ASTRO MED INC /NEW/, 10-K filed on 4/8/2015
Annual Report
Document and Entity Information (USD $)
12 Months Ended
Jan. 31, 2015
Mar. 27, 2015
Aug. 1, 2014
Document And Entity Information [Abstract]
 
 
 
Document Type
10-K 
 
 
Amendment Flag
false 
 
 
Document Period End Date
Jan. 31, 2015 
 
 
Document Fiscal Year Focus
2015 
 
 
Document Fiscal Period Focus
FY 
 
 
Trading Symbol
ALOT 
 
 
Entity Registrant Name
ASTRO MED INC /NEW/ 
 
 
Entity Central Index Key
0000008146 
 
 
Current Fiscal Year End Date
--01-31 
 
 
Entity Well-known Seasoned Issuer
No 
 
 
Entity Current Reporting Status
Yes 
 
 
Entity Voluntary Filers
No 
 
 
Entity Filer Category
Smaller Reporting Company 
 
 
Entity Common Stock, Shares Outstanding
 
7,266,134 
 
Entity Public Float
 
 
$ 68,077,000 
Consolidated Balance Sheets (USD $)
In Thousands, unless otherwise specified
Jan. 31, 2015
Jan. 31, 2014
CURRENT ASSETS
 
 
Cash and Cash Equivalents
$ 7,958 
$ 8,341 
Securities Available for Sale
15,174 
18,766 
Accounts Receivable, net of reserves of $343 in 2015 and $370 in 2014
14,107 
11,366 
Inventories
15,582 
15,178 
Deferred Tax Assets
2,629 
1,673 
Restricted Cash
 
1,800 
Line of Credit Receivable
173 
240 
Note Receivable
255 
250 
Asset Held for Sale
1,900 
2,120 
Prepaid Expenses and Other Current Assets
4,140 
1,383 
Current Assets of Discontinued Operations
 
3,917 
Total Current Assets
61,918 
65,034 
PROPERTY, PLANT AND EQUIPMENT
 
 
Land and Improvements
904 
873 
Buildings and Improvements
10,551 
10,341 
Machinery and Equipment
25,368 
23,746 
Total Property, Plant and Equipment , gross
36,823 
34,960 
Less Accumulated Depreciation
(28,444)
(27,368)
Total Property, Plant and Equipment, net
8,379 
7,592 
OTHER ASSETS
 
 
Note Receivable
256 
440 
Deferred Tax Assets
 
313 
Identifiable Intangibles
2,698 
3,400 
Goodwill
991 
991 
Other
88 
194 
Total Other Assets
4,033 
5,338 
TOTAL ASSETS
74,330 
77,964 
CURRENT LIABILITIES
 
 
Accounts Payable
3,155 
2,374 
Accrued Compensation
3,302 
3,130 
Other Accrued Expenses
2,343 
2,310 
Deferred Revenue
621 
454 
Income Taxes Payable
148 
788 
Current Liabilities of Discontinued Operations
 
836 
Total Current Liabilities
9,569 
9,892 
Long Term Obligation
250 
250 
Deferred Tax Liabilities
83 
77 
Other Long Term Liabilities
1,167 
1,131 
TOTAL LIABILITIES
10,819 
11,350 
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 9,544,864 shares in 2015 and 9,291,225 shares in 2014
477 
465 
Additional Paid-in Capital
43,589 
41,235 
Retained Earnings
39,735 
37,201 
Treasury Stock, at Cost, 2,293,606 shares in 2015 and 1,730,042 shares in 2014
(19,591)
(12,463)
Accumulated Other Comprehensive Income (Loss),Net of Tax
(699)
176 
Total Shareholders' Equity
63,511 
66,614 
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY
$ 74,330 
$ 77,964 
Consolidated Balance Sheets (Parenthetical) (USD $)
In Thousands, except Share data, unless otherwise specified
Jan. 31, 2015
Jan. 31, 2014
Statement of Financial Position [Abstract]
 
 
Accounts Receivable, Reserves
$ 343 
$ 370 
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
9,544,864 
9,291,225 
Treasury Stock, Shares
2,293,606 
1,730,042 
Consolidated Statements of Income (USD $)
In Thousands, except Per Share data, unless otherwise specified
12 Months Ended
Jan. 31, 2015
Jan. 31, 2014
Income Statement [Abstract]
 
 
Net Sales
$ 88,347 
$ 68,592 
Cost of Sales
51,370 
41,609 
Gross Profit
36,977 
26,983 
Costs and Expenses:
 
 
Selling and Marketing
18,289 
14,774 
Research and Development
5,802 
5,072 
General and Administrative
5,655 
5,604 
Operating Expenses
29,746 
25,450 
Operating Income
7,231 
1,533 
Other Income (Expense):
 
 
Investment Income
81 
72 
Other, Net
(380)
(193)
Other Income (Expense)
(299)
(121)
Income from Continuing Operations before Income Taxes
6,932 
1,412 
Income Tax Provision for Continuing Operations
2,270 
175 
Income from Continuing Operations
4,662 
1,237 
Income from Discontinued Operations, Net of Taxes of $777 in 2014
 
1,975 
Net Income
$ 4,662 
$ 3,212 
Net Income per Common Share-Basic:
 
 
From Continuing Operations
$ 0.61 
$ 0.17 
From Discontinued Operations
 
$ 0.26 
Net Income Per Common Share-Basic
$ 0.61 
$ 0.43 
Net Income per Common Share-Diluted:
 
 
From Continuing Operations
$ 0.60 
$ 0.16 
From Discontinued Operations
 
$ 0.26 
Net Income Per Common Share-Diluted
$ 0.60 
$ 0.42 
Weighted Average Number of Common Shares Outstanding-Basic
7,612 
7,470 
Dilutive Effect of Common Stock Equivalents
222 
227 
Weighted Average Number of Common Shares Outstanding-Diluted
7,834 
7,697 
Dividends Declared Per Common Share
$ 0.28 
$ 0.28 
Consolidated Statements of Income (Parenthetical) (USD $)
In Thousands, unless otherwise specified
12 Months Ended
Jan. 31, 2014
Income Statement [Abstract]
 
Income tax expense (benefit) of discontinued operations
$ 777 
Consolidated Statements of Comprehensive Income (USD $)
In Thousands, unless otherwise specified
12 Months Ended
Jan. 31, 2015
Jan. 31, 2014
Statement of Comprehensive Income [Abstract]
 
 
Net Income
$ 4,662 
$ 3,212 
Other Comprehensive Income (Loss), net of taxes and reclassification adjustments:
 
 
Foreign currency translation adjustments
(866)
(14)
Unrealized gain (loss) on securities available for sale
(9)
17 
Net other comprehensive income (loss)
(875)
Comprehensive Income
$ 3,787 
$ 3,215 
Consolidated Statements of Changes in Shareholders' Equity (USD $)
Total
Common Stock [Member]
Additional Paid-in Capital [Member]
Retained Earnings [Member]
Treasury Stock [Member]
Accumulated Other Comprehensive Income (Loss) [Member]
Beginning Balance at Jan. 31, 2013
$ 63,837,000 
$ 452,000 
$ 38,786,000 
$ 36,092,000 
$ (11,666,000)
$ 173,000 
Beginning Balance, Shares at Jan. 31, 2013
 
9,031,756 
 
 
 
 
Share-based compensation
562,000 
 
562,000 
 
 
 
Employee option exercises
1,801,000 
11,000 
1,790,000 
 
 
 
Employee option exercises, Shares
 
214,779 
 
 
 
 
Tax benefit of employee stock options
158,000 
 
158,000 
 
 
 
Restricted stock awards
(59,000)
2,000 
(61,000)
 
 
 
Restricted stock awards, Shares
 
44,690 
 
 
 
 
Purchases of common stock from employees
(797,000)
 
 
 
(797,000)
 
Dividends paid
(2,103,000)
 
 
(2,103,000)
 
 
Net Income
3,212,000 
 
 
3,212,000 
 
 
Other Comprehensive Income (Loss)
3,000 
 
 
 
 
3,000 
Ending Balance at Jan. 31, 2014
66,614,000 
465,000 
41,235,000 
37,201,000 
(12,463,000)
176,000 
Ending Balance, Shares at Jan. 31, 2014
 
9,291,225 
 
 
 
 
Share-based compensation
511,000 
 
511,000 
 
 
 
Employee option exercises
1,887,000 
11,000 
1,876,000 
 
 
 
Employee option exercises, Shares
224,275 
227,512 
 
 
 
 
Tax benefit of employee stock options
107,000 
 
107,000 
 
 
 
Restricted stock awards
(139,000)
1,000 
(140,000)
 
 
 
Restricted stock awards, Shares
 
26,127 
 
 
 
 
Purchases of common stock from employees
(878,000)
 
 
 
(878,000)
 
Repurchases of common stock
(6,250,000)
 
 
 
(6,250,000)
 
Dividends paid
(2,128,000)
 
 
(2,128,000)
 
 
Net Income
4,662,000 
 
 
4,662,000 
 
 
Other Comprehensive Income (Loss)
(875,000)
 
 
 
 
(875,000)
Ending Balance at Jan. 31, 2015
$ 63,511,000 
$ 477,000 
$ 43,589,000 
$ 39,735,000 
$ (19,591,000)
$ (699,000)
Ending Balance, Shares at Jan. 31, 2015
 
9,544,864 
 
 
 
 
Consolidated Statements of Cash Flows (USD $)
In Thousands, unless otherwise specified
12 Months Ended
Jan. 31, 2015
Jan. 31, 2014
Cash Flows from Operating Activities:
 
 
Net Income
$ 4,662 
$ 3,212 
Adjustments to Reconcile Net Income to Net Cash Provided (Used) By Operating Activities:
 
 
Gain on Disposal of Discontinued Operations
 
(1,800)
Depreciation and Amortization
2,063 
1,279 
Share-Based Compensation
511 
562 
Deferred Income Tax Benefit
(636)
(636)
Excess Tax Benefit From Share-Based Compensation
(107)
(158)
Write-down of asset held for sale
220 
779 
Changes in Assets and Liabilities, Net of Impact of Acquisition and Divestiture:
 
 
Accounts Receivable
(2,741)
(2,588)
Inventories
(404)
(1,283)
Accounts Payable and Accrued Expenses
810 
1,469 
Income Taxes Payable
(1,747)
(3,515)
Other
(1,140)
(1,004)
Net Cash Provided (Used) by Operating Activities
1,491 
(4,462)
Cash Flows from Investing Activities:
 
 
Proceeds from Sales/Maturities of Securities Available for Sale
12,885 
10,835 
Purchases of Securities Available for Sale
(9,306)
(21,065)
Release of Funds Held in Escrow From Sale of Grass
1,800 
 
Proceeds Received on Disposition of Grass Inventory
2,355 
 
Payments Received on Line of Credit and Note Receivable
258 
373 
Additions to Property, Plant and Equipment
(2,247)
(1,128)
Acquisition of Miltope Ruggedized Printer Business
 
(6,732)
Net Cash Provided (Used) by Investing Activities
5,745 
(17,717)
Cash Flows from Financing Activities:
 
 
Proceeds from Common Shares Issued Under Employee Benefit Plans and Employee Stock Option Plans, Net of Payment of Minimum Tax Withholdings
870 
944 
Purchase of Treasury Stock
(6,250)
 
Excess Tax Benefit from Share-Based Compensation
107 
158 
Dividends Paid
(2,128)
(2,103)
Net Cash Used in Financing Activities
(7,401)
(1,001)
Effect of Exchange Rate Changes on Cash and Cash Equivalents
(218)
522 
Net Decrease in Cash and Cash Equivalents
(383)
(22,658)
Cash and Cash Equivalents, Beginning of Year
8,341 
30,999 
Cash and Cash Equivalents, End of Year
7,958 
8,341 
Supplemental Information:
 
 
Income Taxes, Net of Refunds
$ 4,566 
$ 5,085 
Summary of Significant Accounting Policies
Summary of Significant Accounting Policies

Note 1—Summary of Significant Accounting Policies

Basis of Presentation: The accompanying financial data have been prepared by us pursuant to the rules and regulations of the U.S. Securities and Exchange Commission (SEC) and are presented in conformity with U.S. generally accepted accounting principles (“U.S. GAAP”). Our fiscal year end is January 31. Unless otherwise stated, all years and dates refer to our fiscal year.

On January 22, 2014, Astro-Med completed the acquisition of the ruggedized printer product line from Miltope Corporation, a company of VT Systems (“Miltope”). Astro-Med’s ruggedized printer product line is part of the Ruggedized product group and is reported as part of the Test & Measurement (T&M) segment. The results of the Miltope’s ruggedized printer product line operations have been included in the consolidated financial statements of the Company since the acquisition date. Refer to Note 2, “Acquisition,” for further details.

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 the 2014 period presented. Refer to Note 20, “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, valuation and estimated lives of intangible assets, impairment of long-lived assets, asset held for sale 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 $2,995,000 and $2,544,000 was held in foreign bank accounts at January 31, 2015 and 2014, 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 (loss) 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 $1,361,000 for fiscal 2015 and $1,279,000 for 2014.

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 vendor specific objective evidence (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 SEC Staff Accounting Bulletin 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: Astro-Med charges costs to expense in the period incurred, and these expenses are shown on a separate line in the consolidated statement of income. Included in research and development expense are the following: salaries and benefits, external engineering service costs, engineering related information costs and supplies. The Company also complies with Accounting Standards Codification (“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 Translation: The financial statements of foreign subsidiaries and branches are measured using the local currency as the functional currency. Foreign currency denominated assets and liabilities are translated into U.S. dollars at year-end exchange rates with the translation adjustment recorded as a component of accumulated comprehensive income (loss) in shareholders’ equity. Revenues and expenses are translated at the monthly average exchange rates. 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 $219,000 and $190,000 for fiscal 2015 and 2014, 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 $1,717,000 and $1,236,000 in fiscal 2015 and 2014, respectively.

Health Insurance Reimbursement Reserve: Astro-Med reimbursed a portion of employee health insurance deductibles and co-payments for fiscal 2015 and 2014. The total reimbursement amounted to approximately $129,000 and $201,000 in 2015 and 2014, respectively. We accrued approximately $20,000 and $75,000 at January 31, 2015 and 2014, 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. Determination of recoverability is based on an estimate of undiscounted future cash flows resulting from the use of the asset and its eventual disposition. If the projected undiscounted cash flows are less these the carrying value, then an impairment charge would be recorded for the excess of the carrying value over the fair value, as determined by the discounting of future cash flows. For both 2015 and 2014, these were no impairment charges for long-lived assets.

Assets Held for Sale: Assets held for sale are reported at the lower of cost or fair value less cost to sell. Astro-Med’s former Grass facility in Rockland met the held for sale classification criteria as of January 31, 2015 and 2014. This property is being actively marketed and management expects to sell the property during the upcoming fiscal year. Accordingly, the asset held for sale has been classified as a current asset.

The Company estimated the fair value of the Rockland facility using the market values for similar properties and estimated the fair value less the cost to sell. This property is considered a Level 2 asset as defined in ASC 820, “Fair Value Measurements.

During the years ended 2015 and 2014, the Company recorded impairment charges of $220,000 and $779,000, respectively, related to the write-down of the Rockland facility to fair value, less cost to sell. In fiscal 2015, the impairment charge was included in other income (expense), other, net in the consolidated statement of income. For fiscal 2014, the impairment charge was included in the income from discontinued operations in the consolidated statement of income.

Intangible Assets: Intangible assets include the value of customer relationships and backlog rights acquired in connection with business acquisitions and are recorded at fair value as determined by the Company. These intangible assets have a definite life and are amortized over the assets’ useful lives using a systematic and rational basis which is representative of the assets use. Intangible assets with a definite life are tested for impairment whenever events or circumstances indicate that the carrying amount of an asset (asset group) may not be recoverable. An impairment loss is recognized when the carrying amount of an asset exceeds the estimated undiscounted cash flows used in determining the fair value of the asset. The amount of the impairment loss recorded is calculated by the excess of the asset’s carrying value over its fair value. Fair value is generally determined using a discounted cash flow analysis. For both 2015 and 2014, there were no impairment charges for intangible assets.

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. 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 2015 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, 2015 and 2014, 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 and disclosure.

Net Income Per Common Share: Basic net income per share is based on the weighted average number of shares outstanding during the period. Diluted net income per share is based on the basic weighted average number of shares and potential common equivalent shares for stock options, restricted stock awards and restricted stock units outstanding during the period using the treasury stock method. In fiscal years 2015 and 2014, there were 156,600 and 126,800 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.

 

The Company measures assets held for sale at fair value on a nonrecurring basis and records impairment charges when the assets are deemed to be impaired.

Share-Based Compensation: Share-based compensation expense is measured based on the estimated fair value of the share-based award when granted and is recognized as an expense over the requisite service period (generally the vesting period of the equity grant). We have estimated the fair value of each option on the date of grant using the Black-Scholes option-pricing model. Our estimate of share-based compensation requires 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 requisite service. Our accounting for share-based compensation for restricted stock awards (“RSA”) and restricted stock units (“RSU”) is also based on the fair value method. The fair value of the RSUs and RSAs is based on the closing market price of the Company’s common stock on the grant date.

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. 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:

Discontinued Operations

In April 2014, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2014-08, “Presentation of Financial Statements (Topic 205) and Property, Plant, and Equipment (Topic 360): Reporting Discontinued Operations and Disclosures of Disposals of Components of an Entity.” ASU 2014-08 limits discontinued operations reporting to disposals of components of an entity that represent strategic shifts that have (or will have) a major effect on an entity’s operations and financial results. In addition, this ASU expands the disclosure requirements for disposals that meet the definition of a discontinued operation and requires entities to disclose information about disposals of individually significant components that do not meet the definition of a discontinued operation. ASU 2014-08 is effective for fiscal years, and interim periods within those years, beginning on or after December 15, 2014 and is to be applied prospectively. We are currently evaluating the impact of ASU 2014-08 and do not expect it to have a material effect on the Company’s financial position or results of operations.

Revenue Recognition

In May 2014, the FASB issued ASU 2014-09, “Revenue from Contracts with Customers (Topic 606).” ASU 2014-09 completes the joint effort by the FASB and International Accounting Standards Board to improve financial reporting by creating common revenue recognition guidance for U.S. GAAP and International Financial Reporting Standards. ASU 2014-09 applies to all companies that enter into contracts with customers to transfer goods or services and is effective for public entities for interim and annual reporting periods beginning after December 15, 2016. Early application is not permitted and entities have the choice to apply ASU 2014-09 either retrospectively to each reporting period presented or by recognizing the cumulative effect of applying ASU 2014-09 at the date of initial application and not adjusting comparative information. The Company is currently evaluating the requirements of ASU 2014-09 and has not yet determined its impact on the Company’s consolidated financial statements.

Acquisition
Acquisition

Note 2—Acquisition

On January 22, 2014, Astro-Med completed the acquisition of the ruggedized printer product line from Miltope Corporation (Miltope), which is engaged in the design, development, manufacture and testing of ruggedized computers and computer peripheral equipment for military, industry and commercial applications. Astro-Med’s ruggedized printer product line is reported as part of the T&M segment. The results of the Miltope’s ruggedized printer product line operations have been included in the consolidated financial statements of the Company since the acquisition date.

The purchase price of the acquisition was $6,732,000 which was funded using existing cash on hand. Of the $6,732,000 purchase price, $500,000 was held in escrow for twelve months following the acquisition date to provide an indemnity to the Company in the event of any breach in the representation, warranties and covenants of Miltope. The assets acquired consist of all of the assets of the Miltope ruggedized printer product line excluding plant and equipment and personnel. Acquisition related costs of approximately $90,000 are included in the general and administrative expenses in the Company’s consolidated statement of income for the fiscal year ended January 31, 2014. The acquisition was accounted for under the acquisition method in accordance with the guidance provided by FASB ASC 805, “Business Combinations.”

As part of the acquisition, Miltope and Astro-Med entered into a manufacturing services agreement under which Miltope provided transition services and continued to manufacture printers for Astro-Med. This agreement concluded in the third quarter of fiscal 2015, as the Company has transitioned all the manufacturing to its West Warwick, Rhode Island facility at that time.

The purchase price of the acquisition has been allocated on the basis of the estimated fair value as follows:

 

(In thousands)       

Accounts Receivable

   $ 713   

Inventories

     2,503   

Identifiable Intangible Assets

     3,400   

Goodwill

     196   

Warranty Reserve

     (80
  

 

 

 

Total Purchase Price

   $ 6,732   
  

 

 

 

Goodwill of $196,000, which is deductible for tax purposes, represents the excess of the purchase price over the estimated fair value assigned to the tangible and identifiable intangible assets acquired and liabilities assumed from Miltope. The carrying amount of the goodwill was allocated to the T&M segment of the Company.

The following table reflects the fair value of the acquired identifiable intangible assets and related estimated useful lives:

 

(In thousands)    Fair
Value
     Useful Life
(Years)
 

Customer Contract Relationships

   $ 3,100         10   

Backlog

     300         1   
  

 

 

    

Total

   $ 3,400      
  

 

 

    

Amortization expense of $702,000 has been included in the statement of income for fiscal 2015 in regards to the above acquired intangibles.

Estimated amortization expense for the next five years is as follows:

 

(In thousands)    2016      2017      2018      2019      2020  

Estimated amortization expenses

   $ 357       $ 349       $ 331       $ 278       $ 278   

 

The following unaudited pro forma information assumes the acquisition of Miltope occurred on February 1, 2013. This information has been prepared for informational purposes only and does not purport to represent the results of operations that would have happened had the acquisition occurred as of the date indicated, nor of future results of operations.

 

     Year Ended
January 31
 
(In thousands)    2014  

Net Revenue

   $ 75,362   

The impact on income from continuing operations, net income and earnings per share would not have been material to the Company for the year ended January 31, 2014.

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 (loss), net of taxes 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, 2015

          

State and Municipal Obligations

   $ 15,150       $ 26       $ (2 )   $ 15,174   
  

 

 

    

 

 

    

 

 

   

 

 

 

January 31, 2014

          

State and Municipal Obligations

   $ 18,729       $ 37       $ —       $ 18,766   
  

 

 

    

 

 

    

 

 

   

 

 

 

The contractual maturity dates of these securities are as follows:

 

     January 31  
     2015      2014  
(In thousands)              

Less than one year

   $ 9,470       $ 11,439   

One to three years

     5,704         7,327   
  

 

 

    

 

 

 
   $ 15,174       $ 18,766   
  

 

 

    

 

 

 

Actual maturities may 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  
     2015      2014  
(In thousands)              

Materials and Supplies

   $ 10,600       $ 10,722   

Work-in-Progress

     765         852   

Finished Goods

     7,372         6,798   
  

 

 

    

 

 

 
     18,737         18,372   

Inventory Reserve

     (3,155      (3,194
  

 

 

    

 

 

 

Balance at January 31

   $ 15,582       $ 15,178   
  

 

 

    

 

 

 

Included within finished goods inventory is $1,030,000 and $767,000 of demonstration equipment at January 31, 2015 and 2014, respectively.

Accrued Expenses
Accrued Expenses

Note 5—Accrued Expenses

Accrued expenses consisted of the following:

 

     January 31  
     2015      2014  
(In thousands)              

Warranty

   $ 375       $ 355   

Product Replacement Cost Reserve

     353       $ 480   

Professional Fees

     256         269   

Executive Retirement Package

     250         250   

Dealer Commissions

     163         55   

Other

     946         901   
  

 

 

    

 

 

 
   $ 2,343       $ 2,310   
  

 

 

    

 

 

 
Line of Credit
Line of Credit

Note 6—Line of Credit

On September 5, 2014, Astro-Med entered into a new unsecured revolving line of credit agreement with Wells Fargo Bank to replace the previous agreement which expired on May 30, 2014. The terms of the new agreement are for a three-year, $10 million revolving line of credit to be available to the Company to be used as needed for ongoing working capital requirements, business acquisitions or general corporate purposes. Any borrowings made under the new line of credit bear interest at either a fluctuating base rate equal to the highest of (i) the Prime Rate, (ii) 1.50% above the daily one month LIBOR, and (iii) the Federal Funds Rate in effect plus 1.50% or at a fixed rate of LIBOR plus an agreed upon margin of between 0% and 2.25%, based on the Company’s funded debt to EBITDA ratio as defined in the agreement. In addition, the new agreement provided for two financial covenant requirements, namely, Total Funded Debt to Adjusted EBITDA (as defined) of not greater than 3 to 1 and a Fixed Charge Coverage Ratio (as defined) of not less than 1.25 to 1, both measured at the end of each quarter on a rolling four quarter basis. As of the January 31, 2015, there have been no borrowings against this line of credit and the Company was in compliance with its financial covenants.

Note Receivable and Revolving Line of Credit Issued
Note Receivable and Revolving Line of Credit Issued

Note 7—Note Receivable and Revolving Line of Credit Issued

On January 30, 2012, we completed the sale of our label manufacturing operations in Asheboro, North Carolina to Label Line Ltd. The net sales price of $1,000,000 was received in the form of a promissory note issued by Label Line Ltd. and is fully secured by a first lien on various collateral, including the Asheboro plant and plant assets. The note bears interest at 3.75% and is payable in sixteen quarterly installments of principal and interest which commenced on January 30, 2013. As of January 31, 2015, $511,000 remains outstanding on this note which approximates its estimated fair value.

The terms of the Asheboro sale also included an agreement for Astro-Med to provide Label Line Ltd. with additional financing in the form of a revolving line of credit of $600,000, which is fully secured by a first lien on various collateral, 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 (5.25% at January 31, 2015). Although the initial term was for a period of one-year from the date of the sale, the agreement had been extended through January 31, 2015. As of January 31, 2015, $173,000 remains outstanding on this revolving line of credit. Subsequent to fiscal 2015 year-end, the agreement was amended to extend the term of the agreement through January 31, 2016.

Accumulated Other Comprehensive Income (Loss)
Accumulated Other Comprehensive Income (Loss)

Note 8—Accumulated Other Comprehensive Income (Loss)

The changes in the balance of accumulated other comprehensive income (loss) by component are as follows:

 

(In thousands)    Foreign Currency
Translation
Adjustments
     Unrealized Holding Gain
on Available for
Sale Securities
     Total  

Balance at January 31, 2013

   $ 166       $ 7       $ 173   

Other Comprehensive Income (Loss)

     (14      17         3   

Amounts Reclassified to Net Income

     —           —           —     
  

 

 

 

Net Other Comprehensive Income (Loss)

     (14      17         3   
  

 

 

 

Balance at January 31, 2014

     152         24         176   

Other Comprehensive Income (Loss)

     (866      (9      (875

Amounts Reclassified to Net Income

     —          —          —    
  

 

 

 

Net Other Comprehensive Income (Loss)

     (866      (9      (875
  

 

 

 

Balance at January 31, 2015

   $ (714    $ 15       $ (699
  

 

 

 

The amounts presented above in other comprehensive income (loss) are net of taxes except for translation adjustments associated with our German subsidiary.

Shareholders' Equity
Shareholders' Equity

Note 9—Shareholders’ Equity

On December 5, 2014, the Company repurchased 500,000 shares of the Company’s common stock from the Estate of Albert W. Ondis for an aggregate purchase price of $6,250,000. Prior to entering into the Stock Purchase Agreement, the Company obtained an opinion from an independent investment banking firm as to the fairness, from a financial point of view, to the public shareholders of the Company other than the selling shareholders, of the consideration paid by the Company in the transaction. The purchase was funded using existing cash on hand. This transaction did not impact the number of shares authorized for repurchase under the Company’s current repurchase program. During fiscal 2014 the Company did not repurchase any shares of its common stock except as described below in connection with the exercise of employee stock options.

During fiscal 2015 and 2014, certain of the Company’s employees delivered a total of 62,797 and 66,828 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 $878,000 and $797,000, respectively, and are included in treasury stock in the accompanying consolidated balance sheets at January 31, 2015 and 2014. These transactions did not impact the number of shares authorized for repurchase under the Company’s current repurchase program.

As of January 31, 2015, 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.

Share-Based Compensation
Share-Based Compensation

Note 10—Share-Based Compensation

Astro-Med maintains the following share-based compensation plans:

Stock Plans:

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. An aggregate of 1,000,000 shares were authorized for awards under the Plan. At January 31, 2015, 206,339 shares were available for grant under the Plan. Options granted to employees vest over four years. The exercise price of each stock option will be established at the discretion of the Compensation Committee of the Board of Directors; however, any incentive stock options granted must be at an exercise price of not less than fair market value at the date of grant.

In fiscal year 2013, a portion of the Company’s executive’s long-term incentive compensation was awarded in the form of RSUs (“2013 RSUs”). The 2013 RSUs were earned based on the Company achieving specific thresholds of net sales and annual operating income as established under the fiscal 2013 Domestic Management Bonus Plan and vested 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 was employed on each vesting date by Astro-Med or an affiliate company. All such 2013 RSUs were earned and vested as of March 2014. In April 2013, the Company granted options and RSUs to officers (“2014 RSUs”). Each 2014 RSU will be earned and vest as follows: twenty-five percent vests on the third anniversary of the grant date, fifty percent vests upon the Company achieving its cumulative budgeted net sales target for fiscal years 2014 through 2016 (the “Measurement Period”), and twenty-five percent vests upon the Company’s achieving a target average annual ORONA (operating income return on net assets as calculated under the Domestic Management Bonus Plan) for the Measurement Period. The grantee may not sell, transfer or otherwise dispose of more than fifty percent of the common stock issued upon vesting of the RSU until the first anniversary of the vesting date. No 2014 RSUs whose vesting is dependent upon the achievement of financial performance goals as set forth herein, have vested as of January 31, 2015.

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 annual 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. In addition to the automatic option grant under Plan, the Company has a Non-Employee Director Annual Compensation Program (the “Program”) which provides that each non-employee director is entitled to an annual cash retainer of $7,000 (the “Annual Cash Retainer”), plus $500 for each Board and committee meeting attended. In addition, effective August 1, 2014, the Chairman of the Board also receives an annual retainer of $6,000 and the Chair of the Audit Committee and Compensation Committee each receive an annual retainer of $4,000 each (“Chair Retainer”). The non-employee director may elect for any fiscal year to receive all or a portion of the Annual Cash Retainer and/or Chair Retainer (collectively 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 non-employee 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, each non-employee director receives RSAs with a value equal to $20,000 (the “Equity Retainer”) upon adjournment of each annual shareholders’ meeting. 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, 2014

     736,647      $ 5.78-11.90       $ 8.63   

Options Granted

     158,600      $ 13.46-14.20       $ 13.99   

Options Exercised

     (224,275   $ 6.22-11.90       $ 8.29   

Options Expired

     (14,961   $ 7.95-14.20       $ 9.49   
  

 

 

   

 

 

    

 

 

 

Options Outstanding, January 31, 2015

     656,011      $ 5.78-14.20       $ 10.01   
  

 

 

   

 

 

    

 

 

 

Options Exercisable, January 31, 2015

     413,612      $ 5.78-13.46       $ 8.78   

Set forth below is a summary of options outstanding at January 31, 2015:

 

Outstanding

     Exercisable  

Range of

Exercise prices

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

$5.78-8.73

     314,365       $ 7.64         5.1         254,516       $ 7.54   

$8.95-13.46

     190,046       $ 10.79         4.3         159,096       $ 10.76   

$13.80-14.20

     151,600       $ 14.00         9.2         —         $ —     
  

 

 

          

 

 

    
     656,011               413,612      
  

 

 

          

 

 

    

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
     2015    2014

Risk-Free Interest Rate

   1.5%-1.62%    0.81%-0.84%

Expected Life (years)

   5    5

Expected Volatility

   21.47%-26.75%    38.07%-38.46%

Expected Dividend Yield

   1.98%    2.63%

The weighted average fair value of options granted during fiscal 2015 and 2014 was $2.85 and $2.79, respectively. As of January 31, 2015, there was $455,000 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, 2015, the aggregate intrinsic value (the aggregate difference between the closing stock price of the Company’s common stock on January 31, 2015, and the exercise price of the outstanding options) that would have been received by the option holders if all options had been exercised was $2,554,000 for all exercisable options and $3,225,000 for all options outstanding. The weighted average remaining contractual terms for these options are 4.2 years. The total aggregate intrinsic value of options exercised during fiscal 2015 and 2014 was $1,149,000 and $706,000, 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, 2014

     106,496       $ 9.12   

Granted

     7,245         13.80   

Vested

     (35,662      8.75   

Expired or canceled

     (5,834      10.07   
  

 

 

    

 

 

 

Outstanding at January 31, 2015

     72,245       $ 9.70   
  

 

 

    

 

 

 

As of January 31, 2015, there was $278,000 of unrecognized compensation expense related to unvested RSUs and RSAs.

Share-based compensation expense has been recognized as follows:

 

     Years Ended January 31  
             2015                      2014          
(In thousands)              

Stock Options

   $ 241       $ 192   

Restricted Stock Awards and Restricted Stock Units

     270         370   
  

 

 

    

 

 

 

Total

   $ 511       $ 562   
  

 

 

    

 

 

 

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  
             2015                      2014          

Shares Reserved, Beginning

     60,242         64,231   

Shares Purchased

     (3,237      (3,989
  

 

 

    

 

 

 

Shares Reserved, Ending

     57,005         60,242   
  

 

 

    

 

 

 
Income Taxes
Income Taxes

Note 11—Income Taxes

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

 

     Years Ended
January 31
 
     2015      2014  
(In thousands)              

Domestic

   $ 5,401       $ 537   

Foreign

     1,531         875   
  

 

 

    

 

 

 
   $ 6,932       $ 1,412   
  

 

 

    

 

 

 

 

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

 

     Years Ended
January 31
 
     2015     2014  
(In thousands)             

Current:

    

Federal

   $ 1,666      $ 930   

State

     466        179   

Foreign

     535        297   
  

 

 

   

 

 

 
     2,667        1,406   
  

 

 

   

 

 

 

Deferred:

    

Federal

     (290     (1,044

State

     (107     (174

Foreign

     —          (13
  

 

 

   

 

 

 
     (397     (1,231
  

 

 

   

 

 

 
   $ 2,270      $ 175   
  

 

 

   

 

 

 

The provision for income taxes for continuing operations differs from the amount computed by applying the statutory federal income tax rate of 34% in fiscal 2015 and 2014 to income before income taxes due to the following:

 

     Years Ended
January 31
 
     2015     2014  
(In thousands)             

Income Tax Provision at Statutory Rate

   $ 2,357      $ 480   

State Taxes, Net of Federal Tax Effect

     233        (47

Change in Reserves Related to ASC 740 Liability

     23        (59

Meals and Entertainment

     41        38   

Domestic Production Deduction

     (164     (30

Share-Based Compensation

     (25     36   

Tax-exempt Income

     (24     (22

R&D Credits

     (135     (114

Foreign Rate Differential

     (56     (26

Other Permanent Differences and Miscellaneous, Net

     20        (81
  

 

 

   

 

 

 
   $ 2,270      $ 175   
  

 

 

   

 

 

 

 

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  
     2015     2014  
(In thousands)             

Deferred Tax Assets:

    

Inventory

   $ 1,666      $ 1,792   

Share-Based Compensation

     572        535   

State R&D Credits

     371        258   

Compensation Accrual

     417        493   

ASC 740 Liability Federal Benefit

     304        290   

Deferred Service Contract Revenue

     235        181   

Warranty Reserve

     140        137   

Reserve for Doubtful Accounts

     116        127   

Foreign Tax Credit

     356        213   

Other

     298        119   
  

 

 

   

 

 

 
     4,475        4,145   

Deferred Tax Liabilities:

    

Accumulated Tax Depreciation in Excess of Book Depreciation

     766        830   

Deferred Gain on Asset Held for Sale

     785        897   

Currency Translation Adjustment

     36        173   

Other

     87        78   
  

 

 

   

 

 

 
     1,674        1,978   
  

 

 

   

 

 

 

Subtotal

     2,801        2,167   

Valuation Allowance

     (255     (258
  

 

 

   

 

 

 

Net Deferred Tax Assets

   $ 2,546      $ 1,909   
  

 

 

   

 

 

 

The valuation allowance at January 31, 2015 relates to certain state research and development tax credit carryforwards which are expected to expire unused. The change in the valuation allowance in 2015 was a decrease of approximately $3,000 and represented a decrease in the reserve due to the utilization of research and development credits during the current year, net of federal benefit. The change in the valuation allowance in 2014 was an increase of approximately $27,000 and represented an increase in the reserve due to the generation of research and development credits 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. The changes in the balance of unrecognized tax benefits, excluding interest and penalties are as follows:

 

     2015     2014  
(In thousands)             

Balance at February 1

   $ 715      $ 941   

Increases in prior period tax positions

     —          31   

Increases in current period tax positions

     87        42   

Reductions related to lapse of statute of limitations

     (95     (299
  

 

 

   

 

 

 

Balance at January 31

   $ 707      $ 715   
  

 

 

   

 

 

 

If the $707,000 is recognized, $493,000 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 2015 and 2014 the Company recognized an expense of $43,000 and $68,000, respectively, related to interest and penalties, which are included as a component of income tax expense in the accompanying statements of income. At January 31, 2015 and 2014, the Company had accrued potential interest and penalties of $460,000 and $416,000, 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 tax examinations prior to 2010.

On September 13, 2013, the U.S. Treasury Department and the Internal Revenue Service released final regulations that provided guidance on the application of IRC Section 263(a) for amounts paid to acquire, produce, or improve tangible property, as well as the rules for materials and supplies and proposed regulations addressing dispositions and general asset accounts. The final regulations are generally effective for tax years beginning on or after January 1, 2014. We are currently evaluating the impact of these new regulations and do not expect them to have a material impact to our financial statements.

At January 31, 2015, the Company has indefinitely reinvested $3,909,000 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, 2015, 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 12—Contractual Obligations

The following table summarizes our contractual obligations:

 

     Total      2016      2017      2018      2019      2020
and
Thereafter
 
(In thousands)                                          

Purchase Commitments*

   $ 15,117       $ 14,907       $ 210       $ —         $ —         $ —     

Operating Lease Obligations

     688         255         225         136         72         —    
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 
   $ 15,805       $ 15,162       $ 435       $ 136       $ 72       $ —     
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

 

* Purchase commitments consists primarily of inventory and equipment purchase orders made in the ordinary course of business.

The Company incurred rent and lease expenses in the amount of $614,000 and $599,000 for the fiscal years 2015 and 2014, respectively.

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

Note 13—Nature of Operations, Segment Reporting and Geographical Information

The Company’s operations consist of the design, development, manufacture and sale of specialty printers and data acquisition and analysis systems, including both hardware & software 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 has two reporting segments consistent with its sales product groups: QuickLabel Systems (QuickLabel) and Test & Measurement (T&M).

QuickLabel produces an array of high-technology digital color and monochrome label printers, labeling software and consumables for a variety of commercial industries worldwide. T&M produces data recording equipment used worldwide for a variety of recording, monitoring and troubleshooting applications for many industries including aerospace, automotive, defense, rail, energy, industrial and general manufacturing.

Business is conducted in the United States and through foreign affiliates in Canada, Europe, Southeast Asia and Mexico. 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 22, 2014, Astro-Med completed the acquisition of the ruggedized printer product line from Miltope. Astro-Med’s ruggedized printer product line is part of the Ruggedized product group and is reported as part of the T&M segment. The results of the Miltope’s ruggedized printer product line operations have been included from the date of acquisitions for all periods presented below. Refer to Note 2, “Acquisition,” for further details.

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 core businesses. Consequently, the Company has classified the results of operations of Grass as discontinued operations for the fiscal 2014 period presented. Refer to Note 20 “Discontinued Operations,” 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
 
     2015      2014          2015              2014          2015     2014  

QuickLabel

   $ 59,779       $ 49,065       $ 7,259       $ 5,154         12.1     10.5

T&M

     28,568         19,527         5,627         2,655         19.7     13.6
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

   

 

 

 

Total

   $ 88,347       $ 68,592         12,886         7,809         14.6     11.4
  

 

 

    

 

 

          

 

 

   

 

 

 

Product Replacement Costs

           —           672        

Corporate Expenses

           5,655         5,604        
        

 

 

    

 

 

      

Operating Income

           7,231         1,533        

Other Expense

           299         121        
        

 

 

    

 

 

      

Income from Continuing Operations before Income Taxes

           6,932         1,412        

Income Tax Provision for Continuing Operations

           2,270         175        
        

 

 

    

 

 

      
           4,662         1,237        

Income from Discontinued Operations, Net of Taxes

           —           1,975        
        

 

 

    

 

 

      

Net Income

         $ 4,662       $ 3,212        
        

 

 

    

 

 

      

No customer accounted for greater than 10% of net sales in fiscal 2015 and 2014.

Other information by segment is presented below:

 

(In thousands)    Assets  
     2015      2014  

QuickLabel

   $ 24,874       $ 25,306   

T&M

     22,323         17,049   

Discontinued Operations

     —           3,917   

Corporate*

     27,133         31,692   
  

 

 

    

 

 

 

Total

   $ 74,330       $ 77,964   
  

 

 

    

 

 

 

 

* Corporate assets consist principally of cash and cash equivalents, securities available for sale, and building held for sale.

 

(In thousands)    Depreciation and
Amortization
     Capital Expenditures  
     2015      2014          2015              2014      

QuickLabel

   $ 678       $ 639       $ 1,408       $ 543   

T&M

     1,385         640         839         585   
  

 

 

    

 

 

    

 

 

    

 

 

 

Total

   $ 2,063       $ 1,279       $ 2,247       $ 1,128   
  

 

 

    

 

 

    

 

 

    

 

 

 

Geographical Data

Presented below is selected financial information by geographic area:

 

(In thousands)    Net Sales      Long-Lived Assets  
     2015      2014      2015      2014  

United States

   $ 61,494       $ 48,679       $ 10,422       $ 10,115   

Europe

     18,181         14,909         383         538   

Canada

     3,934         2,569         272         339   

Asia

     1,408         1,167         —          —    

Central and South America

     1,919         908         —          —    

Other

     1,411         360         —          —    
  

 

 

    

 

 

    

 

 

    

 

 

 

Total

   $ 88,347       $ 68,592       $ 11,077       $ 10,992   
  

 

 

    

 

 

    

 

 

    

 

 

 

Long-lived assets excludes goodwill assigned to the T&M segment of $1.0 million at January 31, 2015 and 2014.

Employee Benefit Plans
Employee Benefit Plans

Note 14—Employee Benefit Plans

Employee Stock Ownership Plan (ESOP):

Astro-Med has an 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 2015 and 2014 and were recorded as compensation expense. All shares owned by the ESOP have been allocated to participants.

Profit-Sharing Plan:

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 $294,000 and $251,000 in fiscal 2015 and 2014, respectively.

Product Warranty Liability
Product Warranty Liability

Note 15—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,  
     2015     2014  
(In thousands)             

Balance, beginning of the year

   $ 355      $ 350   

Warranties issued

     546        447   

Settlements made

     (526     (442
  

 

 

   

 

 

 

Balance, end of the year

   $ 375      $ 355   
  

 

 

   

 

 

 
Product Replacement Costs
Product Replacement Costs

Note 16—Product Replacement Costs

In April 2013, tests conducted by the Company revealed that one of its suppliers had been using a non-conforming material in certain models of Astro-Med’s Test & Measurement printers. No malfunctions have been reported by customers as a result of the non-conforming material.

Upon identifying this issue, Astro-Med immediately suspended production of the printers, notified all customers and contacted the supplier who confirmed the problem. Astro-Med is continuing to work with its customers to replace the non-conforming material on existing printers with conforming material. The estimated costs associated with the replacement program were $672,000, which was based upon the number of printers shipped during the period the non-conforming material was used. Those costs were recognized and recorded in the first quarter of fiscal 2014 and are included in cost of sales in the accompanying consolidated statement of income for the fiscal year ended January 31, 2014. As of January 31, 2015, the Company had expended $319,000 in replacement costs which have been charged against this reserve. The remaining reserve amount of $353,000 is included in other accrued expenses in the accompanying consolidated balance sheet as of January 31, 2015.

Astro-Med is currently receiving power supplies with compliant materials and has resumed printer production and shipments to customers.

Since the supplier deviated from the agreed upon specifications for the power supply while providing certificates of conformance to the original specifications, Astro-Med received a non-refundable $450,000 settlement from the supplier in January 2014 for recovery of the costs and expense associated with this issue. This settlement was recorded in cost of sales in the accompanying consolidated statement of income for the fiscal year ended January 31, 2014. In addition to this cash settlement, the Company will receive lower product prices from the supplier through fiscal 2017.

Concentration of Risk
Concentration of Risk

Note 17—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.

During the years ended January 31, 2015 and 2014, one vendor accounted for 21.9% and 14.3% of purchases, and 55.1% and 23.6% of accounts payable, respectively.

Commitments and Contingencies
Commitments and Contingencies

Note 18—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 19—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 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, 2015

   Level 1      Level 2      Level 3      Total  
(In thousands)                            

Money market funds (included in cash and cash equivalents)

   $ 3,028       $ —        $ —        $ 3,028   

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

     —          15,174         —          15,174   
  

 

 

    

 

 

    

 

 

    

 

 

 

Total

   $ 3,028       $ 15,174       $ —        $ 18,202   
  

 

 

    

 

 

    

 

 

    

 

 

 

January 31, 2014

   Level 1      Level 2      Level 3      Total  
(In thousands)                            

Money market funds (included in cash and cash equivalents)

   $ 4,734       $ —        $ —        $ 4,734   

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

     —          18,766         —          18,766   
  

 

 

    

 

 

    

 

 

    

 

 

 

Total

   $ 4,734       $ 18,766       $      $ 23,500   
  

 

 

    

 

 

    

 

 

    

 

 

 

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.

Non-financial assets measured at fair value on a non-recurring basis are summarized below:

 

January 31, 2015

   Level 1      Level 2      Level 3  
(In thousands)                     

Asset Held for Sale

   $ —        $ 1,900      $ —    
  

 

 

    

 

 

    

 

 

 

January 31, 2014

   Level 1      Level 2      Level 3  
(In thousands)                     

Asset Held for Sale

   $ —        $ 2,120      $ —    
  

 

 

    

 

 

    

 

 

 

Asset held for sale consists of Astro-Med’s former Grass facility in Rockland, Massachusetts which is being actively marketed for sale. In accordance with ASC 360, “Property, Plant and Equipment,” assets held for sale are written down to fair value less cost to sell and as such, the Company has recorded impairment charges of $220,000 and $779,000, in fiscal 2015 and 2014, respectively. In fiscal 2015, the impairment charge was included in other income (expense), other, net in the consolidated statement of income. In fiscal 2014, the impairment charge was included in the income from discontinued operations in the consolidated statement of income, as the Rockland facility was part of the Grass operations at that time. The Company estimated the fair value of the Rockland facility using the market values for similar properties less the cost to sell.

Discontinued Operations
Discontinued Operations

Note 20—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 was held in escrow following the closing date of the transaction and was received by Astro-Med in the first quarter of fiscal 2015.

 

As part of this transaction, a Transition Service Agreement (TSA) was entered into with the purchaser pursuant to which Astro-Med agreed to provide transition services and continue to manufacture Grass products for the purchaser for a period not to exceed twelve months following the sale closing date. The Company determined that cash flows from this activity were not significant and therefore Grass has been classified as a discontinued operation for the fiscal 2014 period presented. The TSA expired on January 31, 2014 and the Company is no longer reporting discontinued operations in fiscal 2015.

In accordance with the terms of the TSA, the purchaser was obligated to acquire the remaining Grass inventory upon expiration of the TSA and as such, the Company received $2,355,000 in the first quarter of fiscal 2015 from the purchaser of Grass related to the disposition of this inventory.

Any future services related to Grass since fiscal 2014 have not been, and are not expected to be material.

Results for discontinued operations are as follows:

 

     2014  
(In thousands)       

Net Sales

   $ 8,401   

Cost of Sales

   $ 7,353   

Gross Profit

   $ 1,048   

Operating Expenses

   $ 96   

Income from Discontinued Operations

   $ 952   

Gain on Sale of Assets of Discontinued Operations

   $ 1,800   

Income Tax Expense

   $ 777   

Income from Discontinued Operations

   $ 1,975  
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,

          

2015

   $ 370       $ 60       $ (87   $ 343   

2014

   $ 345       $ 119       $ (94   $ 370   

 

(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 have been prepared by us pursuant to the rules and regulations of the U.S. Securities and Exchange Commission (SEC) and are presented in conformity with U.S. generally accepted accounting principles (“U.S. GAAP”). Our fiscal year end is January 31. Unless otherwise stated, all years and dates refer to our fiscal year.

On January 22, 2014, Astro-Med completed the acquisition of the ruggedized printer product line from Miltope Corporation, a company of VT Systems (“Miltope”). Astro-Med’s ruggedized printer product line is part of the Ruggedized product group and is reported as part of the Test & Measurement (T&M) segment. The results of the Miltope’s ruggedized printer product line operations have been included in the consolidated financial statements of the Company since the acquisition date. Refer to Note 2, “Acquisition,” for further details.

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 the 2014 period presented. Refer to Note 20, “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, valuation and estimated lives of intangible assets, impairment of long-lived assets, asset held for sale 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 $2,995,000 and $2,544,000 was held in foreign bank accounts at January 31, 2015 and 2014, 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 $1,361,000 for fiscal 2015 and $1,279,000 for 2014.

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 vendor specific objective evidence (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 SEC Staff Accounting Bulletin 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: Astro-Med charges costs to expense in the period incurred, and these expenses are shown on a separate line in the consolidated statement of income. Included in research and development expense are the following: salaries and benefits, external engineering service costs, engineering related information costs and supplies. The Company also complies with Accounting Standards Codification (“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 Translation: The financial statements of foreign subsidiaries and branches are measured using the local currency as the functional currency. Foreign currency denominated assets and liabilities are translated into U.S. dollars at year-end exchange rates with the translation adjustment recorded as a component of accumulated comprehensive income (loss) in shareholders’ equity. Revenues and expenses are translated at the monthly average exchange rates. 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 $219,000 and $190,000 for fiscal 2015 and 2014, 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 $1,717,000 and $1,236,000 in fiscal 2015, and 2014, respectively.

Health Insurance Reimbursement Reserve: Astro-Med reimbursed a portion of employee health insurance deductibles and co-payments for fiscal 2015 and 2014. The total reimbursement amounted to approximately $129,000 and $201,000 in 2015 and 2014, respectively. We accrued approximately $20,000 and $75,000 at January 31, 2015 and 2014, 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. Determination of recoverability is based on an estimate of undiscounted future cash flows resulting from the use of the asset and its eventual disposition. If the projected undiscounted cash flows are less these the carrying value, then an impairment charge would be recorded for the excess of the carrying value over the fair value, as determined by the discounting of future cash flows. For both 2015 and 2014, these were no impairment charges for long-lived assets.

Assets Held for Sale: Assets held for sale are reported at the lower of cost or fair value less cost to sell. Astro-Med’s former Grass facility in Rockland met the held for sale classification criteria as of January 31, 2015 and 2014. This property is being actively marketed and management expects to sell the property during the upcoming fiscal year. Accordingly, the asset held for sale has been classified as a current asset.

The Company estimated the fair value of the Rockland facility using the market values for similar properties and estimated the fair value less the cost to sell. This property is considered a Level 2 asset as defined in ASC 820, “Fair Value Measurements.

During the years ended 2015 and 2014, the Company recorded impairment charges of $220,000 and $779,000, respectively, related to the write-down of the Rockland facility to fair value, less cost to sell. In fiscal 2015, the impairment charge was included in other income (expense), other, net in the consolidated statement of income. For fiscal 2014, the impairment charge was included in the income from discontinued operations in the consolidated statement of income.

Intangible Assets: Intangible assets include the value of customer relationships and backlog rights acquired in connection with business acquisitions and are recorded at fair value as determined by the Company. These intangible assets have a definite life and are amortized over the assets’ useful lives using a systematic and rational basis which is representative of the assets use. Intangible assets with a definite life are tested for impairment whenever events or circumstances indicate that the carrying amount of an asset (asset group) may not be recoverable. An impairment loss is recognized when the carrying amount of an asset exceeds the estimated undiscounted cash flows used in determining the fair value of the asset. The amount of the impairment loss recorded is calculated by the excess of the asset’s carrying value over its fair value. Fair value is generally determined using a discounted cash flow analysis. For both 2015 and 2014, there were no impairment charges for intangible assets.

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. 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 2015 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, 2015 and 2014, 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: 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 2015 and 2014, there were 156,600 and 126,800 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.

The Company measures assets held for sale at fair value on a nonrecurring basis and records impairment charges when the assets are deemed to be impaired.

Share-Based Compensation: Share-based compensation expense is measured based on the estimated fair value of the share-based award when granted and is recognized as an expense over the requisite service period (generally the vesting period of the equity grant). We have estimated the fair value of each option on the date of grant using the Black-Scholes option-pricing model. Our estimate of share-based compensation requires 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 requisite service. Our accounting for share-based compensation for restricted stock awards (“RSA”) and restricted stock units (“RSU”) is also based on the fair value method. The fair value of the RSUs and RSAs is based on the closing market price of the Company’s common stock on the grant date.

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. 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:

Discontinued Operations

In April 2014, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2014-08, “Presentation of Financial Statements (Topic 205) and Property, Plant, and Equipment (Topic 360): Reporting Discontinued Operations and Disclosures of Disposals of Components of an Entity.” ASU 2014-08 limits discontinued operations reporting to disposals of components of an entity that represent strategic shifts that have (or will have) a major effect on an entity’s operations and financial results. In addition, this ASU expands the disclosure requirements for disposals that meet the definition of a discontinued operation and requires entities to disclose information about disposals of individually significant components that do not meet the definition of a discontinued operation. ASU 2014-08 is effective for fiscal years, and interim periods within those years, beginning on or after December 15, 2014 and is to be applied prospectively. We are currently evaluating the impact of ASU 2014-08 and do not expect it to have a material effect on the Company’s financial position or results of operations.

Revenue Recognition

In May 2014, the FASB issued ASU 2014-09, “Revenue from Contracts with Customers (Topic 606).” ASU 2014-09 completes the joint effort by the FASB and International Accounting Standards Board to improve financial reporting by creating common revenue recognition guidance for U.S. GAAP and International Financial Reporting Standards. ASU 2014-09 applies to all companies that enter into contracts with customers to transfer goods or services and is effective for public entities for interim and annual reporting periods beginning after December 15, 2016. Early application is not permitted and entities have the choice to apply ASU 2014-09 either retrospectively to each reporting period presented or by recognizing the cumulative effect of applying ASU 2014-09 at the date of initial application and not adjusting comparative information. The Company is currently evaluating the requirements of ASU 2014-09 and has not yet determined its impact on the Company’s consolidated financial statements.

Acquisition (Tables)

This information has been prepared for informational purposes only and does not purport to represent the results of operations that would have happened had the acquisition occurred as of the date indicated, nor of future results of operations.

 

     Year Ended
January 31
 
(In thousands)    2014  

Net Revenue

   $ 75,362   

The purchase price of the acquisition has been allocated on the basis of the estimated fair value as follows:

 

(In thousands)       

Accounts Receivable

   $ 713   

Inventories

     2,503   

Identifiable Intangible Assets

     3,400   

Goodwill

     196   

Warranty Reserve

     (80
  

 

 

 

Total Purchase Price

   $ 6,732   
  

 

 

 

The following table reflects the fair value of the acquired identifiable intangible assets and related estimated useful lives:

 

(In thousands)    Fair
Value
     Useful Life
(Years)
 

Customer Contract Relationships

   $ 3,100         10   

Backlog

     300         1   
  

 

 

    

Total

   $ 3,400      
  

 

 

    

Estimated amortization expense for the next five years is as follows:

 

(In thousands)    2016      2017      2018      2019      2020  

Estimated amortization expenses

   $ 357       $ 349       $ 331       $ 278       $ 278   
Securities Available for Sale (Tables)

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, 2015

          

State and Municipal Obligations

   $ 15,150       $ 26       $ (2 )   $ 15,174   
  

 

 

    

 

 

    

 

 

   

 

 

 

January 31, 2014

          

State and Municipal Obligations

   $ 18,729       $ 37       $ —       $ 18,766  

The contractual maturity dates of these securities are as follows:

 

     January 31  
     2015      2014  
(In thousands)              

Less than one year

   $ 9,470       $ 11,439   

One to three years

     5,704         7,327   
  

 

 

    

 

 

 
   $ 15,174       $ 18,766   
  

 

 

    

 

 

Inventories (Tables)
Components of Inventories

The components of inventories are as follows:

 

     January 31  
     2015      2014  
(In thousands)              

Materials and Supplies

   $ 10,600       $ 10,722   

Work-in-Progress

     765         852   

Finished Goods

     7,372         6,798   
  

 

 

    

 

 

 
     18,737         18,372   

Inventory Reserve

     (3,155      (3,194
  

 

 

    

 

 

 

Balance at January 31

   $ 15,582       $ 15,178   
  

 

 

    

 

 

 
Accrued Expenses (Tables)
Summary of Accrued Expenses

Accrued expenses consisted of the following:

 

     January 31  
     2015      2014  
(In thousands)              

Warranty

   $ 375       $ 355   

Product Replacement Cost Reserve

     353       $ 480   

Professional Fees

     256         269   

Executive Retirement Package

     250         250   

Dealer Commissions

     163         55   

Other

     946         901   
  

 

 

    

 

 

 
   $ 2,343       $ 2,310   
  

 

 

    

 

 

 
Accumulated Other Comprehensive Income (Loss) (Tables)
Changes in the Balance of Accumulated Other Comprehensive Income (Loss)

The changes in the balance of accumulated other comprehensive income (loss) by component are as follows:

 

(In thousands)    Foreign Currency
Translation
Adjustments
     Unrealized Holding Gain
on Available for
Sale Securities
     Total  

Balance at January 31, 2013

   $ 166       $ 7       $ 173   

Other Comprehensive Income (Loss)

     (14      17         3   

Amounts Reclassified to Net Income

     —           —           —     
  

 

 

 

Net Other Comprehensive Income (Loss)

     (14      17         3   
  

 

 

 

Balance at January 31, 2014

     152         24         176   

Other Comprehensive Income (Loss)

     (866      (9      (875

Amounts Reclassified to Net Income

     —          —          —    
  

 

 

 

Net Other Comprehensive Income (Loss)

     (866      (9      (875
  

 

 

 

Balance at January 31, 2015

   $ (714    $ 15       $ (699
  

 

 

 
Share-Based Compensation (Tables)

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, 2014

     736,647      $ 5.78-11.90       $ 8.63   

Options Granted

     158,600      $ 13.46-14.20       $ 13.99   

Options Exercised

     (224,275   $ 6.22-11.90       $ 8.29   

Options Expired

     (14,961   $ 7.95-14.20       $ 9.49   
  

 

 

   

 

 

    

 

 

 

Options Outstanding, January 31, 2015

     656,011      $ 5.78-14.20       $ 10.01   
  

 

 

   

 

 

    

 

 

 

Options Exercisable, January 31, 2015

     413,612      $ 5.78-13.46       $ 8.78   

Set forth below is a summary of options outstanding at January 31, 2015:

 

Outstanding

     Exercisable  

Range of

Exercise prices

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

$5.78-8.73

     314,365       $ 7.64         5.1         254,516       $ 7.54   

$8.95-13.46

     190,046       $ 10.79         4.3         159,096       $ 10.76   

$13.80-14.20

     151,600       $ 14.00         9.2         —         $ —     
  

 

 

          

 

 

    
     656,011               413,612      
  

 

 

          

 

 

    

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
     2015    2014

Risk-Free Interest Rate

   1.5%-1.62%    0.81%-0.84%

Expected Life (years)

   5    5

Expected Volatility

   21.47%-26.75%    38.07%-38.46%

Expected Dividend Yield

   1.98%    2.63%

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, 2014

     106,496       $ 9.12   

Granted

     7,245         13.80   

Vested

     (35,662      8.75   

Expired or canceled

     (5,834      10.07   
  

 

 

    

 

 

 

Outstanding at January 31, 2015

     72,245       $ 9.70   
  

 

 

    

 

 

 

Share-based compensation expense has been recognized as follows:

 

     Years Ended January 31,  
             2015                      2014          
(In thousands)              

Stock Options

   $ 241       $ 192   

Restricted Stock Awards and Restricted Stock Units

     270         370   
  

 

 

    

 

 

 

Total

   $ 511       $ 562   
  

 

 

    

 

 

 

Summarized plan activity is as follows:

 

     Years Ended January 31  
             2015                      2014          

Shares Reserved, Beginning

     60,242         64,231   

Shares Purchased

     (3,237      (3,989
  

 

 

    

 

 

 

Shares Reserved, Ending

     57,005         60,242   
  

 

 

    

 

 

Income Taxes (Tables)

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

 

     Years Ended
January 31,
 
     2015      2014  
(In thousands)              

Domestic

   $ 5,401       $ 537   

Foreign

     1,531         875   
  

 

 

    

 

 

 
   $ 6,932       $ 1,412   
  

 

 

    

 

 

 

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

 

     Years Ended
January 31,
 
     2015     2014  
(In thousands)             

Current:

    

Federal

   $ 1,666      $ 930   

State

     466        179   

Foreign

     535        297   
  

 

 

   

 

 

 
     2,667        1,406   
  

 

 

   

 

 

 

Deferred:

    

Federal

     (290     (1,044

State

     (107     (174

Foreign

     —          (13
  

 

 

   

 

 

 
     (397     (1,231
  

 

 

   

 

 

 
   $ 2,270      $ 175   
  

 

 

   

 

 

 

The provision for income taxes for continuing operations differs from the amount computed by applying the statutory federal income tax rate of 34% in fiscal 2015 and 2014 to income before income taxes due to the following:

 

     Years Ended
January 31
 
     2015     2014  
(In thousands)             

Income Tax Provision at Statutory Rate

   $ 2,357      $ 480   

State Taxes, Net of Federal Tax Effect

     233        (47

Change in Reserves Related to ASC 740 Liability

     23        (59

Meals and Entertainment

     41        38   

Domestic Production Deduction

     (164     (30

Share-Based Compensation

     (25     36   

Tax-exempt Income

     (24     (22

R&D Credits

     (135     (114

Foreign Rate Differential

     (56     (26

Other Permanent Differences and Miscellaneous, Net

     20        (81
  

 

 

   

 

 

 
   $ 2,270      $ 175   
  

 

 

   

 

 

 

The tax effects of temporary differences that gave rise to significant portions of the deferred tax assets and liabilities are as follows:

 

     January 31  
     2015     2014  
(In thousands)             

Deferred Tax Assets:

    

Inventory

   $ 1,666      $ 1,792   

Share-Based Compensation

     572        535   

State R&D Credits

     371        258   

Compensation Accrual

     417        493   

ASC 740 Liability Federal Benefit

     304        290   

Deferred Service Contract Revenue

     235        181   

Warranty Reserve

     140        137   

Reserve for Doubtful Accounts

     116        127   

Foreign Tax Credit

     356        213   

Other

     298        119   
  

 

 

   

 

 

 
     4,475        4,145   

Deferred Tax Liabilities:

    

Accumulated Tax Depreciation in Excess of Book Depreciation

     766        830   

Deferred Gain on Asset Held for Sale

     785        897   

Currency Translation Adjustment

     36        173   

Other

     87        78   
  

 

 

   

 

 

 
     1,674        1,978   
  

 

 

   

 

 

 

Subtotal

     2,801        2,167   

Valuation Allowance

     (255     (258
  

 

 

   

 

 

 

Net Deferred Tax Assets

   $ 2,546      $ 1,909   
  

 

 

   

 

 

 

A reconciliation of unrecognized tax benefits, excluding interest and penalties follows:

 

     2015     2014  
(In thousands)             

Balance at February 1

   $ 715      $ 941   

Increases in prior period tax positions

     —          31   

Increases in current period tax positions

     87        42   

Reductions related to lapse of statute of limitations

     (95     (299
  

 

 

   

 

 

 

Balance at January 31

   $ 707      $ 715   
  

 

 

   

 

 

 
Contractual Obligations (Tables)
Summary of Contractual Obligations

The following table summarizes our contractual obligations:

 

     Total      2016      2017      2018      2019      2020
and
Thereafter
 
(In thousands)                                          

Purchase Commitments*

   $ 15,117       $ 14,907       $ 210       $ —         $ —         $ —     

Operating Lease Obligations

     688         255         225         136         72         —    
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 
   $ 15,805       $ 15,162       $ 435       $ 136       $ 72       $ —     
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

 

* Purchase commitments consists primarily of inventory and equipment purchase orders made in the ordinary course of business.
Nature of Operations, Segment Reporting and Geographical Information (Tables)

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
 
     2015      2014          2015              2014          2015     2014  

QuickLabel

   $ 59,779       $ 49,065       $ 7,259       $ 5,154         12.1     10.5

T&M

     28,568         19,527         5,627         2,655         19.7     13.6
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

   

 

 

 

Total

   $ 88,347       $ 68,592         12,886         7,809         14.6     11.4
  

 

 

    

 

 

          

 

 

   

 

 

 

Product Replacement Costs

           —           672        

Corporate Expenses

           5,655         5,604        
        

 

 

    

 

 

      

Operating Income

           7,231         1,533        

Other Expense

           299         121        
        

 

 

    

 

 

      

Income from Continuing Operations before Income Taxes

           6,932         1,412        

Income Tax Provision for Continuing Operations

           2,270         175        
        

 

 

    

 

 

      
           4,662         1,237        

Income from Discontinued Operations, Net of Taxes

           —           1,975        
        

 

 

    

 

 

      

Net Income

         $ 4,662       $ 3,212        
        

 

 

    

 

 

 

Other information by segment is presented below:

 

(In thousands)    Assets  
     2015      2014  

QuickLabel

   $ 24,874       $ 25,306   

T&M

     22,323         17,049   

Discontinued Operations

     —           3,917   

Corporate*

     27,133         31,692   
  

 

 

    

 

 

 

Total

   $ 74,330       $ 77,964   
  

 

 

    

 

 

 

 

* Corporate assets consist principally of cash and cash equivalents, securities available for sale, and building held for sale.

 

(In thousands)    Depreciation and
Amortization
     Capital Expenditures  
     2015      2014          2015              2014      

QuickLabel

   $ 678       $ 639       $ 1,408       $ 543   

T&M

     1,385         640         839         585   
  

 

 

    

 

 

    

 

 

    

 

 

 

Total

   $ 2,063       $ 1,279       $ 2,247       $ 1,128   
  

 

 

    

 

 

    

 

 

    

 

 

 

Presented below is selected financial information by geographic area:

 

(In thousands)    Net Sales      Long-Lived Assets  
     2015      2014      2015      2014  

United States

   $ 61,494       $ 48,679       $ 10,422       $ 10,115   

Europe

     18,181         14,909         383         538   

Canada

     3,934         2,569         272         339   

Asia

     1,408         1,167         —          —    

Central and South America

     1,919         908         —          —    

Other

     1,411         360         —          —    
  

 

 

    

 

 

    

 

 

    

 

 

 

Total

   $ 88,347       $ 68,592       $ 11,077       $ 10,992   
  

 

 

    

 

 

    

 

 

    

 

 

 
Product Warranty Liability (Tables)
Activity in Product Warranty Liability

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,  
     2015     2014  
(In thousands)             

Balance, beginning of the year

   $ 355      $ 350   

Warranties issued

     546        447   

Settlements made

     (526     (442
  

 

 

   

 

 

 

Balance, end of the year

   $ 375      $ 355   
  

 

 

   

 

 

 
Fair Value Measurements (Tables)

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

 

January 31, 2015

   Level 1      Level 2      Level 3      Total  
(In thousands)                            

Money market funds (included in cash and cash equivalents)

   $ 3,028       $ —        $ —        $ 3,028   

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

     —          15,174         —          15,174   
  

 

 

    

 

 

    

 

 

    

 

 

 

Total

   $ 3,028       $ 15,174       $ —        $ 18,202   
  

 

 

    

 

 

    

 

 

    

 

 

 

January 31, 2014

   Level 1      Level 2      Level 3      Total  
(In thousands)                            

Money market funds (included in cash and cash equivalents)

   $ 4,734       $ —        $ —        $ 4,734   

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

     —          18,766         —          18,766   
  

 

 

    

 

 

    

 

 

    

 

 

 

Total

   $ 4,734       $ 18,766       $      $ 23,500   
  

 

 

    

 

 

    

 

 

    

 

 

 

Non-financial assets measured at fair value on a non-recurring basis are summarized below:

 

January 31, 2015

   Level 1      Level 2      Level 3  
(In thousands)                     

Asset Held for Sale

   $ —        $ 1,900      $ —    
  

 

 

    

 

 

    

 

 

 

January 31, 2014

   Level 1      Level 2      Level 3  
(In thousands)                     

Asset Held for Sale

   $ —        $ 2,120      $ —    
  

 

 

    

 

 

    

 

 

 
Discontinued Operations (Tables)
Summary of Discontinued Operations

Results for discontinued operations are as follows:

 

     2014  
(In thousands)       

Net Sales

   $ 8,401   

Cost of Sales

   $ 7,353   

Gross Profit

   $ 1,048   

Operating Expenses

   $ 96   

Income from Discontinued Operations

   $ 952   

Gain on Sale of Assets of Discontinued Operations

   $ 1,800   

Income Tax Expense

   $ 777   

Income from Discontinued Operations

   $ 1,975   
Summary of Significant Accounting Policies - Additional Information (Detail) (USD $)
12 Months Ended
Jan. 31, 2015
Jan. 31, 2014
Summary Of Significant Accounting Policies [Line Items]
 
 
Highly liquid investments with an original maturity
90 days or less 
 
Cash of held in foreign bank accounts
$ 2,995,000 
$ 2,544,000 
Depreciation expense
1,361,000 
1,279,000 
Net foreign exchange losses
219,000 
190,000 
Advertising expense
1,717,000 
1,236,000 
Total reimbursement
129,000 
201,000 
Estimated outstanding reimbursements
20,000 
75,000 
Impairment charges for long-lived assets
Write-down of asset held for sale
220,000 
779,000 
Impairment charges for intangible assets
Number of common equivalent shares
156,600 
126,800 
Compensation expenses is recognized for option forfeited
$ 0 
 
Miltope's Ruggedized Printer Product Line Operation [Member]
 
 
Summary Of Significant Accounting Policies [Line Items]
 
 
Completion date of acquisition
Jan. 22, 2014 
 
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 
 
Building and Improvements [Member] |
Maximum [Member]
 
 
Summary Of Significant Accounting Policies [Line Items]
 
 
Estimated useful lives of the assets
45 years 
 
Building 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 
 
Acquisition - Additional Information (Detail) (Miltope's Ruggedized Printer Product Line Operation [Member], USD $)
12 Months Ended
Jan. 31, 2015
Jan. 31, 2014
Miltope's Ruggedized Printer Product Line Operation [Member]
 
 
Business Acquisition [Line Items]
 
 
Completion date of acquisition
Jan. 22, 2014 
 
Purchase price of the acquisition
 
$ 6,732,000 
Amount held in escrow related to business acquisition
 
500,000 
Duration of escrow deposits
 
12 months 
General and administrative expenses
 
90,000 
Goodwill
196,000 
 
Amortization expense
$ 702,000 
 
Acquisition - Purchase Price of Acquisition Allocated on Basis of Estimated Fair Value (Detail) (USD $)
In Thousands, unless otherwise specified
Jan. 31, 2015
Jan. 31, 2014
Jan. 31, 2015
Miltope's Ruggedized Printer Product Line Operation [Member]
Jan. 22, 2014
Miltope's Ruggedized Printer Product Line Operation [Member]
Business Acquisition [Line Items]
 
 
 
 
Accounts Receivable
 
 
 
$ 713 
Inventories
 
 
 
2,503 
Identifiable Intangible Assets
 
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