NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)
(dollars in thousands, except per-share amounts)
(1) BASIS OF PRESENTATION AND PRINCIPLES OF CONSOLIDATION
Raven Industries, Inc. (the Company or Raven) is a diversified technology company providing a variety of products to customers within the agricultural, aerospace/defense, construction, geomembrane, industrial, and stratospheric balloon markets. The Company is comprised of
three
unique operating units, or divisions, classified into reportable segments: Applied Technology, Engineered Films, and Aerostar.
The accompanying interim unaudited consolidated financial statements, which includes the accounts of Raven and its wholly-owned or controlled subsidiaries, net of intercompany balances and transactions, has been prepared by the Company in accordance with generally accepted accounting principles in the United States (GAAP) for interim financial information and the instructions to Form 10-Q and Article 10 of Regulation S-X of the Securities and Exchange Commission (SEC). Accordingly, these financial statements do not include all of the information and notes required by GAAP for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring adjustments) considered necessary to fairly present this financial information have been included. These financial statements should be read in conjunction with the audited consolidated financial statements and the accompanying notes included in the Company's Annual Report on Form 10-K for the fiscal year ended
January 31, 2018
.
Financial results for the interim three- and
nine
-month periods ended
October 31, 2018
are not necessarily indicative of the results that may be expected for the year ending January 31, 2019. The January 31, 2018 consolidated balance sheet was derived from audited financial statements, but does not include all disclosures required in an annual report on Form 10-K. Preparing financial statements in conformity with GAAP requires management to make certain estimates and assumptions. These affect the reported amounts of assets and liabilities as of the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.
Noncontrolling interests represent capital contributions, income and loss attributable to the owners of less than wholly-owned consolidated entities. The Company owns a
75%
interest in an entity consolidated under the Aerostar business segment. Given the Company's controlling financial interest, the accounts of the business venture have been consolidated with the accounts of the Company, and a noncontrolling interest has been recorded for the noncontrolling investor interest in the net assets and operations of the business venture.
(2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
There have been no material changes to the Company's significant accounting policies as described in the Company's Annual Report on Form 10-K for the fiscal year ended January 31, 2018 other than described in the Accounting Standards Adopted section below.
Accounting Pronouncements
Accounting Standards Adopted
In the fiscal 2019 first quarter, the Company early adopted Financial Accounting Standards Board (FASB) Accounting Standards Update (ASU) No. 2018-02, "Income Statement-Reporting Comprehensive Income (Topic 220): Reclassification of Certain Tax Effects from Accumulated Other Comprehensive Income" (ASU 2018-02) issued in February 2018. The amendments in this guidance allow for a reclassification from accumulated other comprehensive income to retained earnings for stranded tax effects resulting from the Tax Cuts and Jobs Act (TCJA). Consequently, the amendments eliminate the stranded tax effects resulting from the TCJA and are intended to improve the usefulness of information reported. The Company elected to apply the amendments in the period of adoption. The Company recorded a
$280
reclassification entry for the stranded tax effects in Accumulated Other Comprehensive Income related to Raven's post-retirement plan further disclosed in the Company's Annual Report in the Form 10-K filed March 23, 2018. The impact of the reclassification is reported as "Reclassification due to ASU 2018-02 adoption" in the Consolidated Statements of Shareholders' Equity.
In the fiscal 2019 first quarter when it became effective, the Company adopted FASB ASU No. 2017-09, "Compensation-Stock Compensation (Topic 718): Scope of Modification Accounting" (ASU 2017-09) on a prospective basis. The guidance amends the scope of modification accounting for share-based payment arrangements. The ASU provides guidance on the types of changes to the terms or conditions of share-based payment awards to which an entity would be required to apply modification accounting under Topic 718. Specifically, an entity would not apply modification accounting if the fair value, vesting conditions, and classification of the awards as equity instruments or liability instruments are the same immediately before and after the modification
(dollars in thousands, except per-share amounts)
to the award. The Company did not modify any of its outstanding awards during the nine-month period ended October 31, 2018; therefore, the adoption of this guidance had no impact on its consolidated financial statements, results of operations, or disclosures.
In the fiscal 2019 first quarter when it became effective, the Company adopted, the FASB ASU No. 2017-07, "Compensation-Retirement Benefits (Topic 715): Improving the Presentation of Net Periodic Postretirement Benefit Cost" (ASU 2017-07). The guidance clarifies where the cost components of the net benefit cost should be reported in the income statement and it allows only the service cost to be capitalized. The adoption of this guidance resulted in
$7
and
$21
of the net periodic benefit cost being reported as a charge to operating income and
$71
and
$213
reported as a charge to non-operating income (expense) for the three- and nine-months ended
October 31, 2018
, respectively. The classification of this charge on the Consolidated Statements of Income and Comprehensive Income is described in Note 8
Employee Retirement Benefits
in the Notes to the Consolidated Financial Statements. The net periodic benefit cost for the prior fiscal year was not material.
In the fiscal 2019 first quarter when it became effective, the Company adopted FASB ASU 2016-16, "Income Taxes (Topic 740) Intra-Entity Transfers of Assets Other Than Inventory" (ASU 2016-16). Previous GAAP prohibits the recognition of current and deferred income taxes for an intra-entity asset transfer until the asset has been sold to an outside party. This prohibition on recognition is an exception to the principle of comprehensive recognition of current and deferred income taxes in GAAP. This new guidance eliminates the exception for an intra-entity transfer of an asset other than inventory. The Company did not have any intra-entity transfers of assets impacted by this guidance, as such the adoption of this guidance had no impact on its consolidated financial statements, results of operations, or disclosures.
In the fiscal 2019 first quarter when it became effective, the Company adopted FASB ASU 2016-15, "Statement of Cash Flows (Topic 230) Classification of Certain Cash Receipts and Cash Payments" (ASU 2016-15). The specific classification issues clarified in the guidance either were not applicable to the Company or are consistent with how the Company previously classified them, therefore the adoption of this guidance had no impact on its consolidated financial statements, results of operations, or disclosures.
In the fiscal 2019 first quarter when it became effective, the Company adopted FASB ASU No. 2016-01, "Financial Instruments-Overall (Subtopic 825-10): Recognition and Measurement of Financial Assets and Financial Liabilities" (ASU 2016-01).
The updated accounting guidance requires equity securities to be measured at fair value with changes in the fair value recognized through net income. An entity’s equity investments that are accounted for under the equity method of accounting or result in consolidation of an investee are not included within the scope of this update. The impacted financial instruments held at the time of adoption were not material, as such, the adoption of this guidance and the subsequent changes to Subtopic 825-10 in ASU 2018-03 "Technical Corrections and Improvements to Financial Instruments—Overall (Subtopic 825-10): Recognition and Measurement of Financial Assets and Financial Liabilities," did not have a material impact on the Company's consolidated financial statements, results of operations, or disclosures.
In the fiscal 2019 first quarter, the Company adopted ASU No. 2014-09, "Revenue from Contracts with Customers (Topic 606)" (ASU 2014-09). ASU 2014-09 provides a comprehensive new recognition model that requires recognition of revenue when a company transfers promised goods or services to customers in an amount that reflects the consideration which a company expects to receive in exchange for those goods or services. This guidance supersedes the revenue recognition requirements in FASB ASC Topic 605, "Revenue Recognition," and most industry-specific guidance. ASU 2014-09 defines a five-step process to achieve this core principle. It also requires additional disclosure about the nature, amount, timing, and uncertainty of revenue and cash flows arising from customer contracts. The Company adopted ASU 2014-09 on a modified retrospective basis. The comparative historical information has not been adjusted and continues to be reported under ASC Topic 605 as previously presented. The adoption of ASU 2014-09 did not have a material impact on the Company’s consolidated financial statements or results of operations as of the adoption date and for the three- or nine months ended October 31, 2018 as a significant majority of our sales revenue is recognized when products are shipped from our manufacturing facilities. As part of our adoption of ASU 2014-09 we have elected the following practical expedients: modified retrospective basis was applied for all contracts that were not completed as of February 1, 2018; shipping and handling costs associated with outbound freight after control over a product has transferred to a customer are considered fulfillment costs included within cost of sales; and taxes that are collected by the Company from a customer, which are assessed by governmental authorities that are both imposed upon and concurrent with a specific revenue-producing transaction, are excluded from revenues. Additional disclosures related to the revenues arising from contracts with customers as required by Topic 606 are included in Note 5
Revenue
.
New Accounting Standards Not Yet Adopted
In August 2018, the FASB issued ASU No. 2018-14, "Compensation-Retirement Benefits-Defined Benefit Plans-General (Subtopic 715-20):
Disclosure Framework-Changes to the Disclosure Requirements for Defined Benefit Plans" (ASU 2018-14). The amendments in ASU 2018-14 modify the disclosure requirements for employers that sponsor defined benefit pension or other postretirement plans
.
The amendments remove disclosures that no longer are considered cost beneficial, clarify the specific requirements of certain disclosures, and add disclosure requirements identified as relevant. ASU 2018-14 is effective for fiscal years ending after December 15, 2020. Early adoption is permitted and the amendments should be applied retrospectively to all
(dollars in thousands, except per-share amounts)
periods presented. The Company is evaluating this guidance, as it relates to its defined benefit post-retirement plan, to determine if it will elect to early adopt ASU 2018-14 in fiscal 2019. The amendments in ASU 2018-14 are disclosure-related only, as such the Company does not expect this new guidance to have a significant impact on the balances reported in the Company's consolidated financial statements or its note disclosures.
In August 2018 the FASB issued ASU No. 2018-13, "Fair Value Measurement (Topic 820): Disclosure Framework-Changes to the Disclosure Requirements for Fair Value Measurement" (ASU 2018-13). The amendments in ASU 2018-13 remove, modify and add disclosures for companies required to make disclosures about recurring or nonrecurring fair value measurements under Topic 820. The amendments in this update are effective for all entities for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2019. Early adoption of this guidance is permitted, however the Company has the option to delay the adoption of the additional disclosures required until the effective date. Certain amendments in this guidance are required to be applied prospectively and others are to be applied retrospectively. The Company is evaluating the amendments in ASU 2018-13 to determine when it will adopt this guidance and the impact the guidance will have on the Company's disclosures for assets and liabilities reported at fair value on a recurring or nonrecurring basis.
In February 2016 the FASB issued ASU No. 2016-02, "Leases (Topic 842)" (ASU 2016-02). The primary difference between previous GAAP and ASU 2016-02 is the recognition of lease assets and lease liabilities by lessees for those leases classified as operating leases under previous GAAP. The guidance requires a lessee to recognize a lease liability (to make lease payments) and a right-of-use asset (representing its right to use the underlying asset for the lease term) on the balance sheet with terms greater than 12 months. ASU 2016-02 is effective for fiscal years beginning after December 15, 2018. In July 2018 the FASB amended Topic 842 to provide entities additional guidance on transition to adopt using either a modified retrospective approach for leases that exist upon adoption and in the comparative periods presented, or an optional approach to initially apply the new lease guidance upon the adoption date without adjusting the comparative periods presented. The Company will adopt this guidance in the first quarter of fiscal 2020 using the modified retrospective approach to apply the new lease guidance without adjusting the comparative periods presented. The Company is in its final stages of evaluating the impact the standard will have on its consolidated financial statements, results of operations, and disclosures.
(dollars in thousands, except per-share amounts)
(3) SELECTED BALANCE SHEET INFORMATION
Following are the components of selected items from the Consolidated Balance Sheets:
|
|
|
|
|
|
|
|
|
|
|
|
October 31, 2018
|
|
January 31, 2018
|
Accounts receivable, net:
|
|
|
|
|
Trade accounts
|
|
$
|
64,942
|
|
|
$
|
57,063
|
|
Unbilled receivables
|
|
1,967
|
|
|
2,447
|
|
Allowance for doubtful accounts
|
|
(743
|
)
|
|
(978
|
)
|
|
|
$
|
66,166
|
|
|
$
|
58,532
|
|
Inventories:
|
|
|
|
|
Finished goods
|
|
7,191
|
|
|
8,054
|
|
In process
|
|
1,040
|
|
|
961
|
|
Materials
|
|
44,998
|
|
|
46,336
|
|
|
|
$
|
53,229
|
|
|
$
|
55,351
|
|
Other current assets:
|
|
|
|
|
Insurance policy benefit
|
|
574
|
|
|
759
|
|
Income tax receivable
|
|
1,370
|
|
|
1,397
|
|
Receivable from sale of investment
|
|
1,055
|
|
|
—
|
|
Prepaid expenses and other
|
|
3,475
|
|
|
3,705
|
|
|
|
$
|
6,474
|
|
|
$
|
5,861
|
|
Property, plant and equipment, net:
|
|
|
|
|
Land
|
|
$
|
3,234
|
|
|
$
|
3,234
|
|
Buildings and improvements
|
|
81,191
|
|
|
80,299
|
|
Machinery and equipment
|
|
157,570
|
|
|
149,847
|
|
Accumulated depreciation
|
|
(135,804
|
)
|
|
(127,523
|
)
|
|
|
106,191
|
|
|
105,857
|
|
Property, plant and equipment subject to capital leases:
|
|
|
|
|
Machinery and equipment
|
|
510
|
|
|
488
|
|
Accumulated amortization for capitalized leases
|
|
(202
|
)
|
|
(65
|
)
|
|
|
$
|
106,499
|
|
|
$
|
106,280
|
|
Other assets:
|
|
|
|
|
Equity investments
|
|
$
|
249
|
|
|
$
|
1,955
|
|
Deferred income taxes
|
|
19
|
|
|
19
|
|
Other
|
|
2,641
|
|
|
976
|
|
|
|
$
|
2,909
|
|
|
$
|
2,950
|
|
Accrued liabilities:
|
|
|
|
|
Salaries and related
|
|
$
|
6,543
|
|
|
$
|
9,409
|
|
Benefits
|
|
4,314
|
|
|
4,225
|
|
Insurance obligations
|
|
2,626
|
|
|
1,992
|
|
Warranties
|
|
851
|
|
|
1,163
|
|
Income taxes
|
|
549
|
|
|
226
|
|
Other taxes
|
|
1,568
|
|
|
1,880
|
|
Acquisition-related contingent consideration
|
|
1,764
|
|
|
1,036
|
|
Other
|
|
3,217
|
|
|
2,015
|
|
|
|
$
|
21,432
|
|
|
$
|
21,946
|
|
Other liabilities:
|
|
|
|
|
Postretirement benefits
|
|
$
|
8,246
|
|
|
$
|
8,264
|
|
Acquisition-related contingent consideration
|
|
647
|
|
|
2,010
|
|
Deferred income taxes
|
|
1,472
|
|
|
615
|
|
Uncertain tax positions
|
|
2,637
|
|
|
2,634
|
|
Other
|
|
4,089
|
|
|
272
|
|
|
|
$
|
17,091
|
|
|
$
|
13,795
|
|
(dollars in thousands, except per-share amounts)
(4) NET INCOME PER SHARE
Basic net income per share is computed by dividing net income by the weighted average common shares and fully vested stock units outstanding. Diluted net income per share is computed by dividing net income by the weighted average common and common equivalent shares outstanding which includes the shares issuable upon exercise of employee stock options (net of shares assumed purchased with the option proceeds), stock units, and restricted stock units outstanding. Performance share awards are included in the diluted calculation based upon what would be issued if the end of the most recent reporting period was the end of the term of the award.
Certain outstanding options and restricted stock units were excluded from the diluted net income per-share calculations because their effect would have been anti-dilutive under the treasury stock method. The options and restricted stock units excluded from the diluted net income per-share share calculation were as follows:
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
|
|
Nine Months Ended
|
|
October 31,
2018
|
|
October 31,
2017
|
|
October 31,
2018
|
|
October 31,
2017
|
Anti-dilutive options and restricted stock units
|
—
|
|
|
338,244
|
|
50,699
|
|
385,157
|
The computation of earnings per share is presented below:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
|
|
Nine Months Ended
|
|
October 31,
2018
|
|
October 31,
2017
|
|
October 31,
2018
|
|
October 31,
2017
|
Numerator:
|
|
|
|
|
|
|
|
Net income attributable to Raven Industries, Inc.
|
$
|
13,032
|
|
|
$
|
11,998
|
|
|
$
|
48,844
|
|
|
$
|
32,581
|
|
|
|
|
|
|
|
|
|
Denominator:
|
|
|
|
|
|
|
|
Weighted average common shares outstanding
|
35,952,688
|
|
|
35,829,880
|
|
|
35,890,638
|
|
|
36,002,024
|
|
Weighted average fully vested stock units outstanding
|
104,649
|
|
|
109,558
|
|
|
98,235
|
|
|
105,830
|
|
Denominator for basic calculation
|
36,057,337
|
|
|
35,939,438
|
|
|
35,988,873
|
|
|
36,107,854
|
|
|
|
|
|
|
|
|
|
Weighted average common shares outstanding
|
35,952,688
|
|
|
35,829,880
|
|
|
35,890,638
|
|
|
36,002,024
|
|
Weighted average fully vested stock units outstanding
|
104,649
|
|
|
109,558
|
|
|
98,235
|
|
|
105,830
|
|
Dilutive impact of stock options and restricted stock units
|
414,542
|
|
|
380,997
|
|
|
450,429
|
|
|
369,339
|
|
Denominator for diluted calculation
|
36,471,879
|
|
|
36,320,435
|
|
|
36,439,302
|
|
|
36,477,193
|
|
|
|
|
|
|
|
|
|
Net income per share ─ basic
|
$
|
0.36
|
|
|
$
|
0.33
|
|
|
$
|
1.36
|
|
|
$
|
0.90
|
|
Net income per share ─ diluted
|
$
|
0.36
|
|
|
$
|
0.33
|
|
|
$
|
1.34
|
|
|
$
|
0.89
|
|
(5) REVENUE
Nature of goods and services
The Company is comprised of
three
unique operating divisions, classified into reportable segments: Applied Technology (ATD), Engineered Films (EFD), and Aerostar (AERO). The following is a description of principal activities, separated by reportable segment, from which the Company generates revenue. Note that service revenues are not material and are not separately disclosed. Furthermore, the Company acts as a principal in transactions and recognizes revenue on a gross basis for which we are entitled from our customers.
Applied Technology
Applied Technology designs, manufactures, sells, and services innovative precision agriculture products and information management tools, which are collectively referred to as precision agriculture equipment, that help growers reduce costs, more precisely control inputs, and improve crop yields for the global agriculture market. Customers can purchase precision agriculture equipment individually or in large quantities. For purchases made in large quantities, the Company accounts for each piece of equipment separately, as each is a distinct performance obligation from which the customer derives benefit. The stand-alone selling prices are determined based on the prices at which the Company charges other customers for similar products in similar circumstances. Kits or bundles, which can consist of various pieces of equipment, are shipped together and therefore allocation
(dollars in thousands, except per-share amounts)
of transaction price does not impact timing of revenue recognition. In the normal course of business the customer agrees to a stated price that does not vary upon purchase and revenue is recognized when control has transferred to the customer.
Engineered Films
Engineered Films manufactures high performance plastic films and sheeting for geomembrane, agricultural, construction, and industrial applications. Engineered Films' ability to develop value-added innovative products is expanded by its fabrication, conversion, and installation capabilities. Plastic film and sheeting can be purchased separately or together with installation services. The majority of transactions within Engineered Films are considered non-customized product-only sales. The Company accounts for each product separately, as each is a distinct performance obligation from which the customer derives benefit. The stand-alone selling prices are determined based on the prices at which the Company charges other customers for similar products in similar circumstances. In the normal course of business the customer agrees to a stated price that does not vary upon purchase and revenue is recognized when control has transferred to the customer.
The remaining transactions within Engineered Films are related to installation and/or customized product sales. Installation revenues are recognized over time using the cost incurred input method (i.e., costs incurred to date relative to total estimated costs at completion) because of continuous transfer of control to our customers. For customized product-only sales, the Company recognizes revenue over time by applying an output method, such as units delivered, to measure progress.
Aerostar
Aerostar serves the aerospace/defense and stratospheric balloon markets. Aerostar designs and manufactures proprietary products including high-altitude (stratospheric) balloon systems, and tethered aerostats, which are collectively referred to as lighter-than-air products, and offers radar processing systems and related services. These products can be integrated with additional third-party sensors to provide research, communications, and situational awareness capabilities to governmental and commercial customers. Aerostar pursues product and support services contracts with agencies and instrumentalities of the U.S. government. Product sales to customers for which we do not continuously transfer control are recognized based on a point-in-time. Contracts with customers which include elements of service, and are considered to be single performance obligations, are recognized over time. The stand-alone selling prices are determined based on the prices at which the Company charges other customers for similar products or services in similar circumstances. In the normal course of business the customer agrees to a stated price that does not vary upon purchase. For revenues recognized at a point-in-time, the Company recognizes revenue when control has transferred to the customer. Certain lighter-than-air contracts are recognized over time using the cost incurred input method. The remaining transactions are recognized over time applying an output method, such as units delivered, to measure progress.
Disaggregation of Revenues
In the following table, revenue is disaggregated by major product category and geography as we believe these categories best depict how the nature, amount, timing and uncertainty of our revenue and cash flows are affected by economic factors. The table also includes a reconciliation of the disaggregated revenue with reportable segments.
(dollars in thousands, except per-share amounts)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenue by Product Category
|
|
Three Months Ended October 31, 2018
|
|
Three Months Ended October 31, 2017
|
|
ATD
|
EFD
|
AERO
|
ELIM
(a)
|
Total
|
|
ATD
|
EFD
|
AERO
|
ELIM
(a)
|
Total
|
Lighter-than-Air
|
|
|
|
|
|
|
|
|
|
|
|
Domestic
|
$
|
—
|
|
$
|
—
|
|
$
|
14,152
|
|
$
|
—
|
|
$
|
14,152
|
|
|
$
|
—
|
|
$
|
—
|
|
$
|
7,443
|
|
$
|
—
|
|
$
|
7,443
|
|
International
|
—
|
|
—
|
|
298
|
|
—
|
|
298
|
|
|
—
|
|
—
|
|
33
|
|
—
|
|
33
|
|
Plastic Films & Sheeting
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Domestic
|
—
|
|
52,841
|
|
—
|
|
(177
|
)
|
52,664
|
|
|
—
|
|
62,421
|
|
—
|
|
(181
|
)
|
62,240
|
|
International
|
—
|
|
5,398
|
|
—
|
|
—
|
|
5,398
|
|
|
—
|
|
2,687
|
|
—
|
|
—
|
|
2,687
|
|
Precision Agriculture Equipment
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Domestic
|
23,764
|
|
—
|
|
—
|
|
—
|
|
23,764
|
|
|
20,079
|
|
—
|
|
—
|
|
—
|
|
20,079
|
|
International
|
5,976
|
|
—
|
|
—
|
|
—
|
|
5,976
|
|
|
5,240
|
|
—
|
|
—
|
|
—
|
|
5,240
|
|
Other
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Domestic
|
—
|
|
—
|
|
2,578
|
|
—
|
|
2,578
|
|
|
—
|
|
—
|
|
3,615
|
|
—
|
|
3,615
|
|
International
|
—
|
|
—
|
|
3
|
|
—
|
|
3
|
|
|
—
|
|
—
|
|
12
|
|
—
|
|
12
|
|
Totals
|
$
|
29,740
|
|
$
|
58,239
|
|
$
|
17,031
|
|
$
|
(177
|
)
|
$
|
104,833
|
|
|
$
|
25,319
|
|
$
|
65,108
|
|
$
|
11,103
|
|
$
|
(181
|
)
|
$
|
101,349
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nine Months Ended October 31, 2018
|
|
Nine Months Ended October 31, 2017
|
|
ATD
|
EFD
|
AERO
|
ELIM
(a)
|
Total
|
|
ATD
|
EFD
|
AERO
|
ELIM
(a)
|
Total
|
Lighter-than-Air
|
|
|
|
|
|
|
|
|
|
|
|
Domestic
|
$
|
—
|
|
$
|
—
|
|
$
|
31,899
|
|
$
|
—
|
|
$
|
31,899
|
|
|
$
|
—
|
|
$
|
—
|
|
$
|
19,109
|
|
$
|
—
|
|
$
|
19,109
|
|
International
|
—
|
|
—
|
|
834
|
|
—
|
|
834
|
|
|
—
|
|
—
|
|
87
|
|
—
|
|
87
|
|
Plastic Films & Sheeting
|
|
|
|
|
|
|
|
|
|
|
|
Domestic
|
—
|
|
163,059
|
|
—
|
|
(441
|
)
|
162,618
|
|
|
—
|
|
148,775
|
|
—
|
|
(508
|
)
|
148,267
|
|
International
|
—
|
|
14,047
|
|
—
|
|
—
|
|
14,047
|
|
|
—
|
|
8,916
|
|
—
|
|
—
|
|
8,916
|
|
Precision Agriculture Equipment
|
|
|
|
|
|
|
|
|
|
|
|
Domestic
|
76,881
|
|
—
|
|
—
|
|
—
|
|
76,881
|
|
|
71,079
|
|
—
|
|
—
|
|
—
|
|
71,079
|
|
International
|
23,651
|
|
—
|
|
—
|
|
—
|
|
23,651
|
|
|
23,154
|
|
—
|
|
—
|
|
—
|
|
23,154
|
|
Other
|
|
|
|
|
|
|
|
|
|
|
|
Domestic
|
—
|
|
—
|
|
8,698
|
|
—
|
|
8,698
|
|
|
—
|
|
—
|
|
10,828
|
|
—
|
|
10,828
|
|
International
|
—
|
|
—
|
|
18
|
|
—
|
|
18
|
|
|
—
|
|
—
|
|
54
|
|
—
|
|
54
|
|
Totals
|
$
|
100,532
|
|
$
|
177,106
|
|
$
|
41,449
|
|
$
|
(441
|
)
|
$
|
318,646
|
|
|
$
|
94,233
|
|
$
|
157,691
|
|
$
|
30,078
|
|
$
|
(508
|
)
|
$
|
281,494
|
|
(a)
Intersegment sales for both fiscal 2019 and 2018 were primarily sales from Engineered Films to Aerostar.
Contract Balances
Contract assets consist of unbilled receivables and retainage. Contract assets primarily relate to the Company’s rights to consideration for work completed but not billed at the reporting date, or retainage provisions on billings that have been issued. Contract assets are converted to receivables when the right to collect becomes unconditional.
Contract liabilities consist of customer advances and deferred revenue. Contract liabilities primarily relate to consideration received from customers prior to transferring goods or services to the customer.
(dollars in thousands, except per-share amounts)
The changes in our contract assets and liabilities were as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
October 31,
2018
|
|
January 31,
2018
|
|
$ Change
|
% Change
|
Contract assets
(a)
|
$
|
2,616
|
|
|
$
|
3,119
|
|
|
$
|
(503
|
)
|
(16.1
|
)%
|
|
|
|
|
|
|
|
Contract liabilities
(b)
|
$
|
1,545
|
|
|
$
|
1,890
|
|
|
$
|
(345
|
)
|
(18.3
|
)%
|
(a)
Contract assets are reported in "Accounts receivable, net" in the Consolidated Balance Sheet.
(b)
Contract liabilities are reported in "Other current liabilities" in the Consolidated Balance Sheet.
During the nine months ended
October 31, 2018
, the Company’s contract assets decreased by
$503
and contract liabilities decreased by
$345
, primarily as a result of the contract terms which include timing of customer payments, timing of invoicing, and progress made on open contracts. Due to the short-term nature of the Company’s contracts, substantially all of the contract assets that existed as of January 31, 2018 were converted to receivables and contract liabilities that existed as of January 31, 2018 were recognized as revenue during the first quarter of fiscal 2019.
Remaining performance obligations
As of October 31, 2018, the Company did not have any remaining performance obligations related to customer contracts that had an original expected duration of one year or more.
(6) ACQUISITIONS AND DIVESTITURES OF AND INVESTMENTS IN BUSINESSES AND TECHNOLOGIES
Colorado Lining International, Inc.
On
September 1, 2017
, the Company completed the acquisition of substantially all of the assets (the acquisition) of
Colorado Lining International, Inc.
, a Colorado corporation, headquartered in Parker, CO (CLI). The acquisition was immediately aligned under the Company’s Engineered Films Division. The acquisition enhanced the Company’s geomembrane market position through extended service and product offerings with the addition of new design-build and installation service components, and advanced Engineered Films’ business model into a vertically-integrated, full-service solutions provider for the geomembrane market. The acquisition constituted a business and as such was accounted for as a business combination.
The purchase price of
$14,938
included a potential earn-out with an estimated fair value of
$1,256
. The earn-out payments are contingent upon achieving certain revenue targets and operational synergies. The fair value of the business acquired was allocated to the assets acquired and liabilities assumed based on their estimated fair values. The excess of the purchase price over the fair value of the identifiable assets acquired and liabilities assumed was recorded as goodwill. Goodwill recorded as part of the purchase price allocation was
$5,714
, all of which is tax deductible. Intangible assets acquired in the acquisition related to customer relationships, order backlog and non-compete agreements were valued at
$610
.
Aerostar's Client Private Business
In fiscal 2018 Aerostar actively marketed the sale of its client private business and classified it as held for sale. During the first quarter of fiscal 2019, the client private business was sold for
$832
which resulted in an immaterial gain in the nine-months ended October 31, 2018.
No
gain was recognized during the three-months ended October 31, 2018.
Site-Specific Technology Development Group, Inc. (SST)
In February 2018 the Company sold its ownership interest of approximately
22%
in
SST
with a carrying value of
$1,937
. This investment was being accounted for as an equity method investment. Raven received
$6,556
in cash at closing which was reported as "Proceeds from sale or maturity of investments" in the Consolidated Statements of Cash Flows. The Company recognized a gain on the sale of
$5,785
for the nine-months ended October 31, 2018.
No
gain was recognized during the three-months ended October 31, 2018. The gain was reported in "Other income (expense), net" in the Consolidated Statements of Income and Comprehensive Income. This amount includes a fifteen percent hold-back provision held in an escrow account which is expected to be settled in fiscal 2020.
(dollars in thousands, except per-share amounts)
Acquisition-related Contingent Consideration
The Company has contingent liabilities related to the acquisition of CLI in September 2017, as well as the prior acquisitions of SBG Innovatie BV and its affiliate, Navtronics BVBA (collectively, SBG) in May 2014 and Vista Research, Inc. (Vista) in January 2012. The fair value of such contingent consideration is estimated as of the acquisition date, and subsequently at the end of each reporting period, using forecasted cash flows. Projecting future cash flows requires the Company to make significant estimates and assumptions regarding future events, conditions, or revenues being achieved under the subject contingent agreement as well as the appropriate discount rate. Such valuation techniques include one or more significant inputs that are not observable (Level 3 fair value measures).
Changes in the fair value of the liability for acquisition-related contingent consideration are as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
|
|
Nine Months Ended
|
|
October 31,
2018
|
|
October 31,
2017
|
|
October 31,
2018
|
|
October 31,
2017
|
Beginning balance
|
$
|
2,950
|
|
|
$
|
1,567
|
|
|
$
|
3,046
|
|
|
$
|
1,741
|
|
Fair value of contingent consideration acquired
|
—
|
|
|
1,256
|
|
|
—
|
|
|
1,256
|
|
Change in fair value of the liability
|
182
|
|
|
52
|
|
|
585
|
|
|
198
|
|
Contingent consideration earn-out paid
|
(721
|
)
|
|
(44
|
)
|
|
(1,220
|
)
|
|
(364
|
)
|
Ending balance
|
$
|
2,411
|
|
|
$
|
2,831
|
|
|
$
|
2,411
|
|
|
$
|
2,831
|
|
|
|
|
|
|
|
|
|
Classification of liability in the Consolidated balance sheet
|
|
|
|
|
|
|
|
Accrued liabilities
|
$
|
1,764
|
|
|
$
|
815
|
|
|
$
|
1,764
|
|
|
$
|
815
|
|
Other liabilities, long-term
|
647
|
|
|
2,016
|
|
|
647
|
|
|
2,016
|
|
Balance at October 31
|
$
|
2,411
|
|
|
$
|
2,831
|
|
|
$
|
2,411
|
|
|
$
|
2,831
|
|
In the CLI acquisition, the Company entered into a contingent earn-out agreement, not to exceed
$2,000
. The earn-out is paid annually for
three years
after the purchase date, contingent upon achieving certain revenues and operational synergies. To date, the Company has paid a total of
$667
of this potential earn-out liability.
In connection with the acquisition of SBG, Raven is committed to making additional earn-out payments, not to exceed
$2,500
calculated and paid quarterly for
ten years
after the purchase date contingent upon achieving certain revenues. To date, the Company has paid a total of
$1,232
of this potential earn-out liability.
Related to the acquisition of Vista in
2012
, the Company is committed to making annual payments based upon earn-out percentages on specific revenue streams for
seven years
after the purchase date, not to exceed
$15,000
. To date, the Company has paid a total of
$1,783
of this potential earn-out liability.
(7) GOODWILL, LONG-LIVED ASSETS, AND OTHER CHARGES
Goodwill
Management assesses goodwill for impairment annually during the fourth quarter and between annual tests whenever a triggering event indicates there may be an impairment. Impairment tests of goodwill are done at the reporting unit level. Management performed an assessment in the third quarter of fiscal 2019 and determined that no triggering events had occurred for any of the Company's reporting units. There were
no
goodwill impairment losses reported in the three- and
nine
-month periods ending
October 31, 2018
and 2017, respectively.
The changes in the carrying amount of goodwill by reporting unit were as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Applied
Technology
|
|
Engineered
Films
|
|
Aerostar
|
|
Total
|
Balance at January 31, 2018
|
|
$
|
12,741
|
|
|
$
|
33,232
|
|
|
$
|
737
|
|
|
$
|
46,710
|
|
Divestiture of business
|
|
—
|
|
|
—
|
|
|
(103
|
)
|
|
(103
|
)
|
Foreign currency translation adjustment
|
|
(258
|
)
|
|
—
|
|
|
—
|
|
|
(258
|
)
|
Balance at October 31, 2018
|
|
$
|
12,483
|
|
|
$
|
33,232
|
|
|
$
|
634
|
|
|
$
|
46,349
|
|
(dollars in thousands, except per-share amounts)
Long-lived Assets and Other Intangibles
Fiscal 2019
The Company assesses the recoverability of long-lived assets, including definite-lived intangibles and property plant and equipment if events or changes in circumstances indicate that an asset might be impaired and performs impairment reviews by asset group. When performing long-lived asset testing, the fair values of assets are determined based on valuation techniques using the best available information. Such valuations are derived from valuation techniques in which one or more significant inputs are not observable (Level 3 fair value measures). An impairment loss is recognized when the estimated undiscounted cash flows used in determining the fair value of the asset are less than its carrying amount.
Management performed an assessment in the fiscal 2019 third quarter and determined that there were no impairment indicators identified for any of the Company's asset groups. There were
no
long-lived asset impairment losses reported in the three- and
nine
-month periods ending
October 31, 2018
.
Fiscal 2018
During first quarter of fiscal 2018, the Company determined that the investment in AgEagle Aerial Systems, Inc. (AgEagle) was impaired due to lower than expected cash flows. This impairment was determined to be other-than-temporary and an accelerated equity method investment loss of
$72
was reported in "Other income (expense), net" in the Consolidated Statements of Income and Comprehensive Income for the nine-month period ended October 31, 2017. The Company also determined the customer relationship intangible asset related to the AgEagle exclusive distribution agreement was fully impaired. The total impairment loss reported related to this intangible asset was
$259
and was reported in "Long-lived asset impairment loss" in the Consolidated Statements of Income and Comprehensive Income for the nine-month period ended October 31, 2017. There were
no
long-lived asset impairments or equity method investment losses reported in the third quarter of fiscal 2018.
The following table provides the gross carrying amount and related accumulated amortization of definite-lived intangible assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
October 31, 2018
|
|
January 31, 2018
|
|
|
Accumulated
|
|
|
|
Accumulated
|
|
|
Amount
|
amortization
|
Net
|
|
Amount
|
amortization
|
Net
|
Existing technology
|
$
|
7,190
|
|
$
|
(7,109
|
)
|
$
|
81
|
|
|
$
|
7,290
|
|
$
|
(6,996
|
)
|
$
|
294
|
|
Customer relationships
|
12,483
|
|
(5,234
|
)
|
7,249
|
|
|
13,264
|
|
(4,834
|
)
|
8,430
|
|
Patents and other intangibles
|
5,837
|
|
(1,760
|
)
|
4,077
|
|
|
4,241
|
|
(2,381
|
)
|
1,860
|
|
Total
|
$
|
25,510
|
|
$
|
(14,103
|
)
|
$
|
11,407
|
|
|
$
|
24,795
|
|
$
|
(14,211
|
)
|
$
|
10,584
|
|
(8) EMPLOYEE POSTRETIREMENT BENEFITS
The Company provides postretirement medical and other benefits to certain current and past senior executive officers and senior managers. These plan obligations are unfunded. The components of the net periodic benefit cost for postretirement benefits are as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
|
|
Nine Months Ended
|
|
October 31,
2018
|
|
October 31,
2017
|
|
October 31,
2018
|
|
October 31,
2017
|
Service cost
|
$
|
7
|
|
|
$
|
21
|
|
|
$
|
21
|
|
|
$
|
64
|
|
Interest cost
|
79
|
|
|
83
|
|
|
237
|
|
|
247
|
|
Amortization of actuarial losses
|
32
|
|
|
30
|
|
|
96
|
|
|
90
|
|
Amortization of unrecognized gains in prior service cost
|
(40
|
)
|
|
(40
|
)
|
|
(120
|
)
|
|
(120
|
)
|
Net periodic benefit cost
|
$
|
78
|
|
|
$
|
94
|
|
|
$
|
234
|
|
|
$
|
281
|
|
Postretirement benefit cost components are reclassified in their entirety from accumulated other comprehensive loss to net periodic benefit cost. Net periodic benefit costs are reported in net income in accordance with ASU 2017-07 "Compensation - Retirement Benefits (Topic 715): Improving the Presentation of Net Periodic Postretirement Benefit Cost" (ASU 2017-07) further described in Note 2
Summary of Significant Accounting Policies
of the Notes to the Consolidated Financial Statements. Service cost is reported in net income as “Cost of sales” or “Selling, general, and administrative expenses” in a manner consistent with the classification of direct labor and personnel costs of the eligible employees. Interest cost, amortization of actuarial gains or losses, and amortization of prior service cost is classified as a non-operating expense in "Other income (expense), net" on the Consolidated Statements of Income and Comprehensive Income.
(dollars in thousands, except per-share amounts)
(9) WARRANTIES
Accruals necessary for product warranties are estimated based on historical warranty costs and average time elapsed between purchases and returns for each division. Additional accruals are made for any significant, discrete warranty issues. Changes in the warranty accrual were as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
|
|
Nine Months Ended
|
|
October 31,
2018
|
|
October 31,
2017
|
|
October 31,
2018
|
|
October 31,
2017
|
Beginning balance
|
$
|
1,137
|
|
|
$
|
2,265
|
|
|
$
|
1,163
|
|
|
$
|
1,547
|
|
Change in provision
|
521
|
|
|
(274
|
)
|
|
1,007
|
|
|
1,504
|
|
Settlements made
|
(807
|
)
|
|
(774
|
)
|
|
(1,319
|
)
|
|
(1,834
|
)
|
Ending balance
|
$
|
851
|
|
|
$
|
1,217
|
|
|
$
|
851
|
|
|
$
|
1,217
|
|
(10) FINANCING ARRANGEMENTS
The Company entered into a credit facility on
April 15, 2015
, with JPMorgan Chase Bank, N.A., Toronto Branch as Canadian Administrative Agent, JPMorgan Chase Bank, National Association, as administrative agent, and each lender from time to time party thereto (the Credit Agreement). The Credit Agreement provides for a syndicated senior revolving credit facility up to
$125,000
with a maturity date of
April 15, 2020
.
Simultaneous with execution of the Credit Agreement, Raven and its subsidiaries entered into a guaranty agreement in favor of JPMorgan Chase Bank, National Association in its capacity as administrator under the Credit Agreement for the benefit of JPMorgan Chase Bank, N.A., Toronto Branch and the lenders and their affiliates under the Credit Agreement.
The unamortized debt issuance costs associated with this Credit Agreement were as follows:
|
|
|
|
|
|
|
|
|
|
October 31, 2018
|
|
January 31, 2018
|
Unamortized debt issuance costs
(a)
|
$
|
160
|
|
|
$
|
242
|
|
(a)
Unamortized debt issuance costs are reported as "Other assets" in the Consolidated Balance Sheets.
Loans or borrowings defined under the Credit Agreement bear interest and fees at varying rates and terms defined in the Credit Agreement based on the type of borrowing as defined. The Credit Agreement includes annual administrative and unborrowed capacity fees. The Credit Agreement also contains customary affirmative and negative covenants, including those relating to financial reporting and notification, limits on levels of indebtedness and liens, investments, mergers and acquisitions, affiliate transactions, sales of assets, restrictive agreements, and change in control as defined in the Credit Agreement.
The Company is in compliance with all covenants as of October 31, 2018.
Financial covenants include an interest coverage ratio and funded indebtedness to earnings before interest, taxes, depreciation, and amortization as defined in the Credit Agreement. The loan proceeds may be utilized by Raven for strategic business purposes and for working capital needs.
Letters of credit (LOC) issued and outstanding were as follows:
|
|
|
|
|
|
|
|
|
|
October 31, 2018
|
|
January 31, 2018
|
Letters of credit outstanding
(a)
|
$
|
514
|
|
|
$
|
1,097
|
|
(a)
All of these LOC are outstanding under the Credit Agreement except one LOC for
$50
that is outstanding with Wells Fargo. Any draws required under the LOC would be settled with available cash or borrowings under the Credit Agreement.
There were
no
borrowings under the Credit Agreement for any of the fiscal periods covered by this Quarterly Report on Form 10-Q. Availability under the Credit Agreement for borrowings as of
October 31, 2018
was
$124,536
.
(11) COMMITMENTS AND CONTINGENCIES
The Company is involved as a party in lawsuits, claims, regulatory inquiries, or disputes arising in the normal course of its business. Such items may result in potential costs and liabilities which cannot be determined at this time. The Company has insurance policies that provide coverage to various degrees for potential liabilities arising from legal proceedings.
(dollars in thousands, except per-share amounts)
The Company entered into a Gift Agreement (the Agreement) effective in January 2018 with the South Dakota State University Foundation, Inc. (the Foundation). The Agreement states that the Company will make a
$5,000
gift to the Foundation, conditional on certain actions. Management concluded that the contingencies related to this gift were substantially met during the three-month period ended April 30, 2018 and a liability had been incurred. As such,
$4,503
of contribution expense was recognized in the three-month period ending April 30, 2018 with interest expense to be recognized in periods thereafter. The fair value of this contingency at
October 31, 2018
was
$4,590
(measured based on the present value of the expected future cash outflows) of which
$1,421
was classified as "Accrued liabilities" and
$3,169
was classified as "Other liabilities". For the nine-month period ended
October 31, 2018
, the Company reported
$4,503
of selling, general, and administrative expenses for contributions to be made. For the three- and nine-month periods ended
October 31, 2018
, the Company reported
$44
and
$87
of interest expense, respectively. This gift will be used by South Dakota State University (SDSU), located in Brookings, SD, for the establishment of a precision agriculture facility to support SDSU's Precision Agriculture degrees and curriculum.
In addition to commitments disclosed elsewhere in the Notes to the Consolidated Financial Statements, the Company has other unconditional purchase obligations that arise in the normal course of business operations. The majority of these obligations are related to the purchase of raw material inventory for the Applied Technology and Engineered Films divisions.
(12) INCOME TAXES
The U.S. Tax Cuts and Jobs Act (TCJA) was enacted on December 22, 2017 and reduced the U.S. federal statutory tax rate to
21 percent
effective January 1, 2018. In addition, the SEC staff issued Staff Accounting Bulletin No. 118 (SAB 118), Income Tax Accounting Implications of the TCJA, which allows the Company to record provisional amounts during a measurement period not to extend beyond one year from the enactment date. The Company completed its accounting for the transition tax in the third quarter of fiscal 2019. Also, the Company has determined that it will elect to recognize Global Intangible Low Taxed Income (GILTI) as a period cost if, and when, incurred. As of October 31, 2018, undistributed earnings of the Canadian and European subsidiaries were considered to have been reinvested indefinitely.
The Company’s effective tax rate varies from the federal statutory rate primarily due to state and local taxes, research and development tax credit, foreign-derived intangible income deduction, and tax-exempt insurance premiums. The Company’s effective tax rates were as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
|
|
Nine Months Ended
|
|
October 31,
2018
|
|
October 31,
2017
|
|
October 31,
2018
|
|
October 31,
2017
|
Effective tax rate
|
8.6
|
%
|
|
32.6
|
%
|
|
15.6
|
%
|
|
31.3
|
%
|
The decrease in effective tax rates year-over-year is primarily due to the decrease in the federal statutory tax rate pursuant to the TCJA. The Company’s effective tax rates, excluding discrete items, in the three- and nine-month periods ended October 31, 2018 were
18.7 percent
and
19.3 percent
, respectively. These effective tax rates were approximately
14
and
11
percentage points lower than the three- and nine-month periods ended October 31, 2017, resulting in a lower tax expense of
$1,971
and
$6,320
, respectively.
In addition, net favorable discrete items in the third quarter of fiscal year 2019 lowered tax expense by
$1,440
. Favorable discrete tax items for the current year nine-month period lowered tax expense by
$2,129
. The Company’s total discrete items were as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
|
|
Nine Months Ended
|
|
October 31,
2018
|
|
October 31,
2017
|
|
October 31,
2018
|
|
October 31,
2017
|
Total discrete tax benefit (expense), net
|
$
|
1,440
|
|
|
$
|
(9
|
)
|
|
$
|
2,129
|
|
|
$
|
(521
|
)
|
(dollars in thousands, except per-share amounts)
(13) DIVIDENDS AND TREASURY STOCK
Dividends paid to Raven shareholders were as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
|
|
Nine Months Ended
|
|
October 31,
2018
|
|
October 31,
2017
|
|
October 31,
2018
|
|
October 31,
2017
|
Dividends paid
(a)
|
$
|
4,674
|
|
|
$
|
4,648
|
|
|
$
|
14,000
|
|
|
$
|
14,032
|
|
|
|
|
|
|
|
|
|
Dividends paid per share (in cents per share)
(a)
|
13.0
|
|
|
13.0
|
|
|
39.0
|
|
|
39.0
|
|
(a)
There were
no
declared and unpaid shareholder dividends at
October 31, 2018
or 2017.
On November 3, 2014, the Company announced that its Board of Directors (Board) had authorized a
$40,000
stock buyback program. Since that time, the Board has provided additional authorizations to increase the total amount authorized under the program to
$75,000
. This authorization remains in place until such time as the authorized spending limit is reached or such authorization is revoked by the Board.
Pursuant to these authorizations, the Company repurchased
348,286
shares, or
$10,000
, in the three- and nine-month periods ended
October 31, 2017
.
No
shares were repurchased in the
three- and nine-month periods ended
October 31, 2018
. There were
no
share repurchases unpaid at October 31, 2018 or October 31, 2017.
The remaining dollar value authorized for share repurchases at
October 31, 2018
is
$27,959
.
(14) SHARE-BASED COMPENSATION
Share-based compensation expense is recognized based on the fair value of the share-based awards expected to vest during the period.
The share-based compensation expense was as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
|
|
Nine Months Ended
|
|
October 31, 2018
|
|
October 31, 2017
|
|
October 31, 2018
|
|
October 31, 2017
|
Cost of sales
|
$
|
99
|
|
|
$
|
62
|
|
|
$
|
282
|
|
|
$
|
175
|
|
Research and development expenses
|
32
|
|
|
14
|
|
|
99
|
|
|
82
|
|
Selling, general, and administrative expenses
|
696
|
|
|
853
|
|
|
2,727
|
|
|
2,604
|
|
Total stock-based compensation expense
|
$
|
827
|
|
|
$
|
929
|
|
|
$
|
3,108
|
|
|
$
|
2,861
|
|
(15) SEGMENT REPORTING
The Company's reportable segments are defined by their product lines which have been grouped in these segments based on technology, manufacturing processes, and end-use application. Raven's reportable segments are Applied Technology, Engineered Films, and Aerostar. The Company measures the performance of its segments based on certain metrics such as net sales and operating income excluding general and administrative expenses. Other income (expense) and income taxes are not allocated to individual operating segments, and assets not identifiable to an individual segment are included as corporate assets. Separate financial information is available and regularly evaluated by the Company's chief operating decision-maker (CODM), the President and Chief Executive Officer, in making resource allocation decisions for the Company's reportable segments. Segment information is reported consistent with the Company's management reporting structure. Business segment net sales and operating income results are as follows:
(dollars in thousands, except per-share amounts)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
|
|
Nine Months Ended
|
|
October 31,
2018
|
|
October 31,
2017
|
|
October 31,
2018
|
|
October 31,
2017
|
Net sales
|
|
|
|
|
|
|
|
Applied Technology
|
$
|
29,740
|
|
|
$
|
25,319
|
|
|
$
|
100,532
|
|
|
$
|
94,233
|
|
Engineered Films
(a)(b)
|
58,239
|
|
|
65,108
|
|
|
177,106
|
|
|
157,691
|
|
Aerostar
|
17,031
|
|
|
11,103
|
|
|
41,449
|
|
|
30,078
|
|
Intersegment eliminations
(c)
|
(177
|
)
|
|
(181
|
)
|
|
(441
|
)
|
|
(508
|
)
|
Consolidated net sales
|
$
|
104,833
|
|
|
$
|
101,349
|
|
|
$
|
318,646
|
|
|
$
|
281,494
|
|
|
|
|
|
|
|
|
|
Operating income
(d)
|
|
|
|
|
|
|
|
Applied Technology
|
$
|
7,737
|
|
|
$
|
5,357
|
|
|
$
|
32,473
|
|
|
$
|
25,447
|
|
Engineered Films
|
9,239
|
|
|
17,115
|
|
|
33,241
|
|
|
35,386
|
|
Aerostar
|
3,839
|
|
|
1,359
|
|
|
10,479
|
|
|
4,165
|
|
Intersegment eliminations
|
(37
|
)
|
|
(12
|
)
|
|
(33
|
)
|
|
(3
|
)
|
Total reportable segment income
|
20,778
|
|
|
23,819
|
|
|
76,160
|
|
|
64,995
|
|
General and administrative expenses
(d)
|
(7,166
|
)
|
|
(5,990
|
)
|
|
(24,388
|
)
|
|
(17,247
|
)
|
Consolidated operating income
|
$
|
13,612
|
|
|
$
|
17,829
|
|
|
$
|
51,772
|
|
|
$
|
47,748
|
|
(a)
The acquisition of CLI, which occurred in September of fiscal year 2018, contributed a total of
$21,568
in sales for the first seven months of fiscal 2019. For the first seven months of fiscal 2018 the division generated
$4,109
in sales to CLI as a customer. Refer to Note 6 "Acquisitions and Divestitures of and Investments in Businesses and Technologies" for further details on the acquisition of CLI.
(b)
Net sales includes
$1,510
and
$10,429
of recovery film sales for the three- and nine-month periods ended October, 31, 2018, respectively, related to hurricane recovery efforts. Fiscal year 2018 Net sales includes
$8,424
of recovery film sales for the three- and nine-month periods ended October 31, 2017.
(c)
Intersegment sales for both fiscal 2019 and 2018 were primarily sales from Engineered Films to Aerostar.
(d)
At the segment level, operating income does not include an allocation of general and administrative expenses and, as a result, "General and administrative expenses" are reported as a deduction from "Total reportable segment income" to reconcile to "Operating income" reported in the Consolidated Statements of Income and Comprehensive Income.
(16) SUBSEQUENT EVENTS
The Company has evaluated events up to the filing date of this Quarterly Report on Form 10-Q and concluded that no subsequent events have occurred that would require recognition or disclosure in the Notes to the Consolidated Financial Statements.