ASTRO MED INC /NEW/, 10-K filed on 4/8/2013
Annual Report
Document and Entity Information (USD $)
12 Months Ended
Jan. 31, 2013
Mar. 28, 2013
Jul. 27, 2012
Document and Entity Information [Abstract]
 
 
 
Entity Registrant Name
ASTRO MED INC /NEW/ 
 
 
Entity Central Index Key
0000008146 
 
 
Document Type
10-K 
 
 
Document Period End Date
Jan. 31, 2013 
 
 
Amendment Flag
false 
 
 
Document Fiscal Year Focus
2013 
 
 
Document Fiscal Period Focus
FY 
 
 
Current Fiscal Year End Date
--01-31 
 
 
Entity Well-known Seasoned Issuer
No 
 
 
Entity Voluntary Filers
No 
 
 
Entity Current Reporting Status
Yes 
 
 
Entity Filer Category
Smaller Reporting Company 
 
 
Entity Public Float
 
 
$ 44,991,919 
Entity Common Stock, Shares Outstanding
 
7,397,571 
 
Trading Symbol
alot 
 
 
Consolidated Balance Sheets (USD $)
In Thousands, unless otherwise specified
Jan. 31, 2013
Jan. 31, 2012
CURRENT ASSETS
 
 
Cash and Cash Equivalents
$ 30,999 
$ 11,704 
Securities Available for Sale
8,509 
11,336 
Accounts Receivable, net of reserves of $345 in 2013 and $356 in 2012
9,376 
9,339 
Inventories
11,179 
10,639 
Deferred Tax Assets
1,866 
2,328 
Line of Credit Receivable
300 
 
Note Receivable
250 
 
Restricted Cash
1,800 
 
Asset Held for Sale
2,016 
 
Prepaid Expenses and Other Current Assets
696 
830 
Current Assets of Discontinued Operations
3,131 
6,302 
Total Current Assets
70,122 
52,478 
PROPERTY, PLANT AND EQUIPMENT
 
 
Land and Improvements
1,233 
1,233 
Buildings and Improvements
9,791 
13,022 
Machinery and Equipment
22,862 
23,621 
Total Property, Plant and Equipment , gross
33,886 
37,876 
Less Accumulated Depreciation
(26,098)
(26,705)
Total Property, Plant and Equipment, net
7,788 
11,171 
OTHER ASSETS
 
 
Goodwill
795 
795 
Note Receivable
756 
970 
Other
96 
106 
Deferred Tax Assets
356 
 
Non-Current Assets of Discontinued Operations
 
1,542 
Total Other Assets
2,003 
3,413 
TOTAL ASSETS
79,913 
67,062 
CURRENT LIABILITIES
 
 
Accounts Payable
1,938 
2,282 
Accrued Compensation
3,176 
3,229 
Other Accrued Expenses
3,164 
1,807 
Deferred Revenue
271 
298 
Income Taxes Payable
4,169 
73 
Current Liabilities of Discontinued Operations
807 
583 
Total Current Liabilities
13,525 
8,272 
Deferred Tax Liabilities
111 
193 
Other Long Term Liabilities
1,289 
1,233 
Non-Current Liabilities of Discontinued Operations
1,151 
1,701 
TOTAL LIABILITIES
16,076 
11,399 
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 9,031,756 shares in 2013 and 8, 956,488 shares in 2012
452 
448 
Additional Paid-in Capital
38,786 
37,964 
Retained Earnings
36,092 
27,920 
Treasury Stock, at Cost, 1,663,214 shares in 2013 and 1, 542,276 shares in 2012
(11,666)
(10,790)
Accumulated Other Comprehensive Income
173 
121 
Total Shareholders' Equity
63,837 
55,663 
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY
$ 79,913 
$ 67,062 
Consolidated Balance Sheets (Parenthetical) (USD $)
In Thousands, except Share data, unless otherwise specified
Jan. 31, 2013
Jan. 31, 2012
Consolidated Balance Sheets [Abstract]
 
 
Accounts Receivable, Reserves
$ 345 
$ 356 
Preferred Stock, Par Value
$ 10 
$ 10 
Preferred Stock, Shares Authorized
100,000 
100,000 
Preferred Stock, Shares Issued
   
   
Common Stock, Par Value
$ 0.05 
$ 0.05 
Common Stock, Shares Authorized
13,000,000 
13,000,000 
Common Stock, Shares Issued
9,031,756 
8,956,488 
Treasury Stock, Shares
1,663,214 
1,542,276 
Consolidated Statements of Income (USD $)
In Thousands, except Share data, unless otherwise specified
12 Months Ended
Jan. 31, 2013
Jan. 31, 2012
Consolidated Statements of Income [Abstract]
 
 
Net Sales
$ 61,224 
$ 60,724 
Cost of Sales
37,496 
38,653 
Gross Profit
23,728 
22,071 
Costs and Expenses:
 
 
Selling and Marketing
12,412 
12,777 
Research and Development
3,816 
4,323 
General and Administrative
4,574 
3,962 
Operating Expenses
20,802 
21,062 
Loss on Sale of Asheboro Operations
 
(681)
Operating Income
2,926 
328 
Other Income (Expense):
 
 
Investment Income
55 
82 
Other, Net
(96)
234 
Other Income (Expense)
(41)
316 
Income from Continuing Operations before Income Taxes
2,885 
644 
Income Tax Provision (Benefit) for Continuing Operations
847 
(97)
Income from Continuing Operations
2,038 
741 
Income from Discontinued Operations, net of taxes of $5,351 in 2013 and $1,198 in 2012
8,729 
2,391 
Net Income
$ 10,767 
$ 3,132 
Net Income per Common Share - Basic:
 
 
From Continuing Operations
$ 0.28 
$ 0.10 
From Discontinued Operations
$ 1.18 
$ 0.33 
Net Income Per Common Share - Basic
$ 1.46 
$ 0.43 
Net Income per Common Share - Diluted:
 
 
From Continuing Operations
$ 0.27 
$ 0.10 
From Discontinued Operations
$ 1.17 
$ 0.32 
Net Income Per Common Share - Diluted
$ 1.44 
$ 0.42 
Weighted Average Number of Common Shares Outstanding - Basic
7,396 
7,325 
Dilutive effect of options outstanding
87 
104 
Weighted Average Number of Common Shares Outstanding - Diluted
7,483 
7,429 
Dividends Declared Per Common Share
$ 0.35 
$ 0.28 
Consolidated Statements of Income (Parenthetical) (USD $)
In Thousands, unless otherwise specified
12 Months Ended
Jan. 31, 2013
Jan. 31, 2012
Consolidated Statements of Income [Abstract]
 
 
Income from Discontinued Operations, net of taxes
$ 5,351 
$ 1,198 
Consolidated Statements of Comprehensive Income (USD $)
In Thousands, unless otherwise specified
12 Months Ended
Jan. 31, 2013
Jan. 31, 2012
Consolidated Statements of Comprehensive Income [Abstract]
 
 
Net Income
$ 10,767 
$ 3,132 
Other Comprehensive Loss, net of taxes and reclassification adjustments:
 
 
Foreign currency translation adjustments
60 
(152)
Unrealized gain on securities available for sale
(8)
Other comprehensive loss
52 
(146)
Comprehensive Income
$ 10,819 
$ 2,986 
Consolidated Statements of Changes in Shareholders' Equity (USD $)
In Thousands
Total
Common Stock
Additional Paid-In Capital
Retained Earnings
Treasury Stock
Accumulated Other Comprehensive Income
Balance at beginning of year at Jan. 31, 2011
 
$ 433 
$ 36,586 
$ 26,843 
$ (9,840)
$ 267 
Net income
3,132 
 
 
3,132 
 
 
Share-based compensation
 
 
208 
 
 
 
Tax benefit (expense) of employee stock options
 
 
306 
 
 
 
Shares issued to employee stock ownership plan
 
 
 
 
88 
 
Contribution of treasury shares to employee stock options plan
 
 
10 
 
 
 
Par value (proceeds) from the exercise of employee stock options
 
79 
 
 
 
Employee option exercise and buyback
 
14 
775 
 
 
 
Dividends paid
 
 
 
(2,055)
 
 
Purchase of common stock from related parties
 
 
 
 
(1,038)
 
Other comprehensive loss
(146)
 
 
 
 
(146)
Balance at end of year at Jan. 31, 2012
55,663 
448 
37,964 
27,920 
(10,790)
121 
Net income
10,767 
 
 
10,767 
 
 
Share-based compensation
 
 
480 
 
 
 
Tax benefit (expense) of employee stock options
 
 
(68)
 
 
 
Shares issued to employee stock ownership plan
 
 
 
 
70 
 
Contribution of treasury shares to employee stock options plan
 
 
29 
 
 
 
Par value (proceeds) from the exercise of employee stock options
 
233 
 
 
 
Employee option exercise and buyback
 
148 
 
 
 
Dividends paid
 
 
 
(2,595)
 
 
Purchase of treasury stock
(770)
 
 
 
(770)
 
Purchase of common stock from related parties
 
 
 
 
(176)
 
Other comprehensive loss
52 
 
 
 
 
52 
Balance at end of year at Jan. 31, 2013
$ 63,837 
$ 452 
$ 38,786 
$ 36,092 
$ (11,666)
$ 173 
Consolidated Statements of Cash Flows (USD $)
In Thousands, unless otherwise specified
12 Months Ended
Jan. 31, 2013
Jan. 31, 2012
Cash Flows from Operating Activities:
 
 
Net Income
$ 10,767 
$ 3,132 
Adjustments to Reconcile Net Income to Net Cash Provided By Operating Activities:
 
 
Gain on Disposal of Discontinued Operations
(10,162)
 
Depreciation and Amortization
1,331 
1,576 
Employee Stock Ownership Plan Contribution
 
100 
Share-Based Compensation
480 
208 
Deferred Income Tax Benefit
(548)
(208)
Excess Tax Benefit From Share-Based Compensation
 
(306)
Loss on Sale of Asheboro Operations
 
618 
Changes in Assets and Liabilities, Net of Impact of Divestiture:
 
 
Accounts Receivable
(1,256)
(689)
Inventories
(240)
(5)
Accounts Payable and Accrued Expenses
(763)
679 
Income Taxes Payable
4,307 
562 
Other
(53)
(195)
Net Cash Provided by Operating Activities
3,863 
5,472 
Cash Flows from Investing Activities:
 
 
Proceeds from Sales/Maturities of Securities Available for Sale
17,640 
10,155 
Purchases of Securities Available for Sale
(14,825)
(8,571)
Proceeds on the Sale of Grass
16,800 
 
Line of Credit Issuance
(300)
 
Additions to Property, Plant and Equipment
(849)
(1,154)
Net Cash Provided by Investing Activities
18,466 
430 
Cash Flows from Financing Activities:
 
 
Proceeds (Contributions) from Common Shares Issued Under Employee Benefit Plans and Employee Stock Option Plans, Net of Payment of Minimum Tax Withholdings
232 
(169)
Purchases of Treasury Stock
(770)
 
Shares issued to ESOP
99 
 
Excess Tax (Expense) Benefit from Share-Based Compensation
   
306 
Dividends Paid
(2,595)
(2,055)
Net Cash Used in Financing Activities
(3,034)
(1,918)
Net Increase in Cash and Cash Equivalents
19,295 
3,984 
Cash and Cash Equivalents, Beginning of Year
11,704 
7,720 
Cash and Cash Equivalents, End of Year
30,999 
11,704 
Cash Paid During the Period for:
 
 
Income Taxes, Net of Refunds
$ 2,461 
$ 740 
Summary of Significant Accounting Policies
Summary of Significant Accounting Policies

Note 1—Summary of Significant Accounting Policies

Basis of Presentation: The accompanying financial data has been prepared by us pursuant to the rules and regulations of the U.S. Securities and Exchange Commission (SEC) and is 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.

On January 31, 2013, we completed the sale of substantially all of the assets of our Grass Technologies Product Group. Consequently, we have classified the results of operations of the Grass Technologies Product Group as discontinued operations for all periods presented. Refer to Note 17, “Discontinued Operations,” for further discussion.

Principles of Consolidation: The consolidated financial statements include the accounts of Astro-Med, 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 presentation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect these financial statements and accompanying notes. Some of the more significant estimates relate to the allowances for doubtful accounts and credits, inventory valuation, impairment of long-lived assets and goodwill, income taxes, share-based compensation and warranty reserves. Management’s estimates are based on the facts and circumstances available at the time estimates are made, past historical experience, risk of loss, general economic conditions and trends, and management’s assessments of the probable future outcome of these matters. 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. Similar investments with original maturities beyond three months are classified as securities available for sale. Cash of $1,157,000 and $1,929,000 was held in foreign bank accounts at January 31, 2013 and 2012, respectively.

Securities Available for Sale: Securities available for sale are carried at fair value based on quoted market prices, where available. The difference between cost and fair value, net of related tax effects, is recorded as a component of accumulated other comprehensive income in shareholders’ equity.

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 improvements—10 to 45 years; machinery and equipment—3 to 10 years). Depreciation expense was $1,331,000 for fiscal 2013 and $1,576,000 for 2012.

Revenue Recognition: Astro-Med’s product sales are recognized when all of the following criteria have been met: persuasive evidence of an arrangement exists; price to the buyer is fixed or determinable; delivery has occurred and legal title and risk of loss have passed to the customer; and collectability is reasonably assured. Returns and customer credits are infrequent and are recorded as a reduction to sales. Rights of return are not included in sales arrangements. Revenue associated with products that contain specific customer acceptance criteria is not recognized before the customer acceptance criteria are satisfied. Discounts from list prices are recorded as a reduction to sales. Amounts billed to customers for shipping and handling fees are included in sales while related shipping and handling costs are included in cost of sales.

The majority of our equipment contains 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 separately or marketed separately and its production costs are minor as compared to those of the hardware system. Therefore, the Company’s hardware appliances are considered non-software elements and are not subject to the industry-specific software revenue recognition guidance.

Our multiple-element arrangements are generally comprised of a combination of equipment, software, installation and/or training services. Hardware and software elements are typically delivered at the same time and revenue is recognized when all the revenue recognition criteria for each unit are met. Delivery of installation and training services will 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. Service revenue is deferred and recognized over the contractual period or as services are rendered and accepted by the customer.

We have evaluated the deliverables in our multiple-element arrangements and concluded that they are separate units of accounting if the delivered item or items have value to the customer on a standalone basis and delivery or performance of the undelivered item(s) is considered probable and substantially in our control. We allocate revenue to each element in our multiple-element arrangements based upon their relative selling prices. We determine the selling price for each deliverable based on a selling price hierarchy. The selling price for a deliverable is based on VSOE if available, third-party evidence (“TPE”) if VSOE is not available, or estimated selling price (“ESP”) if neither VSOE nor TPE is available. Revenue allocated to each element is then recognized when the basic revenue recognition criteria for that element have been met.

Infrequently, Astro-Med recognizes revenue for non-recurring engineering (NRE) fees 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. NRE fees have not been significant in the periods presented herein.

Infrequently, Astro-Med receives requests from customers to hold product purchased from us for the customer’s convenience. Revenue is recognized for such bill and hold arrangements in accordance with the requirements of SAB No. 104 which requires, among other things, the existence of a valid business purpose for the arrangement; the transfer of ownership of the purchased product; a fixed delivery date that is reasonable and consistent with the buyer’s business purpose; the readiness of the product for shipment; the use of customary payment terms; no continuing performance obligation by us and segregation of the product from our inventories.

Research and Development Costs: The Company complies with the guidance provided in the Financial Accounting Standards Board’s (“FASB”) Accounting Standards Codification (“ASC”) FASB 730, “Research and Development” by charging any costs to expense when incurred, as well as by disclosing in the financial statements the amount of Research & Development charged to expense. These charges include: salaries and benefits, external engineering service costs, engineering related information costs and supplies. The Company also complies with ASC 985-20, “Costs of Computer Software to be Sold, Leased or Marketed” and ASC 350-40, “Internal-Use Software” in accounting for the costs of software either developed or acquired.

Foreign Currency: The financial statements of foreign subsidiaries 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 in shareholders’ equity. Revenues and costs are translated at average exchange rates during the year. We do not provide for U.S. income taxes on foreign currency translation adjustments associated with our German subsidiary since its undistributed earnings are considered to be permanently invested. Our net foreign exchange losses were $158,000 and $27,000 for fiscal 2013 and 2012, respectively.

Advertising: Astro-Med expenses 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 $750,000 and $970,000 in fiscal 2013 and 2012, respectively.

 

Health Insurance Reimbursement Reserve: Astro-Med reimburses a portion of employee health insurance deductibles and co-payments. The total reimbursement amounted to approximately $313,000 and $487,000 in 2013 and 2012, respectively. We accrued approximately $100,000 and $150,000 at January 31, 2013 and 2012, respectively, for estimated outstanding reimbursements due to employees, including a reserve for incurred but not reported amounts.

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 in accordance with the guidance provided in ASC 360, “Property, Plant and Equipment.” Determination of recoverability is based on an estimate of undiscounted future cash flows resulting from the use of the asset and its eventual disposition. Measurement of an impairment loss for long-lived assets that management expects to hold and use is based on the fair value of the asset.

In 2013, we recognized an impairment of $779,000 related to the Grass Technologies Product Group‘s manufacturing facilities located in Rockland, Massachusetts. This impairment was included as part of the Income from Discontinued Operations in the accompanying consolidated statement of income for the period ended January 31, 2013. Refer to Note 17, “Discontinued Operations,” for further discussion.

Goodwill: Management evaluates the recoverability of goodwill annually or more frequently if events or changes in circumstances, such as declines in sales, earnings or cash flows, or material adverse changes in the business climate, indicate that the carrying value of an asset might be impaired. During the fourth quarter of fiscal 2012, we adopted new accounting guidance which simplifies goodwill impairment testing. Under the new guidance, goodwill is first qualitatively assessed to determine whether further impairment testing is necessary. 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 amount, a two step process is then performed. Step one compares the fair value of the reporting unit with its carrying value, including goodwill. If the carrying amount exceeds the fair value of the reporting unit, step two is required to determine if there is an impairment of the goodwill. Step two compares the implied fair value of the reporting unit goodwill to the carrying amount of the goodwill. 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, the Company uses 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.

We performed a qualitative assessment for our 2013 analysis of goodwill. Based on this assessment, management does not believe that it is more likely than not that the carrying value of the reporting units exceed their fair values. Accordingly, no further testing was performed as management believes that there are no impairment issues in regards to goodwill at this time.

Income Taxes: Astro-Med uses 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 enacted tax rates that will be in effect when the differences are expected to reverse. 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, 2013 and 2012, a valuation allowance was provided for deferred tax assets attributable to certain state R&D credit carryforwards.

Astro-Med accounts 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, disclosure and transition.

Net Income Per Common Share: Net income per common share has been computed and presented in accordance with the guidance provided in ASC 260, “Earnings per 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 2013 and 2012, there were 583,512 and 664,690 common equivalent shares that were not included in the computation of diluted net income per common share because their inclusion would be anti-dilutive.

Allowance for Doubtful Accounts: In circumstances where we are aware of a customer’s inability to meet its financial obligations, an allowance is established. The majority of accounts are individually evaluated on a regular basis and allowances are established to state such receivables at their net realizable value. The remainder of the allowance is based upon historical write-off experience and current market assessments.

Fair Value of Financial Instruments: Our financial instruments consist of cash and cash equivalents, investment securities, accounts receivable, a note receivable, a line of credit receivable and accounts payable. The carrying amount reflected in the consolidated balance sheets for cash and cash equivalents, accounts receivable and accounts payable approximates fair value due to the short-term nature of these items. Investment securities, all of which are available for sale, are carried in the consolidated balance sheets at fair value based on quoted market prices, when available. The note receivable is carried in the consolidated balance sheets at fair value based on the present value of the discounted cash flows over the life of the note.

Comprehensive Income: In accordance with the guidance provided in ASC 220, “Comprehensive Income,” we report the change in net assets during the period from non-owner sources by major components and as a single total in the Consolidated Statements of Comprehensive Income. Accumulated other comprehensive income at January 31, 2013 consists of net unrealized gains on available for sale securities of $7,000 and net translation gains on foreign operations of $166,000.

Share-Based Compensation: We account for share based awards granted to employees and directors using the FASB guidance included in ASC 718, “Stock Compensation.” Effective as of February 1, 2006, we adopted the “modified prospective” transition method provided in ASC 718. Under this method, share-based compensation is recognized in the consolidated statement of operation for share-based payment awards granted prior to, but not yet vested as of February 1, 2006, based on the grant date fair value estimated in accordance with prior authoritative guidance and for share-based payment awards granted subsequent to February 1, 2006, based on the grant date fair value estimated in accordance with the provisions of ASC 718.

In accordance with ASC 718, share-based compensation expense is based on the estimated fair value of the share-based award when granted to an employee or director. 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 a number of complex and subjective assumptions including our stock price volatility, employee exercise patterns (expected life of the options), the risk-free interest rate and the Company’s 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, the Company has 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 requested service. Our accounting for share-based compensation for restricted stock awards (“RSAs”) 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 the Company’s common stock on the grant date of the RSU or RSA.

The cash flow from the tax benefits that are a result of tax deductions in excess of the compensation cost recognized for those options (excess tax benefits) are classified as a cash inflow from financing activities and a cash outflow from operating activity in accordance with the guidance provided by ASC 718. Tax deductions from certain stock option exercises are treated as being realized when they reduce taxes payable in accordance with relevant tax law.

Recent Accounting Pronouncements:

Comprehensive Income

In February 2013, the FASB issued Accounting Standard Update (“ASU”) 2013-02, “Reporting of Amounts Reclassified Out of Accumulated Other Comprehensive Income,” which requires entities to provide information about the amounts reclassified out of accumulated other comprehensive income by component. In addition, entities are required to present, either on the face of the statement where net income is presented or in the notes, significant amounts reclassified out of accumulated other comprehensive income by the respective line items of net income but only if the amount reclassified is required under U.S. GAAP to be reclassified to net income in its entirety in the same reporting period. For other amounts that are not required under U.S. GAAP to be reclassified in their entirety to net income, entities are required to cross-reference to other disclosures required under U.S. GAAP that provide additional detail on these amounts. ASU 2013-02 is effective prospectively for reporting periods beginning after December 15, 2012. We will adopt this guidance in our first quarter ending May 4, 2013. Since ASU 2013-02 only impacts presentation and disclosure requirements, the adoption of this guidance will not have a material impact on the Company’s financial position or results of operations.

In June 2011, the FASB issued ASU 2011-05, “Presentation of Comprehensive Income,” which requires entities to present the components of net income and other comprehensive income either as one continuous statement or as two consecutive statements. ASU 2011-05 eliminates the option to present the components of other comprehensive income as part of the statement of changes in shareholders’ equity. While ASU 2011-05 changes the presentation of comprehensive income, it does not change the components that are recognized in net income or comprehensive income under current accounting guidance. ASU 2011-05 also requires entities to present reclassification adjustments out of accumulated other comprehensive income by component in both the statement in which net income is presented and the statement in which other comprehensive income is presented. In December 2011, the FASB issued ASU 2011-12, “Deferral of the Effective Date for Amendments to the Presentation of Reclassification of Items Out of Accumulated Other Comprehensive Income in Accounting Standard Update No. 2011-05,” which defers the guidance related to the presentation of reclassification adjustments. ASU 2011-05 is effective for interim and annual periods beginning after December 15, 2011, and must be applied retrospectively. We adopted this guidance in the first quarter of fiscal 2013 and have provided the disclosures required for the periods ended January 31, 2013 and 2012, in the accompanying Consolidated Statements of Comprehensive Income.

Intangibles

In July 2012, the FASB issued ASU 2012-02, “Testing Indefinite-Lived Intangible Assets for Impairment,” which allows entities to use a qualitative approach to test indefinite-lived intangible assets for impairment. ASU 2012-02 permits an entity to first assess qualitative factors to determine whether it is more likely than not that the fair value of the indefinite-lived intangible asset is less than its carrying value. If it is concluded that this is the case, it is necessary to perform the currently prescribed quantitative impairment test. Otherwise, the quantitative impairment test is not required. ASU 2012-02 is effective for annual and interim impairment tests performed for fiscal years beginning after September 15, 2012. The adoption of the provisions of ASU 2012-02 will not have a material impact on the Company’s financial position or results of operations.

 

Divestiture
Divestiture

Note 2—Divestiture

On January 30, 2012, we completed the sale of our label manufacturing operations in Asheboro, North Carolina to Label Line Ltd., (the “Buyer”) the original owner of the Asheboro operations. The Asheboro operations were part of the QuickLabel System business segment. The net sales price of $1,000,000 was received in the form of a promissory note in consideration for the inventory and equipment of the Asheboro operations. The promissory note issued by the Buyer is fully secured by a first lien on various collateral of the Buyer, including the Asheboro plant and plant assets. The note bears interest at a rate equal to the lesser of the United States prime rate as of January 30, 2013 plus 50 basis points or six percent per annum and is payable in sixteen quarterly installments of principal and interest commencing on January 30, 2013. The Note Receivable is disclosed at its present value on the accompanying consolidated balance sheet.

The divestiture resulted in a net book loss of $681,000, which is included in Operating Income in the accompanying consolidated statements of income for the year ended January 31, 2012 and includes $64,000 related to closing costs and $265,000 related to the write-off of intangibles. As we have expanded our label manufacturing operations in Canada, Germany and West Warwick, Rhode Island, the sale of the Asheboro operations did not impact our continued involvement in label manufacturing within the QuickLabel segment.

The terms of the sale also include an agreement for Astro-Med to provide the Buyer with additional financing in form of a revolving line of credit in the amount of $600,000, which is fully secured by first lien on various collateral of the Buyer, including the Asheboro plant and plant assets. This line of credit bears interest at a rate equal to the United States prime rate plus an additional margin of two percent of the outstanding credit balance and has an initial term of one-year from the date of the sale which may be extended for consecutive one-year terms on mutual agreement of the parties. As of January 31, 2013, Astro-Med has extended $300,000 on this revolving line of credit. On March 27, 2013, Astro-Med signed an agreement to extend this line of credit through January 30, 2014. The terms of the sale also included a three-year purchase commitment for the Company to purchase $3,250,000 of inventory from the Buyer. The disposal did not qualify as a discontinued operation due to our continuing involvement with the Asheboro operation.

Securities Available for Sale
Securities Available for Sale

Note 3—Securities Available for Sale

Pursuant to our investment policy, securities available for sale include state and municipal securities with various contractual or anticipated maturity dates ranging from one month to three years. These securities are carried at fair value, with unrealized gains and losses reported as a component of accumulated other comprehensive income in shareholders’ equity until realized. Realized gains and losses from the sale of available for sale securities, if any, are determined on a specific identification basis. A decline in the fair value of any available for sale security below cost that is determined to be other than temporary will result in a write-down of its carrying amount to fair value. No such impairment charges were recorded for any period presented. All short-term investment securities have original maturities greater than 90 days.

The fair value, amortized cost and gross unrealized gains and losses of the securities are as follows:

 

                                 
    Amortized
Cost
    Gross
Unrealized
Gains
    Gross
Unrealized
Losses
    Fair Value  
(In thousands)                        

January 31, 2013

                               

State and Municipal Obligations

  $ 8,499     $ 10     $ —       $ 8,509  
   

 

 

   

 

 

   

 

 

   

 

 

 
         
    Amortized
Cost
    Gross
Unrealized
Gains
    Gross
Unrealized
Losses
    Fair Value  

January 31, 2012

                               

State and Municipal Obligations

  $ 11,313     $ 23     $ —       $ 11,336  
   

 

 

   

 

 

   

 

 

   

 

 

 

 

The contractual maturity dates of these securities are as follows:

 

                 
    January 31,  
    2013     2012  
(In thousands)            

Less than one year

  $ 5,986     $ 8,494  

One to three years

    2,523       2,842  
   

 

 

   

 

 

 
    $ 8,509     $ 11,336  
   

 

 

   

 

 

 

Actual maturities are expected to differ from contractual dates as a result of sales or earlier issuer redemptions.

Inventories
Inventories

Note 4—Inventories

Inventories are stated at the lower of cost (first-in, first-out) or market and include material, labor and manufacturing overhead. The components of inventories are as follows:

 

                 
    January 31,  
    2013     2012  
(In thousands)            

Materials and Supplies

  $ 6,654     $ 7,147  

Work-in-Progress

    591       1,024  

Finished Goods

    3,934       2,468  
   

 

 

   

 

 

 
    $ 11,179     $ 10,639  
   

 

 

   

 

 

 

Included within finished goods inventory is $812,000 and $953,000 of demonstration equipment at January 31, 2013 and 2012, respectively.

Accrued Expenses
Accrued Expenses

Note 5—Accrued Expenses

Accrued expenses consisted of the following:

 

                 
    January 31,  
    2013     2012  
(In thousands)            

Reserve for cash in escrow

  $ 1,800     $ —    

Warranty

    350       343  

Professional fees

    174       246  

Health insurance reimbursement reserve

    100       150  

Dealer commissions

    91       149  

R&D outsourcing

    —         167  

Other

    649       752  
   

 

 

   

 

 

 
    $ 3,164     $ 1,807  
   

 

 

   

 

 

 
Line of Credit
Line of Credit

Note 6—Line of Credit

The Company has a $5,000,000 revolving bank line of credit with Wells Fargo Bank. Borrowings under this line of credit bear interest at either a fluctuating 75 basis points below the base rate, as defined in the agreement, or at a fixed rate 150 basis points above LIBOR. At January 31, 2013, there were no borrowings against this line and the entire line is currently available.

 

Shareholders' Equity
Shareholders' Equity

Note 7—Shareholders’ Equity

The number of shares of common stock is summarized below:

 

                 
    2013     2012  

Balance at beginning of year

    8,956,488       8,660,270  

Exercise of employee stock options

    66,313       289,417  

Shares issued to employee stock purchase plan

    5,976       6,801  

Share-based compensation

    2,979       —    
   

 

 

   

 

 

 

Balance at end of year

    9,031,756       8,956,488  
   

 

 

   

 

 

 

Common Stock: The Company purchased 110,000 shares of its common stock for $770,000 in fiscal 2013. During fiscal 2012 the Company did not repurchase any shares of its common stock. As of January 31, 2013, the Company’s Board of Directors has authorized the purchase of up to an additional 390,000 shares Company’s common stock on the open market or in privately negotiated transactions.

During fiscal 2013 and 2012, certain of the Company’s employees delivered a total of 20,938 and 139,895 shares respectively, of the Company’s common stock to satisfy the exercise price for stock options exercised and related taxes. The shares delivered were valued at a total of $176,000 and $1,038,000 respectively and are included with the treasury stock in the accompanying consolidated balance sheet at January 31, 2013 and 2012. These transactions did not impact the number of shares authorized for repurchase under the Company’s current repurchase program.

Astro-Med maintains the following benefit plans involving its common stock:

Stock Plans: As of January 31, 2013, Astro-Med has one equity incentive plan (the “Plan”) under which incentive stock options, non-qualified stock options, restricted stock units (“RSUs”), restricted stock awards (“RSAs”) and other equity-based awards may be granted to directors, officers and certain employees. Options granted to employees vest over four years. An aggregate of 1,000,000 shares were authorized for awards under the Plan. The exercise price of each stock option will be established at the discretion of the Compensation Committee; however, any incentive stock options granted under the Plan must be at an exercise price of not less than fair market value at the date of grant. Beginning in fiscal 2013, a portion of the Company’s long-term incentive compensation was awarded in the form of RSUs. The RSUs vest fifty-percent on the first anniversary of the grant date and fifty-percent on the second anniversary of the grant date provided that the grantee is employed on each vesting date by Astro-Med or an affiliate company and provided the Company achieves specific thresholds of net sales and annual operating income as established under the Management Bonus Domestic Plan for the fiscal year ended January 31, 2013. At January 31, 2013, 467,594 shares were available for grant under the Plan.

On September 6, 2012, Astro-Med, Inc. announced the appointment of Gregory A. Woods, as Executive Vice President and Chief Operating Officer. Upon this appointment, Mr. Woods was granted 50,000 shares of restricted stock and options to purchase 50,000 shares of the Company’s common stock, both of which vest in four equal, annual installments commencing on the first anniversary of his appointment. Mr. Woods will be eligible to participate in the incentive compensation and bonus plans applicable to executive officers of the Company.

The Plan provides for an automatic annual grant of ten-year options to purchase 5,000 shares of stock to each non-employee director upon the adjournment of each shareholders’ meeting. Each such option is exercisable at the fair market value as of the grant date and vests immediately prior to the next succeeding shareholders’ meeting. During fiscal 2013 and 2012, 20,000 options were awarded each year to non-employee directors pursuant to the Plan. In addition to the automatic option grant under Plan, the Company adopted a Non-Employee Director Annual Compensation Program (the “Program”) effective as of February 1, 2012. The Program provides that each non-employee director is entitled to an annual cash retainer of $7,000 (the “Cash Retainer”), plus $500 for each Board and committee meeting attended, provided that if more than one meeting occurs on the same day, no more than $500 shall be paid for such day. The non-employee director may elect for any fiscal year to receive all or a portion of the Cash Retainer in the form of common stock of the Company, which will be issued under the Plan. If a non-employee director elects to receive all or a portion of the Cash Retainer in the form of common stock, such shares shall be issued in four quarterly installments on the first day of each fiscal quarter, and the number of shares of common stock to be issued shall be based on the fair market value of such common stock on the date such installment is payable. The common stock received in lieu of such Cash Retainer will be fully vested. However, a non-employee director who receives common stock in lieu of all or a portion of the Cash Retainer may not sell, transfer, assign, pledge or otherwise encumber the common stock prior to the first anniversary of the date on which such shares were issuable. In the event of the death or disability of a nonemployee director, or a change in control of the Company, any shares of common stock issued in lieu of such Cash Retainer, shall no longer be subject to such restrictions on transfer.

In addition, under the Program, commencing with the 2012 annual meeting, each non-employee director received RSAs with a value equal to $20,000 (the “Equity Retainer”). If a non-employee director is first appointed or elected to the Board of Directors effective on a date other than at the annual shareholders meeting, on the date of such appointment or election, the director shall receive a pro rata award of restricted common stock having a value based on the number of days remaining until the next annual meeting. The Equity Retainer will vest on the earlier of 12 months after the grant date or the date immediately prior to the next annual meeting of the shareholders following the meeting at which such RSAs were granted. However, a non-employee director may not sell, transfer, assign, pledge or otherwise encumber the vested common stock prior to the second anniversary of the vesting date. In the event of the death or disability of a non-employee director, or a change in control of the Company, the RSAs shall immediately vest and shall no longer be subject to such restrictions on transfer.

Stock Options:

Aggregated information regarding stock options granted under the Plan is summarized below:

 

                         
    Number
of Shares
    Option Price
Per Share
    Weighted Average
Option Price Per
Share
 

Options Outstanding, January 31, 2012

    888,097     $ 2.40-11.90     $ 8.27  

Options Granted

    144,000     $ 7.91-8.35     $ 8.09  

Options Exercised

    (66,313   $ 2.40-8.95     $ 5.15  

Options Expired

    (49,172   $ 2.69-11.90     $ 8.39  
   

 

 

   

 

 

   

 

 

 

Options Outstanding, January 31, 2013

    916,612     $ 2.40-11.90     $ 8.46  
   

 

 

   

 

 

   

 

 

 

Options Exercisable, January 31, 2013

    711,112     $ 2.40-11.90     $ 8.64  

Set forth below is a summary of options outstanding at January 31, 2013:

 

                                         

Outstanding

    Exercisable  

Range of

Exercise prices

  Options     Weighted Average
Exercise Price
    Remaining
Contractual Life
    Options     Weighted Average
Exercise Price
 

$2.40-5.78

    18,439     $ 5.15       3.8       18,439     $ 5.15  

$6.22-9.59

    756,073     $ 7.97       4.5       550,573     $ 8.01  

$9.81-11.90

    142,100     $ 11.54       3.9       142,100     $ 11.54  
   

 

 

                   

 

 

         
      916,612                       711,112          
   

 

 

                   

 

 

         

The fair value of each stock option granted was estimated on the grant date using the Black-Scholes option-pricing model with the following weighted average assumptions:

 

         
    Years Ended January 31,
    2013   2012

Risk-free interest rate

  0.62%-1.20%   0.94%-2.00%

Expected life (years)

  5   5

Expected volatility

  38.74%-39.46%   39.07%-39.43%

Expected dividend yield

  3.41-3.46%   3.50%-3.89%

 

The weighted average fair value of options granted during fiscal 2013 and 2012 was $2.02. As of January 31, 2013, there was $287,000 of unrecognized compensation expense related to the unvested stock options granted under the plans. The expense is to be recognized over a weighted average of two years.

As of January 31, 2013, the aggregate intrinsic value (the aggregate difference between the closing stock price of the Company’s common stock on January 31, 2013, and the exercise price of the outstanding options) that would have been received by the option holders if all options had been exercised was $1,188,000 for all exercisable options and $1,624,000 for all options outstanding. The weighted average remaining contractual terms for these options are 3.2 years for options that are exercisable and 4.4 years for all options outstanding. The total aggregate intrinsic value of options exercised during fiscal 2013 and 2012 was $241,000 and $1,320,000, respectively.

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, 2012

    —       $ —    

Granted

    96,900       8.10  

Exercised

    —         —    

Expired or canceled

    —         —    
   

 

 

   

 

 

 

Outstanding at January 31, 2013

    96,900     $ 8.10  
   

 

 

   

 

 

 

As of January 31, 2013, there was $492,000 of unrecognized compensation expense related to unvested RSUs and RSAs.

Share-based compensation expense has been recognized as follows:

 

                 
    Years Ended January 31,  
            2013                     2012          
(In thousands)            

Stock Options

  $ 163     $ 208  

Restricted Stock Awards and Restricted Stock Units

    317       —    
   

 

 

   

 

 

 

Total

  $ 480     $ 208  
   

 

 

   

 

 

 

Employee Stock Purchase Plan (ESPP): Astro-Med’s 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:

 

                 
    Years Ended January 31,  
            2013                     2012          

Shares reserved, beginning

    70,207       77,008  

Shares purchased

    (5,976     (6,801
   

 

 

   

 

 

 

Shares reserved, ending

    64,231       70,207  
   

 

 

   

 

 

 

Employee Stock Ownership Plan: Astro-Med has an Employee Stock Ownership Plan (ESOP) providing retirement benefits to all eligible employees. Annual contributions in amounts determined by the Company’s Board of Directors are invested by the ESOP’s Trustees in shares of common stock of Astro-Med. Contributions may be in cash or stock. Astro-Med’s contributions (paid or accrued) amounted to $100,000 in both fiscal 2013 and 2012 and were recorded as compensation expense. All shares owned by the ESOP have been allocated to participants.

 

Income Taxes
Income Taxes

Note 8—Income Taxes

The components of income from continuing operations before income taxes are as follows:

 

                 
    Years Ended
January 31,
 
    2013     2012  
(In thousands)            

Domestic

  $ 1,850     $ (1,103

Foreign

    1,035       1,747  
   

 

 

   

 

 

 
    $ 2,885     $ 644  
   

 

 

   

 

 

 

The components of the provision (benefit) for income taxes from continuing operations are as follows:

 

                 
    Years Ended
January 31,
 
    2013     2012  
(In thousands)            

Current:

               

Federal

  $ 425     $ (371

State

    (237     11  

Foreign

    366       516  
   

 

 

   

 

 

 
      554       156  
   

 

 

   

 

 

 
     

Deferred:

               

Federal

    253       (248

State

    38       (28

Foreign

    2       23  
   

 

 

   

 

 

 
      293       (253
   

 

 

   

 

 

 
    $ 847     $ (97
   

 

 

   

 

 

 

The provision (benefit) for income taxes from continuing operations differs from the amount computed by applying the statutory federal income tax rate of 35% in fiscal 2013 and 34% in fiscal 2012 to income before income taxes due to the following:

 

                 
    Years Ended
January 31,
 
    2013     2012  
(In thousands)            

Income tax provision at statutory rate

  $ 1,010     $ 219  

State taxes, net of federal tax effect

    114       (12

Officers life insurance

    4       (93

Change in valuation allowance

    (49     35  

Change in reserves related to ASC 740 liability

    (197     61  

Meals and entertainment

    55       40  

Domestic product deduction

    (60     —    

Share-based compensation

    26       54  

Tax-exempt income

    (16     (27

Prior year tax filing true up adjustment

    90       (157

R&D credits

    (106     (175

Foreign rate differential

    (22     (39

Other, net

    (2     (3
   

 

 

   

 

 

 
    $ 847     $ (97
   

 

 

   

 

 

 

 

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,  
    2013     2012  
(In thousands)            

Deferred Tax Assets:

               

Inventory

  $ 1,258     $ 1,515  

Stock-Based Compensation

    403       380  

R&D Credits

    231       280  

Vacation Accrual

    349       355  

ASC 740 Liability Federal Benefit

    361       336  

Deferred Service Contract Revenue

    106       126  

Warranty Reserve

    135       132  

Reserve for Doubtful Accounts

    117       150  

Other

    166       336  
   

 

 

   

 

 

 
      3,126       3,610  

Deferred Tax Liabilities:

               

Accumulated Tax Depreciation in Excess of Book Depreciation

    532       907  

Currency Translation Adjustment

    189       155  

Lease Amortization

    —         70  

Other

    63       63  
   

 

 

   

 

 

 
      784       1,195  
   

 

 

   

 

 

 

Subtotal

    2,342       2,415  

Valuation Allowance

    (231     (280
   

 

 

   

 

 

 

Net Deferred Tax Assets

  $ 2,111     $ 2,135  
   

 

 

   

 

 

 

At January 31, 2013, we have state net operating loss carryforwards of $131,000, which can be used to offset future tax liabilities and expire at various dates beginning in fiscal 2024. At January 31, 2013 we have state research and development credit carryforwards of approximately $349,000, which can be used to offset future tax liabilities and expire at various dates beginning in fiscal 2013.

The valuation allowance at January 31, 2013 relates to certain state research and development tax credit carryforwards which are expected to expire unused. The change in the valuation allowance is a decrease of approximately $49,000 and represents a reduction in the reserve due to the expiration of research and development credits expiring during the current year net of federal benefit.

The Company reasonably believes that it is 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. A reconciliation of unrecognized tax benefits, excluding interest and penalties follows:

 

                 
    2013     2012  
(In thousands)            

Balance at February 1

    $780       $727  

Increases in prior period tax positions

    16       31  

Increases in current period tax positions

    386       79  

Reductions related to lapse of statute of limitations

    (241     (57
   

 

 

   

 

 

 

Balance at January 31

  $ 941     $ 780  
   

 

 

   

 

 

 

If the $941,000 is recognized, $580,000 would decrease the effective tax rate in the period in which each of the benefits is recognized and the remainder would be offset by a reversal of deferred tax assets.

 

During fiscal 2013 and 2012 the Company recognized $105,000 of benefit and $33,000 of expense, respectively, related to interest and penalties, which are included as a component of income tax expense in the accompanying statement of income. At January 31, 2013 and 2012, the Company had accrued potential interest and penalties of $348,000 and $453,000, respectively.

The Company and its subsidiaries file income tax returns in U.S. federal jurisdictions, various state jurisdictions, and various foreign jurisdictions. The Company is no longer subject to U.S. federal examinations prior to 2009.

At January 31, 2013, the Company has indefinitely reinvested $3,143,000 of the cumulative undistributed earnings of its foreign subsidiary in Germany, all of which would be subject to U.S. taxes if repatriated to the U.S. Through January 31, 2013, the Company has not provided deferred income taxes on the undistributed earnings of this subsidiary because such earnings are considered to be indefinitely reinvested. Non-U.S. income taxes are, however, provided on these undistributed earnings.

Contractual Obligations
Contractual Obligations

Note 9—Contractual Obligations

The following table summarizes our contractual obligations:

 

                                                 
    Total     2014     2015     2016     2017     2018
and
Thereafter
 
(In thousands)                                    

Purchase Commitments*

  $ 9,420     $ 8,173     $ 1,247     $ —       $ —       $ —    

Operating Lease Obligations

  $ 887     $ 372     $ 273     $ 138       104       —    
   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 
    $ 10,307     $ 8,545     $ 1,520     $ 138     $ 104     $ —    
   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

 

* Purchase commitments consists primarily of inventory and equipment purchase orders made in the ordinary course of business, including the purchase commitment agreement entered into with Buyer of the Asheboro operations as described in Note 2.

The Company incurred rent and lease expenses in the amount of $607,000 and $706,000 for the fiscal years 2013 and 2012, respectively.

Nature of Operations, Segment Reporting and Geographical Information
Nature of Operations, Segment Reporting and Geographical Information

Note 10—Nature of Operations, Segment Reporting and Geographical Information

The Company’s operations consist of the design, development, manufacture and sale of specialty data recorder and acquisition systems, label printing and applicator systems and related consumable supplies. The Company organizes and manages its business as a portfolio of products and services designed around a common theme of data acquisition and information output. The Company reports two reporting segments consistent with its sales product groups: Test & Measurement (T&M) and QuickLabel Systems (QuickLabel).

T&M produces data recording equipment used worldwide for a variety of recording, monitoring and troubleshooting applications for the aerospace, automotive, metal mill, power and telecommunications industries. QuickLabel produces an array of high-technology digital color and monochrome label printers, labeling software and consumables for a variety of commercial industries worldwide.

Business is conducted in the United States and through foreign affiliates in Canada and Europe. Manufacturing activities are primarily conducted in the United States. Sales 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.

On January 31, 2013, the Company completed the sale of substantially all of the assets of its Grass Technologies Product Group (Grass) in order to focus on its existing core businesses. Grass produced a range of instrumentation equipment and supplies for clinical neurophysiology (EEG and epilepsy monitoring), polysomnography (PSG—Sleep Monitoring) and biomedical research applications used by universities, medical centers and companies engaged in a variety of clinical and research activities. Consequently, the Company has classified the results of operations of Grass as discontinued operations for all periods presented. Refer to Note 17 for further details.

The accounting policies of the reporting segments are the same as those described in the summary of significant accounting policies herein. The Company evaluates segment performance based on the segment profit before corporate and financial administration expenses.

Summarized below are the Net Sales and Segment Operating Profit (both in dollars and as a percentage of Net Sales) for each reporting segment:

 

                                                 
($ in thousands)   Net Sales     Segment Operating Profit     Segment Operating Profit %
of Net Sales
 
    2013     2012         2013             2012         2013     2012  

T&M

  $ 17,636     $ 17,138     $ 3,109     $ 2,425       17.6     14.1

QuickLabel

    43,588       43,586       4,380       2,553       10.0     5.9
   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total

  $ 61,224     $ 60,724       7,489       4,978       12.2     8.2
   

 

 

   

 

 

                   

 

 

   

 

 

 

Corporate Expenses

                    4,563       3,969                  

Loss on Sale of Asheboro*

                    —         (681                
                   

 

 

   

 

 

                 

Operating Income

                    2,926       328                  

Other Income (Expense), Net

                    (41     316                  
                   

 

 

   

 

 

                 

Income From Continuing Operations Before Income Taxes

                    2,885       644                  

Income Tax Provision (Benefit)

                    847       (97                
                   

 

 

   

 

 

                 
                      2,038       741                  

Income from Discontinued Operations, Net of Taxes

                    8,729       2,391                  
                   

 

 

   

 

 

                 

Net Income

                  $ 10,767     $ 3,132                  
                   

 

 

   

 

 

                 

 

* The Asheboro operations were part of the QuickLabel Systems segment.

No customer accounted for greater than 10% of net sales in fiscal 2013 and 2012.

Other information by segment is presented below:

 

                 
(In thousands)   Assets  
    2013     2012  

T&M

  $ 10,493     $ 10,300  

QuickLabel

    23,468       21,260  

Discontinued Operations

    3,131       11,054  

Corporate*

    42,821       24,448  
   

 

 

   

 

 

 

Total

  $ 79,913     $ 67,062  
   

 

 

   

 

 

 

 

* Corporate assets consist of cash and cash equivalents, securities available for sale, income tax accounts and accruals.

 

                                 
(In thousands)   Depreciation and
Amortization
    Capital Expenditures  
    2013     2012         2013             2012      

T&M

  $ 435     $ 567     $ 383     $ 497  

QuickLabel

    710       806       398       535  

Discontinued Operations

    186       203       68       122  
   

 

 

   

 

 

   

 

 

   

 

 

 

Total

  $ 1,331     $ 1,576     $ 849     $ 1,154  
   

 

 

   

 

 

   

 

 

   

 

 

 

 

Geographical Data

Presented below is selected financial information by geographic area:

 

                                 
(In thousands)   Net Sales     Long-Lived Assets  
    2013     2012     2013     2012  

United States

  $ 44,613     $ 43,570     $ 6,741     $ 7,073  

Europe

    12,324       12,914       609       646  

Canada

    2,136       2,074       438       494  

Asia

    910       1,050       —         —    

Central and South America

    752       610       —         —    

Other

    489       506       —         —    
   

 

 

   

 

 

   

 

 

   

 

 

 

Total

  $ 61,224     $ 60,724     $ 7,788     $ 8,213  
   

 

 

   

 

 

   

 

 

   

 

 

 

Long-lived assets excludes goodwill assigned to the T&M segment of $0.7 million at January 31, 2013 and 2012.

Profit-Sharing Plan
Profit-Sharing Plan

Note 11—Profit-Sharing Plan

Along with the ESOP described in Note 7, Astro-Med sponsors 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 the policy of the Company to fund any contributions accrued. The Company’s annual contribution amounts are determined by the Board of Directors. Contributions paid or accrued amounted to $261,000 and $259,000 in fiscal 2013 and 2012, respectively.

Product Warranty Liability
Product Warranty Liability

Note 12—Product Warranty Liability

Astro-Med offers a manufacturer’s warranty for the majority of its hardware products. The specific terms and conditions of warranty vary depending upon the product sold and country in which the Company does business. For products sold in the United States, the Company provides a basic limited warranty, including parts and labor. The Company estimates the warranty costs based on historical claims experience and records a liability in the amount of such estimates at the time product revenue is recognized. The Company regularly assesses the adequacy of its recorded warranty liabilities and adjusts the amounts as necessary. Activity in the product warranty liability is as follows:

 

                 
    January 31,  
    2013     2012  
(In thousands)            

Balance, beginning of the year

  $ 343     $ 258  

Warranties issued

    783       661  

Settlements made

    (776     (576
   

 

 

   

 

 

 

Balance, end of the year

  $ 350     $ 343  
   

 

 

   

 

 

 
Concentration of Risk
Concentration of Risk

Note 13—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 the Company’s customer base. The Company periodically performs on-going credit evaluations of its customers. The Company has not historically experienced significant credit losses on collection of its accounts receivable.

Excess cash is invested principally in investment grade government and state municipal securities. The Company has established guidelines relative to diversification and maturities that maintain safety of principal, liquidity and yield. These guidelines are periodically reviewed and modified to reflect changes in market conditions. The Company has not historically experienced any significant losses on its cash equivalents or investments.

Commitments and Contingencies
Commitments and Contingencies

Note 14—Commitments and Contingencies

Astro-Med is 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, 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, the Company believes 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 the Company’s control.

Fair Value Measurements
Fair Value Measurements

Note 15—Fair Value Measurements

We measure our financial assets at fair value on a 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 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 receivables; line of credit receivable; accounts payable, note receivable, accrued compensation and other expenses; and income tax payable are reflected in the condensed consolidated balance sheet at carrying value, which approximates fair value due to the short term nature of the these instruments.

 

Assets measured at fair value on a recurring basis are summarized below:

 

                                 

January 31, 2013

  Level 1     Level 2     Level 3     Total  
(In thousands)                        

Money market funds (included in cash and cash equivalents)

  $ 8,784     $  —       $ —       $ 8,784  

State and municipal obligations (included in securities available for sale)

    8,509       —         —         8,509  
   

 

 

   

 

 

   

 

 

   

 

 

 

Total

  $ 17,293     $ —       $ —       $ 17,293  
   

 

 

   

 

 

   

 

 

   

 

 

 
         

January 31, 2012

  Level 1     Level 2     Level 3     Total  
(In thousands)                        

Money market funds (included in cash and cash equivalents)

  $ 5,922     $ —       $ —       $ 5,922  

State and municipal obligations (included in securities available for sale)

    11,336       —         —         11,336  
   

 

 

   

 

 

   

 

 

   

 

 

 

Total

  $ 17,258     $ —       $ —       $ 17,258  
   

 

 

   

 

 

   

 

 

   

 

 

 

We did not have any transfers of investments into or out of Level 1 or Level 2 during fiscal 2013.

For our money market funds and state and municipal obligations, we utilize the market approach to measure fair value. The market approach is based on using quoted market prices for identical assets.

For our Note Receivable we utilized the income approach to measure fair value by discounting the present value of the Note. The discount rate used is based on similar rates used for high credit ratings and highly collateralized lending.

Life Insurance Proceeds
Life Insurance Proceeds

Note 16—Life Insurance Proceeds

During the second quarter of fiscal 2012, we recognized income on key-man life insurance proceeds of $300,000. This income is included in other income in the accompanying consolidated statements of operations for the year end January 31, 2012.

Discontinued Operations
Discontinued Operations

Note 17—Discontinued Operations

On January 31, 2013, the Company completed the sale of substantially all of the assets of its Grass Technologies Product Group (Grass) which manufactured polysomnography and electroencephalography systems and related accessories and propriety electrodes for use in both research and clinical settings. The assets sold consisted primarily of working capital (exclusive of inventory and accounts payable related to manufacturing), the engineering, sales and support workforce, intellectual property and certain other related assets. The proceeds from the sale consisted of $18.6 million in cash, of which $1.8 million which is being held in escrow for twelve months following the closing date of the transaction in order to provide indemnity to the purchaser in the event of any breach in the representation, warranties and covenants of Astro-Med and is fully reserved for in Other Accrued Expenses in the accompanying consolidated balance sheet for the period ended January 31, 2013.

As part of this transaction, Astro-Med entered into a Transition Service Agreement with the purchaser in which the Company will provide transition services and continue to manufacture Grass products for the purchaser for a period of between nine and twelve months following the closing date, after which the purchaser will acquire any remaining inventory. The Company has determined that cash flows from this activity will not be significant and therefore Grass has been presented as a discontinued operation for all periods presented.

As a result of the above, the Company has classified the results of operations of the Grass Technologies Product Group as a discontinued operation for all periods presented.

 

Results for discontinued operations are as follows:

 

                 
    2013     2012  
(In thousands)            

Net Sales

  $ 19,195     $ 18,469  

Cost of Sales

  $ 9,072     $ 8,758  

Gross Profit

  $ 10,123     $ 9,711  
     

Operating Expenses

  $ 6,205     $ 6,122  

Income from Discontinued Operations

  $ 3,918     $ 3,589  
     

Gain on Sale of Assets of Discontinued Operations

  $ 10,162     $ —    

Income Tax Expense

  $ 5,351     $ 1,198  

Income from Discontinued Operations

  $ 8,729     $ 2,391  

Included in the above calculation of the Gain on Sale of Assets of Discontinued Operations is a charge of $779,000 related to the impairment of the Grass Technologies Product Group facility located in Rockland, Massachusetts. The impairment charge was based on the fair value of the facility, less costs to sell, using market values for similar properties which is a Level 2 measurement in the fair value hierarchy discussed in Note 15. This property is being actively marketed and sale of this property is considered probable within the next twelve months and as such, the property is classified as an asset held for sale in the accompanying balance sheets for the period ended January 31, 2013.

Valuation and Qualifying Accounts and Reserves
VALUATION AND QUALIFYING ACCOUNTS AND RESERVES
VALUATION AND QUALIFYING ACCOUNTS AND RESERVES

SCHEDULE II—VALUATION AND QUALIFYING ACCOUNTS AND RESERVES

 

                                 

Description

  Balance at
Beginning
of Year
    Provision
Charged to
Operations
    Deductions(2)     Balance
at End
of Year
 

Allowance for Doubtful Accounts(1):

                               
(In thousands)                        

Year Ended January 31,

                               

2013

  $ 356     $ 70     $ (81   $ 345  

2012

  $ 547     $ 22     $ (213   $ 356  

 

(1) The allowance for doubtful accounts has been netted against accounts receivable as of the respective balance sheet dates.
(2) Uncollectible accounts written off, net of recoveries, also includes foreign exchange adjustment.
Summary of Significant Accounting Policies (Policies)

Basis of Presentation: The accompanying financial data has been prepared by us pursuant to the rules and regulations of the U.S. Securities and Exchange Commission (SEC) and is 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.

On January 31, 2013, we completed the sale of substantially all of the assets of our Grass Technologies Product Group. Consequently, we have classified the results of operations of the Grass Technologies Product Group as discontinued operations for all periods presented. Refer to Note 17, “Discontinued Operations,” for further discussion.

Principles of Consolidation: The consolidated financial statements include the accounts of Astro-Med, 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 presentation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect these financial statements and accompanying notes. Some of the more significant estimates relate to the allowances for doubtful accounts and credits, inventory valuation, impairment of long-lived assets and goodwill, income taxes, share-based compensation and warranty reserves. Management’s estimates are based on the facts and circumstances available at the time estimates are made, past historical experience, risk of loss, general economic conditions and trends, and management’s assessments of the probable future outcome of these matters. 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. Similar investments with original maturities beyond three months are classified as securities available for sale. Cash of $1,157,000 and $1,929,000 was held in foreign bank accounts at January 31, 2013 and 2012, respectively.

Securities Available for Sale: Securities available for sale are carried at fair value based on quoted market prices, where available. The difference between cost and fair value, net of related tax effects, is recorded as a component of accumulated other comprehensive income in shareholders’ equity.

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 improvements—10 to 45 years; machinery and equipment—3 to 10 years). Depreciation expense was $1,331,000 for fiscal 2013 and $1,576,000 for 2012.

Revenue Recognition: Astro-Med’s product sales are recognized when all of the following criteria have been met: persuasive evidence of an arrangement exists; price to the buyer is fixed or determinable; delivery has occurred and legal title and risk of loss have passed to the customer; and collectability is reasonably assured. Returns and customer credits are infrequent and are recorded as a reduction to sales. Rights of return are not included in sales arrangements. Revenue associated with products that contain specific customer acceptance criteria is not recognized before the customer acceptance criteria are satisfied. Discounts from list prices are recorded as a reduction to sales. Amounts billed to customers for shipping and handling fees are included in sales while related shipping and handling costs are included in cost of sales.

The majority of our equipment contains 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 separately or marketed separately and its production costs are minor as compared to those of the hardware system. Therefore, the Company’s hardware appliances are considered non-software elements and are not subject to the industry-specific software revenue recognition guidance.

Our multiple-element arrangements are generally comprised of a combination of equipment, software, installation and/or training services. Hardware and software elements are typically delivered at the same time and revenue is recognized when all the revenue recognition criteria for each unit are met. Delivery of installation and training services will 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. Service revenue is deferred and recognized over the contractual period or as services are rendered and accepted by the customer.

We have evaluated the deliverables in our multiple-element arrangements and concluded that they are separate units of accounting if the delivered item or items have value to the customer on a standalone basis and delivery or performance of the undelivered item(s) is considered probable and substantially in our control. We allocate revenue to each element in our multiple-element arrangements based upon their relative selling prices. We determine the selling price for each deliverable based on a selling price hierarchy. The selling price for a deliverable is based on VSOE if available, third-party evidence (“TPE”) if VSOE is not available, or estimated selling price (“ESP”) if neither VSOE nor TPE is available. Revenue allocated to each element is then recognized when the basic revenue recognition criteria for that element have been met.

Infrequently, Astro-Med recognizes revenue for non-recurring engineering (NRE) fees 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. NRE fees have not been significant in the periods presented herein.

Infrequently, Astro-Med receives requests from customers to hold product purchased from us for the customer’s convenience. Revenue is recognized for such bill and hold arrangements in accordance with the requirements of SAB No. 104 which requires, among other things, the existence of a valid business purpose for the arrangement; the transfer of ownership of the purchased product; a fixed delivery date that is reasonable and consistent with the buyer’s business purpose; the readiness of the product for shipment; the use of customary payment terms; no continuing performance obligation by us and segregation of the product from our inventories.

Research and Development Costs: The Company complies with the guidance provided in the Financial Accounting Standards Board’s (“FASB”) Accounting Standards Codification (“ASC”) FASB 730, “Research and Development” by charging any costs to expense when incurred, as well as by disclosing in the financial statements the amount of Research & Development charged to expense. These charges include: salaries and benefits, external engineering service costs, engineering related information costs and supplies. The Company also complies with ASC 985-20, “Costs of Computer Software to be Sold, Leased or Marketed” and ASC 350-40, “Internal-Use Software” in accounting for the costs of software either developed or acquired.

Foreign Currency: The financial statements of foreign subsidiaries 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 in shareholders’ equity. Revenues and costs are translated at average exchange rates during the year. We do not provide for U.S. income taxes on foreign currency translation adjustments associated with our German subsidiary since its undistributed earnings are considered to be permanently invested. Our net foreign exchange losses were $158,000 and $27,000 for fiscal 2013 and 2012, respectively.

Advertising: Astro-Med expenses 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 $750,000 and $970,000 in fiscal 2013 and 2012, respectively.

Health Insurance Reimbursement Reserve: Astro-Med reimburses a portion of employee health insurance deductibles and co-payments. The total reimbursement amounted to approximately $313,000 and $487,000 in 2013 and 2012, respectively. We accrued approximately $100,000 and $150,000 at January 31, 2013 and 2012, respectively, for estimated outstanding reimbursements due to employees, including a reserve for incurred but not reported amounts.

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 in accordance with the guidance provided in ASC 360, “Property, Plant and Equipment.” Determination of recoverability is based on an estimate of undiscounted future cash flows resulting from the use of the asset and its eventual disposition. Measurement of an impairment loss for long-lived assets that management expects to hold and use is based on the fair value of the asset.

In 2013, we recognized an impairment of $779,000 related to the Grass Technologies Product Group‘s manufacturing facilities located in Rockland, Massachusetts. This impairment was included as part of the Income from Discontinued Operations in the accompanying consolidated statement of income for the period ended January 31, 2013. Refer to Note 17, “Discontinued Operations,” for further discussion.

Goodwill: Management evaluates the recoverability of goodwill annually or more frequently if events or changes in circumstances, such as declines in sales, earnings or cash flows, or material adverse changes in the business climate, indicate that the carrying value of an asset might be impaired. During the fourth quarter of fiscal 2012, we adopted new accounting guidance which simplifies goodwill impairment testing. Under the new guidance, goodwill is first qualitatively assessed to determine whether further impairment testing is necessary. 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 amount, a two step process is then performed. Step one compares the fair value of the reporting unit with its carrying value, including goodwill. If the carrying amount exceeds the fair value of the reporting unit, step two is required to determine if there is an impairment of the goodwill. Step two compares the implied fair value of the reporting unit goodwill to the carrying amount of the goodwill. 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, the Company uses 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.

We performed a qualitative assessment for our 2013 analysis of goodwill. Based on this assessment, management does not believe that it is more likely than not that the carrying value of the reporting units exceed their fair values. Accordingly, no further testing was performed as management believes that there are no impairment issues in regards to goodwill at this time.

Income Taxes: Astro-Med uses 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 enacted tax rates that will be in effect when the differences are expected to reverse. 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, 2013 and 2012, a valuation allowance was provided for deferred tax assets attributable to certain state R&D credit carryforwards.

Astro-Med accounts 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, disclosure and transition.

Net Income Per Common Share: Net income per common share has been computed and presented in accordance with the guidance provided in ASC 260, “Earnings per 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 2013 and 2012, there were 583,512 and 664,690 common equivalent shares that were not included in the computation of diluted net income per common share because their inclusion would be anti-dilutive.

Allowance for Doubtful Accounts: In circumstances where we are aware of a customer’s inability to meet its financial obligations, an allowance is established. The majority of accounts are individually evaluated on a regular basis and allowances are established to state such receivables at their net realizable value. The remainder of the allowance is based upon historical write-off experience and current market assessments.

Fair Value of Financial Instruments: Our financial instruments consist of cash and cash equivalents, investment securities, accounts receivable, a note receivable, a line of credit receivable and accounts payable. The carrying amount reflected in the consolidated balance sheets for cash and cash equivalents, accounts receivable and accounts payable approximates fair value due to the short-term nature of these items. Investment securities, all of which are available for sale, are carried in the consolidated balance sheets at fair value based on quoted market prices, when available. The note receivable is carried in the consolidated balance sheets at fair value based on the present value of the discounted cash flows over the life of the note.

Comprehensive Income: In accordance with the guidance provided in ASC 220, “Comprehensive Income,” we report the change in net assets during the period from non-owner sources by major components and as a single total in the Consolidated Statements of Comprehensive Income. Accumulated other comprehensive income at January 31, 2013 consists of net unrealized gains on available for sale securities of $7,000 and net translation gains on foreign operations of $166,000.

Share-Based Compensation: We account for share based awards granted to employees and directors using the FASB guidance included in ASC 718, “Stock Compensation.” Effective as of February 1, 2006, we adopted the “modified prospective” transition method provided in ASC 718. Under this method, share-based compensation is recognized in the consolidated statement of operation for share-based payment awards granted prior to, but not yet vested as of February 1, 2006, based on the grant date fair value estimated in accordance with prior authoritative guidance and for share-based payment awards granted subsequent to February 1, 2006, based on the grant date fair value estimated in accordance with the provisions of ASC 718.

In accordance with ASC 718, share-based compensation expense is based on the estimated fair value of the share-based award when granted to an employee or director. 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 a number of complex and subjective assumptions including our stock price volatility, employee exercise patterns (expected life of the options), the risk-free interest rate and the Company’s 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, the Company has 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 requested service. Our accounting for share-based compensation for restricted stock awards (“RSAs”) 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 the Company’s common stock on the grant date of the RSU or RSA.

The cash flow from the tax benefits that are a result of tax deductions in excess of the compensation cost recognized for those options (excess tax benefits) are classified as a cash inflow from financing activities and a cash outflow from operating activity in accordance with the guidance provided by ASC 718. Tax deductions from certain stock option exercises are treated as being realized when they reduce taxes payable in accordance with relevant tax law.

Recent Accounting Pronouncements:

Comprehensive Income

In February 2013, the FASB issued Accounting Standard Update (“ASU”) 2013-02, “Reporting of Amounts Reclassified Out of Accumulated Other Comprehensive Income,” which requires entities to provide information about the amounts reclassified out of accumulated other comprehensive income by component. In addition, entities are required to present, either on the face of the statement where net income is presented or in the notes, significant amounts reclassified out of accumulated other comprehensive income by the respective line items of net income but only if the amount reclassified is required under U.S. GAAP to be reclassified to net income in its entirety in the same reporting period. For other amounts that are not required under U.S. GAAP to be reclassified in their entirety to net income, entities are required to cross-reference to other disclosures required under U.S. GAAP that provide additional detail on these amounts. ASU 2013-02 is effective prospectively for reporting periods beginning after December 15, 2012. We will adopt this guidance in our first quarter ending May 4, 2013. Since ASU 2013-02 only impacts presentation and disclosure requirements, the adoption of this guidance will not have a material impact on the Company’s financial position or results of operations.

In June 2011, the FASB issued ASU 2011-05, “Presentation of Comprehensive Income,” which requires entities to present the components of net income and other comprehensive income either as one continuous statement or as two consecutive statements. ASU 2011-05 eliminates the option to present the components of other comprehensive income as part of the statement of changes in shareholders’ equity. While ASU 2011-05 changes the presentation of comprehensive income, it does not change the components that are recognized in net income or comprehensive income under current accounting guidance. ASU 2011-05 also requires entities to present reclassification adjustments out of accumulated other comprehensive income by component in both the statement in which net income is presented and the statement in which other comprehensive income is presented. In December 2011, the FASB issued ASU 2011-12, “Deferral of the Effective Date for Amendments to the Presentation of Reclassification of Items Out of Accumulated Other Comprehensive Income in Accounting Standard Update No. 2011-05,” which defers the guidance related to the presentation of reclassification adjustments. ASU 2011-05 is effective for interim and annual periods beginning after December 15, 2011, and must be applied retrospectively. We adopted this guidance in the first quarter of fiscal 2013 and have provided the disclosures required for the periods ended January 31, 2013 and 2012, in the accompanying Consolidated Statements of Comprehensive Income.

Intangibles

In July 2012, the FASB issued ASU 2012-02, “Testing Indefinite-Lived Intangible Assets for Impairment,” which allows entities to use a qualitative approach to test indefinite-lived intangible assets for impairment. ASU 2012-02 permits an entity to first assess qualitative factors to determine whether it is more likely than not that the fair value of the indefinite-lived intangible asset is less than its carrying value. If it is concluded that this is the case, it is necessary to perform the currently prescribed quantitative impairment test. Otherwise, the quantitative impairment test is not required. ASU 2012-02 is effective for annual and interim impairment tests performed for fiscal years beginning after September 15, 2012. The adoption of the provisions of ASU 2012-02 will not have a material impact on the Company’s financial position or results of operations.

Securities Available for Sale (Tables)
                                 
    Amortized
Cost
    Gross
Unrealized
Gains
    Gross
Unrealized
Losses
    Fair Value  
(In thousands)                        

January 31, 2013

                               

State and Municipal Obligations

  $ 8,499     $ 10     $ —       $ 8,509  
   

 

 

   

 

 

   

 

 

   

 

 

 
         
    Amortized
Cost
    Gross
Unrealized
Gains
    Gross
Unrealized
Losses
    Fair Value  

January 31, 2012

                               

State and Municipal Obligations

  $ 11,313     $ 23     $ —       $ 11,336  
   

 

 

   

 

 

   

 

 

   

 

 

 
                 
    January 31,  
    2013     2012  
(In thousands)            

Less than one year

  $ 5,986     $ 8,494  

One to three years

    2,523       2,842  
   

 

 

   

 

 

 
    $ 8,509     $ 11,336  
   

 

 

   

 

 

 
Inventories (Tables)
Components of inventories
                 
    January 31,  
    2013     2012  
(In thousands)            

Materials and Supplies

  $ 6,654     $ 7,147  

Work-in-Progress

    591       1,024  

Finished Goods

    3,934       2,468  
   

 

 

   

 

 

 
    $ 11,179     $ 10,639  
   

 

 

   

 

 

 
Accrued Expenses (Tables)
Summary of Accrued expenses
                 
    January 31,  
    2013     2012  
(In thousands)            

Reserve for cash in escrow

  $ 1,800     $ —    

Warranty

    350       343  

Professional fees

    174       246  

Health insurance reimbursement reserve

    100       150  

Dealer commissions

    91       149  

R&D outsourcing

    —         167  

Other

    649       752  
   

 

 

   

 

 

 
    $ 3,164     $ 1,807  
   

 

 

   

 

 

 
Shareholder's Equity (Tables)
                 
    2013     2012  

Balance at beginning of year

    8,956,488       8,660,270  

Exercise of employee stock options

    66,313       289,417  

Shares issued to employee stock purchase plan

    5,976       6,801  

Share-based compensation

    2,979       —    
   

 

 

   

 

 

 

Balance at end of year

    9,031,756       8,956,488  
   

 

 

   

 

 

 
                         
    Number
of Shares
    Option Price
Per Share
    Weighted Average
Option Price Per
Share
 

Options Outstanding, January 31, 2012

    888,097     $ 2.40-11.90     $ 8.27  

Options Granted

    144,000     $ 7.91-8.35     $ 8.09  

Options Exercised

    (66,313   $ 2.40-8.95     $ 5.15  

Options Expired

    (49,172   $ 2.69-11.90     $ 8.39  
   

 

 

   

 

 

   

 

 

 

Options Outstanding, January 31, 2013

    916,612     $ 2.40-11.90     $ 8.46  
   

 

 

   

 

 

   

 

 

 

Options Exercisable, January 31, 2013

    711,112     $ 2.40-11.90     $ 8.64  
                                         

Outstanding

    Exercisable  

Range of

Exercise prices

  Options     Weighted Average
Exercise Price
    Remaining
Contractual Life
    Options     Weighted Average
Exercise Price
 

$2.40-5.78

    18,439     $ 5.15       3.8       18,439     $ 5.15  

$6.22-9.59

    756,073     $ 7.97       4.5       550,573     $ 8.01  

$9.81-11.90

    142,100     $ 11.54       3.9       142,100     $ 11.54  
   

 

 

                   

 

 

         
      916,612                       711,112          
   

 

 

                   

 

 

         
         
    Years Ended January 31,
    2013   2012

Risk-free interest rate

  0.62%-1.20%   0.94%-2.00%

Expected life (years)

  5   5

Expected volatility

  38.74%-39.46%   39.07%-39.43%

Expected dividend yield

  3.41-3.46%   3.50%-3.89%
                 
    RSAs & RSUs     Weighted Average
Grant Date Fair Value
 

Outstanding at January 31, 2012

    —       $ —    

Granted

    96,900       8.10  

Exercised

    —         —    

Expired or canceled

    —         —    
   

 

 

   

 

 

 

Outstanding at January 31, 2013

    96,900     $ 8.10  
   

 

 

   

 

 

 
                 
    Years Ended January 31,  
            2013                     2012          
(In thousands)            

Stock Options

  $ 163     $ 208  

Restricted Stock Awards and Restricted Stock Units

    317       —    
   

 

 

   

 

 

 

Total

  $ 480     $ 208  
   

 

 

   

 

 

 
                 
    Years Ended January 31,  
            2013                     2012          

Shares reserved, beginning

    70,207       77,008  

Shares purchased

    (5,976     (6,801
   

 

 

   

 

 

 

Shares reserved, ending

    64,231       70,207  
   

 

 

   

 

 

 
Income Taxes (Tables)
                 
    Years Ended
January 31,
 
    2013     2012  
(In thousands)            

Domestic

  $ 1,850     $ (1,103

Foreign

    1,035       1,747  
   

 

 

   

 

 

 
    $ 2,885     $ 644  
   

 

 

   

 

 

 
                 
    Years Ended
January 31,
 
    2013     2012  
(In thousands)            

Current:

               

Federal

  $ 425     $ (371

State

    (237     11  

Foreign

    366       516  
   

 

 

   

 

 

 
      554       156  
   

 

 

   

 

 

 
     

Deferred:

               

Federal

    253       (248

State

    38       (28

Foreign

    2       23  
   

 

 

   

 

 

 
      293       (253
   

 

 

   

 

 

 
    $ 847     $ (97
   

 

 

   

 

 

 
                 
    Years Ended
January 31,
 
    2013     2012  
(In thousands)            

Income tax provision at statutory rate

  $ 1,010     $ 219  

State taxes, net of federal tax effect

    114       (12

Officers life insurance

    4       (93

Change in valuation allowance

    (49     35  

Change in reserves related to ASC 740 liability

    (197     61  

Meals and entertainment

    55       40  

Domestic product deduction

    (60     —    

Share-based compensation

    26       54  

Tax-exempt income

    (16     (27

Prior year tax filing true up adjustment

    90       (157

R&D credits

    (106     (175

Foreign rate differential

    (22     (39

Other, net

    (2     (3
   

 

 

   

 

 

 
    $ 847     $ (97
   

 

 

   

 

 

 
                 
    January 31,  
    2013     2012  
(In thousands)            

Deferred Tax Assets:

               

Inventory

  $ 1,258     $ 1,515  

Stock-Based Compensation

    403       380  

R&D Credits

    231       280  

Vacation Accrual

    349       355  

ASC 740 Liability Federal Benefit

    361       336  

Deferred Service Contract Revenue

    106       126  

Warranty Reserve

    135       132  

Reserve for Doubtful Accounts

    117       150  

Other

    166       336  
   

 

 

   

 

 

 
      3,126       3,610  

Deferred Tax Liabilities:

               

Accumulated Tax Depreciation in Excess of Book Depreciation

    532       907  

Currency Translation Adjustment

    189       155  

Lease Amortization

    —         70  

Other

    63       63  
   

 

 

   

 

 

 
      784       1,195  
   

 

 

   

 

 

 

Subtotal

    2,342       2,415  

Valuation Allowance

    (231     (280
   

 

 

   

 

 

 

Net Deferred Tax Assets

  $ 2,111     $ 2,135  
   

 

 

   

 

 

 
                 
    2013     2012  
(In thousands)            

Balance at February 1

    $780       $727  

Increases in prior period tax positions

    16       31  

Increases in current period tax positions

    386       79  

Reductions related to lapse of statute of limitations

    (241     (57
   

 

 

   

 

 

 

Balance at January 31

  $ 941     $ 780  
   

 

 

   

 

 

 
Contractual Obligations (Tables)
Summary of contractual obligations
                                                 
    Total     2014     2015     2016     2017     2018
and
Thereafter
 
(In thousands)                                    

Purchase Commitments*

  $ 9,420     $ 8,173     $ 1,247     $ —       $ —       $ —    

Operating Lease Obligations

  $ 887     $ 372     $ 273     $ 138       104       —    
   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 
    $ 10,307     $ 8,545     $ 1,520     $ 138     $ 104     $ —    
   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 
Nature of Operations Segment Reporting and Geographical Information (Tables)
                                                 
($ in thousands)   Net Sales     Segment Operating Profit     Segment Operating Profit %
of Net Sales
 
    2013     2012         2013             2012         2013     2012  

T&M

  $ 17,636     $ 17,138     $ 3,109     $ 2,425       17.6     14.1

QuickLabel

    43,588       43,586       4,380       2,553       10.0     5.9
   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total

  $ 61,224     $ 60,724       7,489       4,978       12.2     8.2
   

 

 

   

 

 

                   

 

 

   

 

 

 

Corporate Expenses

                    4,563       3,969                  

Loss on Sale of Asheboro*

                    —         (681                
                   

 

 

   

 

 

                 

Operating Income

                    2,926       328                  

Other Income (Expense), Net

                    (41     316                  
                   

 

 

   

 

 

                 

Income From Continuing Operations Before Income Taxes

                    2,885       644                  

Income Tax Provision (Benefit)

                    847       (97                
                   

 

 

   

 

 

                 
                      2,038       741                  

Income from Discontinued Operations, Net of Taxes

                    8,729       2,391                  
                   

 

 

   

 

 

                 

Net Income

                  $ 10,767     $ 3,132                  
                   

 

 

   

 

 

                 

 

* The Asheboro operations were part of the QuickLabel Systems segment.
                 
(In thousands)   Assets  
    2013     2012  

T&M

  $ 10,493     $ 10,300  

QuickLabel

    23,468       21,260  

Discontinued Operations

    3,131       11,054  

Corporate*

    42,821       24,448  
   

 

 

   

 

 

 

Total

  $ 79,913     $ 67,062  
   

 

 

   

 

 

 

 

* Corporate assets consist of cash and cash equivalents, securities available for sale, income tax accounts and accruals.

 

                                 
(In thousands)   Depreciation and
Amortization
    Capital Expenditures  
    2013     2012         2013             2012      

T&M

  $ 435     $ 567     $ 383     $ 497  

QuickLabel

    710       806       398       535  

Discontinued Operations

    186       203       68       122  
   

 

 

   

 

 

   

 

 

   

 

 

 

Total

  $ 1,331     $ 1,576     $ 849     $ 1,154  
   

 

 

   

 

 

   

 

 

   

 

 

 
                                 
(In thousands)   Net Sales     Long-Lived Assets  
    2013     2012     2013     2012  

United States

  $ 44,613     $ 43,570     $ 6,741     $ 7,073  

Europe

    12,324       12,914       609       646  

Canada

    2,136       2,074       438       494  

Asia

    910       1,050       —         —    

Central and South America

    752       610       —         —    

Other

    489       506       —         —    
   

 

 

   

 

 

   

 

 

   

 

 

 

Total

  $ 61,224     $ 60,724     $ 7,788     $ 8,213  
   

 

 

   

 

 

   

 

 

   

 

 

 
Product Warranty Liability (Tables)
Activity in product warranty liability
                 
    January 31,  
    2013     2012  
(In thousands)            

Balance, beginning of the year

  $ 343     $ 258  

Warranties issued

    783       661  

Settlements made

    (776     (576
   

 

 

   

 

 

 

Balance, end of the year

  $ 350     $ 343  
   

 

 

   

 

 

 
Fair Value Measurements (Tables)
Assets measured at fair value on a recurring basis
                                 

January 31, 2013

  Level 1     Level 2     Level 3     Total  
(In thousands)                        

Money market funds (included in cash and cash equivalents)

  $ 8,784     $  —       $ —       $ 8,784  

State and municipal obligations (included in securities available for sale)

    8,509       —         —         8,509  
   

 

 

   

 

 

   

 

 

   

 

 

 

Total

  $ 17,293     $ —       $ —       $ 17,293  
   

 

 

   

 

 

   

 

 

   

 

 

 
         

January 31, 2012

  Level 1     Level 2     Level 3     Total  
(In thousands)                        

Money market funds (included in cash and cash equivalents)

  $ 5,922     $ —       $ —       $ 5,922  

State and municipal obligations (included in securities available for sale)

    11,336       —         —         11,336  
   

 

 

   

 

 

   

 

 

   

 

 

 

Total

  $ 17,258     $ —       $ —       $ 17,258  
   

 

 

   

 

 

   

 

 

   

 

 

 
Discontinued Operations (Tables)
Summary of discontinued operations
                 
    2013     2012  
(In thousands)            

Net Sales

  $ 19,195     $ 18,469  

Cost of Sales

  $ 9,072     $ 8,758  

Gross Profit

  $ 10,123     $ 9,711  
     

Operating Expenses

  $ 6,205     $ 6,122  

Income from Discontinued Operations

  $ 3,918     $ 3,589  
     

Gain on Sale of Assets of Discontinued Operations

  $ 10,162     $ —    

Income Tax Expense

  $ 5,351     $ 1,198  

Income from Discontinued Operations

  $ 8,729     $ 2,391  
Summary of Significant Accounting Policies (Details) (USD $)
12 Months Ended
Jan. 31, 2013
Jan. 31, 2012
Summary of Significant Accounting Policies (Textual) [Abstract]
 
 
Highly liquid investments with an original maturity
90 days or less 
 
Cash of held in foreign bank accounts
$ 1,157,000 
$ 1,929,000 
Depreciation expense
1,331,000 
1,576,000 
Net foreign exchange losses
158,000 
27,000 
Advertising expense
750,000 
970,000 
Total reimbursement
313,000 
487,000 
Estimated outstanding reimbursements
100,000 
150,000 
Number of common equivalent shares
583,512 
664,690 
Net unrealized gains on available for sale securities
7,000 
 
Net translation gains on foreign operations
166,000 
 
Compensation expenses is recognized for option forfeited
 
Land improvements [Member] |
Maximum [Member]
 
 
Summary of Significant Accounting Policies [Line Items]
 
 
Estimated useful lives of the assets
20 years 
 
Land improvements [Member] |
Minimum [Member]
 
 
Summary of Significant Accounting Policies [Line Items]
 
 
Estimated useful lives of the assets
10 years 
 
Buildings and improvements [Member] |
Maximum [Member]
 
 
Summary of Significant Accounting Policies [Line Items]
 
 
Estimated useful lives of the assets
45 years 
 
Buildings and improvements [Member] |
Minimum [Member]
 
 
Summary of Significant Accounting Policies [Line Items]
 
 
Estimated useful lives of the assets
10 years 
 
Machinery and equipment [Member] |
Maximum [Member]
 
 
Summary of Significant Accounting Policies [Line Items]
 
 
Estimated useful lives of the assets
10 years 
 
Machinery and equipment [Member] |
Minimum [Member]
 
 
Summary of Significant Accounting Policies [Line Items]
 
 
Estimated useful lives of the assets
3 years 
 
Grass Technologies Product Group [Member]
 
 
Summary of Significant Accounting Policies [Line Items]
 
 
Gain on sale of assets of discontinued operations
$ 779,000 
 
Divestiture (Details) (USD $)
12 Months Ended
Jan. 31, 2013
Installment
Jan. 31, 2012
Divestiture (Textual) [Abstract]
 
 
Net sales
$ 1,000,000 
 
Note bears interest base point
0.50% 
 
Note bears interest rate
6.00% 
 
Number of quarterly installments
16 
 
Loss on Sale of Asheboro Operations
 
(681,000)
Closing costs
 
64,000 
Write-off of intangibles
 
265,000 
Revolving line of credit amount
600,000 
 
Outstanding line of credit
2.00% 
 
Initial Term For Mutual Agreement
1 year 
 
Resolving line of credit
300,000 
 
Purchase commitment period
3 years 
 
Purchase commitment for Inventory
$ 3,250,000 
 
Securities Available for Sale (Details) (State and Municipal Obligations [Member], USD $)
In Thousands, unless otherwise specified
Jan. 31, 2013
Jan. 31, 2012
State and Municipal Obligations [Member]
 
 
Fair value, amortized cost and gross unrealized gains and losses of the securities
 
 
Amortized Cost
$ 8,499 
$ 11,313 
Gross Unrealized Gains
10 
23 
Gross Unrealized Losses
   
   
Fair Value
$ 8,509 
$ 11,336 
Securities Available For Sale (Details 1) (USD $)
In Thousands, unless otherwise specified
Jan. 31, 2013
Jan. 31, 2012
Contractual maturity dates of securities
 
 
Less than one year
$ 5,986 
$ 8,494 
One to three years
2,523 
2,842 
Fair Value
$ 8,509 
$ 11,336 
Securities Available for Sale (Details Textual) (USD $)
12 Months Ended
Jan. 31, 2013
Securities Available for Sale (Textual) [Abstract]
 
Short-term investment securities have original maturities greater than (days)
90 days 
Impairment charges on available for sale security
$ 0 
Minimum [Member]
 
Securities Available for Sale (Textual) [Abstract]
 
Anticipated maturity dates range
1 month 
Maximum [Member]
 
Securities Available for Sale (Textual) [Abstract]
 
Anticipated maturity dates range
3 years 
Inventories (Details) (USD $)
In Thousands, unless otherwise specified
Jan. 31, 2013
Jan. 31, 2012
Components of inventories
 
 
Materials and Supplies
$ 6,654 
$ 7,147 
Work-in-Progress
591 
1,024 
Finished Goods
3,934 
2,468 
Inventories, Net
$ 11,179 
$ 10,639 
Inventories (Details Textual) (USD $)
Jan. 31, 2013
Jan. 31, 2012
Inventories (Textual) [Abstract]
 
 
Inventory demonstration equipment
$ 812,000 
$ 953,000 
Accrued Expenses (Details) (USD $)
In Thousands, unless otherwise specified
Jan. 31, 2013
Jan. 31, 2012
Summary of Accrued expenses
 
 
Reserve for cash in escrow
$ 1,800 
 
Warranty
350 
343 
Professional fees
174 
246 
Health insurance reimbursement reserve
100 
150 
Dealer commissions
91 
149 
R&D outsourcing
 
167 
Other
649 
752 
Total
$ 3,164 
$ 1,807 
Line of Credit (Details) (USD $)
12 Months Ended
Jan. 31, 2012
Jan. 31, 2013
Revolving line of credit [Member]
Jan. 31, 2012
Revolving line of credit [Member]
Line of Credit (Textual) [Abstract]
 
 
 
Revolving line of credit
 
$ 0 
$ 5,000,000 
Line of credit basis spread on base rate
0.75% 
 
 
Line of credit basis spread on London interbank offered rate
1.50% 
 
 
Shareholders' Equity (Details)
12 Months Ended
Jan. 31, 2013
Jan. 31, 2012
Summarized Shares of common stock
 
 
Balance at beginning of year
8,956,488 
8,660,270 
Exercise of employee stock options
66,313 
289,417 
Shares issued to employee stock purchase plan
5,976 
6,801 
Share-based compensation
2,979 
139,895 
Balance at end of year
9,031,756 
8,956,488 
Shareholders' Equity (Details 1) (USD $)
12 Months Ended
Jan. 31, 2013
Jan. 31, 2012
Aggregated information regarding stock options granted
 
 
Beginning balance, Number of Shares
888,097 
 
Beginning balance, Weighted Average Option Price Per Share
$ 8.27 
 
Options Granted, Number of Shares
144,000 
 
Options Granted, Weighted Average Option Price Per Share
$ 8.09 
 
Options Exercised, Number of Shares
(66,313)
(289,417)
Options Exercised, Weighted Average Option Price Per Share
$ 5.15 
 
Options Expired, Number of Shares
(49,172)
 
Options Expired, Weighted Average Option Price Per Share
$ 8.39 
 
Ending balance, Number of Shares
916,612 
888,097 
Ending balance, Weighted Average Option Price Per Share
$ 8.46 
$ 8.27 
Exercisable, Number of Options
711,112 
 
Options Exercisable, Weighted Average Option Price Per Share
$ 8.64 
 
Range One [Member]
 
 
Aggregated information regarding stock options granted