2012
Quality
at the
Core
A n n uAl R eP O R t
Quality at the Core
At Raven, we measure quality in terms of the customer experience. we
back high performance products with superior service. Performance means
increasing crop yields and decreasing costs to farmers with our precision
agriculture solutions. It means preventing radon gas from seeping inside homes
with our engineered barrier films. It means protecting u.s. troops with our
advanced aerostat surveillance systems.
Quality is at the core of our success. we do many things well, but we can
always do better. that’s why we are driven to continuously improve our
customers’ experience.
In fiscal 2012, we achieved solid revenue gains and record profits as we
made significant investments in new products, expanded capacity and new
team members. the following pages of this report show how Raven is focused
not only on quality results today, but also on building a brighter future.
Inside this Report
letter to shareholders . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Raven at a Glance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
Operations Review . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
Board of directors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .16
executive team . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .16
10-K table of contents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10K-2
management’s discussion and Analysis . . . . . . . . . . . . . . . . . . . 10K-15
Financial statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10K-27
Investor Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Inside back cover
Financial Highlights
(Dollars in thousands, except per-share data)
Operations
net sales
Operating income
net income attributable to Raven Industries, Inc.
cash flows from operating activities
depreciation and amortization
Per Share
net income—diluted
cash dividends
Book value
Performance
Operating income margin
Return on net sales
Return on average assets
Return on beginning shareholders’ equity
Other Information
shares and stock units outstanding, year end (in thousands)
Average number of team members
(a) excludes a special dividend of $1.25 that was paid during the third quarter of fiscal 2011.
For the years
ended January 31,
2012
2011
change
$381,511
75,641
50,569
43,831
9,268
$314,708
60,203
40,537
42,085
7,631
$2.77
0.72
9.95
19.8%
13.3%
23.3%
35.8%
$2.24
0.64(a)
7.81
19.1%
12.9%
22.6%
30.4%
18,142
1,252
18,089
1,036
21.2%
25.6%
24.8%
4.2%
21.4%
23.7%
12.5%
27.4%
3.7%
3.1%
3.1%
17.8%
0.3%
20.8%
Net Sales
(Dollars in millions)
Earnings Per Share
(Diluted, in dollars)
381.5
314.7
279.9
234.0
217.5
237.8
2.77
2.24
1.70
1.53
1.58
1.39
Regular Dividends Per Share
(Dollars)
0.72
0.64
0.55
0.52
0.44
0.36
’07
’08
’09
’10
’11
’12
’07
’08
’09
’10
’11
’12
’07
’08
’09
’10
’11
’12
sales in fiscal 2012 reached a record
$381.5 million, an increase of 21
percent over the prior year. Raven saw
growth in key markets of precision
agriculture, barrier films and parachutes.
Raven achieved a new record of
$2.77 per share, an increase of 24
percent over the prior year. earnings
grew faster than sales despite
higher investments in personnel and
R&d to support future growth.
strong cash flow supports continued
growth in quarterly dividends. Raven
is only one of 102 u.s. companies
that have increased dividend every
year for the past 25 years.
2012 AnnuAl RePOR t 1
314.699699
269.742599
224.785500
179.828400
134.871300
89.914200
44.957100
0.000000
1.792
1.344
0.896
0.448
0.000
0.64
0.56
0.48
0.40
0.32
0.24
0.16
0.08
0.00
To our Shareholders,
Customers and Team Members:
This last year marked one of the most strategic growth periods in our history. For the second year in a
row, each of the four operating businesses grew year over year in revenues and operating profits, while
fulfilling the corporate purpose. Although a significant part of our success lies in the foundation set forth
in our business model, it’s really the values which are rooted in what actually goes on at Raven day to
day that make the biggest impact. We focus a lot of attention on the purpose of the products we design
and build. Making a real difference in the world is front of mind as we make business decisions.
Our purpose as a business has always
calculated risks. However, we think that
been to solve great challenges. It is
a lot of our long-term success is actually
gratifying to know that as we fulfill
due to our stability. At Raven, we focus
that purpose today, we are making a
a great deal of attention on culture,
direct impact on the world, specifically
shared values, and customers who remain
in the areas of feeding a growing
loyal. Our business model stems from
world population, ensuring the safety
our values and purpose, which are the
of our country’s troops and its borders,
foundation for our results and growth.
aiding in disaster relief, and protecting
our environment. Raven’s commitment
to compete on service, innovation,
quality, and peak performance is
what sets us apart. we were pleased
to be singled out for our financial
performance by Forbes magazine as
one of the “Best small companies in
America” for the sixth consecutive year.
since we started the company over 55
years ago, we have refined our business
Raven values arise from our belief in
ethical and honest behavior at our core:
• we achieve performance with
integrity.
• we treat each other with dignity
and respect while ensuring a safe
workplace.
• Our team members are valued as
individuals and challenged to grow
and perform at their peak.
model, and yet the end game has
• Our customers and suppliers are
always been to serve the organizational
considered business partners and
purpose and generate profitable growth.
treated that way.
we were fortunate during our early
years to achieve more hits than misses.
It has always been in our nature to aim
big. that aggressive drive is very much
evident today. we pursue a constant
stream of new business initiatives. And
we’re not afraid to experiment and take
• we are competitive and aim to win.
• we support diversity, team member
involvement, and a climate of
inclusiveness.
• Our profitability ensures the viability
and growth of the organization.
Daniel A. Rykhus
President & Chief Executive Officer
2 RA ven In du stR Ies , In c.
Raven versus the S&P 500
(excluding dividends, fiscal years ending January 31)
1200%
1000%
800%
600%
400%
200%
0%
-200%
RAVN Total Return
S&P 500 Total Return
’02
’03
’04
’05
’06
’07
’08
’09
’10
’11
’12
Raven has significantly outperformed the S&P 500 Index in total shareholder return over the past 10 years. Over that time, Raven’s stock price has
grown 1,051% versus the S&P’s gain of 16%.
Our record results for fiscal 2012
in the pursuit of quality financial
confirm our strategy as measured by
results. while there may be slight
quality delights our customers
and is essential to customer
a number of our key benchmarks:
shifts in any given year with strategy
growth and retention. Innovation
execution or capital allocation, the
is the driving force behind our
cornerstones of our business model
long-term growth. At Raven,
• sales increased 21% to
$381.5 million.
• net income rose 25% to $50.6
million, with operating margins
of 19.8%, up from 19.1%.
• net return on sales was 13.3%,
up from 12.9%.
• Return on equity improved to
35.8% from 30.4%.
are firmly in place. specifically:
• We serve market segments
with strong growth prospects,
both near term and long term.
Our disciplined approach to
serving fundamentally strong
markets ensures a crisp focus
for the organization.
• we invested $51 million in
• We serve a set of diversified
our future growth through
R&d, capital expenditures
and strategic acquisitions.
• we returned a total of $13
million to shareholders as
we increased the dividend
for the 25th straight year.
The Raven Business
Model Delivers Quality
Financial Results
markets. maintaining a portfolio
of businesses that share a common
purpose but serve different
markets provides balance,
opportunity, and risk mitigation.
• We consistently manage a
pipeline of growth initiatives
within our market segments.
diversity within this pipeline
ensures a steady stream of growth
opportunities for the corporation.
even though Raven is comprised of four
• We aggressively compete on
uniquely different operating divisions,
we follow a consistent approach
quality, service, innovation and
peak performance. exceptional
service is not simply a tagline,
it emanates from how we serve
each other and our communities,
and it’s how we develop and
maintain customer loyalty. Peak
performance is our commitment
to prepare as individuals and
as a corporation to do our best.
together, outstanding performance
on these four competitive
dimensions truly sets Raven apart.
• We’re on a path of continuous
improvement. Raven first
adopted tQm in 1990. since
then, Raven has embarked on
an ongoing pursuit of continuous
improvement through the use of
emerging process improvement
tools, including lean manufacturing
techniques and six sigma. we
constantly look for ways to increase
the bottom line. we apply value
engineering to lower the cost of
products, to streamline processes
2012 AnnuAl RePOR t 3
fiscal 2012 are a short-term measure of
• New People, New Capabilities–
corporate health. they are history, and
Over the past year, we increased
therefore not a reliable measure of how
our workforce by approximately
well our businesses are positioned for
20%. we also created new work
future growth and improving returns.
environments where Raven team
As hard as Raven works to produce
strong annual results, we work even
harder to sustain that growth and
profitability over the long term. this
requires continuous reinvestment
in the form of new products, new
capabilities, and higher and more
efficient capacity. much of this is
accomplished through our R&d
and capital spending, both of
which were at record levels last
year. Acquisitions also play a
key role in building our long-term
advantage with new technologies,
new skill sets, and new customers.
Over the past year, we built an even
stronger pipeline of growth drivers
for the future as evidenced by:
• New Products–Applied
technology division introduced
Fleet view™ applications on its
slingshot™ platform, which allow
simple and affordable tracking of
all types of machines, assets and
support vehicles used in farming
applications. engineered Films
division introduced the dura-skrim®
textured K-series with a unique
textured reinforced geomembrane
designed for applications requiring
exceptional slope stability such as
landfill caps, mining leach pads
and pond/pit liners. Aerostar
released the tIF-75K aerostat
designed to fly at 5,000 feet
and carry 1,000 pounds of
equipment such as cameras that
provide facial recognition.
members and customers can more
efficiently collaborate on business
development and new innovations.
this includes eFd’s technology
solutions center with two state-of-
the-art pilot extrusion lines. the pilot
lines are adjacent to a modern
full-service accredited laboratory.
Aerostar incorporated a facility for
aerostat demonstrations and testing,
along with 24/7 customer support.
• Higher, More Efficient Capacity–
eFd completed the second phase of
its expansion plan, increasing its total
tonnage capacity by approximately
40% over the past two years. the
result was a record number of
pounds produced in fiscal 2012.
Atd manufacturing moved into a
new 81,000-square-foot, state-of-
the-art manufacturing building for the
production of precision agriculture
products. Aerostar was able to
increase the production rate of
military parachutes by more than
20% in newly expanded facilities.
• Acquisitions–we acquired vista
Research, Inc., a leading provider
of surveillance systems that enhance
the effectiveness of radar. this will
immediately allow Raven Aerostar
to strengthen its tethered aerostat
security solutions. longer term, we
are positioned to meet growing
global demand for low-cost
detection and tracking systems
used by government and law
enforcement agencies. vista brings
a highly engineered product serving
“ As hard as Raven works to
produce strong annual results, we
work even harder to sustain that
growth and profitability over the
long term. This requires continuous
reinvestment in the form of new
products, new people, new
capabilities, and higher and
more efficient capacity.”
Daniel A. Rykhus
President &
Chief Executive Officer
and to improve efficiencies.
this element is why we’re able
to sustain profitability while
aggressively investing in growth.
• Cash flow and ROI are front
and center. the Raven model
has a proven track record
of putting capital to work to
generate attractive returns. we
expect to generate more cash
than we consume and typically
have operated this way.
• We make corporate responsibility
a top priority. corporate
integrity and reputation attract
great team members, customers
and opportunities. It is a key
to long-term success.
Building Our Long-
Term Advantage
while we take pride in our financial
results, we also know that the profits
and revenue growth we reported in
4 RA ven In du stR Ies , In c.
Corporate Services Executives
From left to right:
Thomas Iacarella
Vice President & Chief Financial Officer
Jan L. Matthiesen
Vice President – Administration
Mark L. West
Chief Technology Officer
Brian E. Meyer
Chief Information Officer
a unique market niche, along with
is one of only 102 u.s. companies
A Quality Team
a new customer base. Raven brings
that have increased their dividend
strengths in commercialization,
every year for at least the past 25
manufacturing, business
years—another quality distinction.
development and customer service.
A Quality Capital Base
A Mindset That We
Can Do Better
It has taken a great deal of invested
Our enduring purpose since our
capital to get us where we are today.
beginning has been to solve great
If you look at our balance sheet over
challenges. Our founders set off
the past five years, you will see that our
to fulfill that purpose through the
total assets have more than doubled.
design of products that enabled
And we accomplished this without
research intended to improve the
issuing debt or equity. In addition,
understanding of the universe we
our growth did not consume every
live in. the same drive to solve great
available dollar, even during the past
challenges guides our vision today.
year in which our outlays for plant
now we are focusing our resources
and equipment, R&d and working
and attention on the challenges
capital hit new records. In fact, we
of hunger, safety, environmental
ended the fiscal year with cash and
protection and energy independence.
investment balances of approximately
$25.8 million and no long-term debt.
the Raven story is one of steadiness
drawn from our values and purpose
Along with our goal of growing net
amidst continuous change in how
income by at least 10% each year,
that purpose is fulfilled. more than
we are committed to increasing the
once this company has had the
annual dividend to our shareholders.
flexibility to shift its operational focus
On march 23, 2012, Raven’s Board
to meet market demand. customer
of directors approved the 26th annual
needs are always evolving and
increase in the company’s quarterly
it’s important to retain a level of
dividend to $0.21 per share. Raven
fluidity in our product capabilities.
On may 24, 2011, conrad J.
Hoigaard (35 years of service) and
david A. christensen (40 years of
service) stepped down from the Board
of directors. I am deeply grateful for
their leadership and exemplary service.
we wish to thank our team members
for their tireless dedication, our
customers for the opportunity to serve
them, our communities for providing
places where we can work and
give back, and our shareholders
for their continuing support.
daniel A. Rykhus
President and Chief Executive Officer
2012 AnnuAl RePOR t 5
A Consistent
Approach to
Quality Results
Even though Raven is comprised of four uniquely different
operating divisions, we follow a consistent approach in
delivering quality financial results.
Operating
Unit
Product/
Service
100
80
60
40
20
0
Applied Technology Division (ATD)
31.000000
Precision agriculture products and
information management tools to reduce
26.571429
costs and improve crop yields.
22.142857
17.714286
Engineered Films Division (EFD)
High-quality flexible films for applications in
energy, construction, agriculture, water and
environmental safety.
8.857143
• Automated steering
13.285714
• sprayer controls
• seed and fertilizer application
• GPs guidance
• Field computers
0.000000
• High-speed Internet connectivity
• Integrated information management
4.428571
• One-piece oil pit liners
• vapor and gas barriers
• Reinforced pond liners
Net Sales*
• Agricultural silage covers
• scrim-reinforced sheets
• Geomembrane films
100.1
• 7-layer specialty films
132.6
86.2
25.7
Operating Income*
45.4
31.1
100
80
60
40
20
106.0
19.000000
0
16.285714
Earnings reached record levels in FY
2012 from broad-based demand in
both U.S. and international markets.
Operating income was $45 million
on net sales of over $132 million.
10.857143
13.571429
8.142857
’11
’11
‘10
‘10
’12
Earnings grew in FY 2012, led by
energy markets and geomembrane
films for environmental protection.
Operating income was $21.5 million
on net sales of over $133 million.
’12
5.428571
Net Sales*
2.714286
132.6
0.000000
100.1
86.2
Operating Income*
45.4
31.1
25.7
84.800003
26.571419
30.999989
63.600002
22.142849
17.714279
42.400002
13.285709
21.200001
8.857140
4.428570
0.000000
0.000000
Net Sales*
Operating Income*
133.5
105.8
21.5
19.2
63.8
10.2
‘10
’11
9.000000
’12
‘10
’11
’12
’10
’11
’12
’10
’11
’12
*Dollars in millions
Operating Income*
Net Sales*
• continue to increase the volume
of pounds produced and sold.
48.8 52.4
• Improve productivity as measured
9.4
by cost per unit of output.
11.5
27.2
• Reduce new product cycle time to
accommodate growing pipeline.
5.6
• Introduce innovative barrier films for
environmental and industrial markets.
’12
’11
’10
’10
’11
’12
• expand distribution and market
share in agricultural films.
Net Sales*
Operating Income*
63.5
65.9
71.7
11.3
9.9
9.0
’10
’11
’12
’10
’11
’12
7.714286
*Dollars in millions
6.428571
• continue to increase international
5.142857
sales as a percent of total.
• Introduce new applications and
Net Sales*
Operating Income*
3.857143
wireless capabilities for slingshot™
2.571429
133.5
Information management systems.
19.2
1.285714
• Gain u.s. market share with core
0.000000
products, with a focus on growers.
105.8
10.2
63.8
39.200001
21.5
29.400001
• Introduce the next generation of air
seeders and field computers.
’12
• Pursue new products and technologies
’12
’10
’10
’11
’11
66.0
through acquisition.
10.000000
19.600000
9.800000
16.285739
13.571450
10.857160
0.000000
8.142870
5.428580
2.714290
0.000000
52.8
39.6
39.200001
26.4
29.400001
19.600000
13.2
9.800000
0.000000
8.571429
7.142857
Net Sales*
Operating Income*
65.999999
5.714286
48.8 52.4
4.285714
1.428571
27.2
2.857143
5.6
9.4
52.799999
11.5
39.599999
26.400000
13.200000
0.000000
0.0
0.000000
’10
’11
’12
’10
’11
’12
65.999999
52.799999
39.599999
26.400000
13.200000
0.000000
Net Sales*
Operating Income*
63.5
65.9
71.7
11.3
9.9
9.0
’10
’11
’12
’10
’11
’12
8.99997
7.71426
6.42855
5.14284
3.85713
2.57142
1.28571
0.00000
9.999989
8.571419
7.142850
5.714280
4.285710
2.857140
1.428570
0.000000
84.8
63.6
42.4
21.2
0.0
49.0
39.2
29.4
19.6
9.8
0.0
FY 2012
Results
100
80
60
40
20
0
Key
Performance
Goals
84.800003
63.600002
42.400002
21.200001
0.000000
6 RA ven In du stR Ies , In c.
30.999989
26.571419
22.142849
17.714279
13.285709
8.857140
4.428570
0.000000
16.285739
13.571450
10.857160
8.142870
5.428580
2.714290
0.000000
8.99997
7.71426
6.42855
5.14284
3.85713
2.57142
1.28571
0.00000
9.999989
8.571419
7.142850
5.714280
4.285710
2.857140
1.428570
0.000000
100
80
60
40
20
0
106.0
84.8
63.6
42.4
21.2
0.0
49.0
39.2
29.4
19.6
9.8
0.0
66.0
52.8
39.6
26.4
13.2
0.0
31.000000
26.571429
22.142857
17.714286
13.285714
8.857143
4.428571
0.000000
19.000000
16.285714
13.571429
10.857143
8.142857
5.428571
2.714286
0.000000
9.000000
7.714286
6.428571
5.142857
3.857143
2.571429
1.285714
0.000000
10.000000
8.571429
7.142857
5.714286
4.285714
2.857143
1.428571
0.000000
100
80
60
40
20
0
106.0
84.8
63.6
42.4
21.2
0.0
49.0
39.2
29.4
19.6
9.8
0.0
66.0
52.8
39.6
26.4
13.2
0.0
100
80
60
40
20
0
84.800003
63.600002
42.400002
21.200001
0.000000
39.200001
29.400001
19.600000
9.800000
0.000000
65.999999
52.799999
39.599999
26.400000
13.200000
0.000000
100
80
60
40
20
0
106.0
84.8
63.6
42.4
21.2
0.0
49.0
39.2
29.4
19.6
9.8
0.0
66.0
52.8
39.6
26.4
13.2
0.0
31.000000
26.571429
22.142857
17.714286
13.285714
8.857143
4.428571
0.000000
19.000000
16.285714
13.571429
10.857143
8.142857
5.428571
2.714286
0.000000
9.000000
7.714286
6.428571
5.142857
3.857143
2.571429
1.285714
0.000000
10.000000
8.571429
7.142857
5.714286
4.285714
2.857143
1.428571
0.000000
31.000000
26.571429
22.142857
17.714286
13.285714
8.857143
4.428571
0.000000
19.000000
16.285714
13.571429
10.857143
Net Sales*
8.142857
132.6
5.428571
100.1
Net Sales*
Operating Income*
132.6
45.4
100.1
86.2
31.1
25.7
‘10
’11
’12
‘10
’11
’12
30.999989
26.571419
22.142849
17.714279
13.285709
8.857140
4.428570
0.000000
Division Vice Presidents
From left to right:
100
Lon E. Stroschein
Division Vice President & General Manager
Aerostar Division
80
60
40
Matthew T. Burkhart
Division Vice President & General Manager
Applied Technology Division
20
0
David R. Bair
Division Vice President & General Manager
Electronic Systems Division
Operating Income*
Anthony D. Schmidt
Division Vice President & General Manager
Engineered Films Division
45.4
31.1
86.2
Aerostar Division
2.714286
solutions for scientific and military operations,
research, surveillance and communications
using specialized fabrics, films and sensors.
0.000000
25.7
84.800003
63.600002
30.999989
26.571419
22.142849
17.714279
13.285709
8.857140
4.428570
0.000000
‘10
’11
’12
‘10
’11
’12
42.400002
21.200001
0.000000
7.714286
• tethered aerostats
9.000000
• military parachutes
• Protective wear
• High-altitude research balloons
6.428571
• Persistent surveillance
Net Sales*
• marine navigation systems
5.142857
133.5
• Radar detection and tracking
3.857143
105.8
Operating Income*
21.5
19.2
2.571429
10.2
39.200001
16.285739
13.571450
29.400001
10.857160
63.8
1.285714
Earnings reached record levels in
FY 2012 from consistent strength
0.000000
in parachutes, as well as aerostat
’12
deliveries. Operating income was over
$11 million on net sales of $52 million.
’10
’10
’11
’12
’11
9.800000
0.000000
19.600000
10.000000
Net Sales*
Operating Income*
8.571429
48.8 52.4
7.142857
27.2
5.714286
5.6
4.285714
’10
2.857143
’12
1.428571
’11
9.4
11.5
65.999999
52.799999
39.599999
26.400000
13.200000
’10
’11
0.000000
’12
*Dollars in millions
0.000000
Operating Income*
• complete new customer demonstrations
Net Sales*
of tactical aerostats.
65.9
71.7
63.5
11.3
9.9
• deliver new lcAd parachute contract
9.0
on time and within budget.
Net Sales*
Operating Income*
Electronic Systems Division (ESD)
21.5
contract electronic manufacturing services,
primarily for low-volume/high-mix industrial
products.
63.8
105.8
133.5
10.2
19.2
’11
’10
• Integrated circuits manufacturing
’11
’12
• Box build assembly
• design for manufacturability
• value engineering and testing
• GPs signal amplification products
’10
’12
Net Sales*
Operating Income*
48.8 52.4
11.5
9.4
27.2
5.6
8.142870
5.428580
2.714290
0.000000
Earnings reached record levels in FY
2012 from demand for industrial controls
and secure communications products.
Operating income was $11 million on
net sales of nearly $72 million.
’12
’12
’10
’10
’11
’11
Net Sales*
Operating Income*
63.5
65.9
71.7
11.3
9.9
9.0
8.99997
7.71426
6.42855
5.14284
3.85713
2.57142
1.28571
0.00000
’10
’11
’12
’10
’11
’12
*Dollars in millions
• Improve the time to profitability
for new products.
9.999989
8.571419
7.142850
• deliver follow-on orders for
vista Research, Inc.
• Accelerate new product development
process at vista Research, Inc.
• extend time and payload capabilities
’12
’11
with airship test flights.
’10
’10
’11
’12
• Introduce new lighter weight aerostat
material with greater lift capabilities.
5.714280
4.285710
• Improve working capital management,
2.857140
1.428570
including inventory turns and cycle times.
0.000000
• expand sales of our proprietary products.
16.285739
13.571450
10.857160
8.142870
5.428580
2.714290
0.000000
We serve market
segments with
strong growth
prospects.
Our disciplined
approach to serving
fundamentally strong
markets ensures a
crisp focus for the
organization.
8.99997
We aggressively
compete on quality
and service.
7.71426
6.42855
5.14284
3.85713
2.57142
1.28571
0.00000
At Raven, service is
not simply a tagline,
it emanates from
how we serve
each other and our
communities, and
it’s how we develop
and maintain
customer loyalty.
9.999989
8.571419
7.142850
5.714280
4.285710
2.857140
1.428570
0.000000
We’re on a path
of continuous
improvement.
We constantly look
for ways to increase
the bottom line.
Cash flow and
ROI are front
and center.
We have a proven
record of generating
attractive returns and
increasing cash flows.
2012 AnnuAl RePOR t 7
RAven In du s tR Ies , I nc.
Applied
Technology
Division
“ At Raven, we’re plotting our growth strategy in precision agriculture for the next several
years. We aim to be among the top players and will differentiate ourselves by our innovative
products, knowledgeable field support and world class customer service. As value migrates
from hardware and software to information management, Raven will continue to be at the
forefront with its open information management platform, enabling a growing array of
applications and information-sharing capabilities.”
Matthew T. Burkhart
Division Vice President and
General Manager
Innovative products such as SmarTraxTM RTK automatic steering controls and the award-winning OmniRow® advanced planter
control system help producers improve efficiencies and maximize yields by ensuring proper seed spacing and placement.
FY 2012 in Review
strong demand across our entire
product line led to a 33% increase in
sales to $132.6 million. Improving
margins resulted in record operating
profits. new products made a significant
contribution last year, including expanded
offerings of our field computers, planter
controls, boom controls, steering
and information management.
International sales growth continued at a
strong pace led by Brazil, the former soviet
Republics, Australia and south Africa. we
have seen a significant market shift overseas
characterized by the adoption of guidance
and steering systems. Farmers today can
start out with higher-end precision ag
platforms, which are far more capable
and easier to use than in years past.
demand also remained strong from
our original equipment manufacturer
(Oem) partners. we increased both the
take rate of our products from the factory,
along with placing more of our products
on each unit that leaves the factory.
Building Our Quality
Advantage
At Raven Atd, quality is defined as
products that are easy to use and perform
as promised every time, supported
with dedicated customer service. From
equipment upgrades to complete new
systems, Raven delivers innovations for
the entire growing season. everything is
fully integrated with the industry’s most
powerful field computers and advanced
wireless communications technology.
Over the past year we continued
to build our quality advantage by:
• moving into a new 81,000
square foot manufacturing facility.
this will allow us to better meet
demand in a space designed
for improved productivity.
• making additional process
improvements. Building upon
our IsO 9001 certification, we
strengthened our supply chain and
implemented changes geared to
enhance the customer experience.
• expanding research and development,
both at the Raven Innovation campus
in sioux Falls, sd, and our product
development facility in Austin,
tx. we also added innovative
expertise in product development.
• Broadening our suite of precision ag
products. this includes new air seeder
and planter controls, enhanced boom
control capabilities, and expansion
of our slingshot® open information
management and RtK platform.
Outlook for FY 2013
the coming fiscal year is shaping
up to be another period of solid
growth in sales and profits.
the higher cost of nutrients and other
inputs have shortened the payback period
for grower investments in technology.
the combination of our proven ROI with
high farm incomes translates into strong
demand for Raven’s precision ag systems.
International sales should again
outpace the rate of growth in the united
states. we see demand across all
major agricultural regions throughout the
world, with particular strength in south
America, south Africa, eastern europe
and the former soviet Republics, and
in emerging markets such as china.
we have a robust product pipeline with
new innovations planned for introduction
throughout the year. At the same time, we
are aggressively expanding our efforts in
business development, sales and service.
Key Performance Goals
• Increase international sales
through geographic expansion
and tailored product offerings.
• Introduce new applications and
wireless capabilities for slingshot
along with expanded RtK coverage.
• Gain market share in both our
core products and grower lines
via new product introductions
and enhanced distribution.
• Pursue new products and
technologies through acquisition.
Since 1978, Raven has
played a key role in
the growth of precision
agriculture—the use
of electronic controls,
Global Positioning System
(GPS) technology and
information management
tools designed to reduce
operating costs and
improve farm yields
around the world.
The Envizio Pro II® multi-function
field computer enables a farmer
to control, simplify and improve
virtually every phase of their
operation; providing farmers
with a simple way to increase
efficiency and cost savings as
well as reduce operator fatigue.
2012 AnnuAl RePOR t 9
RAven In du s tR Ies , I nc.
Engineered
Films
Division
“ Raven’s Engineered Films Division is fast becoming the premier provider of high-quality,
highly engineered films serving energy, construction, industrial, geomembrane and
agricultural markets where performance is critical. Our new Technology Solutions Center
adds the very latest in processing and testing capabilities. We can now offer our customers
seamless product development from conceptual ideas through full-scale production. As a
new division general manager, I’m excited about the opportunity to provide the widest
range of single and multi-layer custom barrier solutions.”
Anthony D. Schmidt
Division Vice President and
General Manager
State-of-the-art pilot process equipment; prototyping film and sheet formulations at a fraction of the cost and time with new
9-layer blown film pilot line located in the Technology Solutions Center of Engineered Films.
FY 2012 in Review
strong demand for our energy and
geomembrane films drove a 26%
increase in sales to a record $133.5
million. Our profitability was impacted
from delays we faced in ramping-up
our new capacity. Both of our new
extruders are now fully online.
sales into our energy markets
remained strong. new exploration
in north dakota created additional
demand for Raven pit liner films used
in the oil and gas fields. Orders for
our agricultural products, such as our
innovative FeedFresh™ silage covers,
remained strong. we also benefited from
construction remodeling activity thanks
to our national distribution network.
new products continue to drive our
growth. we successfully introduced
dura-skrim® textured K-series—a new
geomembrane product line engineered
for applications requiring exceptional
slope stability, such as landfill caps,
mining leach pads and containment
ponds. environmental protection will
play a growing role in eFd’s future.
Building Our Quality
Advantage
At Raven eFd, quality is defined as
products that are engineered, produced,
and tested for critical performance.
Raven offers a unique combination of
customized solutions using three production
technologies—extrusion, conversion and
lamination—from a single source. we
differentiate ourselves by offering the
widest range of formulations and the
development of new materials. Over
the past several years, we have made
significant investments in state-of-the-art
processing and product development.
Over the past year, we continued
to build our quality advantage by:
• expanding our production
capacity. this includes the
installation of the world’s largest
seven-layer barrier film line.
• Increasing our commitment to product
innovation. we opened a new
technology solutions center for
research, analysis and optimization
of new product formulations.
• Introducing new scrim-reinforced
products. with each new solution,
like our K- and J-series, we offer
the widest range of durable, high-
strength reinforced materials.
• demonstrating our value in
environmental protection. we
began shipments of geomembrane
liners as part of a $10 million
municipal water project.
Outlook for FY 2013
we ended the year with good
momentum, and we expect that to
continue in the coming year. Our
profitability will be a function of several
factors, including the cost/price spread
of raw materials and production volumes.
Our goal is to maintain operating
margins in the mid- to upper teens.
High oil prices are driving exploration
activity, thus creating continued demand
in our energy end markets. we expect
to see additional growth from our
agricultural customers with our FeedFresh™
storage covers. As industrial activity
recovers, we anticipate greater sales
of our containment bags used inside
shipping containers to secure materials.
we’ve created an unparalleled
resource in engineered films, and our
customers are taking notice as evidenced
by more collaborative projects than
ever before. with an eye on sales
growth, we also recognize the need
for ongoing process improvements
to increase divisional profits.
Key Performance Goals
• continue to increase the
pounds of film produced.
• Improve productivity as measured
by cost per unit of output.
• Reduce new product cycle time to
accommodate growing pipeline.
• Introduce innovative barrier
films for our served markets.
• expand distribution and market
share in agricultural films.
Raven is a leading supplier
of high-quality flexible films
and sheeting for custom
applications in energy,
industrial, environmental,
agricultural and construction
markets throughout the
United States and abroad.
Our products are designed
to deliver a range of
benefits, including lower
weight yet higher strength,
superior barrier properties
and other characteristics
that result in an exceptional
value for the customer.
Large fish hatchery project
utilized over 5 million sq.ft.
of Rufco® enhanced grip
geomembrane to line fish
ponds in eastern Texas.
2012 AnnuAl RePOR t 11
RAven In du s tR Ies , I nc.
Aerostar
Division
“ Raven Aerostar’s greatest opportunity for growth lies in the area of unmanned surveillance.
Following our initial entry with tethered aerostats and mooring platforms, we expanded our system
components. Today we compete in the global market for situational awareness. Our investment
in Vista Research, Inc. and their radar processing technology enables us to introduce affordable
end-to-end detection and tracking solutions around the world. This strategy builds on our vision to
protect lives with affordable quality products.”
Lon E. Stroschein
Division Vice President and
General Manager
Aerostar’s tethered aerostat product line continues on a revolutionary path forward. Aerostar’s TIF-75KH was designed using
High Strength Laminated Aerostat Material (HSLAM), which allows for additional lift and durability capabilities.
FY 2012 in Review
• Improving the effectiveness and
divisional sales for the year increased
7% to $52.4 million. the previous fiscal
year saw significant initial orders for
tethered aerostats, making for a tough
comparison. Our military parachute and
protective wear programs performed
very well. Profits were up for the year
even though our operating margins were
affected by higher R&d investments.
we strengthened our government
contracting capabilities with a new joint
venture, Aerostar Integrated systems (AIs),
securing a partner with deep experience
in military procurement and accounting,
as well as bringing us national security
clearance coverage. As a result, we
won a contract for the development
of tethered aerostats and deployment
of Flight services Representatives
for our systems in Afghanistan.
we also expanded our manufacturing
capacity for t-11 parachutes by 20%.
this enabled us to significantly boost our
parachute deliveries midway through
FY12. Raven Aerostar also won a small
R&d contract for the u.s. Army that
will help with the manufacturing design
of disposable parachutes (lcAd).
Building Our Quality
Advantage
At Raven Aerostar, quality is defined
as products that not only meet rigorous
performance standards, but are
delivered on time and within budget.
Our parachutes, protective wear and
aerostats are all designed to ensure
the safety of our military personnel
stationed around the world.
Over the past year, we continued
to build our quality advantage by:
• Increasing our parachute
production rate at our sioux Falls,
madison and Huron facilities.
• enhancing our R&d capabilities with
the completion of a large hangar
for aerostat testing. this will greatly
increase the number of test projects
and training capabilities with current
and prospective customers.
integrity of our tethered aerostats.
we deployed our people in
active war zones to find better
ways to operate and service our
products. this has dramatically
improved our production uptime.
• expanding our opportunity in
advanced detection and tracking.
the recent acquisition of vista
Research, Inc. brings new
capabilities in smart radar solutions
that aim to provide improved
security solutions at a lower cost.
Outlook for FY 2013
we’re anticipating solid growth in
the coming fiscal year with the potential
to achieve double-digit gains led by our
parachute and protective wear programs.
Our profit growth will depend on a
number of factors, including the mix of
aerostat shipments and our successes
related to new customer initiatives.
As we envision Raven Aerostar
becoming a much larger player
in situational awareness, we are
strengthening our product development
processes while maintaining our market
advantage. these changes have already
led to higher quality results such as
improved first-time yields. At the same
time, we’ve increased our investment
in parachutes and protective wear
capabilities at a time when others in
the industry have been scaling back.
Although we face an environment of
increasing scrutiny over military funding,
Raven Aerostar stands by its reputation
of proven technology, responsive
service and greater affordability.
Key Performance Goals
• complete new demonstrations
of tactical aerostats.
• deliver on time and on budget
for new lcAd contract.
• Accelerate new product development
at vista Research, Inc.
• extend time and payload
capabilities with airship test flights.
• Introduce new lighter weight aerostat
material with greater lift capabilities.
From an aerospace pioneer
in 1956, the Aerostar
Division today has grown to
become a leading provider
of surveillance technology
and specialty sewn fabrics for
government and commercial
applications, including
research, communications
and intelligence. Products
include tethered aerostats,
military parachutes, protective
wear, high-altitude research
balloons, and radar.
The OTS Dry Undersuit, one
of Aerostar’s protective wear
offerings, integrates thermal
protection with a low profile
design. The suit offers protection
against hypothermia should the
wearer enter cold waters.
2012 AnnuAl RePOR t 13
RAven In du s tR Ies , I nc.
Electronic
Systems
Division
“ Raven’s Electronic Systems Division is on a path of continuous improvement. Customers look to
us for high reliability, design excellence and production flexibility. Overcoming the engineering
challenges is only half of the battle. We specialize in design for manufacturability. That means
the customer’s product will perform up to specifications and meet quality standards, all at
the lowest total cost. We’re driven to become an even more valuable partner to our core
customers, which includes Raven’s expansive manufacturing network.”
David R. Bair
Division Vice President and
General Manager
Raven team member performing quality validation on electronic assembly during the manufacturing process. ESD processes
are ISO 9001 certified.
FY 2012 in Review
despite the expected decline in our
avionics business, the division finished
the year with a revenue gain of 9% to
$71.7 million. Our operating margins
and cash flows held firm for the year.
we continue to experience solid
growth in the industrial segment. Our
business of providing subassemblies for
Raven’s Applied technology division
products also contributed to yearly
gains. this is becoming an increasing
percentage of our total revenues as our
circuit boards make their way into the
growing array of precision ag products,
such as cruizer II™ and viper Pro™.
As anticipated, sales of avionics
assemblies declined last year as
we moved out of certain military
aircraft programs. Although we
added a new customer in secure
communications, we only shipped
a portion of what we expected due
to timing of government funding.
Building Our Quality
Advantage
At Raven esd, quality is defined as
high reliability, design excellence and
production flexibility. we offer a full suite
of engineering services to support new
product development, including rapid
prototyping and design evaluation builds.
It’s all about design for manufacturability,
helping customers achieve the desired
performance at the lowest total cost.
Over the past year, we continued
to build our quality advantage by:
• Improving our on-time delivery
percentage. thanks to better
integration at key stages of the
process, we have been consistently
achieving a rate of 99%.
• Building our capabilities for new
product introduction. we’re
applying more resources up front,
such as engineering reviews,
before a new product hits the
factory floor. the benefit is less
rework and fewer waivers.
• Improving incoming quality
at receiving and inspection.
we added supplier quality
engineers who continue to
increase the effectiveness of
our entire supply base.
• Improving availability of key
components. Our materials
group has done a great job in
securing a continuous supply of
items that were previously difficult
to obtain in a timely manner.
Outlook for FY 2013
For the coming fiscal year, we expect
to generate modest revenue gains
with our industry-leading profit margins
producing stable profits and cash flows.
Industrial controls can be expected to
again pace our growth. we secured two
new customers last year, one of which is
a foreign company that was looking for a
north American manufacturing presence.
the recent trend of companies bringing
their manufacturing back to the united
states bodes well for our future prospects.
Along with continued growth
supplying Raven Atd, we’re applying
more marketing resources behind our
proprietary products this year. this
includes the Raven link system, the first
affordable l1/l2 solution for remote GPs
antenna installations. Finally, we will be
providing engineering and manufacturing
support to Raven’s latest radar technology
acquisition, vista Research, Inc.
Key Performance Goals
• secure one or two new customers for
electronic manufacturing services.
• Improve the time to profitability for
new products.
Raven’s Electronic Systems
Division is a total solution
provider of contract
electronic manufacturing
services primarily for low-
volume/high-mix industrial
products that can stand up
to harsh environments with
great reliability. End markets
served include controls
and instrumentation, secure
communications and GPS
• deliver follow-on orders for vista
signal amplification.
Research, Inc.
• Improve working capital
management, including inventory
turns and cycle times.
• expand sales of our proprietary
products.
2012 AnnuAl RePOR t 15
Board of Directors
Anthony W. Bour (a)(c)
President &
Chief Executive Officer
showplace wood Products, Inc.
Thomas S. Everist (b)(c)
Chairman of the Board
Raven Industries, Inc.
President
the everist company
Mark E. Griffin (b)(c)
President &
Chief Executive Officer
lewis drugs, Inc.
Kevin T. Kirby (a)(b)(c)
Chief Executive Officer & Director
Face It tOGetHeR
Marc E. LeBaron (b)(c)
Chairman & Chief Executive Officer
lincoln Industries, Inc.
Cynthia H. Milligan (a)(c)
Dean Emeritus
college of Business Administration
university of nebraska, lincoln
Daniel A. Rykhus
President &
Chief Executive Officer
Raven Industries, Inc.
a = Audit committee b = Personnel and compensation committee c = Governance committee
Executive Team
David R. Bair – division vice President & General manager – electronic systems division, Age: 55, service 13 years
Matthew T. Burkhart – division vice President & General manager – Applied technology division, Age: 36, service 4 years
Thomas Iacarella – vice President & chief Financial Officer, Age: 58, service 20 years
Jan L. Matthiesen – vice President – Administration, Age: 54, service 1 year
Brian E. Meyer – chief Information Officer, Age: 49, service 1 year
Daniel A. Rykhus – President & chief executive Officer, Age: 47, service 22 years
Anthony D. Schmidt – division vice President & General manager – engineered Films division, Age: 40, service 16 years
Lon E. Stroschein – division vice President & General manager – Aerostar division, Age: 37, service 4 years
Mark L. West – chief technology Officer, Age: 58, service 30 years
16 RA v en Indu stR Ies, Inc.
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended January 31, 2012
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)
South Dakota
(State of incorporation)
205 E. 6th Street, P.O. Box 5107, Sioux Falls, SD
(Address of principal executive offices)
46-0246171
(IRS Employer Identification No.)
57117- 5107
(zip code)
Registrant's telephone number including area code (605) 336-2750
Securities registered pursuant to Section 12(b) of the Act:
Title of Each Class:
Common Stock, $1 par value
Name of Each Exchange on which Registered
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.
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act.
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.
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).
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 registrant's 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.
Yes
Yes
Yes
Yes
No
No
No
No
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
Non-accelerated filer
(Do not check if a smaller reporting company)
Accelerated filer
Smaller reporting company
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act.)
Yes
No
The aggregate market value of the registrant's common stock held by non-affiliates at July 31, 2011 was approximately $934,229,237. The aggregate
market value was computed by reference to the closing price as reported on the NASDAQ Global Select Market, $52.83, on July 29, 2011, which was
as of the last business day of the registrant's most recently completed second fiscal quarter. The number of shares outstanding on March 21, 2012 was
18,120,066.
The definitive proxy statement relating to the registrant's Annual Meeting of Shareholders, to be held May 22, 2012, is incorporated by reference into
Part III to the extent described therein.
DOCUMENTS INCORPORATED BY REFERENCE
PART I
Item 1.
BUSINESS
Item 1A. RISK FACTORS
Item 1B. UNRESOLVED STAFF COMMENTS
Item 2.
Item 3.
PROPERTIES
LEGAL PROCEEDINGS
Item 4. MINE SAFETY DISCLOSURES
PART II
Item 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY, RELATED SHAREHOLDER MATTERS,
AND ISSUER PURCHASES OF EQUITY SECURITIES
Quarterly Information
Stock Performance
Item 6.
SELECTED FINANCIAL DATA
Eleven-year Financial Summary
Business Segments
Item 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
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
Item 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Item 8.
FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
Management's Report on Internal Control Over Financial Reporting
Report of Independent Registered Public Accounting Firm
Consolidated Balance Sheets
Consolidated Statements of Income and Comprehensive Income
Consolidated Statements of Shareholders' Equity
Consolidated Statements of Cash Flows
Notes to Consolidated Financial Statements
Item 9.
CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
Item 9A. CONTROLS AND PROCEDURES
Item 9B. OTHER INFORMATION
PART III
Item 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE
Item 11. EXECUTIVE COMPENSATION
Item 12.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND
RELATED SHAREHOLDER MATTERS
Item 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE
Item 14
PRINCIPAL ACCOUNTING FEES AND SERVICES
PART IV
Item 15.
EXHIBITS, FINANCIAL STATEMENT SCHEDULE
INDEX TO EXHIBITS
SIGNATURES
REPORT OF INDEPENDENT REGISTERED ACCOUNTING FIRM ON FINANCIAL STATEMENT SCHEDULE
SCHEDULE II
3
6
9
9
10
10
10
10
11
12
12
14
15
15
17
21
22
24
24
26
26
27
28
29
30
31
32
33
34
49
49
49
50
50
50
50
50
51
52
54
55
56
PART I
ITEM 1.
BUSINESS
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, energy, construction and military/aerospace markets. The
company employs approximately 1,400 people and is headquartered at 205 E. Sixth Street, Sioux Falls, SD 57104 - telephone
(605) 336-2750. The company's 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 company's 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
company's 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 SEC's Public Reference Room at
100 F Street N.E., Washington, DC 20549, through the SEC's 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:
14
17
46
"Business Segments"
"Results of Operations – Segment Analysis"
"Note 13. Business Segments and Major Customer Information"
BUSINESS SEGMENTS
Applied Technology
Applied Technology designs, manufactures, sells, and services innovative precision agriculture products and information
management tools that help growers reduce costs and improve farm yields around the world. The Applied Technology product
families include field computers, application controls, GPS-guidance and assisted-steering systems, automatic boom controls,
yield monitoring planter controls and an integrated RTK and information platform called SlingshotTM. Recent investments in Site-
Specific Technology Development Group, Inc. (SST), a software company, and the continued build out of the Slingshot API
platform are positioning Applied Technology to be able to provide the information platform of choice that improves grower
decision-making and business efficiencies for our agriculture retail partners.
Applied Technology sells their precision agriculture control products to both original equipment manufacturers (OEMs) and
through after market distribution, in the United States and in most major agriculture areas around the world. The division has
personnel and distribution representatives located in the U.S. and key geographic areas throughout the world, including Canada,
Europe, the former Soviet Republics, South Africa, South America, Australia, and China. The company's competitive advantage
in this segment is designing and selling an easy to use, reliable, and value added products that are supported by an industry leading
service and support team.
Engineered Films
This segment produces rugged reinforced plastic sheeting for industrial, energy, construction, geomembrane and agricultural
applications.
The company's 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
3
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 company's most capital-intensive business segment, requiring regular investments in new
extrusion capacity along with printers and conversion equipment. This segment's capital expenditures were $10.9 million in fiscal
2012, $8.5 million in fiscal 2011 and $1.5 million in fiscal 2010.
Aerostar
Aerostar sells high-altitude research balloons 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.
During fiscal 2012, Aerostar expanded its business through a business venture and acquisition. The business venture, Aerostar
Integrated Systems, is 75% owned by Aerostar and pursues potential product and support services contracts for agencies and
instrumentalities of the United States Government. The acquisition in January 2012 of Vista Research, Inc., a leading provider
of surveillance systems that enhance the effectiveness of radar using sophisticated algorithms, will immediately allow Aerostar
to enhance its tethered aerostat security solutions. Longer-term, the company is positioned to meet growing global demand for
lower-cost detection and tracking systems used by government and law enforcement agencies.
Electronic Systems
The company has focused this segment's 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
Two customers accounted for 10% or more of consolidated sales in fiscal 2012 compared to one customer in fiscal 2011 and 2010.
Fiscal 2012 sales to WT Plastics Limited, a customer in the Engineered Films Division, accounted for 11% of consolidated sales.
Sales in fiscal 2012, 2011 and 2010 to Goodrich Corporation, a customer of the Electronic Systems segment, accounted for 10%,
13% and 16%, respectively, of consolidated sales. While Electronic Systems expects revenue from this customer continue to
decline, the company does not anticipate any sudden disruptions to this relationship.
SEASONAL WORKING CAPITAL REQUIREMENTS
Some seasonal demand exists in Applied Technology's 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, accounts
receivable, accounts payable, and acquisition related contingent payments. 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 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
4
increases could not always be passed on to customers due to weak demand and a competitive pricing environment. The Electronic
Systems segment experiences 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.
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 company's research and development
expenditures are directed toward new products in the Applied Technology, Engineered Films and Aerostar segments. Total company
research and development costs are presented on the Consolidated Statements of Income and Comprehensive 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 company's capital expenditures, earnings or competitive position.
In connection with the sale of substantially all of the assets of the company's 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 company's 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 company's 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 company's
results of operations, financial position or cash flows. The company had $55 thousand accrued at January 31, 2012, representing
its best estimate of probable costs to be incurred related to these matters.
BACKLOG
As of February 1, 2012, the company's order backlog totaled $66.6 million. Backlog amounts as of February 1, 2011 and 2010
were $76.0 million and $74.7 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, 2012, the company had 1,405 employees, 1,382 in an active status. Following is a summary of active employees
by segment: Electronic Systems - 262; Applied Technology - 403; Engineered Films - 267; Aerostar - 373; Administration - 77.
Management believes its employee relations are satisfactory.
5
EXECUTIVE OFFICERS
NAME, AGE AND POSITION
Daniel A. Rykhus, 47
President and Chief Executive Officer
BIOGRAPHICAL DATA
Mr. Rykhus became the company's 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.
Thomas Iacarella, 58
Vice President and Chief Financial Officer
Mr. Iacarella joined Raven in 1991 as Corporate Controller and has been
the company's 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.
David R. Bair, 55
Division Vice President and General Manager -
Electronic Systems Division
Anthony D. Schmidt, 40
Division Vice President and General Manager -
Engineered Films Division
Mr. Bair joined Raven in 1999 as Division Vice President and General
Manager of the Electronic Systems Division.
Mr. Schmidt was named Division Vice President and General Manager of
the Engineered Films Division on February 1 2012. He joined Raven in
1995 in the Applied Technology Division performing various leadership
roles within manufacturing and engineering. He transitioned to Engineered
Films Division in September 2011 as Manufacturing Manager.
Barbara K. Ohme, 64
Vice President - Administration
Ms. Ohme joined Raven in 1987 as Employment Manager and has been the
company's Vice President of Administration since 2004.
Matthew T. Burkhart, 36
Division Vice President and General Manager -
Applied Technology Division
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.
Lon E. Stroschein, 37
Division Vice President and General Manager -
Aerostar Division
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.
Effective February 1, 2012, Anthony Schmidt was named Division Vice President and General Manager for the Engineered Films
Division, replacing James Groninger, who will transition to a new role as the Director of Business Development in the Engineered
Films Division.
Effective April 20, 2012, Barbara Ohme will be retiring as Vice President of Administration. She will be succeeded by Jan L.
Matthiesen, 54, who joined the company in September 2010 as Director of Administration and brings 18 years of government
contracting experience through her work with the Department of the Interior's U.S. Geological Survey and the Department of
Defense. Prior to joining Raven, she was a Human Resource Manager at Science Applications International Corporation (SAIC).
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
6
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 company's primary markets, such as agriculture and construction and oil and gas well drilling; or changes in competition,
raw material availability, technology or relationships with the company's largest customers, any of which could adversely impact
any of the company's 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 company's 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 company's 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 company's markets such as agriculture and construction.
The company's 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 company's Engineered Films Division. To the extent weather conditions
curtail construction activity, sales of the segment's plastic sheeting will likely decrease.
Price fluctuations in and shortages of raw materials could have a significant impact on the company's ability to sustain and
grow earnings.
The company's Engineered Films Division consumes significant amounts of plastic resin, the costs of which reflect market prices
for natural gas, oil and other market forces. These prices are subject to worldwide supply and demand as well as other factors
beyond the control of the company. Although the Engineered Films Division is sometimes able to pass such price increases to its
customers, significant variations in the cost of plastic resins can affect the company's 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 company's
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
company's 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 can be subject
to change in price as the cost of natural gas or oil 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 company's competitive position and have an
adverse effect on the company's financial results.
The company's 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
7
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
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 company's new products could replace
sales of some of its current products, offsetting the benefit of even a successful product introduction.
The company's Electronic Systems Division is dependent on a small number of customers and faces competitive risks.
The company's 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 company's 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 company's 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 Aerostar's 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 company's programs being reduced, delayed or terminated.
Reductions in the company's existing programs, unless offset by other programs and opportunities, could adversely affect its ability
to sustain and grow its future sales and earnings. The company's 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 government's convenience.
The loss of anticipated funding or the termination of multiple or large programs could have an adverse effect on the company's
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 company's sales outside the U.S. were $38.9 million in fiscal 2012. The company's 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 country's or region's 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 company's results of operations are impacted by the market fundamentals of the primary industries served. Significant declines
8
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.
The company may pursue or complete acquisitions which represent additional risk and could impact future financial results.
The company's business strategy includes the potential for future acquisitions. Acquisitions involve a number of risks including
integration of the acquired company with the company's operations and unanticipated liabilities or contingencies related to the
acquired company. The company cannot ensure that the expected benefits of any future acquisitions will be realized. Costs could
be incurred on pursuits or proposed acquisitions that have not yet or may not close which could significantly impact the operating
results, financial condition, or cash flows. Additionally, after the acquisition, unforeseen issues could arise which adversely affect
the anticipated returns or which are otherwise not recoverable as an adjustment to the purchase price. Total goodwill and intangible
assets account for approximately $31.7 million, or 13% of Raven's total assets as of January 31, 2012. The company evaluates
goodwill and intangible assets for impairment annually, or when evidence of potential impairment exists. The annual impairment
test is based on several factors requiring judgment. Principally, a significant decrease in expected cash flows or changes in market
conditions may indicate potential impairment of recorded goodwill or intangible assets.
The company may fail to continue to attract, develop and retain key management and other key employees, which could
negatively impact our operating results.
We depend on the performance of our senior management team and other key employees, including experienced and skilled
technical personnel. The loss of certain members of our senior management, including our Chief Executive Officer, could
negatively impact our operating results and ability to execute our business strategy. Our future success will also depend in part
upon our ability to attract, train, motivate and retain qualified personnel.
The company may fail to protect its intellectual property effectively, or may infringe upon the intellectual property of others.
The company has developed significant proprietary technology and other rights that are used in its businesses. The company relies
on trade secret, copyright, trademark and patent laws and contractual provisions to protect the company's intellectual property.
While the company takes enforcement of these rights seriously, other companies such as competitors or analogous persons in
markets the company does not participate in, may attempt to copy or use for their own benefit its intellectual property.
In addition, intellectual property of others also has an impact on the company's ability to offer some of its products and services
for specific uses or at competitive prices. Competitors' patents or other intellectual property may limit the company's ability to
offer products and services to its customers. Any infringement or claimed infringement of the intellectual property rights of others
could result in litigation and adversely affect the company's ability to continue to provide, or could increase the cost of providing,
products and services.
Intellectual property litigation is very costly and could result in substantial expense and diversions of the company's resources,
both of which could adversely affect its businesses and financial condition and results. In addition, there may be no effective legal
recourse against infringement of the company's intellectual property by third parties, whether due to limitations on enforcement
of rights in foreign jurisdictions or as a result of other factors.
ITEM 1B. UNRESOLVED STAFF COMMENTS
None.
ITEM 2.
PROPERTIES
Our corporate office is at an owned premises located in Sioux Falls, South Dakota. The company owns seperate manufacturing
facilities for each of our business segments located in Sioux Falls as well as various warehouses, training and product development
facilities. In addition to our Sioux Falls facilities, Applied Technology has a product development facility in Austin, Texas;
Electronic Systems has a manufacturing facility located in St. Louis, Missouri; and Aerostar has additional owned manufacturing,
sewing, and research facilities located in Huron and Madison, South Dakota, and Sulphur Springs, Texas; and leased facilities in
Arlington, Virgina; and Monterey and Chatsworth, California. Most of the company's 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 company's facilities is
substantially being utilized. The company also owns approximately 6.2 acres of undeveloped land adjacent to the other owned
property, which is available for expansion.
The following is an approximate total square feet of the company's owned or leased facilities by segment: Applied Technology -
9
145,000; Engineered Films - 295,000; Aerostar - 250,000; Electronic Systems - 50,000; and Corporate - 150,000.
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.
MINE SAFETY DISCLOSURES
Not applicable
PART II
ITEM 5.
MARKET FOR THE REGISTRANT'S COMMON EQUITY, RELATED SHAREHOLDER
MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES
Raven's common stock is traded on the NASDAQ Global Select Market under the symbol RAVN. The following table shows
quarterly unaudited financial results, quarterly high and low closing sales prices per share of Raven's common stock as reported
by NASDAQ, and dividends declared for the periods indicated:
QUARTERLY INFORMATION (UNAUDITED)
(DOLLARS IN THOUSANDS, EXCEPT PER-SHARE AMOUNTS)
Net
Sales
Net Income
Gross Operating Pretax Attributable
Profit
to Raven
Income
Income
Net Income
Per Share(a)
Basic Diluted High
Common Stock
Market Price
Low
Cash
Dividends
Per Share
FISCAL 2012
First Quarter
Second Quarter
Third Quarter
Fourth Quarter
Total Year
FISCAL 2011
First Quarter
Second Quarter
Third Quarter
Fourth Quarter
Total Year
FISCAL 2010
First Quarter
Second Quarter
Third Quarter
Fourth Quarter
Total Year
$ 101,541 $ 32,936 $ 23,533 $23,520 $
90,344
93,300
96,326
28,130
27,254
27,872
18,674
16,875
16,559
18,598
16,871
16,709
$ 381,511 $ 116,192 $ 75,641 $75,698 $
$ 85,030 $ 27,171 $ 19,505 $19,557 $
73,174
85,823
70,681
20,389
24,887
18,982
12,623
17,866
10,209
12,529
17,883
10,313
$ 314,708 $ 91,429 $ 60,203 $60,282 $
$ 65,222 $ 20,428 $ 14,113 $14,114 $
56,586
60,158
55,816
15,112
16,918
15,394
9,306
11,119
8,682
9,411
11,116
8,681
$ 237,782 $ 67,852 $ 43,220 $43,322 $
15,716 $ 0.87 $ 0.86 $ 61.92 $ 47.19 $
0.68
12,461
0.63
11,390
0.60
11,002
50,569 $ 2.79 $ 2.77 $ 69.30 $ 43.23 $
59.60
64.88
69.30
49.35
43.23
50.18
0.69
0.63
0.61
8,353
11,833
7,406
12,945 $ 0.72 $ 0.72 $ 31.79 $ 26.54 $
0.46
0.65
0.41
40,537 $ 2.24 $ 2.24 $ 49.59 $ 26.54 $
38.18
42.11
49.59
28.66
30.00
40.01
0.46
0.65
0.41
9,231 $ 0.51 $ 0.51 $ 24.65 $ 15.37 $
6,204
7,293
5,846
0.34
0.40
0.32
28,574 $ 1.58 $ 1.58 $ 33.18 $ 15.37 $
23.99
24.47
24.04
31.00
32.43
33.18
0.34
0.40
0.32
0.18
0.18
0.18
0.18
0.72
0.16
0.16
1.41(b)
0.16
1.89
0.13
0.14
0.14
0.14
0.55
(a)
(b)
Net income per share is computed discretely by quarter and may not add to the full year.
A special dividend of $1.25 per share was paid during the third quarter of fiscal 2011.
As of January 31, 2012, the company had approximately 10,600 beneficial holders, which includes a substantial number of the
company's common stock held by record by banks, brokers and other financial institutions.
10
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 company's stock on January 31, 2007, held this for five years and reinvested the dividends, have seen its value increase to
$265.30.
Company / Index
2007
2008
2009
2010
2011
2012
Raven Industries, Inc.
$ 100.00
$ 106.99
$
81.37
$ 108.89
$ 190.65
$ 265.30
S&P 1500 Industrial Machinery
Russell 2000
100.00
100.00
105.42
90.22
59.13
56.98
80.59
78.53
108.57
103.16
111.11
106.11
Year Ended January 31
5-Year
CAGR(a)
21.5%
2.1%
1.2%
(a) compound annual growth rate
11
ITEM 6.
SELECTED FINANCIAL DATA
ELEVEN-YEAR FINANCIAL SUMMARY
(DOLLARS AND SHARES IN THOUSANDS, EXCEPT PER-SHARE AMOUNTS)
OPERATIONS
Net sales
Gross profit
Operating income
Income before income taxes
Net income attributable to Raven Industries, Inc.
Net income % of sales
Net income % of beginning equity
Cash dividends(a)
FINANCIAL POSITION
Current assets
Current liabilities
Working capital
Current ratio
Property, plant and equipment
Total assets
Long-term debt, less current portion
Shareholders' equity
Long-term debt / total capitalization
Inventory turnover (COS / average inventory)
CASH FLOWS PROVIDED BY (USED IN)
Operating activities
Investing activities
Financing activities
Change in cash
COMMON STOCK DATA
EPS — basic
EPS — diluted
Cash dividends per share(a)
Book value per share(b)
Stock price range during the year
High
Low
Close
Shares and stock units outstanding, year-end
Number of shareholders, year-end
OTHER DATA
Price / earnings ratio(c)
Average number of employees
Sales per employee
Backlog
For the years ended January 31
2011
2010
2012
$ 381,511
116,192
75,641
75,698
50,569
$
$ 314,708
91,429
60,203
60,282
40,537
$
$ 237,782
67,852
43,220
43,322
$ 28,574
13.3%
35.8%
12.9%
30.4%
$
13,025
$
34,095
$
12.0%
25.2%
9,911
$ 147,559
40,646
$ 106,913
3.63
61,894
245,703
—
$ 180,499
$
$
$ 128,181
34,335
93,846
3.73
41,522
187,760
—
$ 141,214
$
$ 117,747
25,960
$ 91,787
4.54
$ 33,029
170,309
—
$ 133,251
— %
5.4
—%
5.6
—%
5.3
$
$
$
$
$
$
43,831
(40,313)
(15,234)
(11,721)
2.79
2.77
0.72
9.95
69.30
43.23
64.89
18,142
10,618
23.4
1,252
305
66,641
$
$
$
$
$
$
42,085
(11,418)
(33,834)
(3,121)
$ 47,643
(13,396)
(9,867)
24,417
2.24
2.24
1.89
7.81
49.59
26.54
47.24
18,089
7,456
21.1
1,036
304
75,972
$
$
$
1.58
1.58
0.55
7.38
33.18
15.37
28.58
18,051
7,767
18.1
930
$
256
$ 74,718
All per-share, shares outstanding and market price data reflect the October 2004 two-for-one stock split, the January 2003 two-for-one stock split, and the July 2001 three-for-
two stock split.
(a) Includes special dividends of $1.25 per share in fiscal 2011 and 2009; and $0.625 per share in fiscal 2005
(b) Shareholders' equity divided by common shares and stock units outstanding.
(c) Closing stock price divided by EPS — diluted.
12
2009
2008
2007
2006
2005
2004
2003
2002
$ 279,913
73,448
46,394
46,901
$ 30,770
11.0%
26.0%
$ 31,884
$
$ 233,957
63,676
41,145
42,224
$ 27,802
$217,529
57,540
38,302
38,835
$ 25,441
$ 204,528
55,714
37,284
37,494
$ 24,262
$168,086
45,212
27,862
27,955
$ 17,891
$142,727
35,488
21,626
21,716
$ 13,836
$ 120,903
28,828
17,065
17,254
$ 11,185
$118,515
25,340
13,175
13,565
8,847
$
11.9%
28.3%
7,966
11.7%
30.1%
6,507
$
11.9%
36.7%
5,056
$
10.6%
26.9%
9.7%
23.8%
$ 15,298
$ 3,075
$
9.3%
21.5%
2,563
7.5%
18.4%
2,371
$
$ 98,073
23,322
$ 74,751
4.21
$ 35,880
144,415
—
$ 113,556
$ 100,869
22,108
$ 78,761
4.56
$ 35,743
147,861
—
$ 118,275
$ 73,219
16,464
$ 56,755
4.45
$ 36,264
119,764
—
$ 98,268
$ 71,345
20,050
$ 51,295
3.56
$ 25,602
106,157
9
$ 84,389
$ 61,592
20,950
$ 40,642
2.94
$ 19,964
88,509
—
$ 66,082
$ 55,710
11,895
$ 43,815
4.68
$ 15,950
79,508
57
$ 66,471
$ 49,351
13,167
$ 36,184
3.75
$ 16,455
72,816
151
$ 58,236
$ 45,308
13,810
$ 31,498
3.28
$ 14,059
67,836
280
$ 52,032
—%
5.2
—%
5.3
—%
5.4
—%
5.9
—%
5.8
0.1%
6.1
0.3%
4.8
0.5%
5.1
$ 39,037
(7,000)
(36,969)
(5,005)
$ 27,151
(4,433)
(8,270)
14,489
$ 26,313
(18,664)
(10,277)
(2,626)
$ 21,189
(11,435)
(6,946)
2,790
$ 18,871
(7,631)
(19,063)
(7,823)
$ 19,732
(4,352)
(6,155)
9,225
$ 12,735
(9,166)
(5,830)
(2,261)
$ 18,496
(13,152)
(8,539)
(3,195)
$
$
$
1.71
1.70
1.77
6.30
47.82
20.60
21.81
18,027
8,268
12.8
1,070
$
262
$ 80,361
$
$
$
1.54
1.53
0.44
6.52
45.85
26.20
30.02
18,130
8,700
19.6
930
$
252
$ 66,628
$
$
$
1.41
1.39
0.36
5.45
42.70
25.46
28.43
18,044
8,992
20.5
884
$
246
$ 44,237
$
$
$
1.34
1.32
0.28
4.67
33.15
16.54
31.60
18,072
9,263
23.9
845
$
242
$ 43,619
$
$
$
0.99
0.97
0.85
3.67
26.94
13.08
18.38
17,999
6,269
18.9
835
$
201
$ 43,646
$
0.77
0.75
0.17
3.68
$ 15.23
7.56
$ 14.11
18,041
3,560
18.8
787
$
181
$ 47,120
$
$
$
0.61
0.60
0.14
3.21
9.20
4.38
7.91
18,133
2,781
13.2
784
$
154
$ 42,826
$
$
$
0.48
0.47
0.13
2.82
5.88
3.02
5.64
18,424
2,387
12.1
858
$
138
$ 33,834
13
BUSINESS SEGMENTS
(DOLLARS IN THOUSANDS)
APPLIED TECHNOLOGY DIVISION
Sales
Operating income
Assets
Capital expenditures
Depreciation and amortization
ENGINEERED FILMS DIVISION
Sales
Operating income
Assets
Capital expenditures
Depreciation and amortization
AEROSTAR DIVISION
Sales
Operating income
Assets
Capital expenditures
Depreciation and amortization
ELECTRONIC SYSTEMS DIVISION
Sales
Operating income
Assets
Capital expenditures
Depreciation and amortization
INTERSEGMENT ELIMINATIONS
Sales
Engineered Films Division
Aerostar
Electronic Systems Division
Operating income
Assets
CORPORATE & OTHER(a)
Operating loss (from admin expenses)
Assets
Capital expenditures
Depreciation and amortization
2012
2011
2010
2009
2008
2007
For the years ended January 31
$ 132,632
45,358
69,977
11,408
2,351
$ 100,090
31,135
52,669
1,769
2,238
$ 86,217
25,722
51,029
941
1,677
$ 103,098
33,884
48,881
2,674
1,383
$ 64,291
19,102
36,938
1,008
1,125
$ 45,515
10,111
27,629
577
1,142
$ 133,481
21,501
65,100
10,937
4,313
$ 105,838
19,622 (b)
46,519
8,450
3,452
$ 63,783
10,232
35,999
1,460
3,707
$ 89,858
10,919
35,862
3,120
4,303
$ 85,316
17,739
43,688
4,012
4,046
$ 91,082
23,440
41,988
13,266
2,887
$ 52,351
11,468
51,822
3,875
1,079
$ 48,787
9,407
18,140
2,190
757
$ 27,244
5,634
10,462
332
398
$ 27,186
4,219
8,744
383
444
$ 17,290
1,506
9,941
156
499
$ 14,654
707
8,161
812
375
$ 71,744
11,264
24,281
793
825
$ 65,852
9,917
23,385
609
823
$ 63,525
8,979
21,216
290
939
$ 61,983
5,926
26,847
1,399
1,159
$ 67,987
10,365
25,865
1,077
1,237
$ 66,278
10,850
25,175
1,357
1,086
$
(193) $
(1)
(8,503)
(220)
(405)
(307)
(32)
(5,520)
(94)
(186)
$ (13,730) $
34,928
2,002
700
(9,784)
47,233
954
361
$
$
(210) $
(1)
(2,776)
60
(92)
(210) $
(25)
(1,977)
(52)
(152)
(533) $
(16)
(378)
(100)
(100)
—
—
—
—
—
(7,407) $
51,695
279
387
(8,502) $
24,233
425
469
(7,467) $
31,529
382
437
(6,806)
16,811
510
395
TOTAL COMPANY
Sales
Operating income
Assets
Capital expenditures
Depreciation and amortization
(a) Assets are principally cash, investments, deferred taxes, and other receivables.
(b) Includes a $451 pre-tax gain on disposition of assets.
$ 381,511
75,641
245,703
29,015
9,268
60,203 (b)
187,760
13,972
7,631
$ 314,708
$ 237,782
43,220
170,309
3,302
7,108
$ 279,913
46,394
144,415
8,001
7,758
$ 233,957
41,145
147,861
6,635
7,344
$ 217,529
38,302
119,764
16,522
5,885
14
ITEM 7.
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
Management's Discussion and Analysis of Financial Condition and Results of Operations (MD&A) is designed to enhance overall
financial disclosure. It provides management's 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 company's financial statements.
This discussion should be read in conjunction with the company's January 31, 2012 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,
energy, construction and military/aerospace markets, primarily in North America. The company is comprised of unique operating
units, classified into four reportable segments: Applied Technology, Engineered Films, Aerostar and Electronic Systems. While
each segment has distinct characteristics, the products and technologies are largely extensions of durable competitive advantages
rooted in the original research balloon business.
Management uses a number of metrics to assess the company's 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
Vision and Strategy
The company's vision is to advance its leadership positions in niche markets through the development of innovative solutions to
address the needs of customers and help solve great challenges in the areas of hunger, safety, peace, and stability.
The company's primary strategy to achieve this vision is the maintenance of a diversified portfolio of businesses that share a
common purpose but serve different markets providing balance, opportunity, and risk mitigation. Diversification has enabled the
company to consistently generate cash, achieve profitability and maintain financial strength by limiting the impact of market
disruptions and facilitating growth in both strong and weak economic cycles. Additionally, the company continues to achieve
increased geographic, product and market diversification.
The company's overall approach to creating value, which is employed across the four unique segments, is summarized as follows:
Seek to expand in niche markets that have strong prospects for growth and above-average profit margins.
•
• Elevate customer service by leveraging innovation, speed and dedicated engineering support to solve the customer's
problem.
• Reinvest cash generated from operations to fuel growth. Capital is allocated aggressively when the prospects are high
for above-average, risk-adjusted returns on capital. If the company accumulates cash in excess of investment opportunities
for above-average, risk-adjusted returns, it will be returned to shareholders.
• Continue to increase the quarterly dividend annually.
The following discussion highlights the consolidated operating results. Segment operating results are more fully explained in
the Results of Operations - Segment Analysis section.
15
dollars in thousands, except per-share data
Results of Operations
Net sales
Gross margins(a)
Operating income
Operating margins(a)
Net income attributable to Raven Industries, Inc.
Diluted income per share
Cash Flow and Payments to Shareholders
Cash flow from operating activities
Cash outflow for capital expenditures
Cash dividends
Performance Measures
Return on net sales(b)
Return on average assets(c)
Return on beginning equity(d)
For the years ended January 31
%
%
change
change
2011
2010
2012
$ 381,511
21% $ 314,708
32% $ 237,782
$
$
$
$
$
$
30.5%
75,641
19.8%
50,569
2.77
43,831
29,015
13,025
13.3%
23.3%
35.8%
29.1%
28.5%
26% $
60,203
39% $
43,220
19.1%
18.2%
25% $
24% $
40,537
2.24
42% $
42% $
28,574
1.58
$
$
$
42,085
13,972
34,095
$
$
$
47,643
3,302
9,911
12.9%
22.6%
30.4%
12.0%
18.2%
25.2%
(a) The company's 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 2012 versus Fiscal 2011
The company posted record sales, operating income, net income, and diluted earnings per share for fiscal 2012. These levels
resulted in large part from higher demand for Applied Technology's products due to a strong agriculture market and international
expansion. In addition, the high crude oil prices resulted in increased drilling, which drove growth of pit liner sales into the energy
market for Engineered Films. The 21% increase in net sales is the result of year-over-year sales growth in Applied Technology
(33%), Engineered Films (26%), Aerostar (7%) and Electronic Systems (9%).
Fiscal 2012 operating income increased 26% from fiscal 2011 primarily due to sales growth. Applied Technology increased its
operating income by 46% due to higher sales and associated operating leverage. Aerostar posted an increase in operating income
of 22% from the prior year due to higher sales and improved manufacturing efficiencies. Electronic Systems operating income
rose 14% due to a more favorable product mix and higher sales. Operating income growth of 10% in Engineered Films trailed
sales growth in that segment, primarily due to higher material costs. For the first nine months of fiscal 2012, increased material
costs outpaced the favorable impact of higher sales and increased pricing.
Results of Operations - Fiscal 2011 versus Fiscal 2010
Fiscal 2011 net sales rose 32% to $314.7 million and diluted earnings increased 42% to $2.24 per share as a result of sales growth
in all operating segments: Applied Technology (16%), Engineered Films (66%), Aerostar (79%), and Electronic Systems (4%).
Fiscal 2011 operating income increased 39% from the prior year due to the increase in net sales and improved margins from the
recession impacted year of fiscal 2010.
Strategic Investments
In January 2012, the company completed the stock purchase agreement for all the outstanding stock of Vista Research, Inc. (Vista)
for a purchase price of $23.3 million, of which $12.0 million was cash, $2.9 million was on assumed line of credit paid by Raven
at closing, and $8.4 million was valued in contingent consideration and earn-outs.
Vista is a leading provider of surveillance systems that enhance the effectiveness of radars using sophisticated algorithms. Vista's
smart sensing radar systems (SSRS) are employed in a host of advanced detection and tracking applications, including wide-area
surveillance for the border patrol and the military. In the short term, this acquisition will allow Raven to enhance its tethered
16
aerostat security solutions within its Aerostar Division. Longer-term, the company is positioned to meet growing global demand
for low-cost detection and tracking systems used by government and law enforcement agencies. Results of operations subsequent
to the acquisition have been combined into the Aerostar Division.
Cash Flow and Payments to Shareholders
The company continues to generate strong operating cash flows and maintain a strong capital base. Capital expenditures totaled
a record $29.0 million in fiscal 2012 compared to $14.0 million in fiscal 2011. Capital spending consisted primarily of expenditures
related to increased manufacturing capacity in Engineered Films, a new manufacturing facility in Applied Technology and Aerostar's
commitment to a higher level of product development investments in future growth, including facilities and equipment.
During fiscal 2012, $13.0 million was returned to shareholders though quarterly dividends. In the first quarter of fiscal 2012, the
quarterly dividend was raised from 16 cents per share to 18 cents per share, representing the 25th 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. A special
dividend was paid on September 30, 2010 in response to the company’s strong cash position and commitment to return excess
cash to shareholders.
Performance Measures
The company continues to generate positive returns on net sales, average assets and beginning equity, which are important gauges
of Raven's ability to efficiently produce profits. Raven generated a record 13.3% return on sales in fiscal 2012 as the company
continues to capitalize on competitive advantages in niche markets.
RESULTS OF OPERATIONS - SEGMENT ANALYSIS
Applied Technology
Applied Technology designs, manufactures, sells, and services innovative precision agriculture products and information
management tools that help growers reduce costs and improve farm yields around the world.
Financial highlights for the fiscal years ended January 31,
dollars in thousands
Net sales
Gross profit
Gross margins
Operating income
Operating margins
2012
% change
$ 132,632
62,146
46.9%
$
45,358
34.2%
33%
38%
46%
$
$
2011
100,090
45,106
45.1%
31,135
31.1%
% change
2010
16%
19%
21%
$
$
86,217
37,889
43.9%
25,722
29.8%
Fiscal 2012 net sales of $132.6 million increased $32.5 million (33%) and operating income of $45.4 million was up $14.2 million
(46%) versus fiscal 2011.
Fiscal 2012 fourth quarter net sales of $28.8 million grew $6.5 million (29%) and operating income of $7.5 million rose $1.6
million (28%) versus fourth quarter fiscal 2011.
A number of factors contributed to the strong full-year and fourth quarter comparative results:
•
• Market conditions. Global market fundamentals were healthy as population and income growth in emerging economies
have increased demand for food, while natural disasters and adverse weather conditions have restricted supplies. These
factors have resulted in higher crop prices and wider acceptance of precision agriculture as a sound investment for
maximizing yields and controlling input costs.
Sales volume and selling prices. The increase in net sales was driven by higher sales volume, as selling prices reflected
only a modest increase year-over-year. The favorable year-over-year comparisons reflect strong sales growth across
the majority of the division's product offerings, including application controls (i.e. control systems, flow meters, valves),
field computers, guidance and steering products and boom controls.
International sales. Net sales outside the U.S. accounted for 25% of segment sales in fiscal 2012 versus 21% for fiscal
2011. International sales of $32.9 million in fiscal 2012 increased $11.6 million, or 54 % year-over-year as improved
farm fundamentals drove strong overall demand in Brazil, and to a lesser extent, Eastern Europe, Canada, South Africa,
and Australia. New customers have also contributed to the international sales growth, reflecting the segment's current
•
17
and past investment to expand its geographical presence.
• Gross margins. Gross margins of 46.9% in fiscal 2012 improved from 45.1% in fiscal 2011 due to higher sales volume
and operating leverage on profitability.
• Operating expenses. Full-year operating expenses were 12.7% of net sales in fiscal 2012, compared to 14.0% for the
prior year. Although spending for R&D and business development efforts increased $2.8 million versus the prior year,
such spending declined as a percentage of net sales, due to the significant growth in net sales.
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.
Several factors contributed to the strong full-year comparative results:
• Market conditions. U.S. farm fundamentals were strong as commodity prices—corn, 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 Slingshot™—an 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.
Engineered Films
Engineered Films produces rugged reinforced plastic sheeting for industrial, energy, construction, geomembrane and agricultural
applications.
Financial highlights for the fiscal years ended January 31,
2012
$ 133,481
26,090
dollars in thousands
Net sales
Gross profit
Gross margins
Operating income
Operating margins
(a) Includes a $451 pre-tax gain on the disposition of assets.
21,501
16.1%
19.5%
$
% change
26%
15%
10%
$
$
2011
105,838
22,708
21.5%
19,622
(a)
18.5%
% change
66%
75%
92%
$
$
2010
63,783
13,013
20.4%
10,232
16.0%
Fiscal 2012 net sales of $133.5 million increased $27.6 million (26%) while operating income of $21.5 million was up $1.9 million
(10%) versus fiscal 2011.
The year-over-year changes were driven primarily by the following factors:
• Market conditions. Economic growth in emerging markets continued to support higher oil prices, and in turn, increased
•
drilling activity and demand for pit liners in the energy market.
Sales volume and selling prices. Sales growth for fiscal 2012 was predominately driven by the increased demand for pit
liners utilized in oil and gas exploration activity. Environmental and water conservation projects increased the demand
for geomembrane containment liners and covers during fiscal 2012. New product sales of FeedFresh™ and fumigation
films contributed to the year-over-year sales increase in the agriculture market. Selling prices increased approximately
10% during fiscal 2012, reflecting higher material costs as compared with one year ago. Sales volume, as measured by
pounds shipped, was up 12% year-over-year.
18
• Gross margin decline. Full year gross margins declined 2 percentage points, despite the 26% sales growth. The lower
gross margin was attributable to higher resin costs that were not fully offset by increased selling prices in the first nine
months of the year.
• Operating expenses. Fiscal 2012 operating expenses as a percentage of net sales increased slightly to 3.4%, compared
to 3.3% in the prior year, excluding the $0.5 million gain on disposition of assets. The increase in selling expense of
$0.4 million (13%) lagged the 26% increase in sales; however, a year-over-year increase in R&D spending of $0.7 million
contributed to the slight increase in operating expenses as a percentage of sales. Higher R&D spending reflects one of
the segment's key performance goals of expanding its product development efforts.
Fiscal 2012 fourth quarter net sales of $36.0 million grew $11.7 million (48%) and operating income of $6.5 million rose $3.5
million (114%) versus fourth quarter fiscal 2011.
Several factors contributed to the strong fourth quarter comparative results:
•
Sales volume and selling price. Fourth quarter fiscal 2012 sales to the energy and geomembrane markets increased above
levels in the fourth quarter of fiscal 2011 due to market conditions discussed above and increased capacity as new extrusion
equipment was brought on-line in the fourth quarter to meet demand. Selling prices and sales volume, as measured by
pounds shipped, increased 9% and 39%, respectively compared to fourth quarter fiscal 2011.
• Gross margin. Gross margins increased in the fourth quarter of fiscal 2012 to 22.1% compared to 16.7% in the prior
year fourth quarter. The increase in the margin was due to the higher sales volume and the resulting positive operating
leverage and to a more favorable ratio of selling prices to input costs.
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 results were primarily driven by the following factors:
•
•
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 markets, energy and construction, rebounded 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.
• 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.
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
Net sales
Gross profit
Gross margins
Operating income
Operating margins
$
2012
52,351
15,352
29.3%
$
11,468
21.9%
% change
7%
23%
22%
$
$
2011
48,787
12,475
25.6%
9,407
19.3%
% change
79%
88%
67%
$
$
2010
27,244
6,632
24.3%
5,634
20.7%
Fiscal 2012 net sales of $52.4 million increased $3.6 million (7%) and operating income of $11.5 million grew $2.1 million (22%)
over fiscal 2011.
19
Fiscal 2012 fourth quarter net sales of $15.8 million increased $3.9 million (32%) and operating income of $3.4 million increased
$1.1 million (49%) versus fiscal 2011 fourth quarter.
Fiscal 2012 full-year and fourth quarter comparative results were primarily attributable to the following:
•
Sales volumes. Net sales for fiscal 2012 increased $3.6 million from the prior year, mainly due to higher T-11 parachute
and spare parts deliveries and additional protective wear sales, offset by a decrease in tethered aerostat sales. The fourth
quarter 2012 sales increase of 32% was largely impacted by the parachute and protective wear revenue growth and
increased tethered aerostat sales.
• Volatility in aerostat deliveries. The company continued to see volatility in the delivery of aerostats which impact
comparative results. Aerostat sales by fiscal 2012 quarters were $7.3 million in the first quarter; $3.7 million in the
second quarter; $1.6 million in the third quarter and $5.1 million in the fourth quarter.
• Gross margin improvement. Gross margins improved to 29.3% compared to 25.6% in the prior year. Gross margin
expansion on T-11 parachutes resulted from manufacturing efficiencies and higher sales volume but was partially offset
by a change in product mix. Aerostat sales, which carry a relatively higher margin, accounted for approximately 34%
of net sales in fiscal 2012 compared to 46% in fiscal 2011.
• Operating expenses. Operating expenses of $3.9 million or 7.4% of sales increased $0.8 million from $3.1 million or
6.3% of sales as a result of higher investment in research and development to support next generation aerostat technology
and the development of lighter but stronger materials, along with higher selling and business development expense to
expand the tethered aerostat business.
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%) over fiscal 2010.
Fiscal 2011 results were driven by the following:
•
Tethered aerostats. Aerostar capitalized on strong demand from the U.S. military for persistent ground surveillance
systems to be deployed in Afghanistan.
• 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 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.
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
2012
% change
2011
% change
2010
Net sales
Gross profit
Gross margins
Operating income
Operating margins
$
71,744
12,824
17.9%
9%
14%
$
65,852
11,234
17.1%
4%
10%
$
63,525
10,258
16.1%
$
11,264
14%
$
9,917
10%
$
8,979
15.7%
15.1%
14.1%
Fiscal 2012 net sales of $71.7 million increased $5.9 million, (9%) and operating income of $11.3 million grew $1.3 million,
(14%) from fiscal 2011.
20
Fiscal 2012 fourth quarter net sales of $18.4 million increased $4.7 million (34%) and operating income of $3.3 million increased
$1.6 million (93%) over fourth quarter fiscal 2011.
The following factors affected fiscal 2012 full-year and fourth quarter comparative results:
•
Sales volume. Fiscal 2012 net sales increased 9% year-over-year, primarily due to additional intercompany sourcing of
assemblies to the Applied Technology Division and increased sales of hand-held bed controls. Avionics deliveries were
down year-over year, reflecting the planned ending of certain programs this year. Fourth quarter fiscal 2012 net sales
were favorably impacted by increased secure communication electronic shipments and hand-held bed control deliveries
compared to the same period a year ago.
• Gross margins. Year-over-year gross margins improved to 17.9% from 17.1% due to positive operating leverage from
increased sales volume and favorable product mix. Fourth quarter fiscal 2012 gross margins of 19.9% were up from
from 14.7% in the fourth quarter of fiscal 2011 due to increased sales volume.
• Operating expenses. Fiscal 2012 operating expenses were $1.6 million or 2.2% of sales, compared to $1.3 million or
2.0% of sales in fiscal 2011. The year-over-year increase is due to higher selling expenses.
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 full-year comparative results reflected the following:
•
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.
• Operating expenses. Fiscal 2011 operating expenses were relatively unchanged from fiscal 2010 levels.
Corporate Expenses (administrative expenses; other income (expense), net; and income taxes)
dollars in thousands
Administrative expenses
Administrative expenses as a % of sales
Other income (expense), net
Effective tax rate
For the years ended January 31
$
$
2012
13,730
3.6%
57
33.1%
$
$
2011
9,784
3.1%
79
32.8%
$
$
2010
7,407
3.1%
102
34.0%
Administrative expenses increased 40% in fiscal 2012 compared with fiscal 2011. Investments in additional finance, human
resources and information technology personnel to support current and future growth strategies through a strengthened corporate
infrastructure accounted for the majority of the increased spending. Higher professional services spending related to the Vista
acquisition and other business and strategic initiatives also contributed to the increase. Administrative expenses increased 32%
in fiscal 2011 compared with fiscal 2010, driven by increased headcount and higher incentive compensation.
Other income (expense), net consists mainly of interest income, foreign currency transaction gain or loss, and activity related to
the company's equity investment in SST. The year-over-year variability is attributable primarily to a decrease in interest income
due to lower interest rates.
The fiscal 2012 effective tax rate increased slightly compared with fiscal 2011 due to a lower U.S. federal tax deduction from
income attributable to manufacturing activities.
OUTLOOK
Raven has been investing to achieve growth that will average 10-12% over the long term, with opportunities to exceed that objective
and an understanding that it will not meet that target every year. Management believes double digit growth in fiscal 2013 is
possible, and sees a wide range of possible results for Aerostar. The profit effect of expected sales growth is projected to be
partially offset by higher investments in new product development and infrastructure. In addition to the R&D investment levels,
Raven will continue to explore opportunities to grow its businesses through acquisition and expansion activities.
Applied Technology
Applied Technology expects to build on its investments in international growth and integration of hardware and software solutions
to improve agricultural efficiency. The development of an industry-leading decision-support system helps position Applied
21
Technology as a premier total precision solutions provider (GPS steering devices, planting and spraying controls, data collection,
transmission, storage and analysis). Worldwide agriculture conditions are expected to remain healthy for this segment, with rising
global demand for food, heightened environmental concerns and broadening recognition of Raven's suite of productivity tools as
a cost-effective investment. These factors could drive sales growth to the 15-20% range in fiscal 2013. Profitability growth could
be tempered by investments in new initiatives, both from a product development and geographic expansion perspective.
Engineered Films
Management anticipates sales growth of 15-18% to be driven by increased capacity and capabilities. Demand, especially for
energy and geomembrane films, continues to have a positive outlook. Crude oil prices continue to drive oil and gas drilling
activities and demand for pit liners. The impact of transient factors, such as civil unrest in oil-producing countries and speculation
on the price of crude oil is uncertain, but long-term needs remain. New extrusion equipment put into service in the fourth quarter
of fiscal 2012 completed the second phase of its expansion, increasing total tonnage capacity by approximately 40% over the last
two years. The ramp-up period for new equipment has typically taken 2-3 years, depending on market conditions. Management
expects operating income growth to slightly exceed anticipated sales growth due to an improving spread of selling prices over the
cost of plastic resins and higher utilization of the new extrusion equipment, partially offset by higher depreciation and investment
spending for research and product development.
Aerostar
Management believes the addition of Vista surveillance technologies will bring new innovations for detecting and tracking small
objects over the land, on the water and in the air. Raven solutions can replace or enhance traditional, high-cost radar systems used
today.
New opportunities in tethered aerostats to provide cost effective persistent surveillance for the military will be critical to Aerostar's
success. Similar to this past year, deliveries could vary significantly by quarter as orders are dependent on the government funding
process. Management believes with a full year of Vista revenue, and growth in military parachutes and protective wear, Aerostar
revenue growth of 20-40% is possible in the upcoming year. At this point, Aerostar's outlook is impacted by uncertainty in the
funding of new projects by the U.S. government. Despite strong interest, at this point, order backlog is minimal for aerostats and
surveillance systems. Aerostar sales in the first quarter are now expected to decline over the previous year. Aerostar's gross profit
rates are expected to decline by about 3 percentage points in fiscal 2013 due to the change in revenue mix, with Vista service
revenues carrying a lower gross profit rate than product sales.
Electronic Systems
Management looks at Electronic Systems as a complementary business to its growth divisions: Engineered Films, Aerostar and
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. 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 Raven's other divisions. Fiscal 2013 results are expected to be in line with fiscal 2012 results as the
impact of lower avionics sales is substantially offset by higher deliveries to other Raven divisions.
LIQUIDITY AND CAPITAL RESOURCES
The company's 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 Raven's
primary source of liquidity. Management expects that current cash, combined with the generation of positive operating cash flows,
will be sufficient to fund the company's operating, investing and financing activities.
Raven's 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 $25.8 million at January 31, 2012, a $12.7 million decrease from $38.6
million on the same date in 2011. In January 2012, the company made an $11.7 million net payment for the acquisition of Vista
Research, Inc.
Raven has an uncollateralized credit agreement that provides a $10.5 million line of credit, with a balance of zero at January 31,
2012. The line of credit is reduced by outstanding letters of credit totaling $1.3 million as of January 31, 2012. The credit line,
which matures on September 1, 2012, is expected to be renewed during fiscal 2013.
Operating Activities
Operating cash flows result primarily from cash received from customers, which is offset by cash payments for inventories, services,
22
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 company's 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 $43.8 million in fiscal 2012 compared with $42.1 million in fiscal 2011. The increase
in operating cash flows is the result of higher company earnings, depreciation expense, and deferred income taxes, partially offset
by increased working capital to support growth.
In fiscal 2012, inventory and accounts receivable consumed $27.1 million of cash versus $14.7 million in fiscal 2011. The company's
inventory turnover rate declined slightly from the prior year due to higher raw material inventory levels to support increased sales
(trailing 12-month inventory turn of 5.4X in fiscal 2012 versus 5.6X in fiscal 2011). Cash collections continue to be efficient,
with the trailing 12 month days sales outstanding of 47 days in fiscal 2012 compared to 48 days in fiscal 2011. Year-over-year
variability in accounts payable consumed $0.2 million of cash in fiscal 2012 compared to cash generated of $2.7 million in fiscal
2011 due to timing of payments. In fiscal 2012, the change in deferred income taxes contributed $5.4 million of additional operating
cash flow due primarily to the deferral of tax liabilities resulting from bonus depreciation taken on qualified capital expenditures.
In fiscal 2011, inventory consumed $9.2 million of cash 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 growth, particularly sales of engineered
films and tethered aerostats. 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)
contributed to stronger cash flows. 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.
Investing Activities
Cash used in investing activities totaled $40.3 million in fiscal 2012, $11.4 million in fiscal 2011 and $13.4 million in fiscal 2010.
Capital expenditures totaled a record $29.0 million in fiscal 2012 compared to $14.0 million in fiscal 2011. Capital spending
consisted primarily of expenditures related to increased manufacturing capacity in Engineered Films, a new manufacturing facility
in Applied Technology and Aerostar's commitment to a higher level of product development investments in future growth,
including facilities and equipment. Capital outlay for payments related to business acquisitions was $11.8 million in fiscal 2012,
primarily related to the Vista acquisition.
Management anticipates record capital spending in fiscal 2013, in the $35 million range. In addition, management will evaluate
strategic acquisitions that result in expanded capabilities and solidify competitive advantages. As part of the company's investment
in corporate infrastructure, Raven will be investing approximately $15-$20 million over a 3-5 year period to renovate its downtown
Sioux Falls facility headquarters. Expansion of Engineered Films capacity and Applied Technology's manufacturing and research
and development facility are expected to continue.
Financing Activities
Cash used in financing activities is primarily for dividend payments and repurchases of common stock. Financing activities
consumed cash of $15.2 million in fiscal 2012 compared with $33.8 million in fiscal 2011 and $9.9 million in fiscal 2010.
Quarterly dividends paid in fiscal 2012 were $13.0 million, or $0.72 per share, compared to $11.5 million in fiscal 2011 and $9.9
million in fiscal 2010. In the first quarter of fiscal 2012, the company increased the quarterly dividend rate (excluding special
dividends) for the 25th consecutive year. Raven has now paid a dividend in 39 consecutive years.
In fiscal 2011, the company paid a special dividend of $22.5 million, or $1.25 per share.
Cash outflow for repayment of a line of credit in fiscal 2012 totaled $2.9 million. This represents a payment to close a line of
credit assumed as part of the Vista acquisition in January 2012. No borrowings were made on the line of credit.
23
OFF-BALANCE SHEET ARRANGEMENTS AND CONTRACTUAL OBLIGATIONS
As of January 31, 2012, the company is obligated to make cash payments in connection with its non-cancelable operating leases
for facilities and equipment and unconditional purchase obligations, primarily for raw materials, in 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 company's 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, 2012 and for the next five years is shown below.
dollars in thousands
Contractual Obligations:
Line of credit(a)
Operating leases
Unconditional purchase obligations
Postretirement benefits(b)
Acquisition-related contingent payments(c)
Uncertain tax positions(d)
Total
Less than
1 year
1-3
years
3-5
years
More than
5 years
$
— $
— $
— $
— $
—
5,328
59,716
17,890
22,692
—
1,467
59,716
212
3,455
—
2,446
—
486
6,286
—
1,191
—
591
4,601
—
224
—
16,601
8,350
—
$ 105,626
$
64,850
$
9,218
$
6,383
$
25,175
(a) $10.5 million line bears interest at 4.0% as of January 31, 2012 and expires September 2012. The line of credit is reduced by outstanding
letters of credit totaling $1.3 million at January 31, 2012.
(b)
Postretirement benefits amounts represent expected payments on the accumulated postretirement benefit obligation.
(c) Amounts reflect the future milestone and earn-out payments with the Vista and Ranchview acquisition. Actual payments on these obligations
may vary from the recorded balance since the total payment amount due depends upon certain future conditions. See below for further
detail on the specific obligations.
(d) The total liability for uncertain tax positions at January 31, 2012 was $4.9 million. The company is not able to reasonably estimate the
timing of future payments relating to non-current tax benefits.
Acquisition related obligations
The company has entered into future obligations for milestone and earn-out payments associated with the Ranchview and Vista
acquisitions.
In connection with the Vista stock purchase agreement, the company has agreed to pay $3.25 million upon the total receipt of
smart sensing radar systems (SSRS) orders for delivery of a specific quantity by January 31, 2013 and another $3.25 million upon
the delivery of the total specific SSRS quantity by January 31, 2014. No amount would be paid if the specific milestones are not
reached by the specific dates. The company will also make annual payments to the previous owners based upon earn-out percentages
on specific revenue streams until January 31, 2019, not to exceed $15.0 million. Lastly, the company has agreed to fund a revenue
based bonus pool for Vista employees using those same earn-out percentages on specific revenue streams until January 31, 2019,
also not to exceed $15.0 million. The company has not paid any amount on these obligation as of January 31, 2012.
For the Ranchview acquisition, Raven agreed to pay additional consideration on a quarterly basis of 6% on future sales of Ranchview
products, up to a maximum payment of $4.0 million. As of January 31, 2012, the company has paid a total of $0.3 million on this
obligation since acquisition.
The total liability recorded on the consolidated balance sheet as of January 31, 2012 related to these future obligations was $10.9
million, of which $3.3 million is classified as accrued liabilities and $7.6 million as other liabilities. These liabilities primarily
represent the present value of milestone and earn-out payments classified as consideration at the acquisition date. Payments related
to the Vista employee revenue-based bonus pool were treated as a separate transaction from the acquisition and will be accrued
when the specific revenue stream is recorded.
CRITICAL ACCOUNTING ESTIMATES
Critical accounting policies are those that require the application of judgment when valuing assets and liabilities on the company's
balance sheet. These policies are discussed below, because a fluctuation in actual results versus expected results could materially
24
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 company's 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 company's
financial condition, results of operations or cash flows.
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 year's requirements, or that have been dropped from production requirements. Despite
these reviews, technological or strategic decisions made by management or Raven's 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 purchases, especially with long lead-time items, they 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 management's 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 customer's 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 annually, or more frequently if events or changes in circumstances indicate that
an asset might be impaired, using fair value measurement techniques. For goodwill, Raven performs impairment reviews by
reporting units which are the company's reportable segments.
The company has the option to perform a qualitative impairment assessment over relevant events and circumstances to determine
whether it is more likely than not that the fair value of a reporting unit is less than its carrying amount. Certain events and
circumstances reviewed are macroeconomics, industry conditions, cost inputs, overall financial performance, and other relevant
entity specific events. If events and circumstances indicate the fair value of a reporting unit is more likely than not greater than
its carrying amount, then no further goodwill impairment testing is needed. If events and circumstances indicate the fair value of
a reporting unit is less than its carrying value, or the company does not elect to do the qualitative assessment, then the company
must perform step one of the goodwill impairment analysis.
In the first step of goodwill impairment testing, the corporate discount rate is calculated so that the discounted cash flows are equal
to Raven's 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
25
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 definite life intangibles; investments in affiliates; and property, plant and equipment, management
tests for recoverability whenever events or changes in circumstances indicate that the asset's 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 from, but are not limited to, an adverse change in the asset's 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
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
See Note 1 to the consolidated financial statements in Item 8 of this report for discussion of new accounting pronouncements.
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 outstanding as of January 31, 2012. 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
company's financial condition, results of operations or cash flows.
The company's 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 "Other income (expense), net" in the Consolidated Statements
of Income and Comprehensive Income. Foreign currency fluctuations had no material effect on the company's financial condition,
results of operations or cash flows.
26
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
Index to Financial Statements
Management's Report on Internal Control Over Financial Reporting
Report of Independent Registered Public Accounting Firm
Consolidated Financial Statements
Consolidated Balance Sheets
Consolidated Statements of Income and Comprehensive Income
Consolidated Statements of Shareholders' Equity
Consolidated Statements of Cash Flows
Notes to Consolidated Financial Statements
Quarterly Information (Unaudited) - included in Item 5 on page 10
Page(s)
28
29
30
31
32
33
34
10
27
MANAGEMENT'S 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, 2012, our internal control over financial reporting was effective.
Management has excluded from its assessment the internal control over financial reporting at Vista Research, Inc. (Vista), which
was acquired on January 6, 2012 and whose financial statements constitute approximately 11% of total assets and 0.2% of total
revenues on the consolidated financial statements as of and for the year ended January 31, 2012.
The effectiveness of our internal control over financial reporting as of January 31, 2012, 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
Daniel A. Rykhus
/s/ Thomas Iacarella
Thomas Iacarella
President & Chief Executive Officer
Vice President & Chief Financial Officer
March 30, 2012
28
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 and comprehensive
income, of shareholders' equity 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, 2012, 2011 and 2010 and the results of their operations and their cash
flows for each of the three years in the period ended January 31, 2012 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, 2012 based on criteria established in Internal Control - Integrated Framework issued
by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). The Company's 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 Management's Report on Internal Control over Financial
Reporting on the preceding page. Our responsibility is to express opinions on these financial statements and on the Company's
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 company's 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 company's 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 company's 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.
As described in Management's Report on Internal Control over Financial Reporting, management has excluded Vista Research,
Inc. (Vista) from its assessment of internal control over financial reporting as of January 31, 2012 because it was acquired by the
Company in a purchase business combination during January 2012. We have also excluded Vista from our audit of internal control
over financial reporting. Vista is a wholly-owned subsidiary whose total assets and total revenues represent 11% and 0.2%,
respectively, of the related consolidated financial statement amounts as of and for the year ended January 31, 2012.
/s/ PricewaterhouseCoopers LLP
Minneapolis, Minnesota
March 30, 2012
29
RAVEN INDUSTRIES, INC.
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS, EXCEPT PER-SHARE AMOUNTS)
ASSETS
Current assets
Cash and cash equivalents
Short-term investments
Accounts receivable, net
Inventories
Deferred income taxes
Other current assets
Total current assets
Property, plant and equipment, net
Goodwill
Amortizable intangible assets, net
Other assets, net
TOTAL ASSETS
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities
Accounts payable
Accrued liabilities
Customer advances
Total current liabilities
Other liabilities
Commitments and contingencies
Shareholders' Equity
$
$
$
Common stock, $1 par value, authorized shares 100,000; issued
32,566; 32,511; and 32,478, respectively
Paid in capital
Retained earnings
Accumulated other comprehensive loss
Less treasury stock at cost, 14,449 shares
Total Raven Industries, Inc. shareholders' equity
Noncontrolling interest
Total shareholders' equity
TOTAL LIABILITY AND SHAREHOLDERS' EQUITY
$
The accompanying notes are an integral part of the consolidated financial statements.
30
2012
As of January 31
2011
2010
25,842
—
60,759
54,756
3,299
2,903
$
37,563
1,000
39,967
43,679
2,733
3,239
$
40,684
3,000
34,327
34,475
2,471
2,790
147,559
128,181
117,747
61,894
22,274
9,412
4,564
245,703
16,162
22,993
1,491
40,646
24,467
32,566
9,607
193,650
(1,962)
(53,362)
180,499
91
180,590
245,703
41,522
10,777
1,585
5,695
187,760
16,715
16,096
1,524
34,335
12,211
32,511
7,060
156,125
(1,120)
(53,362)
141,214
—
141,214
187,760
$
$
$
33,029
10,699
2,185
6,649
170,309
12,398
12,256
1,306
25,960
11,098
32,478
5,604
149,732
(1,201)
(53,362)
133,251
—
133,251
170,309
$
$
$
RAVEN INDUSTRIES, INC.
CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME
(IN THOUSANDS, EXCEPT PER-SHARE AMOUNTS)
Net sales
Cost of sales
Gross profit
Research and development expenses
Selling, general and administrative expenses
Gain on disposition of assets
Operating income
Other income (expense), net
Income before income taxes
Income taxes
Net income
Net income attributable to the noncontrolling interest
Net income attributable to Raven Industries, Inc.
Net income per common share:
- Basic
- Diluted
Comprehensive income:
Net income
Other comprehensive income, net of tax:
Foreign currency translation
Postretirement benefits, net of income tax of $432, $25, and $122,
respectively
Other comprehensive income (loss), net of tax
For the years ended January 31
2012
2011
2010
$
381,511
265,319
116,192
$
314,708
223,279
91,429
$
237,782
169,930
67,852
9,724
30,827
—
75,641
57
75,698
25,063
50,635
66
50,569
2.79
2.77
50,635
(38)
(804)
(842)
$
$
$
$
7,604
24,073
(451)
60,203
79
60,282
19,745
40,537
—
40,537
2.24
2.24
40,537
127
(46)
81
$
$
$
$
5,843
18,789
—
43,220
102
43,322
14,748
28,574
—
28,574
1.58
1.58
28,574
179
(226)
(47)
$
$
$
$
Comprehensive income
49,793
40,618
28,527
Comprehensive income attributable to noncontrolling interest
66
—
—
Comprehensive income attributable to Raven Industries, Inc.
$
49,727
$
40,618
$
28,527
The accompanying notes are an integral part of the consolidated financial statements.
31
RAVEN INDUSTRIES, INC.
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
(IN THOUSANDS, EXCEPT PER-SHARE AMOUNTS)
$1 Par
common
stock
Paid-in
capital
Treasury stock
Shares
Cost
Retained
earnings
other
comprehensive
income (loss)
Raven
Industries, Inc.
Equity
Non
controlling
Interest
Total
Equity
Accumulated
Total
Balance January 31, 2009
$ 32,461 $ 4,531
(14,449) $ (53,362) $ 131,080 $
(1,154) $
113,556 $
— $113,556
Net income
Other comprehensive income (loss), net of
income tax
Dividends ($0.55 per share)
Stock surrendered upon exercise of stock
options
Employees' stock options exercised
Share-based compensation
Tax cost from exercise of stock options
—
—
—
—
—
11
(51)
(1,319)
65
3
—
1,374
1,031
(24)
—
—
—
—
—
—
—
—
—
—
—
—
—
—
28,574
—
(9,922)
—
—
—
—
—
(47)
—
—
—
—
—
28,574
— 28,574
(47)
(9,911)
—
(47)
— (9,911)
(1,370)
— (1,370)
1,439
1,034
(24)
—
—
—
1,439
1,034
(24)
Balance January 31, 2010
32,478
5,604
(14,449)
(53,362)
149,732
(1,201)
133,251
— 133,251
Net income
Other comprehensive income (loss), net of
income tax
Dividends ($0.64 per share)
Dividends (special—$1.25 per share)
Stock surrendered upon exercise of stock
options
Employees' stock options exercised
Share-based compensation
Tax benefit from exercise of stock options
—
—
—
—
—
—
17
32
(79)
(3,038)
112
3,257
— 1,179
—
9
—
—
—
—
—
—
—
—
—
—
40,537
—
— (11,563)
— (22,581)
—
—
—
—
—
—
—
—
—
81
—
—
—
—
—
—
40,537
— 40,537
81
—
81
(11,546)
(22,549)
— (11,546)
— (22,549)
(3,117)
— (3,117)
3,369
1,179
9
—
—
—
3,369
1,179
9
Balance January 31, 2011
32,511
7,060
(14,449)
(53,362)
156,125
(1,120)
141,214
— 141,214
Net income
Other comprehensive income (loss), net of
income tax
Dividends ($0.72 per share)
Director shares issued
Stock surrendered upon exercise of stock
options
Employees' stock options exercised
Share-based compensation
Tax benefit from exercise of stock options
Noncontrolling capital contribution
—
—
—
7
—
—
19
(7)
(37)
(2,089)
84
1
—
—
2,413
1,921
290
—
—
—
—
—
—
—
—
—
—
—
—
50,569
—
50,569
—
(842)
(842)
66
—
50,635
(842)
— (13,044)
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
(13,025)
— (13,025)
—
—
—
(2,126)
— (2,126)
2,497
1,922
290
—
—
—
—
25
2,497
1,922
290
25
Balance January 31, 2012
$ 32,566 $ 9,607
(14,449) $ (53,362) $ 193,650 $
(1,962) $
180,499 $
91 $180,590
The accompanying notes are an integral part of the consolidated financial statements.
32
RAVEN INDUSTRIES, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
For the years ended January 31
2012
2011
2010
$
50,635
$
40,537
$
28,574
8,180
1,088
—
(14)
(156)
5,358
1,922
(23,076)
(106)
43,831
(29,015)
(11,787)
1,000
—
—
—
(511)
(40,313)
(13,025)
(2,869)
660
(15,234)
(5)
(11,721)
37,563
25,842
6,512
1,119
(451)
274
(195)
423
1,179
(7,273)
(40)
42,085
(13,972)
(399)
3,700
(1,700)
—
888
65
(11,418)
(34,095)
—
261
(33,834)
46
(3,121)
40,684
37,563
6,611
497
—
94
(10)
95
1,034
10,935
(187)
47,643
(3,302)
(2,000)
500
(3,500)
(5,000)
—
(94)
(13,396)
(9,911)
—
44
(9,867)
37
24,417
16,267
40,684
$
$
OPERATING ACTIVITIES:
Net income
Adjustments to reconcile net income to net cash provided by operating
activities:
Depreciation
Amortization of intangible assets
Gain on disposition of assets
Change in fair value of acquisition-related contingent consideration
Earnings of equity investee
Deferred income taxes
Share-based compensation expense
Change in operating assets and liabilities
Other operating activities, net
Net cash provided by operating activities
INVESTING ACTIVITIES:
Capital expenditures
Payments related to business acquisitions, net of cash acquired
Sales of short-term investments
Purchases of short-term investments
Purchase of equity investment
Proceeds from disposition of assets
Other investing activities, net
Net cash used in investing activities
FINANCING ACTIVITIES:
Dividends paid
Repayment of line of credit
Other financing activities, net
Net cash used in financing activities
Effect of exchange rate changes on cash
Net increase (decrease) in cash and cash equivalents
Cash and cash equivalents at beginning of year
Cash and cash equivalents at end of year
$
The accompanying notes are an integral part of the consolidated financial statements.
33
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
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. Raven operates 3 divisions (Applied Technology,
Engineered Films and Electronic Systems), and 6 wholly owned subsidiaries: Aerostar International, Inc. (Aerostar); Raven
Industries Canada, Inc. (Raven Canada); Raven Industries GmbH (Raven GmbH); Raven Industries Australia Pty Ltd (Raven
Australia); Raven Do Brazil Participacoes E Servicos Technicos LTDA (Raven Brazil); and Vista Research, Inc. (Vista).
The consolidated financial statements for the periods included herein have been prepared by Raven Industries, Inc. (Raven or the
company), pursuant to the rules and regulations of the Securities and Exchange Commission (SEC). The accompanying
consolidated financial statements include the accounts of Raven and its wholly owned or controlled subsidiaries. All intercompany
balances and transactions have been eliminated in consolidation.
Noncontrolling Interest
Non-controlling interests represent capital contributions, income and loss attributable to the owners of less than wholly-owned
and consolidated entities. During fiscal year 2012, the company entered into a business venture agreement to pursue potential
product and support services contracts for agencies and instrumentalities for the United States Government. The business venture,
Aerostar Integrated Systems, (AIS), is 75% owned by the company and is included in the Aerostar business segment. Given the
company's majority ownership interest, the accounts of the business venture have been consolidated with the accounts of the
company, and a noncontrolling interest has been recorded for the noncontrolling investor's interests in the net assets and operations
of the business venture.
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 company's share of the investee's results of operations is included in “other income (expense), 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 affiliate's 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 company's subsidiaries that operate outside the United States use the local currency as their functional currency. The functional
currency is translated into U.S. dollars for balance sheet accounts using the period-end exchange rates and average exchange rates
for the statement of income and comprehensive income. Adjustments resulting from financial statement translations are included
as foreign currency translation adjustments in “accumulated other comprehensive income (loss)” within shareholders' equity.
Foreign currency transaction gains or losses are recognized in the period incurred and are included in “other income (expense),
net” in the Consolidated Statements of Income and Comprehensive Income.
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.
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
34
(IN THOUSANDS, EXCEPT PER-SHARE AMOUNTS)
the company's 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:
Building and improvements
Manufacturing equipment by segment
Applied Technology
Engineered Films
Aerostar
Electronic Systems
Furniture, fixtures, office equipment and other
15 - 39 years
3 - 5 years
5 - 12 years
3 - 5 years
3 - 5 years
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 $553 in fiscal 2012, $1,280 in fiscal 2011 and $914
in fiscal 2010. 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.
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 either on a straight-line basis or under the undiscounted cash flows method
over the estimated useful lives ranging from 3 to 20 years. The straight-line method of amortization is used when it 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 Consolidated Statements of Income and Comprehensive
Income.
Goodwill is tested for impairment on an annual basis during the fourth quarter and between annual tests whenever a triggering
event indicates there may be an impairment. Impairment tests of goodwill are performed at the reporting unit level. A qualitative
impairment assessment over relevant events and circumstances may be assessed to determine whether it is more likely than not
that the fair value of a reporting unit is less than its carrying amount. If events and circumstances indicate the fair value of a
reporting unit is less than its carrying value, then the 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 asset's 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
35
(IN THOUSANDS, EXCEPT PER-SHARE AMOUNTS)
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 it is realized or realizable and has been earned. Revenue is recognized when there is persuasive
evidence of an arrangement, the sales price is determinable, collectability is reasonably assured and shipment or delivery has
occurred (depending on the terms of the sale). The company sells directly to customers or distributors 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.
Operating Expenses
The primary types of operating expenses are classified in the income statement as follows:
Cost of sales
Direct material costs
Material acquisition and handling costs
Direct labor
Factory overhead including depreciation
Inventory obsolescence
Product warranties
Shipping and handling cost
Research and development
expenses
Personnel costs
Professional service fees
Material and supplies
Facility allocation
Selling, general and administrative expenses
Personnel costs
Professional service fees
Advertising
Promotions
Information technology equipment depreciation
Office supplies
The company's 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. Under
this method, the fair value of share-based compensation is determined as of the grant date and the related expense is recorded over
the period in which the share-based compensation vests.
Income Taxes
Deferred income taxes reflect temporary differences between assets and liabilities reported on the company's 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 September 2011, the Financial Accounting Standards Board (FASB) issued updated guidance on goodwill impairment testing.
This guidance seeks to reduce the cost and complexity of performing the first step of the two-step goodwill impairment test. This
amendment permits an entity to first assess qualitative factors to determine whether the existence of events or circumstances leads
to a more likely than not (more than 50% likelihood) that the fair value of the reporting unit is less than its carrying amount. The
performance of the two-step impairment test becomes unnecessary if after assessing the totality of events and circumstances, the
entity determines that it is not more likely than not that the fair value of the reporting unit is less than its carrying amount. The
amendment is effective for fiscal years beginning after December 15, 2011, with early adoption permitted. Raven adopted the
accounting guidance for our fiscal 2012 goodwill impairment analysis. The adoption of the guidance did not have any impact on
the company's consolidated financial statements.
36
(IN THOUSANDS, EXCEPT PER-SHARE AMOUNTS)
In June 2011, the FASB issued guidance on the presentation of comprehensive income. This guidance gives an entity the option
to present the total of comprehensive income, the components of net income and the components of other comprehensive income
either in a single continuous statement of comprehensive income or in two separate but consecutive statements. The guidance
eliminates the option to present the components of other comprehensive income as a part of the statement of changes in shareholders'
equity. The guidance does not change the items that must be reported in other comprehensive income or when an item of other
comprehensive income must be reclassified to net income. The guidance should be applied retrospectively, and for public companies
is effective for fiscal years, and interim periods within those years, beginning after December 15, 2011, with early adoption
permitted. In December 2011, FASB deferred the requirement to present reclassification adjustments for each component of
accumulated other comprehensive income in both net income and other comprehensive income. During the deferral period, there
is no requirement to separately present or disclose the reclassification adjustments into net income. Raven adopted the presentation
requirements related to comprehensive income, which did not have any impact on the company's consolidated financial statements.
NOTE 2
SELECTED BALANCE SHEET INFORMATION
Following are the components of selected balance sheet items:
2012
As of January 31
2011
2010
Accounts receivable, net:
Trade accounts
Allowance for doubtful accounts
Inventories:
Finished goods
In process
Materials
Other current assets:
Insurance policy benefit
Prepaid expenses and other
Property, plant and equipment, net:
Land
Buildings and improvements
Machinery and equipment
Accumulated depreciation
Other assets, net:
Investment in affiliate
Deferred income taxes
Other, net
Accrued liabilities:
Salaries and benefits
Vacation
401(k) contributions
Insurance obligations
Profit sharing
Warranties
Taxes - accrued and withheld
Acquisition-related contingent consideration
Other
Other liabilities:
Postretirement benefits
Acquisition-related contingent consideration
Deferred income taxes
Uncertain tax positions
$
$
$
$
$
$
$
$
$
$
$
$
$
$
60,929
(170)
60,759
7,094
6,105
41,557
54,756
1,873
1,030
2,903
2,077
36,952
89,919
(67,054)
61,894
4,409
—
155
4,564
4,297
4,387
966
2,789
1,244
1,699
2,596
3,266
1,749
22,993
7,348
7,655
4,518
4,946
24,467
$
$
$
$
$
$
$
$
$
$
$
$
$
$
40,267
(300)
39,967
7,994
5,424
30,261
43,679
1,909
1,330
3,239
1,798
24,972
75,310
(60,558)
41,522
4,728
924
43
5,695
3,264
3,186
253
3,356
1,627
1,437
1,453
263
1,257
16,096
5,757
2,230
—
4,224
12,211
$
$
$
$
$
$
$
$
$
$
$
$
$
$
34,624
(297)
34,327
6,283
4,172
24,020
34,475
2,300
490
2,790
1,227
22,973
64,119
(55,290)
33,029
5,010
1,580
59
6,649
1,148
2,693
180
3,959
217
1,259
1,574
103
1,123
12,256
5,283
2,301
—
3,514
11,098
37
(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:
Foreign currency translation
Postretirement benefits, net of tax
Total accumulated other comprehensive loss
2012
As of January 31
2011
$
$
145
(2,107)
(1,962)
$
$
183
(1,303)
(1,120)
$
$
2010
56
(1,257)
(1,201)
NOTE 4
SUPPLEMENTAL CASH FLOW INFORMATION
Changes in operating assets and liabilities:
Accounts receivable
Inventories
Prepaid expenses and other assets
Accounts payable
Accrued and other liabilities
Customer advances
Cash paid during the year for income taxes
Significant non-cash transactions:
Capital expenditures included in accounts payable
For the years ended January 31
2012
2011
2010
$
$
$
$
(15,569)
(11,528)
(291)
(233)
4,578
(33)
(23,076)
16,782
984
$
$
$
$
(5,536)
(9,189)
96
2,713
4,428
215
(7,273)
19,700
2,181
$
$
$
$
6,325
1,552
(49)
2,934
(520)
693
10,935
13,816
474
NOTE 5
ACQUISITIONS OF AND INVESTMENTS IN BUSINESSES AND TECHNOLOGIES
Vista Research
In January 2012, the company completed the stock purchase agreement for all the outstanding stock of Vista Research, Inc. (Vista)
for a purchase price of $23,269, of which $12,000 was cash, $2,869 was on assumed line of credit paid by Raven at closing, and
$8,400 was valued in contingent consideration and earn-outs.
Vista is a leading provider of surveillance systems that enhance the effectiveness of radars using sophisticated algorithms. Vista's
smart sensing radar systems (SSRS) are employed in a host of advanced detection and tracking applications, including wide-area
surveillance for the border patrol and the military. In the short term, this acquisition will allow Raven to enhance its tethered
aerostat security solutions within its Aerostar Division. Longer-term, the company is positioned to meet growing global demand
for low-cost detection and tracking systems used by government and law enforcement agencies. Results of operations subsequent
to the acquisition have been combined into the Aerostar Division.
In connection with the stock purchase agreement, Raven has agreed to pay an aggregated $3,250 upon the total receipt of SSRS
orders for delivery of a specific quantity by January 31, 2013 and another $3,250 upon the delivery of the total specific quantity
by January 31, 2014. No amount would be paid if the specific milestones are not reached by the specific dates. The company
will also make annual payments based upon earn-out percentages on specific revenue streams over the next seven years, not to
exceed $15,000. The company has determined the fair value of these contingent considerations to be $8,400, of which $3,068
was classified as accrued liabilities and $5,332 as other liabilities in the Consolidated Balance Sheet.
Lastly, the company agreed to fund a revenue based bonus pool for Vista employees using those same earn-out percentages on
specific revenue streams over the next seven years, also not to exceed $15,000. Payments related to the Vista employee revenue-
based bonus pool were treated as a separate transaction from the acquisition and will be accrued when the specific revenue stream
is recorded.
The fair value of the business acquired was allocated to the assets acquired and liabilities assumed based on their estimated fair
38
(IN THOUSANDS, EXCEPT PER-SHARE AMOUNTS)
values. The excess of the fair value acquired over the identifiable assets acquired and liabilities assumed is reflected as goodwill.
Goodwill recorded as part of the purchase price allocation was $11,497, all of which is tax deductible. Goodwill resulting from
this business combination is largely attributable to the experienced workforce of the acquired business and synergies expected to
arise after integration of Vista products into existing Aerostar products. Identifiable intangible assets acquired as part of the
acquisition were $7,810, including definite-lived intangibles, such as customer relationships, proprietary technology and non-
compete agreements, with a useful life ranging from six to ten years. These intangible assets will be amortized on the basis of
undiscounted cash flows over a weighted average period of 4.1 years.
The total purchase price has been allocated to the estimated fair values of assets acquired and liabilities assumed as follows:
Cash
Accounts receivable
Inventory
Other current and long term assets
Property, plant, and equipment, net
Goodwill
Existing technology
Customer relationships
Other intangibles
Current liabilities
Other liabilities
Total purchase price
$
320
2,375
264
3,342
834
11,497
4,300
3,260
250
(3,023)
(150)
$
23,269
Vista net sales and net loss for the period from the acquisition date to January 31, 2012 were $631 and $(125), respectively.
The following pro forma consolidated condensed financial results of operations are presented as if the acquisition described above
had been completed at the beginning of each period presented:
Pro forma net sales
Pro forma net income attributable to Raven Industries, Inc.
Pro forma earnings per common share:
Basic
Diluted
For the years ended January 31
2012
2011
395,974
$
49,907
328,361
39,948
2.75
2.74
$
$
2.21
2.21
$
$
$
These pro forma consolidated financial results have been prepared for comparative purposes only and include certain adjustments,
such as amortization and acquisition cost. The pro forma information does not purport to be indicative of the results of operations
that actually would have resulted had the combination occurred at the beginning of each period presented, or of future results of
the consolidated entities.
SST
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 company’s share of the underlying net assets of
SST by $4,976. The company's 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.
39
(IN THOUSANDS, EXCEPT PER-SHARE AMOUNTS)
Changes in the net carrying value of the investment in SST (Investment in Affiliate) were as follows:
Balance at beginning of year
Acquisition
Raven's share of SST earnings
Amortization of intangible assets
Balance at end of year
Ranchview
2012
As of January 31
2011
2010
$
$
4,728
—
156
(475)
4,409
$
$
5,010
—
195
(477)
4,728
$
$
—
5,000
10
—
5,010
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.
The allocation of the purchase price is summarized below:
Goodwill
Existing technology
Other intangibles
Total
$
$
2,734
900
175
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 company’s acquisition were not material to the company’s
Consolidated Statements of Income and Comprehensive 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:
Balance at January 31, 2009
Acquisition earn-outs
Acquired goodwill
Balance at January 31, 2010
Acquisition earn-outs
Balance at January 31, 2011
Acquired goodwill
Balance at January 31, 2012
Engineered
Films
Aerostar
Electronic
Systems
Total
96
—
—
96
—
96
—
96
$
464
$
433
$
—
—
464
—
464
11,497
$ 11,961
$
—
—
433
—
433
—
433
$
7,450
515
2,734
10,699
78
10,777
11,497
22,274
$
Applied
Technology
6,457
$
515
2,734
9,706
78
9,784
—
$
9,784
$
40
(IN THOUSANDS, EXCEPT PER-SHARE AMOUNTS)
Intangible Assets
The following table provides the gross carrying amount and related accumulated amortization of definite-lived intangible assets:
For the years ended January 31
2012
Accumulated
2011
Accumulated
2010
Accumulated
Amount Amortization
Net
Amount Amortization
Net
Amount Amortization
Net
Existing technology
$ 7,500 $
(2,637) $ 4,863
$ 3,200 $
(2,159) $ 1,041
$ 3,200 $
(1,681) $ 1,519
Customer relationships
Other intangibles
Total
3,494
2,225
(155)
3,339
(1,015)
1,210
234
1,426
(128)
(988)
106
438
234
1,399
(99)
(868)
135
531
$ 13,219 $
(3,807) $ 9,412
$ 4,860 $
(3,275) $ 1,585
$ 4,833 $
(2,648) $ 2,185
The estimated future amortization expense for identifiable intangible assets during the next five years is as follows:
Estimated amortization expense
$
1,470
$
1,563
$
1,998
$
2,193
$
1,983
2013
2014
2015
2016
2017
NOTE 7
EMPLOYEE RETIREMENT BENEFITS
The company has two 401(k) plans covering substantially all employees as of January 31, 2012. One plan, which covers the
majority of employees, matches employee contributions up to 4%. Prior to January 1, 2010, the company contributed 3% of
qualified payroll. The other 401(k) plan was assumed as part of the Vista acquisition. This plan makes a 3% contribution annually
and may make additional discretionary contributions to the plan that are determined annually by management. Total 401(k)
contribution expense was $1,556, $1,254 and $1,085 for fiscal 2012, 2011 and 2010, 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:
Benefit obligation at beginning of year
Service cost
Interest cost
Actuarial (gain) loss and assumption changes
Total recognized in net and other comprehensive income
Retiree benefits paid
For the years ended January 31
2011
2012
2010
$
$
5,969
121
334
1,363
1,818
(227)
$
5,512
62
324
237
623
(166)
4,840
55
332
476
863
(191)
Benefit obligation at end of year
$
7,560
$
5,969
$
5,512
41
(IN THOUSANDS, EXCEPT PER-SHARE AMOUNTS)
The liability and expense reflected in the balance sheet and income statement were as follows:
Beginning liability balance
Employer expense
Other comprehensive (income) loss
Total recognized in net and other comprehensive income
Retiree benefits paid
Ending liability balance
Current portion in accrued liabilities
Long-term portion in other liabilities
Assumptions used:
Discount rate
Wage inflation rate
For the years ended January 31
2011
2010
2012
$
$
$
$
5,969
582
1,236
1,818
(227)
7,560
212
7,348
$
$
$
$
5,512
552
71
623
(166)
5,969
212
5,757
$
$
$
$
4,840
515
348
863
(191)
5,512
229
5,283
4.50%
4.00%
5.75%
4.00%
6.00%
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 2012 was 8.60% compared with 9.00% and 9.51% for fiscal 2011 and 2010.
The impact of a one-percentage-point change in assumed health care rates would not be significant to the company's income
statement and would affect the ending liability balance by approximately $1,307. The rate to which the fiscal 2012 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:
Beginning balance
Acquired
Accrual for warranties
Settlements made (in cash or in kind)
Ending balance
NOTE 9
INCOME TAXES
2012
1,437
192
3,010
(2,940)
1,699
$
$
As of January 31
2011
$
$
1,259
—
2,461
(2,283)
1,437
2010
1,004
—
2,426
(2,171)
1,259
$
$
The reconciliation of income tax computed at the federal statutory rate to the company's effective income tax rate was as follows:
Tax at U.S. federal statutory rate
State and local income taxes, net of U.S. federal benefit
Tax benefit on qualified production activities
Tax credit for research activities
Other, net
For the years ended January 31
2011
2010
2012
35.0%
1.0
(2.4)
(0.7)
0.2
33.1%
35.0%
1.3
(3.0)
(0.7)
0.2
32.8%
35.0%
1.3
(2.1)
(0.7)
0.5
34.0%
42
(IN THOUSANDS, EXCEPT PER-SHARE AMOUNTS)
Significant components of the company's income tax provision were as follows:
Income taxes:
Currently payable
Deferred
For the years ended January 31
2011
2012
2010
$
$
19,705
5,358
25,063
$
$
19,322
423
19,745
$
$
14,653
95
14,748
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 company's deferred
tax assets and liabilities were as follows:
Current deferred tax assets:
Accounts receivable
Inventories
Accrued vacation
Insurance obligations
Warranty obligations
Other accrued liabilities
Non-current deferred tax assets (liabilities):
Postretirement benefits
Depreciation and amortization
Uncertain tax positions
Other
Net deferred tax asset (liability)
2012
As of January 31
2011
2010
$
$
58
452
1,248
559
595
387
3,299
2,571
(9,673)
1,673
911
(4,518)
(1,219)
$
$
103
463
1,008
485
503
171
2,733
2,014
(3,050)
1,426
534
924
3,657
$
$
103
344
857
553
441
173
2,471
1,849
(1,970)
1,180
521
1,580
4,051
Pre-tax book income for the U.S. companies and the Canadian subsidiary was $74,219 and $1,338, respectively. As of January
31, 2012, 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:
Gross unrecognized tax benefits at beginning of year
Increases in tax positions related to the current year
Decreases as a result of a lapse in applicable statute of limitations
Gross unrecognized tax benefits at end of year
For the years ended January 31
2011
2012
2010
$
$
3,112
699
(244)
3,567
$
$
2,656
601
(145)
3,112
$
$
2,269
463
(76)
2,656
During the fiscal year ended January 31, 2012, 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 company's effective tax rate were $2,318, $2,023 and
$1,727 as of January 31, 2012, January 31, 2011 and January 31, 2010, respectively.
The company recognizes interest and penalties accrued related to unrecognized tax benefits in income tax expense. At January
31, 2012, January 31, 2011 and January 31, 2010, accrued interest and penalties were $1,379, $1,112 and $857, respectively.
43
(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, 2012, federal tax returns filed in the
U.S., Canada and Switzerland for fiscal years ended January 31, 2008-2011 remain subject to examination by federal tax authorities.
In state and local jurisdictions, tax returns for fiscal years ended January 31, 2004-2011 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 $10,500 with a maturity date of September 1, 2012,
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, 2012, 2011 and 2010, and $9,158 was available at January 31, 2012. There have been no borrowings under this credit line in
the last three fiscal years.
Wells Fargo Bank, N.A. provides Raven's line of credit and holds the majority of its cash and cash equivalents. One member of
the company's board of directors is also on the board of directors of Wells Fargo & Co., the parent company of Wells Fargo Bank,
N.A.
Raven assumed a revolving line of credit in the amount of $2,869 as part of the Vista acquisition. The outstanding balance on
this line of credit was paid and subsequently closed in January 2012. No additional borrowings were made under this line of credit
since acquisition.
The company leases certain vehicles, equipment and facilities under operating leases. Total rent and lease expense was $759, $546
and $328 in fiscal 2012, 2011 and 2010, respectively.
Future minimum lease payments under non-cancelable operating leases are as follows:
Minimum lease payments
$
1,467
$
1,305
$
1,141
$
990
$
201
$
224
2013
2014
2015
2016
2017
Thereafter
NOTE 11 SHARE-BASED COMPENSATION
At January 31, 2012, 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:
Stock compensation cost
Tax benefit
Compensation cost capitalized as part of inventory is not significant.
For the years ended January 31
2011
2012
2010
$
1,922
547
$
1,179
272
$
1,034
185
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. There were 500 shares of common
stock reserved for grant, of which 202 were remaining at January 31, 2012. Fiscal 2012 and fiscal 2010 compensation cost
includes $64 and $144 of expense recognized as a result of 1.0 and 4.8 share stock awards, respectively. No stock award was
issued in fiscal 2011.
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.
44
(IN THOUSANDS, EXCEPT PER-SHARE AMOUNTS)
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:
Risk-free interest rate
Expected dividend yield
Expected volatility factor
Expected option term (in years)
For the years ended January 31
2012
2011
2010
0.67%
1.20%
51.44%
4.00
1.46%
1.49%
49.33%
4.50
2.03%
1.73%
49.69%
4.50
Weighted average grant date fair value
$
22.11
$
15.70
$
11.28
Outstanding stock options as of January 31, 2012 and activity for the year then ended are presented below:
Outstanding, January 31, 2011
Granted
Exercised
Forfeited
Outstanding, January 31, 2012
Exercisable, January 31, 2012
Number
of options
Weighted
average
exercise
price
Aggregate
intrinsic
value
Weighted
average
remaining
contractual
term
(years)
445
136
(84)
(1)
496
181
$
$
$
33.86
59.99
29.74
28.01
41.73
32.04
$
$
11,474
5,956
3.27
2.16
The intrinsic value of a stock award is the amount by which the fair value of the underlying stock exceeds the exercise price of
the award. The total intrinsic value of options exercised was $2,362, $1,102 and $314 during the years ended January 31, 2012,
2011 and 2010, respectively. As of January 31, 2012, the total compensation cost for non-vested awards not yet recognized in the
company's statements of income was $4,360, net of the effect of estimated forfeitures. This amount is expected to be recognized
over a weighted average period of 2.96 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 company's common stock as deferred
compensation, to be distributed from an account established by the company in the name of the non-employee director. Stock
units have the same value as a share of common stock but cannot be sold. Stock units are a component of the company's equity.
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 company's common shares,
stock units are added to the directors' balances and a corresponding amount is removed from retained earnings. The intrinsic value
of a stock unit is the fair value of the underlying shares.
Outstanding stock units as of January 31, 2012 and changes during the year then ended are presented below:
Outstanding, January 31, 2011
Granted
Deferred retainers
Dividends
Converted into common shares
Outstanding, January 31, 2012
45
Number
of units
Weighted
average
price
27
3
1
1
(7)
25
$
$
47.24
51.89
51.89
58.62
56.82
64.89
(IN THOUSANDS, EXCEPT PER-SHARE AMOUNTS)
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 2012, 2011 and 2010, 34, 128 and 338 options, respectively,
were excluded from the diluted net income per-share calculation.
Details of the computation are presented below:
Numerator:
Net income attributable to Raven Industries, Inc.
Denominator:
Weighted average common shares outstanding
Weighted average stock units outstanding
Denominator for basic calculation
Weighted average common shares outstanding
Weighted average stock units outstanding
Dilutive impact of stock options
Denominator for diluted calculation
Net income per share - basic
Net income per share - diluted
For the years ended January 31
2011
2012
2010
$
50,569
$
40,537
$
28,574
18,091
26
18,117
18,091
26
110
18,227
2.79
2.77
$
$
18,042
25
18,067
18,042
25
43
18,110
$
$
2.24
2.24
$
$
18,021
19
18,040
18,021
19
3
18,043
1.58
1.58
NOTE 13 BUSINESS SEGMENTS AND MAJOR CUSTOMER INFORMATION
The company's reportable segments are defined by their common technologies, production processes and inventories. These
segments reflect Raven's organization into three Raven divisions and the Aerostar subsidiary. Raven Canada, Raven GmbH, Raven
Australia, and Raven Brazil are included in the Applied Technology Division. Vista and AIS are included in the Aerostar Division.
Substantially all of the company's long-lived assets are located in the United States.
Applied Technology designs, manufactures, sells, and services innovative precision agriculture products and information
management tools that help growers reduce costs and improve farm yields around the world. Their product families include field
computers, application controls, GPS-guidance and assisted-steering systems, automatic boom controls, yield monitoring planter
controls and an integrated RTK and information platform called Slingshot. Engineered Films produces rugged reinforced plastic
sheeting for industrial, energy, construction, geomembrane, and agriculture applications. Aerostar sells high-altitude research
balloons 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 System's 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 company's management reporting structure.
46
(IN THOUSANDS, EXCEPT PER-SHARE AMOUNTS)
Business segment information is as follows:
APPLIED TECHNOLOGY DIVISION
Sales
Operating income
Assets
Capital expenditures
Depreciation and amortization
ENGINEERED FILMS DIVISION
Sales
Operating income
Assets
Capital expenditures
Depreciation and amortization
AEROSTAR DIVISION
Sales
Operating income
Assets
Capital expenditures
Depreciation and amortization
ELECTRONIC SYSTEMS DIVISION
Sales
Operating income
Assets
Capital expenditures
Depreciation and amortization
INTERSEGMENT ELIMINATIONS
Sales
Engineered Films Division
Aerostar
Electronic Systems Division
Operating income
Assets
REPORTABLE SEGMENTS TOTAL
Sales
Operating income
Assets
Capital expenditures
Depreciation and amortization
CORPORATE & OTHER(a)
Operating (loss) from administrative expenses
Assets
Capital expenditures
Depreciation and amortization
TOTAL COMPANY
Sales
Operating income
Assets
Capital expenditures
Depreciation and amortization
(a) Assets are principally cash, investments, deferred taxes and other receivables.
(b) Includes a $451 pre-tax gain on disposition of assets.
47
For the years ended January 31
2011
2010
2012
$
$
$
$
$
$
$
$
132,632
45,358
69,977
11,408
2,351
133,481
21,501
65,100
10,937
4,313
52,351
11,468
51,822
3,875
1,079
71,744
11,264
24,281
793
825
(193)
(1)
(8,503)
(220)
(405)
381,511
89,371
210,775
27,013
8,568
(13,730)
34,928
2,002
700
381,511
75,641
245,703
29,015
9,268
$
$
$
$
$
$
$
$
$
$
(b)
$
$
$
$
(b)
$
$
(b)
100,090
31,135
52,669
1,769
2,238
105,838
19,622
46,519
8,450
3,452
48,787
9,407
18,140
2,190
757
65,852
9,917
23,385
609
823
(307)
(32)
(5,520)
(94)
(186)
314,708
69,987
140,527
13,018
7,270
(9,784)
47,233
954
361
314,708
60,203
187,760
13,972
7,631
86,217
25,722
51,029
941
1,677
63,783
10,232
35,999
1,460
3,707
27,244
5,634
10,462
332
398
63,525
8,979
21,216
290
939
(210)
(1)
(2,776)
60
(92)
237,782
50,627
118,614
3,023
6,721
(7,407)
51,695
279
387
237,782
43,220
170,309
3,302
7,108
(IN THOUSANDS, EXCEPT PER-SHARE AMOUNTS)
Sales to a customer of the Electronic Systems segment accounted for 10%, 13% and 16% of consolidated sales in fiscal 2012,
2011 and 2010, respectively, and 10%, 11% and 13% of consolidated accounts receivable at the end of fiscal 2012, 2011 and 2010,
respectively.
Sales to a customer of the Engineered Films segment accounted for 11% of consolidated sales in fiscal 2012 and 1% of consolidated
accounts receivable at the end of fiscal 2012.
The table below provides a summary of net sales by principal product categories:
Agricultural precision control devices and accessories
Pit lining and geomembrane films
Other plastic films
Tethered aerostats
Parachutes and protective wear
Electronic manufacturing services
Other
Total sales
For the years ended January 31
2011
2012
2010
$
131,169
$
80,154
53,327
17,749
26,069
63,241
9,802
98,402
55,048
50,483
22,423
17,375
60,333
10,644
$
83,236
26,834
36,739
3,048
15,732
60,749
11,444
$
381,511
$
314,708
$
237,782
Foreign sales are attributed to product delivered to non-U.S. locations. Sales to countries outside the United States, primarily to
Canada and Brazil, were as follows:
Applied Technology
Engineered Films
Aerostar
Electronic Systems
Total foreign sales
For the years ended January 31
2011
2012
2010
$
$
32,931
3,161
1,282
1,535
38,909
$
$
21,349
2,200
427
693
24,669
$
$
17,140
1,383
1,219
495
20,237
48
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, 2012, 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 company's 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 company's disclosure controls and procedures were effective as of January 31, 2012.
Management's Report on Internal Control Over Financial Reporting
Management’s annual report on internal control over financial reporting and the report of the company's 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 company's internal control over financial reporting that occurred during the fiscal quarter ended
January 31, 2012, that have materially affected, or are reasonably likely to materially affect, the company's internal control over
financial reporting.
ITEM 9B. OTHER INFORMATION
Not applicable.
49
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 company's Proxy Statement relating to its 2012 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 company's Proxy Statement relating to its 2012 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 company’s Proxy Statement relating
to its 2012 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 company’s
Proxy Statement relating to its 2012 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 company’s Proxy Statement relating to its 2012 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
company’s Proxy Statement relating to its 2012 Annual Meeting of Shareholders.
50
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.
51
Exhibit
Number
Description
2(a)
Stock Purchase Agreement, dated as of December 30, 2011, by and between Aerostar International, Inc. and Vista Applied
Technologies Group, Inc. (incorporated by reference to Exhibit 2.1 of the company's Form 8-K filed January 6, 2012).
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 company's 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 company's 8-K filed October 1, 2010). †
10(e) Employment Agreement between Raven Industries, Inc. and Anthony D. Schmidt dated as of February 1, 2012
(incorporated by reference to Exhibit 10.1 to the company's 8-K filed February 1, 2012). †
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: Daniel A. Rykhus and Thomas Iacarella. † ****
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: Daniel
A. Rykhus, Thomas Iacarella, 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 company's 8-K filed December 17, 2007). †
10(j) Raven Industries, Inc. 2000 Stock Option and Compensation Plan adopted May 24, 2000 (incorporated by reference to
Exhibit A to the company's definitive Proxy Statement filed April 19, 2000).†
10(k) Raven Industries, Inc. 2010 Stock Incentive Plan adopted May 25, 2010 (incorporated by reference to Exhibit A of the
company's definitive Proxy Statement filed April 14, 2010).†
10(l) Raven Industries, Inc. Deferred Compensation Plan for Directors adopted May 23, 2007 (incorporated by reference to
Exhibit 10.1 to the company's 8-K filed May 24, 2007). †
10(m) Employment Agreement between Raven Industries, Inc. and Matthew T. Burkhart dated February 1, 2010 (incorporated by
reference to Exhibit 10.1 to the company's 8-K filed February 2, 2010). †
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 company's 8-K filed February 2, 2010). †
10(o) 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 company's 8-K filed October 1, 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, Anthony D. Schmidt, Lon E. Stroschein and Barbara K. Ohme. † ****
10(q) Change in Control Agreement between Raven Industries, Inc. and Anthony D. Schmidt dated February 1, 2012 (incorporated
by reference to Exhibit 10.3 to the company's 8-K filed February 1, 2012). †
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.
101.INS XBRL Instance Document
101.SCH XBRL Taxonomy Extension Schema
101.CAL XBRL Taxonomy Extension Calculation Linkbase
101.DEF XBRL Taxonomy Extension Definition Linkbase
52
101.LAB XBRL Taxonomy Extenstion Label Linkbase
101.PRE XBRL Taxonomy Extension Presentation Linkbase
† Management contract or compensatory plan or arrangement.
*
**
***
****
Incorporated by reference to corresponding Exhibit Number of the company's Form 10-K for the year ended January 31, 1989.
Incorporated by reference to corresponding Exhibit Number of the company's Form 10-K for the year ended January 31, 2004.
Incorporated by reference to corresponding Exhibit Number of the company's Form 10-K for the year ended January 31, 2007.
Incorporated by reference to corresponding Exhibit Number of the company's Form 10-K for the year ended January 31, 2011.
53
SIGNATURES
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 30, 2012
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
Daniel A. Rykhus
President and Chief Executive Officer
(principal executive officer) and Director
/s/ THOMAS IACARELLA
Thomas Iacarella
Vice President and Chief Financial Officer
(principal financial and accounting officer)
/s/ THOMAS S. EVERIST
Thomas S. Everist
Chairman of the Board
/s/ ANTHONY W. BOUR
Anthony W. Bour
Director
/s/ MARK E. GRIFFIN
Mark E. Griffin
Director
/s/ KEVIN T. KIRBY
Kevin T. Kirby
Director
/s/ MARC E. LEBARON
Marc E. LeBaron
Director
/s/ CYNTHIA H. MILLIGAN
Cynthia H. Milligan
Director
Date: March 30, 2012
54
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 30, 2012 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 30, 2012
55
SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS
for the years ended January 31, 2012, 2011 and 2010
(in thousands)
Column A
Column B
Column C
Additions
Column D
Column E
Description
Deducted in the balance sheet from the asset to which it
applies:
Allowance for doubtful accounts:
Year ended January 31, 2012
Year ended January 31, 2011
Year ended January 31, 2010
Note:
Balance at
Beginning
of Year
Charged to
Costs and
Expenses
Charged to
Other
Accounts
Deductions
From
Reserves (1)
Balance at
End of Year
$
$
$
300 $
297 $
613 $
(91) $
(1) $
(183) $
— $
— $
— $
39 $
(4) $
133 $
170
300
297
(1) Represents uncollectible accounts receivable written off during the year, net of recoveries.
56
Investor Information
Annual Meeting
may 22, 2012, 9:00 a.m. cdt
Ramkota Hotel and conference center
3200 w. maple Avenue
sioux Falls, sd
Stock Transfer Agent & Registrar
wells Fargo Bank, n.A.
P.O. Box 64854
south st. Paul, mn 55164-0854
Phone: 800-468-9716
website: www.shareowneronline.com
Dividend Reinvestment Plan
Raven Industries, Inc. sponsors a dividend Reinvestment
Form 10-K
Plan so shareholders can purchase additional Raven
Raven Industries, Inc.’s Form 10-K for the fiscal year
common stock without paying any brokerage commission
ended January 31, 2012, which has been filed with the
or fees. For more information on how you can take
securities and exchange commission, is available free
advantage of this plan, contact your broker, our stock
of charge on the company’s website, or upon written
transfer agent or write to our Investor Relations department.
request to the Investor Relations department.
Dividend Policy
Inquiries
Our policy is to return a substantial portion of earnings
mail to:
Raven Industries, Inc.
to shareholders through regular dividends. each year
our board of directors reviews Raven’s dividend and
will increase it when the new level is sustainable. Fiscal
2012 was the 25th-consecutive year we raised our
annual dividend.
Raven Website
www.ravenind.com
Independent Registered Public Accounting
Firm
Pricewaterhousecoopers llP
minneapolis, mn
Stock Quotations
listed on the nasdaq nGs stock market – RAvn
contact:
Investor Relations
P.O. Box 5107
sioux Falls, sd 57117-5107
Phone:
605-336-2750
e-mail:
irinfo@ravenind.com
Affirmative Action Plan
Raven Industries, Inc. and Aerostar International, Inc. are
equal employment Opportunity employers with approved
affirmative action plans.
Forward-Looking Statements
this annual report contains “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 management believes that the expectations
reflected in forward-looking statements are based on reasonable assumptions, there is no assurance these assumptions are correct or that these expectations will be achieved.
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 sales and profitability in some of the company’s primary markets, such as agriculture, construction
and oil and gas drilling; or changes in competition, raw material availability, technology or relationships with the company’s largest customers—any of which could adversely
affect any of the company’s product lines—as well as other risks described in the company’s 10-K under Item 1A. this list is not exhaustive, and the company does not have
an obligation to revise any forward-looking statements to reflect events or circumstances after the date these statements are made.
RAven IndustRIes
PO BOx 5107
sIOux F Alls , sd 571 17-5107
www.RA venIn d.cOm