AstroNova, Inc. Income Taxes Disclosure
Note 16—Income Taxes
The components of income (loss) before income taxes are as follows for the years ended January 31,:
(In thousands) |
|
2026 |
|
|
2025 |
|
|
2024 |
|
|||
Domestic |
|
$ |
(3,624 |
) |
|
$ |
5,605 |
|
|
$ |
5,448 |
|
Foreign |
|
|
1,088 |
|
|
|
(17,892 |
) |
|
|
625 |
|
|
|
$ |
(2,536 |
) |
|
$ |
(12,287 |
) |
|
$ |
6,073 |
|
The components of the provision for income taxes are as follows for the years ended January 31,:
(In thousands) |
|
2026 |
|
|
2025 |
|
|
2024 |
|
|||
Current: |
|
|
|
|
|
|
|
|
|
|||
Federal |
|
$ |
164 |
|
|
$ |
1,125 |
|
|
$ |
966 |
|
State |
|
|
43 |
|
|
|
134 |
|
|
|
71 |
|
Foreign |
|
|
1,022 |
|
|
|
153 |
|
|
|
420 |
|
|
|
$ |
1,229 |
|
|
$ |
1,412 |
|
|
$ |
1,457 |
|
Deferred: |
|
|
|
|
|
|
|
|
|
|||
Federal |
|
$ |
(800 |
) |
|
$ |
(621 |
) |
|
$ |
(32 |
) |
State |
|
|
(191 |
) |
|
|
(13 |
) |
|
|
2 |
|
Foreign |
|
|
(398 |
) |
|
|
1,424 |
|
|
|
(48 |
) |
|
|
$ |
(1,389 |
) |
|
$ |
790 |
|
|
$ |
(78 |
) |
|
|
$ |
(160 |
) |
|
$ |
2,202 |
|
|
$ |
1,379 |
|
The following table presents a reconciliation of income taxes calculated at the statutory rate and the provision for income taxes:
(In thousands) |
|
2026 |
|
|
2025 |
|
|
2024 |
|
|||||||||||||||
U.S. Federal Statutory Tax Rate |
|
$ |
(533 |
) |
|
|
21.0 |
% |
|
$ |
(2,579 |
) |
|
|
21.0 |
% |
|
$ |
1,275 |
|
|
|
21.0 |
% |
State and local income tax, net of federal (national) income tax effect (1) |
|
|
(117 |
) |
|
|
4.6 |
% |
|
|
96 |
|
|
|
(0.8 |
)% |
|
|
56 |
|
|
|
0.9 |
% |
Foreign tax effects |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Canada |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Return to Provision Adjustment |
|
|
(32 |
) |
|
|
1.3 |
% |
|
|
(56 |
) |
|
|
0.5 |
% |
|
|
— |
|
|
|
— |
|
Statutory rate difference between Canada and United States |
|
|
4 |
|
|
|
(0.2 |
)% |
|
|
16 |
|
|
|
(0.1 |
)% |
|
|
356 |
|
|
|
5.9 |
% |
France |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Statutory rate difference between France and United States |
|
|
114 |
|
|
|
(4.5 |
)% |
|
|
(1 |
) |
|
|
— |
|
|
|
41 |
|
|
|
0.7 |
% |
Return to Provision Adjustment |
|
|
— |
|
|
|
— |
|
|
|
(94 |
) |
|
|
0.8 |
% |
|
|
90 |
|
|
|
1.5 |
% |
Germany |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
German Trade Tax |
|
|
145 |
|
|
|
(5.7 |
)% |
|
|
147 |
|
|
|
(1.2 |
)% |
|
|
107 |
|
|
|
1.8 |
% |
Statutory rate difference between Germany and United States |
|
|
(114 |
) |
|
|
4.5 |
% |
|
|
(58 |
) |
|
|
0.5 |
% |
|
|
(284 |
) |
|
|
(4.7 |
)% |
Other |
|
|
6 |
|
|
|
(0.2 |
)% |
|
|
8 |
|
|
|
(0.1 |
)% |
|
|
6 |
|
|
|
0.1 |
% |
United Kingdom |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Statutory rate difference between United Kingdom and United States |
|
|
92 |
|
|
|
(3.6 |
)% |
|
|
7 |
|
|
|
(0.1 |
)% |
|
|
(54 |
) |
|
|
(0.9 |
)% |
Other |
|
|
(17 |
) |
|
|
0.7 |
% |
|
|
(3 |
) |
|
|
— |
|
|
|
(11 |
) |
|
|
(0.2 |
)% |
Denmark |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Statutory rate difference between Denmark and United States |
|
|
(119 |
) |
|
|
4.7 |
% |
|
|
278 |
|
|
|
(2.3 |
)% |
|
|
107 |
|
|
|
1.8 |
% |
Return to Provision Adjustment |
|
|
— |
|
|
|
— |
|
|
|
(105 |
) |
|
|
0.9 |
% |
|
|
(178 |
) |
|
|
(2.9 |
)% |
China |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Changes in Valuation Allowances |
|
|
(131 |
) |
|
|
5.2 |
% |
|
|
(42 |
) |
|
|
0.3 |
% |
|
|
73 |
|
|
|
1.2 |
% |
Other |
|
|
13 |
|
|
|
(0.5 |
)% |
|
|
7 |
|
|
|
(0.1 |
)% |
|
|
(12 |
) |
|
|
(0.2 |
)% |
Portugal |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Statutory rate difference between Portugal and United States |
|
|
357 |
|
|
|
(14.1 |
)% |
|
|
43 |
|
|
|
(0.4 |
)% |
|
|
— |
|
|
|
— |
|
Goodwill Impairment |
|
|
62 |
|
|
|
(2.5 |
)% |
|
|
2,815 |
|
|
|
(22.9 |
)% |
|
|
— |
|
|
|
— |
|
Portugal Tax Incentives - Valuation Allowance |
|
|
— |
|
|
|
— |
|
|
|
2,373 |
|
|
|
(19.3 |
)% |
|
|
— |
|
|
|
— |
|
Other |
|
|
15 |
|
|
|
(0.6 |
)% |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
Effect of Cross-Border Tax Laws |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Global Intangible Low Tax Income (GILTI) |
|
|
160 |
|
|
|
(6.3 |
)% |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
Section 250 Deduction - FDII |
|
|
— |
|
|
|
— |
|
|
|
(151 |
) |
|
|
1.2 |
% |
|
|
(98 |
) |
|
|
(1.6 |
)% |
Other |
|
|
(27 |
) |
|
|
1.1 |
% |
|
|
(19 |
) |
|
|
0.2 |
% |
|
|
(47 |
) |
|
|
(0.8 |
)% |
Tax Credits |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
R&D Credits |
|
|
(213 |
) |
|
|
8.4 |
% |
|
|
(205 |
) |
|
|
1.7 |
% |
|
|
(160 |
) |
|
|
(2.6 |
)% |
Changes in Valuation Allowances |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
Nontaxable or Nondeductible Items |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Stock Compensation |
|
|
79 |
|
|
|
(3.1 |
)% |
|
|
(74 |
) |
|
|
0.6 |
% |
|
|
(43 |
) |
|
|
(0.7 |
)% |
Fines and Penalties |
|
|
34 |
|
|
|
(1.3 |
)% |
|
|
10 |
|
|
|
(0.1 |
)% |
|
|
13 |
|
|
|
0.2 |
% |
Other |
|
|
50 |
|
|
|
(2.0 |
)% |
|
|
178 |
|
|
|
(1.4 |
)% |
|
|
(6 |
) |
|
|
(0.1 |
)% |
Changes in Unrecognized Tax Benefits |
|
|
116 |
|
|
|
(4.6 |
)% |
|
|
133 |
|
|
|
(1.1 |
)% |
|
|
60 |
|
|
|
1.0 |
% |
Return to Provision Adjustment |
|
|
100 |
|
|
|
(4.0 |
)% |
|
|
(262 |
) |
|
|
2.1 |
% |
|
|
106 |
|
|
|
1.7 |
% |
Effect of Rates Different than Statutory |
|
|
(206 |
) |
|
|
8.1 |
% |
|
|
(258 |
) |
|
|
2.1 |
% |
|
|
(17 |
) |
|
|
(0.3 |
)% |
Other Adjustments |
|
|
2 |
|
|
|
(0.1 |
)% |
|
|
(2 |
) |
|
|
0.1 |
% |
|
|
(1 |
) |
|
|
— |
|
Effective Tax Rate |
|
$ |
(160 |
) |
|
|
6.3 |
% |
|
$ |
2,202 |
|
|
|
(17.9 |
)% |
|
$ |
1,379 |
|
|
|
22.7 |
% |
Our effective tax rate for fiscal 2026 was 6.3% compared to (17.9)% in fiscal 2025 and 22.7% in fiscal 2024. The fiscal 2026 increase in the effective tax rate compared to the prior year is primarily driven by a change in the earnings mix of the Company’s pre-tax book income, the release of a valuation allowance on China net operating losses, the benefit from state research and development tax credits, and adjustment to goodwill impairment recorded in the prior year. The increase to the effective tax rate in the current year was partially offset by tax expense related to uncertain tax positions, foreign tax rate differences to the US statutory rate, a decrease in windfalls on share based compensation, and income inclusions related to Global Intangible Low‑Taxed Income.
In fiscal 2025, the effective tax rate was impacted by a valuation allowance recorded against MTEX deferred tax assets as well as goodwill impairment on MTEX assets, decreasing the rate. The decrease in the effective tax rate in fiscal 2025 from fiscal 2024 is primarily related to the decrease in pre-tax book income and the federal income tax provision associated with the goodwill impairment and MTEX losses, the decrease in return to provision adjustments, and the decrease in the valuation allowance associated with China losses. This decrease was partially offset by other factors increasing the effective tax rate such as the valuation allowance recorded on Portuguese tax credits, goodwill impairment recorded on MTEX for the PI reporting segment, and transaction costs associated with the MTEX acquisition.
Cash paid for income taxes, net of refunds by jurisdiction is as follows:
(In thousands) |
|
2026 |
|
|
2025 |
|
|
2024 |
|
|||
U.S. Federal |
|
$ |
300 |
|
|
$ |
1,490 |
|
|
$ |
951 |
|
U.S. State and Local |
|
|
|
|
|
|
|
|
|
|||
Rhode Island |
|
|
49 |
|
|
|
— |
|
|
|
— |
|
California |
|
|
37 |
|
|
|
— |
|
|
|
— |
|
Illinois |
|
|
— |
|
|
|
— |
|
|
|
135 |
|
All other state and local jurisdictions |
|
|
(41 |
) |
|
|
168 |
|
|
|
216 |
|
Foreign: |
|
|
|
|
|
|
|
|
|
|||
Germany |
|
|
364 |
|
|
|
525 |
|
|
|
329 |
|
Canada |
|
|
(111 |
) |
|
|
— |
|
|
|
— |
|
All Other Foreign Jurisdictions |
|
|
36 |
|
|
|
27 |
|
|
|
63 |
|
Total Cash Income Taxes Paid, Net of Refunds |
|
$ |
634 |
|
|
$ |
2,210 |
|
|
$ |
1,694 |
|
The components of deferred income tax expense arise from various temporary differences and relate to items included in the statement of income. The tax effects of temporary differences that gave rise to significant portions of the deferred tax assets and liabilities are as follows:
|
|
January 31, |
|
|||||
(In thousands) |
|
2026 |
|
|
2025 |
|
||
Deferred Tax Assets: |
|
|
|
|
|
|
||
Honeywell Royalty Liability |
|
$ |
4,821 |
|
|
$ |
4,280 |
|
R&D Expense Capitalization |
|
|
3,667 |
|
|
|
2,894 |
|
Portugal Tax Incentives |
|
|
2,373 |
|
|
|
2,373 |
|
Inventory |
|
|
1,839 |
|
|
|
1,994 |
|
State R&D Credits |
|
|
2,105 |
|
|
|
1,721 |
|
Net Operating Loss |
|
|
1,049 |
|
|
|
886 |
|
Share-Based Compensation |
|
|
593 |
|
|
|
575 |
|
Portugal Statutory Tax Adjustments |
|
|
541 |
|
|
|
541 |
|
Compensation Accrual |
|
|
250 |
|
|
|
285 |
|
Foreign Tax Credit |
|
|
154 |
|
|
|
154 |
|
Bad Debt |
|
|
93 |
|
|
|
115 |
|
Warranty Reserve |
|
|
127 |
|
|
|
120 |
|
ASC 842 Adjustment – Lease Liability |
|
|
218 |
|
|
|
87 |
|
Other |
|
|
799 |
|
|
|
563 |
|
|
|
$ |
18,629 |
|
|
$ |
16,588 |
|
Deferred Tax Liabilities: |
|
|
|
|
|
|
||
Accumulated Tax Depreciation in Excess of Book Depreciation |
|
|
1,371 |
|
|
|
1,632 |
|
Intangibles |
|
|
2,037 |
|
|
|
1,544 |
|
Purchase Price Accounting |
|
|
270 |
|
|
|
270 |
|
Portugal Statutory Tax Adjustments |
|
|
110 |
|
|
|
110 |
|
ASC 842 Adjustment – ROU Asset |
|
|
215 |
|
|
|
87 |
|
Other |
|
|
142 |
|
|
|
154 |
|
|
|
$ |
4,145 |
|
|
$ |
3,797 |
|
Subtotal |
|
|
14,484 |
|
|
|
12,791 |
|
Valuation Allowance |
|
|
(4,653 |
) |
|
|
(4,400 |
) |
Net Deferred Tax Assets |
|
$ |
9,831 |
|
|
$ |
8,391 |
|
Deferred taxes are reflected in the consolidated balance sheet as follows:
|
|
January 31, |
|
|||||
(In thousands) |
|
2026 |
|
|
2025 |
|
||
Deferred Tax Assets |
|
$ |
9,850 |
|
|
$ |
8,431 |
|
Deferred Tax Liabilities |
|
|
(19 |
) |
|
|
(40 |
) |
Total Net Deferred Tax Assets |
|
$ |
9,831 |
|
|
$ |
8,391 |
|
The valuation allowances of $4.7 million at January 31, 2026 and $4.4 million at January 31, 2025, relate to Rhode Island research and development tax credit carryforwards, foreign tax credit carryforwards and Portugal tax credits. The valuation allowance as of January 31, 2025, included amounts related to China net operating losses, which were released during the period ending January 31, 2026.
At January 31, 2026, we had net operating loss carryforwards of $1.0 million, which expire in 2026 through 2045 and interest expense carryforwards of $11,800, which carry forward indefinitely.
At January 31, 2026, we had state research credit carryforwards of approximately $2.1 (net of federal benefit) million which expire in 2027 through 2032. Additionally, we had $0.2 million of foreign tax credits. We maintain a full valuation allowance against these credits as we expect these credits to expire unused. Due to the acquisition of MTEX that occurred during 2024, we acquired tax attributes of $2.3 million related to tax incentives associated with the System of Tax Incentives in Business Research and Development ("SIFIDE") and Investment Support Tax Regime ("RFAI"). The SIFIDE incentive is a research and development credit for Portuguese tax resident companies carrying out commercial, industrial, or agricultural activities, and non-resident companies with a permanent establishment in the Portuguese territory. The RFAI is a tax regime for investment promotion, in which an incentive is given to companies that invest in certain regions (capped at 50% of the corporate income tax due) of 30% (for qualified investments lower than € 15 million) or 10% (for the part of qualified investments exceeding that limit) of the qualified investment. The credits have carryforward periods of 10 years and 12 years for SIFIDE and RFAI, respectively. We maintain a full valuation allowance against these credits as we expect these credits to expire unused.
The changes in the balances of unrecognized tax benefits, excluding interest and penalties are as follows:
(In thousands) |
|
2026 |
|
|
2025 |
|
|
2024 |
|
|||
Balance, beginning of the year |
|
$ |
639 |
|
|
$ |
505 |
|
|
$ |
414 |
|
Increases in prior period tax positions |
|
|
21 |
|
|
|
10 |
|
|
|
— |
|
Increases in current period tax positions |
|
|
135 |
|
|
|
143 |
|
|
|
162 |
|
Reductions related to lapse of statutes of limitations |
|
|
(8 |
) |
|
|
(19 |
) |
|
|
(71 |
) |
Balance, end of the year |
|
$ |
787 |
|
|
$ |
639 |
|
|
$ |
505 |
|
During fiscal 2026 and 2025, we released $38,000 and $19,000, respectively, of uncertain tax positions including accrued interest and penalties relating to a change in various unrecognized tax positions. We have accrued potential interest and penalties of $40,000 included in income taxes payable in the accompanying consolidated balance sheet at January 31, 2026.
We and our subsidiaries file income tax returns in U.S. federal jurisdictions, various state jurisdictions, and various foreign jurisdictions. In fiscal 2025, we released $18,000 of state nexus positions as a result of the expiration of the statute of limitations.
U.S. income taxes have not been provided on $14.0 million of undistributed earnings of our foreign subsidiaries since it is our intention to permanently reinvest such earnings offshore. If the earnings were distributed in the form of dividends, we would not be subject to U.S. tax as a result of the Tax Cuts and Jobs Act (“TCJA") but could be subject to foreign income and withholding taxes. Determination of the amount of this unrecognized deferred income tax liability is not practical.
On July 4, 2025, the “One Big Beautiful Bill Act” (“OBBBA”) was signed into law in the United States. The OBBBA includes a broad range of tax reform provisions for businesses, including extensions of key TCJA provisions, modifications to the international tax framework, and restoration of favorable tax treatment for certain business provisions. Certain provisions of the legislation became effective in 2025, while others will become effective in 2026. The OBBBA was enacted during our second fiscal quarter of 2026, and we have considered its potential effects and reflected the impact of the OBBBA on our financial position, results of operations, and cash flows. The fiscal 2026 impacts of the OBBBA are insignificant based on our current operations.
Historical Timeline
| Fiscal Year | Filed | |
|---|---|---|
| 2026 | Apr 15, 2026 | Showing above |
| 2025 | Apr 15, 2025 | |
| 2024 | Apr 12, 2024 | |
| 2023 | Apr 17, 2023 | |
| 2022 | Apr 18, 2022 | |
| 2021 | Apr 13, 2021 | |
| 2020 | Apr 10, 2020 | |
| 2019 | Apr 10, 2019 | |
| 2018 | Apr 10, 2018 | |
| 2017 | Apr 7, 2017 | |
| 2016 | Apr 8, 2016 | |
About Income Taxes Disclosures
The income tax disclosure reveals how much a company actually pays in taxes versus what the statutory rate would predict. Analysts focus on the effective tax rate (ETR) reconciliation, which breaks down every item driving the gap between the 21% federal rate and the company's reported ETR — including R&D credits, foreign rate differentials, and state taxes. Deferred tax assets (DTAs) and their valuation allowances signal management's confidence in future profitability: a rising allowance suggests the company doubts it can use accumulated tax benefits. Uncertain tax benefit (UTB) reserves quantify exposure to IRS challenges on aggressive positions.
Key signals to watch: sudden ETR drops without clear operational reasons, large increases in valuation allowances, growing UTB balances, and significant unremitted foreign earnings. Post-TCJA, pay attention to GILTI and BEAT provisions that affect multinational tax structures. Compare the cash taxes paid (from the cash flow statement) against the income tax provision to gauge earnings quality.