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What changed in AstroNova, Inc.'s 10-K — 2022 vs 2023

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Paragraph-level year-over-year comparison of AstroNova, Inc.'s 2022 and 2023 10-K annual filings, covering the Business, Risk Factors, Legal Proceedings, Cybersecurity, MD&A and Market Risk sections. Every new, removed and edited paragraph is highlighted side-by-side so you can see exactly what management changed in the 2023 report.

+289 added−256 removedSource: 10-K (2023-04-17) vs 10-K (2022-04-18)

Top changes in AstroNova, Inc.'s 2023 10-K

289 paragraphs added · 256 removed · 181 edited across 6 sections

Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

72 edited+50 added−17 removed69 unchanged
Biggest changeAny failure or perceived failure by us (or any third parties with whom we have contracted to store such information) to comply with applicable privacy and security laws, policies or related contractual obligations or any compromise of security that results in unauthorized access to personal information may result in governmental enforcement actions, significant fines, litigation, claims of breach of contract and indemnity by third parties and adverse publicity.
Biggest changeThere is no assurance that we will not be subject to claims that we have violated applicable laws or codes of conduct, that we will be able to successfully defend against such claims or that we will not be subject to significant fines and penalties in the event we are found not to be in compliance with such laws or codes of conduct. 21 Any failure or perceived failure by us (or any third parties with whom we have contracted to store such information) to comply with applicable privacy and security laws, policies or related contractual obligations or any compromise of security that results in unauthorized access to personal information may result in governmental enforcement actions, significant fines, litigation, claims of breach of contract and indemnity by third parties and adverse publicity.
We spend a significant amount of time and effort on the development of our airborne and color printer products as well as our acquisition and data recorder products.
We spend a significant amount of time and effort on the development of our airborne and color printer products as well as our data acquisition and recorder products.
In addition, through our acquisitions, we have assumed, and may in the future assume, liabilities related to products previously developed by an acquired company that have not been subjected to adequate product development, testing and quality control processes, and may have unknown or undetected defects.
In addition, through our acquisitions, we have assumed, and may in the future assume, liabilities related to products previously developed by an acquired company that may not have been subjected to adequate product development, testing and quality control processes, and may have unknown or undetected defects.
In any acquisition that we complete we cannot be certain that: • We will successfully integrate the operations of the acquired business with our own; • All the benefits expected from such integration will be realized; • Management’s attention will not be diverted or divided, to the detriment of current operations; • Amortization of acquired intangible assets or possible impairment of acquired intangibles will not have a negative impact on operating results or other aspects of our business; • Delays or unexpected costs related to the acquisition will not have a detrimental impact on our business, operating results and financial condition; • Customer dissatisfaction with, or performance problems at, an acquired company will not have an adverse impact on our reputation; and • Respective operations, management and personnel will be compatible.
In any acquisition that we complete, we cannot be certain that: • We will successfully integrate the operations of the acquired business with our own; 17 • All the benefits expected from such integration will be realized; • Management’s attention will not be diverted or divided, to the detriment of current operations; • Amortization of acquired intangible assets or possible impairment of acquired intangibles will not have a negative impact on operating results or other aspects of our business; • Delays or unexpected costs related to the acquisition will not have a detrimental impact on our business, operating results and financial condition; • Customer dissatisfaction with, or performance problems at, an acquired company will not have an adverse impact on our reputation; and • Respective operations, management and personnel will be compatible.
We will continue to monitor our supply chain going forward and update our mitigation strategies as we determine appropriate. We are not able to predict how current supply chain difficulties will develop in the future, and if the steps we are taking are not effective, it could have a material adverse impact on our results of operations.
We will continue to monitor our supply chain going forward and update our mitigation strategies as we determine appropriate. We are not able to predict how current supply chain difficulties will develop in the future, and if the steps we are taking are not effective, it could have a material adverse impact on our business and results of operations.
We desire to reduce and ultimately eliminate any adverse environmental impact of our business and to comply with relevant laws and regulations. We expect this effort to affect our ongoing operations and require additional capital and operating expenditures. If we were to fail to manage our environmental compliance effectively, we could suffer economic or reputational harm.
We desire to reduce and ultimately eliminate any adverse environmental impact of our 20 business and to comply with relevant laws and regulations. We expect this effort to affect our ongoing operations and require additional capital and operating expenditures. If we were to fail to manage our environmental compliance effectively, we could suffer economic or reputational harm.
We compete based on technology, performance, price, quality, reliability, brand, distribution and customer service and support. Our success in future performance is largely dependent upon our ability to compete successfully in the markets we currently serve and to expand into additional market segments.
We compete based 11 on technology, performance, price, quality, reliability, brand, distribution and customer service and support. Our success in future performance is largely dependent upon our ability to compete successfully in the markets we currently serve and to expand into additional market segments.
However, in the future such events could result in legal claims or proceedings, liability or penalties under privacy laws, disruption in operations, and damage to our brand and reputation, all of which could adversely affect our business, operating results and financial condition.
However, in the future, such events could result in legal claims or proceedings, liability or 13 penalties under privacy laws, disruption in operations, and damage to our brand and reputation, all of which could adversely affect our business, operating results and financial condition.
If we are not able to successfully integrate or divest businesses, products, technologies or personnel that we acquire or divest, or able to realize expected benefits of our acquisitions, divestitures or strategic partnerships, our business, results of operations and financial condition could be adversely affected.
If we are not able to successfully integrate or divest businesses, products, technologies or personnel that we acquire or divest, or able to realize the expected benefits of our acquisitions, divestitures or strategic partnerships, our business, results of operations and financial condition could be adversely affected.
Our credit agreement with Bank of America requires us, among other things, to satisfy certain financial ratios on an ongoing basis, consisting of a maximum consolidated leverage ratio and a minimum consolidated fixed charge coverage ratio.
Our credit agreement with Bank of America requires us, among other things, to satisfy certain financial ratios on an ongoing basis, consisting of a maximum consolidated leverage ratio, a minimum consolidated fixed charge coverage ratio and an asset coverage ratio.
There is substantial competition for skilled personnel, and the failure to attract, develop, retain and motivate qualified personnel could negatively impact our business, financial condition, results of operations and prospects.
There is substantial competition for skilled personnel, and the failure to attract, develop, retain and motivate adequately qualified personnel could negatively impact our business, financial condition, results of operations and prospects.
Accordingly, our business, operating results and financial condition could be harmed by a variety of factors, including: • Interruption to transportation flows for delivery of parts to us and finished goods to our customers; • Customer and vendor financial stability; • Fluctuations in foreign currency exchange rates; • Changes in a specific country’s or region’s environment including political, economic, monetary, regulatory or other conditions; • Trade protection measures and import or export licensing requirements; • Negative consequences from changes in tax laws; • Difficulty in managing and overseeing operations that are distant and remote from corporate headquarters; • Difficulty in obtaining and maintaining adequate staffing; • Differing labor regulations; • Failure to comply with complex and rapidly changing government economic sanctions measures against other countries, especially arising from responses to armed conflict; • Unexpected changes in regulatory requirements; • Uncertainty surrounding the implementation and effects of the United Kingdom’s withdrawal from the EU, commonly known as “Brexit”; and • Geopolitical turmoil, including terrorism, war and public health disruptions, such as that caused by the current COVID-19 pandemic.
Accordingly, our business, operating results and financial condition could be harmed by a variety of factors, including: • Interruption to transportation flows for delivery of parts to us and finished goods to our customers; • Customer and vendor financial stability; • Fluctuations in foreign currency exchange rates; • Changes in a specific country’s or region’s environment including political, economic, monetary, regulatory or other conditions; • Trade protection measures and import or export licensing requirements; • Negative consequences from changes in tax laws; • Difficulty in managing and overseeing operations that are distant and remote from corporate headquarters; 15 • Difficulty in obtaining and maintaining adequate staffing; • Differing labor regulations; • Failure to comply with complex and rapidly changing government economic sanctions against other countries, especially arising from responses to armed conflict; • Unexpected changes in regulatory requirements; • Uncertainty surrounding the implementation and effects of the United Kingdom’s withdrawal from the EU, commonly known as “Brexit”; and • Geopolitical turmoil, including terrorism, war and public health disruptions, such as that caused by the COVID-19 pandemic or Russia’s invasion of Ukraine.
It is possible, however, that our actual liabilities may exceed our estimates of loss. We may also experience an unexpectedly large number of claims that result in costs or liabilities in excess of our projections, which could cause us to record additional expenses, which could adversely impact our business, financial condition, results of operations and cash flow.
It is possible, however, that our actual liabilities may exceed our estimates of losses. We may also experience an unexpectedly large number of claims that result in costs or liabilities in excess of our projections, which could cause us to record additional expenses, which could adversely impact our business, financial condition, results of operations and cash flow.
We are also required to comply with other covenants and conditions, set forth in the credit agreement, including, among others, limitations on our and our subsidiaries’ ability to incur future indebtedness, to place liens on assets, to pay dividends or distributions on their capital stock, to repurchase or 15 Table of Contents acquire their capital stock, to conduct mergers or acquisitions, to sell assets, to alter their capital structure, to make investments and loans, to change the nature of their business, and to prepay subordinated indebtedness, in each case subject to certain exceptions and thresholds as set forth in the credit agreement.
We are also required to comply with other covenants and conditions, set forth in the credit agreement, including, among others, limitations on our and our subsidiaries’ ability to incur future indebtedness, to place liens on assets, to pay dividends or distributions on their capital stock, to repurchase or acquire their capital stock, to conduct mergers or acquisitions, to sell assets, to alter their capital structure, to make investments and loans, to change the nature of their business, and to prepay subordinated indebtedness, in each case subject to certain exceptions and thresholds as set forth in the credit agreement.
In certain instances, as permitted by applicable law and NASDAQ rules, acquisitions may be consummated without seeking and obtaining shareholder approval, in which case shareholders will not have an opportunity to consider and vote upon the merits of such an acquisition.
In certain instances, as permitted by applicable law and NASDAQ rules, acquisitions, such as the Astro Machine acquisition, may be consummated without seeking and obtaining shareholder approval, in which case shareholders will not have an opportunity to consider and vote upon the merits of such an acquisition.
These systems are vulnerable to damage, disruptions and/or shutdowns due to attack by cyber-criminals, data breaches, employee error, power outages, computer viruses, telecommunication or utility failures, systems failures, natural disasters, catastrophic events or other unforeseen events.
These systems are vulnerable to damage, disruptions and/or shutdowns due to attacks by cyber-criminals, data breaches, employee error, power outages, computer viruses, telecommunication or utility failures, systems failures, natural disasters, catastrophic events or other unforeseen events.
Thus, we have and will continue to generate a generally limited amounts of hazardous wastes in our operations. We manage our compliance with laws and regulations and the proper mitigation of risks internally and through the input or external consultants and outside service providers and we believe we are in material compliance with all applicable environmental laws and regulations.
Thus, we have and will continue to generate a generally limited amounts of hazardous waste in our operations. We manage our compliance with laws and regulations and the proper mitigation of risks internally and through the input of external consultants and outside service providers and we believe we are in material compliance with all applicable environmental laws and regulations.
Our continued access to capital markets, the stability of our lenders and their willingness to support our needs, and the stability of the counter-parties to our financial transactions that hedge risks are essential for us to meet our current and long-term obligations, fund operations, and fund our future strategic initiatives.
Our continued access to capital markets, the stability of our lenders and their willingness to support our needs, and the stability of the counterparties to our financial transactions that hedge risks are essential for us to meet our current and long-term obligations, fund operations, and fund our future strategic initiatives.
In order to hire new personnel or retain or replace our key personnel, we must maintain competitive compensation and benefits, and we may also be required to increase compensation, which would decrease net income. Additionally, several key employees have special knowledge of customers, supplier relationships, business processes, manufacturing operations, and financial management issues.
In order to hire new personnel or retain or replace our key personnel, we must maintain competitive compensation and benefits, and we may also be required to increase compensation, which would decrease net income. Additionally, several key employees have special knowledge of customers, supplier relationships, business processes, manufacturing operations, regulatory and customer quality compliance management, and financial management issues.
An interruption in our access to external financing or financial transactions to hedge risk could materially and adversely affect our business and financial condition. Inadequate self-insurance accruals or insurance coverage for employee health care benefits could have an adverse effect on our business, financial results or financial condition.
An interruption in our access to external financing or financial transactions to hedge risk could materially and adversely affect our business and financial condition. Inadequate self-insurance accruals or insurance coverage for employee healthcare benefits could have an adverse effect on our business, financial results or financial condition.
We are also continually reviewing our operations with a view towards reducing our cost structure, including but not limited to reducing our labor cost-to-revenue ratio, improving process and system efficiencies and 11 Table of Contents outsourcing certain internal functions. From time to time, we also engage in restructuring actions to reduce our cost structure.
We are also continually reviewing our operations with a view towards reducing our cost structure, including but not limited to reducing our labor cost-to-revenue ratio, improving process and system efficiencies and outsourcing certain internal functions. From time to time, we also engage in restructuring actions to reduce our cost structure.
We rely on on-premises and cloud-based information technology systems, some of which are managed by or licensed from third parties, to support many critical aspects of our business, as well as, to process, transmit and 12 Table of Contents store our own electronic proprietary or confidential information, and confidential information of customers, employees, suppliers and others including personally identifiable information, credit card data, and other proprietary confidential information.
We rely on on-premise and cloud-based information technology systems, some of which are managed by or licensed from third parties, to support many critical aspects of our business, as well as to process, transmit and store our own electronic proprietary or confidential information, and confidential information of customers, employees, suppliers and others, including personally identifiable information, credit card data, and other proprietary confidential information.
We operate in parts of the world that have experienced governmental corruption 18 Table of Contents to some degree, and in certain circumstances, strict compliance with anti-corruption laws may conflict with local customs and practices.
We operate in parts of the world that have experienced governmental corruption to some degree, and in certain circumstances, strict compliance with anti-corruption laws may conflict with local customs and practices.
Revenue from international operations, which includes both direct and indirect sales to customers outside the U.S., accounted for approximately 40% of our total revenue for fiscal year 2022, and we anticipate that international sales will continue to account for a significant portion of our revenue. In addition, we have employees, suppliers, contractors and facilities located outside the U.S.
Revenue from international operations, which includes both direct and indirect sales to customers outside the U.S., accounted for approximately 35% of our total revenue for fiscal 2023, and we anticipate that international sales will continue to account for a significant portion of our revenue. In addition, we have employees, suppliers, contractors and facilities located outside the U.S.
We record a liability for our estimated cost of U.S. claims incurred and unpaid as of each balance sheet date. Our estimated liability is recorded on an undiscounted basis and is based on historical trends. Our history of claims activity is closely monitored, and liabilities are adjusted as warranted based on changing circumstances.
We record a liability for our estimated cost of U.S. claims incurred and unpaid as of each balance sheet date. Our estimated liability is recorded on an undiscounted basis and is based on historical trends and data provided by our insurance broker. Our history of claims activity is closely monitored, and liabilities are adjusted as warranted based on changing circumstances.
We are also monitoring and reacting to extended lead times on electronic components and utilizing a variety of strategies, including blanket orders, vendor-bonded inventories, extended commitments to our supply base, and seeking alternative suppliers.
For our T&M segment, we are also monitoring and reacting to extended lead times on electronic components, and utilizing a variety of strategies, including blanket orders, vendor-bonded inventories, extended commitments to our supply base, and seeking alternative suppliers.
Although we will endeavor to evaluate the risks inherent in an acquisition, there can be no assurance that we will properly ascertain or assess such risks. 16 Table of Contents We may also divest certain businesses from time to time.
Although we will endeavor to evaluate the risks inherent in an acquisition, there can be no assurance that we will properly ascertain or assess such risks. We may also divest certain businesses from time to time.
Changes to tax laws and regulations or changes to the interpretation thereof (including regulations and interpretations pertaining to the 2017 Tax Cuts and Jobs Act), the ambiguity of tax laws and regulations, the subjectivity of factual interpretations, uncertainties regarding the geographic mix of earnings in any particular period, and other factors, could have a material impact on our estimates of our effective tax rate and our deferred tax assets and liabilities.
Changes to tax laws and regulations or changes to the interpretation thereof, the ambiguity of tax laws and regulations, the subjectivity of factual interpretations, uncertainties regarding the geographic mix of earnings in any particular period, and other factors, could have a material impact on our estimates of our effective tax rate and our deferred tax assets and liabilities.
Generally accepted accounting principles and related accounting pronouncements, implementation guidelines, and interpretations with regard to a wide range of matters that are relevant to our business, such as 19 Table of Contents revenue recognition, asset impairment and fair value determinations, inventories, business combinations and intangible asset valuations, leases, and litigation, are highly complex and involve many subjective assumptions, estimates and judgments.
Generally accepted accounting principles and related accounting pronouncements, implementation guidelines, and interpretations with regard to a wide range of matters that are relevant to our business, such as revenue recognition, asset impairment and fair value determinations, inventories, business combinations and intangible asset valuations, income taxes, and warranties, are highly complex and involve many subjective assumptions, estimates and judgments.
For example, the 2020 grounding, suspension and subsequent slow restart of production of the Boeing 737 MAX, and then the effect of the COVID-19 pandemic on the demand for new aircraft, reduced demand for our airborne printers that are installed on that aircraft, as well as the related repairs and supplies, which has negatively affected our results of operations.
For example, the 2020 grounding, suspension and subsequent slow restart of production of the Boeing 737 MAX, coupled with the negative impact of the COVID-19 pandemic on the demand for new aircraft and travel, reduced the demand for our airborne printers, as well as for the related repairs and supplies which has negatively affected our results of operations.
We may not realize the anticipated benefits of past or future acquisitions, divestitures and strategic partnerships, and integration of acquired companies or divestiture of businesses may negatively impact our overall business. We have made strategic investments in other companies, products and technologies.
We may not realize the anticipated benefits of past or future acquisitions, divestitures and strategic partnerships, and integration of acquired companies or divestiture of businesses may negatively impact our overall business. We have made strategic investments in other companies, products and technologies, including our August 2022 acquisition of Astro Machine LLC and 2017 acquisition of TrojanLabel.
Foreign Corrupt Practices Act, and any determination that we or any of our subsidiaries has violated the Foreign Corrupt Practices Act could have a material adverse effect on our business. The U.S.
Our operations are subject to anti-corruption laws, including the U.S. Foreign Corrupt Practices Act, and any determination that we or any of our subsidiaries has violated the Foreign Corrupt Practices Act could have a material adverse effect on our business. The U.S.
The aerospace industry, which we serve through our aerospace product line, has also been significantly disrupted by the COVID-19 pandemic, both inside and outside of the United States because of the severe decline in the demand for air travel, demand for aircraft, and a general curtailment of aircraft production rates.
The aerospace industry, which we serve through our aerospace product line, was significantly disrupted by the COVID-19 pandemic, both inside and outside of the United States because of the severe decline in the demand for air travel, demand for aircraft, and a general curtailment of aircraft production rates. This had a material adverse impact on our financial results.
The GDPR, which is applicable to all companies processing data of European Union residents, imposes significant fines and sanctions for violations.
The GDPR, which is applicable to all companies processing data of European Union residents, imposes significant fines and sanctions for violations. These requirements are complicated and compliance is technically complex to maintain.
If one of our significant subcontractors becomes unable or unwilling to continue to manufacture or provide these products in required volumes or fails to meet our quality standards, we will have to identify qualified alternate subcontractors or take over the manufacturing ourselves.
If one of our significant subcontractors becomes unable or unwilling to continue to manufacture or provide these products in required volumes, fails to meet our quality standards, or imposes rapid price increases that we cannot recover in the market, we will have to identify alternate qualified subcontractors, take over the manufacturing ourselves, or redesign our products to use components from other suppliers.
For example, due to the continued global COVID-19 pandemic, there has been and likely will continue to be disruption to our supply chain due to the delays of component shipments from our vendors in China and other jurisdictions in which normal business operations are disrupted.
For example, as a result of the global COVID-19 pandemic, there was a disruption to our supply chain due to the delays of component shipments from our vendors in China and other jurisdictions in which normal business operations were disrupted.
Additionally, if any single or limited source supplier becomes unable or unwilling to continue to supply these components, assembled products or supplies in required volumes, we will have to identify and qualify acceptable replacements or redesign our products with different components. Alternative sources may not be available, or product redesign may not be feasible on a timely basis.
Additionally, if any single or limited source supplier becomes unable or unwilling to continue to supply components, assembled products or supplies in required volumes or at acceptable prices, we will have to identify and qualify acceptable replacements or redesign our products with different components.
In many cases we have had to expedite delivery of critical materials through significantly higher cost airfreight methods. Our ability to offset these effects through pricing actions for our products and services may not prove sufficient to offset these or further cost increases. Attempts to increase prices may not hold in the face of customer resistance and/or competition.
This has been exacerbated by increases in the cost of transportation to expedite incoming components and supplies. In many cases, we have had to expedite delivery of critical materials through significantly higher cost airfreight methods. Our ability to offset these effects through pricing actions for our products and services may not prove sufficient to offset these or further cost increases.
We depend on our key employees and other highly qualified personnel and our ability to attract and develop new, talented professionals. Our inability to attract and retain key employees, as well as challenges with respect to the management of human capital resources, could compromise our future success and our business could be harmed.
Our inability to attract and retain key employees, as well as challenges with respect to the management of human capital resources, could compromise our future success and our business could be harmed.
If we do not comply with applicable laws, rules and regulations we could be subject to costs and liabilities and our business may be adversely impacted. Certain of our operations and products are subject to environmental, health and safety laws and regulations, which may result in substantial compliance costs or otherwise adversely affect our business.
Certain of our operations and products are subject to environmental, health and safety laws and regulations, which may result in substantial compliance costs or otherwise adversely affect our business.
Examples of some of these impacts on us include reduced availability of certain electronic components and the need to pay premium prices to obtain them, and noticeably higher costs for a wide array of other parts and raw material components. This has been exacerbated by significant increases in the cost of transportation to expedite incoming components and supplies.
Examples of some of these impacts on us include reduced availability of certain electronic components and the need to pay premium prices to obtain them, and noticeably higher costs for a wide array of other parts and raw material components in both of our product segments.
Any sustained labor shortage or increased turnover rates within our employee base, whether caused by COVID-19 or as a result of general macroeconomic factors or wage competition, could lead to increased costs and lost profitability and could otherwise compromise us in efficiently operating our business. We may record future impairment charges, which could materially adversely impact our results of operations.
Any sustained labor shortage or increased turnover rates within our employee base, could lead to increased costs and lost profitability and could otherwise compromise our ability to efficiently operate our business. We may record future impairment charges, which could materially adversely impact our results of operations.
We assess goodwill for impairment at the reporting unit level 13 Table of Contents and, monitor the key drivers of fair value to detect events or other changes that would warrant an interim impairment test of our goodwill and intangible assets.
We test our goodwill balances annually, or more frequently if indicators are present or changes in circumstances suggest that impairment may exist. We assess goodwill for impairment at the reporting unit level and monitor the key drivers of fair value to detect events or other changes that would warrant an interim impairment test of our goodwill and intangible assets.
If these suppliers do not meet demand, either in volume or quality, then we could be materially harmed. Although we use standard parts and components for our products where possible, we purchase certain components, assembled products and supplies used in the manufacture of our products from a single source or limited supplier sources.
Although we use standard parts and components for our products where possible, we purchase certain components, assembled products and supplies used in the manufacture of our products from a single source or limited supplier sources.
Relying on subcontractors involves a number of significant risks, including: • Disruptions in the global supply chain; • Limited control over the manufacturing process; • Potential absence of adequate production capacity; • Potential delays in production lead times; • Unavailability of certain process technologies; and • Reduced control over delivery schedules, manufacturing yields, quality and costs.
Relying on subcontractors involves a number of significant risks, including: • Disruptions in the global supply chain; • Limited control over the manufacturing process; 10 • Potential absence of adequate production capacity; • Potential delays in production lead times; • Unavailability of certain process technologies; • Reduced control over delivery schedules, manufacturing yields, quality and costs and • Exposure to rapid unplanned cost increases that cannot be adequately recovered by customer price increases due to market competition or contractual constraints.
In certain industries and for certain products, such as those used in aircraft, we must obtain certifications for our products by customers, regulators or standards organizations.
Legal and Regulatory Risks: Certain of our products require certifications by customers, regulators or standards organizations, and our failure to obtain or maintain such certifications could negatively impact our business. In certain industries and for certain products, such as those used in aircraft, we must obtain certifications for our products by customers, regulators or standards organizations.
Litigation may be necessary to protect our intellectual property rights or defend against claims of infringement, which could result in significant costs and divert our management’s focus away from operations. We have significant inventories on hand.
Any diminution in our ability to defend against the unauthorized use of these rights and assets could have an adverse effect on our results of operations and financial condition. Litigation may be necessary to protect our intellectual property rights or defend against claims of infringement, which could result in significant costs and divert our management’s focus away from operations.
If we are unable to obtain adequate pricing for our products and services, our results of operations and financial position could be materially adversely affected.
Attempts to increase prices may not hold in the face of customer resistance and/or competition. If we are unable to obtain adequate pricing for our products and services, our results of operations and financial position could be materially adversely affected.
To date the impact of the Russian invasion of Ukraine and the resulting governmental sanctions and our decision to halt all activities in the affected areas has had an immaterial impact on revenues. 14 Table of Contents Changes in our tax rates or exposure to additional income tax liabilities or assessments could affect our profitability.
To date, the impact of the Russian invasion of Ukraine and the resulting governmental sanctions and our decision to halt all activities in the affected areas has had an immaterial direct impact on our revenues.
Although we believe our tax estimates are reasonable, the ultimate tax outcome may materially differ from the amounts recorded in our consolidated financial statements and may materially affect our income tax benefit or expense, net loss or income, and cash flows in the period in which such determination is made.
Although we believe our tax estimates are reasonable, the ultimate tax outcome may materially differ from the amounts recorded in our consolidated financial statements and may materially affect our income tax benefit or expense, net loss or income, and cash flows in the period in which such determination is made. 16 Deferred tax assets are recognized for the expected future tax consequences of temporary differences between the carrying amount for financial reporting purposes and the tax bases of assets and liabilities, and for net operating losses and tax credit carry forwards.
However, if these efforts to constrain the cost of our operations are inadequate to offset higher product and employee wage costs, our results of operations and financial position could be materially adversely affected. Our inability to adequately enforce and protect our intellectual property, defend against assertions of infringement or lose certain licenses could prevent or restrict our ability to compete.
However, if these efforts to constrain the cost of our operations are inadequate to offset higher product and employee wage costs, our results of operations and financial position could be materially adversely affected.
These factors may cause demand for aircraft to grow slowly or decline, which would reduce our demand, and in turn which could harm our results of operations, financial position and cash flows. 9 Table of Contents Our future revenue growth depends on our ability to develop and introduce new products and services on a timely basis and achieve market acceptance of these new products and services.
These factors may in particular cause demand for aircraft to grow slowly or decline, which would reduce demand for our products, and in turn harm our results of operations, financial position and cash flows.
Any interruption in the supply, increase in the cost of the products manufactured by a third-party subcontractor or failure of a subcontractor to meet quality standards could have a material adverse effect on our business, operating results and financial condition. 10 Table of Contents For certain components, assembled products and supplies, we are dependent upon single or limited source suppliers.
Additional qualified subcontractors may not be available or may not be available on a timely or cost-competitive basis. Any interruption in the supply, increase in the cost of the products manufactured by a third-party subcontractor or failure of a subcontractor to meet quality standards could have a material adverse effect on our business, operating results and financial condition.
Although we have provided an allowance for slow-moving and obsolete inventory, any significant unanticipated changes in future product demand or market conditions, including obsolescence or the uncertainty in the global market, as well as continued reduced demand for our products if the COVID-19 pandemic is further prolonged, could have an impact on the value of inventory and adversely affect our business, operating results and financial condition.
We maintain allowances for slow-moving and obsolete inventory that we believe are adequate, but any significant unanticipated changes in future product demand or market conditions, could have an impact on the value of inventory and adversely affect our business, operating results and financial condition.
We also review our long-lived assets including property, plant and equipment, and other intangibles assets for impairment when events or changes in circumstances indicate the carrying value may not be recoverable.
We also review our long-lived assets including property, plant and equipment, and other intangibles assets for impairment when events or changes in circumstances indicate the carrying value may not be recoverable. 14 Factors we consider include significant under-performance relative to expected historical or projected future operating results, significant negative industry or economic trends and our market capitalization relative to net book value.
Additional risks and uncertainties not presently known to us, or that we currently consider to be immaterial, may also impact our business operations. Business and Industry Risks: The ongoing COVID-19 pandemic has adversely affected and will likely continue to adversely affect our revenues, results of operations and financial condition.
Additional risks and uncertainties not presently known to us, or that we currently consider to be immaterial, may also impact our business operations.
Financial and Economic Risks: Economic, political and other risks associated with international sales and operations could adversely affect our results of operations and financial position. Because we sell our products worldwide, our business is subject to risks associated with doing business internationally.
Because we sell our products worldwide, our business is subject to risks associated with doing business internationally.
Our operating results and financial condition could be harmed if the markets into which we sell our products decline or do not grow as anticipated. Any decline in our customers’ markets or their general economic conditions would likely result in a reduction in demand for our products.
Any decline in our customers’ markets or their general economic conditions would likely result in a reduction in demand for our products.
The loss of the trademarks QuickLabel, TrojanLabel, ToughWriter and ToughSwitch or the loss of the licenses provided under the Honeywell Agreement could have a material adverse impact on our business taken as a whole. Operating outside the United States also exposes us to additional intellectual property risk.
Our competitors may develop technologies that are similar or superior to our proprietary technologies or design technologies around the intellectual property protections or licenses that we currently own. The loss of the trademarks QuickLabel, TrojanLabel, ToughWriter and ToughSwitch or the loss of the licenses provided under the Honeywell Agreement could have a material adverse impact on our business.
We review our deferred tax assets and valuation allowance requirements quarterly.
In some cases, we may record a valuation allowance to reduce our deferred tax assets to estimated realizable value. We review our deferred tax assets and valuation allowance requirements quarterly.
Our cash and cash equivalents are held in a mix of money market funds, bank demand deposit accounts and foreign bank accounts. Disruptions in the financial markets such as those caused by the current COVID-19 pandemic may, in some cases, result in an inability to access assets such as money market funds that traditionally have been viewed as highly liquid.
Disruptions in the financial markets may, in some cases, result in an inability to access assets such as money market funds that traditionally have been viewed as highly liquid. Any failure of our counterparty financial institutions or funds in which we have invested may adversely impact our cash and cash equivalent positions and, in turn, our financial position.
Adverse conditions in the global banking industry and credit markets could impair our liquidity or interrupt our access to capital markets, borrowings or financial transactions to hedge certain risks. At the end of fiscal 2022, we had approximately $5.3 million of cash and cash equivalents.
In any of these events our costs may increase, and we may have significant charges or losses associated with the write-down or divestiture of assets. 18 Adverse conditions in the global banking industry and credit markets could impair our liquidity or interrupt our access to capital markets, borrowings or financial transactions to hedge certain risks.
The laws and enforcement practices of certain jurisdictions in which we operate do not protect our intellectual property rights to the same extent as in the United States. Any diminution in our ability to defend against the unauthorized use of these rights and assets could have an adverse effect on our results of operations and financial condition.
Operating outside the United States also exposes us to additional intellectual property risk. The laws and enforcement practices of certain jurisdictions in which we operate do not protect our intellectual property rights to the same extent as in the United States.
We rely on patents, trademarks, licenses, and proprietary knowledge and technology, both internally developed and acquired, in order to maintain a competitive advantage. Our competitors may develop technologies that are similar or superior to our proprietary technologies or design technologies around the intellectual property protections or licenses that we currently own.
Our inability to adequately enforce and protect our intellectual property defend against assertions of infringement or the loss of certain licenses could prevent or restrict our ability to compete. We rely on patents, trademarks, licenses, and proprietary knowledge and technology, both internally developed and acquired, in order to maintain a competitive advantage.
The markets for our products are characterized by evolving technologies which in turn effect our product introduction cycles.
Our future revenue growth depends on our ability to develop and introduce new products and services on a timely basis and achieve market acceptance of these new products and services. The markets for our products are characterized by evolving technologies which in turn effect our product introduction cycles.
In addition, we occasionally enter into financial transactions to hedge certain foreign exchange and interest rate risks.
To date, we have been able to access financing that has allowed us to make investments in growth opportunities and fund working capital requirements as needed. In addition, we occasionally enter into financial transactions to hedge certain foreign exchange and interest rate risks.
Our Product Identification business has been negatively impacted by the COVID-19 pandemic because our ability to meet with customers to demonstrate our products at trade shows and on-site in their facilities has been curtailed.
Our PI business was impacted by the COVID-19 pandemic as it limited our ability to meet with customers to demonstrate our products at trade shows and on-site in their facilities was curtailed. We partially countered this through a variety of virtual, on-line selling and digital marketing strategies, a number of which we continue to emphasize today.
Our strategies to counteract the impact of the pandemic and the related supply chain dislocations have increased the amount of inventory we maintain to support our product sales. We have also experienced several situations where component shortages and scarcity have required us to pay significantly higher costs to obtain those components.
We have also experienced several situations where component shortages and scarcity have required us to pay significantly higher costs to obtain those components, particularly electronic components and circuit board assemblies in the T&M segment and inks and printer machine parts in the PI segment.
We are currently monitoring the world-wide delays in transit time, as freight carriers continue to experience significant delays in overseas shipments. We are addressing these issues through long range planning and procuring higher inventory on severely allocated items to help mitigate potential shortages whenever practicable.
These factors negatively impacted our efficiency, delayed shipments in each of the fiscal quarters of 2023, and caused what we believe are product shortages. We are addressing these issues through long-range planning and procuring higher inventory levels for affected items to help mitigate potential shortages whenever practicable.
While demand for air travel has recently increased, the impact of another period of COVID-19 infections could negatively impact this trend in the future. Also, we believe our customers’ markets have declined and the impact on their financial capacity has been material enough to alter their strategies and industry dynamics.
Also, we believe that the pandemic has negatively impacted our customers’ financial capacity materially enough to alter their strategies and industry dynamics so as to make changes in their demand more volatile.
We maintain a significant amount of inventory, and a result of recent supply chain disruption expect to increase the amount of inventory we maintain on-hand.
We have significant inventories on hand. We maintain a significant amount of inventory, and as a result of recent supply chain disruptions and announced or anticipated price increases from suppliers, we have further increased the amount of inventory we maintain on hand to ensure we are able to meet market demand for our products at a reasonable price.
Some of the structural dislocations in the global economy caused by the pandemic are deepening and prolonging these difficulties. We have had to incur additional costs, such as expedited and express shipping fees (i.e., air rather than ocean freight.) These difficulties have also negatively impacted our efficiency, delayed shipments and caused product shortages .
We expect to incur substantial costs in doing so but we are unable to accurately estimate the financial impact due to the rapidly changing environment. We also have had to incur additional costs, such as higher shipping fees (i.e., air rather than ocean freight) and though these have abated to a degree, they have not returned to pre-pandemic levels.
Removed
All of our global operations have been materially adversely affected by the worldwide COVID-19 pandemic during the past two years. We expect this adverse impact to continue to a degree that we cannot predict. We made significant modifications to our global pre-pandemic operations because of the COVID-19 pandemic. We initially required most non-production related team members to work remotely.
Added
Business and Industry Risks: The structural impacts on the economy as a result of the COVID-19 pandemic and its aftermath have adversely affected and will likely continue to adversely affect our revenues, results of operations and financial condition. All of our global operations were materially adversely affected by the worldwide COVID-19 pandemic and the related supply-chain disruptions.
Removed
Although this no longer is required for health and safety reasons, for many of our team members, remote work has become a preference and we believe we have to a large degree successfully adapted to it through the use of technology and changed management practices, but further adaptations, unknown at this time, may be required.
Added
The aftermath of the immediate severe impacts of COVID-19 on our operations and financial performance, the changes in our customers’ purchasing behavior, the post-pandemic impact of inflation from macroeconomic factors, and the continued and lingering structural impacts on our global supply chain, particularly with respect to the availability and costs of electronic components, have made planning for customer demand and manufacturing production more difficult.
Removed
As the result of the changes that have been required by the response to the COVID-19 pandemic, we expect that the mix of on-site and remote work will be permanently changed, as will our increased safety protocols and the other adaptations undertaken during the pandemic, but our practices and plans are still developing, and we cannot predict the result yet. 8 Table of Contents Since the COVID-19 pandemic began we have experienced difficulties in obtaining raw materials and components for our products.
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Also, it has led to a rise in the cost of a number of classes of acquired goods for both the T&M and PI segments.
Removed
We have partially countered this through a variety of virtual, on-line selling and digital marketing strategies, but the degree to which this will be successful to mitigate the lack of face-to-face selling is unclear.
Added
We will continue to evaluate the impact of COVID-19 and its aftermath effects on our business, results of operations and cash flows throughout fiscal 2024, including the potential impacts on various estimates and assumptions inherent in the preparation of our condensed consolidated financial statements.

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Item 2. Properties

Properties — owned and leased real estate

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Biggest changeThe following information pertains to each location: Location Approximate Square Footage Principal Use Dietzenbach, Germany 18,630 Manufacturing, sales and service Copenhagen, Denmark 4,800 R&D, sales and service Brossard, Quebec, Canada 4,500 Manufacturing, sales and service Elancourt, France 4,150 Sales and service Schaumburg, Illinois, United States 3,428 Sales Irvine, California, United States 3,100 Sales Shah Alam, Selangor, Malaysia 2,067 Sales Guangzhou, China 1,252 Sales and service Maidenhead, England 1,021 Sales and service Shanghai, China 425 Sales Mexico City, Mexico 97 Sales The West Warwick facility is used by both of our business segments, but the leased locations are primarily used by the Product Identification segment.
Biggest changeThe following information pertains to each location: Location Approximate Square Footage Principal Use Dietzenbach, Germany 18,630 Manufacturing, sales and service Copenhagen, Denmark 4,800 R&D, sales and service Brossard, Quebec, Canada 4,500 Manufacturing, sales and service Elancourt, France 4,150 Sales and service Irvine, California, United States 3,100 Sales Shah Alam, Selangor, Malaysia 2,067 Sales Guangzhou, China 1,253 Sales and service Maidenhead, England 1,021 Sales and service Shanghai, China 425 Sales Mexico City, Mexico 97 Sales The West Warwick facility is used by both of our business segments, but the Elk Grove facility and leased locations are primarily used by the PI segment.
We believe our facilities are well maintained, in good operating condition and generally adequate to meet our needs for the foreseeable future.
We believe our facilities are well maintained, in good operating condition and generally adequate to meet our needs for the foreseeable future. 22
Item 2. Properties The following table sets forth information regarding our principal owned property. This property is subject to a security agreement and a mortgage in favor of the lender under our credit facility.
Item 2. Properties The following table sets forth information regarding our principal owned properties. The West Warwick property is subject to a security agreement and a mortgage in favor of the lender under our credit facility.
Location Approximate Square Footage Principal Use West Warwick, Rhode Island, United States 135,500 Corporate headquarters, research and development, manufacturing, sales and service We also lease facilities in various other locations.
Location Approximate Square Footage Principal Use West Warwick, Rhode Island, United States 135,500 Corporate headquarters, research and development, manufacturing, sales and service Elk Grove Village, Illinois 34,460 Astro Machine principal place of business We also lease facilities in various other locations.

Item 3. Legal Proceedings

Legal Proceedings — active lawsuits and investigations

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Biggest changeItem 3. Legal Proceedings We are not a party to any pending, material legal proceedings. However, because of the nature of our business, we may be subject in the future to lawsuits or other claims, including those pertaining to product liability, patent infringement, commercial, employment, employee benefits, environmental and stockholder matters . Item 4.
Biggest changeAdditionally, because of the nature of our business, we may be subject in the future to lawsuits or other claims, including those pertaining to product liability, patent infringement, commercial, employment, employee benefits, environmental and stockholder matters and an unfavorable resolution of any of these matters could materially affect our future results of operations, cash flows or financial position. Item 4.
Mine Safety Disclosures Not applicable. 20 Table of Contents PART II
Mine Safety Disclosures Not applicable . 23 PART II
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Item 3. Legal Proceedings We are party to various legal proceedings arising from normal business activities. Management believes that the ultimate resolution of these matters will not have a material adverse effect on our financial position, results of operations or cash flows.

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

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Biggest changeStock Repurchases During the fourth quarter of fiscal 2022, we made the following repurchases of our common stock: Total Number of Shares Repurchased Average Price paid Per Share ($) Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs Maximum Number of Shares That May Be Purchased Under the Plans or Programs November 1 – November 30 — — — — December 1 – December 31 483 (a) 15.88 (a) — — January 1 – January 31 1,682 (b) 13.10 (b) — — (a) An executive of the company delivered 483 shares of our common stock toward the satisfaction of taxes due in connection with the vesting of restricted shares.
Biggest changeStock Repurchases During the fourth quarter of fiscal 2023, we made the following repurchases of our common stock: Total Number of Shares Repurchased Average Price paid Per Share ($) Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs Maximum Number of Shares That May Be Purchased Under the Plans or Programs November 1 – November 30 — — — — December 1 – December 31 678 (a)(b) 11.70 (a)(b) — — January 1 – January 31 — — — — (a) An executive of the company delivered 442 shares of our common stock toward the satisfaction of taxes due in connection with the vesting of restricted shares.
Item 5. Market for the Registrant ’ s Common Stock, Related Stockholder Matters and Issuer Purchases of Equity Securities Our common stock trades on the NASDAQ Global Market under the symbol “ALOT.” We had approximately 214 shareholders of record as of April 12, 2022, which does not reflect shareholders with beneficial ownership in shares held in nominee name.
Item 5. Market for the Registrant ’ s Common Stock, Related Stockholder Matters and Issuer Purchases of Equity Securities Our common stock trades on the NASDAQ Global Market under the symbol “ALOT.” We had approximately 390 shareholders of record as of April 10, 2023, which does not reflect shareholders with beneficial ownership in shares held in nominee name.
The shares delivered were valued at a market value of $13.10 per share and are included with treasury stock in the consolidated balance sheet. Item 6. (Reserved)
The shares delivered were valued at a market value of $11.75 per share and are included with treasury stock in the consolidated balance sheet. Item 6. [Reserved]
The shares delivered were valued at a market value of $15.88 per share and are included with treasury stock in the consolidated balance sheet. (b) An executive of the company delivered 1,682 shares of our common stock toward the satisfaction of taxes due in connection with the vesting of restricted shares.
The shares delivered were valued at a market value of $11.67 per share and are included with treasury stock in the consolidated balance sheet. (b) An executive of the company delivered 236 shares of our common stock toward the satisfaction of taxes due in connection with the vesting of restricted shares.

Item 7. Management's Discussion & Analysis

Management's Discussion & Analysis (MD&A) — revenue / margin commentary

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Biggest changeWe believe that our available cash and credit facilities combined with our cash generated from operations will be sufficient to support our operating requirements including our capital expenditure commitments. 27 Table of Contents Indebtedness Term Loan The Amended Credit Agreement requires that the term loan be paid as follows: the principal amount of each quarterly installment required to be paid on the last day of each of our fiscal quarters ending on or about April 30, 2021 through January 31, 2022 is $187,500; the principal amount of each quarterly installment required to be paid on the last day of each of our fiscal quarters ending on or about April 30, 2022 through January 31, 2023 is $250,000; the principal amount of each quarterly installment required to be paid on the last day of each of our fiscal quarters ending on or about April 30, 2023 through January 31, 2025 is $312,500; the principal amount of each quarterly installment required to be paid on the last day of each of our fiscal quarters ending on or about April 30, 2025 and July 31, 2025 is $500,000; and the entire remaining principal balance of the term loan is required to be paid on September 30, 2025.
Biggest changeIndebtedness Term Loan The Amended Credit Agreement requires that the term loan be paid in quarterly installments on the last day of each of our fiscal quarters over the term of the Amended Credit Agreement on the following repayment schedule: the principal amount of each quarterly installment required to be paid on the last day of each of our fiscal quarters ending on or about October 31, 2022 through July 31, 2023 is $375,000; and the principal amount of each quarterly installment required to be paid on the last day of each of our fiscal quarters ending on or about October 31, 2023 through April 30, 2027 is $675,000.
It is possible, however, that results of operations for any future period could be materially affected by changes in our assumptions or strategies related to these contingencies or changes out of our control.
It is possible, however, that our results of operations for any future period could be materially affected by changes in our assumptions or strategies related to these contingencies or changes out of our control.
PPP Loan Forgiveness On May 6, 2020, we entered into a loan agreement with, and executed a promissory note in favor of Greenwood Credit Union (“Greenwood”) pursuant to which we borrowed $4.4 million (the “PPP Loan”) from Greenwood pursuant to the Paycheck Protection Program (“PPP”) administered by the United States Small Business Administration (the “SBA”) and authorized by the Coronavirus Aid, Relief, and Economic Security Act (the “CARES Act”), enacted on March 27, 2020.
PPP Loan On May 6, 2020, we entered into a Loan Agreement with and executed a promissory note in favor of Greenwood Credit Union (“Greenwood”) pursuant to which we borrowed $4.4 million (the “PPP Loan”) from Greenwood pursuant to the Paycheck Protection Program (the “PPP”) administered by the United States Small Business Administration (the “SBA”) and authorized by the Coronavirus Aid, Relief, and Economic Security Act (the “CARES Act”), enacted on March 27, 2020.
The T&M segment includes a line of aerospace printers used to print hard copies of data required for the safe and efficient operation of aircraft, including navigation maps, clearances, arrival and departure procedures, flight itineraries, weather maps, performance data, passenger data, and various air traffic control data. Aerospace products also include aircraft networking systems for high-speed onboard data transfer.
The T&M segment includes a line of aerospace printers used to print hard copies of data required for the safe and efficient operation of aircraft, including navigation maps, clearances, arrival and departure procedures, NOTAMS, flight itineraries, weather maps, performance data, passenger data, and various air traffic control data. Aerospace products also include aircraft networking systems for high-speed onboard data transfer.
Overview We are a multi-national enterprise that leverages its proprietary data visualization technologies to design, develop, manufacture, distribute and service a broad range of products that acquire, store, analyze and present data in multiple formats. We organize our structure around a core set of competencies, including research and development, manufacturing, service, marketing and distribution.
Overview We are a multi-national enterprise that leverages its proprietary data visualization technologies to design, develop, manufacture, distribute and service a broad range of products that acquire, store, analyze and present data in multiple formats. We organize our structure around a core set of competencies, including research and 24 development, manufacturing, service, marketing and distribution.
We will continue to monitor our supply chain going forward and update our mitigation strategies as we determine appropriate. We are not able to predict how current supply chain difficulties will develop in the future, and if the steps we are taking are not effective, it could have a material adverse impact on our results of operations.
We will continue to monitor our supply chain going forward and update our mitigation strategies as we determine appropriate. We are not able to predict how current supply chain difficulties will develop in the future, and if the steps we are taking are not effective, it could have a material adverse impact on our business and results of operations.
In addition, we use the market approach, which compares the reporting unit to publicly traded companies and transactions involving similar business, to support the conclusions based upon the income approach. The income approach requires the use of many assumptions and estimates including future revenue, expenses, capital expenditures, and working capital, as well as discount factors and income tax rates.
In addition, we use the market approach, which compares the reporting unit to publicly traded companies and transactions involving similar business, to support the conclusions based upon the income approach. The income approach 36 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.
The primary non-financial covenants limit our and our subsidiaries’ ability to incur future indebtedness, to place liens on assets, to pay dividends or distributions on their capital stock, to repurchase or acquire their capital stock, to conduct mergers or acquisitions, to sell assets, to alter their capital structure, to make investments and loans, to change the nature of their business, and to prepay subordinated indebtedness, in each case subject to certain exceptions and thresholds as set forth in the Amended Credit Agreement, certain of which provisions were modified by the Amendment.
The primary non-financial covenants limit our and our subsidiaries’ ability to incur future indebtedness, to place liens on assets, to pay dividends or distributions on our or our subsidiaries’ capital stock, to repurchase or acquire our or our subsidiaries’ capital stock, to conduct mergers or acquisitions, to sell assets, to alter our or our subsidiaries’ capital structure, to make investments and loans, to change the nature of our or our subsidiaries’ business, and to prepay subordinated indebtedness, in each case subject to certain exceptions and thresholds as set forth in the Amended Credit Agreement, certain of which provisions were modified by the Second Amendment.
A review of all available positive and negative evidence must be considered, including our performance, the market environment in which we operate, length of carryforward periods, existing revenue backlog and future revenue projections.
A review of all available positive and negative evidence must be 35 considered, including our performance, the market environment in which we operate, length of carryforward periods, existing revenue backlog and future revenue projections.
We recognize revenue for such bill and hold arrangements in accordance with the guidance provided by Topic 606, which requires the transaction to meet the following criteria in order to determine that the customer has obtained control: (a) the reason for the bill and hold is substantive, (b) the product has separately been identified as belonging to the customer, (c) the product is currently ready for physical transfer to the customer, and (d) we do not have the ability to use the product or direct it to another customer.
We recognize revenue for such bill and hold arrangements in accordance with the guidance provided by ASC 606, which requires the transaction to meet the following criteria in order to determine that the customer has obtained control: (a) the reason for the bill and hold is substantive, (b) the product has separately been identified as belonging to the customer, (c) the product is currently ready for physical transfer to the customer, and (d) we do not have the ability to use the product or direct it to another customer.
We must comply with various customary financial and non-financial covenants under the Amended Credit Agreement. The financial covenants under the Amended Credit Agreement consist of a maximum consolidated leverage ratio and a minimum consolidated fixed charge coverage ratio.
We must comply with various customary financial and non-financial covenants under the Amended Credit Agreement. The financial covenants under the Amended Credit Agreement consist of a maximum consolidated leverage ratio, a minimum consolidated fixed charge coverage ratio and a minimum consolidated asset coverage ratio.
The results for the current period were impacted by income of $4.5 million ($4.4 million net of tax or $0.60 per diluted share) related to the forgiveness of our PPP Loan, income of $2.1 million ($1.6 million net of tax or $0.22 per diluted share) related to the net ERC and expense of $0.7 million ($0.5 million net of tax or $0.07 per diluted share) related to the write-off of our Oracle EnterpriseOne ERP system and related prepaid service and maintenance contracts.
The results for the prior period were impacted by income of $4.5 million ($4.4 million net of tax, or $0.60 per diluted share) related to the forgiveness of our PPP loan, income of $2.1 million ($1.6 million net of tax, or $0.22 per diluted share) related to the net ERC and expense of $0.7 million ($0.5 million net of tax, or $0.07 per diluted share) related to the write-off of our Oracle EnterpriseOne ERP system and related prepaid service and maintenance contracts.
In situations where we are aware of a specific customer’s inability to meet its financial obligation, such as in the case of a bankruptcy filing, we assess the need for a specific reserve for bad debts. We believe that our procedure for estimating such amounts is reasonable and historically have not resulted in material adjustments in subsequent periods.
In situations where we are aware of a specific customer’s inability to meet its financial obligation, such as in the case of a bankruptcy filing, we assess the need for a specific reserve for bad debts. We believe that our procedure for estimating such amounts is reasonable and historically has not resulted in material adjustments in subsequent periods.
Bad debt expense was less than 1% of net sales in each of fiscal 2022 and 2021. Warranty Claims: We offer warranties on some of our products. We establish a reserve for estimated costs of warranties at the time the product revenue is recognized.
Bad debt expense was less than 1% of net sales in each of fiscal 2023 and 2022. Warranty Claims: We offer warranties on some of our products. We establish a reserve for estimated costs of warranties at the time the product revenue is recognized.
In addition to certain other fees and expenses that we are required to pay to the Lender, we are required to pay a commitment fee on the undrawn portion of the revolving credit facility that varies within a range of 0.15% and 0.30% based on our consolidated leverage ratio.
In addition to certain other fees and expenses that we are required to pay to the Lender, we are required to pay a commitment fee on the undrawn portion of the revolving credit facility that varies within a range of 0.15% and 0.35% based on our consolidated leverage ratio.
If actual product failure rates and/or corrective costs differ from the estimates, we revise our estimated warranty liability accordingly. Inventories: Inventories are stated at the lower of cost or net realizable value.
If actual product failure rates and/or corrective costs differ from the estimates, we revise our estimated warranty liability accordingly. Inventories: Inventories are stated at the lower of average and standard cost or net realizable value.
Recognition of revenue based on incorrect judgments, including the identification of performance obligation arrangements as well as the pattern of delivery 31 Table of Contents for those services, could result in inappropriate recognition of revenue, or incorrect timing of revenue recognition, which could have a material effect on our financial condition and results of operations.
Recognition of revenue based on incorrect judgments, including the identification of performance obligation arrangements as well as the pattern of delivery for those services, could result in inappropriate recognition of revenue, or incorrect timing of revenue recognition, which could have a material effect on our financial condition and results of operations.
Fiscal 2021 compared to Fiscal 2020 For a comparison of our cash flow for the fiscal years ended January 31, 2021 and January 31, 2020, see “Part II, Item 7.
Fiscal 2022 compared to Fiscal 2021 For a comparison of our cash flow for the fiscal years ended January 31, 2022 and January 31, 2021, see “Part II, Item 7.
Refer to Note 11, “Royalty Obligation,” in our audited consolidated financial statements included in this Annual Report on Form 10-K for further details. In order to meet our manufacturing demands and, in some cases, lock in particular pricing structures for specific goods used in manufacturing, we enter into purchase commitments with our suppliers.
Refer to Note 2 “Acquisitions” and Note 12, “Royalty Obligation,” in our audited consolidated financial statements included in this Annual Report on Form 10-K for further details. In order to meet our manufacturing demands and, in some cases, lock in particular pricing structures for specific goods used in manufacturing, we enter into purchase commitments with our suppliers.
If the fair value of the reporting unit exceeds the carrying value of the net assets including goodwill assigned to that unit, goodwill is not impaired. If the 33 Table of Contents carrying value of the reporting unit’s net assets including goodwill exceeds the fair value of the reporting unit, then we record an impairment charge based on that difference.
If the fair value of the reporting unit exceeds the carrying value of the net assets including goodwill assigned to that unit, goodwill is not impaired. If the carrying value of the reporting unit’s net assets including goodwill exceeds the fair value of the reporting unit, then we record an impairment charge based on that difference.
Our accounting policies relating to the recognition of revenue under Topic 606 require management to make estimates, determinations and judgments based on historical experience and on various other assumptions, which include (i) the existence of a contract with the customer, (ii) the identification of the performance obligations in the contract, (iii) the value of any variable consideration in the contract, (iv) the stand alone selling price of multiple obligations in the contract, for the purpose of allocating the consideration in the contract, and (v) determining when a performance obligation has been met.
Our accounting policies relating to the recognition of revenue under ASC 606 require management to make estimates, determinations and judgments based on historical experience and on various other assumptions, which 34 include (i) the existence of a contract with the customer, (ii) the identification of the performance obligations in the contract, (iii) the value of any variable consideration in the contract, (iv) the standalone selling price of multiple obligations in the contract, for the purpose of allocating the consideration in the contract, and (v) determining when a performance obligation has been met.
PI also provides software to design, manage and print labeling and packaging 21 Table of Contents images locally and across networked printing systems, as well as all related printing supplies such as pressure sensitive labels, tags, inks, toners and thermal transfer ribbons used by digital printers.
PI also provides software to design, manage and print labeling and packaging images locally and across networked printing systems, as well as all related printing supplies such as pressure-sensitive labels, tags, inks, toners and thermal transfer ribbons used by digital printers.
Dollars, the applicable quoted rate), plus a margin that varied within a range of 1.60% to 2.30% based on our consolidated leverage ratio, or (b) a fluctuating reference rate equal to the highest of (i) the federal fund rate plus 0.50%, (ii) Bank of America’s publicly announced prime rate, (iii) the LIBOR Rate plus 1.00% or (iv) 0.50%, plus a margin that varied within a range of 0.60% to 1.30% based on our consolidated leverage ratio.
Dollars, the applicable quoted rate), plus a margin that varies within a range of 1.60% to 2.50% based on our consolidated leverage ratio, or (b) a fluctuating reference rate equal to the highest of (i) the federal fund rate plus 0.50%, (ii) Bank of America’s publicly announced prime rate, (iii) the BSBY Rate plus 1.00%, or (iv) 0.50%, plus a margin that varies within a range of 0.60% to 1.50% based on our consolidated leverage ratio.
Additionally, we have 22 Table of Contents taken actions to increase regular contact with our essential vendors and increased our forecasting horizon for our products to help us better manage our supply chain. In some cases, we are working with our vendors to help them procure components.
Additionally, we have taken actions to increase regular contact with our essential vendors and increased our forecasting horizon for our products to help us better manage our supply chain. In some cases, we are working with our vendors to help them procure components.
We are also monitoring and reacting to extended lead times on electronic components and utilizing a variety of strategies, including blanket orders, vendor-bonded inventories, extended commitments to our supply base, and seeking alternative suppliers.
For our T&M segment, we are also monitoring and reacting to extended lead times on electronic components, and utilizing a variety of strategies, including blanket orders, vendor-bonded inventories, extended commitments to our supply base, and seeking alternative suppliers.
Management’s Discussion and Analysis of Financial Condition and Results of Operations” of our annual report on Form 10-K for the fiscal year ended January 31, 2021, filed with the SEC on April 13, 2021. Segment Analysis We report two segments consistent with our product revenue groups: PI and T&M.
Management’s Discussion and Analysis of Financial Condition and Results of Operations” of our annual report on Form 10-K for the fiscal year ended January 31, 2022, filed with the SEC on April 18, 2022. 28 Segment Analysis We report two segments consistent with our product revenue groups: PI and T&M.
In fiscal 2022, 2021 and 2020, revenue from customers in various geographic areas outside the United States, primarily in Western Europe, Canada and Asia, amounted to $49.3 million, $45.1 million and $49.8 million, respectively. We maintain an active program of product research and development.
In fiscal 2023, 2022, and 2021, revenue from customers in various geographic areas outside the United States, primarily in Western Europe, Canada and Asia, amounted to $50.6 million, $49.3 million, and $45.1 million, respectively. We maintain an active program of product research and development.
We are also subject to contingencies, including legal proceedings and claims arising out of its businesses that cover a wide range of matters, such as: contract and employment claims; workers compensation claims; product liability claims; warranty claims; and claims related to modification, adjustment or replacement of component parts of units sold.
We are also subject to contingencies, including legal proceedings and claims arising out of our business that cover a wide range of matters, such as: contract and employment claims; workers’ compensation claims; product liability claims; warranty claims; and claims related to modification, adjustment or replacement of component parts of units sold.
Current year other income includes $4.5 million related to the forgiveness of our PPP Loan, partially offset by $0.7 million related to the write-off of our Oracle EnterpriseOne ERP system and related prepaid service and maintenance contracts as a result of the full implementation of a new ERP system in our US based operations in the fourth quarter of fiscal 2022, interest expense on debt of $0.7 million, and net foreign exchange loss of $0.3 million.
Prior year other income includes $4.5 million related to the forgiveness of the loan we received under the Paycheck Protection Program (the “PPP”), partially offset by $0.7 million related to the write-off of our Oracle EnterpriseOne ERP system and related prepaid service and maintenance contracts as a result of the full implementation of a new ERP system in our US-based operations in the fourth quarter of fiscal 2022, interest expense on debt of $0.7 million, and net foreign exchange loss of $0.3 million.
As a result, we recorded a $4.5 million gain on extinguishment of debt in other income (expense) which is included in our consolidated income statement for the period ended January 31, 2022. Cash Flow The statements of cash flows for the years ended January 31, 2022, 2021 and 2020 are included on page 50 of this Form 10-K.
As a result, we recorded a $4.5 million gain on the extinguishment of debt in Other Income (Expense) in our condensed consolidated income statement for the year ended January 31, 2022. Cash Flow The statements of cash flows for the years ended January 31, 2023, 2022, and 2021 are included on page F-9 of this Form 10-K.
During fiscal 2022, 2021 and 2020, we spent $6.8 million, $6.2 million and $8.1 million, respectively, on Company-sponsored product development. We are committed to continuous product development as essential to our organic growth and expect to continue our focus on research and development efforts in fiscal 2022 and beyond.
We spent approximately $6.8 million in both fiscal 2023 and 2022, and $6.2 million in fiscal 2021 on Company-sponsored product development. We are committed to continuous product development as essential to our organic growth and expect to continue our focus on research and development efforts in fiscal 2024 and beyond.
Our obligations under the Amended Credit Agreement continue to be secured by substantially all of our personal property assets (including a pledge of the equity interests held by us in ANI ApS, in our wholly-owned German subsidiary AstroNova GmbH, and in our wholly-owned French subsidiary AstroNova SAS), subject to certain exceptions, and by a mortgage on our owned real property in West Warwick, Rhode Island.
Our obligations under the Amended Credit Agreement continue to be secured by substantially all of our personal property assets (including a pledge of the equity interests we hold in ANI ApS, AstroNova GmbH and AstroNova SAS), subject to certain exceptions, and by a mortgage on our owned real property in West Warwick, Rhode Island, and are guaranteed by, and secured by substantially all of the personal property assets of Astro Machine.
We may repay borrowings under the revolving credit facility at any time without premium or penalty (other than customary breakage costs, if applicable), but in any event no later than September 30, 2025, at which time any outstanding revolving loans will be due and payable in full, and the revolving credit facility will terminate.
We may repay borrowings under the revolving credit facility at any time without premium or penalty (other than customary breakage costs, if applicable), but in any event no later than August 4, 2027, and any outstanding revolving loans thereunder will be due and payable in full, and the revolving credit facility will terminate, on such date.
Prior to giving effect to the LIBOR Amendment, the interest rates under Amended Credit Agreement were as follows: the term loan and revolving credit loans bore interest at a rate per annum equal to, at our option, either (a) the LIBOR Rate as defined in the A&R Credit Agreement (or in the case of revolving credit loans denominated in a currency other than U.S.
The interest rates under the Amended Credit Agreement are as follows: the term loan and revolving credit loans bear interest at a rate per annum equal to, at our option, either (a) the BSBY Rate as defined in the Amended Credit Agreement (or, in the case of revolving credit loans denominated in a currency other than U.S.
($ in thousands) Revenue Segment Operating Profit (Loss) Segment Operating Profit (Loss) as a % of Revenue 2022 2021 2020 2022 2021 2020 2022 2021 2020 PI $ 90,915 $ 90,268 $ 88,116 $ 10,411 $ 12,885 $ 7,509 11.5 % 14.3 % 8.5 % T&M 26,565 25,765 45,330 3,398 (1,032 ) 6,281 12.8 % (4.0 )% 13.9 % Total $ 117,480 $ 116,033 $ 133,446 13,809 11,853 13,790 11.8 % 10.2 % 10.3 % Corporate Expenses 9,553 9,420 11,357 Operating Income 4,256 2,433 2,433 Other Expense, Net 2,778 (254 ) (1,063 ) Income Before Income Taxes 7,034 2,179 1,370 Income Tax Provision (Benefit) 605 895 (389 ) Net Income $ 6,429 $ 1,284 $ 1,759 Product Identification Revenue from the PI segment increased 0.7% in fiscal 2022, with revenue of $90.9 million compared to revenue of $90.3 million in the prior year.
($ in thousands) Revenue Segment Operating Profit (Loss) Segment Operating Profit (Loss) as a % of Revenue 2023 2022 2021 2023 2022 2021 2023 2022 2021 P I $ 103,089 $ 90,915 $ 90,268 $ 7,889 $ 10,411 $ 12,885 7.7 % 11.5 % 14.3 % T&M 39,438 26,565 25,765 8,989 3,398 (1,032 ) 22.8 % 12.8 % (4.0 )% Total $ 142,527 $ 117,480 $ 116,033 16,878 13,809 11,853 11.8 % 11.8 % 10.2 % Corporate Expenses 11,435 9,553 9,420 Operating Income 5,443 4,256 2,433 Other Income (Expense), Net (2,033 ) 2,778 (254 ) Income Before Income Taxes 3,410 7,034 2,179 Income Tax Provision 749 605 895 Net Income $ 2,661 $ 6,429 $ 1,284 Product Identification Revenue from the PI segment increased 13.4% in fiscal 2023, with revenue of $103.1 million compared to revenue of $90.9 million in the prior year.
Return on revenue was 5.5% for fiscal 2022 compared to 1.1% for fiscal 2021. 25 Table of Contents Fiscal 2021 compared to Fiscal 2020 For a comparison of our results of operations for the fiscal years ended January 31, 2021, and January 31, 2020, see “Part II, Item 7.
Fiscal 2022 compared to Fiscal 2021 For a comparison of our results of operations for the fiscal years ended January 31, 2022, and January 31, 2021, see “Part II, Item 7.
As under the A&R Credit Agreement, the loans under the Amended Credit Agreement are subject to certain mandatory prepayments, subject to various exceptions, from (a) net cash proceeds from certain dispositions of property, (b) net cash proceeds from certain issuances of equity, (c) net cash proceeds from certain issuances of additional debt and (d) net cash proceeds from certain extraordinary receipts.
The loans under the Amended Credit Agreement are subject to certain mandatory prepayments, subject to various exceptions, from (a) net cash proceeds from certain dispositions of property, (b) net cash proceeds from certain issuances of equity, (c) net cash proceeds from certain issuances of additional debt and (d) net cash proceeds from certain extraordinary receipts. 31 Amounts repaid under the revolving credit facility may be reborrowed, subject to our continued compliance with the Amended Credit Agreement.
We also continue to invest in sales and marketing initiatives by expanding the existing sales force and using various marketing campaigns to achieve our goals of sales growth and increased profitability notwithstanding the challenging economic environment. COVID-19 Update All of our global operations have been materially adversely affected by the worldwide COVID-19 pandemic during the past two years.
We also continue to invest in sales and marketing initiatives by expanding and improving the existing sales force and using various marketing campaigns to achieve our goals of sales growth and increased profitability. COVID-19 Update All of our global operations were materially adversely affected by the worldwide COVID-19 pandemic and the related supply-chain disruptions.
We are subject to a guaranteed minimum royalty payment obligation over the next six years pursuant to the Honeywell Agreement, which, at January 31, 2022, included a balance due of $6.4 million, with $2.0 million due within 12 months.
We are subject to a guaranteed minimum royalty payment obligation over the next five years pursuant to the Honeywell Agreements, which, at January 31, 2023 included a balance due of $5.1 million, with $1.7 million due within 12 months.
The changes in accounts receivable, inventory, income taxes, accounts payable and accrued expenses for the current year decreased cash by $3.9 million in fiscal 2022 compared to an increase to cash of $7.4 million in the prior year.
The changes in accounts receivable, inventory, income taxes, accounts payable and accrued expenses for the current year decreased cash by $14.3 million in fiscal 2023 compared to $2.8 million in the prior year.
Net cash provided by operating activities was $1.4 million in fiscal 2022 compared to net cash provided by operating activities of $15.5 million in the previous year. The decrease in net cash provided by operations for the current year is primarily due to a decrease in cash provided by working capital of $11.3 million from fiscal 2021.
Net cash used by operating activities was $2.9 million in fiscal 2023 compared to net cash provided by operating activities of $1.4 million in the previous year. The increase in net cash used by operations for the current year is primarily due to an $11.5 million increase in cash used for working capital.
PI current year segment operating profit was $10.4 million with a profit margin of 11.5%, compared to the prior year segment operating profit of $12.9 million and related profit margin of 14.3%. The decrease in current year segment operating profit and margin is primarily due to increased operating expenses.
PI current year segment operating profit was $7.9 million with a profit margin of 7.7%, compared to the prior year segment operating profit of $10.4 million and related profit margin of 11.5%.
Test & Measurement Update The aerospace industry, which we serve through our aerospace product line, has also been significantly disrupted by the COVID-19 pandemic, both inside and outside of the United States because of the severe decline in the demand for air travel and aircraft, and a general curtailment of aircraft production rates.
Test & Measurement Update The aerospace industry, which we serve through our aerospace product line, was significantly disrupted by the COVID-19 pandemic, because of the severe decline in the demand for air travel, demand for aircraft, and a general curtailment of aircraft production rates. This had a material adverse impact on our financial results.
Our gross profit margin of 37.2% in fiscal 2022 reflects a 2.4 percentage point increase compared to fiscal 2021 gross profit margin of 35.6%.
Our gross profit margin of 33.8% in fiscal 2023 reflects a 3.4 percentage point decrease compared to fiscal 2022 gross profit margin of 37.2%.
We may voluntarily prepay the term loan, in whole or in part, from time to time without premium or penalty (other than customary breakage costs, if applicable).
The entire remaining principal balance of the term loan is required to be paid on August 4, 2027. We may voluntarily prepay the term loan, in whole or in part, from time to time without premium or penalty (other than customary breakage costs, if applicable).
Refer to Note 12, “Leases,” in our audited consolidated financial statements included in this Annual Report on Form 10-K for further details. 30 Table of Contents Debt arrangements under our Amended Credit Agreement with Bank of America, N.A., consist of the balance due of $9.3 million at January 31, 2022.
Debt arrangements under our Amended Credit Agreement with Bank of America, N.A., consist of the balance due of $14.3 million at January 31, 2023, with $2.1 million due within 12 months. For additional details regarding our long-term debt obligations, see Note 8, “Debt,” in our audited consolidated financial statements included in this Annual Report on Form 10-K.
If the projected undiscounted cash flows are less than the carrying value, then an impairment charge would be recorded for the excess of the carrying value over the fair value, which is determined by the discounting of future cash flows. Goodwill: Goodwill is tested for impairment at the reporting unit.
If the projected undiscounted cash flows are less than the carrying value, then an impairment charge would be recorded for the excess of the carrying value over the fair value, which is determined by the discounting of future cash flows. No impairment of intangible assets was identified for the years ended January 31, 2023 or January 31, 2022.
General and administrative expenses increased 1.4% to $9.6 million in the current year compared to $9.4 million in the prior year, primarily due to an increase in outside service fees, employee wages, bonuses and fees, partially offset by a decrease in payroll taxes related to the ERC.
General and administrative expenses increased 19.7% to $11.4 million in the current year compared to $9.6 million in the prior year, primarily due to an increase in outside service fees and employee wages, and the impact of the ERC, which reduced manufacturing payroll taxes in the amount of $0.3 million in the third quarter of the prior year, partially offset by a decrease in bonus and advertising and trade show expenses.
At January 31, 2022 our purchase commitments totaled $37.5 million, with $35.4 million due within 12 months, most of which are non-cancelable.
At January 31, 2023 our purchase commitments totaled $25.8 million, with $22.8 million due within 12 months, some of which are non-cancelable.
The decrease in the effective tax rate in 2022 from 2021 is primarily related to the PPP loan forgiveness tax-exempt income. Specific items decreasing the effective tax rate include PPP loan forgiveness tax-exempt income, R&D tax credits, foreign derived intangible income (“FDII”) deductions, and a change in reserves related to ASC 740 liabilities.
During fiscal 2022, we recognized $0.6 million of income tax expense for the prior fiscal year, resulting in an effective tax rate of 8.6%. Specific items decreasing the effective tax rate include PPP loan forgiveness tax-exempt income, R&D tax credits, foreign derived intangible income (“FDII”) deductions, and a change in reserves related to ASC 740 liabilities.
To a lesser degree, the increase in the current year revenue was also impacted by the increase in supplies revenue in the aerospace product lines. T&M current year segment operating profit was $3.4 million resulting in a 12.8% profit margin compared to the prior year segment operating loss of $1.0 million and related negative operating margin of 4.0%.
T&M current year segment operating profit was $9.0 million resulting in a 22.8% profit margin compared to the prior year segment operating profit of $3.4 million and related operating margin of 12.8%.
Management’s Discussion and Analysis of Liquidity and Capital Resources” in our annual report on Form 10-K for the fiscal year ended January 31, 2021, filed with the SEC on April 13, 2021. Contractual Obligations, Commitments and Contingencies As of January 31, 2022, we had contractual obligations related to lease arrangements, debt and royalty obligation arrangements and purchase commitments.
Management’s Discussion and Analysis of Liquidity and Capital Resources” in our annual report on Form 10-K for the fiscal year ended January 31, 2022, filed with the SEC on April 18, 2022.
($ in thousands) 2022 2021 Revenue As a % of Total Revenue % Change Over Prior Year Revenue As a % of Total Revenue Product Identification $ 90,915 77.4 % 0.7 % $ 90,268 77.8 % T&M 26,565 22.6 % 3.1 % 25,765 22.2 % Total $ 117,480 100.0 % 1.2 % $ 116,033 100.0 % Net revenue in fiscal 2022 was $117.5 million, a 1.2% increase compared to net revenue of $116.0 million for fiscal 2021.
($ in thousands) 2023 2022 Revenue As a % of Total Revenue % Change Over Prior Year Revenue As a % of Total Revenue P I $ 103,089 72.3 % 13.4 % $ 90,915 77.4 % T&M 39,438 27.7 % 48.5 % 26,565 22.6 % Total $ 142,527 100.0 % 21.3 % $ 117,480 100.0 % Net revenue in fiscal 2023 was $142.5 million, a 21.3% increase compared to net revenue of $117.5 million for fiscal 2022.
Current year revenue through domestic channels was $68.2 million, a decline of 3.8% from prior year domestic revenue of $70.9 million. International revenue of $49.3 million for fiscal 2022 increased 9.2% compared to prior year international revenue of $45.1 million.
Current year revenue through domestic channels was $91.8 million, an increase of 34.8% from prior year domestic revenue of $68.2 million. International revenue of $50.6 million for fiscal 2023 increased 2.7% compared to prior year international revenue of $49.3 million.
The terms of the PPP Loan were subsequently revised in accordance with the provisions of the Paycheck Protection Flexibility Act of 2020 (the “PPP Flexibility Act”) which was enacted on June 5, 2020. On June 15, 2021, the SBA approved our application for forgiveness of the entire $4.4 million principal balance of our PPP Loan and all accrued interest thereon.
The terms of the PPP Loan were subsequently revised in accordance with the provisions of the Paycheck Protection Flexibility Act of 2020 (the “PPP Flexibility Act”), which was enacted on June 5, 2020.
T&M also provides repairs, service and spare parts. We market and sell our products and services globally through a diverse distribution structure of direct sales personnel, manufacturers’ representatives and authorized dealers that deliver a full complement of branded products and services to customers in our respective markets.
Refer to Note 2, “Acquisition,” in our consolidated financial statements included elsewhere in this report for further details. We market and sell our products and services globally through a diverse distribution structure of direct sales personnel, manufacturers’ representatives and authorized dealers that deliver a full complement of branded products and services to customers in our respective markets.
Since the COVID-19 pandemic began we have experienced difficulties in obtaining raw materials and components for our products. Some of the structural dislocations in the global economy caused by the pandemic are deepening and prolonging these difficulties. We have had to incur additional costs, such as expedited and express shipping fees (i.e., air rather than ocean freight).
Since the COVID-19 pandemic began we have experienced difficulties in obtaining raw materials and components for our products. Some of the structural dislocations in the global economy that were triggered by the pandemic are prolonging these difficulties.
The decrease in cash from operations for fiscal 2022 was also impacted by the $3.1 million ERC receivable and the $4.5 million gain on the forgiveness of the PPP Loan. The accounts receivable balance decreased to $17.1 million at January 31, 2022, compared to $17.4 at January 31, 2021.
The increase in cash used for operations for fiscal 2023 was partially offset by the $3.1 million of ERC receivable received in the first quarter of the current year. Cash from operations for fiscal 2022 was also impacted by the $3.1 million ERC receivable and the $4.5 million gain on the forgiveness of the PPP Loan.
The PPP Loan, which would have matured on May 6, 2022, was unsecured and bore interest at a rate of 1.0% per annum, accruing from the loan date.
The PPP Loan, which would have matured on May 6, 2022, was unsecured and bore interest at a rate of 1.0% per annum, accruing from the loan date. 32 On June 15, 2021, Greenwood notified us that the SBA approved our application for forgiveness of the entire $4.4 million principal balance of our PPP Loan and all accrued interest thereon.
Test & Measurement Revenue from the T&M product group was $26.6 million for fiscal 2022, a 3.1% increase compared to revenue of $25.8 million in the prior year. The increase in revenue for the current year is primarily attributable to the increase in repairs and parts sales for the aerospace printer product lines.
Test & Measurement Revenue from the T&M product group was $39.4 million for fiscal 2023, a 48.5% increase compared to revenue of $26.6 million in the prior year. The current year increase in T&M revenue is primarily due to a 44.2% or $7.5 million increase in hardware sales resulting primarily from increased aerospace printer product unit volume.
At January 31, 2022, our cash and cash equivalents were $5.3 million. There was no outstanding balance on our revolving line of credit at January 31, 2022 and we have $22.5 million available for borrowing under that facility.
At January 31, 2023, our cash and cash equivalents were $3.9 million. During fiscal 2023, we borrowed a net of $15.9 million on our revolving line of credit, and at January 31, 2023, we had $9.1 million available for borrowing under that facility.
Fiscal 2022 international revenue reflects a favorable foreign exchange rate impact of $1.1 million, compared to a favorable impact of $0.8 million in fiscal 2021. Hardware revenue in fiscal 2022 was $31.5 million, a $2.6 million or 7.7% decrease compared to fiscal 2021 hardware revenue of $34.1 million.
Fiscal 2023 international revenue reflects an unfavorable foreign exchange rate impact of $3.5 million, compared to a favorable foreign exchange rate impact of $1.1 million in fiscal 2022.
Prior year other expense includes $1.0 million of interest expense on debt and revolving line of credit, offset by a net foreign exchange gain of $0.6 million and other income of $0.1 million. We recognized $0.6 million of income tax expense for the current fiscal year, resulting in an effective tax rate of 8.6%.
Other expense in fiscal 2023 was $2.0 million compared to other income of $2.8 million in fiscal 2022. Current year expense includes $1.7 million of interest expense on our debt and revolving line of credit and $0.4 million of net foreign exchange loss, offset by net other income of $0.1 million.
Product Identification Update Our Product Identification business has been negatively impacted by the COVID-19 pandemic because our ability to meet with customers to demonstrate our products at trade shows and on-site in their facilities has been curtailed.
Product Identification Update The COVID-19 pandemic impacted our PI business by limiting our ability to meet with customers to demonstrate our products at trade shows and on-site in their facilities was curtailed. We partially countered this through a variety of virtual, on-line selling and digital marketing strategies, a number of which we continue to emphasize today.
The current year decline in selling and marketing expenses was partially offset by an increase in employee wages and bonuses as well as increased travel and entertainment, commissions, and advertising expenses.
The current year increase in selling and marketing expenses was partially offset by a decrease in commissions and advertising and trade show expenses.
Our accounting for share-based compensation for restricted stock awards (“RSAs”) and restricted stock units (“RSUs”) is also based on the fair value method. The fair value of the RSUs and RSAs is based on the closing market price of our common stock on the date of grant.
Share-Based Compensation: Compensation expense for time-based restricted stock units is measured at the grant date and recognized ratably over the vesting period. We determine the fair value of time-based and performance-based restricted stock units based on the closing market price of our common stock on the grant date.
Net cash used by investing activities for fiscal 2022 was $1.8 million for capital expenditures, of which $1.6 million related to the capitalization of our new ERP system and the related hardware, and the remaining $0.2 million was for machinery and tools. Net cash used by financing activities for fiscal 2022 was $5.6 million.
Net cash used by investing activities for fiscal 2023 was $17.2 million, which includes $17.0 million related to the acquisition of Astro Machine and $0.2 million for capital expenditures. Net cash provided by financing activities for fiscal 2023 was $18.8 million.
We believe the following critical accounting policies require significant judgments and estimates in the preparation of our consolidated financial statements: Revenue Recognition : We recognize revenue in accordance with Accounting Standards Update (ASU) 2014-9, Revenue from Contracts with Customers (also referred to as Topic 606).
We believe the following critical accounting policies require significant judgments and estimates in the preparation of our consolidated financial statements: Revenue Recognition : We recognize revenue in accordance with Accounting Standards Codification (ASC) 606, “Revenue from Contracts with Customers.” Under ASC 606, based on the nature of our contracts, we recognize most of our revenue upon shipment, which is when the performance obligation has been satisfied.
These difficulties have also negatively impacted our efficiency, delayed shipments and caused product shortages . We are currently monitoring the world-wide delays in transit time, as freight carriers continue to experience significant delays in overseas shipments. We are addressing these issues through long range planning and procuring higher inventory on severely allocated items to help mitigate potential shortages whenever practicable.
These factors have negatively impacted our efficiency, have delayed shipments for each of the fiscal quarters of fiscal 2023, and have caused what we believe are product shortages. We are addressing these issues through long-range planning and procuring higher inventory levels for the affected items to help mitigate potential shortages whenever practicable.
The higher profit and related margin for the current year compared to the prior year is primarily attributable to increased revenue and the impact of the ERC, which reduced manufacturing payroll taxes in the amount of $1.7 million in the second quarter of the current year.
The lower gross profit margin for the current year compared to the prior year is primarily attributable to the inclusion of Astro Machine for the six months since its acquisition, because of the impact of its lower gross margin business model, plus the impact of the employment retention tax credit (“ERC”) in the prior year, which reduced manufacturing payroll taxes, a component of cost of revenue, in the amount of $1.7 million in the second quarter of the prior year.
Cash outflows for financing activities for fiscal 2022 included the refinancing of debt, which resulted in a net outflow of cash of $2.6 million, and principal payments on the new long-term debt and the guaranteed royalty obligation of $0.8 million and $2.0 million, respectively.
Cash provided from financing activities for fiscal 2023 includes $15.9 million for borrowings under the revolving line of credit and $6.0 million of proceeds from long term borrowings. Cash outflows for financing activities for fiscal 2022 include principal payments on long-term debt and the guaranteed royalty obligation of $1.0 million and $2.0 million, respectively.
The decrease in selling and marketing expenses for the current year is primarily due to a decrease in payroll taxes in the second quarter of the current year related to the ERC, as well as a decrease in amortization expense related to the second quarter’s change in the remaining useful lives and amortization methods for certain of our customer relationship intangibles.
The increase in selling and marketing expenses for the current year is primarily due to a decrease in payroll taxes in the second quarter of the prior year related to the ERC, which reduced payroll taxes in the amount of $0.8 million, as well as the current year increase in employee wages and travel and entertainment expenses.
The days sales outstanding decrease in the current year is due to customer mix, as aerospace receivables typically take longer to collect, and these revenues continued to represent a lesser percentage of total sales in fiscal 2022.
The days sales outstanding increased to 49 days at year end compared to 45 days at the end of fiscal 2022 contributing to the higher receivables balance at January 31, 2023. The days sales outstanding increase in the current year is due to customer mix, as aerospace receivables typically take longer to collect.
The Amended Credit Agreement provides for (i) a term loan in the principal amount of $10.0 million, and (ii) a $22.5 million revolving credit facility available for general corporate purposes.
The Amended Credit Agreement provides for (i) a new term loan in the principal amount of $6.0 million, which term loan was in addition to the existing term loan outstanding under the Existing Credit Agreement in the principal amount of $9.0 million as of the effective date of the Second Amendment, and (ii) an increase in the aggregate principal amount of the revolving credit facility available thereunder from $22.5 million to $25.0 million.
Reductions in compensation expense associated with forfeited awards are estimated at the date of grant, and this estimated forfeiture rate is adjusted periodically based on actual forfeiture experience. Recent Accounting Pronouncements Reference is made to Note 1 of our audited consolidated financial statements included elsewhere in this report.
Recent Accounting Pronouncements Reference is made to Note 1 of our audited consolidated financial statements included elsewhere in this report.
Results of Operations Fiscal 2022 compared to Fiscal 2021 The following table presents the revenue of each of our segments, as well as the percentage of total revenue and change from the prior year.
If this were to happen individually or in combination, these factors would be difficult to respond to, which could have a material adverse impact on our business operations and financial results. 26 Results of Operations Fiscal 2023 compared to Fiscal 2022 The following table presents the revenue of each of our segments, as well as the percentage of total revenue and change from the prior year.
This decrease was offset by state taxes, return to provision adjustments, and taxes on foreign earnings. The PPP Loan forgiveness is excluded from taxable income under Section 1106(i) of the CARES Act. During fiscal 2021 we recognized a $0.9 million income tax expense, or a 41.1% effective tax rate.
This decrease was offset by state taxes, return to provision adjustments, and taxes on foreign earnings. The PPP loan forgiveness is excluded from taxable income. Net income for fiscal 2023 was $2.7 million, or $0.36 per diluted share. Net income for fiscal 2022 was $6.4 million, or $0.88 per diluted share.
Determination of recoverability is based on an estimate of undiscounted future cash flows resulting from the use of the asset and its eventual disposition.
Intangible assets that are subject to amortization 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.
Also contributing to the current year increase in supplies revenue was the increase in sales of supplies in both our aerospace printer and data recorder product lines, and a slight increase in ink jet supply sales in the QuickLabel product group.
Also contributing to the increase in current year supply revenue was the increase in paper supply revenue for the aerospace printers in the T&M segment and the increased sales of supplies in our TrojanLabel product line in the PI segment.
Operating expenses for the current year were $39.5 million, representing a 1.4% increase from the prior year’s operating expenses of $38.9 million. Specifically, selling and marketing expenses of $23.2 million in fiscal 2022 decreased 0.5% from the prior year amount of $23.3 million.
Specifically, selling and marketing expenses of $24.5 million in fiscal 2023 increased 5.5% from the prior year amount of $23.2 million.

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Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Market Risk — interest-rate, FX, commodity exposure

6 edited+1 added−2 removed4 unchanged
Biggest changeA hypothetical 10% change in the rates used to translate the results of our foreign subsidiaries would result in an increase or decrease in our consolidated net income of approximately $0.2 million for the year ended January 31, 2022. 34 Table of Contents Transactional exposure arises where transactions occur in currencies other than the functional currency.
Biggest changeOur primary currency translation exposure is related to our subsidiaries that have functional currencies denominated in Danish Kroner and the Euro. A hypothetical 10% change in the rates used to translate the results of our foreign subsidiaries would result in an increase or decrease in our consolidated net income of approximately $0.2 million for the year ended January 31, 2023.
The cumulative foreign currency translation adjustment is recorded as a component of accumulated other comprehensive loss in shareholders’ equity. The reported results of our foreign subsidiaries will be influenced by their translation into U.S. dollars by currency movements against the U.S. dollar.
The cumulative foreign currency translation adjustment is recorded as a component of accumulated other comprehensive loss in shareholders’ equity. The reported results of our foreign 37 subsidiaries will be influenced by their translation into U.S. dollars by currency movements against the U.S. dollar.
At January 31, 2022, under the LIBOR Transition Amendment to the Amended Credit Agreement, the term loan bears interest at a BSBY (Bloomberg Short-Term Bank Yield) rate plus a margin that varies between 1.60% and 2.30% based on our consolidated leverage ratio. During fiscal 2022, the interest rate on our variable rate debt ranged between 2.35% to 4.65% .
At January 31, 2023, under the LIBOR Transition Amendment to the Amended Credit Agreement, the term loan bears interest at a BSBY (Bloomberg Short-Term Bank Yield) rate plus a margin that varies between 1.60% and 2.30% based on our consolidated leverage ratio.
Transactions in foreign currencies are recorded at the exchange rate prevailing at the date of the transaction. The resulting monetary assets and liabilities are translated into the appropriate functional currency at exchange rates prevailing at the balance sheet date and the resulting gains and losses are reported as foreign exchange gain (loss) in the consolidated statements of income.
The resulting monetary assets and liabilities are translated into the appropriate functional currency at exchange rates prevailing at the balance sheet date and the resulting gains and losses are reported as foreign exchange gain (loss) in the consolidated statements of income. Foreign exchange losses resulting from transactional exposure were $0.5 million for the year ended January 31, 2023.
The impact on our results of operations of a 100 basis point change in the interest rate on the outstanding balance of our variable-rate debt, would be approximately $0.1 million annually. Item 8.
During fiscal 2023, the weighted average interest rate on our variable rate debt was 4.77% and the weighted average interest rate on our revolving line of credit was 6.71% The impact on our results of operations of a 100 basis point change in the interest rates on the outstanding balance of our variable-rate debt and revolving line of credit would be approximately $0.2 million annually.
Foreign exchange losses resulting from transactional exposure were $0.3 million for the year ended January 31, 2022. Interest Rate Risk At January 31, 2022, our total indebtedness included $9.25 million of term loan variable-rate debt.
Interest Rate Risk At January 31, 2023, our total indebtedness included $14.25 million of term loan variable-rate debt and $15.9 million outstanding balance on our revolving line of credit.
Removed
Our primary currency translation exposure is related to our subsidiaries that have functional currencies denominated in Danish Kroner and the Euro.
Added
Transactional exposure arises where transactions occur in currencies other than the functional currency. Transactions in foreign currencies are recorded at the exchange rate prevailing at the date of the transaction.
Removed
Financial Statements and Supplementary Data The consolidated financial statements required under this item are submitted as a separate section of this report on the pages indicated at Item 15(a)(1). Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure None.

Other ALOT 10-K year-over-year comparisons