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Note 1—Summary of Significant Accounting Policies
Basis of Presentation: The accompanying financial data has been prepared by us pursuant to the rules and regulations of the U.S. Securities and Exchange Commission (SEC) and is in conformity with U.S. generally accepted accounting principles (“U.S. GAAP”). Our fiscal year end is January 31. Unless otherwise stated, all years and dates refer to our fiscal year.
On January 31, 2013, we completed the sale of substantially all of the assets of our Grass Technologies Product Group. Consequently, we have classified the results of operations of the Grass Technologies Product Group as discontinued operations for all periods presented. Refer to Note 17, “Discontinued Operations,” for further discussion.
Principles of Consolidation: The consolidated financial statements include the accounts of Astro-Med, Inc. and its subsidiaries. All material intercompany accounts and transactions are eliminated in consolidation.
Reclassification: Certain amounts in prior year’s financial statements have been reclassified to conform to the current year’s presentation.
Use of Estimates: The presentation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect these financial statements and accompanying notes. Some of the more significant estimates relate to the allowances for doubtful accounts and credits, inventory valuation, impairment of long-lived assets and goodwill, income taxes, share-based compensation and warranty reserves. Management’s estimates are based on the facts and circumstances available at the time estimates are made, past historical experience, risk of loss, general economic conditions and trends, and management’s assessments of the probable future outcome of these matters. Consequently, actual results could differ from those estimates.
Cash and Cash Equivalents: Highly liquid investments with an original maturity of 90 days or less are considered to be cash equivalents. Similar investments with original maturities beyond three months are classified as securities available for sale. Cash of $1,157,000 and $1,929,000 was held in foreign bank accounts at January 31, 2013 and 2012, respectively.
Securities Available for Sale: Securities available for sale are carried at fair value based on quoted market prices, where available. The difference between cost and fair value, net of related tax effects, is recorded as a component of accumulated other comprehensive income in shareholders’ equity.
Property, Plant and Equipment: Property, plant and equipment are stated at cost less accumulated depreciation. Depreciation is provided on the straight-line basis over the estimated useful lives of the assets (land improvements—10 to 20 years; buildings and improvements—10 to 45 years; machinery and equipment—3 to 10 years). Depreciation expense was $1,331,000 for fiscal 2013 and $1,576,000 for 2012.
Revenue Recognition: Astro-Med’s product sales are recognized when all of the following criteria have been met: persuasive evidence of an arrangement exists; price to the buyer is fixed or determinable; delivery has occurred and legal title and risk of loss have passed to the customer; and collectability is reasonably assured. Returns and customer credits are infrequent and are recorded as a reduction to sales. Rights of return are not included in sales arrangements. Revenue associated with products that contain specific customer acceptance criteria is not recognized before the customer acceptance criteria are satisfied. Discounts from list prices are recorded as a reduction to sales. Amounts billed to customers for shipping and handling fees are included in sales while related shipping and handling costs are included in cost of sales.
The majority of our equipment contains embedded operating systems and data management software which is included in the purchase price of the equipment. The software is deemed incidental to the systems as a whole as it is not sold separately or marketed separately and its production costs are minor as compared to those of the hardware system. Therefore, the Company’s hardware appliances are considered non-software elements and are not subject to the industry-specific software revenue recognition guidance.
Our multiple-element arrangements are generally comprised of a combination of equipment, software, installation and/or training services. Hardware and software elements are typically delivered at the same time and revenue is recognized when all the revenue recognition criteria for each unit are met. Delivery of installation and training services will vary based on certain factors such as the complexity of the equipment, staffing availability in a geographic location and customer preferences, and can range from a few days to a few months. Service revenue is deferred and recognized over the contractual period or as services are rendered and accepted by the customer.
We have evaluated the deliverables in our multiple-element arrangements and concluded that they are separate units of accounting if the delivered item or items have value to the customer on a standalone basis and delivery or performance of the undelivered item(s) is considered probable and substantially in our control. We allocate revenue to each element in our multiple-element arrangements based upon their relative selling prices. We determine the selling price for each deliverable based on a selling price hierarchy. The selling price for a deliverable is based on VSOE if available, third-party evidence (“TPE”) if VSOE is not available, or estimated selling price (“ESP”) if neither VSOE nor TPE is available. Revenue allocated to each element is then recognized when the basic revenue recognition criteria for that element have been met.
Infrequently, Astro-Med recognizes revenue for non-recurring engineering (NRE) fees for product modification orders upon completion of agreed-upon milestones. Revenue is deferred for any amounts received prior to completion of milestones. Certain of our NRE arrangements include formal customer acceptance provisions. In such cases, we determine whether we have obtained customer acceptance for the specific milestone before recognizing revenue. NRE fees have not been significant in the periods presented herein.
Infrequently, Astro-Med receives requests from customers to hold product purchased from us for the customer’s convenience. Revenue is recognized for such bill and hold arrangements in accordance with the requirements of SAB No. 104 which requires, among other things, the existence of a valid business purpose for the arrangement; the transfer of ownership of the purchased product; a fixed delivery date that is reasonable and consistent with the buyer’s business purpose; the readiness of the product for shipment; the use of customary payment terms; no continuing performance obligation by us and segregation of the product from our inventories.
Research and Development Costs: The Company complies with the guidance provided in the Financial Accounting Standards Board’s (“FASB”) Accounting Standards Codification (“ASC”) FASB 730, “Research and Development” by charging any costs to expense when incurred, as well as by disclosing in the financial statements the amount of Research & Development charged to expense. These charges include: salaries and benefits, external engineering service costs, engineering related information costs and supplies. The Company also complies with ASC 985-20, “Costs of Computer Software to be Sold, Leased or Marketed” and ASC 350-40, “Internal-Use Software” in accounting for the costs of software either developed or acquired.
Foreign Currency: The financial statements of foreign subsidiaries are measured using the local currency as the functional currency. Foreign currency denominated assets and liabilities are translated into U.S. dollars at year-end exchange rates with the translation adjustment recorded as a component of accumulated comprehensive income in shareholders’ equity. Revenues and costs are translated at average exchange rates during the year. We do not provide for U.S. income taxes on foreign currency translation adjustments associated with our German subsidiary since its undistributed earnings are considered to be permanently invested. Our net foreign exchange losses were $158,000 and $27,000 for fiscal 2013 and 2012, respectively.
Advertising: Astro-Med expenses advertising costs as incurred. Advertising costs including advertising production, trade shows and other activities are designed to enhance demand for our products and amounted to approximately $750,000 and $970,000 in fiscal 2013 and 2012, respectively.
Health Insurance Reimbursement Reserve: Astro-Med reimburses a portion of employee health insurance deductibles and co-payments. The total reimbursement amounted to approximately $313,000 and $487,000 in 2013 and 2012, respectively. We accrued approximately $100,000 and $150,000 at January 31, 2013 and 2012, respectively, for estimated outstanding reimbursements due to employees, including a reserve for incurred but not reported amounts.
Long-Lived Assets: Long-lived assets to be held and used are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of such assets may not be recoverable in accordance with the guidance provided in ASC 360, “Property, Plant and Equipment.” Determination of recoverability is based on an estimate of undiscounted future cash flows resulting from the use of the asset and its eventual disposition. Measurement of an impairment loss for long-lived assets that management expects to hold and use is based on the fair value of the asset.
In 2013, we recognized an impairment of $779,000 related to the Grass Technologies Product Group‘s manufacturing facilities located in Rockland, Massachusetts. This impairment was included as part of the Income from Discontinued Operations in the accompanying consolidated statement of income for the period ended January 31, 2013. Refer to Note 17, “Discontinued Operations,” for further discussion.
Goodwill: Management evaluates the recoverability of goodwill annually or more frequently if events or changes in circumstances, such as declines in sales, earnings or cash flows, or material adverse changes in the business climate, indicate that the carrying value of an asset might be impaired. During the fourth quarter of fiscal 2012, we adopted new accounting guidance which simplifies goodwill impairment testing. Under the new guidance, goodwill is first qualitatively assessed to determine whether further impairment testing is necessary. Factors that management considers in this assessment include macroeconomic conditions, industry and market considerations, overall financial performance (both current and projected), changes in management and strategy and changes in the composition or carrying amount of net assets. If this qualitative assessment indicates that it is more likely than not that the fair value of a reporting unit is less than its carrying amount, a two step process is then performed. Step one compares the fair value of the reporting unit with its carrying value, including goodwill. If the carrying amount exceeds the fair value of the reporting unit, step two is required to determine if there is an impairment of the goodwill. Step two compares the implied fair value of the reporting unit goodwill to the carrying amount of the goodwill. We estimate the fair value of our reporting units using the income approach based upon a discounted cash flow model. We believe that this approach is appropriate because it provides a fair value estimate based upon the reporting unit’s expected long–term operating cash flow performance. In addition, the Company uses the market approach, which compares the reporting unit to publicly-traded companies and transactions involving similar business, to support the conclusions based upon the income approach. The income approach requires the use of many assumptions and estimates including future revenue, expenses, capital expenditures, and working capital, as well as discount factors and income tax rates.
We performed a qualitative assessment for our 2013 analysis of goodwill. Based on this assessment, management does not believe that it is more likely than not that the carrying value of the reporting units exceed their fair values. Accordingly, no further testing was performed as management believes that there are no impairment issues in regards to goodwill at this time.
Income Taxes: Astro-Med uses the liability method of accounting for income taxes. Under this method, deferred tax assets and liabilities are determined based on the differences between the financial reporting basis and tax basis of the assets and liabilities and are measured using enacted tax rates that will be in effect when the differences are expected to reverse. An allowance against deferred tax assets is recognized when it is more-likely-than-not that some portion or all of the deferred tax assets will not be realized. At January 31, 2013 and 2012, a valuation allowance was provided for deferred tax assets attributable to certain state R&D credit carryforwards.
Astro-Med accounts for uncertain tax positions in accordance with the guidance provided in ASC 740, “Accounting for Income Taxes.” This guidance describes a recognition threshold and measurement attribute for the financial statement disclosure of tax positions taken or expected to be taken in a tax return and requires recognition of tax benefits that satisfy a more-likely-than-not threshold. ASC 740 also provides guidance on de-recognition, classification, interest and penalties, accounting in interim periods, disclosure and transition.
Net Income Per Common Share: Net income per common share has been computed and presented in accordance with the guidance provided in ASC 260, “Earnings per Share.” Basic net income per share is based on the weighted average number of shares outstanding during the period. Diluted net income per share is based on the basic weighted average number of shares and potential common equivalent shares for stock options, restricted stock awards and restricted stock units outstanding during the period using the treasury stock method. In fiscal years 2013 and 2012, there were 583,512 and 664,690 common equivalent shares that were not included in the computation of diluted net income per common share because their inclusion would be anti-dilutive.
Allowance for Doubtful Accounts: In circumstances where we are aware of a customer’s inability to meet its financial obligations, an allowance is established. The majority of accounts are individually evaluated on a regular basis and allowances are established to state such receivables at their net realizable value. The remainder of the allowance is based upon historical write-off experience and current market assessments.
Fair Value of Financial Instruments: Our financial instruments consist of cash and cash equivalents, investment securities, accounts receivable, a note receivable, a line of credit receivable and accounts payable. The carrying amount reflected in the consolidated balance sheets for cash and cash equivalents, accounts receivable and accounts payable approximates fair value due to the short-term nature of these items. Investment securities, all of which are available for sale, are carried in the consolidated balance sheets at fair value based on quoted market prices, when available. The note receivable is carried in the consolidated balance sheets at fair value based on the present value of the discounted cash flows over the life of the note.
Comprehensive Income: In accordance with the guidance provided in ASC 220, “Comprehensive Income,” we report the change in net assets during the period from non-owner sources by major components and as a single total in the Consolidated Statements of Comprehensive Income. Accumulated other comprehensive income at January 31, 2013 consists of net unrealized gains on available for sale securities of $7,000 and net translation gains on foreign operations of $166,000.
Share-Based Compensation: We account for share based awards granted to employees and directors using the FASB guidance included in ASC 718, “Stock Compensation.” Effective as of February 1, 2006, we adopted the “modified prospective” transition method provided in ASC 718. Under this method, share-based compensation is recognized in the consolidated statement of operation for share-based payment awards granted prior to, but not yet vested as of February 1, 2006, based on the grant date fair value estimated in accordance with prior authoritative guidance and for share-based payment awards granted subsequent to February 1, 2006, based on the grant date fair value estimated in accordance with the provisions of ASC 718.
In accordance with ASC 718, share-based compensation expense is based on the estimated fair value of the share-based award when granted to an employee or director. We have estimated the fair value of each option on the date of grant using the Black-Scholes option-pricing model. Our estimate of share-based compensation requires a number of complex and subjective assumptions including our stock price volatility, employee exercise patterns (expected life of the options), the risk-free interest rate and the Company’s dividend yield. The stock price volatility assumption is based on the historical weekly price data of our common stock over a period equivalent to the weighted average expected life of our options. Management evaluated whether there were factors during that period which were unusual and would distort the volatility figure if used to estimate future volatility and concluded that there were no such factors. In determining the expected life of the option grants, the Company has observed the actual terms of prior grants with similar characteristics and the actual vesting schedule of the grant and has assessed the expected risk tolerance of different option groups. The risk-free interest rate is based on the actual U.S. Treasury zero coupon rates for bonds matching the expected term of the option as of the option grant date. The dividend assumption is based upon the prior year’s average dividend yield. No compensation expense is recognized for options that are forfeited for which the employee does not render the requested service. Our accounting for share-based compensation for restricted stock awards (“RSAs”) and restricted stock units (“RSU”) is also based on the fair value method. The fair value of the RSUs and RSAs is based on the closing market price of the Company’s common stock on the grant date of the RSU or RSA.
The cash flow from the tax benefits that are a result of tax deductions in excess of the compensation cost recognized for those options (excess tax benefits) are classified as a cash inflow from financing activities and a cash outflow from operating activity in accordance with the guidance provided by ASC 718. Tax deductions from certain stock option exercises are treated as being realized when they reduce taxes payable in accordance with relevant tax law.
Recent Accounting Pronouncements:
Comprehensive Income
In February 2013, the FASB issued Accounting Standard Update (“ASU”) 2013-02, “Reporting of Amounts Reclassified Out of Accumulated Other Comprehensive Income,” which requires entities to provide information about the amounts reclassified out of accumulated other comprehensive income by component. In addition, entities are required to present, either on the face of the statement where net income is presented or in the notes, significant amounts reclassified out of accumulated other comprehensive income by the respective line items of net income but only if the amount reclassified is required under U.S. GAAP to be reclassified to net income in its entirety in the same reporting period. For other amounts that are not required under U.S. GAAP to be reclassified in their entirety to net income, entities are required to cross-reference to other disclosures required under U.S. GAAP that provide additional detail on these amounts. ASU 2013-02 is effective prospectively for reporting periods beginning after December 15, 2012. We will adopt this guidance in our first quarter ending May 4, 2013. Since ASU 2013-02 only impacts presentation and disclosure requirements, the adoption of this guidance will not have a material impact on the Company’s financial position or results of operations.
In June 2011, the FASB issued ASU 2011-05, “Presentation of Comprehensive Income,” which requires entities to present the components of net income and other comprehensive income either as one continuous statement or as two consecutive statements. ASU 2011-05 eliminates the option to present the components of other comprehensive income as part of the statement of changes in shareholders’ equity. While ASU 2011-05 changes the presentation of comprehensive income, it does not change the components that are recognized in net income or comprehensive income under current accounting guidance. ASU 2011-05 also requires entities to present reclassification adjustments out of accumulated other comprehensive income by component in both the statement in which net income is presented and the statement in which other comprehensive income is presented. In December 2011, the FASB issued ASU 2011-12, “Deferral of the Effective Date for Amendments to the Presentation of Reclassification of Items Out of Accumulated Other Comprehensive Income in Accounting Standard Update No. 2011-05,” which defers the guidance related to the presentation of reclassification adjustments. ASU 2011-05 is effective for interim and annual periods beginning after December 15, 2011, and must be applied retrospectively. We adopted this guidance in the first quarter of fiscal 2013 and have provided the disclosures required for the periods ended January 31, 2013 and 2012, in the accompanying Consolidated Statements of Comprehensive Income.
Intangibles
In July 2012, the FASB issued ASU 2012-02, “Testing Indefinite-Lived Intangible Assets for Impairment,” which allows entities to use a qualitative approach to test indefinite-lived intangible assets for impairment. ASU 2012-02 permits an entity to first assess qualitative factors to determine whether it is more likely than not that the fair value of the indefinite-lived intangible asset is less than its carrying value. If it is concluded that this is the case, it is necessary to perform the currently prescribed quantitative impairment test. Otherwise, the quantitative impairment test is not required. ASU 2012-02 is effective for annual and interim impairment tests performed for fiscal years beginning after September 15, 2012. The adoption of the provisions of ASU 2012-02 will not have a material impact on the Company’s financial position or results of operations.
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Note 2—Divestiture
On January 30, 2012, we completed the sale of our label manufacturing operations in Asheboro, North Carolina to Label Line Ltd., (the “Buyer”) the original owner of the Asheboro operations. The Asheboro operations were part of the QuickLabel System business segment. The net sales price of $1,000,000 was received in the form of a promissory note in consideration for the inventory and equipment of the Asheboro operations. The promissory note issued by the Buyer is fully secured by a first lien on various collateral of the Buyer, including the Asheboro plant and plant assets. The note bears interest at a rate equal to the lesser of the United States prime rate as of January 30, 2013 plus 50 basis points or six percent per annum and is payable in sixteen quarterly installments of principal and interest commencing on January 30, 2013. The Note Receivable is disclosed at its present value on the accompanying consolidated balance sheet.
The divestiture resulted in a net book loss of $681,000, which is included in Operating Income in the accompanying consolidated statements of income for the year ended January 31, 2012 and includes $64,000 related to closing costs and $265,000 related to the write-off of intangibles. As we have expanded our label manufacturing operations in Canada, Germany and West Warwick, Rhode Island, the sale of the Asheboro operations did not impact our continued involvement in label manufacturing within the QuickLabel segment.
The terms of the sale also include an agreement for Astro-Med to provide the Buyer with additional financing in form of a revolving line of credit in the amount of $600,000, which is fully secured by first lien on various collateral of the Buyer, including the Asheboro plant and plant assets. This line of credit bears interest at a rate equal to the United States prime rate plus an additional margin of two percent of the outstanding credit balance and has an initial term of one-year from the date of the sale which may be extended for consecutive one-year terms on mutual agreement of the parties. As of January 31, 2013, Astro-Med has extended $300,000 on this revolving line of credit. On March 27, 2013, Astro-Med signed an agreement to extend this line of credit through January 30, 2014. The terms of the sale also included a three-year purchase commitment for the Company to purchase $3,250,000 of inventory from the Buyer. The disposal did not qualify as a discontinued operation due to our continuing involvement with the Asheboro operation.
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Note 3—Securities Available for Sale
Pursuant to our investment policy, securities available for sale include state and municipal securities with various contractual or anticipated maturity dates ranging from one month to three years. These securities are carried at fair value, with unrealized gains and losses reported as a component of accumulated other comprehensive income in shareholders’ equity until realized. Realized gains and losses from the sale of available for sale securities, if any, are determined on a specific identification basis. A decline in the fair value of any available for sale security below cost that is determined to be other than temporary will result in a write-down of its carrying amount to fair value. No such impairment charges were recorded for any period presented. All short-term investment securities have original maturities greater than 90 days.
The fair value, amortized cost and gross unrealized gains and losses of the securities are as follows:
| Amortized Cost |
Gross Unrealized Gains |
Gross Unrealized Losses |
Fair Value | |||||||||||||
| (In thousands) | ||||||||||||||||
|
January 31, 2013 |
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|
State and Municipal Obligations |
$ | 8,499 | $ | 10 | $ | — | $ | 8,509 | ||||||||
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| Amortized Cost |
Gross Unrealized Gains |
Gross Unrealized Losses |
Fair Value | |||||||||||||
|
January 31, 2012 |
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|
State and Municipal Obligations |
$ | 11,313 | $ | 23 | $ | — | $ | 11,336 | ||||||||
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The contractual maturity dates of these securities are as follows:
| January 31, | ||||||||
| 2013 | 2012 | |||||||
| (In thousands) | ||||||||
|
Less than one year |
$ | 5,986 | $ | 8,494 | ||||
|
One to three years |
2,523 | 2,842 | ||||||
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| $ | 8,509 | $ | 11,336 | |||||
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Actual maturities are expected to differ from contractual dates as a result of sales or earlier issuer redemptions.
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Note 4—Inventories
Inventories are stated at the lower of cost (first-in, first-out) or market and include material, labor and manufacturing overhead. The components of inventories are as follows:
| January 31, | ||||||||
| 2013 | 2012 | |||||||
| (In thousands) | ||||||||
|
Materials and Supplies |
$ | 6,654 | $ | 7,147 | ||||
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Work-in-Progress |
591 | 1,024 | ||||||
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Finished Goods |
3,934 | 2,468 | ||||||
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| $ | 11,179 | $ | 10,639 | |||||
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Included within finished goods inventory is $812,000 and $953,000 of demonstration equipment at January 31, 2013 and 2012, respectively.
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Note 5—Accrued Expenses
Accrued expenses consisted of the following:
| January 31, | ||||||||
| 2013 | 2012 | |||||||
| (In thousands) | ||||||||
|
Reserve for cash in escrow |
$ | 1,800 | $ | — | ||||
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Warranty |
350 | 343 | ||||||
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Professional fees |
174 | 246 | ||||||
|
Health insurance reimbursement reserve |
100 | 150 | ||||||
|
Dealer commissions |
91 | 149 | ||||||
|
R&D outsourcing |
— | 167 | ||||||
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Other |
649 | 752 | ||||||
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| $ | 3,164 | $ | 1,807 | |||||
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Note 6—Line of Credit
The Company has a $5,000,000 revolving bank line of credit with Wells Fargo Bank. Borrowings under this line of credit bear interest at either a fluctuating 75 basis points below the base rate, as defined in the agreement, or at a fixed rate 150 basis points above LIBOR. At January 31, 2013, there were no borrowings against this line and the entire line is currently available.
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Note 8—Income Taxes
The components of income from continuing operations before income taxes are as follows:
| Years Ended January 31, |
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| 2013 | 2012 | |||||||
| (In thousands) | ||||||||
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Domestic |
$ | 1,850 | $ | (1,103 | ) | |||
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Foreign |
1,035 | 1,747 | ||||||
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| $ | 2,885 | $ | 644 | |||||
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The components of the provision (benefit) for income taxes from continuing operations are as follows:
| Years Ended January 31, |
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| 2013 | 2012 | |||||||
| (In thousands) | ||||||||
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Current: |
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Federal |
$ | 425 | $ | (371 | ) | |||
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State |
(237 | ) | 11 | |||||
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Foreign |
366 | 516 | ||||||
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| 554 | 156 | |||||||
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Deferred: |
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Federal |
253 | (248 | ) | |||||
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State |
38 | (28 | ) | |||||
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Foreign |
2 | 23 | ||||||
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| 293 | (253 | ) | ||||||
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| $ | 847 | $ | (97 | ) | ||||
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The provision (benefit) for income taxes from continuing operations differs from the amount computed by applying the statutory federal income tax rate of 35% in fiscal 2013 and 34% in fiscal 2012 to income before income taxes due to the following:
| Years Ended January 31, |
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| 2013 | 2012 | |||||||
| (In thousands) | ||||||||
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Income tax provision at statutory rate |
$ | 1,010 | $ | 219 | ||||
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State taxes, net of federal tax effect |
114 | (12 | ) | |||||
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Officers life insurance |
4 | (93 | ) | |||||
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Change in valuation allowance |
(49 | ) | 35 | |||||
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Change in reserves related to ASC 740 liability |
(197 | ) | 61 | |||||
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Meals and entertainment |
55 | 40 | ||||||
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Domestic product deduction |
(60 | ) | — | |||||
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Share-based compensation |
26 | 54 | ||||||
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Tax-exempt income |
(16 | ) | (27 | ) | ||||
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Prior year tax filing true up adjustment |
90 | (157 | ) | |||||
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R&D credits |
(106 | ) | (175 | ) | ||||
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Foreign rate differential |
(22 | ) | (39 | ) | ||||
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Other, net |
(2 | ) | (3 | ) | ||||
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| $ | 847 | $ | (97 | ) | ||||
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The components of deferred income tax expense arise from various temporary differences and relate to items included in the statement of income. The tax effects of temporary differences that gave rise to significant portions of the deferred tax assets and liabilities are as follows:
| January 31, | ||||||||
| 2013 | 2012 | |||||||
| (In thousands) | ||||||||
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Deferred Tax Assets: |
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|
Inventory |
$ | 1,258 | $ | 1,515 | ||||
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Stock-Based Compensation |
403 | 380 | ||||||
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R&D Credits |
231 | 280 | ||||||
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Vacation Accrual |
349 | 355 | ||||||
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ASC 740 Liability Federal Benefit |
361 | 336 | ||||||
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Deferred Service Contract Revenue |
106 | 126 | ||||||
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Warranty Reserve |
135 | 132 | ||||||
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Reserve for Doubtful Accounts |
117 | 150 | ||||||
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Other |
166 | 336 | ||||||
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| 3,126 | 3,610 | |||||||
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Deferred Tax Liabilities: |
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Accumulated Tax Depreciation in Excess of Book Depreciation |
532 | 907 | ||||||
|
Currency Translation Adjustment |
189 | 155 | ||||||
|
Lease Amortization |
— | 70 | ||||||
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Other |
63 | 63 | ||||||
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|||||
| 784 | 1,195 | |||||||
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Subtotal |
2,342 | 2,415 | ||||||
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Valuation Allowance |
(231 | ) | (280 | ) | ||||
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Net Deferred Tax Assets |
$ | 2,111 | $ | 2,135 | ||||
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At January 31, 2013, we have state net operating loss carryforwards of $131,000, which can be used to offset future tax liabilities and expire at various dates beginning in fiscal 2024. At January 31, 2013 we have state research and development credit carryforwards of approximately $349,000, which can be used to offset future tax liabilities and expire at various dates beginning in fiscal 2013.
The valuation allowance at January 31, 2013 relates to certain state research and development tax credit carryforwards which are expected to expire unused. The change in the valuation allowance is a decrease of approximately $49,000 and represents a reduction in the reserve due to the expiration of research and development credits expiring during the current year net of federal benefit.
The Company reasonably believes that it is possible that some unrecognized tax benefits, accrued interest and penalties could decrease income tax expense in the next year due to either the review of previously filed tax returns or the expiration of certain statutes of limitation. A reconciliation of unrecognized tax benefits, excluding interest and penalties follows:
| 2013 | 2012 | |||||||
| (In thousands) | ||||||||
|
Balance at February 1 |
$780 | $727 | ||||||
|
Increases in prior period tax positions |
16 | 31 | ||||||
|
Increases in current period tax positions |
386 | 79 | ||||||
|
Reductions related to lapse of statute of limitations |
(241 | ) | (57 | ) | ||||
|
|
|
|
|
|||||
|
Balance at January 31 |
$ | 941 | $ | 780 | ||||
|
|
|
|
|
|||||
If the $941,000 is recognized, $580,000 would decrease the effective tax rate in the period in which each of the benefits is recognized and the remainder would be offset by a reversal of deferred tax assets.
During fiscal 2013 and 2012 the Company recognized $105,000 of benefit and $33,000 of expense, respectively, related to interest and penalties, which are included as a component of income tax expense in the accompanying statement of income. At January 31, 2013 and 2012, the Company had accrued potential interest and penalties of $348,000 and $453,000, respectively.
The Company and its subsidiaries file income tax returns in U.S. federal jurisdictions, various state jurisdictions, and various foreign jurisdictions. The Company is no longer subject to U.S. federal examinations prior to 2009.
At January 31, 2013, the Company has indefinitely reinvested $3,143,000 of the cumulative undistributed earnings of its foreign subsidiary in Germany, all of which would be subject to U.S. taxes if repatriated to the U.S. Through January 31, 2013, the Company has not provided deferred income taxes on the undistributed earnings of this subsidiary because such earnings are considered to be indefinitely reinvested. Non-U.S. income taxes are, however, provided on these undistributed earnings.
|
|||
Note 9—Contractual Obligations
The following table summarizes our contractual obligations:
| Total | 2014 | 2015 | 2016 | 2017 | 2018 and Thereafter |
|||||||||||||||||||
| (In thousands) | ||||||||||||||||||||||||
|
Purchase Commitments* |
$ | 9,420 | $ | 8,173 | $ | 1,247 | $ | — | $ | — | $ | — | ||||||||||||
|
Operating Lease Obligations |
$ | 887 | $ | 372 | $ | 273 | $ | 138 | 104 | — | ||||||||||||||
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|
|
|
|
|
|
|
|
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|
|
|
|||||||||||||
| $ | 10,307 | $ | 8,545 | $ | 1,520 | $ | 138 | $ | 104 | $ | — | |||||||||||||
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|
|
|
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|
|
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| * | Purchase commitments consists primarily of inventory and equipment purchase orders made in the ordinary course of business, including the purchase commitment agreement entered into with Buyer of the Asheboro operations as described in Note 2. |
The Company incurred rent and lease expenses in the amount of $607,000 and $706,000 for the fiscal years 2013 and 2012, respectively.
|
|||
Note 10—Nature of Operations, Segment Reporting and Geographical Information
The Company’s operations consist of the design, development, manufacture and sale of specialty data recorder and acquisition systems, label printing and applicator systems and related consumable supplies. The Company organizes and manages its business as a portfolio of products and services designed around a common theme of data acquisition and information output. The Company reports two reporting segments consistent with its sales product groups: Test & Measurement (T&M) and QuickLabel Systems (QuickLabel).
T&M produces data recording equipment used worldwide for a variety of recording, monitoring and troubleshooting applications for the aerospace, automotive, metal mill, power and telecommunications industries. QuickLabel produces an array of high-technology digital color and monochrome label printers, labeling software and consumables for a variety of commercial industries worldwide.
Business is conducted in the United States and through foreign affiliates in Canada and Europe. Manufacturing activities are primarily conducted in the United States. Sales and service activities outside the United States are conducted through wholly-owned entities and, to a lesser extent, through authorized distributors and agents. Transfer prices are intended to produce gross profit margins as would be associated with an arms-length transaction.
On January 31, 2013, the Company completed the sale of substantially all of the assets of its Grass Technologies Product Group (Grass) in order to focus on its existing core businesses. Grass produced a range of instrumentation equipment and supplies for clinical neurophysiology (EEG and epilepsy monitoring), polysomnography (PSG—Sleep Monitoring) and biomedical research applications used by universities, medical centers and companies engaged in a variety of clinical and research activities. Consequently, the Company has classified the results of operations of Grass as discontinued operations for all periods presented. Refer to Note 17 for further details.
The accounting policies of the reporting segments are the same as those described in the summary of significant accounting policies herein. The Company evaluates segment performance based on the segment profit before corporate and financial administration expenses.
Summarized below are the Net Sales and Segment Operating Profit (both in dollars and as a percentage of Net Sales) for each reporting segment:
| ($ in thousands) | Net Sales | Segment Operating Profit | Segment Operating Profit % of Net Sales |
|||||||||||||||||||||
| 2013 | 2012 | 2013 | 2012 | 2013 | 2012 | |||||||||||||||||||
|
T&M |
$ | 17,636 | $ | 17,138 | $ | 3,109 | $ | 2,425 | 17.6 | % | 14.1 | % | ||||||||||||
|
QuickLabel |
43,588 | 43,586 | 4,380 | 2,553 | 10.0 | % | 5.9 | % | ||||||||||||||||
|
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|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
|
Total |
$ | 61,224 | $ | 60,724 | 7,489 | 4,978 | 12.2 | % | 8.2 | % | ||||||||||||||
|
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|
|
|
|
|
|
|||||||||||||||||
|
Corporate Expenses |
4,563 | 3,969 | ||||||||||||||||||||||
|
Loss on Sale of Asheboro* |
— | (681 | ) | |||||||||||||||||||||
|
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|
|
|
|||||||||||||||||||||
|
Operating Income |
2,926 | 328 | ||||||||||||||||||||||
|
Other Income (Expense), Net |
(41 | ) | 316 | |||||||||||||||||||||
|
|
|
|
|
|||||||||||||||||||||
|
Income From Continuing Operations Before Income Taxes |
2,885 | 644 | ||||||||||||||||||||||
|
Income Tax Provision (Benefit) |
847 | (97 | ) | |||||||||||||||||||||
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|
|
|
|||||||||||||||||||||
| 2,038 | 741 | |||||||||||||||||||||||
|
Income from Discontinued Operations, Net of Taxes |
8,729 | 2,391 | ||||||||||||||||||||||
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|
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|
Net Income |
$ | 10,767 | $ | 3,132 | ||||||||||||||||||||
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| * | The Asheboro operations were part of the QuickLabel Systems segment. |
No customer accounted for greater than 10% of net sales in fiscal 2013 and 2012.
Other information by segment is presented below:
| (In thousands) | Assets | |||||||
| 2013 | 2012 | |||||||
|
T&M |
$ | 10,493 | $ | 10,300 | ||||
|
QuickLabel |
23,468 | 21,260 | ||||||
|
Discontinued Operations |
3,131 | 11,054 | ||||||
|
Corporate* |
42,821 | 24,448 | ||||||
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|
|
|
|||||
|
Total |
$ | 79,913 | $ | 67,062 | ||||
|
|
|
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|
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| * | Corporate assets consist of cash and cash equivalents, securities available for sale, income tax accounts and accruals. |
| (In thousands) | Depreciation and Amortization |
Capital Expenditures | ||||||||||||||
| 2013 | 2012 | 2013 | 2012 | |||||||||||||
|
T&M |
$ | 435 | $ | 567 | $ | 383 | $ | 497 | ||||||||
|
QuickLabel |
710 | 806 | 398 | 535 | ||||||||||||
|
Discontinued Operations |
186 | 203 | 68 | 122 | ||||||||||||
|
|
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|
|
|
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|
|||||||||
|
Total |
$ | 1,331 | $ | 1,576 | $ | 849 | $ | 1,154 | ||||||||
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|||||||||
Geographical Data
Presented below is selected financial information by geographic area:
| (In thousands) | Net Sales | Long-Lived Assets | ||||||||||||||
| 2013 | 2012 | 2013 | 2012 | |||||||||||||
|
United States |
$ | 44,613 | $ | 43,570 | $ | 6,741 | $ | 7,073 | ||||||||
|
Europe |
12,324 | 12,914 | 609 | 646 | ||||||||||||
|
Canada |
2,136 | 2,074 | 438 | 494 | ||||||||||||
|
Asia |
910 | 1,050 | — | — | ||||||||||||
|
Central and South America |
752 | 610 | — | — | ||||||||||||
|
Other |
489 | 506 | — | — | ||||||||||||
|
|
|
|
|
|
|
|
|
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|
Total |
$ | 61,224 | $ | 60,724 | $ | 7,788 | $ | 8,213 | ||||||||
|
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|
|
|
|
|
|
|
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Long-lived assets excludes goodwill assigned to the T&M segment of $0.7 million at January 31, 2013 and 2012.
|
|||
Note 11—Profit-Sharing Plan
Along with the ESOP described in Note 7, Astro-Med sponsors a Profit-Sharing Plan (the “Plan”) which provides retirement benefits to all eligible domestic employees. The Plan allows participants to defer a portion of their cash compensation and contribute such deferral to the Plan through payroll deductions. The Company makes matching contributions up to specified levels. The deferrals are made within the limits prescribed by Section 401(k) of the Internal Revenue Code.
All contributions are deposited into trust funds. It is the policy of the Company to fund any contributions accrued. The Company’s annual contribution amounts are determined by the Board of Directors. Contributions paid or accrued amounted to $261,000 and $259,000 in fiscal 2013 and 2012, respectively.
|
|||
Note 12—Product Warranty Liability
Astro-Med offers a manufacturer’s warranty for the majority of its hardware products. The specific terms and conditions of warranty vary depending upon the product sold and country in which the Company does business. For products sold in the United States, the Company provides a basic limited warranty, including parts and labor. The Company estimates the warranty costs based on historical claims experience and records a liability in the amount of such estimates at the time product revenue is recognized. The Company regularly assesses the adequacy of its recorded warranty liabilities and adjusts the amounts as necessary. Activity in the product warranty liability is as follows:
| January 31, | ||||||||
| 2013 | 2012 | |||||||
| (In thousands) | ||||||||
|
Balance, beginning of the year |
$ | 343 | $ | 258 | ||||
|
Warranties issued |
783 | 661 | ||||||
|
Settlements made |
(776 | ) | (576 | ) | ||||
|
|
|
|
|
|||||
|
Balance, end of the year |
$ | 350 | $ | 343 | ||||
|
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|
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|
|||
Note 13—Concentration of Risk
Credit is generally extended on an uncollateralized basis to almost all customers after review of credit worthiness. Concentration of credit and geographic risk with respect to accounts receivable is limited due to the large number and general dispersion of accounts which constitute the Company’s customer base. The Company periodically performs on-going credit evaluations of its customers. The Company has not historically experienced significant credit losses on collection of its accounts receivable.
Excess cash is invested principally in investment grade government and state municipal securities. The Company has established guidelines relative to diversification and maturities that maintain safety of principal, liquidity and yield. These guidelines are periodically reviewed and modified to reflect changes in market conditions. The Company has not historically experienced any significant losses on its cash equivalents or investments.
|
|||
Note 14—Commitments and Contingencies
Astro-Med is subject to contingencies, including legal proceedings and claims arising in the normal course of business that cover a wide range of matters including, among others, contract and employment claims, workers compensation claims, product liability, warranty and modification, adjustment or replacement of component parts of units sold.
Direct costs associated with the estimated resolution of contingencies are accrued at the earliest date at which it is deemed probable that a liability has been incurred and the amount of such liability can be reasonably estimated. While it is impossible to ascertain the ultimate legal and financial liability with respect to contingent liabilities, including lawsuits, the Company believes that the aggregate amount of such liabilities, if any, in excess of amounts provided or covered by insurance, will not have a material adverse effect on the consolidated financial position or results of operations. It is possible, however, that future results of operations for any particular future period could be materially affected by changes in our assumptions or strategies related to these contingencies or changes out of the Company’s control.
|
|||
Note 15—Fair Value Measurements
We measure our financial assets at fair value on a recurring basis in accordance with the guidance provided in ASC 820, “Fair Value Measurement and Disclosures,” which defines fair value as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. In addition, ASC 820 establishes a three-tiered hierarchy for inputs used in management’s determination of fair value of financial instruments that emphasizes the use of observable inputs over the use of unobservable inputs by requiring that observable inputs be used when available. Observable inputs are inputs that reflect management’s belief about the assumptions market participants would use in pricing a financial instrument based on the best information available in the circumstances.
The fair value hierarchy is summarized as follows:
| • |
Level 1—Quoted prices in active markets for identical assets or liabilities; |
| • |
Level 2—Inputs other than Level 1 that are observable, either directly or indirectly, such as quoted prices for similar assets or liabilities; quoted prices in markets that are not active or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities; and |
| • |
Level 3—Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities |
Cash and cash equivalents; accounts receivables; line of credit receivable; accounts payable, note receivable, accrued compensation and other expenses; and income tax payable are reflected in the condensed consolidated balance sheet at carrying value, which approximates fair value due to the short term nature of the these instruments.
Assets measured at fair value on a recurring basis are summarized below:
|
January 31, 2013 |
Level 1 | Level 2 | Level 3 | Total | ||||||||||||
| (In thousands) | ||||||||||||||||
|
Money market funds (included in cash and cash equivalents) |
$ | 8,784 | $ | — | $ | — | $ | 8,784 | ||||||||
|
State and municipal obligations (included in securities available for sale) |
8,509 | — | — | 8,509 | ||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
|
Total |
$ | 17,293 | $ | — | $ | — | $ | 17,293 | ||||||||
|
|
|
|
|
|
|
|
|
|||||||||
|
January 31, 2012 |
Level 1 | Level 2 | Level 3 | Total | ||||||||||||
| (In thousands) | ||||||||||||||||
|
Money market funds (included in cash and cash equivalents) |
$ | 5,922 | $ | — | $ | — | $ | 5,922 | ||||||||
|
State and municipal obligations (included in securities available for sale) |
11,336 | — | — | 11,336 | ||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
|
Total |
$ | 17,258 | $ | — | $ | — | $ | 17,258 | ||||||||
|
|
|
|
|
|
|
|
|
|||||||||
We did not have any transfers of investments into or out of Level 1 or Level 2 during fiscal 2013.
For our money market funds and state and municipal obligations, we utilize the market approach to measure fair value. The market approach is based on using quoted market prices for identical assets.
For our Note Receivable we utilized the income approach to measure fair value by discounting the present value of the Note. The discount rate used is based on similar rates used for high credit ratings and highly collateralized lending.
|
|||
Note 16—Life Insurance Proceeds
During the second quarter of fiscal 2012, we recognized income on key-man life insurance proceeds of $300,000. This income is included in other income in the accompanying consolidated statements of operations for the year end January 31, 2012.
|
|||
Note 17—Discontinued Operations
On January 31, 2013, the Company completed the sale of substantially all of the assets of its Grass Technologies Product Group (Grass) which manufactured polysomnography and electroencephalography systems and related accessories and propriety electrodes for use in both research and clinical settings. The assets sold consisted primarily of working capital (exclusive of inventory and accounts payable related to manufacturing), the engineering, sales and support workforce, intellectual property and certain other related assets. The proceeds from the sale consisted of $18.6 million in cash, of which $1.8 million which is being held in escrow for twelve months following the closing date of the transaction in order to provide indemnity to the purchaser in the event of any breach in the representation, warranties and covenants of Astro-Med and is fully reserved for in Other Accrued Expenses in the accompanying consolidated balance sheet for the period ended January 31, 2013.
As part of this transaction, Astro-Med entered into a Transition Service Agreement with the purchaser in which the Company will provide transition services and continue to manufacture Grass products for the purchaser for a period of between nine and twelve months following the closing date, after which the purchaser will acquire any remaining inventory. The Company has determined that cash flows from this activity will not be significant and therefore Grass has been presented as a discontinued operation for all periods presented.
As a result of the above, the Company has classified the results of operations of the Grass Technologies Product Group as a discontinued operation for all periods presented.
Results for discontinued operations are as follows:
| 2013 | 2012 | |||||||
| (In thousands) | ||||||||
|
Net Sales |
$ | 19,195 | $ | 18,469 | ||||
|
Cost of Sales |
$ | 9,072 | $ | 8,758 | ||||
|
Gross Profit |
$ | 10,123 | $ | 9,711 | ||||
|
Operating Expenses |
$ | 6,205 | $ | 6,122 | ||||
|
Income from Discontinued Operations |
$ | 3,918 | $ | 3,589 | ||||
|
Gain on Sale of Assets of Discontinued Operations |
$ | 10,162 | $ | — | ||||
|
Income Tax Expense |
$ | 5,351 | $ | 1,198 | ||||
|
Income from Discontinued Operations |
$ | 8,729 | $ | 2,391 | ||||
Included in the above calculation of the Gain on Sale of Assets of Discontinued Operations is a charge of $779,000 related to the impairment of the Grass Technologies Product Group facility located in Rockland, Massachusetts. The impairment charge was based on the fair value of the facility, less costs to sell, using market values for similar properties which is a Level 2 measurement in the fair value hierarchy discussed in Note 15. This property is being actively marketed and sale of this property is considered probable within the next twelve months and as such, the property is classified as an asset held for sale in the accompanying balance sheets for the period ended January 31, 2013.
|
|||
SCHEDULE II—VALUATION AND QUALIFYING ACCOUNTS AND RESERVES
|
Description |
Balance at Beginning of Year |
Provision Charged to Operations |
Deductions(2) | Balance at End of Year |
||||||||||||
|
Allowance for Doubtful Accounts(1): |
||||||||||||||||
| (In thousands) | ||||||||||||||||
|
Year Ended January 31, |
||||||||||||||||
|
2013 |
$ | 356 | $ | 70 | $ | (81 | ) | $ | 345 | |||||||
|
2012 |
$ | 547 | $ | 22 | $ | (213 | ) | $ | 356 | |||||||
| (1) | The allowance for doubtful accounts has been netted against accounts receivable as of the respective balance sheet dates. |
| (2) | Uncollectible accounts written off, net of recoveries, also includes foreign exchange adjustment. |
|
|||
Basis of Presentation: The accompanying financial data has been prepared by us pursuant to the rules and regulations of the U.S. Securities and Exchange Commission (SEC) and is in conformity with U.S. generally accepted accounting principles (“U.S. GAAP”). Our fiscal year end is January 31. Unless otherwise stated, all years and dates refer to our fiscal year.
On January 31, 2013, we completed the sale of substantially all of the assets of our Grass Technologies Product Group. Consequently, we have classified the results of operations of the Grass Technologies Product Group as discontinued operations for all periods presented. Refer to Note 17, “Discontinued Operations,” for further discussion.
Principles of Consolidation: The consolidated financial statements include the accounts of Astro-Med, Inc. and its subsidiaries. All material intercompany accounts and transactions are eliminated in consolidation.
Reclassification: Certain amounts in prior year’s financial statements have been reclassified to conform to the current year’s presentation.
Use of Estimates: The presentation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect these financial statements and accompanying notes. Some of the more significant estimates relate to the allowances for doubtful accounts and credits, inventory valuation, impairment of long-lived assets and goodwill, income taxes, share-based compensation and warranty reserves. Management’s estimates are based on the facts and circumstances available at the time estimates are made, past historical experience, risk of loss, general economic conditions and trends, and management’s assessments of the probable future outcome of these matters. Consequently, actual results could differ from those estimates.
Cash and Cash Equivalents: Highly liquid investments with an original maturity of 90 days or less are considered to be cash equivalents. Similar investments with original maturities beyond three months are classified as securities available for sale. Cash of $1,157,000 and $1,929,000 was held in foreign bank accounts at January 31, 2013 and 2012, respectively.
Securities Available for Sale: Securities available for sale are carried at fair value based on quoted market prices, where available. The difference between cost and fair value, net of related tax effects, is recorded as a component of accumulated other comprehensive income in shareholders’ equity.
Property, Plant and Equipment: Property, plant and equipment are stated at cost less accumulated depreciation. Depreciation is provided on the straight-line basis over the estimated useful lives of the assets (land improvements—10 to 20 years; buildings and improvements—10 to 45 years; machinery and equipment—3 to 10 years). Depreciation expense was $1,331,000 for fiscal 2013 and $1,576,000 for 2012.
Revenue Recognition: Astro-Med’s product sales are recognized when all of the following criteria have been met: persuasive evidence of an arrangement exists; price to the buyer is fixed or determinable; delivery has occurred and legal title and risk of loss have passed to the customer; and collectability is reasonably assured. Returns and customer credits are infrequent and are recorded as a reduction to sales. Rights of return are not included in sales arrangements. Revenue associated with products that contain specific customer acceptance criteria is not recognized before the customer acceptance criteria are satisfied. Discounts from list prices are recorded as a reduction to sales. Amounts billed to customers for shipping and handling fees are included in sales while related shipping and handling costs are included in cost of sales.
The majority of our equipment contains embedded operating systems and data management software which is included in the purchase price of the equipment. The software is deemed incidental to the systems as a whole as it is not sold separately or marketed separately and its production costs are minor as compared to those of the hardware system. Therefore, the Company’s hardware appliances are considered non-software elements and are not subject to the industry-specific software revenue recognition guidance.
Our multiple-element arrangements are generally comprised of a combination of equipment, software, installation and/or training services. Hardware and software elements are typically delivered at the same time and revenue is recognized when all the revenue recognition criteria for each unit are met. Delivery of installation and training services will vary based on certain factors such as the complexity of the equipment, staffing availability in a geographic location and customer preferences, and can range from a few days to a few months. Service revenue is deferred and recognized over the contractual period or as services are rendered and accepted by the customer.
We have evaluated the deliverables in our multiple-element arrangements and concluded that they are separate units of accounting if the delivered item or items have value to the customer on a standalone basis and delivery or performance of the undelivered item(s) is considered probable and substantially in our control. We allocate revenue to each element in our multiple-element arrangements based upon their relative selling prices. We determine the selling price for each deliverable based on a selling price hierarchy. The selling price for a deliverable is based on VSOE if available, third-party evidence (“TPE”) if VSOE is not available, or estimated selling price (“ESP”) if neither VSOE nor TPE is available. Revenue allocated to each element is then recognized when the basic revenue recognition criteria for that element have been met.
Infrequently, Astro-Med recognizes revenue for non-recurring engineering (NRE) fees for product modification orders upon completion of agreed-upon milestones. Revenue is deferred for any amounts received prior to completion of milestones. Certain of our NRE arrangements include formal customer acceptance provisions. In such cases, we determine whether we have obtained customer acceptance for the specific milestone before recognizing revenue. NRE fees have not been significant in the periods presented herein.
Infrequently, Astro-Med receives requests from customers to hold product purchased from us for the customer’s convenience. Revenue is recognized for such bill and hold arrangements in accordance with the requirements of SAB No. 104 which requires, among other things, the existence of a valid business purpose for the arrangement; the transfer of ownership of the purchased product; a fixed delivery date that is reasonable and consistent with the buyer’s business purpose; the readiness of the product for shipment; the use of customary payment terms; no continuing performance obligation by us and segregation of the product from our inventories.
Research and Development Costs: The Company complies with the guidance provided in the Financial Accounting Standards Board’s (“FASB”) Accounting Standards Codification (“ASC”) FASB 730, “Research and Development” by charging any costs to expense when incurred, as well as by disclosing in the financial statements the amount of Research & Development charged to expense. These charges include: salaries and benefits, external engineering service costs, engineering related information costs and supplies. The Company also complies with ASC 985-20, “Costs of Computer Software to be Sold, Leased or Marketed” and ASC 350-40, “Internal-Use Software” in accounting for the costs of software either developed or acquired.
Foreign Currency: The financial statements of foreign subsidiaries are measured using the local currency as the functional currency. Foreign currency denominated assets and liabilities are translated into U.S. dollars at year-end exchange rates with the translation adjustment recorded as a component of accumulated comprehensive income in shareholders’ equity. Revenues and costs are translated at average exchange rates during the year. We do not provide for U.S. income taxes on foreign currency translation adjustments associated with our German subsidiary since its undistributed earnings are considered to be permanently invested. Our net foreign exchange losses were $158,000 and $27,000 for fiscal 2013 and 2012, respectively.
Advertising: Astro-Med expenses advertising costs as incurred. Advertising costs including advertising production, trade shows and other activities are designed to enhance demand for our products and amounted to approximately $750,000 and $970,000 in fiscal 2013 and 2012, respectively.
Health Insurance Reimbursement Reserve: Astro-Med reimburses a portion of employee health insurance deductibles and co-payments. The total reimbursement amounted to approximately $313,000 and $487,000 in 2013 and 2012, respectively. We accrued approximately $100,000 and $150,000 at January 31, 2013 and 2012, respectively, for estimated outstanding reimbursements due to employees, including a reserve for incurred but not reported amounts.
Long-Lived Assets: Long-lived assets to be held and used are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of such assets may not be recoverable in accordance with the guidance provided in ASC 360, “Property, Plant and Equipment.” Determination of recoverability is based on an estimate of undiscounted future cash flows resulting from the use of the asset and its eventual disposition. Measurement of an impairment loss for long-lived assets that management expects to hold and use is based on the fair value of the asset.
In 2013, we recognized an impairment of $779,000 related to the Grass Technologies Product Group‘s manufacturing facilities located in Rockland, Massachusetts. This impairment was included as part of the Income from Discontinued Operations in the accompanying consolidated statement of income for the period ended January 31, 2013. Refer to Note 17, “Discontinued Operations,” for further discussion.
Goodwill: Management evaluates the recoverability of goodwill annually or more frequently if events or changes in circumstances, such as declines in sales, earnings or cash flows, or material adverse changes in the business climate, indicate that the carrying value of an asset might be impaired. During the fourth quarter of fiscal 2012, we adopted new accounting guidance which simplifies goodwill impairment testing. Under the new guidance, goodwill is first qualitatively assessed to determine whether further impairment testing is necessary. Factors that management considers in this assessment include macroeconomic conditions, industry and market considerations, overall financial performance (both current and projected), changes in management and strategy and changes in the composition or carrying amount of net assets. If this qualitative assessment indicates that it is more likely than not that the fair value of a reporting unit is less than its carrying amount, a two step process is then performed. Step one compares the fair value of the reporting unit with its carrying value, including goodwill. If the carrying amount exceeds the fair value of the reporting unit, step two is required to determine if there is an impairment of the goodwill. Step two compares the implied fair value of the reporting unit goodwill to the carrying amount of the goodwill. We estimate the fair value of our reporting units using the income approach based upon a discounted cash flow model. We believe that this approach is appropriate because it provides a fair value estimate based upon the reporting unit’s expected long–term operating cash flow performance. In addition, the Company uses the market approach, which compares the reporting unit to publicly-traded companies and transactions involving similar business, to support the conclusions based upon the income approach. The income approach requires the use of many assumptions and estimates including future revenue, expenses, capital expenditures, and working capital, as well as discount factors and income tax rates.
We performed a qualitative assessment for our 2013 analysis of goodwill. Based on this assessment, management does not believe that it is more likely than not that the carrying value of the reporting units exceed their fair values. Accordingly, no further testing was performed as management believes that there are no impairment issues in regards to goodwill at this time.
Income Taxes: Astro-Med uses the liability method of accounting for income taxes. Under this method, deferred tax assets and liabilities are determined based on the differences between the financial reporting basis and tax basis of the assets and liabilities and are measured using enacted tax rates that will be in effect when the differences are expected to reverse. An allowance against deferred tax assets is recognized when it is more-likely-than-not that some portion or all of the deferred tax assets will not be realized. At January 31, 2013 and 2012, a valuation allowance was provided for deferred tax assets attributable to certain state R&D credit carryforwards.
Astro-Med accounts for uncertain tax positions in accordance with the guidance provided in ASC 740, “Accounting for Income Taxes.” This guidance describes a recognition threshold and measurement attribute for the financial statement disclosure of tax positions taken or expected to be taken in a tax return and requires recognition of tax benefits that satisfy a more-likely-than-not threshold. ASC 740 also provides guidance on de-recognition, classification, interest and penalties, accounting in interim periods, disclosure and transition.
Net Income Per Common Share: Net income per common share has been computed and presented in accordance with the guidance provided in ASC 260, “Earnings per Share.” Basic net income per share is based on the weighted average number of shares outstanding during the period. Diluted net income per share is based on the basic weighted average number of shares and potential common equivalent shares for stock options, restricted stock awards and restricted stock units outstanding during the period using the treasury stock method. In fiscal years 2013 and 2012, there were 583,512 and 664,690 common equivalent shares that were not included in the computation of diluted net income per common share because their inclusion would be anti-dilutive.
Allowance for Doubtful Accounts: In circumstances where we are aware of a customer’s inability to meet its financial obligations, an allowance is established. The majority of accounts are individually evaluated on a regular basis and allowances are established to state such receivables at their net realizable value. The remainder of the allowance is based upon historical write-off experience and current market assessments.
Fair Value of Financial Instruments: Our financial instruments consist of cash and cash equivalents, investment securities, accounts receivable, a note receivable, a line of credit receivable and accounts payable. The carrying amount reflected in the consolidated balance sheets for cash and cash equivalents, accounts receivable and accounts payable approximates fair value due to the short-term nature of these items. Investment securities, all of which are available for sale, are carried in the consolidated balance sheets at fair value based on quoted market prices, when available. The note receivable is carried in the consolidated balance sheets at fair value based on the present value of the discounted cash flows over the life of the note.
Comprehensive Income: In accordance with the guidance provided in ASC 220, “Comprehensive Income,” we report the change in net assets during the period from non-owner sources by major components and as a single total in the Consolidated Statements of Comprehensive Income. Accumulated other comprehensive income at January 31, 2013 consists of net unrealized gains on available for sale securities of $7,000 and net translation gains on foreign operations of $166,000.
Share-Based Compensation: We account for share based awards granted to employees and directors using the FASB guidance included in ASC 718, “Stock Compensation.” Effective as of February 1, 2006, we adopted the “modified prospective” transition method provided in ASC 718. Under this method, share-based compensation is recognized in the consolidated statement of operation for share-based payment awards granted prior to, but not yet vested as of February 1, 2006, based on the grant date fair value estimated in accordance with prior authoritative guidance and for share-based payment awards granted subsequent to February 1, 2006, based on the grant date fair value estimated in accordance with the provisions of ASC 718.
In accordance with ASC 718, share-based compensation expense is based on the estimated fair value of the share-based award when granted to an employee or director. We have estimated the fair value of each option on the date of grant using the Black-Scholes option-pricing model. Our estimate of share-based compensation requires a number of complex and subjective assumptions including our stock price volatility, employee exercise patterns (expected life of the options), the risk-free interest rate and the Company’s dividend yield. The stock price volatility assumption is based on the historical weekly price data of our common stock over a period equivalent to the weighted average expected life of our options. Management evaluated whether there were factors during that period which were unusual and would distort the volatility figure if used to estimate future volatility and concluded that there were no such factors. In determining the expected life of the option grants, the Company has observed the actual terms of prior grants with similar characteristics and the actual vesting schedule of the grant and has assessed the expected risk tolerance of different option groups. The risk-free interest rate is based on the actual U.S. Treasury zero coupon rates for bonds matching the expected term of the option as of the option grant date. The dividend assumption is based upon the prior year’s average dividend yield. No compensation expense is recognized for options that are forfeited for which the employee does not render the requested service. Our accounting for share-based compensation for restricted stock awards (“RSAs”) and restricted stock units (“RSU”) is also based on the fair value method. The fair value of the RSUs and RSAs is based on the closing market price of the Company’s common stock on the grant date of the RSU or RSA.
The cash flow from the tax benefits that are a result of tax deductions in excess of the compensation cost recognized for those options (excess tax benefits) are classified as a cash inflow from financing activities and a cash outflow from operating activity in accordance with the guidance provided by ASC 718. Tax deductions from certain stock option exercises are treated as being realized when they reduce taxes payable in accordance with relevant tax law.
Recent Accounting Pronouncements:
Comprehensive Income
In February 2013, the FASB issued Accounting Standard Update (“ASU”) 2013-02, “Reporting of Amounts Reclassified Out of Accumulated Other Comprehensive Income,” which requires entities to provide information about the amounts reclassified out of accumulated other comprehensive income by component. In addition, entities are required to present, either on the face of the statement where net income is presented or in the notes, significant amounts reclassified out of accumulated other comprehensive income by the respective line items of net income but only if the amount reclassified is required under U.S. GAAP to be reclassified to net income in its entirety in the same reporting period. For other amounts that are not required under U.S. GAAP to be reclassified in their entirety to net income, entities are required to cross-reference to other disclosures required under U.S. GAAP that provide additional detail on these amounts. ASU 2013-02 is effective prospectively for reporting periods beginning after December 15, 2012. We will adopt this guidance in our first quarter ending May 4, 2013. Since ASU 2013-02 only impacts presentation and disclosure requirements, the adoption of this guidance will not have a material impact on the Company’s financial position or results of operations.
In June 2011, the FASB issued ASU 2011-05, “Presentation of Comprehensive Income,” which requires entities to present the components of net income and other comprehensive income either as one continuous statement or as two consecutive statements. ASU 2011-05 eliminates the option to present the components of other comprehensive income as part of the statement of changes in shareholders’ equity. While ASU 2011-05 changes the presentation of comprehensive income, it does not change the components that are recognized in net income or comprehensive income under current accounting guidance. ASU 2011-05 also requires entities to present reclassification adjustments out of accumulated other comprehensive income by component in both the statement in which net income is presented and the statement in which other comprehensive income is presented. In December 2011, the FASB issued ASU 2011-12, “Deferral of the Effective Date for Amendments to the Presentation of Reclassification of Items Out of Accumulated Other Comprehensive Income in Accounting Standard Update No. 2011-05,” which defers the guidance related to the presentation of reclassification adjustments. ASU 2011-05 is effective for interim and annual periods beginning after December 15, 2011, and must be applied retrospectively. We adopted this guidance in the first quarter of fiscal 2013 and have provided the disclosures required for the periods ended January 31, 2013 and 2012, in the accompanying Consolidated Statements of Comprehensive Income.
Intangibles
In July 2012, the FASB issued ASU 2012-02, “Testing Indefinite-Lived Intangible Assets for Impairment,” which allows entities to use a qualitative approach to test indefinite-lived intangible assets for impairment. ASU 2012-02 permits an entity to first assess qualitative factors to determine whether it is more likely than not that the fair value of the indefinite-lived intangible asset is less than its carrying value. If it is concluded that this is the case, it is necessary to perform the currently prescribed quantitative impairment test. Otherwise, the quantitative impairment test is not required. ASU 2012-02 is effective for annual and interim impairment tests performed for fiscal years beginning after September 15, 2012. The adoption of the provisions of ASU 2012-02 will not have a material impact on the Company’s financial position or results of operations.
|
|||
| Amortized Cost |
Gross Unrealized Gains |
Gross Unrealized Losses |
Fair Value | |||||||||||||
| (In thousands) | ||||||||||||||||
|
January 31, 2013 |
||||||||||||||||
|
State and Municipal Obligations |
$ | 8,499 | $ | 10 | $ | — | $ | 8,509 | ||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Amortized Cost |
Gross Unrealized Gains |
Gross Unrealized Losses |
Fair Value | |||||||||||||
|
January 31, 2012 |
||||||||||||||||
|
State and Municipal Obligations |
$ | 11,313 | $ | 23 | $ | — | $ | 11,336 | ||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| January 31, | ||||||||
| 2013 | 2012 | |||||||
| (In thousands) | ||||||||
|
Less than one year |
$ | 5,986 | $ | 8,494 | ||||
|
One to three years |
2,523 | 2,842 | ||||||
|
|
|
|
|
|||||
| $ | 8,509 | $ | 11,336 | |||||
|
|
|
|
|
|||||
|
|||
| January 31, | ||||||||
| 2013 | 2012 | |||||||
| (In thousands) | ||||||||
|
Materials and Supplies |
$ | 6,654 | $ | 7,147 | ||||
|
Work-in-Progress |
591 | 1,024 | ||||||
|
Finished Goods |
3,934 | 2,468 | ||||||
|
|
|
|
|
|||||
| $ | 11,179 | $ | 10,639 | |||||
|
|
|
|
|
|||||
|
|||
| January 31, | ||||||||
| 2013 | 2012 | |||||||
| (In thousands) | ||||||||
|
Reserve for cash in escrow |
$ | 1,800 | $ | — | ||||
|
Warranty |
350 | 343 | ||||||
|
Professional fees |
174 | 246 | ||||||
|
Health insurance reimbursement reserve |
100 | 150 | ||||||
|
Dealer commissions |
91 | 149 | ||||||
|
R&D outsourcing |
— | 167 | ||||||
|
Other |
649 | 752 | ||||||
|
|
|
|
|
|||||
| $ | 3,164 | $ | 1,807 | |||||
|
|
|
|
|
|||||
|
|||
| Years Ended January 31, |
||||||||
| 2013 | 2012 | |||||||
| (In thousands) | ||||||||
|
Domestic |
$ | 1,850 | $ | (1,103 | ) | |||
|
Foreign |
1,035 | 1,747 | ||||||
|
|
|
|
|
|||||
| $ | 2,885 | $ | 644 | |||||
|
|
|
|
|
|||||
| Years Ended January 31, |
||||||||
| 2013 | 2012 | |||||||
| (In thousands) | ||||||||
|
Current: |
||||||||
|
Federal |
$ | 425 | $ | (371 | ) | |||
|
State |
(237 | ) | 11 | |||||
|
Foreign |
366 | 516 | ||||||
|
|
|
|
|
|||||
| 554 | 156 | |||||||
|
|
|
|
|
|||||
|
Deferred: |
||||||||
|
Federal |
253 | (248 | ) | |||||
|
State |
38 | (28 | ) | |||||
|
Foreign |
2 | 23 | ||||||
|
|
|
|
|
|||||
| 293 | (253 | ) | ||||||
|
|
|
|
|
|||||
| $ | 847 | $ | (97 | ) | ||||
|
|
|
|
|
|||||
| Years Ended January 31, |
||||||||
| 2013 | 2012 | |||||||
| (In thousands) | ||||||||
|
Income tax provision at statutory rate |
$ | 1,010 | $ | 219 | ||||
|
State taxes, net of federal tax effect |
114 | (12 | ) | |||||
|
Officers life insurance |
4 | (93 | ) | |||||
|
Change in valuation allowance |
(49 | ) | 35 | |||||
|
Change in reserves related to ASC 740 liability |
(197 | ) | 61 | |||||
|
Meals and entertainment |
55 | 40 | ||||||
|
Domestic product deduction |
(60 | ) | — | |||||
|
Share-based compensation |
26 | 54 | ||||||
|
Tax-exempt income |
(16 | ) | (27 | ) | ||||
|
Prior year tax filing true up adjustment |
90 | (157 | ) | |||||
|
R&D credits |
(106 | ) | (175 | ) | ||||
|
Foreign rate differential |
(22 | ) | (39 | ) | ||||
|
Other, net |
(2 | ) | (3 | ) | ||||
|
|
|
|
|
|||||
| $ | 847 | $ | (97 | ) | ||||
|
|
|
|
|
|||||
| January 31, | ||||||||
| 2013 | 2012 | |||||||
| (In thousands) | ||||||||
|
Deferred Tax Assets: |
||||||||
|
Inventory |
$ | 1,258 | $ | 1,515 | ||||
|
Stock-Based Compensation |
403 | 380 | ||||||
|
R&D Credits |
231 | 280 | ||||||
|
Vacation Accrual |
349 | 355 | ||||||
|
ASC 740 Liability Federal Benefit |
361 | 336 | ||||||
|
Deferred Service Contract Revenue |
106 | 126 | ||||||
|
Warranty Reserve |
135 | 132 | ||||||
|
Reserve for Doubtful Accounts |
117 | 150 | ||||||
|
Other |
166 | 336 | ||||||
|
|
|
|
|
|||||
| 3,126 | 3,610 | |||||||
|
Deferred Tax Liabilities: |
||||||||
|
Accumulated Tax Depreciation in Excess of Book Depreciation |
532 | 907 | ||||||
|
Currency Translation Adjustment |
189 | 155 | ||||||
|
Lease Amortization |
— | 70 | ||||||
|
Other |
63 | 63 | ||||||
|
|
|
|
|
|||||
| 784 | 1,195 | |||||||
|
|
|
|
|
|||||
|
Subtotal |
2,342 | 2,415 | ||||||
|
Valuation Allowance |
(231 | ) | (280 | ) | ||||
|
|
|
|
|
|||||
|
Net Deferred Tax Assets |
$ | 2,111 | $ | 2,135 | ||||
|
|
|
|
|
|||||
| 2013 | 2012 | |||||||
| (In thousands) | ||||||||
|
Balance at February 1 |
$780 | $727 | ||||||
|
Increases in prior period tax positions |
16 | 31 | ||||||
|
Increases in current period tax positions |
386 | 79 | ||||||
|
Reductions related to lapse of statute of limitations |
(241 | ) | (57 | ) | ||||
|
|
|
|
|
|||||
|
Balance at January 31 |
$ | 941 | $ | 780 | ||||
|
|
|
|
|
|||||
|
|||
| Total | 2014 | 2015 | 2016 | 2017 | 2018 and Thereafter |
|||||||||||||||||||
| (In thousands) | ||||||||||||||||||||||||
|
Purchase Commitments* |
$ | 9,420 | $ | 8,173 | $ | 1,247 | $ | — | $ | — | $ | — | ||||||||||||
|
Operating Lease Obligations |
$ | 887 | $ | 372 | $ | 273 | $ | 138 | 104 | — | ||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
| $ | 10,307 | $ | 8,545 | $ | 1,520 | $ | 138 | $ | 104 | $ | — | |||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
|
|||
| ($ in thousands) | Net Sales | Segment Operating Profit | Segment Operating Profit % of Net Sales |
|||||||||||||||||||||
| 2013 | 2012 | 2013 | 2012 | 2013 | 2012 | |||||||||||||||||||
|
T&M |
$ | 17,636 | $ | 17,138 | $ | 3,109 | $ | 2,425 | 17.6 | % | 14.1 | % | ||||||||||||
|
QuickLabel |
43,588 | 43,586 | 4,380 | 2,553 | 10.0 | % | 5.9 | % | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
|
Total |
$ | 61,224 | $ | 60,724 | 7,489 | 4,978 | 12.2 | % | 8.2 | % | ||||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||||||||||
|
Corporate Expenses |
4,563 | 3,969 | ||||||||||||||||||||||
|
Loss on Sale of Asheboro* |
— | (681 | ) | |||||||||||||||||||||
|
|
|
|
|
|||||||||||||||||||||
|
Operating Income |
2,926 | 328 | ||||||||||||||||||||||
|
Other Income (Expense), Net |
(41 | ) | 316 | |||||||||||||||||||||
|
|
|
|
|
|||||||||||||||||||||
|
Income From Continuing Operations Before Income Taxes |
2,885 | 644 | ||||||||||||||||||||||
|
Income Tax Provision (Benefit) |
847 | (97 | ) | |||||||||||||||||||||
|
|
|
|
|
|||||||||||||||||||||
| 2,038 | 741 | |||||||||||||||||||||||
|
Income from Discontinued Operations, Net of Taxes |
8,729 | 2,391 | ||||||||||||||||||||||
|
|
|
|
|
|||||||||||||||||||||
|
Net Income |
$ | 10,767 | $ | 3,132 | ||||||||||||||||||||
|
|
|
|
|
|||||||||||||||||||||
| * | The Asheboro operations were part of the QuickLabel Systems segment. |
| (In thousands) | Assets | |||||||
| 2013 | 2012 | |||||||
|
T&M |
$ | 10,493 | $ | 10,300 | ||||
|
QuickLabel |
23,468 | 21,260 | ||||||
|
Discontinued Operations |
3,131 | 11,054 | ||||||
|
Corporate* |
42,821 | 24,448 | ||||||
|
|
|
|
|
|||||
|
Total |
$ | 79,913 | $ | 67,062 | ||||
|
|
|
|
|
|||||
| * | Corporate assets consist of cash and cash equivalents, securities available for sale, income tax accounts and accruals. |
| (In thousands) | Depreciation and Amortization |
Capital Expenditures | ||||||||||||||
| 2013 | 2012 | 2013 | 2012 | |||||||||||||
|
T&M |
$ | 435 | $ | 567 | $ | 383 | $ | 497 | ||||||||
|
QuickLabel |
710 | 806 | 398 | 535 | ||||||||||||
|
Discontinued Operations |
186 | 203 | 68 | 122 | ||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
|
Total |
$ | 1,331 | $ | 1,576 | $ | 849 | $ | 1,154 | ||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| (In thousands) | Net Sales | Long-Lived Assets | ||||||||||||||
| 2013 | 2012 | 2013 | 2012 | |||||||||||||
|
United States |
$ | 44,613 | $ | 43,570 | $ | 6,741 | $ | 7,073 | ||||||||
|
Europe |
12,324 | 12,914 | 609 | 646 | ||||||||||||
|
Canada |
2,136 | 2,074 | 438 | 494 | ||||||||||||
|
Asia |
910 | 1,050 | — | — | ||||||||||||
|
Central and South America |
752 | 610 | — | — | ||||||||||||
|
Other |
489 | 506 | — | — | ||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
|
Total |
$ | 61,224 | $ | 60,724 | $ | 7,788 | $ | 8,213 | ||||||||
|
|
|
|
|
|
|
|
|
|||||||||
|
|||
| January 31, | ||||||||
| 2013 | 2012 | |||||||
| (In thousands) | ||||||||
|
Balance, beginning of the year |
$ | 343 | $ | 258 | ||||
|
Warranties issued |
783 | 661 | ||||||
|
Settlements made |
(776 | ) | (576 | ) | ||||
|
|
|
|
|
|||||
|
Balance, end of the year |
$ | 350 | $ | 343 | ||||
|
|
|
|
|
|||||
|
|||
|
January 31, 2013 |
Level 1 | Level 2 | Level 3 | Total | ||||||||||||
| (In thousands) | ||||||||||||||||
|
Money market funds (included in cash and cash equivalents) |
$ | 8,784 | $ | — | $ | — | $ | 8,784 | ||||||||
|
State and municipal obligations (included in securities available for sale) |
8,509 | — | — | 8,509 | ||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
|
Total |
$ | 17,293 | $ | — | $ | — | $ | 17,293 | ||||||||
|
|
|
|
|
|
|
|
|
|||||||||
|
January 31, 2012 |
Level 1 | Level 2 | Level 3 | Total | ||||||||||||
| (In thousands) | ||||||||||||||||
|
Money market funds (included in cash and cash equivalents) |
$ | 5,922 | $ | — | $ | — | $ | 5,922 | ||||||||
|
State and municipal obligations (included in securities available for sale) |
11,336 | — | — | 11,336 | ||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
|
Total |
$ | 17,258 | $ | — | $ | — | $ | 17,258 | ||||||||
|
|
|
|
|
|
|
|
|
|||||||||
|
|||
| 2013 | 2012 | |||||||
| (In thousands) | ||||||||
|
Net Sales |
$ | 19,195 | $ | 18,469 | ||||
|
Cost of Sales |
$ | 9,072 | $ | 8,758 | ||||
|
Gross Profit |
$ | 10,123 | $ | 9,711 | ||||
|
Operating Expenses |
$ | 6,205 | $ | 6,122 | ||||
|
Income from Discontinued Operations |
$ | 3,918 | $ | 3,589 | ||||
|
Gain on Sale of Assets of Discontinued Operations |
$ | 10,162 | $ | — | ||||
|
Income Tax Expense |
$ | 5,351 | $ | 1,198 | ||||
|
Income from Discontinued Operations |
$ | 8,729 | $ | 2,391 | ||||
|
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