over financial reporting based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (“PCAOB”) and are required to be independent with respect to the Company in accordance with the 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, and whether effective internal control over financial reporting was maintained in all material respects.
Our audits of the financial statements 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. Our audit of internal control over financial reporting 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 audits also included performing such other procedures as we considered necessary in the circumstances. We believe that our audits provide a reasonable basis for our opinions.
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
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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.
Critical Audit Matters
Critical audit matters 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. We have determined that there are no critical audit matters.
/s/ Wolf & Company, P.C.
We have served as the Company’s auditor since 2013.
Boston, Massachusetts
April 18, 2022
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ASTRONOVA, INC.
CONSOLIDATED BALANCE SHEETS
As of January 31
(In Thousands, Except Share Data)

|  | 2022 |  |  | 2021 |
ASSETS |  |  |  |  |  |
CURRENT ASSETS |  |  |  |  |  |  |  |
Cash and Cash Equivalents |  | $ | 5,276 |  |  | $ | 11,439 |
Accounts Receivable, net of reserves of $826 in 2022 and $1,054 in 2021 |  |  | 17,124 |  |  |  | 17,415 |
Inventories |  |  | 34,609 |  |  |  | 30,060 |
Employee Retention Credit Receivable |  |  | 3,135 |  |  |  | — |
Prepaid Expenses and Other Current Assets |  |  | 3,634 |  |  |  | 1,807 |
Total Current Assets |  |  | 63,778 |  |  |  | 60,721 |
Property, Plant and Equipment, net |  |  | 11,441 |  |  |  | 12,011 |
Identifiable Intangibles, net |  |  | 19,200 |  |  |  | 21,502 |
Goodwill |  |  | 12,156 |  |  |  | 12,806 |
Deferred Tax Assets, net |  |  | 5,591 |  |  |  | 5,941 |
Right of Use Asset |  |  | 1,094 |  |  |  | 1,389 |
Other |  |  | 1,695 |  |  |  | 1,103 |
TOTAL ASSETS |  | $ | 114,955 |  |  | $ | 115,473 |
LIABILITIES AND SHAREHOLDERS’ EQUITY |  |  |  |  |  |  |  |
CURRENT LIABILITIES |  |  |  |  |  |  |  |
Accounts Payable |  | $ | 8,590 |  |  | $ | 5,734 |
Accrued Compensation |  |  | 3,512 |  |  |  | 2,917 |
Other Accrued Expenses |  |  | 4,113 |  |  |  | 3,874 |
Current Portion of Long-Term Debt |  |  | 1,000 |  |  |  | 5,326 |
Current Liability—Royalty Obligation |  |  | 2,000 |  |  |  | 2,000 |
Current Liability—Excess Royalty Payment Due |  |  | 235 |  |  |  | 177 |
Income Taxes Payable |  |  | 323 |  |  |  | 655 |
Deferred Revenue |  |  | 262 |  |  |  | 285 |
Total Current Liabilities |  |  | 20,035 |  |  |  | 20,968 |
NON - CURRENT LIABILITIES |  |  |  |  |  |  |  |
Long-Term Debt, net of current portion |  |  | 8,154 |  |  |  | 7,109 |
Royalty Obligation, net of current portion |  |  | 4,361 |  |  |  | 6,161 |
Long-Term Debt—PPP Loan |  |  | — |  |  |  | 4,422 |
Lease Liabilities, net of current portion |  |  | 808 |  |  |  | 1,065 |
Income Taxes Payable |  |  | 399 |  |  |  | 681 |
Deferred Tax Liabilities |  |  | 186 |  |  |  | 384 |
TOTAL LIABILITIES |  |  | 33,943 |  |  |  | 40,790 |
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 10,566,404 shares in 2022 and 10,425,094 shares in 2021 |  |  | 528 |  |  |  | 521 |
Additional Paid-in Capital |  |  | 59,692 |  |  |  | 58,049 |
Retained Earnings |  |  | 56,514 |  |  |  | 50,085 |
Treasury Stock, at Cost, 3,324,280 shares in 2022 and 3,297,058 shares in 2021 |  |  | (33,974 | ) |  |  | (33,588 | )
Accumulated Other Comprehensive Loss, net of tax |  |  | (1,748 | ) |  |  | (384 | )
TOTAL SHAREHOLDERS’ EQUITY |  |  | 81,012 |  |  |  | 74,683 |
TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY |  | $ | 114,955 |  |  | $ | 115,473 |

See Notes to the Consolidated Financial Statements.
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ASTRONOVA, INC.
CONSOLIDATED STATEMENTS OF INCOME
For the years ended January 31
(In Thousands, Except Per Share Data)

|  | 2022 |  |  | 2021 |  |  | 2020 |
Revenue |  | $ | 117,480 |  |  | $ | 116,033 |  |  | $ | 133,446 |
Cost of Revenue |  |  | 73,741 |  |  |  | 74,673 |  |  |  | 84,688 |
Gross Profit |  |  | 43,739 |  |  |  | 41,360 |  |  |  | 48,758 |
Costs and Expenses: |  |  |  |  |  |  |  |  |  |  |  |
Selling and Marketing |  |  | 23,177 |  |  |  | 23,301 |  |  |  | 26,884 |
Research and Development |  |  | 6,753 |  |  |  | 6,206 |  |  |  | 8,084 |
General and Administrative |  |  | 9,553 |  |  |  | 9,420 |  |  |  | 11,357 |
Operating Expenses |  |  | 39,483 |  |  |  | 38,927 |  |  |  | 46,325 |
Operating Income |  |  | 4,256 |  |  |  | 2,433 |  |  |  | 2,433 |
Other Income (Expense): |  |  |  |  |  |  |  |  |  |  |  |
Gain on Extinguishment of Debt – PPP Loan |  |  | 4,466 |  |  |  | — |  |  |  | — |
Loss on Disposal of Assets |  |  | (696 | ) |  |  | — |  |  |  | — |
Interest Expense |  |  | (677 | ) |  |  | (955 | ) |  |  | (682 | )
Gain (Loss) on Foreign Currency Transactions |  |  | (288 | ) |  |  | 590 |  |  |  | (448 | )
Other, net |  |  | (27 | ) |  |  | 111 |  |  |  | 67 |
|  |  | 2,778 |  |  |  | (254 | ) |  |  | (1,063 | )
Income before Income Taxes |  |  | 7,034 |  |  |  | 2,179 |  |  |  | 1,370 |
Income Tax Provision (Benefit) |  |  | 605 |  |  |  | 895 |  |  |  | (389 | )
Net Income |  | $ | 6,429 |  |  | $ | 1,284 |  |  | $ | 1,759 |
Net Income Per Common Share—Basic |  | $ | 0.89 |  |  | $ | 0.18 |  |  | $ | 0.25 |
Net Income Per Common Share—Diluted |  | $ | 0.88 |  |  | $ | 0.18 |  |  | $ | 0.24 |
Weighted Average Number of Common Shares Outstanding—Basic |  |  | 7,207 |  |  |  | 7,104 |  |  |  | 7,024 |
Dilutive Effect of Common Stock Equivalents |  |  | 132 |  |  |  | 62 |  |  |  | 214 |
Weighted Average Number of Common Shares Outstanding—Diluted |  |  | 7,339 |  |  |  | 7,166 |  |  |  | 7,238 |

See Notes to the Consolidated Financial Statements.
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ASTRONOVA, INC.
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
For the years ended January 31
(In Thousands)

|  | 2022 |  |  | 2021 |  |  | 2020 |
Net Income |  | $ | 6,429 |  |  | $ | 1,284 |  |  | $ | 1,759 |
Other Comprehensive Income (Loss), net of taxes and reclassification adjustments: |  |  |  |  |  |  |  |  |  |  |  |
Foreign Currency Translation Adjustments |  |  | (1,426 | ) |  |  | 710 |  |  |  | (133 | )
Change in Value of Derivatives Designated as Cash Flow Hedge |  |  | — |  |  |  | (239 | ) |  |  | 122 |
(Gains) Losses from Cash Flow Hedges Reclassified to Income Statement |  |  | 62 |  |  |  | 193 |  |  |  | (264 | )
Cross-Currency Interest Rate Swap Terminations |  |  | — |  |  |  | 45 |  |  |  | — |
Other Comprehensive Income (Loss) |  |  | (1,364 | ) |  |  | 709 |  |  |  | (275 | )
Comprehensive Income |  | $ | 5,065 |  |  | $ | 1,993 |  |  | $ | 1,484 |

See Notes to the Consolidated Financial Statements.
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ASTRONOVA, INC.
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY
($ In Thousands)

|  | Common Stock |  |  | Additional Paid-in Capital |  |  | Retained Earnings |  |  | Treasury Stock |  |  | Accumulated Other Comprehensive Income (Loss) |  |  | Total Shareholders’ Equity |
|  | Shares |  |  | Amount |
Balance January 31, 2019 |  |  | 10,218,559 |  |  | $ | 511 |  |  | $ | 53,568 |  |  | $ | 49,511 |  |  | $ | (32,997 | ) |  | $ | (818 | ) |  | $ | 69,775 |
Share-Based Compensation |  |  | — |  |  |  | — |  |  |  | 1,775 |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | 1,775 |
Employee O ption E xercises |  |  | 65,121 |  |  |  | 3 |  |  |  | 790 |  |  |  | — |  |  |  | (11 | ) |  |  | — |  |  |  | 782 |
Restricted Stock Awards Vested, net |  |  | 59,930 |  |  |  | 3 |  |  |  | (3 | ) |  |  | — |  |  |  | (469 | ) |  |  | — |  |  |  | (469 | )
Common Stock— C ash D ividend—$0.28 per share |  |  | — |  |  |  | — |  |  |  | — |  |  |  | (1,972 | ) |  |  | — |  |  |  | — |  |  |  | (1,972 | )
Net I ncome |  |  | — |  |  |  | — |  |  |  | — |  |  |  | 1,759 |  |  |  | — |  |  |  | — |  |  |  | 1,759 |
Other C omprehensive L oss |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | (275 | ) |  |  | (275 | )
Balance January 31, 2020 |  |  | 10,343,610 |  |  | $ | 517 |  |  | $ | 56,130 |  |  | $ | 49,298 |  |  | $ | (33,477 | ) |  | $ | (1,093 | ) |  | $ | 71,375 |
Share- B ased C ompensation |  |  | — |  |  |  | — |  |  |  | 1,819 |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | 1,819 |
Employee O ption E xercises |  |  | 16,487 |  |  |  | 1 |  |  |  | 103 |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | 104 |
Restricted S tock A wards V ested, net |  |  | 64,997 |  |  |  | 3 |  |  |  | (3 | ) |  |  | — |  |  |  | (111 | ) |  |  | — |  |  |  | (111 | )
Common Stock— C ash D ividend—$0.07 per share |  |  | — |  |  |  | — |  |  |  | — |  |  |  | (497 | ) |  |  | — |  |  |  | — |  |  |  | (497 | )
Net I ncome |  |  | — |  |  |  | — |  |  |  | — |  |  |  | 1,284 |  |  |  | — |  |  |  | — |  |  |  | 1,284 |
Other C omprehensive I ncome |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | 709 |  |  |  | 709 |
Balance January 31, 2021 |  |  | 10,425,094 |  |  | $ | 521 |  |  | $ | 58,049 |  |  | $ | 50,085 |  |  | $ | (33,588 | ) |  | $ | (384 | ) |  | $ | 74,683 |
Share-Based Compensation |  |  | — |  |  |  | — |  |  |  | 1,493 |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | 1,493 |
Employee Option Exercises |  |  | 14,371 |  |  |  | 1 |  |  |  | 156 |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | 157 |
Restricted Stock Awards Vested, net |  |  | 126,939 |  |  |  | 6 |  |  |  | (6 | ) |  |  | — |  |  |  | (386 | ) |  |  | — |  |  |  | (386 | )
Net Income |  |  | — |  |  |  | — |  |  |  | — |  |  |  | 6,429 |  |  |  | — |  |  |  | — |  |  |  | 6,429 |
Other Comprehensive Loss |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | (1,364 | ) |  |  | (1,364 | )
Balance January 31, 2022 |  |  | 10,566,404 |  |  | $ | 528 |  |  | $ | 59,692 |  |  | $ | 56,514 |  |  | $ | (33,974 | ) |  | $ | (1,748 | ) |  | $ | 81,012 |

See Notes to the Consolidated Financial Statements.
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ASTRONOVA, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
For the years ended January 31
(In Thousands)

|  | 2022 |  |  | 2021 |  |  | 2020 |
Cash Flows from Operating Activities: |  |  |  |  |  |  |  |  |  |  |  |
Net Income |  | $ | 6,429 |  |  | $ | 1,284 |  |  | $ | 1,759 |
Adjustments to Reconcile Net Income to Net Cash Provided By Operating Activities: |  |  |  |  |  |  |  |  |  |  |  |
Depreciation and Amortization |  |  | 3,994 |  |  |  | 5,983 |  |  |  | 6,284 |
Amortization of Debt Issuance Costs |  |  | 44 |  |  |  | 75 |  |  |  | 49 |
Share-Based Compensation |  |  | 1,493 |  |  |  | 1,819 |  |  |  | 1,775 |
Loss on Disposal of Assets |  |  | 696 |  |  |  | — |  |  |  | — |
Gain on Extinguishment of Debt |  |  | (4,466 | ) |  |  | — |  |  |  | — |
Deferred Income Tax Provision (Benefit) |  |  | 210 |  |  |  | (1,021 | ) |  |  | (1,638 | )
Changes in Assets and Liabilities: |  |  |  |  |  |  |  |  |  |  |  |
Accounts Receivable |  |  | 77 |  |  |  | 2,702 |  |  |  | 3,594 |
Other Receivable – Employee Retention Credit Receivable |  |  | (3,135 | ) |  |  | — |  |  |  | — |
Inventories |  |  | (4,883 | ) |  |  | 4,247 |  |  |  | (3,938 | )
Accounts Payable and Accrued Expenses |  |  | 4,052 |  |  |  | (57 | ) |  |  | (2,732 | )
Income Taxes Payable |  |  | (2,043 | ) |  |  | 1,482 |  |  |  | (1,773 | )
Other |  |  | (1,074 | ) |  |  | (970 | ) |  |  | (156 | )
Net Cash Provided by Operating Activities |  |  | 1,394 |  |  |  | 15,544 |  |  |  | 3,224 |
Cash Flows from Investing Activities: |  |  |  |  |  |  |  |  |  |  |  |
Additions to Property, Plant and Equipment |  |  | (1,796 | ) |  |  | (2,587 | ) |  |  | (2,906 | )
Net Cash Used by Investing Activities |  |  | (1,796 | ) |  |  | (2,587 | ) |  |  | (2,906 | )
Cash Flows from Financing Activities: |  |  |  |  |  |  |  |  |  |  |  |
Net Cash Proceeds from Employee Stock Option Plans |  |  | 60 |  |  |  | 9 |  |  |  | 654 |
Net Cash Proceeds from Share Purchases under Employee Stock Purchase Plan |  |  | 96 |  |  |  | 95 |  |  |  | 128 |
Net Cash Used for Payment of Taxes Related to Vested Restricted Stock |  |  | (386 | ) |  |  | (111 | ) |  |  | (469 | )
Net (Repayments)/Borrowings under Revolving Credit Facility |  |  | — |  |  |  | (6,500 | ) |  |  | 5,000 |
Payment of Minimum Guarantee Royalty Obligation |  |  | (2,000 | ) |  |  | (2,000 | ) |  |  | (1,875 | )
Proceeds from Long-Term Debt – PPP Loan |  |  | — |  |  |  | 4,422 |  |  |  | — |
Proceeds from Long-Term Debt Borrowings |  |  | 10,000 |  |  |  | 15,232 |  |  |  | — |
Payoff of Long-Term Debt |  |  | (12,576 | ) |  |  | (11,732 | ) |  |  | — |
Principal Payments on Long-Term Debt |  |  | (750 | ) |  |  | (3,958 | ) |  |  | (5,208 | )
Payments of Debt Issuance Costs |  |  | — |  |  |  | (100 | ) |  |  | — |
Dividends Paid |  |  | — |  |  |  | (497 | ) |  |  | (1,972 | )
Net Cash Used by Financing Activities |  |  | (5,556 | ) |  |  | (5,140 | ) |  |  | (3,742 | )
Effect of Foreign Exchange Rate Changes on Cash and Cash Equivalents |  |  | (205 | ) |  |  | (627 | ) |  |  | 139 |
Net Increase (Decrease) in Cash and Cash Equivalents |  |  | (6,163 | ) |  |  | 7,190 |  |  |  | (3,285 | )
Cash and Cash Equivalents, Beginning of Year |  |  | 11,439 |  |  |  | 4,249 |  |  |  | 7,534 |
Cash and Cash Equivalents, End of Year |  | $ | 5,276 |  |  | $ | 11,439 |  |  | $ | 4,249 |
Supplemental Information: |  |  |  |  |  |  |  |  |  |  |  |
Cash Paid During the Period for: |  |  |  |  |  |  |  |  |  |  |  |
Interest |  | $ | 342 |  |  | $ | 677 |  |  | $ | 531 |
Income Taxes, Net of Refunds |  | $ | 2,414 |  |  | $ | 446 |  |  | $ | 2,913 |

See Notes to the Consolidated Financial Statements.
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ASTRONOVA, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
January 31, 2022, 2021 and 2020
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; estimated useful life and valuation 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.
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, 2022 and 2021,
$3.7 million and $4.6 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 Update (“ASU”)
2014-
09
, “Revenue
from Contracts with Customers (“Topic 606”).” The core principle of Topic 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. Topic 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 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.
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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 Topic 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 service at the request of the customer, generally for the repair and maintenance of products previously sold. These services are short in duration and total less than 11% and 9% of revenue for the years ended January 31, 2022 and 2021, 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.
We recognize 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. Costs related to obtaining sales contracts for our aerospace printer products have been capitalized and are being amortized based on the forecasted number of units sold over the estimated benefit term. 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
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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.
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 their undistributed earnings are considered to be permanently invested. Included in our consolidated statements of income was a net transactional foreign exchange loss of $0.3
million in fiscal 2022, a net transaction foreign exchange gain of
$0.6
million in fiscal 2021, and a net transaction foreign exchange loss of
$0.4
million in fiscal 2020.
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 $1.3 million; $0.9 million and $1.8 million in fiscal 2022, 2021 and 2020, 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 2022, 2021 or 2020.
Intangible Assets:
Intangible assets include the value of customer and distributor relationships, existing technology and
non-competition
agreements 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 2022, 2021 or 2020.
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
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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 and 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 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 2022 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 2022, 2021 or 2020.
Leases:
We account for our leases in accordance with Accounting Standard Codification (“ASC”) 842, Leases. 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
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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, 2022 and 2021, a valuation allowance was provided for deferred tax assets attributable to certain domestic R&D and foreign tax credit carryforwards which are expected to expire unused.
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 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 2022, 2021 and 2020, there were 345,085; 642,623
and 202,187, respectively, of 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
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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.
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 $0.2 million a
t
January 31, 2022 and 2021.
Share-Based Compensation:
Share-based compensation expense is measured based on the estimated fair value of the share-based award when granted and is recognized as an expense over the requisite service period (generally the vesting period of the equity grant). We have estimated the fair value of each option on the date of grant using the Black-Scholes option-pricing model. Our estimate of share-based compensation requires several complex and subjective assumptions including our stock price volatility, employee exercise patterns (expected life of the options), the risk-free interest rate and our dividend yield. The stock price volatility assumption is based on the historical weekly price data of our common stock over a period equivalent to the weighted average expected life of our options. Management evaluated whether there were factors during that period which were unusual and would distort the volatility figure if used to estimate future volatility and concluded that there were no such factors. In determining the expected life of the option grants, we have observed the actual terms of prior grants with similar characteristics and the actual vesting schedule of the grant and has assessed the expected risk tolerance of different option groups. The risk-free interest rate is based on the actual U.S. Treasury zero coupon rates for bonds matching the expected term of the option as of the option grant date. The dividend assumption is based upon the prior year’s average dividend yield. No compensation expense is recognized for options that are forfeited for which the employee does not render the requisite service. Our accounting for share-based compensation for restricted stock awards (RSA) and restricted stock units (RSU) is also based on the fair value method. The fair value of the RSUs and RSAs is based on the closing market price of our common stock on the grant date. Reductions in compensation expense associated with forfeited awards are estimated at the date of grant, and this estimated forfeiture rate is adjusted periodically based on actual forfeiture experience.
Cash flow from tax deductions in excess of the compensation cost
recognized
for those options (excess tax benefits) is classified with other income tax cash flows as an operating activity.
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
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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 effective portion of the gain or loss on the derivative instrument is reported as a component of other comprehensive income (loss) (OCI) 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
Recently Adopted:
Income Taxes
In December 2019, the FASB issued ASU
2019-12,
“Simplifying the Accounting for Income Taxes,” which simplifies the accounting for income taxes, eliminates certain exceptions within ASC 740, Income Taxes, and clarifies certain aspects of the current guidance to promote consistency among reporting entities. ASU
2019-12
is effective for fiscal years beginning after December 15, 2020. Most amendments within the standard are required to be applied on a prospective basis, while certain amendments must be applied on a retrospective or modified retrospective basis. The adoption of this guidance did not have a material impact on our consolidated financial statements and accompanying disclosures.
No other new accounting pronouncements, issued or effective during fiscal 2022, have had or are expected to have a material impact on our consolidated financial statements.
Note 2—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 in the cabin of military, commercial and business 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) |  | 2022 |  |  | 2021 |  |  | 2020 |
United States |  | $ | 68,185 |  |  | $ | 70,911 |  |  | $ | 83,671 |
Europe |  |  | 31,922 |  |  |  | 29,029 |  |  |  | 29,617 |
Canada |  |  | 6,519 |  |  |  | 5,574 |  |  |  | 5,719 |
Asia |  |  | 5,926 |  |  |  | 5,105 |  |  |  | 8,316 |
Central and South America |  |  | 3,271 |  |  |  | 3,950 |  |  |  | 4,145 |
Other |  |  | 1,657 |  |  |  | 1,464 |  |  |  | 1,978 |
Total Revenue |  | $ | 117,480 |  |  | $ | 116,033 |  |  | $ | 133,446 |

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Major product types:

(In thousands) |  | 2022 |  |  | 2021 |  |  | 2020 |
Hardware |  | $ | 31,492 |  |  | $ | 34,111 |  |  | $ | 48,959 |
Supplies |  |  | 73,244 |  |  |  | 71,772 |  |  |  | 71,838 |
Service and Other |  |  | 12,744 |  |  |  | 10,150 |  |  |  | 12,649 |
Total Revenue |  | $ | 117,480 |  |  | $ | 116,033 |  |  | $ | 133,446 |

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 $262,000 and $285,000 at January 31,
2022 and January 31, 2021, respectively, and are recorded as deferred revenue in the consolidated balance sheet. The decrease in the deferred revenue balance during the period ended January 31,
2022 is primarily due to $269,000 of revenue recognized during the period that was included in the deferred revenue balance at January 31, 2021 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 is being 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, 2021 was $0.9 million and in the second quarter of the current year, we incurred an additional $0.4 million in contract costs which will be amortized over 20 years. We amortized $60,000 of direct costs for the period ended January 31, 2022,
and the balance of deferred incremental direct costs net of accumulated amortization at January 31, 2022
,
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 consolidated balance sheet.
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Note 3—Intangible Assets
Intangible assets are as follows:

|  | January 31, 2022 |  |  | January 31, 2021 |
(In thousands) |  | Gross Carrying Amount |  |  | Accumulated Amortization |  |  | Currency Translation Adjustment |  |  | Net Carrying Amount |  |  | Gross Carrying Amount |  |  | Accumulated Amortization |  |  | Currency Translation Adjustment |  |  | Net Carrying Amount |
Miltope: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Customer Contract Relationships |  | $ | 3,100 |  |  | $ | (2,515 | ) |  | $ | — |  |  | $ | 585 |  |  | $ | 3,100 |  |  | $ | (2,284 | ) |  | $ | — |  |  | $ | 816 |
RITEC: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Customer Contract Relationships |  |  | 2,830 |  |  |  | (1,557 | ) |  |  | — |  |  |  | 1,273 |  |  |  | 2,830 |  |  |  | (1,423 | ) |  |  | — |  |  |  | 1,407 |
TrojanLabel: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Existing Technology |  |  | 2,327 |  |  |  | (1,767 | ) |  |  | 127 |  |  |  | 687 |  |  |  | 2,327 |  |  |  | (1,405 | ) |  |  | 196 |  |  |  | 1,118 |
Distributor Relations |  |  | 937 |  |  |  | (498 | ) |  |  | 46 |  |  |  | 485 |  |  |  | 937 |  |  |  | (396 | ) |  |  | 89 |  |  |  | 630 |
Honeywell: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Customer Contract Relationships |  |  | 27,243 |  |  |  | (11,073 | ) |  |  | — |  |  |  | 16,170 |  |  |  | 27,243 |  |  |  | (9,712 | ) |  |  | — |  |  |  | 17,531 |
Intangible Assets, net |  | $ | 36,437 |  |  | $ | (17,410 | ) |  | $ | 173 |  |  | $ | 19,200 |  |  | $ | 36,437 |  |  | $ | (15,220 | ) |  | $ | 285 |  |  | $ | 21,502 |

In the second quarter of the current year, we extended the remaining useful life of the 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 and the change in the amortization of the RITEC customer contract relationship intangibles is being treated as a change in accounting estimate 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, 2022 and 2021. Amortization expense of $2.2 million
,
$4.1 million and $4.2 million with regard to acquired intangibles has been included in the consolidated statements of income for
the
years ended January 31, 2022, 2021 and 2020, respectively.
Estimated amortization expense for the next five fiscal years is as follows:

(In thousands) |  | 2023 |  |  | 2024 |  |  | 2025 |  |  | 2026 |  |  | 2027 |
Estimated amortization expense |  | $ | 1,632 |  |  | $ | 1,693 |  |  | $ | 1,008 |  |  | $ | 1,008 |  |  | $ | 1,008 |

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Note 4—Inventories
The components of inventories are as follows:

|  | January 31, |
|  | 2022 |  |  | 2021 |
(In thousands) |  |  |  |  |  |
Materials and Supplies |  | $ | 22,709 |  |  | $ | 20,265 |
Work-in-Progress |  |  | 1,489 |  |  |  | 2,076 |
Finished Goods |  |  | 19,718 |  |  |  | 16,371 |
|  |  | 43,916 |  |  |  | 38,712 |
Inventory Reserve |  |  | (9,307 | ) |  |  | (8,652 | )
|  | $ | 34,609 |  |  | $ | 30,060 |

Finished goods inventory includes $3.4 million and $4.0 million of demonstration equipment at January 31, 2022 and 2021, respectively.
Note 5—Property, Plant and Equipment
Property, plant and equipment consist of the following:

|  | January 31, |
|  | 2022 |  |  | 2021 |
(In thousands) |  |  |  |  |  |
Land and Land Improvements |  | $ | 1,004 |  |  | $ | 1,004 |
Buildings and Leasehold Improvements |  |  | 12,666 |  |  |  | 12,642 |
Machinery and Equipment |  |  | 23,238 |  |  |  | 23,346 |
Computer Equipment and Software |  |  | 13,913 |  |  |  | 13,847 |
Gross Property, Plant and Equipment |  |  | 50,821 |  |  |  | 50,839 |
Accumulated Depreciation |  |  | (39,380) |  |  |  | (38,828) |
Net Property Plant and Equipment |  | $ | 11,441 |  |  | $ | 12,011 |

Depreciation expense on property, plant and equipment was $1.7 million for the year ended January 31,
2022 and $1.9 million and $2.0 million for the years ended January 31, 2020 and 2019, respectively.
During the current fiscal year, 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 have been 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.
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Note 6—Accrued Expenses
Accrued expenses consist of the following:

|  | January 31, |
|  | 2022 |  |  | 2021 |
(In thousands) |  |  |  |  |  |
Warranty |  | $ | 834 |  |  | $ | 730 |
Professional Fees |  |  | 411 |  |  |  | 546 |
Freight |  |  | 347 |  |  |  | 57 |
Lease Liability |  |  | 327 |  |  |  | 372 |
Accrued Property & Sales Tax |  |  | 316 |  |  |  | 443 |
Stockholder Relation Fees |  |  | 102 |  |  |  | 91 |
Dealer Commissions |  |  | 139 |  |  |  | 57 |
Other Accrued Expenses |  |  | 1,637 |  |  |  | 1,578 |
|  | $ | 4,113 |  |  | $ | 3,874 |

Note 7—Credit Agreement and Long-Term Debt
Credit Agreement
On March 24, 2021, we entered into a First Amendment to Credit Agreement (the “Amendment”) to our Amended & Restated Credit Agreement (the “A&R Credit Agreement,” as amended by the Amendment; the “Amended Credit Agreement”) with Bank of America, N.A., as lender (the “Lender”), and our subsidiaries, ANI ApS and TrojanLabel. The A&R Credit Agreement, which we entered into on July, 30, 2020, amended and restated the Credit Agreement dated as of February 28, 2017 (the “Prior Credit Agreement”) by and among us, ANI ApS, TrojanLabel and the Lender. Immediately prior to the closing of the Amendment, we repaid
$2.6
million in principal amount of the term loan outstanding under the A&R Credit Agreement
The Amended Credit Agreement provides for (i) a term loan in the principal amount of $10.0 million, and (ii) a $22.5 million revolving credit facility available for general corporate purposes. At the closing of the Amendment, we borrowed the entire $10.0
million term loan which was used to refinance, in full, the outstanding term loan under the A&R Credit Agreement. 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.
Balances outstanding under the revolving line of credit for the years ended January 31, 2022 and 2021, bore interest at weighted average annual rates
of 4.10% and 3.41%, respectively and we incurred $4,000 and $188,000
in fiscal 2022 and 2021
, respectively, for interest on this obligation. Additionally, for
fiscal year
s
ended January 31, 2022 and 2021, we incurred $50,000 and $8,300, respectively, for commitment fees on the undrawn portion of our revolving credit facility. Both the interest expense and commitment fees are included as interest expense in the accompanying consolidated income statement. At January 31, 2022, there is no balance outstanding on the revolving line of credit and the entire $22.5 million is available for borrowing.
The Amended Credit Agreement requires that the term loan be paid in quarterly installments on the last day of each of our fiscal quarters with the final payment due on September 30, 2025. We may voluntarily prepay the term loan, in whole or in part, from time to time without premium or penalty (other than customary breakage costs, if applicable). We may repay borrowings under the revolving credit facility at any time without premium or penalty (other than customary breakage costs, if applicable), but in any event no later
than September 30, 2025, at which time any outstanding revolving loans will be due and payable in full, and the revolving credit facility will terminate. We may reduce or terminate the revolving line of credit at any time,
subject to certain thresholds and conditions, without premium or penalty.
The Amended Credit Agreement includes an uncommitted accordion provision under which the term loan and/or revolving credit facility commitments may be increased in an aggregate principal amount not exceeding $10.0 million, subject to obtaining the agreement of the Lender and the satisfaction of certain other conditions.
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On December 14, 2021, we and the Lender entered into a LIBOR Transition Amendment (the “LIBOR Amendment”) with regard to the Amended Credit Agreement. The LIBOR Amendment, among other things, (i) changes the rate under the Amended Credit Agreement for borrowings denominated in U.S. Dollars from a LIBOR-based rate to a BSBY (Bloomberg Short-Term Bank Yield Index)-based rate, subject to certain adjustments, (ii) changes the rate under the Amended Credit Agreement for borrowings denominated in British Pounds Sterling from a LIBOR-based rate to a SONIA (Sterling Overnight Index Average)-based rate, subject to certain adjustments, (iii) changes the rate under the Amended Credit Agreement for borrowings denominated in Euros from a LIBOR-based rate to a EURIBOR (Euro Interbank Offered Rate)-based rate, subject to certain adjustments, and (iv) updates certain other provisions of the Amended Credit Agreement regarding successor interest rates to LIBOR.
The interest rates under
the
Amended Credit Agreement, giving effect to the LIBOR Amendment, are as follows: the term loan and revolving credit loans bear interest at a rate per annum equal to, at our option, either (a) the BSBY Rate as defined in the LIBOR Amendment (or in the case of revolving credit loans denominated in a Pounds Sterling, Euros or another currency other than U.S. Dollars, the SONIA Rate as defined in the LIBOR Amendment, EURIOBOR Rate as defined in the LIBOR Amendment, or the applicable quoted rate, respectively), plus a margin that varies within a range of 1.60% to 2.30% based on our consolidated leverage ratio, or (b) a fluctuating reference rate equal to the highest of (i) the federal fund rate plus 0.50%, (ii) Bank of America’s publicly announced prime rate, (iii) the BSBY Rate, SONIA Rate, EURIBOR Rate or other applicable quoted rate plus 1.00% or (iv) 0.50%, plus a margin that varies within a range of 0.60% to 1.30% based on our consolidated leverage ratio. In addition to certain other fees and expenses that we are required to pay to the Lender, we are required to pay a commitment fee on the undrawn portion of the revolving credit facility that varies within a range of 0.15% and 0.30% based on our consolidated leverage ratio.
As under the A&R Credit Agreement, 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 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 and a minimum consolidated fixed charge 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 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 Amended Credit Agreement, certain of which provisions were modified by the Amendment.
The Lender is entitled to accelerate repayment of the loans and to terminate its revolving credit commitment under the Amended Credit Agreement upon the occurrence of any of various customary events of default, which include, among other events, the following (which are subject, in some cases, to certain grace periods): failure to pay when due any principal, interest or other amounts in respect of the loans, breach of any of our covenants or representations under the loan documents, default under any other of our or our subsidiaries’ significant indebtedness agreements, a bankruptcy, insolvency or similar event with respect to us or any of our subsidiaries, a significant unsatisfied judgment against us or any of our subsidiaries, or a change of control.
Our obligations under the Amended Credit Agreement continue to be secured by substantially all of our personal property assets (including a pledge of the equity interests held in ANI ApS, in our wholly-owned German subsidiary AstroNova GmbH, and in our wholly-owned French subsidiary AstroNova SAS), subject to certain exceptions, and by a mortgage on our owned real property in West Warwick, Rhode Island.
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Long-Term Debt
Long-term debt in the accompanying condensed consolidated balance sheets under the Amended Credit Agreement is as follows:

|  | January 31, |
(In thousands) |  | 2022 |  |  | 2021 |
USD Term Loan (2.35% as of January 31, 2022); maturity date of September 30, 2025 |  | $ | 9,250 |  |  | $ | — |
USD Term Loan (4.65% as of January 31, 2021) |  |  | — |  |  |  | 12,576 |
|  |  | 9,250 |  |  |  | 12,576 |
Debt Issuance Costs, net of accumulated amortization |  |  | (96 | ) |  |  | (141 | )
Current Portion of Term Loan |  |  | (1,000 | ) |  |  | (5,326 | )
Long-Term Debt |  | $ | 8,154 |  |  | $ | 7,109 |

During the years ended January 31, 2022, 2021 and 2020, we recognized $0.3 million, $0.5 million and $0.4 million of interest expense
on our long-term debt
, respectively, which was included in interest expense in the accompanying consolidated income statement.
The schedule of required principal payments remaining under the Amended Credit Agreement on long-term debt outstanding as of January 31, 2022 is as follows:

(In thousands) |  |  |
Fiscal 2023 |  | $ | 1,000 |
Fiscal 2024 |  |  | 1,000 |
Fiscal 2025 |  |  | 1,250 |
Fiscal 2026 |  |  | 6,000 |
|  | $9,250 |

Note 8—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. No payments were due on the PPP Loan until the date on which
the lender determined the amount of the PPP Loan that is eligible for forgiveness. The PPP Loan was classified as long-term debt—PPP Loan in the condensed consolidated balance sheet at January 31, 2021.
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 9—Derivative Financial Instruments and Risk Management
In 2017, we entered into a cross-currency interest rate swap to manage the interest rate risk and foreign currency exchange risk associated with the floating-rate foreign currency-denominated term loan borrowing by ANI ApS and an interest rate swap to manage the interest rate risk associated with our variable rate term loan borrowing. Both swaps were designated as cash flow hedges of floating-rate borrowings.
Our cross-currency interest rate swap agreement effectively modified our exposure to interest rate risk and foreign currency exchange rate risk by converting our floating-rate debt denominated in U.S. Dollars on ANI
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ApS’s books to a fixed-rate debt denominated in Danish Kroner for the term of the loan, thus reducing the impact of interest-rate and foreign currency exchange rate changes on future interest expense and principal repayments. This swap involved the receipt of floating interest rate amounts in U.S. Dollars in exchange for fixed-rate interest payments in Danish Kroner, as well as exchanges of principal at the inception spot rate, over the life of the term loan.
The interest rate swap agreement effectively modified our exposure to interest rate risk by effectively converting our floating-rate term-loan debt to fixed-rate debt, thus reducing the impact of interest-rate changes on future interest expense. This swap involved the receipt of floating rate amounts in U.S. Dollars in exchange for fixed-rate payments in U.S. dollars over the life of the term loan.
As a direct result of the terms of the Lender’s conditions for entry into the A&R Credit Agreement, on July 30, 2020, we terminated these two
s
waps. The terms of the A&R Credit Agreement caused those swaps to cease to be effective hedges of the underlying exposures. The termination of the
s
waps 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 and is included in other expense in the accompanying consolidated statements of income for the period ended January 31, 2021. The remaining balance in accumulated other comprehensive loss related to the interest rate swap of $0.2 million is being amortized into earnings through the original term of the hedge relationship as the underlying floating interest rate debt still exists.
The following tables present the impact of the derivative instruments in our consolidated financial statements for the years ended January 31, 2022 and 2021:

|  | Years Ended |
Cash Flow Hedge (In thousands) |  | Amount of Gain(Loss) Recognized in OCI on Derivative |  |  | Location of Gain (Loss) Reclassified from Accumulated OCI into Income |  |  | Amount of Gain (Loss) Reclassified from Accumulated OCI into Income |
| January 31, 2022 |  |  | January 31, 2021 |  |  | January 31, 2022 |  |  | January 31, 2021 |
Swap contracts |  | $ | — |  |  | $ | (360 | ) |  |  | Other Income |  |  | $ | (79 | ) |  | $ | (288 | )

At January 31, 202
2
, we expect to reclassify approximately $0.1 million of
net losses on the frozen OCI balance associated with the terminated interest rate swap from accumulated other comprehensive loss to earnings during the next 12 months due to the payment of variable interest associated with the floating interest rate debt.
Note 10—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
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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 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 rece
i
vable. This amount remains outstanding as of January 31, 2022 and is included as such in the accompanying consolidated balance sheet. Th
e $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 milli
on
in general and administrative which is reflected in the accompanying consolidated income statement for the year ended January 31, 2022.
Subsequent to year end, on March 22,
2022
, we received the $3.1 million for the ERC.
Note 11—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 using a present value factor of 2.8%, which is based on the estimated
after-tax
cost of
debt for similar
companies. As of January 31, 2022, we had paid an aggregate of $7.5
million of the guaranteed minimum royalty obligation. At January 31, 2022, 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 $4.4
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, 2022 and January 31, 2021, we also incurred excess royalty expense of $0.5
million and $31
thousand, respectively, which is included in cost of revenue in our consolidated statements of income. A total of $0.2
million of excess royalty is payable and reported as a current liability on our consolidated balance sheet at January 31, 2022.
Note 12—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.
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Balance sheet and other information related to our leases is as follows:

Operating Leases (In thousands) |  | Balance Sheet Classification |  | January 31, 2022 |  |  | January 31, 2021 |
Lease Assets |  | Right of Use Assets |  | $ | 1,094 |  |  | $ | 1,389 |
Lease Liabilities—Current |  | Other Accrued Expenses |  |  | 327 |  |  |  | 372 |
Lease Liabilities—Long Term |  | Lease Liabilities |  | $ | 808 |  |  | $ | 1,065 |

Lease cost information is as follows:

Operating Leases (In thousands) |  | Statement of Income Classification |  |  | 2022 |  |  | 2021 |
Operating Lease Costs |  |  | General and Administrative Expense |  |  | $ | 510 |  |  | $ | 485 |

At January 31, 2022, maturities of operating lease liabilities are as follows:

(In thousands) |  |  |
2023 |  | $ | 327 |
2024 |  |  | 308 |
2025 |  |  | 203 |
2026 |  |  | 159 |
2027 |  |  | 153 |
Thereafter |  |  | 91 |
Total Lease Payments |  |  | 1,241 |
Less: Imputed Interest |  |  | (106 | )
Total Lease Liabilities |  | $ | 1,135 |

As of January 31, 2022, the weighted-average remaining lease term and weighted-average discount rate for our operating leases are 4.5 years and 3.85%, 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) |  | 2022 |  |  | 2021 |
Cash paid for operating lease liabilities |  | $ | 372 |  |  | $ | 429 |

Note 13—Accumulated Other Comprehensive Income (Loss)
The changes in the balance of accumulated other comprehensive income (loss) by component are as follows:

(In thousands) |  | Foreign Currency Translation Adjustments |  |  | Net Unrealized Gain (Losses) on Cash Flow Hedges |  |  | Total |
Balance at January 31, 2019 |  | $ | (852 | ) |  | $ | 34 |  |  | $ | (818 | )
Other Comprehensive Income (Loss) before reclassification |  |  | (133 | ) |  |  | 122 |  |  |  | (11 | )
Amounts reclassified from AOCI to Earnings |  |  | — |  |  |  | (264 | ) |  |  | (264 | )
Other Comprehensive Loss |  |  | (133 | ) |  |  | (142 | ) |  |  | (275 | )
Balance at January 31, 2020 |  | $ | (985 | ) |  | $ | (108 | ) |  | $ | (1,093 | )
Other Comprehensive Income (Loss) before reclassification |  |  | 710 |  |  |  | (239 | ) |  |  | 471 |
Amounts Reclassified from AOCI to Earnings |  |  | — |  |  |  | 193 |  |  |  | 193 |
Cross-Currency Interest Rate Swap Termination |  |  | — |  |  |  | 45 |  |  |  | 45 |
Other Comprehensive Income (Loss) |  |  | 710 |  |  |  | (1 | ) |  |  | 709 |
Balance at January 31, 202 1 |  | $ | (275 | ) |  | $ | (109 | ) |  | $ | (384 | )
Other Comprehensive Loss before reclassificatio n |  |  | (1,426 | ) |  |  | — |  |  |  | (1,426 | )
Amounts Reclassified from AOCI to Earning s |  |  | — |  |  |  | 62 |  |  |  | 62 |
Other Comprehensive Income (Loss ) |  |  | (1,426 | ) |  |  | 62 |  |  |  | (1,364 | )
Balance at January 31, 202 2 |  | $ | (1,701 | ) |  | $ | (47 | ) |  | $ | (1,748 | )

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The amounts presented above in other comprehensive income (loss) are net of taxes except for translation adjustments associated with our German and Danish subsidiaries.
Note 14—Shareholders’ Equity
During fiscal 2022 and 2021, certain of our employees delivered a total of 27,222 and 15,357 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 $0.4 million and $0.1 million, respectively, and are included in treasury stock in the accompanying consolidated balance sheets at January 31, 2022 and 2021. These transactions did not impact the number of shares authorized for repurchase under our current repurchase program.
Note 15—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 135,403
unvested RSUs;
43,529
unvested PSUs
; 20,410 unvested RSAs and options to purchase an aggregate of 135,500 shares outstanding as of January 31, 2022.
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, 2022, options to purchase an aggregate of 323,468 shares were outstanding under the 2007 Plan and options to purchase an aggregate of 139,075 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 2022 was
$60,000. 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.
Share-Based Compensation:
Share-based compensation expense has been recognized as follows:

(In thousands) |  |  |  |  |  |  |  |  |
Stock Options |  | $ | 210 |  |  | $ | 517 |  |  | $ | 616 |
Restricted Stock Awards and Restricted Stock Units |  |  | 1,266 |  |  |  | 1,285 |  |  |  | 1,136 |
Employee Stock Purchase Plan |  |  | 17 |  |  |  | 17 |  |  |  | 23 |
Total |  | $ | 1,493 |  |  | $ | 1,819 |  |  | $ | 1,775 |

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Stock Options:
Aggregated information regarding stock options granted under the plans is summarized below:

|  | Number of Shares |  |  | Weighted- Average Exercise Price Per Share |
Options Outstanding, January 31, 2019 |  |  | 771,145 |  |  | $ | 14.30 |
Options Granted |  |  | — |  |  |  | — |
Options Exercised |  |  | (57,175 | ) |  |  | 11.60 |
Options Forfeited |  |  | (34,526 | ) |  |  | 15.73 |
Options Cancelled |  |  | (400 | ) |  |  | 6.22 |
Options Outstanding, January 31, 2020 |  |  | 679,044 |  |  | $ | 14.46 |
Options Granted |  |  | — |  |  |  | — |
Options Exercised |  |  | (1,200 | ) |  |  | 7.60 |
Options Forfeited |  |  | (54,361 | ) |  |  | 12.89 |
Options Cancelled |  |  | (1,400 | ) |  |  | 7.36 |
Options Outstanding, January 31, 2021 |  |  | 622,083 |  |  | $ | 14.63 |
Options Granted |  |  | — |  |  |  | — |
Options Exercised |  |  | (6,425 | ) |  |  | 9.34 |
Options Forfeited |  |  | (17,615 | ) |  |  | 15.09 |
Options Cancelled |  |  | — |  |  |  | — |
Options Outstanding, January 31, 2022 |  |  | 598,043 |  |  | $ | 14.67 |

Set forth below is a summary of options outstanding at January 31, 2022:

Outstanding |  |  | Exercisable |
Range of Exercise prices |  | Number of Shares |  |  | Weighted- Average Exercise Price |  |  | Weighted- Average Remaining Contractual Life |  |  | Number of Shares |  |  | Weighted- Average Exercise Price |  |  | Weighted Average Remaining Contractual Life |
$5.00-10.00 |  |  | 35,844 |  |  | $ | 7.97 |  |  |  | 0.5 |  |  |  | 35,844 |  |  | $ | 7.97 |  |  |  | 0.5 |
$10.01-15.00 |  |  | 345,749 |  |  |  | 13.62 |  |  |  | 3.9 |  |  |  | 345,749 |  |  |  | 13.62 |  |  |  | 3.9 |
$15.01-20.00 |  |  | 216,450 |  |  |  | 17.48 |  |  |  | 5.8 |  |  |  | 209,900 |  |  |  | 17.43 |  |  |  | 5.8 |
|  |  | 598,043 |  |  | $ | 14.67 |  |  |  | 4.4 |  |  |  | 591,493 |  |  | $ | 14.63 |  |  |  | 4.3 |

No options were granted during fiscal 2022 or fiscal 2021. As of January 31, 2022, there was $8,000 of unrecognized compensation expense related to the unvested stock options granted under the plans. This expense is expected to be recognized over a weighted-average period of 0.3 years.
As of January 31, 2022, the aggregate intrinsic value (the aggregate difference between the closing stock price of our common stock on January 31, 2022, and the exercise price of the outstanding options) that would have been received by the option holders if all options had been exercised was $0.3 million for all exercisable options and $0.3 million for all options outstanding. The total aggregate intrinsic value of options exercised during fiscal 2022, 2021 and 2020 was $26,000, $4,000 and $0.5 million, respectively.
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Restricted Stock Units (RSUs) and Restricted Stock Awards (RSAs):
Aggregated information regarding RSUs and RSAs granted under the Plan is summarized below:

|  | RSAs & RSUs |  |  | Weighted-Average Grant Date Fair Value |
Outstanding at January 31, 2019 |  |  | 133,667 |  |  | $ | 16.90 |
Granted |  |  | 119,522 |  |  |  | 19.86 |
Vested |  |  | (59,930 | ) |  |  | 14.50 |
Forfeited |  |  | (58,625 | ) |  |  | 19.00 |
Outstanding at January 31, 2020 |  |  | 134,634 |  |  | $ | 16.79 |
Granted |  |  | 245,131 |  |  |  | 7.61 |
Vested |  |  | (64,997 | ) |  |  | 17.28 |
Forfeited |  |  | (117,355 | ) |  |  | 8.83 |
Outstanding at January 31, 2021 |  |  | 197,413 |  |  | $ | 9.96 |
Granted |  |  | 151,406 |  |  |  | 14.51 |
Vested |  |  | (126,939 | ) |  |  | 10.43 |
Forfeited |  |  | (22,538 | ) |  |  | 14.26 |
Outstanding at January 31, 2022 |  |  | 199,342 |  |  | $ | 12.63 |

As of January 31, 2022, there was $1.7 million of unrecognized compensation expense related to unvested RSUs and RSAs. This expense is expected to be recognized over a weighted average period of 1.0 years.
Employee Stock Purchase Plan (ESPP):
Our ESPP allows eligible employees to purchase shares of common stock at a 15% discount from fair market value on the date of purchase. A total of 247,500 shares were initially reserved for issuance under this plan. Summarized plan activity is as follows:

|  | 2022 |  |  | 2021 |  |  | 2020 |
Shares Reserved, Beginning |  |  | 10,374 |  |  |  | 24,974 |  |  |  | 33,853 |
Shares Purchased |  |  | (8,092 | ) |  |  | (14,600 | ) |  |  | (8,879 | )
Shares Reserved, Ending |  |  | 2,282 |  |  |  | 10,374 |  |  |  | 24,974 |

Note 16—Income Taxes
The components of income (loss) before income taxes are as follows:

|  | 2022 |  |  | 2021 |  |  | 2020 |
(In thousands) |  |  |  |  |  |  |  |  |
Domestic |  | $ | 5,046 |  |  | $ | (1,193 | ) |  | $ | 1,930 |
Foreign |  |  | 1,988 |  |  |  | 3,372 |  |  |  | (560 | )
|  | $ | 7,034 |  |  | $ | 2,179 |  |  | $ | 1,370 |

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The components of the provision/(benefit) for income taxes are as follows:

|  | 2022 |  |  | 2021 |  |  | 2020 |
(In thousands) |  |  |  |  |  |  |  |  |
Current: |  |  |  |  |  |  |  |  |  |  |  |
Federal |  | $ | (183 | ) |  | $ | 1,272 |  |  | $ | 660 |
State |  |  | 76 |  |  |  | 224 |  |  |  | 221 |
Foreign |  |  | 501 |  |  |  | 420 |  |  |  | 368 |
|  |  | 394 |  |  |  | 1,916 |  |  |  | 1,249 |
Deferred: |  |  |  |  |  |  |  |  |  |  |  |
Federal |  | $ | 180 |  |  | $ | (910 | ) |  | $ | (1,364 | )
State |  |  | 177 |  |  |  | (189 | ) |  |  | (282 | )
Foreign |  |  | (146 | ) |  |  | 78 |  |  |  | 8 |
|  |  | 211 |  |  |  | (1,021 | ) |  |  | (1,638 | )
|  | $ | 605 |  |  | $ | 895 |  |  | $ | (389 | )

Total income tax provision/(benefit) differs from the expected tax provision/(benefit) as a result of the following:

|  | 2022 |  |  | 2021 |  |  | 2020 |
(In thousands) |  |  |  |  |  |  |  |  |
Income Tax Provision at Statutory Rate |  | $ | 1,477 |  |  | $ | 458 |  |  | $ | 288 |
Return to Provision Adjustment |  |  | 368 |  |  |  | (2 | ) |  |  | (207 | )
State Taxes, Net of Federal Tax Effect |  |  | 143 |  |  |  | 28 |  |  |  | (48 | )
Denmark Statutory Audit |  |  | — |  |  |  | 341 |  |  |  | — |
Foreign Rate Differential |  |  | 61 |  |  |  | 197 |  |  |  | 315 |
Change in Valuation Allowance |  |  | 57 |  |  |  | (81 | ) |  |  | 256 |
Meals and Entertainment |  |  | 9 |  |  |  | 11 |  |  |  | 31 |
Canada Withholding Taxes |  |  | — |  |  |  | 62 |  |  |  | — |
Global Intangible Low Taxed Income |  |  | — |  |  |  | 14 |  |  |  | 107 |
Foreign Tax Credits |  |  | — |  |  |  | — |  |  |  | (344 | )
Foreign Derived Intangible Income |  |  | (55 | ) |  |  | (150 | ) |  |  | (107 | )
Share Based Compensation |  |  | (95 | ) |  |  | 171 |  |  |  | (145 | )
R&D Credits |  |  | (180 | ) |  |  | (157 | ) |  |  | (209 | )
Change in Reserves Related to ASC 740 Liability |  |  | (245 | ) |  |  | (10 | ) |  |  | (352 | )
PPP Loan Forgiveness |  |  | (937 | ) |  |  | — |  |  |  | — |
Other |  |  | 2 |  |  |  | 13 |  |  |  | 26 |
|  | $ | 605 |  |  | $ | 895 |  |  | $ | (389 | )

Our effective tax rate for 2022 was 8.6% compared to 41.1% in 2021 and (28.4)% in 2020. The decrease in the effective tax rate in 2022 from 2021 is primarily related to 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.
The increase in the effective tax rate in 2021 from 2020 is primarily related to the change in mix of income between relevant jurisdictions in which we are subject to income taxes. Specific items increasing the effective tax rate include foreign rate differential, Denmark statutory audit adjustments, stock-based compensation, and Canada withholding taxes. This increase was offset by the foreign derived intangible income (“FDII”) deduction, the release of a valuation allowance in China, and R&D tax credits expected to be utilized.
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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:

|  | January 31, |
|  | 2022 |  |  | 2021 |
(In thousands) |  |  |  |  |  |
Deferred Tax Assets: |  |  |  |  |  |  |  |
Inventory |  | $ | 2,159 |  |  | $ | 2,700 |
Honeywell Royalty Liability |  |  | 2,655 |  |  |  | 2,590 |
State R&D Credits |  |  | 1,925 |  |  |  | 1,546 |
Share-Based Compensation |  |  | 593 |  |  |  | 600 |
Bad Debt |  |  | 213 |  |  |  | 245 |
Warranty Reserve |  |  | 198 |  |  |  | 176 |
Compensation Accrual |  |  | 322 |  |  |  | 159 |
Net Operating Loss |  |  | 152 |  |  |  | 154 |
ASU 842 Adjustment – Lease Liability |  |  | 93 |  |  |  | 125 |
Unrecognized State Tax Benefits |  |  | 64 |  |  |  | 101 |
Foreign Tax Credit |  |  | 154 |  |  |  | 83 |
Deferred Service Contract Revenue |  |  | 61 |  |  |  | 68 |
Other |  |  | 224 |  |  |  | 308 |
|  |  | 8,813 |  |  |  | 8,855 |
Deferred Tax Liabilities: |  |  |  |  |  |  |  |
Accumulated Tax Depreciation in Excess of Book Depreciation |  |  | 455 |  |  |  | 752 |
Intangibles |  |  | 767 |  |  |  | 399 |
ASU 842 Adjustment – Lease Liability |  |  | 90 |  |  |  | 119 |
Other |  |  | 318 |  |  |  | 307 |
|  |  | 1,630 |  |  |  | 1,577 |
Subtotal |  |  | 7,183 |  |  |  | 7,278 |
Valuation Allowance |  |  | (1,778 | ) |  |  | (1,721 | )
Net Deferred Tax Assets |  | $ | 5,405 |  |  | $ | 5,557 |
Deferred taxes are reflected in the consolidated balance sheet as follows: |  |  |
|  | January 31, |
|  | 2022 |  |  | 2021 |
Deferred Tax Assets |  |  | 5,651 |  |  |  | 5,941 |
Deferred Tax Liabilities |  |  | (246 | ) |  |  | (384 | )
Total Net Deferred Tax Assets |  | $ | 5,405 |  |  | $ | 5,557 |

The valuation allowances of $1.8 million at January 31, 2022 and $1.7 million at January 31, 2021, relate to domestic research and development tax credit carryforwards and foreign tax credit carryforwards which are expected to expire unused.
At January 31, 2022, we had net operating loss carryforwards of $0.6 million in China, which expire in 2023 through 2027. 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 China and France before expiration.
At January 31, 2022, we had state research credit carryforwards of approximately $1.6 million which expire in 2022 through 2029. Additionally, we had $0.2 million of foreign tax credit
s
. We maintain a full valuation allowance against these credits as we expect these credits to expire unused.
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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:

|  | 2022 |  |  | 2021 |  |  | 2020 |
(In thousands) |  |  |  |  |  |  |  |  |
Balance , beginning of the year |  | $ | 384 |  |  | $ | 362 |  |  | $ | 618 |
Increases in prior period tax positions |  |  | 63 |  |  |  | 59 |  |  |  | — |
Increases in current period tax positions |  |  | 67 |  |  |  | 5 |  |  |  | 2 |
Reductions related to lapse of statutes of limitations |  |  | (211 | ) |  |  | (42 | ) |  |  | (26 | )
Reductions related to settlement with tax authorities |  |  | — |  |  |  | — |  |  |  | (232 | )
Balance, end of the year |  | $ | 303 |  |  | $ | 384 |  |  | $ | 362 |

During fiscal 2022 and 2021, we released $211,000 and $50,000, respectively, of accrued interest and penalties relating to a change in various unrecognized tax positions. We have accrued potential interest and penalties of $95,000 included in Income Taxes Payable in the consolidated balance sheet at January 31, 2022.
The Company and its subsidiaries file income tax returns in U.S. federal jurisdictions, various state jurisdictions, and various foreign jurisdictions. The Company was previously under audit by the IRS for the tax years ended January 31, 2015, 2016, and 2017, but on June 6, 2019, we received formal communication regarding the close of the audit with no additional changes made by the IRS. Therefore, the reserves for federal uncertain tax positions relating to the years in question have been released. In fiscal 2020, we released $232,000 relating to the federal tax exposure for the years previously under audit and $74,000 of related interest (net of federal benefit) and penalties.
U.S. income taxes have not been provided on $7.3 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 17—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. 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.
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.
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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 |
|  | 2022 |  |  | 2021 |  |  | 2020 |  |  | 2022 |  |  | 2021 |  |  | 2020 |  |  | 2022 |  |  | 2021 |  |  | 2019 |
Product Identification |  | $ | 90,915 |  |  | $ | 90,268 |  |  | $ | 88,116 |  |  | $ | 10,411 |  |  | $ | 12,885 |  |  | $ | 7,509 |  |  |  | 11.5 | % |  |  | 14.3 | % |  |  | 8.5 | %
T&M |  |  | 26,565 |  |  |  | 25,765 |  |  |  | 45,330 |  |  |  | 3,398 |  |  |  | (1,032 | ) |  |  | 6,281 |  |  |  | 12.8 | % |  |  | (4.0 | )% |  |  | 13.9 | %
Total |  | $ | 117,480 |  |  | $ | 116,033 |  |  | $ | 133,446 |  |  |  | 13,809 |  |  |  | 11,853 |  |  |  | 13,790 |  |  |  | 11.8 | % |  |  | 10.2 | % |  |  | 10.3 | %
Corporate Expenses |  |  |  |  |  |  |  |  |  |  |  |  |  |  | 9,553 |  |  |  | 9,420 |  |  |  | 11,357 |  |  |  |  |  |  |  |  |  |  |  |  |
Operating Income |  |  |  |  |  |  |  |  |  |  |  |  |  |  | 4,256 |  |  |  | 2,433 |  |  |  | 2,433 |  |  |  |  |  |  |  |  |  |  |  |  |
Other Income (Expense), Net |  |  |  |  |  |  |  |  |  |  |  |  |  |  | 2,778 |  |  |  | (254) |  |  |  | (1,063) |  |  |  |  |  |  |  |  |  |  |  |  |
Income Before Income Taxes |  |  |  |  |  |  |  |  |  |  |  |  |  |  | 7,034 |  |  |  | 2,179 |  |  |  | 1,370 |  |  |  |  |  |  |  |  |  |  |  |  |
Income Tax Provision (Benefit) |  |  |  |  |  |  |  |  |  |  |  |  |  |  | 605 |  |  |  | 895 |  |  |  | (389 | ) |  |  |  |  |  |  |  |  |  |  |  |
Net Income |  |  |  |  |  |  |  |  |  |  |  |  |  | $ | 6,429 |  |  | $ | 1,284 |  |  | $ | 1,759 |  |  |  |  |  |  |  |  |  |  |  |  |

No customer accounted for greater than 10% of net revenue in fiscal 2022, 2021 or 2020.
Other information by segment is presented below:

(In thousands) |  | Assets |
|  | January 31, |
|  | 2022 |  |  | 2021 |
Product Identification |  | $ | 51,732 |  |  | $ | 50,047 |
T&M |  |  | 50,374 |  |  |  | 51,262 |
Corporate* |  |  | 12,849 |  |  |  | 14,164 |
Total |  | $ | 114,955 |  |  | $ | 115,473 |

* | Corporate assets consist principally of cash, cash equivalents, deferred tax assets and refunds, and certain prepaid corporate assets.

(In thousands) |  | Depreciation and Amortization |  |  | Capital Expenditures |
|  | 2022 |  |  | 2021 |  |  | 2020 |  |  | 2022 |  |  | 2021 |  |  | 2020 |
Product Identification |  | $ | 1,157 |  |  | $ | 1,835 |  |  | $ | 1,928 |  |  | $ | 847 |  |  | $ | 1,563 |  |  | $ | 2,001 |
T&M |  |  | 2,837 |  |  |  | 4,148 |  |  |  | 4,356 |  |  |  | 949 |  |  |  | 1,024 |  |  |  | 905 |
Total |  | $ | 3,994 |  |  | $ | 5,983 |  |  | $ | 6,284 |  |  | $ | 1,796 |  |  | $ | 2,587 |  |  | $ | 2,906 |

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Geographical Data
Presented below is selected financial information by geographic area:

|  |  |  |  | Long-Lived Assets* |
(In thousands) |  | Revenue |  |  | January 31, |
|  | 2022 |  |  | 2021 |  |  | 2020 |  |  | 2022 |  |  | 2021 |
United States |  | $ | 68,185 |  |  | $ | 70,911 |  |  | $ | 83,671 |  |  | $ | 29,131 |  |  | $ | 31,226 |
Europe |  |  | 31,922 |  |  |  | 29,029 |  |  |  | 29,617 |  |  |  | 1,486 |  |  |  | 2,274 |
Canada |  |  | 6,519 |  |  |  | 5,574 |  |  |  | 5,719 |  |  |  | 9 |  |  |  | 13 |
Asia |  |  | 5,926 |  |  |  | 5,105 |  |  |  | 8,316 |  |  |  | 15 |  |  |  | — |
Central and South America |  |  | 3,271 |  |  |  | 3,950 |  |  |  | 4,145 |  |  |  | — |  |  |  | — |
Other |  |  | 1,657 |  |  |  | 1,464 |  |  |  | 1,978 |  |  |  | — |  |  |  | — |
Total |  | $ | 117,480 |  |  | $ | 116,033 |  |  | $ | 133,446 |  |  | $ | 30,641 |  |  | $ | 33,513 |

* | Long-lived assets exclude goodwill assigned to the T&M segment of $4.5 million at both January 31, 2022 and 2021 and $7.6 million and $8.3 million assigned to the PI segment at January 31, 2022 and 2021, respectively.

Note 18—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 2022, $0.4 million in fiscal 2021 and $0.5 million in fiscal 2020.
Note 19—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 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:

|  | 2022 |  |  | 2021 |  |  | 2020 |
(In thousands) |  |  |  |  |  |  |  |  |
Balance, beginning of the year |  | $ | 730 |  |  | $ | 850 |  |  | $ | 832 |
Provision for Warranty Expense |  |  | 2,174 |  |  |  | 855 |  |  |  | 1,733 |
Cost of Warranty Repairs |  |  | (2,070 | ) |  |  | (975 | ) |  |  | (1,715 | )
Balance, end of the year |  | $ | 834 |  |  | $ | 730 |  |  | $ | 850 |

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. We have recorded this payment to offset cost of goods in our Product Identification segment for the product lines effected by the product quality issue to partially reverse the accounting impact when the original costs of the quality issues were incurred during the year.
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Note 20—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, 2022, 2021 and 2020, one vendor accounted for 23.3%, 23.2% and 21.2% of purchases, and 15.4%, 28.3% and 28.0% of accounts payable, respectively, as of January 31, 2022, 2021 and 2020.
Note 21
—Commitments and Contingencies
We are 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 2
2
—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:

|  | Fair Value Measurement at January 31, 2022 |  |  |  |
(In thousands) |  | Level 1 |  |  | Level 2 |  |  | Level 3 |  |  | Total |  |  | Carrying Value |
Long-Term Debt and Related Current Maturities |  | $ | — |  |  | $ | — |  |  | $ | 9,255 |  |  | $ | 9,255 |  |  | $ | 9,250 |
|  | Fair Value Measurement at January 31, 2021 |  |  |  |
(In thousands) |  | Level 1 |  |  | Level 2 |  |  | Level 3 |  |  | Total |  |  | Carrying Value |
Long-Term Debt and Related Current Maturities |  | $ | — |  |  | $ | — |  |  | $ | 12,586 |  |  | $ | 12,586 |  |  | $ | 12,576 |

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.
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ASTRONOVA, INC.
SCHEDULE II—VALUATION AND QUALIFYING ACCOUNTS AND RESERVES

Description |  | Balance at Beginning of Year |  |  | Provision/ (Benefit) Charged to Operations |  |  | Deductions(2) |  |  | Balance at End of Year |
Allowance for Doubtful Accounts (1): |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
(In thousands) |  |  |  |  |  |  |  |  |  |  |  |
Year Ended January 31, |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
2022 |  | $ | 1,054 |  |  | $ | 50 |  |  | $ | (278 | ) |  | $ | 826 |
2021 |  | $ | 856 |  |  | $ | 194 |  |  | $ | 4 |  |  | $ | 1,054 |
2020 |  | $ | 521 |  |  | $ | 546 |  |  | $ | (211 | ) |  | $ | 856 |

(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.

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