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Acquisitions | 3 Months Ended
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Apr. 29, 2023
Business Combinations [Abstract] |
Acquisitions | Note 3 – Acquisitions Astro Machine On August 4, 2022, we acquired Astro Machine LLC (“Astro Machine”), an Illinois-based manufacturer of printing equipment, including label printers, tabbers, conveyors, and envelope feeders, for aggregate consideration of $17.1 million. The acquisition was accomplished pursuant to an Equity Interest Purchase Agreement dated as of August 4, 2022 (the “Purchase Agreement”) by and among us, GSND Holding Corporation (“GSND”), the parent company of Astro Machine, and Astro Machine. Pursuant to the Purchase Agreement, we purchased 100% of the issued and outstanding equity interests of Astro Machine from GSND for a purchase price of $15.6 million. The acquisition was funded using borrowings under our credit facility. We obtained a representation and warranty insurance policy and placed $300,000 of the purchase price into an escrow account, which pursuant to the terms and conditions of the Purchase Agreement, are our sole recourse for breaches of representations and warranties by GSND. Upon the closing of the transaction, Astro Machine became a wholly owned subsidiary of AstroNova, Inc. Concurrently with the signing of the Purchase Agreement, our newly acquired subsidiary, Astro Machine, entered into a Purchase and Sale Agreement with Selak Real Estate Limited Partnership (“SRE”), pursuant to which Astro Machine purchased certain real property assets of SRE for a purchase price, paid in cash, of $1.5 million. These real estate assets are comprised of a 34,460 square foot industrial manufacturing building (including offices) on 1.26 acres of land, which is Astro Machine’s principal place of business. This transaction was a business combination and accounted for using the acquisition method of accounting prescribed by ASC 805, “Business Combinations” (“ASC 805”), whereby the results of operations, including the revenues and earnings of Astro Machine, are included in our financial statements from the date of acquisition. The purchase price of Astro Machine was allocated to the tangible and intangible assets acquired and liabilities assumed and recognized at their fair value based on widely accepted valuation techniques in accordance with ASC 820, “Fair Value Measurement,” as of the acquisition date. The process for estimating fair values requires the use of significant estimates, assumptions and judgments, including determining the timing and estimates of future cash flows and developing appropriate discount rates. The excess of the purchase price over the fair value of the net identified assets acquired and liabilities assumed was recorded as goodwill. ASC 805 establishes a measurement period to provide companies with a reasonable amount of time to obtain the information necessary to identify and measure various items in a business combination and cannot extend beyond one year from the acquisition date. The following table sets forth the final purchase price allocation of the Astro Machine acquisition for the estimated fair value of the net assets acquired and liabilities assumed as of the date of acquisition:
(In thousands) |  |  |
Cash |  | $ | 91 |
Accounts Receivable |  |  | 3,393 |
Inventory |  |  | 5,715 |
Property, Plant and Equipment |  |  | 4,200 |
Identifiable Intangible Assets |  |  | 3,480 |
Goodwill |  |  | 2,730 |
Accounts Payable and Other Current Liabilities |  |  | (2,484 | )
Total Purchase Price |  | $ | 17,125 |
The fair value of the intangible assets acquired was estimated by applying the income approach. This fair value measurement is based on significant inputs that are not observable in the market and therefore represents a Level 3 measurement as defined in ASC 820, “Fair Value Measurement.” Key assumptions in estimating the fair value of the intangibles include (1) remaining useful life of the tradename/trademarks and customer relations (2) royalty rate of 0.75%, (3) customer attrition rate of 18.0%, (4) discount rate of 19.0 % and (5) a range of revenue and net income projections for fiscal years 2023 through 2026. The following table sets forth the fair value of the acquired identifiable intangible assets and related estimated useful lives:
(In thousands) |  | Fair Value |  |  | Useful Life (years) |
Customer Relations |  | $ | 3,060 |  |  |  | 5 |
Trademarks/Tradenames |  |  | 420 |  |  |  | 5 |
Total |  | $ | 3,480 |  |  |  |  |
The Customer Relations intangible asset represents the relationships that will be maintained with certain historical customers of Astro Machine. The trademark/tradename intangible assets reflect the industry reputation of the Astro Machine name and the registered trademarks held by Astro Machine for the use of several marks and logos. Goodwill of $2.73 million, which is not deductible for tax purposes, represents the excess of the purchase price over the estimated fair value assigned to the tangible and identifiable intangible assets acquired and liabilities assumed from Astro Machine. The goodwill recognized under ASC 805 is attributable to synergies which are expected to enhance and expand our overall product portfolio, opportunities in new and existing markets, future technologies that have yet to be determined and Astro Machine’s assembled workforce. The carrying amount of the goodwill was allocated to the PI segment. Total acquisition-related costs of $0.7 million were included in general and administrative expenses in our consolidated statement of income for the year ended January 31, 2023. The amounts of revenue and earnings before taxes included in our consolidated statement of income for the quarter ended April 29, 2023:
(In thousands) |  |  |
Revenue |  | $ | 4,229 |
Earnings before Taxes |  |  | 689 |
Astro Machine results are reported as part of the PI segment. Proforma results are not provided, as disclosure of such amounts was impractical to determine as the acquired business had insufficient financial records and no audit history prior to the transaction. Honeywell Asset Purchase and License Agreement On June 30, 2022, we entered into an Asset Purchase and License Agreement with Honeywell International Inc. (“New HW Agreement”) to acquire an exclusive, perpetual, world-wide license to manufacture Honeywell’s flight deck printers for the Boeing 787 aircraft. The New HW Agreement provides for royalty payments to Honeywell based on gross revenues from the sales of the printers, paper and repair services of the licensed products in perpetuity. The royalty rates vary based on the year in which they are paid or earned and as products are sold or as services are provided and range from single-digit to mid-double-digit percentages of gross revenue. The New HW Agreement includes a provision for guaranteed minimum royalty payments to be paid in the event that the royalties earned by Honeywell do not meet the minimum for the preceding calendar year as follows: $ 100,000 in 2024, $200,000 in 2025, $233,000 in 2026 and 2027, and $234,000 in 2028. This transaction was evaluated under ASC 805, “Business Combinations,” and was accounted for as an asset acquisition. The purchase price was allocated to the customer relationship intangible, which was the only asset acquired as a result of this transaction. This asset will be amortized over the useful life of the intangible. The minimum royalty payment obligation and related customer relationships intangible were recorded at the present value of the minimum royalty payments. The acquired identifiable intangible asset is as follows:
(In thousands) |  | Fair Value |  |  | Useful Life (Years) |
Customer Contract Relationships |  | $ | 530 |  |  |  | 20 |
The minimum royalty payment due was discounted based on the payment schedule and applicable discount rate, resulting in an outstanding royalty obligation of $0.5 million as of January 31, 2023, including $0.1 million recorded as a current liability. As of April 29, 2023, the current outstanding royalty obligation remains $0.5 million, including $0.1 million recorded as a current liability in the accompanying balance sheet. Additional royalties based on sales activity will be recorded in the period that the associated revenue is earned. During fiscal 2023, we incurred $0.1 million in excess royalty expense, which was recorded as a current liability in our consolidated balance sheet at January 31, 2023 and was paid in the first quarter of the current fiscal year.

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- Definition The entire disclosure for a business combination (or series of individually immaterial business combinations) completed during the period, including background, timing, and recognized assets and liabilities. The disclosure may include leverage buyout transactions (as applicable). + References Reference 1: http://fasb.org/us-gaap/role/ref/legacyRef -Publisher FASB -Name Accounting Standards Codification -Topic 805 -URI https://asc.fasb.org/topic&trid=2303972 Reference 2: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 805 -SubTopic 20 -Section 50 -Paragraph 5 -Subparagraph (b) -URI https://asc.fasb.org/extlink&oid=128092470&loc=d3e4946-128472 + Details
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- References No definition available. + Details
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