e10vk
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
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ANNUAL REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the fiscal year ended January 31, 2011
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TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
Commission file number: 001-07982
RAVEN INDUSTRIES, INC.
(Exact name of registrant as specified in its charter)
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South Dakota
(State of incorporation)
205 E. 6th Street, P.O. Box 5107, Sioux Falls, SD
(Address of principal executive offices)
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46-0246171
(IRS Employer Identification No.)
57117- 5107
(zip code) |
Registrants telephone number including area code (605) 336-2750
Securities registered pursuant to Section 12(b) of the Act:
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Title of Each Class:
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Name of Each Exchange on which Registered |
Common Stock, $1 par value
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The NASDAQ Stock Market |
Securities registered pursuant to Section 12(g) of the Act: None
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. o Yes þ No
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. o Yes þ No
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the
Securities Exchange Act of 1934 during the preceding twelve months, and (2) has been subject to such filing requirements
for the past ninety days. þ Yes o No
Indicate by checkmark whether the registrant has submitted electronically and posted on its corporate Website, if any, every
Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12
months (or for such shorter period that the registrant was required
to submit and post such files). o Yes o No
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of
Regulation S-K is not contained herein, and will not be contained, to the best of
registrants knowledge, in definitive proxy or information statements incorporated
by reference in Part III of this Form 10-K or any amendment to this Form 10-K. þ
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated
filer, a non-accelerated filer, or a smaller reporting company. See definition of accelerated
filer, large accelerated filer and smaller reporting company in Rule 12b-2 of the Exchange
Act. (Check one):
Large accelerated filer o |
Accelerated filer þ |
Non-accelerated filer o (Do not check if a smaller reporting company) | Smaller reporting company o |
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the
Exchange Act.) o Yes þ No
The aggregate market value of the registrants common stock held by non-affiliates at July 31, 2010
was approximately $570,364,695. The aggregate market value was computed by reference to the closing
price as reported on the NASDAQ Global Select Market, $35.03, on July 31, 2010, which was as of the
last business day of the registrants most recently completed second fiscal quarter. The number of
shares outstanding on March 25, 2011 was 18,075,906.
DOCUMENTS INCORPORATED BY REFERENCE
The definitive proxy statement relating to the registrants Annual Meeting of Shareholders, to be
held May 24, 2011, is incorporated by reference into Part III to the extent described therein.
PART I
Raven Industries, Inc. was incorporated in February 1956 under the laws of the State of South
Dakota and began operations later that same year. Raven is an industrial manufacturer providing a
variety of products. The company markets its products around the world and has its principal
operations in the United States of America. Raven began operations as a manufacturer of
high-altitude research balloons before diversifying into the industrial, agricultural, construction
and military/aerospace markets. The company employs approximately 1,100 people on active status and
is headquartered at 205 E. Sixth Street, Sioux Falls, SD 57104 telephone (605) 336-2750. The
companys Internet address is http://www.ravenind.com and its common stock trades on the
NASDAQ Global Select Market under the symbol RAVN. The company has adopted a Code of Conduct
applicable to all officers, directors, and employees, which is available on the website.
Information on the companys website is not part of this filing.
All reports (including annual reports on Form 10-K, quarterly reports on Form 10-Q and current
reports on Form 8-K) and proxy and information statements filed with the Securities and Exchange
Commission (SEC) are available through a link from the companys website to the SEC website. All
such information is available as soon as reasonably practicable after it has been electronically
filed. Filings can also be obtained free of charge by contacting the company, the SECs Public
Reference Room at 100 F Street N.E., Washington, DC 20549, through the SECs website at
http://www.sec.gov, or by calling the SEC at 1-800-SEC-0330.
The company has four business segments: Applied Technology Division, Engineered Films Division,
Aerostar Division and Electronic Systems Division. Many of the past and present product lines are
an extension of technology and production methods developed in the original balloon business.
Product lines have been grouped in these segments based on common technologies, production methods
and raw materials; however, more than one business segment may serve each of the product markets
identified above.
Business segment financial information is found on the following pages:
BUSINESS SEGMENTS
Applied Technology
Products in this segment are electronic and Global Positioning System (GPS) devices. They are used
primarily on agricultural sprayers for precision farming applications. The company has developed
products for field location control, chemical injection and automated steering. In the fourth
quarter of fiscal 2010, Raven invested in Site-Specific Technology Development Group, Inc., a
software company, and purchased the assets of Ranchview, Inc., a developer of GPS signal correction
and wireless internet connectivity via cell phone networks. These investments are expected to
position Applied Technology with tools to improve grower decision-making along with the hardware to
execute these decisions in the field.
A field sales force sells the agricultural control products in this segment to original equipment
manufacturers (OEMs) and independent third-party distributors. The segment also markets using
precision agriculture representatives on location in key geographic areas, including Canada,
Europe, Ukraine and Australia. The companys competitive advantage in this segment is product
reliability, ease of use, product availability and service after the sale.
Engineered Films
This segment produces rugged reinforced plastic sheeting for industrial, construction and
agricultural applications.
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The companys sales force sells plastic sheeting to independent third-party distributors in each of
the various markets it serves. 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. Engineered Films believes its ability to both extrude and convert films allows it to
provide a more customized solution to customer needs. A number of suppliers of sheeting compete
with Raven on both price and product availability. Engineered Films is the companys most
capital-intensive business segment, requiring regular investments in new extrusion capacity along
with printers and conversion equipment. This segments capital expenditures were $8.5 million in
fiscal 2011, $1.5 million in fiscal 2010 and $3.1 million in fiscal 2009.
Aerostar
Aerostar sells high-altitude and tethered aerostats for government and commercial research. It
produces military parachutes, uniforms and protective wear for U.S. government agencies and as a
subcontractor. It also manufactures other sewn and sealed products on a contract basis.
Sales are made in response to competitive bid requests. High-altitude research balloons are sold
directly to government agencies (usually funded by the National Aeronautics and Space
Administration) or commercial users. Aerostar is the only balloon supplier for high-altitude
research in the United States.
Electronic Systems
The company has focused this segments capabilities in electronics manufacturing services (EMS) for
commercial customers with a focus on high-mix, low-volume production. Assemblies manufactured by
the Electronic Systems segment include avionics, secure communication, environmental controls and
other products where high quality is critical.
EMS sales are made in response to competitive bid requests by customers. The level and nature
of competition varies with the type of product, but the company frequently competes with a number
of EMS manufacturers on any given bid request. The markets in which the company participates are
highly competitive, with customers having many suppliers from which to choose.
MAJOR CUSTOMER INFORMATION
Sales in fiscal 2011, 2010 and 2009 to Goodrich Corporation, a customer of the Electronic Systems
segment, accounted for 13%, 16% and 13%, respectively, of consolidated sales. While Electronic
Systems expects revenue from this customer to decline, the company does not anticipate any sudden
disruptions to this relationship.
SEASONAL WORKING CAPITAL REQUIREMENTS
Some seasonal demand exists in Applied Technologys agricultural market. Applied Technology
builds product in the fall for winter and spring delivery. Certain sales to agricultural customers
offer spring payment terms for fall and early winter shipments. The resulting fluctuations in
inventory and accounts receivable have required, and may require, seasonal short-term financing.
FINANCIAL INSTRUMENTS
The principal financial instruments that the company maintains are cash, cash equivalents,
short-term investments and accounts receivable. The company manages the interest rate, credit and
market risks associated with these accounts through periodic reviews of the carrying value of
assets and liabilities and establishment of appropriate allowances in connection with the company
policies. The company does not use off-balance sheet financing, except to enter into operating
leases.
The company uses derivative financial instruments to manage foreign currency risk. The use of
these financial instruments has had no material effect on consolidated results of operations,
financial condition or cash flows.
RAW MATERIALS
The company obtains a wide variety of materials from several vendors. Principal materials include
numerous electronic components for the Electronic Systems and Applied Technology segments, various
plastic resins for the Engineered Films segment and fabrics for the Aerostar segment. The
Engineered Films segment has experienced volatile resin prices over the past three years. Price
increases could not always be passed on to customers due to weak demand and a competitive pricing
environment. The Electronic Systems segment will experience variability in lead times for
components as business cycles impact demand. However, predicting future material shortages and the
related potential impact on Raven is not possible.
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PATENTS
The company owns a number of patents. However, Raven does not believe that its business, as a
whole, is materially dependent on any one patent or related group of patents. It believes the
successful manufacture and sale of its products generally depend more upon its technical expertise,
speed to market and manufacturing skills.
RESEARCH AND DEVELOPMENT
The business segments conduct ongoing research and development efforts. Most of the companys
research and development expenditures are directed toward new products in the Applied Technology
and Aerostar segments. Total company research and development costs are presented on the
Consolidated Statements of Income.
ENVIRONMENTAL MATTERS
Except as described below, the company believes that, in all material respects, it is in compliance
with applicable federal, state and local environmental laws and regulations. Expenditures relating
to compliance for operating facilities incurred in the past have not significantly affected the
companys capital expenditures, earnings or competitive position.
In connection with the sale of substantially all of the assets of the companys Glasstite, Inc.
subsidiary in fiscal 2000, the company has agreed to assume responsibility for the investigation
and remediation of any pre-October 29, 1999 environmental contamination at the companys former
Glasstite pickup-truck topper facility in Dunnell, Minnesota as required by the Minnesota Pollution
Control Agency (MPCA) or the United States Environmental Protection Agency (EPA).
The company and the purchasers of the companys Glasstite subsidiary conducted environmental
assessments of the properties. Although these assessments continue to be evaluated by the MPCA on
the basis of the data available, there is no reason to believe that any activities that might be
required as a result of the findings of the assessments will have a material effect on the
companys results of operations, financial position or cash flows. The company had $58,000 accrued
at January 31, 2011, its best estimate of probable costs to be incurred related to these matters.
BACKLOG
As of February 1, 2011, the companys order backlog totaled $76.0 million. Backlog amounts as of
February 1, 2010 and 2009 were $74.7 million and $80.4 million, respectively. Because the length of
time between order and shipment varies considerably by business segment and customers can change
delivery schedules or potentially cancel orders, the company does not believe that backlog, as of
any particular date, is necessarily indicative of actual net sales for any future period.
EMPLOYEES
As of January 31, 2011, the company had 1,112 employees, 1,101 in an active status. Following is a
summary of active employees by segment: Electronic Systems 252; Applied Technology 313;
Engineered Films 177; Aerostar 296; Administration 63. Management believes its employee
relations are satisfactory.
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EXECUTIVE OFFICERS
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NAME, AGE AND POSITION |
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BIOGRAPHICAL DATA |
Daniel
A. Rykhus, 46
President and Chief Executive Officer
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Mr. Rykhus became the
companys President and
Chief Executive Officer in
2010. He joined Raven in
1990 as Director of World
Class Manufacturing, was
General Manager of the
Applied Technology Division
from 1998 through 2009, and
served as Executive Vice
President from 2004 through
2010. |
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Thomas
Iacarella, 57
Vice President and Chief Financial Officer
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Mr. Iacarella joined Raven
in 1991 as Corporate
Controller and has been the
companys Chief Financial
Officer, Secretary and
Treasurer since 1998. Prior
to joining the company, he
held positions with Tonka
Corporation and the
accounting firm now known as
Ernst & Young. |
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David
R. Bair, 54
Division Vice President and General Manager
Electronic Systems Division
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Mr. Bair joined Raven in
1999 as Division Vice
President and General
Manager of the Electronic
Systems Division. |
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James
D. Groninger, 52
Division Vice President and General Manager
Engineered Films Division
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Mr. Groninger joined Raven
in 1986 and in 1995 became
Manager of Glasstite, Inc.
He has been Division Vice
President and General
Manager of the Engineered
Films Division since 2004. |
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Barbara
K. Ohme, 63
Vice President Administration
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Ms. Ohme joined Raven in
1987 as Employment Manager
and has been the companys
Vice President of
Administration since 2004. |
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Matthew
T. Burkhart, 35
Division Vice President and General Manager
Applied Technology Division
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Mr. Burkhart was named
Division Vice President and
General Manager of the
Applied Technology Division
on February 1, 2010. He
joined Raven in 2008 as
Director of Sales and became
General Manager Applied
Technology Division on
February 1, 2009. Prior to
joining the company, he was
a Branch Manager for Johnson
Controls. |
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Lon
E. Stroschein, 36
Division Vice President and General Manager
Aerostar Division
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Mr. Stroschein was named
Vice President and General
Manager of the Aerostar
Division in October 2010. He
joined Raven in 2008 as
International Sales Manager
for Applied Technology.
Prior to joining Raven, he
was a bank Vice President
and was a member of the
executive staff for a U.S.
Senator. |
ITEM 1A. RISK FACTORS
FORWARD-LOOKING STATEMENTS
Certain statements contained in this report are forward-looking statements within the
meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities
Exchange Act of 1934, as amended, including statements regarding the expectations, beliefs,
intentions or strategies regarding the future. Without limiting the foregoing, the words
anticipates, believes, expects, intends, may, plans and similar expressions are
intended to identify forward-looking statements. The company intends that all forward-looking
statements be subject to the safe harbor provisions of the Private Securities Litigation Reform
Act. Although the company believes that the expectations reflected in such forward-looking
statements are based on reasonable assumptions, there is no assurance that such assumptions are
correct or that these expectations will be achieved. Such assumptions involve important risks and
uncertainties that could significantly affect results in the future. These risks and uncertainties
include, but are not limited to, those relating to weather conditions and commodity prices, which
could affect certain of the companys primary markets, such as agriculture and construction and oil
and gas well drilling; or changes in competition,
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raw material availability, technology or relationships with the companys largest customers any of
which could adversely impact any of the companys product lines, as well as other risks described
below. The foregoing list is not exhaustive and the company disclaims any obligation to
subsequently revise any forward-looking statements to reflect events or circumstances after the
date of such statements.
RISKS RELATING TO THE COMPANY
The company operates in markets that involve significant risks, many of which are beyond the
companys control. Based on current information, the company believes that the following identifies
the most significant risk factors that could affect its businesses. However, the risks and
uncertainties the company faces are not limited to those discussed below. There could be other
unknown or unpredictable economic, business, competitive or regulatory factors, including factors
that the company currently believes to be immaterial, that could have material adverse effects on
the companys financial position, liquidity and results of operations. Past financial performance
may not be a reliable indicator of future performance and historical trends should not be used to
anticipate results or trends in future periods.
Weather conditions could affect certain of the companys markets such as agriculture and
construction.
The companys Applied Technology Division is largely dependent on the ability of farmers and
agricultural subcontractors known as custom operators to purchase agricultural equipment that
includes its products. If such farmers experience adverse weather conditions resulting in poor
growing conditions, or experience unfavorable crop prices or expenses, potential buyers may be less
likely to purchase agricultural equipment. Accordingly, weather conditions may adversely affect
sales in the Applied Technology Division.
Weather conditions can also adversely affect sales in the companys Engineered Films Division. To
the extent weather conditions curtail construction activity, sales of the segments plastic
sheeting will likely decrease.
Price fluctuations in and shortages of raw materials could have a significant impact on the
companys ability to sustain and grow earnings.
The companys Engineered Films Division (EFD) consumes significant amounts of plastic resin, the
costs of which primarily reflect market prices for natural gas. These prices are subject to
worldwide supply and demand as well as other factors beyond the control of the company. Although
EFD is sometimes able to pass such price increases to its customers, significant variations in the
cost of plastic resins can affect the companys operating results from period to period. Unusual
supply disruptions, such as caused by a natural disaster, could cause suppliers to invoke force
majeure clauses in their supply agreements, causing shortages of material. Success in offsetting
higher raw material costs with price increases is largely influenced by competitive and economic
conditions and could vary significantly depending on the market served. If the company is not able
to fully offset the effects of material availability and costs, financial results could be
adversely affected.
Electronic components, used by both the Applied Technology Division and Electronic Systems
Division, are sometimes in short supply, impacting our ability to meet customer demand.
If a supplier of raw materials or components were unable to deliver due to shortage or financial
difficulty, any of the companys segments could be adversely affected.
Fluctuations in commodity prices can increase our costs and decrease our sales.
Agricultural income levels are affected by agricultural commodity prices and input costs. As a
result, changes in commodity prices that reduce agricultural income levels could have a negative
effect on the ability of growers and their contractors to purchase the companys precision
agriculture products manufactured by its Applied Technology Division.
Exploration for oil and natural gas fluctuates with their price. Plastic sheeting manufactured and
sold by our Engineered Films Division is sold as pit and pond liners to contain water used in the
drilling process. Lower prices for oil and natural gas could reduce exploration activities and
demand for our products. Plastic sheeting manufacture uses plastic resins which are subject to
change in price as the cost of natural gas changes. Accordingly, volatility in oil and natural gas
prices may negatively affect our cost of goods sold or cause us to change prices, which could
adversely affect our sales and profitability.
Failure to develop and market new technologies and products could impact the companys competitive
position and have an adverse effect on the companys financial results.
The companys operating results in its Applied Technology and to a lesser extent, its
Engineered Films and Aerostar segments, are largely dependent on the ability to renew the pipeline
of new products and to bring those products to market. This ability could be adversely affected by
difficulties or delays in product development such as the inability to identify viable new
products, successfully complete research and development, obtain relevant regulatory approvals,
obtain intellectual property protection, or
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gain market acceptance of new products and services. Because of the lengthy development process,
technological challenges and intense competition, there can be no assurance that any of the
products the company is currently developing, or could begin to develop in the future, will achieve
substantial commercial success. In addition, sales of the companys new products could replace
sales of some of its current products, offsetting the benefit of even a successful product
introduction.
The companys Electronic Systems Division is dependent on a small number of customers and faces
competitive risks.
The companys Electronic Systems Division (ESD) is dependent on a small number of customers
with the top customer representing over half of ESD sales. Accordingly, the ESD segment is
dependent on the continued growth, viability and financial stability of its customers, which
consist of original equipment manufacturers of avionics, consumer beds and secure telecommunication
equipment. Future sales are dependent on the success of the companys customers, some of which
operate in businesses associated with rapid technological change and consequent product
obsolescence. Developments adverse to major customers or their products, or the failure of a major
customer to pay for components or services, could have an adverse effect on the performance of ESD.
Further, ESD competes against many providers of electronics manufacturing services. Certain
competitors have substantially greater resources and more geographically diversified international
operations than ESD. This segment may also be at a competitive disadvantage with respect to price
when compared to manufacturers with lower cost structures, particularly those with more offshore
facilities located where labor and other costs are lower. The company also faces competition from
the manufacturing operations of current and future customers, who are continually evaluating the
merits of manufacturing products internally against the advantages of outsourcing to electronics
manufacturing services providers. Accordingly, to compete effectively, ESD must continue to provide
technologically advanced manufacturing services, maintain strict quality standards, respond
flexibly and rapidly to customers design and schedule changes and deliver products globally on a
reliable basis at competitive prices. Customers may cancel their orders, change production
quantities or delay production. Start-up costs and inefficiencies related to new or transferred
programs can adversely affect operating results and such costs may not be recoverable if such new
programs or transferred programs are cancelled.
The companys Aerostar segment depends on the U.S. government for a significant portion of its
sales, creating uncertainty in the timing of and funding for projected contracts.
A significant portion of Aerostars sales are to the U.S. government or U.S. government agencies as
a prime or sub-contractor. Government spending has historically been cyclical. A decrease in U.S.
government defense or near-space research spending or changes in spending allocation could result
in one or more of the companys programs being reduced, delayed or terminated. Reductions in the
companys existing programs, unless offset by other programs and opportunities, could adversely
affect its ability to sustain and grow its future sales and earnings. The companys U.S. government
sales are funded by the federal budget, which operates on an October-to-September fiscal year.
Changes in congressional schedules, negotiations for program funding levels or unforeseen world
events can interrupt the funding for a program or contract. Funds for multi-year contracts can be
changed in subsequent years in the appropriations process.
In addition, the U.S. government has increasingly relied on indefinite delivery, indefinite
quantity (IDIQ) contracts and other procurement vehicles that are subject to a competitive bidding
and funding process even after the award of the basic contract, adding an additional element of
uncertainty to future funding levels. Delays in the funding process or changes in funding can
impact the timing of available funds or can lead to changes in program content or termination at
the governments convenience. The loss of anticipated funding or the termination of multiple or
large programs could have an adverse effect on the companys future sales and earnings.
The company derives a portion of its revenues from foreign markets, which subjects the company to
risk of changes in government policies and laws or worldwide economic conditions.
The companys sales outside the U.S. were $25 million in fiscal 2011. The companys financial
results could be affected by changes in trade, monetary and fiscal policies, laws and regulations,
or other activities of U.S. and non-U.S. governments, agencies and similar organizations. These
conditions include, but are not limited to, changes in a countrys or regions economic or
political conditions; trade regulations affecting production, pricing and marketing of products;
local labor conditions and regulations; reduced protection of intellectual property rights in some
countries; changes in the regulatory or legal environment; restrictions on currency exchange
activities; burdensome taxes and tariffs and other trade barriers. International risks and
uncertainties, including changing social and economic conditions as well as terrorism, political
hostilities and war, could lead to reduced sales and reduced profitability associated with such
sales.
Adverse economic conditions in the major industries the company serves may materially affect
segment performance and consolidated results of operations.
The companys results of operations are impacted by the market fundamentals of the primary
industries served. Significant declines of economic activity in the agricultural, oil and gas
exploration, construction, industrial, aerospace/aviation, communication, defense and other major
markets served may adversely affect segment performance and consolidated results of operations.
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ITEM 1B. UNRESOLVED STAFF COMMENTS
None.
ITEM 2. PROPERTIES
The company maintains the following properties in connection with its operations, all of which
the company owns, unless indicated otherwise:
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Square |
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Location |
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Feet |
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Function |
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Business segments |
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Sioux Falls, SD |
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150,000 |
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Corporate
office; electronics manufacturing |
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All |
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131,000 |
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Plastic sheeting manufacturing |
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Engineered Films |
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73,000 |
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Warehouse |
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Engineered Films |
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59,000 |
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Plastic sheeting manufacturing and sewing |
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Engineered Films; Aerostar |
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35,000 |
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Warehouse and offices |
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Engineered Films; Aerostar |
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27,000 |
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Training facility and manufacturing |
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Applied Technology |
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25,000 |
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Tethered
aerostat and inflatable manufacturing |
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Aerostar |
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24,000 |
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Electronics manufacturing |
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Electronic Systems |
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*14,000 |
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Tethered aerostat inflation and testing |
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Aerostar |
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23,000 |
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Training and product development facility |
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Applied Technology |
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10,000 |
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Machine shop |
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Applied Technology |
Sulphur Springs, TX |
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64,000 |
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Research balloon manufacturing |
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Aerostar |
Huron, SD |
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24,000 |
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Sewing plant |
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Aerostar |
St. Louis, MO |
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24,000 |
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Electronics manufacturing |
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Electronic Systems |
Madison, SD |
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20,000 |
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Sewing plant |
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Aerostar |
Austin, TX |
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*7,000 |
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Product development facility |
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Applied Technology; Aerostar |
Stockholm, SK |
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*7,000 |
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Warehouse |
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Applied Technology |
Most of the companys manufacturing plants also serve as distribution centers and contain offices
for sales, engineering and manufacturing support staff. The company believes that its properties
are suitable and adequate to meet existing production needs. Additionally, the productive capacity
in the companys facilities is substantially being utilized. The company plans to build a new
Applied Technology manufacturing facility on land purchased in fiscal 2011. In addition, the
company owns 6.95 acres of undeveloped land adjacent to the other owned property in Sioux Falls,
which is available for expansion.
ITEM 3. LEGAL PROCEEDINGS
The company is responsible for investigation and remediation of environmental contamination at
one of its sold facilities (see Item 1, Business Environmental Matters). In addition, the
company is involved as a defendant in lawsuits, claims or disputes arising in the normal course of
its business. The potential costs and liability of such claims cannot be determined at this time.
Management believes that any liability resulting from these claims will be substantially mitigated
by insurance coverage. Accordingly, management does not believe the ultimate outcome of these
matters will be significant to its results of operations, financial position or cash flows.
ITEM 4. REMOVED AND RESERVED
9
PART
II
ITEM 5. MARKET FOR THE REGISTRANTS COMMON EQUITY, RELATED SHAREHOLDER MATTERS AND
ISSUER PURCHASES OF EQUITY SECURITIES
Ravens common stock is traded on the NASDAQ Global Select Market under the symbol RAVN. The
following table shows quarterly financial results, quarterly high and low closing sales prices per
share of Ravens common stock as reported by NASDAQ, and dividends declared for the periods
indicated:
QUARTERLY INFORMATION (UNAUDITED)
(IN THOUSANDS, EXCEPT PER-SHARE AMOUNTS)
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Net Income |
|
|
Common Stock |
|
|
Cash |
|
|
|
Net |
|
|
Gross |
|
|
Operating |
|
|
Pretax |
|
|
Net |
|
|
Per Share(a) |
|
|
Market Price |
|
|
Dividends |
|
|
|
Sales |
|
|
Profit |
|
|
Income |
|
|
Income |
|
|
Income |
|
|
Basic |
|
|
Diluted |
|
|
High |
|
|
Low |
|
|
Per Share |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
FISCAL 2011 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
First Quarter |
|
$ |
85,030 |
|
|
$ |
27,171 |
|
|
$ |
19,505 |
|
|
$ |
19,557 |
|
|
$ |
12,945 |
|
|
$ |
0.72 |
|
|
$ |
0.72 |
|
|
$ |
31.79 |
|
|
$ |
26.54 |
|
|
$ |
0.16 |
|
Second Quarter |
|
|
73,174 |
|
|
|
20,389 |
|
|
|
12,623 |
|
|
|
12,529 |
|
|
|
8,353 |
|
|
|
0.46 |
|
|
|
0.46 |
|
|
|
38.18 |
|
|
|
28.66 |
|
|
|
0.16 |
|
Third Quarter |
|
|
85,823 |
|
|
|
24,887 |
|
|
|
17,866 |
|
|
|
17,883 |
|
|
|
11,833 |
|
|
|
0.65 |
|
|
|
0.65 |
|
|
|
42.11 |
|
|
|
30.00 |
|
|
|
1.41 |
(b) |
Fourth Quarter |
|
|
70,681 |
|
|
|
18,982 |
|
|
|
10,209 |
|
|
|
10,313 |
|
|
|
7,406 |
|
|
|
0.41 |
|
|
|
0.41 |
|
|
|
49.59 |
|
|
|
40.01 |
|
|
|
0.16 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Year |
|
$ |
314,708 |
|
|
$ |
91,429 |
|
|
$ |
60,203 |
|
|
$ |
60,282 |
|
|
$ |
40,537 |
|
|
$ |
2.24 |
|
|
$ |
2.24 |
|
|
$ |
49.59 |
|
|
$ |
26.54 |
|
|
$ |
1.89 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
FISCAL 2010 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
First Quarter |
|
$ |
65,222 |
|
|
$ |
20,428 |
|
|
$ |
14,113 |
|
|
$ |
14,114 |
|
|
$ |
9,231 |
|
|
$ |
0.51 |
|
|
$ |
0.51 |
|
|
$ |
24.65 |
|
|
$ |
15.37 |
|
|
$ |
0.13 |
|
Second Quarter |
|
|
56,586 |
|
|
|
15,112 |
|
|
|
9,306 |
|
|
|
9,411 |
|
|
|
6,204 |
|
|
|
0.34 |
|
|
|
0.34 |
|
|
|
31.00 |
|
|
|
23.99 |
|
|
|
0.14 |
|
Third Quarter |
|
|
60,158 |
|
|
|
16,918 |
|
|
|
11,119 |
|
|
|
11,116 |
|
|
|
7,293 |
|
|
|
0.40 |
|
|
|
0.40 |
|
|
|
32.43 |
|
|
|
24.47 |
|
|
|
0.14 |
|
Fourth Quarter |
|
|
55,816 |
|
|
|
15,394 |
|
|
|
8,682 |
|
|
|
8,681 |
|
|
|
5,846 |
|
|
|
0.32 |
|
|
|
0.32 |
|
|
|
33.18 |
|
|
|
24.04 |
|
|
|
0.14 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Year |
|
$ |
237,782 |
|
|
$ |
67,852 |
|
|
$ |
43,220 |
|
|
$ |
43,322 |
|
|
$ |
28,574 |
|
|
$ |
1.58 |
|
|
$ |
1.58 |
|
|
$ |
33.18 |
|
|
$ |
15.37 |
|
|
$ |
0.55 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
FISCAL 2009 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
First Quarter |
|
$ |
75,166 |
|
|
$ |
23,288 |
|
|
$ |
16,641 |
|
|
$ |
16,759 |
|
|
$ |
10,882 |
|
|
$ |
0.60 |
|
|
$ |
0.60 |
|
|
$ |
32.80 |
|
|
$ |
25.94 |
|
|
$ |
0.13 |
|
Second Quarter |
|
|
69,278 |
|
|
|
17,197 |
|
|
|
10,312 |
|
|
|
10,488 |
|
|
|
6,815 |
|
|
|
0.38 |
|
|
|
0.38 |
|
|
|
39.50 |
|
|
|
29.46 |
|
|
|
0.13 |
|
Third Quarter |
|
|
75,538 |
|
|
|
19,564 |
|
|
|
12,371 |
|
|
|
12,548 |
|
|
|
8,385 |
|
|
|
0.47 |
|
|
|
0.46 |
|
|
|
47.82 |
|
|
|
25.79 |
|
|
|
0.13 |
|
Fourth Quarter |
|
|
59,931 |
|
|
|
13,399 |
|
|
|
7,070 |
|
|
|
7,106 |
|
|
|
4,688 |
|
|
|
0.26 |
|
|
|
0.26 |
|
|
|
33.24 |
|
|
|
20.60 |
|
|
|
1.38 |
(c) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Year |
|
$ |
279,913 |
|
|
$ |
73,448 |
|
|
$ |
46,394 |
|
|
$ |
46,901 |
|
|
$ |
30,770 |
|
|
$ |
1.71 |
|
|
$ |
1.70 |
|
|
$ |
47.82 |
|
|
$ |
20.60 |
|
|
$ |
1.77 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(a) |
|
Net income per share is computed discretely by quarter and may not add to the full
year. |
|
(b) |
|
A special dividend of $1.25 per share was paid during the third quarter of fiscal 2011. |
|
(c) |
|
A special dividend of $1.25 per share was paid during the fourth quarter of fiscal
2009. |
As of January 31, 2011, the company had approximately 7,500 shareholders of record. A
substantially greater number of the companys common stock is held by beneficial holders whose
shares are held of record by banks, brokers and other financial institutions.
COMPARISON OF 5-YEAR CUMULATIVE TOTAL RETURN AMONG RAVEN INDUSTRIES, S&P 1500
INDUSTRIAL MACHINERY INDEX AND RUSSELL 2000 INDEX
Raven continues to outperform its industrial peers and the overall market in shareholder
return. Investors who bought $100 of the companys stock on January 31, 2006, held this for five
years and reinvested the dividends, have seen its value increase to $174.50.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended January 31 |
5-Year |
Company / Index |
|
2006 |
|
2007 |
|
2008 |
|
2009 |
|
2010 |
|
2011 |
|
CAGR(a) |
Raven Industries, Inc. |
|
$ |
100.00 |
|
|
$ |
91.05 |
|
|
$ |
97.37 |
|
|
$ |
74.90 |
|
|
$ |
100.24 |
|
|
$ |
174.50 |
|
|
|
12 |
% |
S&P 1500 Industrial Machinery |
|
|
100.00 |
|
|
|
114.82 |
|
|
|
121.05 |
|
|
|
67.90 |
|
|
|
92.53 |
|
|
|
124.67 |
|
|
|
5 |
% |
Russell 2000 |
|
|
100.00 |
|
|
|
110.51 |
|
|
|
99.70 |
|
|
|
62.97 |
|
|
|
86.78 |
|
|
|
114.00 |
|
|
|
3 |
% |
|
|
|
(a) |
|
compound annual growth rate |
11
ITEM 6. SELECTED FINANCIAL DATA
SIX-YEAR FINANCIAL SUMMARY
(DOLLARS AND SHARES IN THOUSANDS, EXCEPT PER-SHARE AMOUNTS)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the years ended January 31 |
|
|
2011 |
|
|
2010 |
|
|
2009 |
|
|
2008 |
|
|
2007 |
|
|
2006 |
|
OPERATIONS |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net sales |
|
$ |
314,708 |
|
|
$ |
237,782 |
|
|
$ |
279,913 |
|
|
$ |
233,957 |
|
|
$ |
217,529 |
|
|
$ |
204,528 |
|
Gross profit |
|
|
91,429 |
|
|
|
67,852 |
|
|
|
73,448 |
|
|
|
63,676 |
|
|
|
57,540 |
|
|
|
55,714 |
|
Operating income |
|
|
60,203 |
|
|
|
43,220 |
|
|
|
46,394 |
|
|
|
41,145 |
|
|
|
38,302 |
|
|
|
37,284 |
|
Income before income taxes |
|
|
60,282 |
|
|
|
43,322 |
|
|
|
46,901 |
|
|
|
42,224 |
|
|
|
38,835 |
|
|
|
37,494 |
|
Net income |
|
$ |
40,537 |
|
|
$ |
28,574 |
|
|
$ |
30,770 |
|
|
$ |
27,802 |
|
|
$ |
25,441 |
|
|
$ |
24,262 |
|
Net income % of sales |
|
|
12.9 |
% |
|
|
12.0 |
% |
|
|
11.0 |
% |
|
|
11.9 |
% |
|
|
11.7 |
% |
|
|
11.9 |
% |
Net income % of beginning equity |
|
|
30.4 |
% |
|
|
25.2 |
% |
|
|
26.0 |
% |
|
|
28.3 |
% |
|
|
30.1 |
% |
|
|
36.7 |
% |
Cash dividends(a) |
|
$ |
34,095 |
|
|
$ |
9,911 |
|
|
$ |
31,884 |
|
|
$ |
7,966 |
|
|
$ |
6,507 |
|
|
$ |
5,056 |
|
|
|
|
FINANCIAL POSITION |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current assets |
|
$ |
128,181 |
|
|
$ |
117,747 |
|
|
$ |
98,073 |
|
|
$ |
100,869 |
|
|
$ |
73,219 |
|
|
$ |
71,345 |
|
Current liabilities |
|
|
34,335 |
|
|
|
25,960 |
|
|
|
23,322 |
|
|
|
22,108 |
|
|
|
16,464 |
|
|
|
20,050 |
|
Working capital |
|
$ |
93,846 |
|
|
$ |
91,787 |
|
|
$ |
74,751 |
|
|
$ |
78,761 |
|
|
$ |
56,755 |
|
|
$ |
51,295 |
|
Current ratio |
|
|
3.73 |
|
|
|
4.54 |
|
|
|
4.21 |
|
|
|
4.56 |
|
|
|
4.45 |
|
|
|
3.56 |
|
Property, plant and equipment |
|
$ |
41,522 |
|
|
$ |
33,029 |
|
|
$ |
35,880 |
|
|
$ |
35,743 |
|
|
$ |
36,264 |
|
|
$ |
25,602 |
|
Total assets |
|
|
187,760 |
|
|
|
170,309 |
|
|
|
144,415 |
|
|
|
147,861 |
|
|
|
119,764 |
|
|
|
106,157 |
|
Shareholders equity |
|
$ |
141,214 |
|
|
$ |
133,251 |
|
|
$ |
113,556 |
|
|
$ |
118,275 |
|
|
$ |
98,268 |
|
|
$ |
84,389 |
|
Long-term debt / total capitalization |
|
|
0.0 |
% |
|
|
0.0 |
% |
|
|
0.0 |
% |
|
|
0.0 |
% |
|
|
0.0 |
% |
|
|
0.0 |
% |
Inventory turnover (COS / average inventory) |
|
|
5.6 |
|
|
|
5.3 |
|
|
|
5.2 |
|
|
|
5.3 |
|
|
|
5.4 |
|
|
|
5.9 |
|
|
|
|
CASH FLOWS PROVIDED BY (USED IN) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating activities |
|
$ |
42,085 |
|
|
$ |
47,643 |
|
|
$ |
39,037 |
|
|
$ |
27,151 |
|
|
$ |
26,313 |
|
|
$ |
21,189 |
|
Investing activities |
|
|
(11,418 |
) |
|
|
(13,396 |
) |
|
|
(7,000 |
) |
|
|
(4,433 |
) |
|
|
(18,664 |
) |
|
|
(11,435 |
) |
Financing activities |
|
|
(33,834 |
) |
|
|
(9,867 |
) |
|
|
(36,969 |
) |
|
|
(8,270 |
) |
|
|
(10,277 |
) |
|
|
(6,946 |
) |
Change in cash |
|
|
(3,121 |
) |
|
|
24,417 |
|
|
|
(5,005 |
) |
|
|
14,489 |
|
|
|
(2,626 |
) |
|
|
2,790 |
|
|
|
|
COMMON
STOCK DATA |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
EPS basic |
|
$ |
2.24 |
|
|
$ |
1.58 |
|
|
$ |
1.71 |
|
|
$ |
1.54 |
|
|
$ |
1.41 |
|
|
$ |
1.34 |
|
EPS diluted |
|
|
2.24 |
|
|
|
1.58 |
|
|
|
1.70 |
|
|
|
1.53 |
|
|
|
1.39 |
|
|
|
1.32 |
|
Cash dividends per share(a) |
|
|
1.89 |
|
|
|
0.55 |
|
|
|
1.77 |
|
|
|
0.44 |
|
|
|
0.36 |
|
|
|
0.28 |
|
Book value per share (b) |
|
|
7.81 |
|
|
|
7.38 |
|
|
|
6.30 |
|
|
|
6.52 |
|
|
|
5.45 |
|
|
|
4.67 |
|
Stock price range during the year |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
High |
|
$ |
49.59 |
|
|
$ |
33.18 |
|
|
$ |
47.82 |
|
|
$ |
45.85 |
|
|
$ |
42.70 |
|
|
$ |
33.15 |
|
Low |
|
|
26.54 |
|
|
|
15.37 |
|
|
|
20.60 |
|
|
|
26.20 |
|
|
|
25.46 |
|
|
|
16.54 |
|
Close |
|
$ |
47.24 |
|
|
$ |
28.58 |
|
|
$ |
21.81 |
|
|
$ |
30.02 |
|
|
$ |
28.43 |
|
|
$ |
31.60 |
|
Shares and stock units outstanding, year-end |
|
|
18,089 |
|
|
|
18,051 |
|
|
|
18,027 |
|
|
|
18,130 |
|
|
|
18,044 |
|
|
|
18,072 |
|
Number of shareholders, year-end |
|
|
7,456 |
|
|
|
7,767 |
|
|
|
8,268 |
|
|
|
8,700 |
|
|
|
8,992 |
|
|
|
9,263 |
|
|
|
|
OTHER DATA |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Price / earnings ratio (c) |
|
|
21.1 |
|
|
|
18.1 |
|
|
|
12.8 |
|
|
|
19.6 |
|
|
|
20.5 |
|
|
|
23.9 |
|
Average number of employees |
|
|
1,036 |
|
|
|
930 |
|
|
|
1,070 |
|
|
|
930 |
|
|
|
884 |
|
|
|
845 |
|
Sales per employee |
|
$ |
304 |
|
|
$ |
256 |
|
|
$ |
262 |
|
|
$ |
252 |
|
|
$ |
246 |
|
|
$ |
242 |
|
Backlog |
|
$ |
75,972 |
|
|
$ |
74,718 |
|
|
$ |
80,361 |
|
|
$ |
66,628 |
|
|
$ |
44,237 |
|
|
$ |
43,619 |
|
|
|
|
|
|
|
|
(a) |
|
Includes special dividends of $1.25 per share in fiscal 2011 and 2009. |
|
(b) |
|
Shareholders equity divided by common shares and stock units outstanding. |
|
(c) |
|
Closing stock price divided by EPS diluted. |
12
BUSINESS SEGMENTS
(IN THOUSANDS)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the years ended January 31 |
|
|
2011 |
|
2010 |
|
2009 |
|
2008 |
|
2007 |
|
2006 |
APPLIED TECHNOLOGY DIVISION |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Sales |
|
$ |
100,090 |
|
|
$ |
86,217 |
|
|
$ |
103,098 |
|
|
$ |
64,291 |
|
|
$ |
45,515 |
|
|
$ |
47,506 |
|
Operating income |
|
|
31,135 |
|
|
|
25,722 |
|
|
|
33,884 |
|
|
|
19,102 |
|
|
|
10,111 |
|
|
|
13,586 |
|
Assets |
|
|
52,669 |
|
|
|
51,029 |
|
|
|
48,881 |
|
|
|
36,938 |
|
|
|
27,629 |
|
|
|
30,047 |
|
Capital expenditures |
|
|
1,769 |
|
|
|
941 |
|
|
|
2,674 |
|
|
|
1,008 |
|
|
|
577 |
|
|
|
938 |
|
Depreciation and amortization |
|
|
2,238 |
|
|
|
1,677 |
|
|
|
1,383 |
|
|
|
1,125 |
|
|
|
1,142 |
|
|
|
1,085 |
|
|
|
|
ENGINEERED FILMS DIVISION |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Sales |
|
$ |
105,838 |
|
|
$ |
63,783 |
|
|
$ |
89,858 |
|
|
$ |
85,316 |
|
|
$ |
91,082 |
|
|
$ |
82,794 |
|
Operating income |
|
|
19,622 |
(b) |
|
|
10,232 |
|
|
|
10,919 |
|
|
|
17,739 |
|
|
|
23,440 |
|
|
|
19,907 |
|
Assets |
|
|
46,519 |
|
|
|
35,999 |
|
|
|
35,862 |
|
|
|
43,688 |
|
|
|
41,988 |
|
|
|
33,512 |
|
Capital expenditures |
|
|
8,450 |
|
|
|
1,460 |
|
|
|
3,120 |
|
|
|
4,012 |
|
|
|
13,266 |
|
|
|
7,359 |
|
Depreciation and amortization |
|
|
3,452 |
|
|
|
3,707 |
|
|
|
4,303 |
|
|
|
4,046 |
|
|
|
2,887 |
|
|
|
2,436 |
|
|
|
|
AEROSTAR DIVISION |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Sales |
|
$ |
48,787 |
|
|
$ |
27,244 |
|
|
$ |
27,186 |
|
|
$ |
17,290 |
|
|
$ |
14,654 |
|
|
$ |
18,009 |
|
Operating income |
|
|
9,407 |
|
|
|
5,634 |
|
|
|
4,219 |
|
|
|
1,506 |
|
|
|
707 |
|
|
|
2,133 |
|
Assets |
|
|
18,140 |
|
|
|
10,462 |
|
|
|
8,744 |
|
|
|
9,941 |
|
|
|
8,161 |
|
|
|
6,837 |
|
Capital expenditures |
|
|
2,190 |
|
|
|
332 |
|
|
|
383 |
|
|
|
156 |
|
|
|
812 |
|
|
|
179 |
|
Depreciation and amortization |
|
|
757 |
|
|
|
398 |
|
|
|
444 |
|
|
|
499 |
|
|
|
375 |
|
|
|
359 |
|
|
|
|
ELECTRONIC SYSTEMS DIVISION |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Sales |
|
$ |
65,852 |
|
|
$ |
63,525 |
|
|
$ |
61,983 |
|
|
$ |
67,987 |
|
|
$ |
66,278 |
|
|
$ |
56,219 |
|
Operating income |
|
|
9,917 |
|
|
|
8,979 |
|
|
|
5,926 |
|
|
|
10,365 |
|
|
|
10,850 |
|
|
|
8,916 |
|
Assets |
|
|
23,385 |
|
|
|
21,216 |
|
|
|
26,847 |
|
|
|
25,865 |
|
|
|
25,175 |
|
|
|
20,191 |
|
Capital expenditures |
|
|
609 |
|
|
|
290 |
|
|
|
1,399 |
|
|
|
1,077 |
|
|
|
1,357 |
|
|
|
1,612 |
|
Depreciation and amortization |
|
|
823 |
|
|
|
939 |
|
|
|
1,159 |
|
|
|
1,237 |
|
|
|
1,086 |
|
|
|
871 |
|
|
|
|
INTERSEGMENT ELIMINATIONS |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Sales |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Engineered Films Division |
|
$ |
(307 |
) |
|
$ |
(210 |
) |
|
$ |
(210 |
) |
|
$ |
(533 |
) |
|
$ |
|
|
|
$ |
|
|
Aerostar |
|
|
(32 |
) |
|
|
(1 |
) |
|
|
(25 |
) |
|
|
(16 |
) |
|
|
|
|
|
|
|
|
Electronic Systems Division |
|
|
(5,520 |
) |
|
|
(2,776 |
) |
|
|
(1,977 |
) |
|
|
(378 |
) |
|
|
|
|
|
|
|
|
Operating income |
|
|
(94 |
) |
|
|
60 |
|
|
|
(52 |
) |
|
|
(100 |
) |
|
|
|
|
|
|
|
|
Assets |
|
|
(186 |
) |
|
|
(92 |
) |
|
|
(152 |
) |
|
|
(100 |
) |
|
|
|
|
|
|
|
|
|
|
|
REPORTABLE SEGMENTS TOTAL |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Sales |
|
$ |
314,708 |
|
|
$ |
237,782 |
|
|
$ |
279,913 |
|
|
$ |
233,957 |
|
|
$ |
217,529 |
|
|
$ |
204,528 |
|
Operating income |
|
|
69,987 |
(b) |
|
|
50,627 |
|
|
|
54,896 |
|
|
|
48,612 |
|
|
|
45,108 |
|
|
|
44,542 |
|
Assets |
|
|
140,527 |
|
|
|
118,614 |
|
|
|
120,182 |
|
|
|
116,332 |
|
|
|
102,953 |
|
|
|
90,587 |
|
Capital expenditures |
|
|
13,018 |
|
|
|
3,023 |
|
|
|
7,576 |
|
|
|
6,253 |
|
|
|
16,012 |
|
|
|
10,088 |
|
Depreciation and amortization |
|
|
7,270 |
|
|
|
6,721 |
|
|
|
7,289 |
|
|
|
6,907 |
|
|
|
5,490 |
|
|
|
4,751 |
|
|
|
|
CORPORATE & OTHER(a) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating loss (from admin expenses) |
|
$ |
(9,784 |
) |
|
$ |
(7,407 |
) |
|
$ |
(8,502 |
) |
|
$ |
(7,467 |
) |
|
$ |
(6,806 |
) |
|
$ |
(7,258 |
) |
Assets |
|
|
47,233 |
|
|
|
51,695 |
|
|
|
24,233 |
|
|
|
31,529 |
|
|
|
16,811 |
|
|
|
15,570 |
|
Capital expenditures |
|
|
954 |
|
|
|
279 |
|
|
|
425 |
|
|
|
382 |
|
|
|
510 |
|
|
|
270 |
|
Depreciation and amortization |
|
|
361 |
|
|
|
387 |
|
|
|
469 |
|
|
|
437 |
|
|
|
395 |
|
|
|
400 |
|
|
|
|
TOTAL COMPANY |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Sales |
|
$ |
314,708 |
|
|
$ |
237,782 |
|
|
$ |
279,913 |
|
|
$ |
233,957 |
|
|
$ |
217,529 |
|
|
$ |
204,528 |
|
Operating income |
|
|
60,203 |
(b) |
|
|
43,220 |
|
|
|
46,394 |
|
|
|
41,145 |
|
|
|
38,302 |
|
|
|
37,284 |
|
Assets |
|
|
187,760 |
|
|
|
170,309 |
|
|
|
144,415 |
|
|
|
147,861 |
|
|
|
119,764 |
|
|
|
106,157 |
|
Capital expenditures |
|
|
13,972 |
|
|
|
3,302 |
|
|
|
8,001 |
|
|
|
6,635 |
|
|
|
16,522 |
|
|
|
10,358 |
|
Depreciation and amortization |
|
|
7,631 |
|
|
|
7,108 |
|
|
|
7,758 |
|
|
|
7,344 |
|
|
|
5,885 |
|
|
|
5,151 |
|
|
|
|
|
|
|
(a) |
|
Assets are principally cash, investments and deferred taxes. |
|
(b) |
|
Includes a $451 pre-tax gain on disposition of assets. |
13
ITEM 7. MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
Managements Discussion and Analysis of Financial Condition and Results of Operations (MD&A)
is designed to enhance overall financial disclosure. It provides managements analysis of the
primary drivers of year-over-year changes in key financial statement elements, business segment
results and the impact of accounting principles on the companys financial statements.
This discussion should be read in conjunction with the companys January 31, 2011 financial
statements and the accompanying notes.
The MD&A is organized as follows:
|
|
|
Executive Summary |
|
|
|
|
Results of Operations Segment Analysis |
|
|
|
|
Outlook |
|
|
|
|
Liquidity and Capital Resources |
|
|
|
|
Off-balance Sheet Arrangements and Contractual Obligations |
|
|
|
|
Critical Accounting Estimates |
|
|
|
|
New Accounting Standards |
EXECUTIVE SUMMARY
Raven Industries, Inc. is an industrial manufacturer providing a variety of products to customers
within the industrial, agricultural, construction and military/aerospace markets, primarily in
North America. The company operates in four business segments: Applied Technology, Engineered
Films, Electronic Systems and Aerostar.
Management uses a number of metrics to assess the companys performance:
|
|
|
Consolidated net sales, gross margins, operating income, operating margins, net income
and earnings per share |
|
|
|
|
Cash flow from operations and shareholder returns |
|
|
|
|
Return on sales, assets and equity |
|
|
|
|
Segment net sales, gross profit, gross margins, operating income and operating margins |
The following discussion highlights the consolidated operating results. Segment operating results
are more fully explained in the Results of Operations Segment Analysis section.
14
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the years ended January 31 |
|
|
|
|
|
|
|
% |
|
|
|
|
|
|
% |
|
|
|
|
dollars in thousands, except per-share data |
|
2011 |
|
|
change |
|
|
2010 |
|
|
change |
|
|
2009 |
|
Results of Operations |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net sales |
|
$ |
314,708 |
|
|
|
32 |
% |
|
$ |
237,782 |
|
|
|
(15 |
)% |
|
$ |
279,913 |
|
Gross margins (a) |
|
|
29.1 |
% |
|
|
|
|
|
|
28.5 |
% |
|
|
|
|
|
|
26.2 |
% |
Operating income |
|
$ |
60,203 |
|
|
|
39 |
% |
|
$ |
43,220 |
|
|
|
(7 |
)% |
|
$ |
46,394 |
|
Operating margins (a) |
|
|
19.1 |
% |
|
|
|
|
|
|
18.2 |
% |
|
|
|
|
|
|
16.6 |
% |
Net income |
|
$ |
40,537 |
|
|
|
42 |
% |
|
$ |
28,574 |
|
|
|
(7 |
)% |
|
$ |
30,770 |
|
Diluted income per share |
|
$ |
2.24 |
|
|
|
42 |
% |
|
$ |
1.58 |
|
|
|
(7 |
)% |
|
$ |
1.70 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash Flow and Payments to Shareholders |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash flow from operating activities |
|
$ |
42,085 |
|
|
|
|
|
|
$ |
47,643 |
|
|
|
|
|
|
$ |
39,037 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash dividends |
|
$ |
34,095 |
|
|
|
|
|
|
$ |
9,911 |
|
|
|
|
|
|
$ |
31,884 |
|
Common stock repurchases |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
5,180 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash returned to shareholders |
|
$ |
34,095 |
|
|
|
|
|
|
$ |
9,911 |
|
|
|
|
|
|
$ |
37,064 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Performance Measures |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Return on net sales(b) |
|
|
12.9 |
% |
|
|
|
|
|
|
12.0 |
% |
|
|
|
|
|
|
11.0 |
% |
Return on average assets(c) |
|
|
22.6 |
% |
|
|
|
|
|
|
18.2 |
% |
|
|
|
|
|
|
21.1 |
% |
Return on beginning equity(d) |
|
|
30.4 |
% |
|
|
|
|
|
|
25.2 |
% |
|
|
|
|
|
|
26.0 |
% |
|
|
|
(a) |
|
The companys gross and operating margins may not be comparable to industry peers
due to variability in the classification of expenses across industries in which the company
operates. |
|
(b) |
|
Net income divided by sales |
|
(c) |
|
Net income divided by average assets |
|
(d) |
|
Net income divided by beginning equity |
Results of Operations Fiscal 2011 versus Fiscal 2010
Fiscal 2011 was the most profitable year in the companys history as record sales and increased
productivity led to record earnings per share. Sales rose 32% to $314.7 million and diluted
earnings increased 42% to $2.24 per share as a result of sales growth in Applied Technology (16%),
Engineered Films (66%) and Aerostar (79%).
Applied Technology benefited from strong U.S. farm fundamentals as commodity pricescorn, soybeans
and other feed grains remained above historical levels. Economic growth in major economies and
economic, income and population growth in emerging markets continued to spur increased demand for
food and support healthy worldwide agriculture fundamentals. Engineered Films primary end
marketsenergy, geomembrane, industrial, agriculture and constructionrebounded from prior year
recessionary levels. Aerostar capitalized on strong demand from the U.S. military for persistent
ground surveillance systems. Electronic Systems benefited from higher demand for avionics and
increased sourcing of assemblies to Applied Technology partially offset by weaker deliveries of
circuit boards for secure communication devices.
Applied Technology
Fiscal 2011 sales of $100.1 million grew $13.9 million (16%) and operating income of $31.1 million
rose $5.4 million (21%). The primary drivers of the full-year results were strong sales of
application controls (i.e. control systems, flow meters, valves) and steering and guidance products
(i.e. assisted-steering, GPS receivers) and the highly successful first quarter launch of
Slingshotan information platform which improves data collection, transmission, storage and
analysis and provides RTK correction of GPS signals for high accuracy steering solutions.
Engineered Films
Fiscal 2011 sales of $105.8 million increased $42.1 million (66%) and operating income of
$19.6 million increased $9.4 million (92%). Economic growth and expectations for continued economic
growthparticularly in emerging marketspushed oil prices to levels adequate to support an
increase in drilling activity, which accelerated demand for pit liners. Additionally, sales of
FeedFresh silage covers grew due to healthy farm conditions and broadened appreciation of the
value proposition of this highly
engineered film. Sales of construction films (particularly in the fourth quarter) and industrial
films rose as business activity rebounded from recessionary levels. Full-year operating margins
improved, reflecting improved capacity utilization and productivity gains.
Aerostar
Fiscal 2011 sales of $48.8 million grew $21.5 million (79%) and operating income of $9.4 million
rose $3.8 million (67%). The sales and operating income gains were driven by increased demand for
tethered aerostat systems for persistent military surveillance. Full-year operating margins were
down slightly year-over-year as margin gains due to tethered aerostat sales and resulting
profitability were offset by start-up costs related to the T-11 Army Airborne parachute contract
and higher product development and selling expenses to support the tethered aerostats business.
Electronic Systems
Fiscal 2011 sales of $65.9 million increased $2.3 million (4%) and operating income of $9.9 million
grew $0.9 million (10%). Full-year results were positively impacted by avionics sales growth,
despite supply chain disruptions, and increased sourcing of assemblies to Applied Technology
partially offset by weaker deliveries of circuit boards for secure communication devices. Product
mix had a favorable impact on full-year operating margins.
Results of Operations Fiscal 2010 versus Fiscal 2009
The 15% decrease in net sales was the result of year-over-year sales declines in Applied Technology
(16%) and Engineered Films (29%). Electronic Systems and Aerostar sales were relatively flat
year-over-year. Expectations of lower farm income and economic uncertainty caused growers and
custom spray applicators to defer purchases, which negatively affected substantially all of Applied
Technologys product categories. The impact of the weak economy on Engineered Films largest
markets resulted in year-over-year declines of energy market sales (40%) and construction market
sales (25%). Electronic Systems sales were up 2% year-over-year, reflecting increased deliveries of
avionics and secure communication electronics to meet rising demand from government agencies and
the aerospace market, which were partially offset by a smaller customer base. Aerostar sales were
flat compared with last year, as increased deliveries of MC-6 Army parachutes, aerostats and
research balloons were offset by decreased deliveries of protective wear.
Applied Technology operating margins contracted year-over-year, reflecting the negative impact of
lower sales and operating leverage on profitability. However, disciplined margin management,
operational efficiencies and higher productivity brought improved operating margins for Engineered
Films, Electronic Systems and Aerostar. Consequently, the 7% year-over-year decrease in operating
income was less severe than the 15% drop in sales.
Cash Flow and Payments to Shareholders
The company continues to generate strong operating cash flows and maintain a strong capital base.
In the first quarter of fiscal 2011, the quarterly dividend was raised from 14 cents per share to
16 cents per share, representing the 24th consecutive annual increase in the dividend (excluding
special dividends). During fiscal 2011, $34.1 million was returned to shareholders through
quarterly dividends totaling $11.5 million, or 64 cents per share, and a special dividend of $22.5
million, or $1.25 per share. The special dividend was paid on September 30, 2010 in response to the
companys strong cash position and commitment to return excess cash to shareholders.
During fiscal 2010, $9.9 million was returned to shareholders through quarterly dividends. The
quarterly cash dividend increased from 13 cents per share to 14 cents per share beginning in the
second quarter.
Performance Measures
The company continues to generate solid returns on net sales, average assets and beginning equity,
which are important gauges of Ravens ability to efficiently produce profits. Raven generated a
record 12.9% return on sales in fiscal 2011 as the company continues to capitalize on competitive
advantages in niche markets.
16
RESULTS OF OPERATIONS SEGMENT ANALYSIS
Applied Technology
Applied Technology provides electronic and Global Positioning System (GPS) products designed to
reduce operating costs and improve yields for the agriculture market.
Financial highlights for the fiscal years ended January 31,
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
dollars in thousands |
|
2011 |
|
% change |
|
2010 |
|
% change |
|
2009 |
Net sales |
|
$ |
100,090 |
|
|
|
16 |
% |
|
$ |
86,217 |
|
|
|
(16 |
)% |
|
$ |
103,098 |
|
Gross profit |
|
|
45,106 |
|
|
|
19 |
% |
|
|
37,889 |
|
|
|
(19 |
)% |
|
|
46,591 |
|
Gross margins |
|
|
45.1 |
% |
|
|
|
|
|
|
43.9 |
% |
|
|
|
|
|
|
45.2 |
% |
Operating income |
|
$ |
31,135 |
|
|
|
21 |
% |
|
$ |
25,722 |
|
|
|
(24 |
)% |
|
$ |
33,884 |
|
Operating margins |
|
|
31.1 |
% |
|
|
|
|
|
|
29.8 |
% |
|
|
|
|
|
|
32.9 |
% |
Fiscal 2011 net sales of $100.1 million increased $13.9 million (16%) and operating income of $31.1
million was up $5.4 million (21%) versus fiscal 2010.
Fiscal 2011 fourth quarter net sales of $22.3 million grew $5.0 million (29%) and operating income
of $5.9 million rose $1.7 million (42%).
Several factors contributed to the strong full-year and fourth quarter comparative results:
|
|
|
Market conditions. U.S. farm fundamentals were strong as commodity pricescorn,
soybeans and other feed grains remained above historical levels. In addition, global
market conditions were healthy as population and income growth in emerging economies
continued to spur increased demand for food. |
|
|
|
|
Sales volume and selling prices. Fiscal 2011 sales growth was driven by higher volume
and modest selling price increases.
The growth in volume reflects solid year-over-year demand for Slingshot, application controls and guidance and steering products. |
|
|
|
|
New product sales. Year-to-date new product sales reflected the success of Slingshotan information
platform which improves data collection, transmission, storage and analysis and provides RTK correction of GPS signals for high accuracy steering solutions. |
|
|
|
|
International sales. Net sales outside the U.S. accounted for 21% of segment sales in
fiscal 2011 versus 20% in fiscal 2010. International sales of $21.3 million rose $4.2
million (25%) year-over-year led by strong Slingshot demand in Canada. Economic growth and
strong farm fundamentals in Argentina and Brazil drove strong overall demand in South
America. This growth was partially offset by a decrease in Australian sales due to weak
market conditions. |
|
|
|
|
Gross Margins. Gross margins of 45.1% in fiscal 2011 rose from 43.9% in fiscal 2010 due
to the positive effect of higher sales and strong operating leverage on profitability. |
|
|
|
|
Operating expenses. Full-year operating expenses decreased from 14.1% of sales in
fiscal 2010 to 14.0% in fiscal 2011. Strong sales and growth opportunities drove a $1.1
million (16%) increase in selling expenses and research and development expenses increased
$0.7 million (14%) to support product development and strategic initiatives. |
Fiscal 2010 net sales of $86.2 million decreased $16.9 million (16%) and operating income of $25.7
million was down $8.2 million (24%) versus fiscal 2009. Lower sales and operating income were due
primarily to a decrease in sales volume partially offset by modest selling price increases.
A number of factors contributed to the drop in full-year comparative results:
|
|
|
Economic uncertainty. The governments calendar 2009 farm income forecast was
significantly lower than 2008 actual levels. Farm production costs declined from prior-year
levels; however, they were outpaced by the decline in crop prices. Expectations of lower
farm income and economic uncertainty led growers and custom spray applicators to defer
purchases. These factors had a negative impact on substantially all of the segments
product categories. |
|
|
|
|
New product sales. Fiscal 2010 new product sales decreased from one year earlier due to
the highly successful fiscal 2009 launch of innovative field computers. |
|
|
|
|
International sales. International sales of $17.1 million fell $1.7 million (9%)
year-over-year. Net sales outside the U.S. accounted for 20% of segment sales in fiscal
2010 versus 18% in fiscal 2009. Declines in some markets were partially offset by expansion
into regions not previously served. |
|
|
|
|
Negative operating leverage. Gross margins of 43.9% in fiscal 2010 fell from 45.2% in
fiscal 2009 reflecting the negative |
17
|
|
|
impact of falling sales and operating leverage on profitability. |
|
|
|
|
Operating expenses. Full-year operating expenses increased to 14.1% of sales in fiscal
2010 from 12.3% in fiscal 2009. Selling expenses decreased $0.5 million (7%) and lagged the
drop in sales. Research and development expenses were flat year-over-year. |
Engineered Films
Engineered Films produces rugged reinforced plastic sheeting for industrial, construction,
geomembrane and agricultural applications.
Financial highlights for the fiscal years ended January 31,
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
dollars in thousands |
|
2011 |
|
% change |
|
2010 |
|
% change |
|
2009 |
Net sales |
|
$ |
105,838 |
|
|
|
66 |
% |
|
$ |
63,783 |
|
|
|
(29 |
)% |
|
$ |
89,858 |
|
Gross profit |
|
|
22,708 |
|
|
|
75 |
% |
|
|
13,013 |
|
|
|
(10 |
)% |
|
|
14,502 |
|
Gross margins |
|
|
21.5 |
% |
|
|
|
|
|
|
20.4 |
% |
|
|
|
|
|
|
16.1 |
% |
Operating income |
|
$ |
19,622 |
(a) |
|
|
92 |
% |
|
$ |
10,232 |
|
|
|
(6 |
)% |
|
$ |
10,919 |
|
Operating margins |
|
|
18.5 |
% |
|
|
|
|
|
|
16.0 |
% |
|
|
|
|
|
|
12.2 |
% |
|
|
|
(a) |
|
Includes a $451 pre-tax gain on the disposition of assets. |
Fiscal 2011 net sales of $105.8 million increased $42.1 million (66%) while operating income
of $19.6 million was up $9.4 million (92%) versus fiscal 2010.
Fiscal 2011 fourth quarter net sales of $24.3 million grew $7.6 million (45%) and operating income
of $3.0 million rose $0.6 million (27%).
Several factors contributed to the strong full-year and fourth quarter comparative results:
|
|
|
Improved market conditions. Business activity and confidence rose as credit markets
improved and asset values stabilized. Crude oil prices rose to levels adequate to support
increased drilling activity and strengthened energy market demand for pit liners.
Similarly, as credit began flowing and economic uncertainty diminished, the construction
and agriculture markets rose from recessionary levels. |
|
|
|
|
Sales volume and selling prices. Input cost increases drove a 13% increase in selling
prices. Sales volume, as measured by pounds shipped, increased over 50%, as Engineered
Films largest marketsenergy and constructionrebounded from prior year depressed
levels. Recovery of crude oil prices from their lows in early calendar 2009 drove
additional oil and gas drilling activity and increased demand for pit liners as sales to
the energy market more than doubled. Sales of industrial and construction films rose double
digits. Deliveries of agriculture films rose more than 60%. Sales of FeedFresh silage
covers gained traction due to healthy farm conditions and broadened appreciation of the
value-added benefits of this highly engineered film. Grain cover sales improved
year-over-year due to strong yields and a short harvest cycle. |
|
|
|
|
Capacity Utilization. Full-year operating margins expanded from 16.0% to 18.5% as a
result of improved capacity utilization. Fourth quarter profit margins fell from 14.4% to
12.5% as a result of less favorable leverage and increased purchases of outside materials
due to capacity constraints caused by planned maintenance. |
|
|
|
|
Operating expenses. Full-year operating expenses were 3.3% of sales in fiscal 2011
versus 4.4% in fiscal 2010. The increase in selling expenses of $0.7 million (30%) lagged
the 66% increase in sales. Research and development expenses were flat year-over-year. |
Fiscal 2010 net sales of $63.8 million decreased $26.1 million (29%) while operating income of
$10.2 million was off $0.7 million (6%) versus fiscal 2009. Lower sales and operating income
reflected falling sales volume and selling prices.
The year-over-year change was driven primarily by the following factors:
|
|
|
Depressed markets. Dysfunctional credit markets and plunging asset values resulted in
weak economic activity. Energy prices plunged as a result of the reduction in economic
activity, leading to the decline in the oil and gas exploration market. Similarly, as the
flow of credit slowed and economic uncertainty rose, the commercial construction markets
suffered. Agricultural commodity prices also fell sharply, resulting in a softening of the
agricultural market. The impact of the recession was felt across all of the divisions
markets, with sales to the two largest marketsenergy and construction decreasing
approximately 40% and 25%, respectively. |
|
|
|
|
Sales volume and selling prices. Selling prices decreased approximately 16% and sales
volume as measured by pounds |
18
|
|
|
shipped fell 17% year-over-year. These negative trends reflected market disruptions,
competitive pricing pressures stemming from excess industry capacity and lower resin costs
due to relatively low natural gas prices. |
|
|
|
|
Cost containment. Management responded quickly and decisively to the freefall in
business activity experienced in the fourth quarter of fiscal 2009. The necessary steps
were taken to align the division with the weak business environment, by tightly managing
expenses and decreasing headcount. |
|
|
|
|
Margin preservation. Poor economic conditions, volatile material costs and competitive
pricing pressures continued to squeeze margins. However, the impact of these factors was
more than offset by opportune purchases of prime grade resin and cost containments.
Consequently, gross margins increased from 16.1% to 20.4%. |
|
|
|
|
Operating expenses. Full-year operating expenses increased to 4.4% of sales in fiscal
2010 from 4.0% in fiscal 2009. Research and development expenses were flat year-over-year.
Selling expenses of $2.4 million decreased 25% year-over-year through reductions in
personnel and promotional expenses. However, this lagged the 29% drop in sales. |
Aerostar
Aerostar manufactures military parachutes, protective wear, custom-shaped inflatable products and
high-altitude and tethered aerostats for government and commercial research.
Financial highlights for the fiscal years ended January 31,
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
dollars in thousands |
|
2011 |
|
% change |
|
2010 |
|
% change |
|
2009 |
Net sales |
|
$ |
48,787 |
|
|
|
79 |
% |
|
$ |
27,244 |
|
|
|
0 |
% |
|
$ |
27,186 |
|
Gross profit |
|
|
12,475 |
|
|
|
88 |
% |
|
|
6,632 |
|
|
|
28 |
% |
|
|
5,189 |
|
Gross margins |
|
|
25.6 |
% |
|
|
|
|
|
|
24.3 |
% |
|
|
|
|
|
|
19.1 |
% |
Operating income |
|
$ |
9,407 |
|
|
|
67 |
% |
|
$ |
5,634 |
|
|
|
34 |
% |
|
$ |
4,219 |
|
Operating margins |
|
|
19.3 |
% |
|
|
|
|
|
|
20.7 |
% |
|
|
|
|
|
|
15.5 |
% |
Fiscal 2011 net sales of $48.8 million increased $21.5 million (79%) and operating income of $9.4
million grew $3.8 million (67.0%) over fiscal 2010.
Fiscal 2011 fourth quarter net sales of $12.0 million increased $3.0 million (34%) and operating
income of $2.3 million increased $0.2 million (10%) versus fiscal 2010.
Fiscal 2011 full-year and fourth quarter comparative results were primarily attributable to the
following:
|
|
|
Tethered aerostats. Aerostar capitalized on strong demand from the U.S. military for
persistent ground surveillance systems to be deployed in Afghanistan. This segment provides
the helium filled blimp, along with the fiber optics and deployment system. The blimp is
then equipped with surveillance equipment and flown on a tether at over 1,500 feet above
ground level to enable persistent surveillance of a wide area. |
|
|
|
|
Volatility in aerostat deliveries. Sequentially, fiscal 2011 quarterly sales of
aerostats varied materially ($8.2 million in the first quarter; $3.2 million in the second
quarter; $7.4 million in the third quarter and $3.6 million in the fourth quarter) as
design changes and funding shifts have impacted the timing of deliveries. |
|
|
|
|
Military parachutes. Fiscal 2011 full-year and fourth quarter parachute revenue
increased over 20% as the T-11 parachutes ramped to full production and deliveries under
the T-11 spares contract began. |
|
|
|
|
Gross Margins. Full-year gross margins improved year-over-year. The negative effect of
T-11 parachute start-up costs in the first half of the year and increased overhead was
partially offset by a more favorable product mix as the relative contribution of tethered
aerostats to total sales grew. |
|
|
|
|
Operating expenses. Operating expenses of $3.1 million or 6.3% of sales increased $2.1
million from $1.0 million or 3.7% of sales as a result of higher selling expenses and
significant investments in research and development primarily to support aerostat
development. |
Fiscal 2010 net sales of $27.2 million were flat and operating income of $5.6 million grew $1.4
million (34%) over fiscal 2009.
Fiscal 2010 results were driven by the following:
|
|
|
Sales volumes. Flat year-over-year sales reflected increased deliveries of MC-6 Army
parachutes, aerostats and research balloons, offset by decreased deliveries of protective
wear due to the completion of a large contract in January 2009. |
|
|
|
|
Margin expansion. The improvement in gross and operating margins came from increased
parachute manufacturing efficiencies. Final production runs and deliveries were made at the
end of fiscal 2010 on the MC-6 parachute contract. Fiscal 2010 was the most profitable year
for the program, primarily due to the higher efficiency level attained. |
19
|
|
|
Operating expenses. Operating expenses were relatively flat year-over-year. |
Electronic Systems
Electronic Systems is a total-solutions provider of electronics manufacturing services, primarily
to North American original equipment manufacturers.
Financial highlights for the fiscal years ended January 31,
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
dollars in thousands |
|
2011 |
|
% change |
|
2010 |
|
% change |
|
2009 |
Net sales |
|
$ |
65,852 |
|
|
|
4 |
% |
|
$ |
63,525 |
|
|
|
2 |
% |
|
$ |
61,983 |
|
Gross profit |
|
|
11,234 |
|
|
|
10 |
% |
|
|
10,258 |
|
|
|
42 |
% |
|
|
7,218 |
|
Gross margins |
|
|
17.1 |
% |
|
|
|
|
|
|
16.1 |
% |
|
|
|
|
|
|
11.6 |
% |
Operating income |
|
$ |
9,917 |
|
|
|
10 |
% |
|
$ |
8,979 |
|
|
|
52 |
% |
|
$ |
5,926 |
|
Operating margins |
|
|
15.1 |
% |
|
|
|
|
|
|
14.1 |
% |
|
|
|
|
|
|
9.6 |
% |
Fiscal 2011 net sales of $65.9 million increased $2.3 million (4%) and operating income of $9.9
million grew $0.9 million (10%) from fiscal 2010.
Fiscal 2011 fourth quarter net sales of $13.7 million were flat and operating income of $1.7
million decreased $0.3 million (14%) from fourth quarter fiscal 2010.
The following factors affected fiscal 2011 full-year results:
|
|
|
Sales volume. Fiscal 2011 revenue was positively impacted by avionics growth and
increased sourcing of assemblies to Applied Technology partially offset by weaker
deliveries of circuit boards for secure communication devices. |
|
|
|
|
Profit margins. Product mix had a favorable impact on full-year operating margins.
Fourth quarter operating margins of 12.2% were down from 14.2% in the fourth quarter of
fiscal 2010 due to a less favorable mix and increased overhead costs to compensate for
supply chain weakness on flat sales volume. |
|
|
|
|
Operating expenses. Fiscal 2011 operating expenses were relatively unchanged from
fiscal 2010 levels. |
Fiscal 2010 net sales of $63.5 million increased $1.5 million (2%) and operating income of
$9.0 million grew $3.1 million (52%) from fiscal 2009.
Fiscal 2010 full-year comparative results reflected the following:
|
|
|
Growth from existing customers. The rise in sales was attributable to higher deliveries
of avionics and secure communication electronics to meet increased demand from government
agencies and the aerospace market, partially offset by a smaller customer base. |
|
|
|
|
Margin expansion. Gross margins expanded as a result of positive operating leverage
produced through increased sales to existing customers, favorable product mix and cost
controlssuch as headcount reduction and facility consolidation. |
|
|
|
|
Operating expenses. Operating expenses were relatively flat year over year. |
Corporate Expenses (administrative expenses, income taxes and interest income and other, net)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the years ended January 31 |
dollars in thousands |
|
2011 |
|
2010 |
|
2009 |
Administrative expenses |
|
$ |
9,784 |
|
|
$ |
7,407 |
|
|
$ |
8,502 |
|
Administrative expenses as a % of sales |
|
|
3.1 |
% |
|
|
3.1 |
% |
|
|
3.0 |
% |
Interest income and other, net |
|
$ |
79 |
|
|
$ |
102 |
|
|
$ |
507 |
|
Effective tax rate |
|
|
32.8 |
% |
|
|
34.0 |
% |
|
|
34.4 |
% |
Administrative expenses increased 32% in fiscal 2011 compared with fiscal 2010, as a result of
higher compensation expense due to increased headcount and higher incentive compensation.
Administrative expenses declined 13% in fiscal 2010 compared with fiscal 2009, driven by headcount
reductions and lower incentive compensation and legal expenses.
Interest income and other, net consists mainly of interest income, bank fees and foreign currency
transaction gain or loss. The
20
year-over-year variability is attributable primarily to a decrease in interest income due to lower
interest rates and fluctuations in exchange rates.
The fiscal 2011 effective tax rate was favorably affected by the U.S. federal tax deduction from
income attributable to manufacturing activities. Fourth quarter fiscal 2011 tax expense was
favorably impacted by renewal of the U.S. research and development tax credit in December 2010. The
rate is expected to increase slightly in fiscal 2012.
OUTLOOK
Management believes double digit sales and profit growth for fiscal 2012 is achievable, building on
strong fiscal 2011 results.
Fiscal 2010 cash preservation and cost containment strategies enabled management to reinvest across
the company and return $34 million to shareholders in fiscal 2011 while maintaining substantial
liquidity and a strong capital base. In fiscal 2012, management plans to accelerate the rate of
organic investment through increased research and development, and capital investments. Management
also continues to look for complementary acquisitions to augment existing products and markets,
while supporting growth in quarterly dividends. In the near-term, profit margins could be pressured
but these investments are intended to position the company for long-term growth.
Applied Technology
Management will continue to make significant investments in product development and global
expansion and is committed to building on prior year investments in SST and Ranchview. The
development of an industry-leading decision-support system helps position Applied Technology as a
premier total precision solutions provider (GPS steering devices, planting and spraying controls,
data collection, transmission, storage and analysis). Applied Technologys strategy of integrate,
inform and innovate along with strong brand recognition, ease of use, product localization and
industry leading service creates strong growth opportunities. Worldwide agriculture conditions are
expected to remain healthy for this segment, with rising global demand for food, heightened
environmental concerns and broadening recognition of Ravens suite of productivity tools as a
cost-effective investment supporting managements outlook for profit growth that could approach the
20% range.
Engineered Films
The addition of new extrusion equipment in the second half of fiscal 2012 is expected to
increase annual capacity by approximately 25%. This equipment will improve sales opportunities by
adding both new capacity and capabilities to this segment. Additional depreciation and new product
introduction costs will partially offset the positive impact of the higher pounds produced until
new extrusion capacity is fully utilized. This ramp-up period has typically taken 2-3 years,
depending on market conditions.
In addition, profit margins are highly dependent on the ratio of selling prices to input
costs. The selling price of blown films is largely driven by competitive pricing pressure, capacity
utilization and market dynamicssupply and demand. Plastic resina derivative of natural gas and
oilis the primary component of extruded films. Management anticipates continuing demand for pit
liners for oil exploration, geomembrane products for lining and capping landfills, water canals and
reservoirs and to build on its success with highly engineered films such as FeedFresh silage
covers and VaporBlock Plus radon barriers. Double digit growth is possible, if management is able
to bring the new equipment on line and exploit its new capabilities in the second half of the year.
Aerostar
Management projects strong sales growth for the first half of the coming year. Tethered aerostat
systems deployed in Afghanistan have promoted the safety of U.S. troops by successfully providing
continuous wide-area surveillance of insurgents. Management is optimistic about new opportunities
in tethered aerostats and anticipates follow-on opportunities to provide cost-effective persistent
surveillance for the military. As in this past year, deliveries could vary significantly by quarter
as follow-on orders are dependent on the government funding process. Management also sees
opportunities for growth under existing government contracts for military parachutes and new
contracts for protective wear. The engineering knowledge and manufacturing technology gained from
these relationships along with expertise in sewing and sealing specialty fabrics will help solidify
Aerostars competitive advantage. Additional investment in product and market development is
expected to partially offset the impact of sales growth, but profit growth in the 15-20% range is
possible.
Electronic Systems
Management looks at Electronic Systems as a complementary business to its growth divisions:
Engineered Films, Aerostar and especially Applied Technology. This business carries technical
expertise that support the efforts of its sister divisions and provides electronic manufacturing
services to low-volume high-mix customers that require high levels of service and engineering
support. Management anticipates adding an additional customer in fiscal 2012, but believes this
growth will be more than offset by lower avionics sales. The mid- to long-term growth strategy is
predicated on the development of proprietary products, expansion of the customer base and continued
in-sourcing of assemblies for Ravens other divisions. Electronic Systems Division results for
fiscal
21
2012 are expected to be roughly flat or somewhat lower than in fiscal 2011.
LIQUIDITY AND CAPITAL RESOURCES
The companys balance sheet continues to reflect significant liquidity and a strong capital base.
Management focuses on the current cash balance and operating cash flows in considering liquidity,
as operating cash flows have historically been Ravens primary source of liquidity. Management
expects that current cash, combined with the generation of positive operating cash flows, will be
sufficient to fund the companys operating, investing and financing activities.
Ravens cash needs are seasonal, with working capital demands strongest in the first quarter. As a
result, the discussion of trends in operating cash flows focuses on the primary drivers of
year-over-year variability in working capital.
Cash, cash equivalents and short-term investments totaled $38.6 million at January 31, 2011, a $5.1
million decrease from $43.7 million on the same date in 2010. In September 2010, the company paid a
special cash dividend of $22.5 million.
Raven has an uncollateralized credit agreement that provides an $8.0 million line of credit, with a
balance of zero at January 31, 2011. The line of credit is reduced by outstanding letters of credit
totaling $1.3 million as of January 31, 2011. The credit line, which matures on July 1, 2011, is
expected to be renewed during fiscal 2012.
Operating Activities
Operating cash flows result primarily from cash received from customers, which is offset by
cash payments for inventories, services, employee compensation and income taxes. Management
evaluates working capital levels through the computation of average days sales outstanding and
inventory turnover. Average days sales outstanding is a measure of the companys efficiency in
enforcing its credit policy. The inventory turnover ratio is a metric used to evaluate the
effectiveness of inventory management, with further consideration given to balancing the
disadvantages of excess inventory with the risk of delayed customer deliveries.
Cash provided by operating activities was $42.1 million in fiscal 2011 compared with $47.6 million
in fiscal 2010. The decrease in operating cash flows is the result of increased working capital to
support growth, partially offset by higher company earnings.
Inventory consumed $9.2 million of cash in fiscal 2011 versus cash generated of $1.6 million
in fiscal 2010 reflecting higher raw material costs, higher forecasted demand, delayed deliveries
at Electronic Systems and purchases of plastic resins at Engineered Films in anticipation of price
increases. Similarly, accounts receivable consumed cash of $5.5 million in fiscal 2011 versus cash
generated of $6.3 million in fiscal 2010, reflecting higher receivables associated with sales
growthparticularly sales of engineered films and tethered aerostats. The company continues to
focus on disciplined inventory management (inventory turnover of 5.6X in fiscal 2011 versus 5.3X in
fiscal 2010) and improved cash collections (average days sales outstanding of 48 days in fiscal
2011 versus 52 days in fiscal 2010). Year-over-year variability in accounts payable and accrued
liabilities generated $7.1 million in cash, as compared with cash inflows of $2.4 million in fiscal
2010. This reflected an increase in accounts payable commensurate with the rise in inventory and
higher incentive compensation accruals associated with strong profits. Bad debt expense was not
material for both fiscal 2011 and 2010.
In fiscal 2010, reductions in inventory and accounts receivable generated $7.9 million in cash
versus cash consumed of $4.2 million in fiscal 2009. Lower business levels, disciplined inventory
management (inventory turnover of 5.3X in fiscal 2010 versus 5.2X in fiscal 2009) and improved cash
collections (average days sales outstanding of 52 days in fiscal 2010 versus 54 days in fiscal
2009) resulted in strong operating cash flows. Additionally, year-over-year variability in accounts
payable generated $2.9 million in cash, as compared with $1.0 million in fiscal 2009, due to more
favorable payment terms. This favorable cash impact was partially offset by a decrease in accrued
liabilities, which reflected lower compensation accruals and the acceleration of a $1.1 million
cash contribution to the employee 401(k) plan, due to a change in the plan design. Fiscal 2010 bad
debt recoveries of $0.2 million compared favorably to prior-year expense of $0.6 million,
reflecting lower sales and more stable economic conditions particularly related to the companys
international exposure.
Investing Activities
Cash used in investing activities totaled $11.4 million in fiscal 2011, $13.4 million in fiscal
2010 and $7.0 million in fiscal 2009. The fiscal 2011 decrease from the prior year reflects a
$10.7 million increase in capital expenditures offset by a $5.0 million decrease in net purchases
of short-term investments, proceeds of $0.9 million on the disposition of an Engineered Films
warehouse and $6.5 million of cash outlays in fiscal 2010 for the SST and Ranchview investments.
The increase in cash invested between fiscal 2010 and 2009 was the result of a $4.5 million
increase in net purchases of short-term investments and $6.5 million of cash outlays for the SST
and Ranchview investments, partially offset by a $4.7 million reduction in capital expenditures.
22
Management anticipates record capital spending in fiscal 2012in the $30 million range as
management sees opportunities to earn attractive returns on invested capital through organic
investments. In addition, management will evaluate strategic acquisitions that result in expanded
capabilities and solidify competitive advantages.
Financing
Activities
Cash used in financing activities is primarily for dividend payments and repurchases of common
stock.
Financing activities consumed cash of $33.8 million in fiscal 2011 compared with $9.9 million in
fiscal 2010 and $37.0 million in fiscal 2009.
In fiscal 2011, the company paid quarterly dividends totaling $11.5 million, or 64 cents per
share, and paid a special dividend of $22.5 million, or $1.25 per share.
In fiscal 2010, the company paid quarterly dividends totaling $9.9 million, or 55 cents per share.
In fiscal 2009, the company paid quarterly dividends totaling $9.4 million, or 52 cents per share;
paid a special dividend of $22.5 million, or $1.25 per share and repurchased $5.2 million of
stock.
OFF-BALANCE SHEET ARRANGEMENTS AND CONTRACTUAL OBLIGATIONS
As of January 31, 2011, the company is obligated to make cash payments in connection with its
non-cancelable operating leases for facilities and equipment and unconditional purchase
obligationsprimarily for raw materialsin the amounts listed below. The company has no
off-balance sheet debt or other unrecorded obligations other than the items noted in the following
table. In addition to the commitments noted there, standby letters of credit totaling $1.3 million
have been issued, primarily to support self-insured workers compensation bonding requirements. In
the event the bank chooses not to renew the companys line of credit, the letters of credit would
cease and alternative methods of support for the insurance obligations would be necessary, would be
more expensive and would require additional cash outlays. Management believes the chances of this
are remote.
A summary of the obligations and commitments at January 31, 2011 and for the next five years
is shown below.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Less than |
|
|
1-3 |
|
|
3-5 |
|
|
More than |
|
dollars in thousands |
|
Total |
|
|
1 year |
|
|
years |
|
|
years |
|
|
5 years |
|
Contractual Obligations: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Line of credit(a) |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating leases |
|
|
355 |
|
|
|
237 |
|
|
|
118 |
|
|
|
|
|
|
|
|
|
Postretirement benefits |
|
|
5,969 |
|
|
|
212 |
|
|
|
460 |
|
|
|
504 |
|
|
|
4,793 |
|
Unconditional purchase obligations |
|
|
56,812 |
|
|
|
56,812 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Uncertain tax positions(b) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
63,136 |
|
|
$ |
57,261 |
|
|
$ |
578 |
|
|
$ |
504 |
|
|
$ |
4,793 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(a) |
|
$8.0 million line bears interest at 4.0% as of January 31, 2011 and expires July
2011. The line of credit is reduced by outstanding letters of credit totaling $1.3
million. |
|
(b) |
|
The total liability for uncertain tax positions at January 31, 2011, was $4.2
million. The company is not able to reasonably estimate the timing of future payments
relating to non-current tax benefits. |
CRITICAL ACCOUNTING ESTIMATES
Critical accounting policies are those that require the application of judgment when valuing assets
and liabilities on the companys balance sheet. These policies are discussed below, because a
fluctuation in actual results versus expected results could materially affect operating results and
because the policies require significant judgments and estimates to be made. Accounting related to
these policies is initially based on best estimates at the time of original entry in the accounting
records. Adjustments are periodically recorded when the companys actual experience differs from
the expected experience underlying the estimates. These adjustments could be material if experience
were to change significantly in a short period of time. The company does not enter into derivatives
or other financial instruments for trading or speculative purposes. However, Raven has used
derivative financial instruments to manage the economic impact of fluctuations in currency exchange
rates on transactions that are denominated in currency other than its functional currency, which is
the U.S. dollar. The use of these financial instruments had no material effect on the companys
financial condition, results of operations or cash flows.
23
Inventories
The company estimates inventory valuation each quarter. Typically, when a product reaches the end
of its lifecycle, inventory value declines slowly or the product has alternative uses. Management
uses its manufacturing resources planning data to help determine if inventory is slow-moving or has
become obsolete due to an engineering change. The company closely reviews items that have balances
in excess of the prior years requirements, or that have been dropped from production requirements.
Despite these reviews, technological or strategic decisions made by management or Ravens customers
may result in unexpected excess material. Electronic Systems typically has recourse to customers
for obsolete or excess material. When Electronic Systems customers authorize inventory
purchasesespecially with long lead-time itemsthey are required to take delivery of unused
material or compensate the company accordingly. In every Raven operating unit, management must
manage obsolete inventory risk. The accounting judgment ultimately made is an evaluation of the
success that management will have in controlling inventory risk and mitigating the impact of
obsolescence when it does occur.
Warranties
Estimated warranty liability costs are based on historical warranty costs and average time elapsed
between purchases and returns for each business segment. Warranty issues that are unusual in nature
are accrued for individually.
Allowance
for Doubtful Accounts
Determining the level of the allowance for doubtful accounts requires managements best estimate of
the amount of probable credit losses based on historical writeoff experience by segment and an
estimate of the collectibility of any known problem accounts. Factors that are considered beyond
historical experience include the length of time the receivables are outstanding, the current
business climate and the customers current financial condition.
Revenue
Recognition
Estimated returns or sales allowances are recognized upon shipment of a product. The company sells
directly to customers or distributors that incur the expense and commitment for any post-sale
obligations beyond stated warranty terms.
Goodwill
and Long-lived Assets
Management assesses goodwill for impairment annuallyor more frequently if events or changes in
circumstances indicate that an asset might be impairedusing fair value measurement techniques.
For goodwill, Raven performs impairment reviews by reporting units which are the companys
reportable segments.
In the first step of goodwill impairment testing, the corporate discount rate is calculated so that
the discounted cash flows are equal to Ravens net enterprise value. The corporate discount rate is
then increased when evaluating any individual reporting unit due to any additional risk factors
inherent within the unit versus the corporation as a whole. A discounted cash flow analysis is then
completed for the reporting unit using the adjusted discount rate. The discounted cash flow
assumptions primarily include forecasted sales and costs and the discount rate. Management
evaluates the merits of each significant assumption used to determine the fair value of the
reporting unit.
The estimated fair value of the reporting unit is then compared with its net assets. If the
estimated fair value of the reporting unit is less than the net assets of the reporting unit, an
impairment loss is possible and a more refined measurement of the impairment loss would take place.
This is the second step of the goodwill impairment testing, in which management may use market
comparisons and recent transactions to assign the fair value of the reporting unit to all of the
assets and liabilities of that unit. The valuation methodologies in both steps of goodwill
impairment testing use significant estimates and assumptions, which include projected future cash
flows (including timing and the risks inherent in future cash flows), perpetual growth rates and
determination of appropriate market comparables.
For long-lived assets, including intangibles; investments in affiliates; and property, plant and
equipment, management tests for recoverability whenever events or changes in circumstances indicate
that the assets carrying amount may not be recoverable. Property, plant and equipment are
depreciated over the estimated lives of the assets using accelerated methods, which reduces the
likelihood of an impairment loss. Management periodically discusses any significant changes in the
utilization of long-lived assets, which may result frombut are not limited toan adverse change
in the assets physical condition or a significant adverse change in the business climate. 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. An impairment loss is recognized
when the carrying amount of an asset exceeds the estimated undiscounted cash flows used in
determining its fair value.
Uncertain
Tax Positions
Accounting for tax positions requires judgments, including estimating reserves for
uncertainties associated with the interpretation
24
of income tax laws and regulations and the resolution of tax positions with tax authorities after
discussions and negotiations. The ultimate outcome of these matters could result in material
favorable or unfavorable adjustments to the consolidated financial statements.
NEW ACCOUNTING STANDARDS
In December 2010, the Financial Accounting Standards Board issued guidance on goodwill impairment
testing. This guidance modifies the first step of the goodwill impairment test to include reporting
units with zero or negative carrying amounts. For these reporting units, the second step of the
goodwill impairment test shall be performed to measure the amount of impairment loss, if any, when
it is more likely than not that a goodwill impairment exists. The guidance is effective for fiscal
years and interim periods beginning after December 15, 2010. The adoption of this guidance on
February 1, 2011, is not expected to have a material impact on the companys consolidated results
of operation, financial condition or cash flows.
|
|
|
ITEM 7A. |
|
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK |
The exposure to market risks pertains mainly to changes in interest rates on cash and cash
equivalents and short-term investments. The company has no debt. The company does not expect
operating results or cash flows to be significantly affected by changes in interest rates.
Additionally, the company does not enter into derivatives or other financial instruments for
trading or speculative purposes. However, the company does utilize derivative financial instruments
to manage the economic impact of fluctuation in foreign currency exchange rates on those
transactions that are denominated in currency other than its functional currency, which is the U.S.
dollar. The use of these financial instruments had no material effect on the companys financial
condition, results of operations or cash flows.
The companys subsidiaries that operate outside the United States use their local currency as the
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 statement of
income. Adjustments resulting from financial statement translations are included as cumulative
translation adjustments in accumulated other comprehensive income (loss) within shareholders
equity. Foreign currency transaction gains or losses are recognized in the period incurred and are
included in interest income and other, net in the Consolidated Statements of Income. Foreign
currency fluctuations had no material effect on the companys financial condition, results of
operations or cash flows.
25
|
|
|
ITEM 8. |
|
FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA |
Index to Financial Statements
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|
Page(s) |
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27 |
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28 |
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29 |
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30 |
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31 |
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32 |
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33 |
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|
10 |
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26
MANAGEMENTS REPORT ON INTERNAL CONTROL
OVER FINANCIAL REPORTING
Our management is responsible for establishing and maintaining effective internal control over
financial reporting as defined in Rule 13a-15(f) of the Securities Exchange Act of 1934. Our
internal control over financial reporting is a process designed to provide reasonable assurance
regarding the reliability of financial reporting and the preparation of financial statements for
external purposes in accordance with generally accepted accounting principles. Our internal control
over financial reporting includes those policies and procedures that (i) pertain to the maintenance
of records that, in reasonable detail, accurately and fairly reflect the transactions and
dispositions of our assets; (ii) provide reasonable assurance that transactions are recorded as
necessary to permit preparation of financial statements in accordance with generally accepted
accounting principles and that our receipts and expenditures are being made only in accordance with
authorizations of our management and directors; and (iii) provide reasonable assurance regarding
prevention or timely detection of unauthorized acquisition, use, or disposition of our assets that
could have a material effect on the financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or
detect misstatements. Also, projections of any evaluation of effectiveness to future periods are
subject to the risk that controls may become inadequate because of changes in conditions, or that
the degree of compliance with the policies or procedures may deteriorate.
Management has assessed our internal control over financial reporting in relation to criteria
described in Internal Control Integrated Framework, issued by the Committee of Sponsoring
Organizations of the Treadway Commission. Based on this assessment using those criteria, we
concluded that, as of January 31, 2011, our internal control over financial reporting was
effective.
The effectiveness of our internal control over financial reporting as of January 31, 2011, has
been audited by PricewaterhouseCoopers LLP, an independent registered public accounting firm, as
stated in their report, which appears on the next page.
|
|
|
|
/s/ Daniel A. Rykhus
|
|
/s/
Thomas Iacarella |
|
Daniel A. Rykhus
President & Chief Executive Officer
|
|
Thomas Iacarella
Vice President & Chief Financial Officer |
|
March 31, 2011
27
REPORT OF INDEPENDENT REGISTERED
PUBLIC ACCOUNTING FIRM
To the Board of Directors and Shareholders of Raven Industries, Inc.:
In our opinion, the accompanying consolidated balance sheets and the related consolidated
statements of income, of shareholders equity and comprehensive income and of cash flows present
fairly, in all material respects, the financial position of Raven Industries, Inc. and its
subsidiaries (the Company) at January 31, 2011, 2010 and 2009 and the results of their operations
and their cash flows for each of the three years in the period ended January 31, 2011 in conformity
with accounting principles generally accepted in the United States of America. Also in our opinion,
the Company maintained, in all material respects, effective internal control over financial
reporting as of January 31, 2011 based on criteria established in Internal Control Integrated
Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO).
The Companys management is responsible for these financial statements, for maintaining effective
internal control over financial reporting and for its assessment of the effectiveness of internal
control over financial reporting, included in Managements Report on Internal Control over
Financial Reporting on the preceding page. Our responsibility is to express opinions on these
financial statements and on the Companys internal control over financial reporting based on our
integrated audits. We conducted our audits in accordance with the standards of the Public Company
Accounting Oversight Board (United States). Those standards require that we plan and perform the
audits to obtain reasonable assurance about whether the financial statements are free of material
misstatement and whether effective internal control over financial reporting was maintained in all
material respects. Our audits of the financial statements included examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements, assessing the
accounting principles used and significant estimates made by management and evaluating the overall
financial statement presentation. Our audit of internal control over financial reporting included
obtaining an understanding of internal control over financial reporting, assessing the risk that a
material weakness exists and testing and evaluating the design and operating effectiveness of
internal control based on the assessed risk. Our audits also included performing such other
procedures as we considered necessary in the circumstances. We believe that our audits provide a
reasonable basis for our opinions.
A companys internal control over financial reporting is a process designed to provide
reasonable assurance regarding the reliability of financial reporting and the preparation of
financial statements for external purposes in accordance with generally accepted accounting
principles. A companys internal control over financial reporting includes those policies and
procedures that (i) pertain to the maintenance of records that, in reasonable detail, accurately
and fairly reflect the transactions and dispositions of the assets of the company; (ii) provide
reasonable assurance that transactions are recorded as necessary to permit preparation of financial
statements in accordance with generally accepted accounting principles and that receipts and
expenditures of the company are being made only in accordance with authorizations of management and
directors of the company; and (iii) provide reasonable assurance regarding prevention or timely
detection of unauthorized acquisition, use or disposition of the companys assets that could have a
material effect on the financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or
detect misstatements. Also, projections of any evaluation of effectiveness to future periods are
subject to the risk that controls may become inadequate because of changes in conditions, or that
the degree of compliance with the policies or procedures may deteriorate.
/s/ PricewaterhouseCoopers LLP
Minneapolis, Minnesota
March 31, 2011
28
RAVEN INDUSTRIES, INC.
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS, EXCEPT PER-SHARE AMOUNTS)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of January 31 |
|
|
|
2011 |
|
|
2010 |
|
|
2009 |
|
ASSETS |
|
|
|
|
|
|
|
|
|
|
|
|
Current assets |
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents |
|
$ |
37,563 |
|
|
$ |
40,684 |
|
|
$ |
16,267 |
|
Short-term investments |
|
|
1,000 |
|
|
|
3,000 |
|
|
|
|
|
Accounts receivable, net |
|
|
39,967 |
|
|
|
34,327 |
|
|
|
40,278 |
|
Inventories |
|
|
43,679 |
|
|
|
34,475 |
|
|
|
35,977 |
|
Deferred income taxes |
|
|
2,733 |
|
|
|
2,471 |
|
|
|
2,542 |
|
Other current assets |
|
|
3,239 |
|
|
|
2,790 |
|
|
|
3,009 |
|
|
|
|
|
|
|
|
|
|
|
Total current assets |
|
|
128,181 |
|
|
|
117,747 |
|
|
|
98,073 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Property, plant and equipment, net |
|
|
41,522 |
|
|
|
33,029 |
|
|
|
35,880 |
|
Goodwill |
|
|
10,777 |
|
|
|
10,699 |
|
|
|
7,450 |
|
Other assets, net |
|
|
7,280 |
|
|
|
8,834 |
|
|
|
3,012 |
|
|
|
|
|
|
|
|
|
|
|
Total assets |
|
$ |
187,760 |
|
|
$ |
170,309 |
|
|
$ |
144,415 |
|
|
|
|
|
|
|
|
|
|
|
LIABILITIES AND SHAREHOLDERS EQUITY |
|
|
|
|
|
|
|
|
|
|
|
|
Current liabilities |
|
|
|
|
|
|
|
|
|
|
|
|
Accounts payable |
|
$ |
16,715 |
|
|
$ |
12,398 |
|
|
$ |
9,433 |
|
Accrued liabilities |
|
|
16,096 |
|
|
|
12,256 |
|
|
|
13,281 |
|
Customer advances |
|
|
1,524 |
|
|
|
1,306 |
|
|
|
608 |
|
|
|
|
|
|
|
|
|
|
|
Total current liabilities |
|
|
34,335 |
|
|
|
25,960 |
|
|
|
23,322 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other liabilities |
|
|
12,211 |
|
|
|
11,098 |
|
|
|
7,537 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commitments and contingencies |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Shareholders equity |
|
|
141,214 |
|
|
|
133,251 |
|
|
|
113,556 |
|
Common shares, par value $1.00 per share |
|
|
|
|
|
|
|
|
|
|
|
|
Authorized 100,000 |
|
|
|
|
|
|
|
|
|
|
|
|
Outstanding 2011: 18,062; 2010: 18,030;
2009: 18,012 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total liabilities and shareholders equity |
|
$ |
187,760 |
|
|
$ |
170,309 |
|
|
$ |
144,415 |
|
|
|
|
|
|
|
|
|
|
|
The accompanying notes are an integral part of the consolidated financial statements.
29
RAVEN INDUSTRIES, INC.
CONSOLIDATED STATEMENTS OF INCOME
(IN THOUSANDS, EXCEPT PER-SHARE AMOUNTS)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the years ended January 31 |
|
|
|
2011 |
|
|
2010 |
|
|
2009 |
|
Net sales |
|
$ |
314,708 |
|
|
$ |
237,782 |
|
|
$ |
279,913 |
|
Cost of sales |
|
|
223,279 |
|
|
|
169,930 |
|
|
|
206,465 |
|
|
|
|
|
|
|
|
|
|
|
Gross profit |
|
|
91,429 |
|
|
|
67,852 |
|
|
|
73,448 |
|
Research and development expenses |
|
|
7,604 |
|
|
|
5,843 |
|
|
|
5,848 |
|
Selling, general and administrative expenses |
|
|
24,073 |
|
|
|
18,789 |
|
|
|
21,206 |
|
Gain on disposition of assets |
|
|
(451 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating income |
|
|
60,203 |
|
|
|
43,220 |
|
|
|
46,394 |
|
Interest income and other, net |
|
|
(79 |
) |
|
|
(102 |
) |
|
|
(507 |
) |
|
|
|
|
|
|
|
|
|
|
Income before income taxes |
|
|
60,282 |
|
|
|
43,322 |
|
|
|
46,901 |
|
Income taxes |
|
|
19,745 |
|
|
|
14,748 |
|
|
|
16,131 |
|
|
|
|
|
|
|
|
|
|
|
Net income |
|
$ |
40,537 |
|
|
$ |
28,574 |
|
|
$ |
30,770 |
|
|
|
|
|
|
|
|
|
|
|
Net income per common share: |
|
|
|
|
|
|
|
|
|
|
|
|
- Basic |
|
$ |
2.24 |
|
|
$ |
1.58 |
|
|
$ |
1.71 |
|
|
|
|
|
|
|
|
|
|
|
- Diluted |
|
$ |
2.24 |
|
|
$ |
1.58 |
|
|
$ |
1.70 |
|
|
|
|
|
|
|
|
|
|
|
The accompanying notes are an integral part of the consolidated financial statements.
30
RAVEN INDUSTRIES, INC.
CONSOLIDATED STATEMENTS OF SHAREHOLDERS EQUITY AND COMPREHENSIVE INCOME
(IN THOUSANDS, EXCEPT PER-SHARE AMOUNTS)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accumulated |
|
|
|
|
|
|
$1 Par |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
other |
|
|
|
|
|
|
common |
|
|
Paid-in |
|
|
Treasury stock |
|
|
Retained |
|
|
comprehensive |
|
|
|
|
|
|
stock |
|
|
capital |
|
|
Shares |
|
|
Cost |
|
|
earnings |
|
|
income (loss) |
|
|
Total |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance January 31, 2008 |
|
$ |
32,408 |
|
|
$ |
3,436 |
|
|
|
(14,288 |
) |
|
$ |
(48,182 |
) |
|
$ |
132,219 |
|
|
$ |
(1,606 |
) |
|
$ |
118,275 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
30,770 |
|
|
|
|
|
|
|
30,770 |
|
Postretirement benefits, net of $375 income tax |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
698 |
|
|
|
698 |
|
Foreign currency translation |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(246 |
) |
|
|
(246 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total comprehensive income |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
31,222 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Dividends ($.52 per share) |
|
|
|
|
|
|
7 |
|
|
|
|
|
|
|
|
|
|
|
(9,381 |
) |
|
|
|
|
|
|
(9,374 |
) |
Dividends (special$1.25 per share) |
|
|
|
|
|
|
18 |
|
|
|
|
|
|
|
|
|
|
|
(22,528 |
) |
|
|
|
|
|
|
(22,510 |
) |
Purchase of stock |
|
|
|
|
|
|
|
|
|
|
(161 |
) |
|
|
(5,180 |
) |
|
|
|
|
|
|
|
|
|
|
(5,180 |
) |
Stock surrendered upon exercise of stock options |
|
|
(34 |
) |
|
|
(1,258 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1,292 |
) |
Employees stock options exercised |
|
|
83 |
|
|
|
1,176 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,259 |
|
Share-based compensation |
|
|
4 |
|
|
|
1,024 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,028 |
|
Tax benefit from exercise of stock options |
|
|
|
|
|
|
128 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
128 |
|
|
|
|
Balance January 31, 2009 |
|
|
32,461 |
|
|
|
4,531 |
|
|
|
(14,449 |
) |
|
|
(53,362 |
) |
|
|
131,080 |
|
|
|
(1,154 |
) |
|
|
113,556 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
28,574 |
|
|
|
|
|
|
|
28,574 |
|
Postretirement benefits, net of ($122) income tax |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(226 |
) |
|
|
(226 |
) |
Foreign currency translation |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
179 |
|
|
|
179 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total comprehensive income |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
28,527 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Dividends ($.55 per share) |
|
|
|
|
|
|
11 |
|
|
|
|
|
|
|
|
|
|
|
(9,922 |
) |
|
|
|
|
|
|
(9,911 |
) |
Stock surrendered upon exercise of stock options |
|
|
(51 |
) |
|
|
(1,319 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1,370 |
) |
Employees stock options exercised |
|
|
65 |
|
|
|
1,374 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,439 |
|
Share-based compensation |
|
|
3 |
|
|
|
1,031 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,034 |
|
Tax cost from exercise of stock options |
|
|
|
|
|
|
(24 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(24 |
) |
|
|
|
Balance January 31, 2010 |
|
|
32,478 |
|
|
|
5,604 |
|
|
|
(14,449 |
) |
|
|
(53,362 |
) |
|
|
149,732 |
|
|
|
(1,201 |
) |
|
|
133,251 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
40,537 |
|
|
|
|
|
|
|
40,537 |
|
Postretirement benefits, net of ($25) income tax |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(46 |
) |
|
|
(46 |
) |
Foreign currency translation |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
127 |
|
|
|
127 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total comprehensive income |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
40,618 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Dividends ($.64 per share) |
|
|
|
|
|
|
17 |
|
|
|
|
|
|
|
|
|
|
|
(11,563 |
) |
|
|
|
|
|
|
(11,546 |
) |
Dividends (special$1.25 per share) |
|
|
|
|
|
|
32 |
|
|
|
|
|
|
|
|
|
|
|
(22,581 |
) |
|
|
|
|
|
|
(22,549 |
) |
Stock surrendered upon exercise of stock options |
|
|
(79 |
) |
|
|
(3,038 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(3,117 |
) |
Employees stock options exercised |
|
|
112 |
|
|
|
3,257 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3,369 |
|
Share-based compensation |
|
|
|
|
|
|
1,179 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,179 |
|
Tax benefit from exercise of stock options |
|
|
|
|
|
|
9 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
9 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance January 31, 2011 |
|
$ |
32,511 |
|
|
$ |
7,060 |
|
|
|
(14,449 |
) |
|
$ |
(53,362 |
) |
|
$ |
156,125 |
|
|
$ |
(1,120 |
) |
|
$ |
141,214 |
|
|
|
|
The accompanying notes are an integral part of the consolidated financial statements.
31
RAVEN INDUSTRIES, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the years ended January 31 |
|
|
|
2011 |
|
|
2010 |
|
|
2009 |
|
Cash flows from operating activities: |
|
|
|
|
|
|
|
|
|
|
|
|
Net income |
|
$ |
40,537 |
|
|
$ |
28,574 |
|
|
$ |
30,770 |
|
Adjustments to reconcile net income to net cash provided by
operating activities: |
|
|
|
|
|
|
|
|
|
|
|
|
Depreciation |
|
|
6,512 |
|
|
|
6,611 |
|
|
|
7,345 |
|
Amortization of intangible assets |
|
|
1,119 |
|
|
|
497 |
|
|
|
413 |
|
Gain on disposition of assets |
|
|
(451 |
) |
|
|
|
|
|
|
|
|
Change in fair value of acquisition-related contingent
consideration |
|
|
274 |
|
|
|
94 |
|
|
|
|
|
Earnings of equity investee |
|
|
(195 |
) |
|
|
(10 |
) |
|
|
|
|
Provision for losses on accounts receivable, net of recoveries |
|
|
|
|
|
|
(183 |
) |
|
|
629 |
|
Deferred income taxes |
|
|
423 |
|
|
|
95 |
|
|
|
216 |
|
Share-based compensation expense |
|
|
1,179 |
|
|
|
1,034 |
|
|
|
1,028 |
|
Change in operating assets and liabilities |
|
|
(7,273 |
) |
|
|
10,935 |
|
|
|
(1,346 |
) |
Other operating activities, net |
|
|
(40 |
) |
|
|
(4 |
) |
|
|
(18 |
) |
|
|
|
|
|
|
|
|
|
|
Net cash provided by operating activities |
|
|
42,085 |
|
|
|
47,643 |
|
|
|
39,037 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash flows from investing activities: |
|
|
|
|
|
|
|
|
|
|
|
|
Capital expenditures |
|
|
(13,972 |
) |
|
|
(3,302 |
) |
|
|
(8,001 |
) |
Purchases of short-term investments |
|
|
(1,700 |
) |
|
|
(3,500 |
) |
|
|
(2,100 |
) |
Sales of short-term investments |
|
|
3,700 |
|
|
|
500 |
|
|
|
3,600 |
|
Purchase of equity investment |
|
|
|
|
|
|
(5,000 |
) |
|
|
|
|
Payments related to business acquisitions |
|
|
(399 |
) |
|
|
(2,000 |
) |
|
|
(488 |
) |
Proceeds from disposition of assets |
|
|
888 |
|
|
|
|
|
|
|
|
|
Other investing activities, net |
|
|
65 |
|
|
|
(94 |
) |
|
|
(11 |
) |
|
|
|
|
|
|
|
|
|
|
Net cash used in investing activities |
|
|
(11,418 |
) |
|
|
(13,396 |
) |
|
|
(7,000 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash flows from financing activities: |
|
|
|
|
|
|
|
|
|
|
|
|
Dividends paid |
|
|
(34,095 |
) |
|
|
(9,911 |
) |
|
|
(31,884 |
) |
Purchases of treasury stock |
|
|
|
|
|
|
|
|
|
|
(5,180 |
) |
Excess tax benefit on stock option exercises |
|
|
9 |
|
|
|
|
|
|
|
128 |
|
Other financing activities, net |
|
|
252 |
|
|
|
44 |
|
|
|
(33 |
) |
|
|
|
|
|
|
|
|
|
|
Net cash used in financing activities |
|
|
(33,834 |
) |
|
|
(9,867 |
) |
|
|
(36,969 |
) |
|
|
|
|
|
|
|
|
|
|
Effect of exchange rate changes on cash |
|
|
46 |
|
|
|
37 |
|
|
|
(73 |
) |
|
|
|
|
|
|
|
|
|
|
Net increase (decrease) in cash and cash equivalents |
|
|
(3,121 |
) |
|
|
24,417 |
|
|
|
(5,005 |
) |
Cash and cash equivalents at beginning of year |
|
|
40,684 |
|
|
|
16,267 |
|
|
|
21,272 |
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents at end of year |
|
$ |
37,563 |
|
|
$ |
40,684 |
|
|
$ |
16,267 |
|
|
|
|
|
|
|
|
|
|
|
The accompanying notes are an integral part of the consolidated financial statements.
32
RAVEN INDUSTRIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(IN THOUSANDS, EXCEPT PER-SHARE AMOUNTS)
NOTE 1 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation and Principles of Consolidation
The consolidated financial statements include the accounts of Raven Industries, Inc. and its
wholly owned subsidiaries (the company or Raven). The company is an industrial manufacturer
providing a variety of products to customers within the industrial, agricultural, construction and
military/aerospace markets, primarily in North America. Raven operates three divisions (Applied
Technology, Engineered Films and Electronic Systems) in addition to four wholly owned subsidiaries:
Aerostar International, Inc. (Aerostar); Raven Industries Canada, Inc. (Raven Canada); Raven
Industries GmbH (Raven GmbH); and Raven Industries Australia Pty Ltd (Raven Australia).
Intercompany balances and transactions have been eliminated in consolidation.
Investments in Affiliate
An affiliate investment over which the company has significant influence, but neither a controlling
interest nor a majority interest in the risks or rewards of the investee, is accounted for using
the equity method. The investment balance is included in other assets, net, while the companys
share of the investees results of operations is included in interest income and other, net. The
company considers whether the value of any of its equity method investments has been impaired
whenever adverse events or changes in circumstances indicate that recorded values may not be
recoverable. If the company considered any such decline to be other than temporary (based on
various factors, including historical financial results, product development activities and the
overall health of the affiliates industry), a write-down would be recorded.
Use of Estimates
Preparing the financial statements in conformity with accounting principles generally accepted in
the United States of America 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 periods. Actual results
could differ from these estimates.
Foreign Currency
The companys 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 statement of
income. Adjustments resulting from financial statement translations are included as foreign
currency translation adjustments in accumulated other comprehensive income (loss) within
shareholders equity. Foreign currency transaction gains or losses are recognized in the period
incurred and are included in interest income and other, net in the Consolidated Statements of
Income.
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, money market and savings accounts with Wells Fargo Bank; Wells Fargo Brokerage Services,
LLC. and Merrill Lynch & Co. (Bank of America).
Accounts Receivable and Allowance for Doubtful Accounts
Trade accounts receivable are recorded at the invoiced amount and do not bear interest. The
allowance for doubtful accounts is the companys best estimate of the amount of probable credit
losses. This is based on historical writeoff experience by segment and an estimate of the
collectibility of any known problem accounts.
Inventory Valuation
Inventories are stated at the lower of cost or market, with cost determined on the first-in,
first-out basis. Market value encompasses consideration of all business factors including price,
contract terms and usefulness.
Property, Plant and Equipment
Property, plant and equipment are stated at cost and are depreciated over the estimated useful
lives of the assets using accelerated methods. The estimated useful lives used for computing
depreciation are as follows:
33
(IN
THOUSANDS, EXCEPT PER-SHARE AMOUNTS)
|
|
|
|
|
Building and improvements |
|
15-39 years |
Manufacturing equipment by segment |
|
|
|
|
Applied Technology |
|
3-5 years |
Engineered Films |
|
5-12 years |
Aerostar |
|
3-5 years |
Electronic Systems |
|
3-5 years |
Furniture, fixtures, office equipment and other |
|
3-7 years |
Maintenance and repairs are charged to expense in the year incurred, and renewals and betterments
are capitalized. The cost and related accumulated depreciation of assets sold or disposed of are
removed from the accounts and the resulting gain or loss is reflected in operations.
The company capitalizes certain costs incurred in connection with developing or obtaining
internal-use software in accordance with the accounting guidance for such costs. Capitalized
software costs totaled $1,280 in fiscal 2011, $914 in fiscal 2010 and $297 in fiscal 2009. The
costs are included in Property, Plant and Equipment, net on the Consolidated Balance Sheets.
Software costs that do not meet capitalization criteria are expensed as incurred. Amortization
expense related to capitalized software is included in depreciation. Included in accounts payable
at January 31, 2011 was $2,181 related to capital expenditures. Comparable amounts for 2010 and
2009 were not significant.
Intangible Assets
Intangible assets, primarily comprised of technologies acquired through acquisition, are recorded
at cost and are presented net of accumulated amortization. Amortization is computed on a
straight-line basis over estimated useful lives ranging from 3 to 20 years. The straight-line
method of amortization reflects an appropriate allocation of the cost of the intangible assets to
earnings in each reporting period.
Goodwill
Raven recognizes goodwill as the excess cost of an acquired business over the net amount assigned
to assets acquired and liabilities assumed. For business combinations prior to February 1, 2009,
earn-out payments to sellers are added to goodwill when payable under the terms of the purchase
agreement. For business combinations after February 1, 2009, 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 the statements of income. Goodwill is tested for impairment on an annual basis during the fourth
quarter and between annual tests whenever a triggering event indicates there is an impairment.
Impairment tests of goodwill are performed at the reporting unit level. Fair values are estimated
based on discounted cash flows 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, the
amount of the impairment loss must be measured and then recognized to the extent the carrying value
exceeds the implied fair value.
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 exceeds the estimated
undiscounted cash flows used in determining the fair value of the assets. The amount of the
impairment loss to be recorded is calculated by the excess of the assets carrying value over its
fair value.
Insurance Obligations
Raven employs insurance policies to cover workers compensation and general liability costs.
Liabilities are accrued related to claims filed and estimates for claims incurred but not reported.
To the extent these obligations are expected to be reimbursed by insurance, the expected insurance
policy benefit is included as a component of other current assets.
Contingencies
The company is involved as a defendant in lawsuits, claims or disputes arising in the normal course
of business. An estimate of the loss on these matters is charged to operations when it is probable
that an asset has been impaired or a liability has been incurred, and the amount of the loss can be
reasonably estimated. While the settlement of any claims cannot be determined at this time,
management believes that any liability resulting from these claims will be substantially covered by
insurance. Accordingly, management does not believe that the ultimate outcome of these matters will
have a significant impact on its results of operations, financial position or cash flows.
Revenue Recognition
Raven recognizes revenue when products are shipped because there is persuasive evidence of an
arrangement, the sales price is determinable, collectability is reasonably assured and delivery has
occurred. The company sells directly to customers or distributors
34
(IN THOUSANDS, EXCEPT PER-SHARE AMOUNTS)
who incur the expense and commitment for any post-sale obligations beyond stated warranty
terms. Estimated returns, sales allowances or warranty charges are recognized upon shipment of a
product. Shipping and handling costs are classified as a component of cost of sales.
Operating Expenses
The primary types of operating expenses are classified in the income statement as follows:
|
|
|
|
|
|
|
Research and development |
|
|
Cost of sales |
|
expenses |
|
Selling, general and administrative expenses |
Direct material costs
|
|
Personnel costs
|
|
Personnel costs |
Material acquisition and handling costs
|
|
Professional service fees
|
|
Professional service fees |
Direct labor
|
|
Material and supplies
|
|
Advertising |
Factory overhead including depreciation
|
|
Facility allocation
|
|
Promotions |
Inventory obsolescence
|
|
|
|
Information technology equipment depreciation |
Product warranties
|
|
|
|
Office supplies |
The companys gross margins 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 and
average time elapsed between purchases and returns for each division. Additional accruals are made
for any significant, discrete warranty issues.
Share-Based Compensation
The company records compensation expense related to its share-based compensation plans using the
fair value method.
Income Taxes
Deferred income taxes reflect temporary differences between assets and liabilities reported on the
companys balance sheet and their tax bases. These differences are measured using enacted tax laws
and statutory tax rates applicable to the periods when the temporary differences will affect
taxable income. Deferred tax assets are reduced by a valuation allowance to reflect realizable
value, when necessary. Accruals are maintained for uncertain tax positions.
New Accounting Standards
In December 2010, the Financial Accounting Standards Board issued guidance on goodwill impairment
testing. This guidance modifies the first step of the goodwill impairment test to include reporting
units with zero or negative carrying amounts. For these reporting units, the second step of the
goodwill impairment test shall be performed to measure the amount of impairment loss, if any, when
it is more likely than not that a goodwill impairment exists. The guidance is effective for fiscal
years and interim periods beginning after December 15, 2010. The adoption of this guidance on
February 1, 2011, is not expected to have a material impact on the companys consolidated results
of operation, financial condition or cash flows.
35
(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 |
|
|
|
2011 |
|
|
2010 |
|
|
2009 |
|
Accounts receivable, net: |
|
|
|
|
|
|
|
|
|
|
|
|
Trade accounts |
|
$ |
40,267 |
|
|
$ |
34,624 |
|
|
$ |
40,891 |
|
Allowance for doubtful accounts |
|
|
(300 |
) |
|
|
(297 |
) |
|
|
(613 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
$ |
39,967 |
|
|
$ |
34,327 |
|
|
$ |
40,278 |
|
|
|
|
|
|
|
|
|
|
|
Inventories: |
|
|
|
|
|
|
|
|
|
|
|
|
Finished goods |
|
$ |
7,994 |
|
|
$ |
6,283 |
|
|
$ |
6,062 |
|
In process |
|
|
5,424 |
|
|
|
4,172 |
|
|
|
3,258 |
|
Materials |
|
|
30,261 |
|
|
|
24,020 |
|
|
|
26,657 |
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
43,679 |
|
|
$ |
34,475 |
|
|
$ |
35,977 |
|
|
|
|
|
|
|
|
|
|
|
Other current assets: |
|
|
|
|
|
|
|
|
|
|
|
|
Insurance policy benefit |
|
$ |
1,909 |
|
|
$ |
2,300 |
|
|
$ |
2,119 |
|
Prepaid expenses and other |
|
|
1,330 |
|
|
|
490 |
|
|
|
890 |
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
3,239 |
|
|
$ |
2,790 |
|
|
$ |
3,009 |
|
|
|
|
|
|
|
|
|
|
|
Property, plant and equipment, net: |
|
|
|
|
|
|
|
|
|
|
|
|
Land |
|
$ |
1,798 |
|
|
$ |
1,227 |
|
|
$ |
1,227 |
|
Buildings and improvements |
|
|
24,972 |
|
|
|
22,973 |
|
|
|
22,593 |
|
Machinery and equipment |
|
|
75,310 |
|
|
|
64,119 |
|
|
|
62,504 |
|
Accumulated depreciation |
|
|
(60,558 |
) |
|
|
(55,290 |
) |
|
|
(50,444 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
$ |
41,522 |
|
|
$ |
33,029 |
|
|
$ |
35,880 |
|
|
|
|
|
|
|
|
|
|
|
Other assets, net: |
|
|
|
|
|
|
|
|
|
|
|
|
Amortizable assets: |
|
|
|
|
|
|
|
|
|
|
|
|
Purchased technology |
|
$ |
3,200 |
|
|
$ |
3,200 |
|
|
$ |
2,300 |
|
Other intangibles |
|
|
1,660 |
|
|
|
1,633 |
|
|
|
1,314 |
|
Accumulated amortization |
|
|
(3,275 |
) |
|
|
(2,648 |
) |
|
|
(2,143 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
1,585 |
|
|
|
2,185 |
|
|
|
1,471 |
|
Investment in affiliate |
|
|
4,728 |
|
|
|
5,010 |
|
|
|
|
|
Deferred income taxes |
|
|
924 |
|
|
|
1,580 |
|
|
|
1,482 |
|
Other, net |
|
|
43 |
|
|
|
59 |
|
|
|
59 |
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
7,280 |
|
|
$ |
8,834 |
|
|
$ |
3,012 |
|
|
|
|
|
|
|
|
|
|
|
Accrued liabilities: |
|
|
|
|
|
|
|
|
|
|
|
|
Salaries and benefits |
|
$ |
3,264 |
|
|
$ |
1,148 |
|
|
$ |
1,891 |
|
Vacation |
|
|
3,186 |
|
|
|
2,693 |
|
|
|
2,581 |
|
401(k) contributions |
|
|
253 |
|
|
|
180 |
|
|
|
1,333 |
|
Insurance obligations |
|
|
3,356 |
|
|
|
3,959 |
|
|
|
3,615 |
|
Profit sharing |
|
|
1,627 |
|
|
|
217 |
|
|
|
436 |
|
Warranties |
|
|
1,437 |
|
|
|
1,259 |
|
|
|
1,004 |
|
Taxes accrued and withheld |
|
|
1,453 |
|
|
|
1,574 |
|
|
|
1,266 |
|
Other |
|
|
1,520 |
|
|
|
1,226 |
|
|
|
1,155 |
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
16,096 |
|
|
$ |
12,256 |
|
|
$ |
13,281 |
|
|
|
|
|
|
|
|
|
|
|
Other liabilities: |
|
|
|
|
|
|
|
|
|
|
|
|
Postretirement benefits |
|
$ |
5,757 |
|
|
$ |
5,283 |
|
|
$ |
4,637 |
|
Acquisition-related contingent consideration |
|
|
2,230 |
|
|
|
2,301 |
|
|
|
|
|
Uncertain tax positions |
|
|
4,224 |
|
|
|
3,514 |
|
|
|
2,900 |
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
12,211 |
|
|
$ |
11,098 |
|
|
$ |
7,537 |
|
|
|
|
|
|
|
|
|
|
|
36
(IN THOUSANDS, EXCEPT PER-SHARE AMOUNTS)
NOTE 3 |
|
ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS) |
Other comprehensive income refers to revenue, expenses, gains and losses that under U.S.
generally accepted accounting principles are recorded as an element of shareholders equity but are
excluded from net income. The components of accumulated other comprehensive income (loss) are shown
below:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of January 31 |
|
|
|
2011 |
|
|
2010 |
|
|
2009 |
|
Foreign currency translation |
|
$ |
183 |
|
|
$ |
56 |
|
|
$ |
(123 |
) |
Postretirement benefits, net of tax |
|
|
(1,303 |
) |
|
|
(1,257 |
) |
|
|
(1,031 |
) |
|
|
|
|
|
|
|
|
|
|
Total accumulated other comprehensive loss |
|
$ |
(1,120 |
) |
|
$ |
(1,201 |
) |
|
$ |
(1,154 |
) |
|
|
|
|
|
|
|
|
|
|
NOTE 4 SUPPLEMENTAL CASH FLOW
INFORMATION
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the years ended January 31 |
|
|
|
2011 |
|
|
2010 |
|
|
2009 |
|
Changes in operating assets and liabilities: |
|
|
|
|
|
|
|
|
|
|
|
|
Accounts receivable |
|
$ |
(5,536 |
) |
|
$ |
6,325 |
|
|
$ |
(4,603 |
) |
Inventories |
|
|
(9,189 |
) |
|
|
1,552 |
|
|
|
447 |
|
Prepaid expenses and other assets |
|
|
96 |
|
|
|
(49 |
) |
|
|
(35 |
) |
Accounts payable |
|
|
2,713 |
|
|
|
2,934 |
|
|
|
963 |
|
Accrued and other liabilities |
|
|
4,428 |
|
|
|
(520 |
) |
|
|
2,194 |
|
Customer advances |
|
|
215 |
|
|
|
693 |
|
|
|
(312 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
$ |
(7,273 |
) |
|
$ |
10,935 |
|
|
$ |
(1,346 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash paid during the year for income taxes |
|
$ |
19,700 |
|
|
$ |
13,816 |
|
|
$ |
15,072 |
|
|
|
|
|
|
|
|
|
|
|
NOTE 5 ACQUISITIONS OF AND INVESTMENTS IN BUSINESSES AND TECHNOLOGIES
In November 2009, the company acquired a 20% interest in Site Specific Technology Development
Group, Inc. (SST) for $5,000. SST is a privately held agricultural software development and
information services provider. Raven and SST are strategically aligned to provide customers with
simple, more efficient ways to move and manage information in the precision agriculture market. At
the acquisition date, the carrying value of the SST investment exceeded the companys share of the
underlying net assets of SST by $4,976. The companys analysis of this excess determined that it
related to $1,054 of technology-related assets to be amortized over a seven-year period and $3,200
of license-related assets to be amortized over a ten-year period. The remainder of the excess is
attributable to equity method goodwill.
Changes in the net carrying value of the investment in SST (Investment in Affiliate) were as follows:
|
|
|
|
|
Balance at January 31, 2010 |
|
$ |
5,010 |
|
Ravens share of SST earnings |
|
|
195 |
|
Amortization of intangible assets |
|
|
(477 |
) |
|
|
|
|
Balance at January 31, 2011 |
|
$ |
4,728 |
|
|
|
|
|
In November 2009, the company purchased substantially all of the assets of Ranchview, Inc., a
privately held Canadian corporation for $1,500 cash and contingent consideration valued at $2,310.
Raven agreed to pay additional consideration on a quarterly basis of 6% on future sales of
Ranchview products, up to a maximum payment of $4,000. Ranchview developed products that use
cellular networks instead of the traditional radio systems that are typically used to deliver RTK
(Real Time Kinematic) corrections to GPS enabled equipment. RTK corrections improve the accuracy of
GPS equipment. The network can also be used to provide high-speed Internet access.
37
(IN THOUSANDS, EXCEPT PER-SHARE AMOUNTS)
The allocation of the purchase price is summarized below:
|
|
|
|
|
Goodwill |
|
$ |
2,734 |
|
Existing technology |
|
|
900 |
|
Other intangibles |
|
|
175 |
|
|
|
|
|
Total |
|
$ |
3,809 |
|
|
|
|
|
The goodwill associated with Ranchview is deductible for tax purposes. Purchased identifiable
intangible assets are amortized on a straight-line basis over their respected useful lives. The
estimated useful life is six years for existing technology and five to seven years for the
remaining intangibles.
The results of operations of Ranchview for periods prior to the companys acquisition were not
material to the companys Consolidated Statements of Income and, accordingly, pro forma results of
operations have not been presented. This operation has been combined into the Applied Technology
Division.
NOTE 6 GOODWILL AND OTHER INTANGIBLES
Goodwill
The changes in the carrying amount of goodwill by reporting segment are shown below:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Applied |
|
|
Engineered |
|
|
Electronic |
|
|
|
|
|
|
|
|
|
Technology |
|
|
Films |
|
|
Systems |
|
|
Aerostar |
|
|
Total |
|
Balance at January 31, 2008 |
|
$ |
5,909 |
|
|
$ |
96 |
|
|
$ |
433 |
|
|
$ |
464 |
|
|
$ |
6,902 |
|
Acquisition earn-outs |
|
|
548 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
548 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at January 31, 2009 |
|
|
6,457 |
|
|
|
96 |
|
|
|
433 |
|
|
|
464 |
|
|
|
7,450 |
|
Acquired goodwill |
|
|
2,734 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2,734 |
|
Acquisition earn-outs |
|
|
515 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
515 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at January 31, 2010 |
|
|
9,706 |
|
|
|
96 |
|
|
|
433 |
|
|
|
464 |
|
|
|
10,699 |
|
Acquisition earn-outs |
|
|
78 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
78 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at January 31, 2011 |
|
$ |
9,784 |
|
|
$ |
96 |
|
|
$ |
433 |
|
|
$ |
464 |
|
|
$ |
10,777 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Intangible Assets
Estimated future amortization expense based on the current carrying value of amortizable
intangible assets for fiscal periods 2012 through 2016 is $601, $245, $237, $200 and $133,
respectively.
NOTE 7 EMPLOYEE RETIREMENT BENEFITS
The company has a 401(k) plan covering substantially all employees. Prior to January 1, 2010,
the company contributed 3% of qualified payroll. Starting January 1, 2010, the company began
matching employee contributions up to a maximum of 4% of pay. Ravens contribution expense was
$1,254, $1,085 and $1,158 for fiscal 2011, 2010 and 2009, respectively.
In addition, the company provides postretirement medical and other benefits to senior executive
officers and senior managers. There are no assets held for the plans and any obligations are
covered through operating cash and investments. The accumulated benefit obligation for these
benefits is shown below:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the years ended January 31 |
|
|
|
2011 |
|
|
2010 |
|
|
2009 |
|
Benefit obligation at beginning of year |
|
$ |
5,512 |
|
|
$ |
4,840 |
|
|
$ |
5,447 |
|
Service cost |
|
|
62 |
|
|
|
55 |
|
|
|
67 |
|
Interest cost |
|
|
324 |
|
|
|
332 |
|
|
|
361 |
|
Actuarial (gain) loss and assumption changes |
|
|
237 |
|
|
|
476 |
|
|
|
(847 |
) |
|
|
|
|
|
|
|
|
|
|
Total recognized in net and other comprehensive income |
|
|
623 |
|
|
|
863 |
|
|
|
(419 |
) |
|
|
|
|
|
|
|
|
|
|
Retiree benefits paid |
|
|
(166 |
) |
|
|
(191 |
) |
|
|
(188 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Benefit obligation at end of year |
|
$ |
5,969 |
|
|
$ |
5,512 |
|
|
$ |
4,840 |
|
|
|
|
|
|
|
|
|
|
|
38
(IN THOUSANDS, EXCEPT PER-SHARE AMOUNTS)
The liability and expense reflected in the balance sheet and income statement were as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the years ended January 31 |
|
|
|
2011 |
|
|
2010 |
|
|
2009 |
|
Beginning liability balance |
|
$ |
5,512 |
|
|
$ |
4,840 |
|
|
$ |
5,447 |
|
Employer expense |
|
|
552 |
|
|
|
515 |
|
|
|
654 |
|
Other comprehensive (income) loss |
|
|
71 |
|
|
|
348 |
|
|
|
(1,073 |
) |
|
|
|
|
|
|
|
|
|
|
Total recognized in net and other comprehensive income |
|
|
623 |
|
|
|
863 |
|
|
|
(419 |
) |
|
|
|
|
|
|
|
|
|
|
Retiree benefits paid |
|
|
(166 |
) |
|
|
(191 |
) |
|
|
(188 |
) |
|
|
|
|
|
|
|
|
|
|
Ending liability balance |
|
$ |
5,969 |
|
|
$ |
5,512 |
|
|
$ |
4,840 |
|
|
|
|
|
|
|
|
|
|
|
|
Current portion in accrued liabilities |
|
$ |
212 |
|
|
$ |
229 |
|
|
$ |
203 |
|
Long-term portion in other liabilities |
|
$ |
5,757 |
|
|
$ |
5,283 |
|
|
$ |
4,637 |
|
Assumptions used: |
|
|
|
|
|
|
|
|
|
|
|
|
Discount rate |
|
|
5.75 |
% |
|
|
6.00 |
% |
|
|
7.00 |
% |
Wage inflation rate |
|
|
4.00 |
% |
|
|
3.00 |
% |
|
|
3.00 |
% |
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.
The assumed health care cost trend rate for fiscal 2011 was 9.00% compared with 9.51% and 8.97%
for fiscal 2010 and 2009. The impact of a one-percentage-point change in assumed health care rates
would not be significant to the companys income statement and would affect the ending liability
balance by approximately $965. The rate to which the fiscal 2011 health care cost trend rate is
assumed to decline is 5.00%, which is the ultimate trend rate. The fiscal year that the rate
reaches the ultimate trend rate is expected to be fiscal 2025.
NOTE 8 WARRANTIES
Changes in the warranty accrual were as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of January 31 |
|
|
|
2011 |
|
|
2010 |
|
|
2009 |
|
Beginning balance |
|
$ |
1,259 |
|
|
$ |
1,004 |
|
|
$ |
684 |
|
Accrual for warranties |
|
|
2,461 |
|
|
|
2,426 |
|
|
|
2,760 |
|
Settlements made (in cash or in kind) |
|
|
(2,283 |
) |
|
|
(2,171 |
) |
|
|
(2,440 |
) |
|
|
|
|
|
|
|
|
|
|
Ending balance |
|
$ |
1,437 |
|
|
$ |
1,259 |
|
|
$ |
1,004 |
|
|
|
|
|
|
|
|
|
|
|
NOTE 9 INCOME TAXES
The reconciliation of income tax computed at the federal statutory rate to the companys
effective income tax rate was as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the years ended January 31 |
|
|
2011 |
|
2010 |
|
2009 |
Tax at U.S. federal statutory rate |
|
|
35.0 |
% |
|
|
35.0 |
% |
|
|
35.0 |
% |
State and local income taxes, net of U.S. federal benefit |
|
|
1.3 |
|
|
|
1.3 |
|
|
|
1.5 |
|
Tax benefit on qualified production activities |
|
|
(3.0 |
) |
|
|
(2.1 |
) |
|
|
(2.0 |
) |
Tax credit for research activities |
|
|
(0.7 |
) |
|
|
(0.7 |
) |
|
|
(0.7 |
) |
Other, net |
|
|
0.2 |
|
|
|
0.5 |
|
|
|
0.6 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
32.8 |
% |
|
|
34.0 |
% |
|
|
34.4 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
39
(IN THOUSANDS, EXCEPT PER-SHARE AMOUNTS)
Significant components of the companys income tax provision were as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the years ended January 31 |
|
|
|
2011 |
|
|
2010 |
|
|
2009 |
|
Income taxes: |
|
|
|
|
|
|
|
|
|
|
|
|
Currently payable |
|
$ |
19,322 |
|
|
$ |
14,653 |
|
|
$ |
15,915 |
|
Deferred |
|
|
423 |
|
|
|
95 |
|
|
|
216 |
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
19,745 |
|
|
$ |
14,748 |
|
|
$ |
16,131 |
|
|
|
|
|
|
|
|
|
|
|
Deferred Tax Assets
Deferred income taxes reflect the net 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 companys deferred tax assets and liabilities were as
follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of January 31 |
|
|
|
2011 |
|
|
2010 |
|
|
2009 |
|
Current deferred tax assets: |
|
|
|
|
|
|
|
|
|
|
|
|
Accounts receivable |
|
$ |
103 |
|
|
$ |
103 |
|
|
$ |
211 |
|
Inventories |
|
|
463 |
|
|
|
344 |
|
|
|
408 |
|
Accrued vacation |
|
|
1,008 |
|
|
|
857 |
|
|
|
840 |
|
Insurance obligations |
|
|
485 |
|
|
|
553 |
|
|
|
489 |
|
Warranty obligations |
|
|
503 |
|
|
|
441 |
|
|
|
352 |
|
Other accrued liabilities |
|
|
171 |
|
|
|
173 |
|
|
|
242 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2,733 |
|
|
|
2,471 |
|
|
|
2,542 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-current deferred tax assets (liabilities): |
|
|
|
|
|
|
|
|
|
|
|
|
Postretirement benefits |
|
|
2,014 |
|
|
|
1,849 |
|
|
|
1,623 |
|
Depreciation and amortization |
|
|
(3,050 |
) |
|
|
(1,970 |
) |
|
|
(1,556 |
) |
Uncertain tax positions |
|
|
1,426 |
|
|
|
1,180 |
|
|
|
969 |
|
Other |
|
|
534 |
|
|
|
521 |
|
|
|
446 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
924 |
|
|
|
1,580 |
|
|
|
1,482 |
|
|
|
|
|
|
|
|
|
|
|
Net deferred tax asset |
|
$ |
3,657 |
|
|
$ |
4,051 |
|
|
$ |
4,024 |
|
|
|
|
|
|
|
|
|
|
|
Pre-tax book income for the U.S. companies was $59,454 and was $772 for the Canadian subsidiary. As
of January 31, 2011, undistributed earnings of the Canadian subsidiary were considered to have been
reinvested indefinitely and, accordingly, the company has not provided United States income taxes
on such earnings.
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 |
|
|
|
2011 |
|
|
2010 |
|
|
2009 |
|
Gross unrecognized tax benefits at beginning of year |
|
$ |
2,656 |
|
|
$ |
2,269 |
|
|
$ |
1,793 |
|
Increases in tax positions related to the current year |
|
|
601 |
|
|
|
463 |
|
|
|
539 |
|
Decreases as a result of a lapse in applicable statute of limitations |
|
|
(145 |
) |
|
|
(76 |
) |
|
|
(63 |
) |
|
|
|
|
|
|
|
|
|
|
Gross unrecognized tax benefits at end of year |
|
$ |
3,112 |
|
|
$ |
2,656 |
|
|
$ |
2,269 |
|
|
|
|
|
|
|
|
|
|
|
During the fiscal year ended January 31, 2011, the only change to uncertain tax positions related
to prior years resulted from the lapse of a statute of limitations. The company does not expect any
significant change in the amount of unrecognized tax benefits in the next fiscal year.
The total unrecognized tax benefits that, if recognized, would affect the companys effective tax
rate were $2,023, $1,727 and $1,475 as of January 31, 2011, January 31, 2010, and January 31, 2009,
respectively.
The company recognizes interest and penalties accrued related to unrecognized tax benefits in
income tax expense. At January 31, 2011, January 31, 2010 and January 31, 2009, accrued interest
and penalties were $1,112, $857 and $630, respectively.
40
(IN THOUSANDS, EXCEPT PER-SHARE AMOUNTS)
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,
2011, federal tax returns filed in the U.S., Canada and Switzerland for fiscal years ended January
31, 2008 2010 remain subject to examination by federal tax authorities. In state and local
jurisdictions, tax returns for fiscal years ended January 31, 2003 2010 remain subject to
examination by state and local tax authorities.
NOTE 10 FINANCING ARRANGEMENTS
Raven has an uncollateralized credit agreement providing a line of credit of $8,000 with a
maturity date of July 1, 2011, bearing interest at the prime rate with a minimum rate of 4.00%.
Letters of credit totaling $1,342 have been issued under the line, primarily to support
self-insured workers compensation bonding requirements. No borrowings were outstanding as of
January 31, 2011, 2010 and 2009, and $6,658 was available at January 31, 2011. There have been no
borrowings under the credit line in the last three fiscal years.
Wells Fargo Bank, N.A. provides Ravens line of credit and holds the majority of its cash and cash
equivalents. One member of the companys board of directors is also on the board of directors of
Wells Fargo & Co., the parent company of Wells Fargo Bank, N.A.
The company leases certain vehicles, equipment and facilities under operating leases. Total rent
and lease expense was $546, $328 and $353 in fiscal 2011, 2010 and 2009, respectively. Future
minimum lease payments under non-cancelable operating leases for fiscal periods 2012 to 2014 are
$237, $80 and $38 respectively, with all leases scheduled to expire during fiscal 2014.
NOTE 11 SHARE-BASED COMPENSATION
At January 31, 2011, Raven 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 |
|
|
2011 |
|
2010 |
|
2009 |
Stock compensation cost |
|
$ |
1,179 |
|
|
$ |
1,034 |
|
|
$ |
1,028 |
|
Tax benefit |
|
|
272 |
|
|
|
184 |
|
|
|
200 |
|
Compensation cost capitalized as part of inventory is not significant.
Stock Option and Compensation Plans
The 2010 Stock Incentive Plan is administered by the Personnel and Compensation Committee of the
board of directors and allows for stock awards and incentive or non-qualified options with terms
not to exceed 10 years. The 2000 Stock Option and Compensation Plan terminated in May 2010 and no
further awards are available under the plan. The shareholders approved the 2010 Stock Incentive
Plan pursuant to which 500 shares of common stock are reserved for grant of which 339 were
remaining at January 31, 2011. There were no stock awards in fiscal 2011. Fiscal 2010 compensation
cost included $144 of expense recognized as a result of a 4.8 share stock award. Fiscal 2009
compensation cost included $135 of expense recognized as a result of a 5.5 share stock award.
Options are granted with exercise prices not less than market value 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 is estimated on the date of grant using the Black-Scholes option pricing model. The company
uses historical data to estimate option exercise and employee termination within the valuation
model.
The fair value of each option grant is estimated on the date of grant using the Black-Scholes
option pricing model, with the following weighted average assumptions by grant year:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the years ended January 31 |
|
|
2011 |
|
2010 |
|
2009 |
Risk-free interest rate |
|
|
1.46 |
% |
|
|
2.03 |
% |
|
|
1.64 |
% |
Expected dividend yield |
|
|
1.49 |
% |
|
|
1.73 |
% |
|
|
2.12 |
% |
Expected volatility factor |
|
|
49.33 |
% |
|
|
49.69 |
% |
|
|
46.32 |
% |
Expected option term (in years) |
|
|
4.50 |
|
|
|
4.50 |
|
|
|
4.25 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average grant date fair value |
|
$ |
15.70 |
|
|
$ |
11.28 |
|
|
$ |
8.08 |
|
41
(IN THOUSANDS, EXCEPT PER-SHARE AMOUNTS)
Outstanding stock options as of January 31, 2011 and activity for the year then ended are presented below:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
average |
|
|
|
|
|
|
|
Weighted |
|
|
|
|
|
|
remaining |
|
|
|
|
|
|
|
average |
|
|
Aggregate |
|
|
contractual |
|
|
|
Number |
|
|
exercise |
|
|
intrinsic |
|
|
term |
|
|
|
of options |
|
|
price |
|
|
value |
|
|
(years) |
|
Oustanding, January 31, 2010 |
|
|
397 |
|
|
$ |
29.33 |
|
|
|
|
|
|
|
|
|
Granted |
|
|
160 |
|
|
|
42.31 |
|
|
|
|
|
|
|
|
|
Exercised |
|
|
(112 |
) |
|
|
30.03 |
|
|
|
|
|
|
|
|
|
Forfeited |
|
|
|
|
|
|
24.51 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Outstanding, January 31, 2011 |
|
|
445 |
|
|
$ |
33.86 |
|
|
$ |
5,953 |
|
|
|
3.30 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Exercisable, January 31, 2011 |
|
|
160 |
|
|
$ |
29.41 |
|
|
$ |
2,850 |
|
|
|
2.04 |
|
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 $1,102,
$314 and $1,874 during the years ended January 31, 2011, 2010 and 2009, respectively. As of January
31, 2011, the total compensation cost for non-vested awards not yet recognized in the companys
statements of income was $3,016, net of the effect of estimated forfeitures. This amount is
expected to be recognized over a weighted average period of 2.83 years.
Deferred Stock Compensation Plan for Directors
The Deferred Stock Compensation Plan for Directors of Raven Industries, Inc. is administered
by the Governance Committee of the board of directors. Under the plan, a stock unit is the right to
receive one share of the companys 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
companys equity. The plan reserves 50 common shares for the conversion of stock units into common
stock after directors retire from the board.
Stock units granted under this plan vest immediately and are expensed at the date of grant.
Stock units are also accumulated if a director elects to defer the annual retainer paid for board
service. When dividends are paid on the companys 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, 2011 and changes during the year then ended are presented
below:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted |
|
|
Number |
|
average |
|
|
of units |
|
price |
Oustanding, January 31, 2010 |
|
|
21 |
|
|
$ |
28.58 |
|
Granted |
|
|
4 |
|
|
|
34.96 |
|
Deferred retainers |
|
|
1 |
|
|
|
34.96 |
|
Dividends |
|
|
1 |
|
|
|
37.81 |
|
Converted into common shares |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Outstanding, January 31, 2011 |
|
|
27 |
|
|
$ |
47.24 |
|
|
|
|
|
|
|
|
|
|
NOTE 12 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) and stock units outstanding. Certain outstanding options were excluded from the diluted
net income per-share calculations because their effect would have been anti-dilutive. For fiscal
2011, 2010 and 2009, 128, 338 and 168 options, respectively, were excluded from the diluted net
income per-share calculation.
42
(IN THOUSANDS, EXCEPT PER-SHARE AMOUNTS)
Details of the computation are presented below:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the years ended January 31 |
|
|
|
2011 |
|
|
2010 |
|
|
2009 |
|
Numerator: |
|
|
|
|
|
|
|
|
|
|
|
|
Net income |
|
$ |
40,537 |
|
|
$ |
28,574 |
|
|
$ |
30,770 |
|
|
|
|
|
|
|
|
|
|
|
Denominator: |
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average common shares outstanding |
|
|
18,042 |
|
|
|
18,021 |
|
|
|
18,031 |
|
Weighted average stock units outstanding |
|
|
25 |
|
|
|
19 |
|
|
|
13 |
|
|
|
|
|
|
|
|
|
|
|
Denominator for basic calculation |
|
|
18,067 |
|
|
|
18,040 |
|
|
|
18,044 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average common shares outstanding |
|
|
18,042 |
|
|
|
18,021 |
|
|
|
18,031 |
|
Weighted average stock units outstanding |
|
|
25 |
|
|
|
19 |
|
|
|
13 |
|
Dilutive impact of stock options |
|
|
43 |
|
|
|
3 |
|
|
|
36 |
|
|
|
|
|
|
|
|
|
|
|
Denominator for diluted calculation |
|
|
18,110 |
|
|
|
18,043 |
|
|
|
18,080 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income per share basic |
|
$ |
2.24 |
|
|
$ |
1.58 |
|
|
$ |
1.71 |
|
Net income per share diluted |
|
$ |
2.24 |
|
|
$ |
1.58 |
|
|
$ |
1.70 |
|
NOTE 13 BUSINESS SEGMENTS AND MAJOR CUSTOMER INFORMATION
The companys reportable segments are defined by their common technologies, production
processes and inventories. These segments reflect Ravens organization into three Raven divisions
and the Aerostar subsidiary. Raven Canada, Raven GmbH and Raven Australia are included in the
Applied Technology Division. Substantially all of the companys long-lived assets are located in
the United States.
Applied Technology products are electronic and Global Positioning System (GPS) devices. They
are used primarily on agricultural sprayers for precision farming applications. The segment has
developed products for field location control, chemical injection and automated steering.
Engineered Films produces rugged reinforced plastic sheeting for industrial, construction and
agriculture applications. Aerostar sells high-altitude and tethered aerostats for government and
commercial research and military parachutes. It produces uniforms and protective wear for U.S.
government agencies as a subcontractor and also manufactures other sewn and sealed products on a
contract basis. Electronic Systems capabilities are focused on electronics manufacturing services
(EMS) for commercial customers with a focus on high-mix, low-volume production. Assemblies
manufactured by the Electronic Systems segment include avionics, communication, environmental
controls and other products where high quality is critical.
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. Segment
information is reported consistent with the companys management reporting structure.
43
(IN THOUSANDS, EXCEPT PER-SHARE AMOUNTS)
Business
segment information is as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the years ended January 31 |
|
|
2011 |
|
2010 |
|
2009 |
APPLIED TECHNOLOGY DIVISION |
|
|
|
|
|
|
|
|
|
|
|
|
Sales |
|
$ |
100,090 |
|
|
$ |
86,217 |
|
|
$ |
103,098 |
|
Operating income |
|
|
31,135 |
|
|
|
25,722 |
|
|
|
33,884 |
|
Assets |
|
|
52,669 |
|
|
|
51,029 |
|
|
|
48,881 |
|
Capital expenditures |
|
|
1,769 |
|
|
|
941 |
|
|
|
2,674 |
|
Depreciation and amortization |
|
|
2,238 |
|
|
|
1,677 |
|
|
|
1,383 |
|
ENGINEERED FILMS DIVISION |
|
|
|
|
|
|
|
|
|
|
|
|
Sales |
|
$ |
105,838 |
|
|
$ |
63,783 |
|
|
$ |
89,858 |
|
Operating income |
|
|
19,622 |
(b) |
|
|
10,232 |
|
|
|
10,919 |
|
Assets |
|
|
46,519 |
|
|
|
35,999 |
|
|
|
35,862 |
|
Capital expenditures |
|
|
8,450 |
|
|
|
1,460 |
|
|
|
3,120 |
|
Depreciation and amortization |
|
|
3,452 |
|
|
|
3,707 |
|
|
|
4,303 |
|
AEROSTAR DIVISION |
|
|
|
|
|
|
|
|
|
|
|
|
Sales |
|
$ |
48,787 |
|
|
$ |
27,244 |
|
|
$ |
27,186 |
|
Operating income |
|
|
9,407 |
|
|
|
5,634 |
|
|
|
4,219 |
|
Assets |
|
|
18,140 |
|
|
|
10,462 |
|
|
|
8,744 |
|
Capital expenditures |
|
|
2,190 |
|
|
|
332 |
|
|
|
383 |
|
Depreciation and amortization |
|
|
757 |
|
|
|
398 |
|
|
|
444 |
|
ELECTRONIC SYSTEMS DIVISION |
|
|
|
|
|
|
|
|
|
|
|
|
Sales |
|
$ |
65,852 |
|
|
$ |
63,525 |
|
|
$ |
61,983 |
|
Operating income |
|
|
9,917 |
|
|
|
8,979 |
|
|
|
5,926 |
|
Assets |
|
|
23,385 |
|
|
|
21,216 |
|
|
|
26,847 |
|
Capital expenditures |
|
|
609 |
|
|
|
290 |
|
|
|
1,399 |
|
Depreciation and amortization |
|
|
823 |
|
|
|
939 |
|
|
|
1,159 |
|
INTERSEGMENT ELIMINATIONS |
|
|
|
|
|
|
|
|
|
|
|
|
Sales |
|
|
|
|
|
|
|
|
|
|
|
|
Engineered Films Division |
|
$ |
(307 |
) |
|
$ |
(210 |
) |
|
$ |
(210 |
) |
Aerostar |
|
|
(32 |
) |
|
|
(1 |
) |
|
|
(25 |
) |
Electronic Systems Division |
|
|
(5,520 |
) |
|
|
(2,776 |
) |
|
|
(1,977 |
) |
Operating income |
|
|
(94 |
) |
|
|
60 |
|
|
|
(52 |
) |
Assets |
|
|
(186 |
) |
|
|
(92 |
) |
|
|
(152 |
) |
REPORTABLE SEGMENTS TOTAL |
|
|
|
|
|
|
|
|
|
|
|
|
Sales |
|
$ |
314,708 |
|
|
$ |
237,782 |
|
|
$ |
279,913 |
|
Operating income |
|
|
69,987 |
(b) |
|
|
50,627 |
|
|
|
54,896 |
|
Assets |
|
|
140,527 |
|
|
|
118,614 |
|
|
|
120,182 |
|
Capital expenditures |
|
|
13,018 |
|
|
|
3,023 |
|
|
|
7,576 |
|
Depreciation and amortization |
|
|
7,270 |
|
|
|
6,721 |
|
|
|
7,289 |
|
CORPORATE & OTHER(a) |
|
|
|
|
|
|
|
|
|
|
|
|
Operating (loss) from administrative expenses |
|
$ |
(9,784 |
) |
|
$ |
(7,407 |
) |
|
$ |
(8,502 |
) |
Assets |
|
|
47,233 |
|
|
|
51,695 |
|
|
|
24,233 |
|
Capital expenditures |
|
|
954 |
|
|
|
279 |
|
|
|
425 |
|
Depreciation and amortization |
|
|
361 |
|
|
|
387 |
|
|
|
469 |
|
TOTAL COMPANY |
|
|
|
|
|
|
|
|
|
|
|
|
Sales |
|
$ |
314,708 |
|
|
$ |
237,782 |
|
|
$ |
279,913 |
|
Operating income |
|
|
60,203 |
(b) |
|
|
43,220 |
|
|
|
46,394 |
|
Assets |
|
|
187,760 |
|
|
|
170,309 |
|
|
|
144,415 |
|
Capital expenditures |
|
|
13,972 |
|
|
|
3,302 |
|
|
|
8,001 |
|
Depreciation and amortization |
|
|
7,631 |
|
|
|
7,108 |
|
|
|
7,758 |
|
|
|
|
(a) |
|
Assets are principally cash, investments, deferred taxes and other receivables. |
|
(b) |
|
Includes a $451 pre-tax gain on disposition of assets. |
44
(IN THOUSANDS, EXCEPT PER-SHARE AMOUNTS)
Sales to a customer of the Electronic Systems segment accounted for 13%, 16% and 13% of
consolidated sales in fiscal 2011, 2010 and 2009, respectively, and 11%, 13% and 18% of
consolidated accounts receivable at the end of fiscal 2011, 2010 and 2009, respectively.
The table below provides a summary of net sales by principal product categories:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the years ended January 31 |
|
|
|
2011 |
|
|
2010 |
|
|
2009 |
|
Pit lining and geomembrane films |
|
$ |
55,048 |
|
|
$ |
26,834 |
|
|
$ |
40,205 |
|
Other plastic films |
|
|
50,483 |
|
|
|
36,739 |
|
|
|
49,443 |
|
Agricultural precision control devices and accessories |
|
|
98,402 |
|
|
|
83,236 |
|
|
|
99,428 |
|
Electronics manufacturing services |
|
|
60,333 |
|
|
|
60,749 |
|
|
|
60,006 |
|
Tethered aerostats |
|
|
22,423 |
|
|
|
3,048 |
|
|
|
265 |
|
Parachute-related products |
|
|
12,816 |
|
|
|
10,298 |
|
|
|
8,660 |
|
Uniforms and protective wear |
|
|
4,559 |
|
|
|
5,434 |
|
|
|
9,976 |
|
Other |
|
|
10,644 |
|
|
|
11,444 |
|
|
|
11,930 |
|
|
|
|
|
|
|
|
|
|
|
Total sales |
|
$ |
314,708 |
|
|
$ |
237,782 |
|
|
$ |
279,913 |
|
|
|
|
|
|
|
|
|
|
|
Foreign sales are attributed to product delivered to non-U.S. locations. Sales to countries outside
the United States, primarily to Canada, were as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the years ended January 31 |
|
|
|
2011 |
|
|
2010 |
|
|
2009 |
|
Applied Technology |
|
$ |
21,349 |
|
|
$ |
17,140 |
|
|
$ |
18,847 |
|
Engineered Films |
|
|
2,200 |
|
|
|
1,383 |
|
|
|
2,034 |
|
Aerostar |
|
|
427 |
|
|
|
1,219 |
|
|
|
1,004 |
|
Electronic Systems |
|
|
693 |
|
|
|
495 |
|
|
|
568 |
|
|
|
|
|
|
|
|
|
|
|
Total foreign sales |
|
$ |
24,669 |
|
|
$ |
20,237 |
|
|
$ |
22,453 |
|
|
|
|
|
|
|
|
|
|
|
45
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL
DISCLOSURE
None.
ITEM 9A. CONTROLS AND PROCEDURES
Disclosure Controls and Procedures
As of January 31, 2011, the end of the period covered by this report, management, including the
Chief Executive Officer (CEO) and the Chief Financial Officer (CFO), evaluated the
effectiveness of the companys disclosure controls and procedures (as defined in Exchange Act Rules
13a-15(e) and 15d-15(e)) as of such date. Based on that evaluation, the CEO and CFO have concluded
that the companys disclosure controls and procedures were effective as of January 31, 2011.
Managements Report on Internal Control Over Financial Reporting
Managements annual report on internal control over financial reporting and the report of the
companys independent registered public accounting firm appear in Part II, Item 8. Financial
Statements and Supplementary Data of this Form 10-K Report.
Changes in Internal Control Over Financial Reporting
There were no changes in the companys internal control over financial reporting that occurred
during the fiscal quarter ended January 31, 2011, that have materially affected, or are reasonably
likely to materially affect, the companys internal control over financial reporting.
ITEM 9B. OTHER INFORMATION
Not applicable.
46
PART III
ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE
Incorporated by reference to the sections entitled Election of Directors, Board of
Directors and Committees, Corporate Governance, and Other Matters within the companys Proxy
Statement relating to its 2011 Annual Meeting of Shareholders.
Information regarding executive officers is set forth in Item 1 of Part 1 of this Report under
the caption Executive Officers .
ITEM 11. EXECUTIVE COMPENSATION
Incorporated by reference to the sections entitled Executive Compensation and
Non-management Director Compensation within the companys Proxy Statement relating to its 2011
Annual Meeting of Shareholders.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED
SHAREHOLDER MATTERS
Incorporated by reference to the section entitled Ownership of Common Stock within the
companys Proxy Statement relating to its 2011 Annual Meeting of Shareholders.
The remaining information called for by this item relating to Securities Authorized for Issuance
under Equity Compensation Plans is incorporated by reference to the section entitled Equity
Compensation Plan Information contained in the companys Proxy Statement relating to its 2011
Annual Meeting of Shareholders.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR
INDEPENDENCE
Incorporated by reference to the sections entitled Board of Directors and Committees and
Corporate Governance contained in the companys Proxy Statement relating to its 2011 Annual
Meeting of Shareholders.
ITEM 14. PRINCIPAL ACCOUNTING FEES AND SERVICES
Incorporated by reference to the section entitled Independent Registered Public Accounting
Firm Fees, contained in the companys Proxy Statement relating to its 2011 Annual Meeting of
Shareholders.
47
PART IV
ITEM 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULE
LIST OF DOCUMENTS FILED AS PART OF THIS REPORT
Financial Statements
See PART II, Item 8.
Financial Statement Schedule
Schedule II Valuation and Qualifying Accounts
All other schedules for which provision is made in the applicable accounting regulations of
the Securities and Exchange Commission are not required under the related instructions or are
inapplicable and therefore have been omitted.
Exhibits
See index to Exhibits on the following page.
48
|
|
|
Exhibit |
|
|
Number |
|
Description |
|
|
|
3(a)
|
|
Articles of Incorporation of Raven Industries, Inc. and all amendments thereto.* |
|
|
|
3(b)
|
|
Bylaws of Raven Industries, Inc.* |
|
|
|
3(c)
|
|
Extract of Shareholders Resolution adopted on April 7, 1962 with respect to the bylaws of Raven Industries, Inc. * |
|
|
|
10(a)
|
|
Employment Agreement between Raven Industries, Inc. and Daniel Rykhus dated as of February 1, 2009 (incorporated
by reference to Exhibit 10.1 of the companys Form 8-K filed February 1, 2009). |
|
|
|
10(b)
|
|
Employment Agreement between Raven Industries, Inc. and David R. Bair dated as of February 1, 2004. *** |
|
|
|
10(c)
|
|
Employment Agreement between Raven Industries, Inc. and James D. Groninger dated as of February 1, 2004. *** |
|
|
|
10(d)
|
|
Employment Agreement between Raven Industries, Inc. and Lon E. Stroschein dated as of October 1, 2010
(Incorporated by reference to Exhibit 10.1 to the companys 8-K filed October 1, 2010) |
|
|
|
10(e)
|
|
Employment Agreement between Raven Industries, Inc. and Ronald M. Moquist dated as of February 1, 2004. ** |
|
|
|
10(f)
|
|
Employment Agreement between Raven Industries, Inc. and Thomas Iacarella dated as of February 1, 2004. ** |
|
|
|
10(g)
|
|
Schedule A to Employment Agreements between Raven Industries, Inc. and each of the following Senior Executive
Officers: Ronald M. Moquist, Thomas Iacarella, and Daniel A. Rykhus. |
|
|
|
10(h)
|
|
Employment Agreement between Raven Industries, Inc. and Barbara Ohme dated as of February 1, 2004. ** |
|
|
|
10(i)
|
|
Change in Control Agreement between Raven Industries, Inc. and each of the following officers and key employees: |
|
|
Ronald M. Moquist, Thomas Iacarella, Daniel A. Rykhus, David R. Bair, James D. Groninger and Barbara K. Ohme
dated as of January 31, 2008 (incorporated by reference to Exhibit 10.1 of the companys 8-K filed December 17,
2007). |
|
|
|
10(j)
|
|
Trust Agreement between Raven Industries, Inc. and Norwest Bank South Dakota, N.A. dated April 26, 1989. * |
|
|
|
10(k)
|
|
Raven Industries, Inc. 2000 Stock Option and Compensation Plan adopted May 24, 2000 (incorporated by reference to
Exhibit A to the companys definitive Proxy Statement filed April 19, 2000). |
|
|
|
10(l)
|
|
Raven Industries, Inc. 2010 Stock Incentive Plan adopted May 25, 2010 (incorporated by reference to Exhibit A of
the companys definitive Proxy Statement filed April 14, 2010). |
|
|
|
10(m)
|
|
Raven Industries, Inc. Deferred Compensation Plan for Directors adopted May 23, 2007 (incorporated by reference
to Exhibit 10.1 to the companys 8-K filed May 24, 2007). |
|
|
|
10(n)
|
|
Change in Control Agreement between Raven Industries, Inc. and Matthew T. Burkhart dated February 1, 2010
(incorporated by reference to Exhibit 10.3 to the companys 8-K filed February 2, 2010). |
|
|
|
10(o)
|
|
Employment Agreement between Raven Industries, Inc. and Matthew T. Burkhart dated February 1, 2010 (incorporated
by reference to Exhibit 10.1 to the companys 8-K filed February 2, 2010). |
|
|
|
10(p)
|
|
Schedule A to Employment Agreements between Raven Industries, Inc. and each of the following Senior Managers: |
|
|
David R. Bair, Matthew T. Burkhart, James D. Groninger, Lon E. Stroschein and Barbara K. Ohme. |
|
|
|
10(q)
|
|
Change in Control Agreement between Raven Industries, Inc. and Lon E. Stroschein dated October 1, 2010
(incorporated by reference to Exhibit 10.3 to the companys 8-K filed October 1, 2010). |
|
|
|
21
|
|
Subsidiaries of the Registrant. |
|
|
|
23
|
|
Consent of Independent Registered Public Accounting Firm. |
|
|
|
31.1
|
|
Certification of CEO Pursuant to Section 302 of Sarbanes-Oxley Act. |
|
|
|
31.2
|
|
Certification of CFO Pursuant to Section 302 of Sarbanes-Oxley Act. |
|
|
|
32.1
|
|
Certification pursuant to Section 906 of Sarbanes-Oxley Act. |
|
|
|
32.2
|
|
Certification pursuant to Section 906 of Sarbanes-Oxley Act. |
|
|
|
|
|
Management contract or compensatory plan or arrangement. |
|
* |
|
Incorporated by reference to corresponding Exhibit Number of the companys Form
10-K for the year ended January 31, 1989. |
|
** |
|
Incorporated by reference to corresponding Exhibit Number of the companys Form
10-K for the year ended January 31, 2004. |
|
*** |
|
Incorporated by reference to corresponding Exhibit Number of the companys Form
10-K for the year ended January 31, 2007. |
49
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto
duly authorized.
|
|
|
|
|
RAVEN INDUSTRIES, INC.
(Registrant)
|
|
|
By: |
/s/ DANIEL A. RYKHUS
|
|
|
|
Daniel A. Rykhus |
|
|
|
President and Chief Executive Officer |
|
|
|
Date: March 31, 2011
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed
below by the following persons on behalf of the registrant and in the capacities and on the dates
indicated.
|
|
|
/s/ DANIEL A. RYKHUS
|
|
/s/ MARK E. GRIFFIN |
|
|
|
Daniel A. Rykhus
President and Chief Executive Officer
(principal executive officer) and Director
|
|
Mark E. Griffin
Director |
|
|
|
/s/ THOMAS IACARELLA
|
|
/s/ CONRAD J. HOIGAARD |
|
|
|
Thomas Iacarella
Vice President and Chief Financial Officer
(principal financial and accounting officer)
|
|
Conrad J. Hoigaard
Director |
|
|
|
/s/ THOMAS S. EVERIST
|
|
/s/ KEVIN T. KIRBY |
|
|
|
Thomas S. Everist
Chairman of the Board
|
|
Kevin T. Kirby
Director |
|
|
|
/s/ ANTHONY W. BOUR
|
|
/s/ CYNTHIA H. MILLIGAN |
|
|
|
Anthony W. Bour
Director
|
|
Cynthia H. Milligan
Director |
|
|
|
/s/ DAVID A. CHRISTENSEN
David A. Christensen
Director
|
|
Date:
March 31, 2011 |
50
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
ON FINANCIAL STATEMENT SCHEDULE
To the Board of Directors and Shareholders of Raven Industries, Inc.:
Our audits of the consolidated financial statements and of the effectiveness of internal control
over financial reporting referred to in our report dated
March 31 2011, appearing elsewhere in this Annual Report on Form
10-K of Raven Industries, Inc. also included an audit of
the financial statement schedule listed in Item 15 of this Form 10-K. In our opinion, this
financial statement schedule presents fairly, in all material respects, the information set forth
therein when read in conjunction with the related consolidated financial statements.
/s/ PricewaterhouseCoopers LLP
PricewaterhouseCoopers LLP
Minneapolis, Minnesota
March 31, 2011
51
SCHEDULE II VALUATION AND QUALIFYING ACCOUNTS
for the years ended January 31, 2011, 2010 and 2009
(in thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Column A |
|
Column B |
|
Column C |
|
Column D |
|
Column E |
|
|
|
|
|
|
Additions |
|
|
|
|
|
|
Balance at |
|
Charged to |
|
Charged to |
|
Deductions |
|
|
|
|
Beginning |
|
Costs and |
|
Other |
|
From |
|
Balance at |
Description |
|
of Year |
|
Expenses |
|
Accounts |
|
Reserves (1) |
|
End of Year |
Deducted in the balance sheet from the asset to which it
applies: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Allowance for doubtful accounts: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year ended January 31, 2011 |
|
$ |
297 |
|
|
$ |
(1 |
) |
|
None |
|
$ |
(4 |
) |
|
$ |
300 |
|
Year ended January 31, 2010 |
|
$ |
613 |
|
|
$ |
(183 |
) |
|
None |
|
$ |
133 |
|
|
$ |
297 |
|
Year ended January 31, 2009 |
|
$ |
293 |
|
|
$ |
629 |
|
|
None |
|
$ |
309 |
|
|
$ |
613 |
|
Note:
|
|
|
(1) |
|
Represents uncollectible accounts receivable written off during the year, net of recoveries. |
52