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RAVEN INDUSTRIES, INC.
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CONSOLIDATED STATEMENTS OF CASH FLOWS
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(Dollars in thousands)
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For the years ended January 31,
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2020
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2019
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2018
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OPERATING ACTIVITIES:
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Net income
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$
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34,613
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$
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51,873
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$
|
41,019
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Adjustments to reconcile net income to net cash provided by operating activities:
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Depreciation
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13,770
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13,296
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|
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12,743
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Amortization of intangible assets
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2,471
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1,827
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|
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2,059
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Long-lived asset impairment loss
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|
—
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|
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—
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259
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|
Change in fair value of acquisition-related contingent consideration
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412
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708
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457
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Loss from equity investments
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—
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—
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114
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Gain from sale of equity method investments
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—
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(5,785)
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|
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—
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Deferred income taxes
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1,506
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|
|
953
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|
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(787)
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Share-based compensation expense
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4,971
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3,951
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|
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3,725
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Other operating activities, net
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(335)
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(2,424)
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|
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2,053
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Change in operating assets and liabilities
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(2,536)
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1,553
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(16,681)
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Net cash provided by operating activities
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54,872
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|
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65,952
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|
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44,961
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|
|
|
|
|
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INVESTING ACTIVITIES:
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Capital expenditures
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(8,560)
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(14,127)
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(12,011)
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Payments related to business acquisitions, net of cash acquired
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(53,317)
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(7,671)
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(13,267)
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Proceeds from sale or maturities of investments
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1,170
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|
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7,334
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|
|
250
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Purchases of investments
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(1,118)
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(745)
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|
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(273)
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Proceeds (disbursements) from sale of assets, settlement of liabilities
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3,459
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|
|
832
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(333)
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Other investing activities, net
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(243)
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(2,067)
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(41)
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Net cash used in investing activities
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(58,609)
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(16,444)
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(25,675)
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FINANCING ACTIVITIES:
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Dividends paid
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(18,650)
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(18,753)
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(18,685)
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Payments for common shares repurchased
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(10,781)
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—
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(10,000)
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Proceeds from borrowings
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33,593
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|
|
—
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|
|
—
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Payment of debt
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(39,762)
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|
|
—
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|
|
—
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|
Payment of acquisition-related contingent liabilities
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(1,306)
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|
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(1,324)
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|
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(408)
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|
|
|
|
|
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Restricted stock units vested and issued
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(2,358)
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|
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(840)
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|
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(237)
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|
Employee stock option exercises net of tax benefit
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|
(1,028)
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|
|
(2,637)
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|
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(290)
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Other financing activities, net
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(595)
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|
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(201)
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|
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(101)
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Net cash used in financing activities
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(40,887)
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|
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(23,755)
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|
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(29,721)
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Effect of exchange rate changes on cash
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(456)
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|
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(501)
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|
|
322
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Net increase (decrease) in cash and cash equivalents
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(45,080)
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|
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25,252
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|
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(10,113)
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Cash and cash equivalents at beginning of year
|
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65,787
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|
|
40,535
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50,648
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Cash and cash equivalents at end of year
|
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$
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20,707
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|
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$
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65,787
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|
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$
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40,535
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The accompanying notes are an integral part of the consolidated financial statements.
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RAVEN INDUSTRIES, INC.
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
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(Dollars in thousands, except per-share amounts)
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NOTE 1
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SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
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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 industrial, agricultural, geomembrane, construction, commercial lighter-than-air and aerospace/defense markets. The Company conducts this business through the following direct and indirect subsidiaries: Aerostar International, Inc. (Aerostar); Aerostar Technical Solutions, Inc. (ATS), Aerostar Integrated Systems, LLC (AIS); Dot Technology Corp. (DOT); Raven CLI Construction, Inc.; Raven Engineered Films, Inc.; Raven Slingshot, Inc.; Raven International Holding Company BV (Raven Holdings); Raven Industries Canada, Inc. (Raven Canada); Raven Europe BV (formerly known as SBG Innovatie BV or "SBG"); Raven Industries Australia Pty Ltd (Raven Australia); Raven Industries Holding, LLC, and Raven do Brasil Participacoes E Servicos Technicos LTDA (Raven Brazil). The Company and these subsidiaries comprise three unique operating units, or divisions, classified into three reportable business segments (Applied Technology, Engineered Films, and Aerostar).
The consolidated financial statements for the periods included herein have been prepared by the Company pursuant to the rules and regulations of the Securities and Exchange Commission (SEC). The accompanying consolidated financial statements include the accounts of the Company and its wholly-owned or controlled subsidiaries. All intercompany balances and transactions have been eliminated in consolidation.
Business Combinations
The Company accounts for the acquisition of a business using the acquisition method of accounting. Assets acquired and liabilities assumed, including amounts attributed to noncontrolling interest, are recorded at their fair values upon acquisition. Assigning fair values requires the Company to make significant estimates and assumptions regarding the fair value of identifiable intangible assets, property, plant and equipment, deferred tax asset valuation allowances, and liabilities, such as uncertain tax positions and contingencies. Independent valuation specialists are used to assist in determining certain fair value calculations. The Company may refine these estimates, if necessary, over a period not to exceed one year by taking into consideration new information that, if known at the acquisition date, would have affected the fair values ascribed to the assets acquired and liabilities assumed.
Significant estimates and assumptions are used in estimating the value of acquired identifiable intangible assets, including estimating future cash flows based on revenues and margins that the Company expects to generate following the acquisition, applying an appropriate discount rate to estimate a present value of those cash flows and determining their useful lives. Subsequent changes to projections driven by actual results following the acquisition date could require the Company to record impairment charges.
Acquisition-related costs are recognized as an expense when incurred and are classified as selling, general and administrative expenses in the Consolidated Statements of Income and Comprehensive Income. Acquisition-related costs incurred were not material for any of the periods presented in this Form 10-K.
Noncontrolling and Redeemable Noncontrolling Interest
Noncontrolling interests represent capital contributions and income and loss attributable to the owners of less than wholly-owned and consolidated entities. Noncontrolling interests in subsidiaries that are redeemable for cash or other assets outside of the Company’s control are classified as mezzanine equity, at the greater of the carrying value or the redemption value, and therefore are not included in either equity or liabilities. The increases or decreases in the estimated redemption amount are recorded with corresponding adjustments to paid-in capital.
The Company owned a 75% interest in a business venture, AIS, to pursue potential product and support services contracts through U.S. government agencies. The Company acquired the remaining 25% noncontrolling interest of AIS in the fourth quarter of fiscal year 2020 at an immaterial additional cost to the company. This business venture is included in the Aerostar segment.
(Dollars in thousands, except per-share amounts)
The Company acquired a majority ownership in DOT in the fiscal 2020 fourth quarter. The majority ownership in DOT is further described in Note 6 "Acquisitions and Investments in Businesses and Technologies," and aligns under the Applied Technology segment. The acquisition provides various put options that, if exercised by the noncontrolling interest shareholders, would obligate the Company to purchase the remaining 36% of the outstanding DOT shares as of January 31, 2020, at a price derived from a specific formula. Due to the redemption features, the minority interest shareholders’ value is classified as a redeemable noncontrolling interest in the Company’s Consolidated Balance Sheets. At January 31, 2020, redeemable noncontrolling interests were reported at their carrying value of $21,302 versus the redemption value, as the carrying value was greater than the estimated redemption value.
Given the Company's controlling financial interest, the accounts of AIS and DOT have been consolidated with the accounts of the Company, and a noncontrolling interest has been recorded for the noncontrolling investor's interests in the net assets and operations of the business venture.
Related Party Transactions
Following the acquisition of DOT, the Company sold products to, paid rent to, and purchased services for manufacturing, R&D, selling, and administration from a business owned by a minority interest shareholder of DOT. The total of these related party transactions was $3,176 for fiscal 2020, of which $409 was reported in accounts payable at January 31, 2020.
Equity Investments
The Company owned an interest of approximately 5% in Ag-Eagle Aerial Systems, Inc. (AgEagle) before being sold for an immaterial gain in fiscal year 2019. The Company accounted for its investment in AgEagle under the equity method of accounting as the Company had the ability to exercise significant influence over the operating policies of AgEagle; however the Company was not the primary beneficiary. In April 2017, the Company determined the investment in AgEagle and the related customer relationship intangible asset were fully impaired. The resulting accelerated equity method investment loss and impairment loss recorded were not material to the Company.
The Company owned an interest of approximately 22% in Site-Specific Technology Development Group, Inc. (SST) before being sold in fiscal year 2019. The Company's proceeds from the sale of its ownership interest in SST were $6,556 and was reported as "Proceeds from sale or maturity of investments" in the Consolidated Statements of Cash Flows in fiscal year 2019. The Company recognized a gain of $5,785 from the sale reported as "Other income (expense), net" in the Consolidated Statements of Income and Comprehensive Income for the fiscal year ended January 31, 2019. This amount included a fifteen percent hold-back provision held in an escrow account which was collected in fiscal 2020.
The Company's share of the results of AgEagle and SST operations are included in "Other income (expense), net" for fiscal years 2019 and 2018.
Use of Estimates
Preparing the financial statements in conformity with accounting principles generally accepted in the United States of America (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. The Company's forecasts, based principally on estimates, are critical inputs to asset valuations such as those for inventory or goodwill. These assumptions and estimates require significant judgment and actual results could differ from assumed and estimated amounts.
Foreign Currency
The Company's subsidiaries that operate outside the United States use the local currency as their functional currency. The functional currency is translated into U.S. dollars for balance sheet accounts using the period-end exchange rates and average exchange rates for the Consolidated Statements of Income and Comprehensive Income. Adjustments resulting from financial statement translations are included as foreign currency translation adjustments in "Accumulated other comprehensive income (loss)" within shareholders' equity in the Consolidated Balance Sheets. Foreign currency transaction gains or losses are recognized in the period incurred and are included in "Other income (expense), net" in the Consolidated Statements of Income and Comprehensive Income. Foreign currency transaction gains and losses were not material for fiscal years 2020 and 2019. Foreign currency transaction gains or losses on intercompany notes receivable and notes payable denominated in foreign currencies for which settlement is not planned in the foreseeable future are considered part the net investment and are reported in the same manner as foreign currency translation adjustments.
Cash and Cash Equivalents
The Company considers all highly liquid instruments with original maturities of three or fewer months to be cash equivalents. Cash and cash equivalent balances are principally concentrated in checking and money market funds. Certificates of deposit that mature in over 90 days but less than one year are considered short-term investments. Certificates of deposit that mature in
(Dollars in thousands, except per-share amounts)
one year or more are considered to be other long-term assets and are carried at cost. The Company held cash and cash equivalents in accounts in the United States of $14,003 and $61,221 as of January 31, 2020 and 2019, respectively. The Company held cash and cash equivalents in accounts outside the United States of $6,704 and $4,566 as of January 31, 2020 and 2019, respectively.
Accounts Receivable and Allowance for Doubtful Accounts
Trade accounts receivable are recorded at the invoiced amount, do not bear interest, and are considered past due based on invoice terms. The allowance for doubtful accounts is the Company’s best estimate of the amount of probable credit losses. This is based on historical write-off experience by segment and an estimate of the collectability of past due accounts. Unbilled receivables arise when revenues have been earned, but not billed, and are related to differences in timing. Unbilled receivables were $6,954 and $1,391 as of January 31, 2020 and 2019, respectively.
Inventory Valuation
Inventories are carried at the lower of cost or net realizable value, with cost determined on the first-in, first-out basis. Net realizable value is the estimated selling price in the ordinary course of business, less reasonably predictable costs of completion, disposal, and transportation.
Pre-Contract Costs
From time to time, pre-contract costs, excluding start-up costs which are expensed as incurred, are incurred and deferred if the Company determines that it is probable it will be awarded the specific anticipated contract. Deferred pre-contract costs are included in "Inventories, net" on the Consolidated Balance Sheets and periodically reviewed and assessed for recoverability under the contract. Write-offs of pre-contract costs are charged to cost of sales when it becomes probable that such costs will not be recoverable. No pre-contract costs were included in "Inventories, net" on the Consolidated Balance Sheets at January 31, 2020 or 2019. Additionally, there were no pre-contract costs written-off in fiscal years 2020, 2019 or 2018.
Property, Plant and Equipment
Property, plant and equipment held for use is carried at the asset's cost and depreciated over the estimated useful life of the asset.
The estimated useful lives used for computing depreciation are as follows:
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|
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Building and improvements
|
15 - 39 years
|
Manufacturing equipment by segment
|
|
Applied Technology
|
3 - 5 years
|
Engineered Films
|
5 - 12 years
|
Aerostar
|
3 - 5 years
|
Furniture, fixtures, office equipment, and other
|
3 - 7 years
|
The cost of maintenance and repairs is charged to expense in the period incurred, and renewals and betterments are capitalized. The cost and related accumulated depreciation of assets sold or disposed are removed from the accounts and the resulting gain or loss is reflected in the Consolidated Statements of Income and Comprehensive Income.
Leases
The Company adopted the new lease accounting standard, "Accounting Standards Codification Topic 842 Leases (ASC 842)" using the modified retrospective basis for all agreements existing as of February 1, 2019 as described further below under Accounting Standards Adopted. Results for reporting periods beginning after January 31, 2019, are presented under ASC 842 while prior period amounts continue to be reported in accordance with legacy lease guidance.
The Company recognizes a right-of-use asset and lease liability for all financing and operating leases with terms greater than twelve months. The lease liability is measured based on the present value of the lease payments not yet paid. The right-of-use asset is measured based on the initial measurement of the lease liability adjusted for any direct costs incurred upon commencement of the lease. The right-of-use assets are amortized on a straight-line basis over the lease term, and are tested for impairment in a manner consistent with the other long-lived assets held by the Company.
Fair Value Measurements
Fair value is defined as an exit price representing the amount that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants. As such, fair value is a market-based measurement that should be determined based on assumptions that market participants would use in pricing an asset or liability. The Company uses the
(Dollars in thousands, except per-share amounts)
established fair value hierarchy, which classifies or prioritizes the inputs used in measuring fair value. These classifications include:
Level 1 - Observable inputs such as quoted prices in active markets.
Level 2 - Inputs other than quoted prices in active markets that are either directly or indirectly observable.
Level 3 - Unobservable inputs in which little or no market data exists, therefore, requiring an entity to develop its own assumptions.
The Company's financial assets required to be measured at fair value on a recurring basis include cash and cash equivalents, short-term investments and mutual funds. The Company determines fair value of its cash equivalents, short-term investments and mutual funds through quoted market prices. Mutual funds relate to the Company's deferred compensation plan further described within Note 8 "Employee Postretirement Benefits." The fair values of accounts receivable and accounts payable approximate their carrying values because of the short-term nature of these instruments.
The Company's goodwill and long-lived assets, including intangible assets subject to amortization, are measured at fair value on a non-recurring basis. These valuations are derived from valuation techniques in which one or more significant inputs are not observable. Fair value measurements associated with goodwill and long-lived assets are further described in Note 7 "Goodwill, and Long-Lived Assets."
For all acquisitions, the Company is required to measure the fair value of the net identifiable tangible and intangible assets acquired. In addition, the Company determines the estimated fair value of contingent consideration as of the acquisition date, and subsequently at the end of each reporting period. These valuations are derived from valuation techniques in which one or more significant inputs are not observable. Fair value measurements associated with acquisitions, including acquisition-related contingent liabilities, are described in Note 6 "Acquisitions and Investments in Businesses and Technologies."
Intangible Assets
Intangible assets, primarily comprised of technologies acquired through acquisitions, are recorded at cost and presented net of accumulated amortization. Amortization is computed using the method that best approximates the pattern of economic benefits which the asset provides. The Company has used both the straight-line method and the undiscounted cash flows method to appropriately allocate the cost of intangible assets to earnings in each reporting period.
The straight-line method allocates the cost of such intangible assets ratably over the asset’s life. Under the undiscounted cash flow method, the estimated cash flow attributable to each year of an intangible asset’s life is calculated as a percentage of the total of the cash flows over the asset’s life and that percentage is applied to the initial value of the asset to determine the annual amortization to be recorded.
Intangible assets also include patents, trademarks, and other product rights attained to protect the Company’s intellectual property. The estimated useful lives of the Company’s intangible assets range from 3 to 20 years.
The Company acquired in-process R&D intangible assets in business combinations transacted during the fourth quarter of fiscal year 2020. These assets are accounted for as indefinite-lived intangible assets and will be amortized when the R&D project is completed or abandoned. Upon completion of each project, a determination of the useful life of the acquired intangible assets is made and they are amortized to expense. These assets are classified as "Intangible assets, net" on the Consolidated Balance Sheets. These assets are reported at fair value based on the discounted probable future cash flows on a project-by-project basis and are subject to at least an annual assessment for impairment going forward.
Goodwill
The Company recognizes goodwill as the excess cost of an acquired business over the net amount assigned to assets acquired and liabilities assumed. Goodwill is allocated to the reporting units that are expected to benefit from the synergies of the business combination. Acquisition earn-out payments are accrued at fair value as of the purchase date and payments reduce the accrual without affecting goodwill. Any change in the fair value of the contingent consideration after the acquisition date is recognized in "Cost of sales" in the Consolidated Statements of Income and Comprehensive Income.
Goodwill is tested for impairment on an annual basis during the fourth quarter and between annual tests whenever a triggering event indicates there may be an impairment. Impairment tests of goodwill are performed at the reporting unit level. A qualitative impairment assessment over relevant events and circumstances may be assessed to determine whether it is more likely than not that the fair value of a reporting unit is less than its carrying amount. If events and circumstances indicate the fair value of a reporting unit may be less than its carrying value, then the fair values are estimated based on discounted cash flows
(Dollars in thousands, except per-share amounts)
and are compared with the corresponding carrying value of the reporting unit. If the fair value of the reporting unit is less than the carrying amount, a goodwill impairment loss is recognized for the amount that the carrying value of the reporting unit, including goodwill, exceeds its fair value, limited to the total amount of goodwill allocated to the reporting unit.
When performing goodwill impairment testing, the fair values of reporting units are determined based on valuation techniques, primarily discounted cash flow projections, 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).
Long-Lived Assets
The Company periodically assesses the recoverability of long-lived and intangible assets. An impairment loss is recognized when the carrying amount of an asset group exceeds the estimated undiscounted cash flows used in determining the fair value of the asset group. The amount of the impairment loss to be recorded is the excess of the carrying value of the assets within the group over their fair value. When performing long-lived asset impairment testing, the fair values of an asset 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).
Long-lived assets determined to be held for sale and classified as such in accordance with the applicable guidance are reported as long-term assets at the lower of the asset's carrying amount or fair value less the estimated cost to sell. Depreciation is not recorded once a long-lived asset has been classified as held for sale.
Acquisition-Related Contingent Consideration
Acquisition-related contingent consideration represents an obligation of the Company to transfer additional assets or equity interests if specified future events occur or conditions are met. This contingency is accounted for at fair value either as a liability or equity depending on the terms of the acquisition agreement. The Company determines the estimated fair value of contingent consideration as of the acquisition date, and subsequently at the end of each reporting period. In doing so, the Company makes significant estimates and assumptions regarding future events or conditions being achieved under the subject contingent agreement as well as the appropriate discount rate to apply. Such valuations are derived from valuation techniques in which one or more significant inputs are not observable (Level 3 fair value measures).
Litigation and Contingencies
Legal costs are recognized as an expense in the period incurred. The Company is involved as a party in lawsuits, claims, regulatory inquiries, or disputes arising in the normal course of business, some of which allege substantial monetary damages. The Company accrues for any loss contingencies when losses become probable and are reasonably estimable. If the reasonable estimate of the loss is a range and no amount within the range is a better estimate than any other amount within the range, the minimum amount of the range is recorded as a liability. Amounts recovered by insurance, if any, are recognized when they are realized.
Revenue Recognition
Revenue is recognized when control of the promised goods or services are transferred to our customers, in an amount that reflects the consideration we expect to be entitled to in exchange for transferring those goods or providing services. The Company accounts for a contract when it has approval and commitment from both parties, the rights of the parties are identified, payment terms are identified, the contract has commercial substance and collectability of consideration is probable.
When determining whether the customer has obtained control of the goods or services, the Company considers any future performance obligations. Generally, there is no post-shipment obligation on products sold other than warranty obligations in the normal and ordinary course of business. In the event significant post-shipment obligations were to exist, revenue recognition would be deferred until the Company has substantially accomplished what it must do to be entitled to the benefits represented by the revenue. Estimated returns, sales allowances, and warranty charges, if applicable, are recorded at the same time revenue is recorded.
Performance obligations
A performance obligation is a promise in a contract to transfer a distinct good or service to the customer, and is the unit of account for purposes of revenue recognition. A contract’s transaction price is allocated to each distinct performance obligation and recognized as revenue when, or as, the performance obligation is satisfied. The majority of the Company’s contracts have a single performance obligation as the promise to transfer the individual goods or services is not separately identifiable from other promises in the contracts and, therefore, are not distinct. For contracts with multiple performance obligations, standalone selling price is generally readily observable. The Company’s performance obligations are satisfied at a point in time or over time as work progresses. Revenue from goods and services transferred to customers at a point in time accounts for a majority of
(Dollars in thousands, except per-share amounts)
the Company’s revenues. Revenue on these contracts is recognized when obligations under the terms of the contract with our customer are satisfied; generally this occurs with the transfer of control upon shipment.
The Company uses an input measure to determine progress towards completion for revenue generated from products and services transferred to customers over time. Under this method, net sales and gross profit are recognized as work is performed generally based on the relationship between the actual costs incurred and the total estimated costs at completion ("the cost-to-cost method") or based on efforts for measuring progress towards completion in situations in which this approach is more representative of the progress on the contract than the cost-to-cost method. Contract costs include labor, material, overhead and, when appropriate, general and administrative expenses. Changes to the original estimates may be required during the life of the contract, and such estimates are reviewed on a regular basis. Sales and gross profit are adjusted using the cumulative catch-up method for revisions in estimated total contract costs. For performance obligations related to service contracts, when estimates of total costs to be incurred on a performance obligation exceed total estimates of revenue to be earned, a provision for the entire loss on the performance obligation is recognized in the period the loss is determined.
Sales returns
The right of return may exist explicitly or implicitly with our customers. The Company’s return policy allows for customer returns only upon the Company's authorization. Goods returned must be a product the Company continues to market and must be in salable condition. When the right of return exists, we adjust the transaction price for the estimated effect of returns. We estimate the expected returns based on historical sales levels, the timing and magnitude of historical sales return levels as a percent of sales, type of product, type of customer and a projection of this experience into the future.
Shipping and handling costs
Amounts billed to customers for shipping and handling activities after the customer obtains control are treated as a promised service performance obligation and recorded in net sales in the accompanying Consolidated Statements of Income and Comprehensive Income. Shipping and handling costs incurred by the Company for the delivery of goods to customers are considered a cost to fulfill the contract and are included in cost of sales in the accompanying Consolidated Statements of Income and Comprehensive Income.
Sales tax
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.
Operating Expenses
The primary types of operating expenses are classified in the income statement as follows:
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Cost of sales
|
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Research and development (R&D) expenses
|
|
Selling, general, and administrative (SG&A) expenses
|
Direct material costs
Material acquisition and handling costs
Direct labor
Factory overhead including depreciation and amortization
Inventory obsolescence
Product warranties
Shipping and handling cost
|
|
Personnel costs
Professional service fees
Material and supplies
Facility allocation
|
|
Personnel costs
Professional service fees
Advertising
Promotions
Information technology equipment depreciation
Office supplies
Facility allocation
Bad debt expense
|
Total engineering costs consist of R&D and other engineering support related expenses. R&D costs are internal direct and indirect costs associated with development of technologies to support the Company's proprietary product lines in each of its divisions. These R&D costs are expensed as incurred. Engineering support related expenses may be allocated to overhead, and thus cost of sales, or R&D expenses based on the focus of the engineering effort.
General and administrative expenses included in SG&A are not allocated at the segment level. The Company's gross margin and segment operating income may not be comparable to industry peers due to variability in the classification of these expenses across the industries in which the Company operates.
Warranties
Accruals necessary for product warranties are estimated based on historical warranty costs in relation to sales and average time elapsed between purchases and returns for each division. Additional accruals are made for any significant, discrete warranty issues.
(Dollars in thousands, except per-share amounts)
Share-Based Compensation
The Company records compensation expense related to its share-based compensation plans using the fair value method. Under this method, the fair value of share-based compensation is determined as of the grant date and the related expense is recorded over the period in which the share-based compensation vests.
Income Taxes
Deferred income taxes reflect future tax effects of temporary differences between the tax and financial reporting basis of the Company's assets and liabilities measured using enacted tax laws and statutory tax rates applicable to the periods when the temporary differences will affect taxable income. When necessary, deferred tax assets are reduced by a valuation allowance to reflect realizable value. All deferred tax balances are reported as long-term on the Consolidated Balance Sheets. Accruals are maintained for uncertain tax positions.
Accounting Pronouncements
Accounting Standards Adopted
In the fiscal 2020 fourth quarter, the Company early adopted Financial Accounting Standards Board (FASB) Accounting Standards Update (ASU) No. 2018-18, "Collaborative Arrangements (Topic 808): Clarifying the Interaction between Topic 808 and Topic 606" (ASU 2018-18), issued in November 2018. The amendments in ASU 2018-18 clarify that certain transactions between participants in collaborative arrangements should be accounted for as revenue under Topic 606, "Revenue from Contracts with Customers," and precludes certain transactions that are not with a customer from using Topic 606. The amendments in this update are effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2019. The amendments should be applied retrospectively to the date Topic 606 was adopted. Raven typically does not receive consideration as part of a collaborative arrangement and thereby does not qualify for ASC 606 treatment. However, in instances where consideration is being exchanged for a distinct good or service (unit of account), Raven has naturally elected to apply ASC 606. As such, there was no impact from the adoption of the amendments of ASU 2018-18.
In the fiscal 2020 first quarter, the Company adopted FASB ASU No. 2016-02, "Leases (Topic 842)" (ASU 2016-02), issued in February 2016 and the subsequently-issued codification improvements to Topic 842. The primary difference between previous GAAP and ASU 2016-02 is the recognition of lease assets and liabilities by lessees for 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. The Company adopted ASU 2016-02 on a modified retrospective basis for all agreements existing as of February 1, 2019. Prior comparative periods have not been adjusted and continue to be reported and disclosed under previous lease guidance. This adoption did not have a material impact to the Company. As of February 1, 2019, the Company recognized a right-of-use asset for finance leases and operating leases of $233 and $3,807, respectively and a current and non-current lease liability of $1,446 and $2,571, respectively. As part of the adoption of ASU 2016-02, the Company elected the following practical expedient: short-term recognition exemption for all leases that qualify. Note disclosures required in Topic 842 are reported in Note 12 "Leases" of the Notes to the Consolidated Financial Statements in this Form 10-K.
New Accounting Standards Not Yet Adopted
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. Certain amendments in this guidance are required to be applied prospectively, and others are to be applied retrospectively. The amendments in ASU 2018-13 are disclosure-related only and as such the Company does not expect the adoption of this guidance to have a significant impact on the balances reported in the Company's consolidated financial statements.
In June 2016, the FASB issued ASU 2016-13, "Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments" (ASU 2016-13). Current GAAP generally delays recognition of the full amount of credit losses until the loss is probable of occurring. The amendments in this guidance eliminate the probable initial recognition threshold and, instead, reflect an entity’s current estimate of all expected credit losses. Previously, when credit losses were measured under GAAP, an entity generally only considered past events and current conditions in measuring the incurred loss. The new standard is effective for annual reporting periods beginning after December 15, 2019. All entities may elect to early adopt ASU 2016-13 for annual reporting periods beginning after December 15, 2018. The adoption of ASU 2016-13 is not expected to have a significant impact on the Company's consolidated financial statements or its note disclosures.
(Dollars in thousands, except per-share amounts)
NOTE 2 SELECTED BALANCE SHEET INFORMATION
Following are the components of selected balance sheet items:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of January 31,
|
|
|
|
|
2020
|
|
2019
|
Accounts receivable, net:
|
|
|
|
|
Trade accounts
|
|
$
|
56,978
|
|
|
$
|
53,820
|
|
Unbilled receivables
|
|
6,954
|
|
|
1,391
|
|
Allowance for doubtful accounts
|
|
(1,380)
|
|
|
(739)
|
|
|
|
$
|
62,552
|
|
|
$
|
54,472
|
|
Inventories, net:
|
|
|
|
|
Finished goods
|
|
$
|
6,309
|
|
|
$
|
7,629
|
|
In process
|
|
3,287
|
|
|
1,103
|
|
Materials
|
|
44,303
|
|
|
45,344
|
|
|
|
$
|
53,899
|
|
|
$
|
54,076
|
|
Other current assets:
|
|
|
|
|
Insurance policy benefit
|
|
$
|
38
|
|
|
$
|
336
|
|
Federal income tax receivable
|
|
1,370
|
|
|
1,045
|
|
Receivable from sale of investment
|
|
—
|
|
|
1,055
|
|
Prepaid expenses and other
|
|
4,028
|
|
|
6,300
|
|
|
|
$
|
5,436
|
|
|
$
|
8,736
|
|
Property, plant and equipment, net(a):
|
|
|
|
|
Land
|
|
$
|
3,117
|
|
|
$
|
3,234
|
|
Buildings and improvements
|
|
80,330
|
|
|
81,381
|
|
Machinery and equipment
|
|
158,354
|
|
|
155,463
|
|
Financing lease right-of-use assets
|
|
881
|
|
|
—
|
|
Accumulated depreciation
|
|
(141,832)
|
|
|
(133,724)
|
|
|
|
100,850
|
|
|
106,354
|
|
Property, plant and equipment subject to capital leases:
|
|
|
|
|
Machinery and equipment
|
|
—
|
|
|
510
|
|
Accumulated amortization for capitalized leases
|
|
—
|
|
|
(249)
|
|
|
|
$
|
100,850
|
|
|
$
|
106,615
|
|
Other assets:
|
|
|
|
|
Equity investments
|
|
$
|
1,289
|
|
|
$
|
345
|
|
Operating lease right-of-use assets
|
|
4,275
|
|
|
—
|
|
Deferred income taxes
|
|
16
|
|
|
16
|
|
Other
|
|
1,507
|
|
|
2,963
|
|
|
|
$
|
7,087
|
|
|
$
|
3,324
|
|
Accrued liabilities:
|
|
|
|
|
Salaries and related
|
|
$
|
4,188
|
|
|
$
|
8,244
|
|
Benefits
|
|
5,339
|
|
|
4,751
|
|
Insurance obligations
|
|
1,680
|
|
|
1,963
|
|
Warranties
|
|
2,019
|
|
|
890
|
|
Income taxes
|
|
293
|
|
|
328
|
|
Other taxes
|
|
1,734
|
|
|
2,434
|
|
Acquisition-related contingent consideration
|
|
763
|
|
|
1,796
|
|
Lease liability
|
|
2,530
|
|
|
—
|
|
Other
|
|
2,197
|
|
|
3,072
|
|
|
|
$
|
20,743
|
|
|
$
|
23,478
|
|
Other liabilities:
|
|
|
|
|
Postretirement benefits
|
|
$
|
8,741
|
|
|
$
|
7,678
|
|
Acquisition-related contingent consideration
|
|
2,171
|
|
|
2,376
|
|
Lease liability
|
|
2,627
|
|
|
—
|
|
Deferred income taxes
|
|
7,080
|
|
|
1,659
|
|
Uncertain tax positions
|
|
2,606
|
|
|
2,670
|
|
Other
|
|
5,936
|
|
|
3,852
|
|
|
|
$
|
29,161
|
|
|
$
|
18,235
|
|
(a) Includes assets held for use and assets held for sale. The amount of assets held for sale as of January 31, 2020, and January 31, 2019, were not material.
(Dollars in thousands, except per-share amounts)
|
|
|
|
|
|
NOTE 3
|
ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS)
|
Other comprehensive income (loss) refers to revenue, expenses, gains, and losses that under GAAP are recorded as an element of shareholders' equity but are excluded from net income. The changes in the components of accumulated other comprehensive income (loss) (AOCI) are shown below:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cumulative foreign currency translation adjustment
|
|
Postretirement benefits
|
|
Total
|
Balance at January 31, 2018
|
|
$
|
(1,193)
|
|
|
$
|
(1,380)
|
|
|
$
|
(2,573)
|
|
Other comprehensive (loss) before reclassifications
|
|
(1,045)
|
|
|
—
|
|
|
(1,045)
|
|
Reclassification due to ASU 2018-02 adoption
|
|
—
|
|
|
(280)
|
|
|
(280)
|
|
Amounts reclassified from accumulated other comprehensive
income (loss) after tax expense of $(99)
|
|
—
|
|
|
342
|
|
|
342
|
|
Balance at January 31, 2019
|
|
(2,238)
|
|
|
(1,318)
|
|
|
(3,556)
|
|
Other comprehensive (loss) before reclassifications
|
|
(994)
|
|
|
—
|
|
|
(994)
|
|
Amounts reclassified from accumulated other comprehensive
income (loss) after tax benefit of $251
|
|
—
|
|
|
(865)
|
|
|
(865)
|
|
Balance at January 31, 2020
|
|
$
|
(3,232)
|
|
|
$
|
(2,183)
|
|
|
$
|
(5,415)
|
|
Postretirement benefit cost components are reclassified in their entirety from accumulated other comprehensive loss to net periodic benefit cost. 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. The components of the net periodic benefit cost, other than the service cost component, are classified as a non-operating expense in "Other income (expense), net" on the Consolidated Statements of Income and Comprehensive Income.
|
|
|
|
|
|
NOTE 4
|
SUPPLEMENTAL CASH FLOW INFORMATION
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the years ended January 31,
|
|
|
|
|
|
|
2020
|
|
2019
|
|
2018
|
Changes in operating assets and liabilities:
|
|
|
|
|
|
|
Accounts receivable
|
|
$
|
(9,118)
|
|
|
$
|
3,938
|
|
|
$
|
(7,014)
|
|
Inventories
|
|
891
|
|
|
1,092
|
|
|
(11,062)
|
|
Prepaid expenses and other assets
|
|
2,092
|
|
|
(2,440)
|
|
|
(2,445)
|
|
Accounts payable
|
|
5,493
|
|
|
(4,517)
|
|
|
1,280
|
|
Accrued and other liabilities
|
|
(1,894)
|
|
|
3,480
|
|
|
2,560
|
|
|
|
$
|
(2,536)
|
|
|
$
|
1,553
|
|
|
$
|
(16,681)
|
|
|
|
|
|
|
|
|
Supplemental disclosures of cash flow information:
|
|
|
|
|
|
|
Cash paid during the year for income taxes
|
|
$
|
4,377
|
|
|
$
|
8,225
|
|
|
$
|
19,854
|
|
Interest paid
|
|
267
|
|
|
227
|
|
|
186
|
|
|
|
|
|
|
|
|
Significant non-cash transactions:
|
|
|
|
|
|
|
Capital expenditures and other intangibles included in accounts payable and other liabilities
|
|
$
|
740
|
|
|
$
|
655
|
|
|
$
|
418
|
|
Redeemable noncontrolling interest included in other liabilities
|
|
2,224
|
|
|
—
|
|
|
—
|
|
Assets acquired under capital leases
|
|
—
|
|
|
38
|
|
|
79
|
|
Right-of-use assets obtained in exchange for lease obligations:
|
|
|
|
|
|
|
Finance leases
|
|
$
|
435
|
|
|
$
|
—
|
|
|
$
|
—
|
|
Operating leases
|
|
1,924
|
|
|
—
|
|
|
—
|
|
(Dollars in thousands, except per-share amounts)
Nature of goods and services
The Company is comprised of three unique operating divisions, classified into reportable business segments: Applied Technology, Engineered Films, and Aerostar. The following is a description of principal activities, separated by segment, from which the Company generates revenue. Service revenues and contract losses are not material and are not separately disclosed. Furthermore, the Company primarily acts as a principal in transactions and recognizes revenue on a gross basis for which it is entitled from its 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 farmers reduce costs, more precisely control inputs, and improve farm 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 of transaction price does not impact timing of revenue recognition. In the normal course of business the customer agrees to a fixed price and revenue is recognized when control has transferred to the customer.
Engineered Films
Engineered Films produces high-performance plastic films and sheeting for geomembrane, agricultural, construction, and industrial applications and also offers design-build and installation services of these plastic films and sheeting. 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 fixed price 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 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 and defense and commercial lighter-than-air markets. Aerostar's core products include high-altitude stratospheric platforms, technical services, and radar systems. 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 U.S. government agencies. Product sales to customers for which the division does 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 fixed price. 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 the Company believes these categories best depict how the nature, amount, timing and uncertainty of revenue and cash flows are affected by economic factors. The table also includes a reconciliation of the disaggregated revenue for all segments.
(Dollars in thousands, except per-share amounts)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenue by Product Category
|
|
|
|
|
|
|
|
|
|
|
For the year ended January 31, 2020
|
|
|
|
|
|
|
|
|
|
|
ATD
|
|
EFD
|
|
AERO
|
|
ELIM(a)
|
|
Total
|
Lighter-than-Air
|
|
|
|
|
|
|
|
|
|
|
Domestic
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
36,535
|
|
|
$
|
—
|
|
|
$
|
36,535
|
|
International
|
|
—
|
|
|
—
|
|
|
52
|
|
|
—
|
|
|
52
|
|
Plastic Films & Sheeting
|
|
|
|
|
|
|
|
|
|
|
Domestic
|
|
—
|
|
|
187,087
|
|
|
—
|
|
|
(90)
|
|
|
186,997
|
|
International
|
|
—
|
|
|
10,632
|
|
|
—
|
|
|
—
|
|
|
10,632
|
|
Precision Agriculture Equipment
|
|
|
|
|
|
|
|
|
|
|
Domestic
|
|
99,137
|
|
|
—
|
|
|
—
|
|
|
(2)
|
|
|
99,135
|
|
International
|
|
31,323
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
31,323
|
|
Other
|
|
|
|
|
|
|
|
|
|
|
Domestic
|
|
—
|
|
|
—
|
|
|
17,731
|
|
|
—
|
|
|
17,731
|
|
International
|
|
—
|
|
|
—
|
|
|
125
|
|
|
—
|
|
|
125
|
|
Totals
|
|
$
|
130,460
|
|
|
$
|
197,719
|
|
|
$
|
54,443
|
|
|
$
|
(92)
|
|
|
$
|
382,530
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the year ended January 31, 2019
|
|
|
|
|
|
|
|
|
|
|
ATD
|
|
EFD
|
|
AERO
|
|
ELIM(a)
|
|
Total
|
Lighter-than-Air
|
|
|
|
|
|
|
|
|
|
|
Domestic
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
37,866
|
|
|
$
|
—
|
|
|
$
|
37,866
|
|
International
|
|
—
|
|
|
—
|
|
|
932
|
|
|
—
|
|
|
932
|
|
Plastic Films & Sheeting
|
|
|
|
|
|
|
|
|
|
|
Domestic
|
|
—
|
|
|
208,882
|
|
|
—
|
|
|
(512)
|
|
|
208,370
|
|
International
|
|
—
|
|
|
17,692
|
|
|
—
|
|
|
—
|
|
|
17,692
|
|
Precision Agriculture Equipment
|
|
|
|
|
|
|
|
|
|
|
Domestic
|
|
100,051
|
|
|
—
|
|
|
—
|
|
|
(10)
|
|
|
100,041
|
|
International
|
|
29,698
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
29,698
|
|
Other
|
|
|
|
|
|
|
|
|
|
|
Domestic
|
|
—
|
|
|
—
|
|
|
12,062
|
|
|
—
|
|
|
12,062
|
|
International
|
|
—
|
|
|
—
|
|
|
7
|
|
|
—
|
|
|
7
|
|
Totals
|
|
$
|
129,749
|
|
|
$
|
226,574
|
|
|
$
|
50,867
|
|
|
$
|
(522)
|
|
|
$
|
406,668
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the year ended January 31, 2018
|
|
|
|
|
|
|
|
|
|
|
ATD
|
|
EFD
|
|
AERO
|
|
ELIM(a)
|
|
Total
|
Lighter-than-Air
|
|
|
|
|
|
|
|
|
|
|
Domestic
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
24,956
|
|
|
$
|
—
|
|
|
$
|
24,956
|
|
International
|
|
—
|
|
|
—
|
|
|
93
|
|
|
—
|
|
|
93
|
|
Plastic Films & Sheeting
|
|
|
|
|
|
|
|
|
|
|
Domestic
|
|
—
|
|
|
201,330
|
|
|
—
|
|
|
(584)
|
|
|
200,746
|
|
International
|
|
—
|
|
|
11,968
|
|
|
—
|
|
|
—
|
|
|
11,968
|
|
Precision Agriculture Equipment
|
|
|
|
|
|
|
|
|
|
|
Domestic
|
|
95,249
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
95,249
|
|
International
|
|
29,439
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
29,439
|
|
Other
|
|
|
|
|
|
|
|
|
|
|
Domestic
|
|
—
|
|
|
—
|
|
|
14,810
|
|
|
—
|
|
|
14,810
|
|
International
|
|
—
|
|
|
—
|
|
|
56
|
|
|
—
|
|
|
56
|
|
Totals
|
|
$
|
124,688
|
|
|
$
|
213,298
|
|
|
$
|
39,915
|
|
|
$
|
(584)
|
|
|
$
|
377,317
|
|
(a) Intersegment sales for fiscal years 2020, 2019 and 2018 were primarily sales from Engineered Films to Aerostar.
(Dollars in thousands, except per-share amounts)
Contract Balances
Contract balances include contract assets and contract liabilities that are recorded when the Company enters into a contract with a customer. Contract assets primarily relate to the Company’s rights to consideration for work completed but not billed (unbilled receivables) 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. The Company's contract assets reported at January 31, 2020 and 2019 primarily relate to Engineered Films' geomembrane installation services and service contracts for Aerostar's lighter-than air products and radar processing systems. Contract assets are reported in "Accounts receivable, net" in the Consolidated Balance Sheets.
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. Contract liabilities are reported in "Other current liabilities" in the Consolidated Balance Sheets.
The changes in contract assets and liabilities were as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
January 31,
2020
|
|
January 31,
2019
|
|
$
Change
|
|
% Change
|
|
|
|
|
Contract assets
|
|
$
|
7,525
|
|
|
$
|
2,027
|
|
|
$
|
5,498
|
|
|
271.2
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Contract liabilities
|
|
$
|
2,288
|
|
|
$
|
1,303
|
|
|
$
|
985
|
|
|
75.6
|
%
|
|
|
|
|
During the twelve months ended January 31, 2020, the Company’s contract assets increased by $5,498 and contract liabilities increased by $985, primarily as a result of the contract terms which include timing of customer payments, timing of invoicing, and progress made on open contracts. The Company's contract assets at January 31, 2020, are primarily unbilled receivables that will be invoiced in first quarter of next year. The Company's contract liabilities at January 31, 2020, include customer advances that will substantially all convert to revenue recognized during the next fiscal year. Due to the short-term nature of the Company’s contracts, substantially all of the contract assets that existed as of January 31, 2019, were converted to accounts receivable. In addition the Company's contract liabilities that existed as of January 31, 2019, were recognized as revenue during fiscal 2020.
Remaining performance obligations
As of January 31, 2020, the Company has no remaining performance obligations related to customer contracts that had an original expected duration of one year or more.
|
|
|
|
|
|
NOTE 6
|
ACQUISITIONS AND INVESTMENTS IN BUSINESSES AND TECHNOLOGIES
|
Fiscal year 2020 acquisitions
On November 1, 2019, the Company acquired Smart Ag. Smart Ag is a technology company located in Ames, Iowa, that develops autonomous farming solutions for agriculture. Smart Ag currently offers aftermarket retrofit kits to automate farm equipment as well as a platform to connect, manage, and safely operate autonomous agricultural machinery.
On November 13, 2019, the Company acquired a majority ownership in Dot Technology Corp. (DOT). Simultaneously with acquiring this majority ownership, the Company contributed cash to DOT in exchange for additional equity, making the majority ownership percentage in DOT 60% when the transaction closed. DOT is located in Regina, Saskatchewan, Canada, and designs autonomous agriculture solutions and manufactures a unique U-shaped agriculture platform to semi-autonomously handle a large variety of agriculture implements.
Both acquisitions will align under the Company's Applied Technology Division and will complement the division's suite of precision ag products and solutions. The aggregate purchase price was approximately $54,000, excluding the noncontrolling interest. Including the noncontrolling interest, $56,022 of the purchase price was allocated to goodwill. Identifiable intangible assets acquired of $31,800 were primarily indefinite-lived intangible assets for in-process R&D. Amortization of these indefinite-lived intangible assets will start when the current in-process R&D project is complete and the product is commercialized, which is expected to occur in fiscal 2021. Amortization of the indefinite-lived intangibles will be on a straight-line basis over the remaining estimated useful lives of these assets. The Company expects the useful lives will range from seven to ten years.
(Dollars in thousands, except per-share amounts)
The purchase accounting for these acquisitions was substantially complete except for the final valuation of intangible assets and deferred income taxes, as of January 31, 2020, and any adjustments to the purchase accounting will be made within twelve months of the acquisition date.
The aggregate purchase price for these acquisitions was allocated to the estimated fair value of assets acquired and liabilities assumed as follows:
|
|
|
|
|
|
Cash and cash equivalents
|
$
|
833
|
|
Accounts receivable, net
|
5
|
|
Inventory
|
963
|
|
Other current assets
|
279
|
|
Property, plant and equipment, net
|
376
|
|
Goodwill
|
56,022
|
|
Intangible assets, net
|
31,800
|
|
Other long-term assets
|
1,394
|
|
Deferred income taxes
|
(4,158)
|
|
Accounts payable and other current liabilities
|
(1,462)
|
|
Debt, including lease liabilities for operating leases
|
(7,587)
|
|
Fair value of consideration transferred, including noncontrolling interest
|
78,465
|
|
|
|
Less: redeemable noncontrolling interest
|
24,315
|
|
Fair value of purchase price consideration transferred, excluding noncontrolling interest
|
$
|
54,150
|
|
The following pro forma consolidated condensed financial results of operations are presented as if the acquisitions described above had been completed at the beginning of fiscal 2019 (unaudited):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(Unaudited)
|
|
|
|
|
|
|
For the years ended January 31,
|
|
|
|
|
2020
|
|
2019
|
Net sales
|
|
$
|
383,418
|
|
|
$
|
406,886
|
|
Net income attributable to Raven Industries, Inc.
|
|
$
|
29,685
|
|
|
$
|
48,210
|
|
|
|
|
|
|
Earnings per common share
|
|
|
|
|
Basic
|
|
$
|
0.82
|
|
|
$
|
1.34
|
|
Diluted
|
|
$
|
0.82
|
|
|
$
|
1.32
|
|
These unaudited pro forma consolidated financial results have been prepared for comparative purposes only and include certain adjustments that were not material in nature. The pro forma information does not purport to be indicative of the results of operations that would have resulted had these business combinations occurred at the beginning of each period presented, or of future results of the consolidated entities. Post-acquisition, these acquisitions contributed zero revenues and reduced fiscal 2020 net income attributable to Raven by $2,279.
Fiscal year 2019 acquisition
On January 1, 2019, the Company completed the acquisition of substantially all of the assets ("AgSync Acquisition") of AgSync Inc. (AgSync), an Indiana corporation, headquartered in Wakarusa, Indiana. This acquisition was aligned under the Company’s Applied Technology Division and enhanced its Slingshot platform by delivering a more seamless logistics solution for ag retailers, aerial applicators, custom applicators and enterprise farms. The AgSync Acquisition constitutes a business and as such was accounted for as a business combination; however, the business combination was not significant enough to warrant pro-forma financial information.
The purchase price was approximately $9,700 which included potential earn-out payments with an estimated fair value of $2,052. The earn-out is contingent upon achieving certain revenue milestones. The purchase price 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 is reflected as goodwill, which is fully tax deductible. The Company completed the valuation and the purchase price allocation during the first quarter of fiscal 2020. This resulted in an adjustment in the fiscal 2020 first quarter that increased the purchase price and the estimated fair value of the
(Dollars in thousands, except per-share amounts)
contingent earn-out payments by approximately $300. The goodwill and identifiable intangible assets recorded as part of the purchase price allocation at January 31, 2020, were $4,526 and $5,700, respectively.
Fiscal year 2018 acquisition
On September 1, 2017, the Company completed the acquisition of substantially all of the assets ("CLI Acquisition") of Colorado Lining International, Inc. (CLI), a Colorado corporation headquartered in Parker, CO. This acquisition was 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 CLI Acquisition constitutes a business and as such was accounted for as a business combination; however, the business combination was not significant enough to warrant pro-forma financial information.
The CLI Acquisition included a working capital adjustment that was settled in January 2018. The final working capital adjustment was $566 which brought the total purchase price to $14,938. This purchase price included potential earn-out payments with an estimated fair value of $1,256 which are contingent upon achieving certain revenues 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 reflected as goodwill. Goodwill recorded as part of the purchase price allocation was $5,714, all of which is tax deductible.
Acquisition-related contingent consideration
The Company has contingent liabilities related to the prior acquisitions of AgSync, as well as the prior acquisitions of CLI in September 2017, SBG in May 2014 and ATS 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:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the years ended January 31,
|
|
|
|
|
2020
|
|
2019
|
Beginning balance
|
|
$
|
4,172
|
|
|
$
|
3,046
|
|
Fair value of contingent consideration acquired
|
|
310
|
|
|
1,742
|
|
Change in fair value of the liability
|
|
412
|
|
|
708
|
|
Contingent consideration earn-out paid
|
|
(1,960)
|
|
|
(1,324)
|
|
Ending balance
|
|
$
|
2,934
|
|
|
$
|
4,172
|
|
|
|
|
|
|
Classification of liability in the Consolidated Balance Sheets
|
|
|
|
|
Accrued Liabilities
|
|
$
|
763
|
|
|
$
|
1,796
|
|
Other Liabilities, long-term
|
|
2,171
|
|
|
2,376
|
|
Ending balance
|
|
$
|
2,934
|
|
|
$
|
4,172
|
|
As part of the AgSync Acquisition in the prior fiscal year, the Company entered into a contingent earn-out agreement, not to exceed $3,500. The earn-out is to be paid annually over three years after the purchase date, contingent upon achieving certain revenue milestones. The Company has made no payments on this potential earn-out liability as of January 31, 2020.
Related to the CLI Acquisition in fiscal 2018, the Company is committed to making additional earn-out payments, not to exceed $2,000, calculated and paid annually three years after the purchase date, contingent upon achieving certain revenues and operational synergies. As of January 31, 2020, the Company has paid a total of $1,333 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. As of January 31, 2020, the Company has paid a total of $2,237 of this potential earn-out liability.
(Dollars in thousands, except per-share amounts)
Related to the acquisition of ATS 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. The Company made the final payment in the first quarter of fiscal 2020 and has no further contingent obligations related to acquisition of ATS.
|
|
|
|
|
|
NOTE 7
|
GOODWILL AND LONG-LIVED ASSETS
|
Goodwill
For goodwill, the Company performs impairment reviews by reporting unit. For fiscal 2019, the Company determined it had three reporting units: Applied Technology, Engineered Films, and Aerostar. In fiscal 2020, the Company determined it had added a fourth reporting unit related to the acquisition of Smart Ag and the acquisition of a majority ownership in DOT: Autonomy.
The changes in the carrying amount of goodwill by reporting unit are shown below:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Applied
Technology (excluding Autonomy)
|
|
Autonomy
|
|
Engineered
Films
|
|
Aerostar
|
|
Total
|
Balance at January 31, 2018
|
|
$
|
12,741
|
|
|
$
|
—
|
|
|
$
|
33,232
|
|
|
$
|
737
|
|
|
$
|
46,710
|
|
Additions due to business combinations
|
|
4,559
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
4,559
|
|
Divestiture of business
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(103)
|
|
|
(103)
|
|
Foreign currency translation adjustment
|
|
(224)
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(224)
|
|
Balance at January 31, 2019
|
|
17,076
|
|
|
—
|
|
|
33,232
|
|
|
634
|
|
|
50,942
|
|
Additions due to business combinations
|
|
(33)
|
|
|
56,022
|
|
|
—
|
|
|
—
|
|
|
55,989
|
|
|
|
|
|
|
|
|
|
|
|
|
Foreign currency translation adjustment
|
|
(100)
|
|
|
(322)
|
|
|
—
|
|
|
—
|
|
|
(422)
|
|
Balance at January 31, 2020
|
|
$
|
16,943
|
|
|
$
|
55,700
|
|
|
$
|
33,232
|
|
|
$
|
634
|
|
|
$
|
106,509
|
|
Goodwill gross and net of accumulated impairment losses were as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of January 31,
|
|
|
|
|
2020
|
|
2019
|
Gross goodwill
|
|
$
|
118,006
|
|
|
$
|
62,439
|
|
Accumulated impairment loss
|
|
(11,497)
|
|
|
(11,497)
|
|
Net goodwill
|
|
$
|
106,509
|
|
|
$
|
50,942
|
|
Goodwill is tested for impairment on an annual basis and between annual tests whenever a triggering event indicates there may be an impairment. The annual impairment tests were completed for each reporting unit in the fourth quarter based on a November 30th valuation date.
Fiscal 2020 & 2019 Goodwill Impairment Testing
In fiscal 2020 and 2019 no triggering events were deemed to have occurred in any of the quarterly periods and no impairments were recorded as a result of the annual impairment testing. In its annual impairment testing, the Company concluded a quantitative analysis was not required for any of its reporting units based on the Company's qualitative analysis.
Fiscal 2018 Goodwill Impairment Testing
In fiscal 2018 no triggering events were deemed to have occurred in any of the quarterly periods and no impairments were recorded as a result of the annual impairment testing. In its annual impairment testing, the Company concluded a quantitative analysis was not required for the Applied Technology and Engineered Films reporting units. This was based on the Company's qualitative analysis and the fact that the estimated fair value in the Company's most recent impairment test substantially exceeded its carrying value for each of these reporting units.
For the Aerostar reporting unit, the Company determined the excess of the fair value of the reporting unit over its carry value in the previous year's annual impairment assessment was not significant enough based on the current macroeconomic conditions to perform a qualitative analysis. As such, the Company performed a quantitative analysis for the annual impairment assessment of the Aerostar reporting unit. In determining the estimated fair value of the Aerostar reporting unit, the Company was required to estimate a number of factors, including future revenues and expenses, projected capital expenditures, changes in net working capital and the discount rate. On the basis of these estimates, the November 30, 2017, analysis indicated that the estimated fair
(Dollars in thousands, except per-share amounts)
value of the Aerostar reporting unit exceeded the reporting unit carrying value by approximately $11,600 or approximately 41%, as such there were no goodwill impairment losses reported in the year ended January 31, 2018.
Intangible Assets
The following table provides the gross carrying amount for intangible assets and the related accumulated amortization of definite-lived intangible assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the years ended January 31,
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2020
|
|
|
|
|
|
2019
|
|
|
|
|
|
|
|
|
|
|
|
|
Accumulated
|
|
|
|
|
|
Accumulated
|
|
|
|
|
|
|
|
|
Amount
|
|
amortization
|
|
Net
|
|
Amount
|
|
amortization
|
|
Net
|
|
|
|
|
Existing technology
|
|
$
|
9,190
|
|
|
$
|
(7,706)
|
|
|
$
|
1,484
|
|
|
$
|
9,203
|
|
|
$
|
(7,216)
|
|
|
$
|
1,987
|
|
|
|
|
|
Customer relationships
|
|
16,067
|
|
|
(6,868)
|
|
|
9,199
|
|
|
15,791
|
|
|
(5,508)
|
|
|
10,283
|
|
|
|
|
|
Patents and other intangibles
|
|
6,678
|
|
|
(2,444)
|
|
|
4,234
|
|
|
5,908
|
|
|
(1,885)
|
|
|
4,023
|
|
|
|
|
|
In-process research and development(a)
|
|
31,300
|
|
|
—
|
|
|
31,300
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
|
|
|
Total
|
|
$
|
63,235
|
|
|
$
|
(17,018)
|
|
|
$
|
46,217
|
|
|
$
|
30,902
|
|
|
$
|
(14,609)
|
|
|
$
|
16,293
|
|
|
|
|
|
(a) Refer to Note 6 "Acquisitions and Investments in Businesses and Technologies" for a more detailed description of these indefinite-lived intangible assets acquired in business combinations in fiscal 2020.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The estimated future amortization expense for these definite-lived intangible assets during the next five years is as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2021
|
|
2022
|
|
2023
|
|
2024
|
|
2025
|
Estimated amortization expense
|
|
$
|
2,497
|
|
|
$
|
2,443
|
|
|
$
|
2,334
|
|
|
$
|
1,852
|
|
|
$
|
1,824
|
|
The estimated future amortization expense table above does not reflect the expected amortization associated with indefinite-lived in-process R&D assets acquired in business combinations during fiscal 2020. Amortization of these indefinite-lived intangible assets will start upon completion of the current R&D projects, which is expected to occur in fiscal year 2021, on a straight-line basis over their remaining estimated useful life. The applicable table will be updated at such time these intangible assets are placed into service.
Long-lived assets
The Company assesses the recoverability of long-lived assets, including definite-lived intangibles, equity method investments, and property plant and equipment if events or changes in circumstances indicate that an asset might be impaired. For long-lived and intangible assets, the Company performs impairment reviews by asset groups. Management periodically assesses for triggering events and discusses any significant changes in the utilization of long-lived assets. For purposes of recognition and measurement of an impairment loss, a long-lived asset is grouped with other assets and liabilities at the lowest level for which identifiable cash flows are largely independent of the cash flows of other assets and liabilities.
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 measured and recognized when the carrying amount of an asset exceeds the estimated discounted cash flows.
Fiscal 2020 & 2019 Long-lived Assets Impairment Assessment
The Company did not identify any triggering events for any of its asset groups during fiscal 2020 and 2019 and as such there were no impairment losses reported in the year ended January 31, 2020 or 2019, for any of the Company's long-lived assets.
Fiscal 2018 Long-lived Assets Impairment Assessment
During first quarter of fiscal 2018, the Company determined the customer relationship intangible asset related to the AgEagle investment was fully impaired. This impairment is more fully described in Note 1 "Significant Accounting Policies." The Company did not identify any additional triggering events for any of its asset groups for the remainder of fiscal 2018.
(Dollars in thousands, except per-share amounts)
|
|
|
|
|
|
NOTE 8
|
EMPLOYEE POSTRETIREMENT BENEFITS
|
Defined contribution 401(k) plan
The Company has one 401(k) plan covering substantially all employees and this plan matches employee contributions up to 5%. Prior to January 1, 2018, the plan matched contributions up to 4%. Under this plan all account balances and future contributions and related earnings can be invested in several investment alternatives as well as the Company's common stock in accordance with each participant's elections. Participants may choose to make separate investment choices for current account balances and for future contributions. Participants may elect to direct up to 10% of their contributions and the employers matching contributions to the 401(k) plan into the Company's common stock. In addition, the plan does not allow a participant to exchange more than 10% of their existing account balance into the Company’s common stock or permit exchanges that would cause the participant’s investment in the Company’s common stock to exceed 10% of the participant's total balance in the 401(k) plan. Officers of the Company may not include Raven's common stock in their 401(k) plan elections.
Total contribution expense was $3,696, $3,006, and $2,263 for fiscal 2020, 2019, and 2018, respectively.
Deferred compensation plan
Effective January 1, 2018, the Company established a section 409A non-qualified deferred compensation plan (the "Plan") and associated rabbi trust for participants approved by the Board of Director's Personnel and Compensation Committee. The purpose of the deferred compensation plan is to attract and retain key employees by providing them with an opportunity to defer a portion of their compensation. The Plan's rabbi trust is funded from the participant's deferred compensation as the Company does not contribute or match participant contributions. Any assets held in rabbi trust are part of the Company's general assets and are subject to creditor's claims. The Company's common stock is not an investment option under this Plan as all contributions to the rabbi trust are invested in open-end mutual funds registered with the Securities and Exchange Commission based on the participant's investment elections.
The Company reports these financial instruments at fair value using level 1 observable inputs and are primarily classified as long term assets and reported as "Other assets" in the Consolidated Balance Sheets. The fair value of the liability and financial instruments held were $1,363 and $1,358, respectively at January 31, 2020. The fair value of the liability and financial instruments held at January 31, 2019 were not material. Changes in the fair value of these financial instruments, realized gains and losses, dividends, and interest income were reported in "Other income (expense), net" on the Consolidated Statements of Income and Comprehensive Income and were not material for fiscal years 2020 and 2019.
Defined benefit postretirement plan
In addition, the Company provides postretirement medical and other benefits to certain senior executive officers and senior managers. These plan obligations are unfunded and therefore have no assets as of January 31, 2020, and 2019. The accumulated benefit obligation is as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the years ended January 31,
|
|
|
|
|
|
|
2020
|
|
2019
|
|
|
Benefit obligation at beginning of year
|
|
$
|
8,001
|
|
|
$
|
8,571
|
|
|
|
Service cost
|
|
27
|
|
|
28
|
|
|
|
Interest cost
|
|
333
|
|
|
316
|
|
|
|
Actuarial (gain) loss and assumption changes
|
|
1,053
|
|
|
(473)
|
|
|
|
Retiree benefits paid
|
|
(341)
|
|
|
(441)
|
|
|
|
Benefit obligation at end of year
|
|
$
|
9,073
|
|
|
$
|
8,001
|
|
|
|
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. The components of the net periodic benefit cost, other than the service cost component, are 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)
The following tables set forth the plan's pre-tax adjustment to accumulated other comprehensive income/loss:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the years ended January 31,
|
|
|
|
|
|
|
2020
|
|
2019
|
|
|
Amounts not yet recognized in net periodic benefit cost:
|
|
|
|
|
|
|
Net actuarial loss
|
|
$
|
3,070
|
|
|
$
|
2,114
|
|
|
|
Prior service cost
|
|
(253)
|
|
|
(413)
|
|
|
|
Total pre-tax accumulated other comprehensive loss
|
|
$
|
2,817
|
|
|
$
|
1,701
|
|
|
|
|
|
|
|
|
|
|
Pre-tax accumulated other comprehensive loss - beginning of year related to benefit obligation
|
|
$
|
1,701
|
|
|
$
|
2,142
|
|
|
|
Reclassification adjustments recognized in benefit cost:
|
|
|
|
|
|
|
Recognized net (loss)
|
|
(97)
|
|
|
(128)
|
|
|
|
Amortization of prior service cost
|
|
160
|
|
|
160
|
|
|
|
Amounts recognized in AOCI during the year:
|
|
|
|
|
|
|
Net actuarial (gain) loss
|
|
1,053
|
|
|
(473)
|
|
|
|
Pre-tax accumulated other comprehensive loss - end of year related to benefit obligation
|
|
$
|
2,817
|
|
|
$
|
1,701
|
|
|
|
The net actuarial loss for fiscal year 2020 was the result of a decrease in the discount rate by 111 basis points. The mortality assumptions and claims experience were also updated and were favorable to the benefit obligation at January 31, 2020 by approximately $400. The net actuarial gain for fiscal year 2019 was the result of an increase in the discount rate by 50 basis points and unfavorable medical cost trends. The liability and net periodic benefit cost reflected in the Consolidated Balance Sheets and Consolidated Statements of Income and Comprehensive Income were as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the years ended January 31,
|
|
|
|
|
|
|
2020
|
|
2019
|
|
|
Beginning liability balance
|
|
$
|
8,001
|
|
|
$
|
8,571
|
|
|
|
Net periodic benefit cost
|
|
297
|
|
|
312
|
|
|
|
Other comprehensive (gain) loss
|
|
1,116
|
|
|
(441)
|
|
|
|
Total recognized in net periodic benefit cost and other comprehensive income
|
|
1,413
|
|
|
(129)
|
|
|
|
Retiree benefits paid
|
|
(341)
|
|
|
(441)
|
|
|
|
Ending liability balance
|
|
$
|
9,073
|
|
|
$
|
8,001
|
|
|
|
|
|
|
|
|
|
|
Current portion in accrued liabilities
|
|
$
|
332
|
|
|
$
|
323
|
|
|
|
Long-term portion in other liabilities
|
|
$
|
8,741
|
|
|
$
|
7,678
|
|
|
|
|
|
|
|
|
|
|
Assumptions used to calculate benefit obligation:
|
|
|
|
|
|
|
Discount rate
|
|
3.14
|
%
|
|
4.25
|
%
|
|
|
Rate of compensation increase
|
|
4.00
|
%
|
|
4.00
|
%
|
|
|
Health care cost trend rates:
|
|
|
|
|
|
|
Health care cost trend rate assumed for next year
|
|
6.17
|
%
|
|
6.33
|
%
|
|
|
Ultimate health care cost trend rate
|
|
4.50
|
%
|
|
4.50
|
%
|
|
|
Year that the rate reaches the ultimate trend rate
|
|
2030
|
|
2030
|
|
|
Assumptions used to calculate the net periodic benefit cost:
|
|
|
|
|
|
|
Discount rate
|
|
4.25
|
%
|
|
3.75
|
%
|
|
|
Rate of compensation increase
|
|
4.00
|
%
|
|
4.00
|
%
|
|
|
The discount rate is based on matching rates of return on high-quality fixed-income investments with the timing and amount of expected benefit payments. No material fluctuations in retiree benefit payments are expected in future years.
(Dollars in thousands, except per-share amounts)
The Company expects to make $337 in postretirement medical and other benefit payments in fiscal 2021. The following postretirement other than pension benefit payments, which reflect expected future service as appropriate, are expected to be paid:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2021
|
|
2022
|
|
2023
|
|
2024
|
|
2025
|
|
2026 - 2030
|
Expected postretirement medical and other benefit
payments
|
|
$
|
337
|
|
|
$
|
344
|
|
|
$
|
349
|
|
|
$
|
350
|
|
|
$
|
349
|
|
|
$
|
1,864
|
|
Changes in the warranty accrual were as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the years ended January 31,
|
|
|
|
|
|
|
2020
|
|
2019
|
|
2018
|
Beginning balance
|
|
$
|
890
|
|
|
$
|
1,163
|
|
|
$
|
1,547
|
|
Change in provision
|
|
3,326
|
|
|
1,449
|
|
|
1,762
|
|
Settlements made
|
|
(2,197)
|
|
|
(1,722)
|
|
|
(2,146)
|
|
Ending balance
|
|
$
|
2,019
|
|
|
$
|
890
|
|
|
$
|
1,163
|
|
The reconciliation of income tax computed at the federal statutory rate to the Company's effective income tax rate was as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the years ended January 31,
|
|
|
|
|
|
|
2020
|
|
2019
|
|
2018
|
Tax at U.S. federal statutory rate
|
|
21.0
|
%
|
|
21.0
|
%
|
|
33.8
|
%
|
Impact of the Tax Cuts and Jobs Act
|
|
—
|
|
|
—
|
|
|
(0.1)
|
|
State and local income taxes, net of U.S. federal tax benefit
|
|
0.8
|
|
|
1.7
|
|
|
1.6
|
|
Tax credit for research activities
|
|
(4.6)
|
|
|
(2.3)
|
|
|
(1.8)
|
|
Tax benefit on qualified production activities
|
|
—
|
|
|
—
|
|
|
(3.0)
|
|
Tax benefit from foreign-derived intangible income
|
|
(1.1)
|
|
|
(0.8)
|
|
|
—
|
|
Tax benefit on insurance premiums
|
|
(1.2)
|
|
|
(0.8)
|
|
|
(1.3)
|
|
Change in uncertain tax positions
|
|
0.3
|
|
|
—
|
|
|
0.1
|
|
Foreign tax rate difference
|
|
—
|
|
|
0.1
|
|
|
—
|
|
Impact of settlement of stock-based awards
|
|
(3.3)
|
|
|
(2.4)
|
|
|
1.2
|
|
Change in valuation allowances
|
|
0.8
|
|
|
—
|
|
|
—
|
|
Other, net
|
|
0.8
|
|
|
(0.8)
|
|
|
—
|
|
Effective Tax Rate
|
|
13.5
|
%
|
|
15.7
|
%
|
|
30.5
|
%
|
The decrease in the effective tax rate for fiscal 2020 was driven primarily by the decrease in current year profitability that resulted in a higher R&D tax credit as a percentage of pre-tax income.
The decrease in the effective tax rate for fiscal 2019 compared to fiscal 2018 was primarily due to the decrease in the federal statutory tax rate pursuant to the TCJA and the recognition of net favorable discrete tax items.
(Dollars in thousands, except per-share amounts)
The expense (benefit) for income taxes consists of:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the years ended January 31,
|
|
|
|
|
|
|
2020
|
|
2019
|
|
2018
|
Current expense (benefit):
|
|
|
|
|
|
|
Federal
|
|
$
|
3,401
|
|
|
$
|
6,910
|
|
|
$
|
17,057
|
|
State
|
|
416
|
|
|
1,099
|
|
|
1,549
|
|
Foreign
|
|
98
|
|
|
735
|
|
|
148
|
|
|
|
3,915
|
|
|
8,744
|
|
|
18,754
|
|
Deferred expense (benefit):
|
|
|
|
|
|
|
Federal
|
|
1,271
|
|
|
1,018
|
|
|
(613)
|
|
State
|
|
204
|
|
|
73
|
|
|
(13)
|
|
Foreign
|
|
31
|
|
|
(138)
|
|
|
(161)
|
|
|
|
1,506
|
|
|
953
|
|
|
(787)
|
|
Income tax expense
|
|
$
|
5,421
|
|
|
$
|
9,697
|
|
|
$
|
17,967
|
|
Deferred Tax Assets (Liabilities)
Deferred income taxes reflect the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes. Significant components of the Company's deferred tax assets and liabilities were as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of January 31,
|
|
|
|
|
|
|
2020
|
|
2019
|
|
|
Deferred tax assets:
|
|
|
|
|
|
|
Accounts receivable
|
|
$
|
286
|
|
|
$
|
147
|
|
|
|
Inventories
|
|
1,152
|
|
|
1,110
|
|
|
|
Accrued vacation
|
|
778
|
|
|
695
|
|
|
|
Insurance obligations
|
|
205
|
|
|
187
|
|
|
|
Warranty obligations
|
|
454
|
|
|
200
|
|
|
|
Postretirement benefits
|
|
2,042
|
|
|
1,800
|
|
|
|
Uncertain tax positions
|
|
445
|
|
|
487
|
|
|
|
Share-based compensation
|
|
1,927
|
|
|
1,834
|
|
|
|
Tax loss carryforwards
|
|
3,929
|
|
|
—
|
|
|
|
Leases
|
|
962
|
|
|
—
|
|
|
|
Other accrued liabilities
|
|
952
|
|
|
913
|
|
|
|
|
|
13,132
|
|
|
7,373
|
|
|
|
Valuation allowance
|
|
(630)
|
|
|
—
|
|
|
|
|
|
12,502
|
|
|
7,373
|
|
|
|
Deferred tax (liabilities):
|
|
|
|
|
|
|
Depreciation and amortization
|
|
(18,086)
|
|
|
(8,498)
|
|
|
|
Leases
|
|
(962)
|
|
|
—
|
|
|
|
Other
|
|
(518)
|
|
|
(518)
|
|
|
|
|
|
(19,566)
|
|
|
(9,016)
|
|
|
|
Net deferred tax asset (liability)
|
|
$
|
(7,064)
|
|
|
$
|
(1,643)
|
|
|
|
Uncertain Tax Positions
A summary of the activity related to the gross unrecognized tax benefits (excluding interest and penalties) is as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the years ended January 31,
|
|
|
|
|
|
|
2020
|
|
2019
|
|
2018
|
Gross unrecognized tax benefits at beginning of year
|
|
$
|
2,228
|
|
|
$
|
2,216
|
|
|
$
|
2,110
|
|
Increases in tax positions related to the current year
|
|
338
|
|
|
415
|
|
|
426
|
|
Increases in tax positions related to prior years
|
|
45
|
|
|
—
|
|
|
—
|
|
Decreases as a result of lapses in applicable statutes of limitation
|
|
(435)
|
|
|
(403)
|
|
|
(320)
|
|
|
|
|
|
|
|
|
Gross unrecognized tax benefits at end of year
|
|
$
|
2,176
|
|
|
$
|
2,228
|
|
|
$
|
2,216
|
|
(Dollars in thousands, except per-share amounts)
The total unrecognized tax benefits (including interest and penalty) that, if recognized, would affect the Company's effective tax rate were $2,162, $2,183, and $2,143 as of January 31, 2020, 2019, and 2018, respectively. The Company recognizes interest and penalties accrued related to unrecognized tax benefits in income tax expense. At January 31, 2020, 2019 and 2018, accrued interest and penalties were $430, $442, and $418, respectively. The Company does not expect any significant change in the amount of unrecognized tax benefits in the next fiscal year.
As of January 31, 2020, the Company had a Canada net operating loss ("NOL") carryforward of approximately $3,001 due to the acquisition of a majority interest in DOT in the current fiscal year. A deferred tax asset has been recorded for this NOL carryforward in the amount of $630. However, due to uncertainty in future taxable income of DOT, a valuation allowance in the amount of $630 has been recorded.
Additional Tax Information
The Company files tax returns, including returns for its subsidiaries, with various federal, state, and local jurisdictions. Uncertain tax positions are related to tax years that remain subject to examination. As of January 31, 2020, federal tax returns filed in the U.S. for fiscal years ended January 31, 2017 through January 31, 2019 remain subject to examination by federal tax authorities. In state and local jurisdictions, tax returns for fiscal years ended January 31, 2014 through January 31, 2019 remain subject to examination by state and local tax authorities. International jurisdictions have open tax years varying by location beginning in fiscal 2014.
Pre-tax book income (loss) for the U.S. companies and the foreign subsidiaries was $44,328 and $(4,294), respectively. As of January 31, 2020, the Company has no deferred tax liability recognized relating to the Company’s investment in foreign subsidiaries where the earnings have been indefinitely reinvested. The TCJA generally eliminates U.S. federal income taxes on dividends from foreign subsidiaries, and as a result, the accumulated undistributed earnings would only be subject to other taxes, such as withholding taxes and state income taxes, on distribution of such earnings. No additional withholding or income taxes have been provided for any remaining undistributed foreign earnings, as it is the Company’s intention for these amounts to continue to be indefinitely reinvested in foreign operations.
|
|
|
|
|
|
NOTE 11
|
FINANCING ARRANGEMENTS
|
Credit Facility
The Company entered into a credit facility on September 20, 2019, with Bank of America, N. A., as administrative agent, and Wells Fargo Bank, National Association (the Credit Agreement). The Credit Agreement provides for a syndicated senior revolving credit facility up to $100,000 with a maturity date of September 20, 2022. Loan proceeds may be utilized by Raven for strategic business purposes, such as business acquisitions, and for net working capital needs.
This new Credit Agreement replaces the Company's previous Credit Agreement which was scheduled to mature in April 2020. The Company was able to take advantage of more favorable pricing with the new Credit Agreement.
The unamortized debt issuance costs associated with this Credit Agreement were as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of January 31,
|
|
|
|
|
|
|
2020
|
|
2019
|
|
|
Unamortized debt issuance costs(a)
|
|
$
|
215
|
|
|
$
|
132
|
|
|
|
(a) Unamortized debt issuance costs are amortized over the term of the Credit Agreement and 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. Such fees were $181, $212 and $211 for the years ended January 31, 2020, 2019 and 2018, respectively.
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. 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 Company is in compliance with all financial covenants as of January 31, 2020.
(Dollars in thousands, except per-share amounts)
Letters of credit (LOC) issued and outstanding were as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of January 31,
|
|
|
|
|
2020
|
|
2019
|
Letters of credit outstanding(a)
|
|
$
|
50
|
|
|
$
|
514
|
|
(a)Any draws required under the LOC would be settled with available cash or borrowings under the Credit Agreement.
There were no borrowings outstanding at January 31, 2020 or January 31, 2019. Availability under the Credit Agreement for borrowings as of January 31, 2020 was $100,000.
Long-Term Notes
The Company assumed certain long-term notes pursuant to the acquisition of Smart Ag and the acquisition of a majority ownership in DOT in fiscal year 2020 as described in Note 6 "Acquisitions and Investments in Businesses and Technologies". The Company has repaid all acquired long-term notes except one DOT related financial assistance agreement (Agreement) between DOT and Western Economic Diversification Canada (WEDC), a government agency in Canada, that was entered into in August 2019. Under the Agreement, the WEDC agrees to contribute up to $5,000 over a three year period for costs incurred to develop a cloud-based distribution and service channel for a particular product being developed by DOT. DOT is eligible to receive contributions for costs incurred for purposes specified in the Agreement. The Company is required to repay the funds contributed by WEDC in 60 monthly installments beginning April 1, 2023, plus interest that begins on April 1, 2023, based on an average bank rate plus 3%. As of January 31, 2020, the Company had received $225 in contributions from WEDC and no repayments have been made. The outstanding liability balance is reported as "Long-term borrowings" on the Consolidated Balance Sheets.
At January 31, 2020, the Company's debt maturities based on outstanding principal were as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2021
|
|
2022
|
|
2023
|
|
2024
|
|
2025
|
|
Thereafter
|
Maturities of debt
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
225
|
|
|
$
|
—
|
|
|
$
|
—
|
|
The Company enters into operating and finance lease contracts related to facilities, vehicles and equipment. Operating leases are primarily related to facilities to support production, R&D, and sales efforts. Finance leases are primarily related to vehicles and equipment to support general business operations. Lease payments are typically fixed and carry lease terms of one to six years, some of which have an option to terminate or extend up to an additional ten years. For purposes of the quantitative disclosures below related to the calculation of operating and finance leases, lease terms predominantly did not include options to terminate or extend, as the Company is reasonably certain it would not exercise the options. Most of the Company's leases do not contain a purchase option, material residual value guarantee, or material restrictive covenants.
The Company is primarily a lessee in all lease arrangements but may become a lessor and lease or sublease certain assets to other entities if not fully utilized. These lessor activities are not material and are not separately disclosed.
To determine whether a contract is or contains a lease, the Company assessed its right to control the use of the identified asset, whether explicitly or implicitly stated, for a period of time while considering all facts and circumstances for each individual arrangement. The Company also has leases with non-lease components which are separately stated within the agreement and not included in the recognition of the right-of use asset and lease liability balances.
The discount rate used to calculate the present value of the lease liabilities is based upon the implied rate within each contract. If the rate is unknown or cannot be determined, the Company uses an incremental borrowing rate, which is determined by the length of the contract, asset class, and the Company's borrowing rates as of the commencement date of the contract.
Components of Company lease costs, including operating, finance, and short-term leases are included in the table below. Depreciation of right-of-use assets, operating lease costs, and short-term lease costs are reported in net income as "Cost of sales," "Research and development expenses," or "Selling, general, and administrative expenses," depending on what business function the asset primarily supports. Interest on lease liabilities are 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)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the Year
Ended
January 31, 2020
|
|
|
Lease Costs:
|
|
|
|
|
|
Finance Leases
|
|
|
|
|
|
Depreciation of right-of-use assets
|
|
|
$
|
413
|
|
|
|
Interest on lease liabilities
|
|
|
21
|
|
|
|
Total finance lease cost
|
|
|
$
|
434
|
|
|
|
|
|
|
|
|
|
Operating Leases
|
|
|
|
|
|
Operating lease cost
|
|
|
$
|
1,536
|
|
|
|
Short-term lease cost
|
|
|
446
|
|
|
|
Total operating lease cost
|
|
|
1,982
|
|
|
|
Total finance and operating lease cost
|
|
|
$
|
2,416
|
|
|
|
Supplemental balance sheet information related to operating and finance leases include:
|
|
|
|
|
|
|
|
|
|
|
As of
January 31, 2020
|
Operating Leases
|
|
|
Operating lease right-of-use assets
|
|
$
|
4,275
|
|
|
|
|
|
Current lease liability
|
|
$
|
2,272
|
|
Non-current lease liability
|
|
2,370
|
|
Total operating lease liabilities
|
|
$
|
4,642
|
|
|
|
|
Finance Leases
|
|
|
Property, plant and equipment, at cost
|
|
$
|
881
|
|
Accumulated depreciation
|
|
(366)
|
|
Property, plant and equipment, net
|
|
$
|
515
|
|
|
|
|
Current lease liability
|
|
$
|
258
|
|
Non-current lease liability
|
|
257
|
|
Total finance lease liabilities
|
|
$
|
515
|
|
Weighted average remaining lease terms and discount rates include:
|
|
|
|
|
|
|
|
|
|
|
As of
January 31, 2020
|
Weighted Average Remaining Lease Term:
|
|
|
Operating leases
|
|
4 years
|
Finance leases
|
|
2 years
|
Weighted Average Discount Rate:
|
|
|
Operating leases
|
|
3.5
|
%
|
Finance leases
|
|
3.5
|
%
|
(Dollars in thousands, except per-share amounts)
Supplemental unaudited cash flow information related to operating and finance leases include:
|
|
|
|
|
|
|
|
|
|
|
|
|
For The Year
Ended
January 31, 2020
|
Cash paid for amounts included in the measurement of lease liabilities:
|
|
|
|
Operating cash flows from operating leases
|
|
|
$
|
1,536
|
|
Operating cash flows from finance leases
|
|
|
$
|
21
|
|
Financing cash flows from finance leases
|
|
|
$
|
413
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Future operating and finance lease obligations that have not yet commenced as of January 31, 2020, were immaterial and excluded from the lease liability schedule below accordingly.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of
January 31, 2020
|
|
|
|
|
Operating Leases
|
|
Finance Leases
|
Fiscal 2021
|
|
$
|
2,406
|
|
|
$
|
271
|
|
Fiscal 2022
|
|
1,178
|
|
|
160
|
|
Fiscal 2023
|
|
444
|
|
|
84
|
|
Fiscal 2024
|
|
232
|
|
|
21
|
|
Fiscal 2025
|
|
134
|
|
|
—
|
|
Thereafter
|
|
570
|
|
|
—
|
|
Total lease payments
|
|
4,964
|
|
|
536
|
|
Less imputed interest
|
|
(322)
|
|
|
(21)
|
|
Total lease liabilities
|
|
$
|
4,642
|
|
|
$
|
515
|
|
Prior to adoption of ASU 2016-02
Prior to the Company's adoption of ASU 2016-02 in the first quarter of fiscal year 2020, future minimum lease payments reported in the Company’s Annual Report on Form 10-K for the year ended January 31, 2019, were as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of
January 31, 2020
|
|
|
|
|
Operating Leases
|
|
Capital Leases
|
Fiscal 2020
|
|
$
|
2,213
|
|
|
$
|
182
|
|
Fiscal 2021
|
|
1,939
|
|
|
102
|
|
Fiscal 2022
|
|
728
|
|
|
44
|
|
Fiscal 2023
|
|
356
|
|
|
2
|
|
Fiscal 2024
|
|
140
|
|
|
—
|
|
Thereafter
|
|
—
|
|
|
—
|
|
Total lease payments
|
|
$
|
5,376
|
|
|
330
|
|
Less amount representing estimated executory costs such as taxes, license and
insurance including profit thereon
|
|
|
|
(14)
|
|
Less amounts representing interest
|
|
|
|
(32)
|
|
Present value of net minimum lease payments
|
|
|
|
$
|
284
|
|
For capital leases, total amortization expense was $200 and $65 in fiscal 2019 and 2018, respectively, while interest expense for capital leases was $39 and $13, respectively.
Under operating leases in fiscal 2019 and 2018, the Company leased certain vehicles, equipment and facilities. Total rent and lease expense was $2,897 and $2,104, respectively.
(Dollars in thousands, except per-share amounts)
|
|
|
|
|
|
NOTE 13
|
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, the potential costs and liability of which cannot be determined at this time. Management does not believe the ultimate outcomes of its legal proceedings are likely to be material to its results of operations, financial position, or cash flows.
The Company has insurance policies that provide coverage to various degrees for potential liabilities arising from legal proceedings.
The Company entered into a Gift Agreement (the Agreement) effective in January 2018 with the South Dakota State University Foundation, Inc. (the Foundation). 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. This facility will assist the Company in further collaboration with faculty, staff, and students on emerging technology in support of the growing need for precision agriculture practices and tools.
The Company will make a $5,000 gift to the Foundation. $4,503 of contribution expense was recognized in first quarter of fiscal 2019 and reported as "Selling, general, and administrative expenses" with interest expense to be recognized in periods thereafter. The fair value of this contingency at January 31, 2020, was $2,607 (measured based on the present value of the expected future cash outflows) of which $691 was classified as "Accrued liabilities" and $1,916 was classified as "Other liabilities" on the Consolidated Balance Sheet. The fair value of this contingency at January 31, 2019, was $3,200 of which $691 was classified as "accrued liabilities" and $2,509 was classified as "Other liabilities" on the Consolidated Balance Sheet. As of January 31, 2020, the Company has made payments related to the commitment totaling $2,145.
In addition to commitments disclosed elsewhere in the Notes to the Consolidated Financial Statements, the Company has approximately $32,000 of unconditional purchase obligations for inventory and other obligations that arise in the normal course of business operations and have a term of less than one year. The majority of these obligations are related to the Applied Technology and Engineered Films divisions and arise from the purchase of raw materials inventory.
|
|
|
|
|
|
NOTE 14
|
SHARE-BASED COMPENSATION
|
At January 31, 2020, the Company had two shareholder approved share-based compensation plans, which are described below. The compensation cost and related income tax benefit for these plans were as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the years ended January 31,
|
|
|
|
|
|
|
2020
|
|
2019
|
|
2018
|
Share-based compensation cost
|
|
$
|
4,971
|
|
|
$
|
3,951
|
|
|
$
|
3,725
|
|
Tax benefit
|
|
$
|
670
|
|
|
$
|
736
|
|
|
$
|
1,275
|
|
Share-based compensation cost capitalized as part of inventory is not significant.
Equity Compensation Plans
The Company reserved shares of its common stock for issuance to directors, officers, employees and certain advisors of the Company through incentive stock options and non-statutory stock options, stock appreciation rights, stock awards, restricted stock, restricted stock units (RSUs) and performance awards to be granted under the 2019 Equity Incentive Plan (the Plan) which was approved by shareholders on May 21, 2019. The number of shares initially available for grant under the Plan was 1,300,000. As of January 31, 2020, the number of shares available for grant was 1,156,389.
Shares outstanding under the Amended and Restated 2010 Stock Incentive Plan (the "2010 Plan") are still subject to terms of the 2010 Plan, but if those awards subsequently expire, are forfeited or cancelled, or are settled in cash, the shares subject to those awards will become available under the Plan. Under both Plans, option exercises or units and awards vested are settled in newly issued common shares. As of January 31, 2020, the number of shares reserved for grant under the 2010 plan for grants, RSUs or awards was 862,834.
Both plans are administered by the Personnel and Compensation Committee of the Board of Directors (the Committee), consisting of two or more independent directors of the Company. The Committee determines the option exercise prices and the term of each grant. The Committee may accelerate the exercisability of awards under either Plan or extend the term of such
(Dollars in thousands, except per-share amounts)
awards to the extent allowed to a maximum term of ten years. One type of award, restricted stock units, was granted in fiscal 2020.
Stock Option Awards
The Company granted no non-qualified stock options during fiscal 2020. For fiscal years prior to fiscal 2020, options were granted with exercise prices not less than the market value of the Company's common stock at the date of grant. The stock options vest over a four-year period and expire after five years. Options contain retirement and change-in-control provisions that may accelerate the vesting period. The fair value of each option grant was estimated on the date of grant using the Black-Scholes option pricing model. The Company used historical data to estimate option exercises, employee terminations and volatility within this valuation model.
The weighted average assumptions used for the Black-Scholes option pricing model by grant year were as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the years ended January 31,
|
|
|
|
|
2019
|
|
2018
|
Risk-free interest rate
|
|
2.51
|
%
|
|
1.68
|
%
|
Expected dividend yield
|
|
1.48
|
%
|
|
1.78
|
%
|
Expected volatility factor
|
|
35.20
|
%
|
|
33.87
|
%
|
Expected option term (in years)
|
|
4.25
|
|
4.25
|
|
|
|
|
|
Weighted average grant date fair value
|
|
$
|
9.83
|
|
|
$
|
7.35
|
|
Outstanding stock options as of January 31, 2020, and activity for the year then ended are presented below:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Number
of options
|
|
Weighted average exercise price
|
|
Aggregate intrinsic value
|
|
Weighted
average
remaining
contractual
term
(years)
|
Outstanding, January 31, 2019
|
|
368,130
|
|
|
$
|
23.06
|
|
|
|
|
|
Granted
|
|
—
|
|
|
—
|
|
|
|
|
|
Exercised
|
|
(146,145)
|
|
|
20.30
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Forfeited
|
|
(7,725)
|
|
|
20.62
|
|
|
|
|
|
Outstanding, January 31, 2020
|
|
214,260
|
|
|
$
|
25.03
|
|
|
$
|
1,564
|
|
|
2.00
|
|
|
|
|
|
|
|
|
|
Outstanding exercisable, January 31, 2020
|
|
76,879
|
|
|
$
|
24.18
|
|
|
$
|
603
|
|
|
1.85
|
|
|
|
|
|
|
|
|
|
Options vested, or expected to vest, January 31, 2020
|
|
214,260
|
|
|
$
|
25.03
|
|
|
$
|
1,564
|
|
|
2.00
|
The intrinsic value of a stock award is the amount by which the fair value of the underlying stock exceeds the exercise price of the award. The total intrinsic value of options exercised was $2,620, $7,568, and $1,036 during the years ended January 31, 2020, 2019 and 2018, respectively. The total fair value of options vested was $749, $892 and $1,312, during the years ended January 31, 2020, 2019 and 2018, respectively. As of January 31, 2020, the total unrecognized compensation cost for non-vested awards was $265. This amount is expected to be recognized over a weighted average period of 1.7 years.
Restricted Stock Unit Awards
The Company granted 203,539 time-vested RSUs during the year ended January 31, 2020. The fair value of a time-vested RSU is measured based upon the closing market price of the Company's common stock on the day prior to the date of grant. Time-vested RSUs will vest if, at the end of the vesting period, the employee remains employed by the Company. RSUs contain retirement and change-in-control provisions that may accelerate the vesting period. Dividends are cumulatively earned on the time-vested RSUs over the vesting period and are forfeited if such RSUs do not vest.
(Dollars in thousands, except per-share amounts)
Activity for time-vested RSUs under the Plan in fiscal 2020 was as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Number
of restricted stock units
|
|
Weighted
average grant date fair value per share
|
Outstanding, January 31, 2019
|
|
166,025
|
|
|
$
|
26.09
|
|
Granted
|
|
203,539
|
|
|
36.04
|
|
Vested
|
|
(61,051)
|
|
|
16.03
|
|
Forfeited
|
|
(8,001)
|
|
|
33.26
|
|
Outstanding, January 31, 2020
|
|
300,512
|
|
|
$
|
34.69
|
|
|
|
|
|
|
Cumulative dividends, January 31, 2020
|
|
4,890
|
|
|
The Company also granted performance-based RSUs during the year ended January 31, 2020. The exact number of performance shares to be issued will vary from 0% to 200% of the target award, depending on the Company's actual performance over the vesting period in comparison to the target award. The target awards for the fiscal 2020, 2019 and 2018 grants are based on return on equity (ROE), which is defined as net income attributable to Raven divided by the average of beginning and ending shareholders' equity for the fiscal year. The performance-based RSUs will vest if, at the end of the performance period, the Company has achieved certain performance goals and the employee remains employed by the Company. Performance-based RSUs contain retirement and change-in-control provisions that may accelerate the vesting period. Dividends are cumulatively earned on performance-based RSUs over the vesting period and are forfeited if such RSUs do not vest.
The fair value of the performance-based restricted stock units is based upon the closing market price of the Company's common stock on the day prior to the grant date. The number of restricted stock units granted is based on 100% of the target award. The number of RSUs that will vest is determined by the estimated ROE target over the performance period. The estimated performance factor used to estimate the number of restricted stock units expected to vest is evaluated quarterly. The number of restricted stock units issued at the vesting date will be based on actual results.
Activity for performance-based RSUs under the Plan in fiscal 2020 was as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Number
of restricted stock units expected to vest
|
|
Weighted
average grant date fair value per share
|
Outstanding, January 31, 2019
|
|
164,300
|
|
|
$
|
22.44
|
|
Granted
|
|
46,626
|
|
|
39.01
|
|
Vested
|
|
(96,075)
|
|
|
15.61
|
|
Forfeited
|
|
(1,300)
|
|
|
29.20
|
|
Performance-based adjustment
|
|
45,496
|
|
|
39.40
|
|
Outstanding, January 31, 2020
|
|
159,047
|
|
|
$
|
36.22
|
|
|
|
|
|
|
Cumulative dividends, January 31, 2020
|
|
2,269
|
|
|
|
The weighted average grant date fair values of the time-based and performance-based RSUs by grant year are as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the years ended January 31,
|
|
|
|
|
|
|
2020
|
|
2019
|
|
2018
|
Weighted average grant date fair value: time-based RSUs
|
|
$
|
36.04
|
|
|
$
|
35.15
|
|
|
$
|
29.33
|
|
Weighted average grant date fair value: performance-based RSUs
|
|
$
|
39.01
|
|
|
$
|
35.05
|
|
|
$
|
29.20
|
|
The total intrinsic value of RSUs vested (or converted to shares) was $6,120, $2,468, and $685 during the years ended January 31, 2020, 2019 and 2018, respectively. The total fair value of RSUs vested (or converted to shares) was $5,948, $2,477, and $678, during the years ended January 31, 2020, 2019 and 2018, respectively. As of January 31, 2020, there were 459,559
(Dollars in thousands, except per-share amounts)
outstanding RSUs expected to vest with a weighted average term of 2.3 years and an aggregate intrinsic value of $14,412. None of the outstanding RSUs are vested as of January 31, 2020. The total unrecognized compensation cost for non-vested RSU awards at January 31, 2020, was $10,104. This amount is expected to be recognized over a weighted average period of 2.3 years.
Deferred Stock Compensation Plan for Directors
The Company issues common stock to certain members of its Board of Directors under the Deferred Stock Compensation Plan for Directors of Raven Industries, Inc. (the Director Plan). The Director Plan is administered by the Personnel and Compensation Committee of the Board of Directors. Under the Director Plan, any non-employee director receives a grant of a number of stock units as deferred compensation to be converted into common stock after retirement from the Board of Directors and may elect to have a specified percentage of their annual retainer converted to stock units. Under the Director Plan, a stock unit is the right to receive one share of the Company's common stock as deferred compensation, to be distributed from an account established by the Company in the name of the non-employee director. Stock units have the same value as a share of common stock but cannot be sold. Stock units are a component of the Company's equity.
Stock units granted under the Director Plan vest immediately and are expensed at the date of grant. When dividends are paid on the Company's common shares, stock units are added to the directors' balances and a corresponding amount is removed from retained earnings. The intrinsic value of a stock unit is the fair value of the underlying shares.
Outstanding stock units as of January 31, 2020, and changes during the year then ended are presented below:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Number
of stock units
|
|
Weighted
average price
|
Outstanding, January 31, 2019
|
|
105,225
|
|
|
$
|
22.67
|
|
Granted
|
|
19,528
|
|
|
34.82
|
|
Deferred retainers
|
|
2,872
|
|
|
34.82
|
|
Dividends
|
|
1,788
|
|
|
35.66
|
|
|
|
|
|
|
Outstanding, January 31, 2020
|
|
129,413
|
|
|
$
|
24.95
|
|
|
|
|
|
|
|
NOTE 15
|
NET INCOME PER SHARE
|
Basic net income per share is computed by dividing net income by the weighted average common shares and 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 calculation were as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the years ended January 31,
|
|
|
|
|
|
|
2020
|
|
2019
|
|
2018
|
Anti-dilutive options and restricted stock units
|
|
29,876
|
|
|
54,631
|
|
|
344,774
|
|
(Dollars in thousands, except per-share amounts)
The computation of earnings per share is presented below:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the years ended January 31,
|
|
|
|
|
|
|
2020
|
|
2019
|
|
2018
|
Numerator:
|
|
|
|
|
|
|
Net income attributable to Raven Industries, Inc.
|
|
$
|
35,196
|
|
|
$
|
51,794
|
|
|
$
|
41,022
|
|
|
|
|
|
|
|
|
Denominator:
|
|
|
|
|
|
|
Weighted average common shares outstanding
|
|
35,861,255
|
|
|
35,907,041
|
|
|
35,945,225
|
|
Weighted average stock units outstanding
|
|
122,792
|
|
|
99,922
|
|
|
104,980
|
|
Denominator for basic calculation
|
|
35,984,047
|
|
|
36,006,963
|
|
|
36,050,205
|
|
|
|
|
|
|
|
|
Weighted average common shares outstanding
|
|
35,861,255
|
|
|
35,907,041
|
|
|
35,945,225
|
|
Weighted average stock units outstanding
|
|
122,792
|
|
|
99,922
|
|
|
104,980
|
|
Dilutive impact of stock options and RSUs
|
|
231,708
|
|
|
431,595
|
|
|
399,620
|
|
Denominator for diluted calculation
|
|
36,215,755
|
|
|
36,438,558
|
|
|
36,449,825
|
|
|
|
|
|
|
|
|
Net income per share - basic
|
|
$
|
0.98
|
|
|
$
|
1.44
|
|
|
$
|
1.14
|
|
Net income per share - diluted
|
|
$
|
0.97
|
|
|
$
|
1.42
|
|
|
$
|
1.13
|
|
|
|
|
|
|
|
NOTE 16
|
BUSINESS SEGMENTS AND MAJOR CUSTOMER INFORMATION
|
The Company's operating segments, which are also its reportable business segments, are defined by their product lines which have been generally grouped based on technology, manufacturing processes, and end-use application. The Company's business segments are Applied Technology Division, Engineered Films Division, and Aerostar Division. Separate financial information is available for each segment and regularly evaluated by the Company's chief operating decision-maker, the President and Chief Executive Officer, in making resource allocation decisions for the Company's segments. Segment information is reported consistent with the Company's management reporting structure.
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 farmers reduce costs, more precisely control inputs, and improve farm yields for the global agriculture market. The Applied Technology product families include application controls, GPS-guidance steering systems, field computers, automatic boom controls, machine automation, and injection systems. Applied Technology's services include wireless connectivity, cloud-based data management and logistics services. Applied Technology’s acquisition of Smart Ag and acquisition of a majority ownership in DOT in November 2019, brings a unique U-shaped platform designed to autonomously handle a large variety of agriculture implements along with perception, path planning, machine safety, and remote communication solutions to the precision ag market.
Engineered Films produces high-performance plastic films and sheeting for geomembrane, agricultural, construction, and industrial applications and also offers design-build and installation services of these plastic films and sheeting. Plastic film and sheeting can be purchased separately or together with installation services. Engineered Films sells both direct to end-customers and through independent third-party distributors. The majority of product sold into the construction and agriculture markets is through distributors, while sales into the geomembrane and industrial markets are more direct in nature. The Company extrudes a significant portion of the film converted for its commercial products and believes it is one of the largest sheeting converters in the United States in the markets it serves. Engineered Films' ability to extrude and convert films, along with offering installation services for its geomembrane products, allows it to provide a more customized solution to customers. A number of film manufacturers compete with the Company on both price and product availability.
Aerostar serves the aerospace and defense and commercial lighter-than-air markets. Aerostar's core products include high-altitude stratospheric platforms, technical services, and radar systems. These products can be integrated with additional third-party sensors to provide research, communications, and situational awareness capabilities to governmental and commercial customers. Aerostar’s growth strategy emphasizes the design and manufacture of proprietary products in these markets. Aerostar also pursues product and support services contracts with U.S. government agencies as well as sales of radar systems in international markets.
(Dollars in thousands, except per-share amounts)
The Company measures the performance of its segments based on their operating income excluding administrative and general expenses. The accounting policies of the operating segments are the same as those described in Note 1 "Summary of Significant Accounting Policies." Other income, interest expense, and income taxes are not allocated to individual operating segments, and assets not identifiable to an individual segment are included as corporate assets.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Business segment financial performance and other information is as follows:
|
|
|
|
|
|
|
|
|
For the years ended January 31,
|
|
|
|
|
|
|
2020
|
|
2019
|
|
2018
|
APPLIED TECHNOLOGY DIVISION
|
|
|
|
|
|
|
Sales
|
|
$
|
130,460
|
|
|
$
|
129,749
|
|
|
$
|
124,688
|
|
Operating income(a)(f)
|
|
30,672
|
|
|
39,044
|
|
|
31,257
|
|
Assets(b)(c)
|
|
172,320
|
|
|
79,742
|
|
|
66,555
|
|
Capital expenditures
|
|
1,464
|
|
|
2,050
|
|
|
1,489
|
|
Depreciation and amortization
|
|
3,995
|
|
|
3,433
|
|
|
3,365
|
|
ENGINEERED FILMS DIVISION
|
|
|
|
|
|
|
Sales(d)
|
|
$
|
197,719
|
|
|
$
|
226,574
|
|
|
$
|
213,298
|
|
Operating income(a)
|
|
28,695
|
|
|
39,714
|
|
|
47,324
|
|
Assets(b)
|
|
158,440
|
|
|
159,592
|
|
|
168,797
|
|
Capital expenditures
|
|
5,317
|
|
|
9,544
|
|
|
8,128
|
|
Depreciation and amortization
|
|
9,518
|
|
|
9,149
|
|
|
8,761
|
|
AEROSTAR DIVISION
|
|
|
|
|
|
|
Sales
|
|
$
|
54,443
|
|
|
$
|
50,867
|
|
|
$
|
39,915
|
|
Operating income(a)
|
|
8,597
|
|
|
8,179
|
|
|
4,122
|
|
Assets(b)
|
|
26,344
|
|
|
21,515
|
|
|
22,127
|
|
Capital expenditures
|
|
652
|
|
|
168
|
|
|
343
|
|
Depreciation and amortization
|
|
933
|
|
|
891
|
|
|
1,386
|
|
INTERSEGMENT ELIMINATIONS
|
|
|
|
|
|
|
Sales
|
|
|
|
|
|
|
Applied Technology Division
|
|
$
|
(2)
|
|
|
$
|
(10)
|
|
|
$
|
—
|
|
Engineered Films Division
|
|
(90)
|
|
|
(512)
|
|
|
(584)
|
|
|
|
|
|
|
|
|
Operating income(a)
|
|
—
|
|
|
(35)
|
|
|
20
|
|
Assets(b)
|
|
(104)
|
|
|
(104)
|
|
|
(3,380)
|
|
REPORTABLE SEGMENTS TOTAL
|
|
|
|
|
|
|
Sales(d)
|
|
$
|
382,530
|
|
|
$
|
406,668
|
|
|
$
|
377,317
|
|
Operating income(a)
|
|
67,964
|
|
|
86,902
|
|
|
82,723
|
|
Assets(b)
|
|
357,000
|
|
|
260,745
|
|
|
254,099
|
|
Capital expenditures
|
|
7,433
|
|
|
11,762
|
|
|
9,960
|
|
Depreciation and amortization
|
|
14,446
|
|
|
13,473
|
|
|
13,512
|
|
CORPORATE & OTHER
|
|
|
|
|
|
|
Operating (loss) from administrative expenses(a)(e)
|
|
$
|
(28,025)
|
|
|
$
|
(31,769)
|
|
|
$
|
(23,553)
|
|
Assets(b)(c)(g)
|
|
46,257
|
|
|
99,500
|
|
|
72,704
|
|
Capital expenditures
|
|
1,127
|
|
|
2,365
|
|
|
2,051
|
|
Depreciation and amortization
|
|
1,795
|
|
|
1,650
|
|
|
1,290
|
|
TOTAL COMPANY
|
|
|
|
|
|
|
Sales(d)
|
|
$
|
382,530
|
|
|
$
|
406,668
|
|
|
$
|
377,317
|
|
Operating income(e)
|
|
39,939
|
|
|
55,133
|
|
|
59,170
|
|
Assets
|
|
403,257
|
|
|
360,245
|
|
|
326,803
|
|
Capital expenditures
|
|
8,560
|
|
|
14,127
|
|
|
12,011
|
|
Depreciation and amortization
|
|
16,241
|
|
|
15,123
|
|
|
14,802
|
|
(a) 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 "Operating (loss) from administrative expenses" in Corporate & Other.
(b) Certain facilities owned by the Company are shared by more than one reporting segment. All facilities are reported as an asset based on the segment that
(Dollars in thousands, except per-share amounts)
acquired the asset as the Company believes this most appropriately reflects the total assets of each business segment. Expenses and costs related to these facilities, including depreciation expense, are allocated and reported in each reporting segment's operating income for each fiscal year presented.
(c) Applied Technology fiscal 2020 Assets include goodwill and intangible assets related to the acquisition of Smart Ag and the acquisition of a majority ownership in DOT. These assets are further disclosed in Note 6 "Acquisitions and Investments in Business Technologies". Fiscal 2020 Assets for the Corporate & Other segment reflect the use of cash to fund the acquisition of Smart Ag and the acquisition of a majority ownership in DOT.
(d) In September of fiscal year 2018, the Company acquired CLI. For the first seven months of fiscal 2019 CLI contributed a total of $21,568 in sales and for the first seven months of fiscal 2018 the division generated $4,109 in sales to CLI as a customer. Additionally, sales of hurricane recovery film in fiscal years 2020, 2019 and 2018 were $1,860, $14,494, and $24,225, respectively.
(e) Fiscal 2019 administrative expenses included a $4,503 expense related to the previously announced gift to SDSU. Fiscal 2020 and 2019 included approximately $2,700 and $4,000 of expenses related to Project Atlas. Project Atlas related expenses in fiscal 2018 were approximately $900.
(f) Applied Technology's operating income for fiscal 2020 includes $2,834 of costs and expenses incurred in fourth quarter of fiscal 2020 related to Raven Autonomy™ .
(g) Assets are principally cash, investments, and other receivables.
No customers accounted for 10% or more of consolidated net sales in fiscal 2020, 2019 or 2018.
Substantially all of the Company's long-lived assets are located in the United States. Foreign sales are attributed to countries based on location of the customer. Net sales to customers outside the United States were as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the years ended January 31,
|
|
|
|
|
|
|
2020
|
|
2019
|
|
2018
|
Canada
|
|
$
|
12,121
|
|
|
$
|
12,492
|
|
|
$
|
12,940
|
|
Europe
|
|
14,681
|
|
|
15,786
|
|
|
13,864
|
|
Latin America
|
|
8,261
|
|
|
5,950
|
|
|
4,439
|
|
Asia
|
|
3,387
|
|
|
7,240
|
|
|
4,074
|
|
Other foreign sales
|
|
3,682
|
|
|
6,861
|
|
|
6,239
|
|
Total foreign sales
|
|
42,132
|
|
|
48,329
|
|
|
41,556
|
|
United States
|
|
340,398
|
|
|
358,339
|
|
|
335,761
|
|
|
|
$
|
382,530
|
|
|
$
|
406,668
|
|
|
$
|
377,317
|
|
|
|
|
|
|
|
NOTE 17
|
QUARTERLY INFORMATION (UNAUDITED)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Sales
|
Gross Profit
|
Operating Income
|
Pre-tax Income
|
Net Income Attributable to Raven
|
Net Income Per Share(a)
|
|
|
Cash Dividends Per Share
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
Diluted
|
|
|
FISCAL 2020
|
|
|
|
|
|
|
|
|
|
|
First Quarter(d)
|
|
$
|
98,178
|
|
$
|
35,066
|
|
$
|
15,121
|
|
$
|
15,052
|
|
$
|
13,210
|
|
$
|
0.37
|
|
$
|
0.36
|
|
|
$
|
0.13
|
|
Second Quarter(d)
|
|
98,058
|
|
31,338
|
|
10,570
|
|
10,953
|
|
8,766
|
|
0.24
|
|
0.24
|
|
|
0.13
|
|
Third Quarter(d)
|
|
100,533
|
|
30,304
|
|
11,332
|
|
11,416
|
|
9,934
|
|
0.28
|
|
0.28
|
|
|
0.13
|
|
Fourth Quarter(b)(d)
|
|
85,761
|
|
27,039
|
|
2,916
|
|
2,613
|
|
3,286
|
|
0.09
|
|
0.09
|
|
|
0.13
|
|
Total Year
|
|
$
|
382,530
|
|
$
|
123,747
|
|
$
|
39,939
|
|
$
|
40,034
|
|
$
|
35,196
|
|
$
|
0.98
|
|
$
|
0.97
|
|
|
$
|
0.52
|
|
|
|
|
|
|
|
|
|
|
|
|
FISCAL 2019
|
|
|
|
|
|
|
|
|
|
|
First Quarter(c)(d)(e)
|
|
$
|
111,129
|
|
$
|
39,998
|
|
$
|
21,531
|
|
$
|
27,210
|
|
$
|
22,135
|
|
$
|
0.62
|
|
$
|
0.61
|
|
|
$
|
0.13
|
|
Second Quarter(d)
|
|
102,684
|
|
34,608
|
|
16,629
|
|
16,490
|
|
13,677
|
|
0.38
|
|
0.38
|
|
|
0.13
|
|
Third Quarter(d)
|
|
104,833
|
|
32,653
|
|
13,612
|
|
14,286
|
|
13,032
|
|
0.36
|
|
0.36
|
|
|
0.13
|
|
Fourth Quarter(d)
|
|
88,022
|
|
25,290
|
|
3,361
|
|
3,584
|
|
2,950
|
|
0.08
|
|
0.08
|
|
|
0.13
|
|
Total Year
|
|
$
|
406,668
|
|
$
|
132,549
|
|
$
|
55,133
|
|
$
|
61,570
|
|
$
|
51,794
|
|
$
|
1.44
|
|
$
|
1.42
|
|
|
$
|
0.52
|
|
|
|
|
|
|
|
|
|
|
|
|
(a) Net income per share is computed discretely by quarter and may not add to the full year.
(b) In the fourth quarter of fiscal 2020, the Company incurred operating expenses of $3,152 related to the Raven AutonomyTM strategic initiative announced in November 2019.
(c) In the first quarter of fiscal 2019, the Company sold its ownership interest in SST and recognized a gain on sale of $5,785 reported as nonoperating income in "Other income (expense), net" in the Consolidated Statements of Income and Comprehensive Income.
(d) Sales of hurricane recovery film in fiscal year 2020 were $17, $806, $1,010 and $27 for the first, second, third, and fourth quarters, respectively. Sales of hurricane recovery film in fiscal year 2019 were $8,919, $0, $1,510 and $4,065 for the first, second, third, and fourth quarters, respectively.
(e) In the first quarter of fiscal 2019, the Company incurred a $4,503 operating expense related to the previously announced gift to SDSU.
(Dollars in thousands, except per-share amounts)
|
|
|
|
|
|
NOTE 18
|
SUBSEQUENT EVENTS
|
In March 2020, the Company was required to redeem the remaining noncontrolling interest in DOT after the minority interest shareholders exercised their put options. The redeemable amount is approximately $20,959, of which $18,048 is payable within ninety days of the put notice and the remaining $2,911 is payable in November 2021. The Company expects to settle this short-term obligation by using its current cash balance along with borrowings from the Company's existing credit facility.
In December 2019, a novel strain of coronavirus disease (“COVID-19”) was first reported in Wuhan, China. Less than four months later, on March 11, 2020, the World Health Organization declared COVID-19 a global pandemic. The extent of COVID-19’s effect on the Company’s operational and financial performance will depend on future developments, including the duration, spread and intensity of the pandemic, all of which are uncertain and difficult to predict considering the rapidly evolving landscape. The Company is currently analyzing the potential impacts to all of its business segments. At this time, it is not possible to determine the magnitude of the overall impact of COVID-19 on the Company’s business. However, it could have a material adverse effect on the Company’s business, financial condition, liquidity, results of operations, and cash flows. The Company is leveraging its balance sheet and drew $50,000 on its credit facility in March 2020 to increase its cash position and help preserve its financial flexibility.