-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, OwJJs9v0kVd0Wf1L95ruSrHcCmkU5FKwc3Ddt/xnWyPD4NHtwSdExzoBe+WDLtyZ 93dWmqriDU442ht2wp9XZQ== 0000897101-00-000443.txt : 20000501 0000897101-00-000443.hdr.sgml : 20000501 ACCESSION NUMBER: 0000897101-00-000443 CONFORMED SUBMISSION TYPE: 10-K PUBLIC DOCUMENT COUNT: 7 CONFORMED PERIOD OF REPORT: 20000131 FILED AS OF DATE: 20000428 FILER: COMPANY DATA: COMPANY CONFORMED NAME: RAVEN INDUSTRIES INC CENTRAL INDEX KEY: 0000082166 STANDARD INDUSTRIAL CLASSIFICATION: APPAREL & OTHER FINISHED PRODS OF FABRICS & SIMILAR MATERIAL [2300] IRS NUMBER: 460246171 STATE OF INCORPORATION: SD FISCAL YEAR END: 0131 FILING VALUES: FORM TYPE: 10-K SEC ACT: SEC FILE NUMBER: 001-07982 FILM NUMBER: 611571 BUSINESS ADDRESS: STREET 1: 205 E 6TH ST STREET 2: PO BOX 5107 CITY: SIOUX FALLS STATE: SD ZIP: 57117 BUSINESS PHONE: 6053362750 MAIL ADDRESS: STREET 1: P O BOX 5107 CITY: SIOUX FALLS STATE: SD ZIP: 57117-5107 10-K 1 FORM 10-K SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 (Mark One) [X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the Fiscal Year Ended January 31, 2000 ---------------- [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from _______________________ to ______________________ Commission file number 0-3136 ------ RAVEN INDUSTRIES, INC. - -------------------------------------------------------------------------------- (Exact name of registrant as specified in its charter) South Dakota 46-0246171 - -------------------------------------------------------------------------------- (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) 205 E. 6th Street, Sioux Falls, South Dakota 57117 - -------------------------------------------------------------------------------- (Address of principal offices)(Zip Code) Registrant's telephone number, including area code (605) 336-2750 ----------------------------- Securities registered pursuant to Section 12(b) of the Act: None Securities registered pursuant to Section 12(g) of the Act: Common stock, $1 par value -------------------------- (Title of each class) Indicate by checkmark 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. Yes _X_ No ___ Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of 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. [ ] The aggregate market value of voting stock held by nonaffiliates of the Registrant, based on the closing price of $13.00 per share as reported on the NASDAQ National Market System on April 12, 2000 was $41,591,979. Shares of common stock outstanding at April 12, 2000: 3,720,407. DOCUMENTS INCORPORATED BY REFERENCE The following table shows, except as otherwise noted, the location of information, required in this Form 10-K, in the registrant's Annual Report to Shareholders for the year ended January 31, 2000 and Proxy Statement for the registrant's 2000 annual meeting, a definitive copy of which was filed on April 19, 2000. All such information set forth under the heading "Reference" below is included herein or incorporated herein by reference. A copy of the registrant's Annual Report to Shareholders for the year ended January 31, 2000 is included as an exhibit to this report. PART I. ITEM IN FORM 10-K REFERENCE ------- ----------------- --------- Item 1. Business Business, pages 4-7, this document; Business Segments, page 9, and Sales by Markets, page 13, Annual Report to Shareholders Item 2. Properties Properties, pages 8-9, this document Item 3. Pending Legal Pending Legal Proceedings, Proceedings page 9, this document Item 4. Submission of Matters Submission of Matters to a to a Vote of Vote of Security Security Holders Holders, page 9, this document PART II. - -------- Item 5. Market for the Regis- Quarterly Information trant's Common (unaudited), page 22, Equity and Related Eleven-year Financial Stockholder Matters Summary, pages 14-15, and inside back cover, Annual Report to Shareholders Item 6. Selected Financial Data Eleven-Year Financial Summary, pages 14-15, Annual Report to Shareholders Item 7. Management's Discussion Financial Review and and Analysis of Analysis, pages 16-21, Financial Condition Annual Report to Share- and Results of holders Operations 2 ITEM IN FORM 10-K REFERENCE ----------------- --------- Item 8. Financial Statements and Pages 22-31, Annual Report Supplementary Data to Shareholders. Item 9. Changes in and Disagree- Changes in and Disagree- ments with Account- ments with Accountants ants on Accounting on Accounting and and Financial Financial Disclosure, Disclosure page 9, this document PART III. - --------- Item 10. Directors of the Regis- Election of Directors and trant Executive Compensation, Proxy Statement Executive Officers of Executive Officers of the Registrant Registrant, page 9-10, this document and Other Matters, Proxy Statement Item 11. Executive Compensation Executive Compensation, Proxy Statement Item 12. Voting Securities and Ownership of Common Stock, Principal Holders Proxy Statement Thereof Item 13. Certain Relationships Election of Directors, and Related Proxy Statement Transactions PART IV. - -------- Item 14. Exhibits, Financial Exhibits, Financial Statement Schedule Statement Schedule and Reports on Form and Reports on Form 8-K. 8-K, pages 10-11, this document. FORWARD-LOOKING STATEMENTS Certain sections of this report contain discussions of items which may constitute forward-looking statements within the meaning of federal securities laws. Although Raven Industries, Inc., believes that expectations reflected in such forward-looking statements are based on reasonable assumptions, it can give no assurances that its expectations will be achieved. Factors that could cause actual results to differ from expectations include general economic conditions, weather conditions which could affect certain of the company's primary markets such as the agricultural market or its market for outerwear or changes in competition which could impact any of the company's product lines. 3 RAVEN INDUSTRIES, INC. FORM 10-K year ended January 31, 2000 Item 1. Business General Raven Industries, Inc., was incorporated in February 1956 under the laws of the State of South Dakota and began operations later that same year. The following terms - the company, Raven or the registrant - are intended to apply to Raven Industries, Inc. and its consolidated subsidiaries listed in Exhibit 21 to this report. Raven is headquartered in Sioux Falls, South Dakota, employing approximately 1,100 persons in six states. The company began operations as a manufacturer of high-altitude research balloons. It has diversified over the years to supply specialized products for a number of markets, including industrial, recreation, agriculture, automotive and defense. Many of these product lines are an extension of technology and production methods developed in the original balloon business. The automotive product line was sold in the third quarter of fiscal 2000. Page 13 of the company's Annual Report to Shareholders, incorporated herein by reference, provides financial information regarding sales by markets. The company has three business segments: Electronics, Plastics and Sewn Products. 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. Page 9 of the company's Annual Report to Shareholders, incorporated herein by reference, provides financial information concerning the three business segments. Business Segments Electronics - Historically, the company's Electronics segment provided a variety of assemblies and controls to the U.S. Department of Defense and other defense contractors. The company is expanding this segment's capabilities in contract electronics assembly for commercial customers to offset a decline in defense contracts. Assemblies manufactured by the Electronics segment include communication, computer and other products where high quality is critical. Flow control devices, used primarily for precision farming applications, are designed and produced within this business segment. These devices are also used for roadside and turf spraying. The company has developed new products for field location control to expand the company's capabilities and support precision farming in future years. The segment also builds and installs automated control systems for use in feedmills. 4 Contract electronics assembly sales are made in response to competitive bid requests by commercial customers and defense contractors. The level and nature of competition varies with the type of product, but the company frequently competes with a number of assembly manufacturers on any given bid request. Home office personnel sell flow control devices directly to original equipment manufacturers(OEMs)and distributors. Company sales representatives sell automated systems directly to feedmills. All the product markets the company participates in are competitive, with customers having a number of suppliers from which to choose. Plastics - Products in this segment include heavy-duty sheeting for industrial and agricultural applications; fiberglass, polyethylene and dual-laminate tanks for industrial and agricultural use; high altitude balloons for public and commercial research. The company's Glasstite operations were sold in October of 1999. Glasstite was a manufacturer of pickup-truck toppers which were sold in the small truck after market. This sale was an important part of the company's plan for repositioning its business by disposing of its non-strategic businesses. The company sells plastic sheeting to distributors in each of the various markets it serves. The company extrudes a significant portion of the film converted for its commercial products and believes it is one of the largest sheeting converters in the U.S. A number of suppliers of sheeting compete with Raven on both price and product availability. Home office personnel and manufacturer's representatives sell storage tanks to OEMs and through distributors. Competition comes not only from many other plastic tank manufacturers, but also from manufacturers using other materials (aluminum and steel). The company makes a number of custom fiberglass and dual-laminate products, but polyethylene tanks tend to be commodity products and subject to intense price competition. The company sells research balloons directly to public agencies (usually funded by the National Aeronautics and Space Administration) or commercial users. Demand is small but stable. Raven is the largest balloon supplier for high-altitude research in the United States. Sewn Products - The Sewn Products segment of the company produces and sells outerwear for a variety of recreational activities, including hunting and fishing. This segment also manufactures sport balloons principally for recreational use. Another major product is large inflatable devices, which enjoy a number of uses, such as parade floats and advertising media. Recreational outerwear is now entirely a contract business sold by home office personnel to distributors and catalog retailers. The company's proprietary skiwear line was sold at the end of the fourth quarter of fiscal 2000 to reduce inventory, lower accounts receivable levels and improve cash return on investment. There are many outerwear manufacturers in the U.S. and abroad, and considerable competition exists. The company competes successfully in the medium-to-higher priced range of the market where specialty fabrics such as Gore-Tex(R) are involved, emphasizing quality, service and manufacturing expertise. 5 The Sewn Products segment sells balloons through a dealer network. Raven is the originator of modern hot-air ballooning and continues to be a leader in design and technical expertise. The company believes it has approximately 40 percent of the U.S. hot-air balloon market, although others are able to compete with lower-cost products. Inflatables are sold directly to corporate customers and are subject to varying levels of competition. Generally, the more customized the product, the greater the company's market share. Major Customer Information No customer accounted for more than 10 percent of consolidated sales in fiscal 2000 or for more than 10 percent of the company's consolidated accounts receivable at January 31, 2000. However, the company sells sewn products to several large customers. In fiscal 2000, the top five customers in the Sewn Products segment accounted for more than two-thirds of that segment's sales. Although the loss of these accounts would adversely affect profitability, the company believes that, over the long term, addition of new customers and sales growth from existing customers would replace any lost sales. Seasonality/Working Capital Requirements Some seasonality in demand exists for the company's outerwear products, many of which are produced in spring/summer for summer/fall delivery. Most of these sales carry net thirty day terms, although some winter-dated terms were offered in the company's proprietary skiwear line. Sales to the agricultural market (flow controls, plastic tanks) also experience some seasonality, building in the fall for winter/spring delivery. Certain sales to agricultural customers offer spring dating terms for late fall and early winter shipments. The resulting fluctuations in inventory and accounts receivable balances may require, and have required, seasonal short-term financing. Financial Instruments The principal financial instruments the company maintains are in accounts receivable, notes receivable and long-term debt. The company believes that the interest rate, credit and market risk related to these accounts is not significant. The company manages the risk associated with these accounts through periodic reviews of the carrying value for non-collectability of assets and establishment of appropriate allowances in connection with the company's internal controls and policies. The company does not enter into hedging or derivative instruments. Raw Materials The company obtains a wide variety of materials from numerous vendors. Principal materials include numerous electronic components for the Electronics segment, various plastic resins for the Plastics segment and fabric for the Sewn Products segment. The company has not experienced any significant shortages or other problems in purchasing raw materials to date, and alternative sources of supply are generally available. However, predicting future material shortages and the related potential impact on Raven is not possible. 6 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 and manufacturing skills. Research and Development The business segments noted above conduct ongoing research and development efforts. Most of the company's research and development expenditures are directed toward new products in the Electronics and Plastics segments. Total company research and development costs are disclosed in Note 1 to the Consolidated Financial Statements located on page 27 of the Annual Report to Shareholders, incorporated herein by reference. Environmental Matters Except as described below, the company believes that it is in compliance in all material respects 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, the company has agreed to assume responsibility for the investigation and remediation of any pre-October 29, 1999 environmental contamination at the company's Glasstite pickup-truck topper facility in Dunnell, Minnesota as required by the Minnesota Pollution Control Agency (MPCA) or the U.S. Environmental Protection Agency (EPA). The Company and purchaser have conducted a preliminary environmental assessment of the Company's properties. Although this assessment is still being evaluated by the MPCA, on the basis of the preliminary data available there is no reason to believe that any activities which might be required as a result of the findings of the assessment will have a material effect on the company's results of operations, financial position or cash flow of the company. As discussed in Note 4 to the Consolidated Financial Statements, located on pages 28 and 29 of the Annual Report to Shareholders, incorporated herein by reference, the company had accrued $150,000 at January 31, 2000, its best estimate of probable costs to be incurred related to this matter. Backlog As of February 1, 2000, the company's backlog of firm orders totaled $44.9 million. Comparable backlog amounts as of February 1, 1999 and 1998 were $47.4 million and $47.2 million, respectively. Approximately $3 million of the February 1, 2000 backlog is not scheduled for shipment by January 31, 2001. Employees As of January 31, 2000, the company had approximately 1100 employees, consisting of 400 in the Electronics segment, 300 in the Plastics segment and 400 in the Sewn Products segment. Management believes its employee relations are satisfactory. 7 Item 2. Properties All properties, unless otherwise indicated are owned by Raven. Square Business Location Feet Use Segments - -------- ---- --- -------- Sioux Falls, SD 150,000 Corporate office and All electronics manufacturing 73,300 Storage tank Plastics manufacturing 68,400 Sewn products warehouse Sewn Products 62,300 Plastic sheeting Plastics manufacturing 59,000 Plastic sheeting and hot- Plastics air balloon manufacturing Sewn Products 31,400 Storage tank Plastics manufacturing 27,000 Offices and material Sewn Products handling facility 25,300 Inflatable manufacturing Sewn Products 24,000 Electronics manufacturing Electronics 10,200 Machine Shop Electronics 6,200 Training/meeting center All 31,214 Warehouse Plastics Albertville, AL 49,600 Storage tank Plastics manufacturing Tacoma, WA *46,650 Storage tank Plastics manufacturing Sulphur Springs, TX *45,400 Research balloon Plastics manufacturing Springfield, OH 30,000 Plastic sheeting Plastics manufacturing Huron, SD 24,100 Sewing plant Sewn Products Washington Court 21,500 Storage tank Plastics House, OH manufacturing St. Louis, MO 21,000 Electronics manufacturing Electronics Gordo, AL *20,000 Feedmill automation Electronics equipment manufacturing 8 Square Business Location Feet Use Segments - -------- ---- --- -------- Beresford, SD 20,000 Sewing plant Sewn Products Madison, SD 20,000 Sewing plant Sewn Products Salem, SD 15,000 Sewing plant Sewn Products Parkston, SD 14,000 Sewing plant Sewn Products * Leased, short-term 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, in all material respects, in good condition and are adequate to meet existing production needs. The company owns 6.95 acres of undeveloped land adjacent to the other owned property in Sioux Falls which is available for expansion. Item 3. Pending Legal Proceedings The company is involved as a defendant in lawsuits, claims or disputes arising in the normal course of business. The settlement 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. Submission of Matters to a Vote of Security Holders There was no matter submitted during the fourth quarter to a vote of security holders of the company. Item 9. Changes In and Disagreements With Accountants on Accounting and Financial Disclosure None. Item 10. Executive Officers of the Registrant Name Age Position Period Served ---- --- -------- ------------- David A. Christensen 65 President and Chief April 1971 to present Executive Officer Gary L. Conradi 60 Vice President, January 1980 to present Administration Thomas Iacarella 46 Vice President, August 1998 to present Finance, Secretary and Treasurer Ronald M. Moquist 54 Executive Vice January 1979 to present President Each of the above named individuals serves at the pleasure of the Board of Directors on a year-to-year basis. 9 Item 10. Executive Officers of the Registrant, continued: Mr. Christensen has been President and Chief Executive Officer of the Company since April 1971. He is a Director of Northern States Power Co., Minneapolis, MN, Medcomp Software, Inc., Colorado Springs, Co, and Wells Fargo & Co., San Francisco, CA. Mr. Conradi was named Vice President-Administration of Raven Industries, Inc., on June 1, 1999. He served as Vice President- Corporate Services from 1980 to 1999. From 1966 to 1980 he was the company's Director of Personnel. Mr. Iacarella has been Vice President-Finance, Secretary and Treasurer of the company since 1998. He is the company's Chief Financial Officer. He joined Raven Industries, as Corporate Controller in 1991. Prior to joining Raven Industries, he held positions with Tonka Corporation and Ernst & Young. Mr. Moquist has been Executive Vice President, of Raven Industries, Inc., since 1985. As Vice President, Raven Industries, 1979-1985 his responsibilities encompassed both corporate and divisional management positions. He joined Raven Industries in 1975 as Sales and Marketing Manager. Item 14. Exhibits, Financial Statement Schedule and Reports on Form 8-K (a) Consolidated Financial Statements and Schedule 1. Incorporated by reference from the attached exhibit containing the 2000 Annual Report to Shareholders: Consolidated Balance Sheet Consolidated Statement of Income Consolidated Statements of Stockholders' Equity and Comprehensive Income Consolidated Statement of Cash Flows Notes to Financial Statements Report of Independent Accountants 2. Included in Part II: Report of Independent Accountants on Financial Statement Schedule Schedule II - Valuation and Qualifying Accounts The following schedules are omitted for the reason that they are not applicable or are not required: I, III and IV. (b) Reports on Form 8-K An 8-K was filed November 9, 1999 concerning the October 29, 1999 sale of the assets of the company's Glasstite subsidiary. (c) Exhibits filed 3(a) Articles of Incorporation of Raven Industries, Inc. and all amendments thereto.* 3(b) By-Laws of Raven Industries, Inc.* 10 Item 14. Exhibits, Financial Statement Schedule and Reports on Form 8-K, continued: Exhibit Number Description ------ ----------- 3(c) Extract of Shareholders Resolution adopted on April 7, 1962 with respect to the by-laws of Raven Industries, Inc.* 10(a) Change in Control Agreement between Raven Industries, Inc. and David A. Christensen dated as of March 17, 1989.* 10(b) Change in Control Agreement between Raven Industries, Inc. and Gary L. Conradi dated as of March 17, 1989.* 10(c) Change in Control Agreement between Raven Industries, Inc. and Ronald M. Moquist dated as of March 17, 1989.* 10(d) Change in Control Agreement between Raven Industries, Inc. and Thomas Iacarella dated as of August 1, 1998 (incorporated by reference to Exhibit 10.1 of the Company's Form 10-Q for the quarter ended July 31, 1998). 10(e) Employment Agreement between Raven Industries, Inc. and David A. Christensen dated as of November 29, 1999. 10(f) Schedule identifying material details of other Employment Agreements between Raven Industries and other executive officers substantially identical to the Employment Agreement filed as Exhibit 10(e). 10(g) Raven Industries, Inc. 1990 Stock Option Plan adopted January 30, 1990 (incorporated by reference to Exhibit A to the Company's definitive Proxy Statement filed April 25, 1990). 10(h) Deferred Compensation Plan between Raven Industries, Inc. and David A. Christensen dated as of February 1, 1997 (incorporated by reference to Exhibit 10(h) of the Company's Form 10-K for the year ended January 31, 1999). 10(i) Trust Agreement between Raven Industries, Inc. and Norwest Bank South Dakota, N.A. dated April 26, 1989.* 13 2000 Annual Report to Shareholders (only those portions specifically incorporated herein by reference shall be deemed filed with the Commission). 21 Subsidiaries of the Registrant. 23 Consent of Independent Accountants. 27 Financial Data Schedule. * Incorporated by reference to corresponding Exhibit Number of the Company's Form 10-K for the year ended January 31, 1989. 11 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) April 28, 2000 By: /S/ David A. Christensen - ----------------------- ------------------------------------ Date David A. Christensen President (Principal Executive Officer and Director) 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. April 28, 2000 By: /S/ David A. Christensen - ----------------------- ------------------------------------ Date David A. Christensen President (Principal Executive Officer and Director) April 28, 2000 /S/ Thomas Iacarella - ----------------------- ------------------------------------ Date Thomas Iacarella Vice President, Finance, Secretary and Treasurer (Principal Financial and Accounting Officer) Directors: April 28, 2000 /S/ Conrad J. Hoigaard - ----------------------- ------------------------------------ Date Conrad J. Hoigaard April 28, 2000 /S/ Ronald M. Moquist - ----------------------- ------------------------------------ Date Ronald M. Moquist April 28, 2000 /S/ Mark E. Griffin - ----------------------- ------------------------------------ Date Mark E. Griffin April 28, 2000 /S/ Kevin T. Kirby - ----------------------- ------------------------------------ Date Kevin T. Kirby April 28, 2000 /S/ Anthony W. Bour - ----------------------- ------------------------------------ Date Anthony W. Bour April 28, 2000 /S/ Thomas S. Everist - ----------------------- ------------------------------------ Date Thomas S. Everist 12 REPORT OF INDEPENDENT ACCOUNTANTS ON FINANCIAL STATEMENT SCHEDULE To the Board of Directors and Stockholders of Raven Industries, Inc.: Our audits of the consolidated financial statements referred to in our report dated March 11, 2000 appearing in the 2000 Annual Report to Stockholders of Raven Industries, Inc. (which report and consolidated financial statements are incorporated by reference in this Annual Report on Form 10-K) also included an audit of the financial statement schedule listed in Item 14(a)2 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. PricewaterhouseCoopers LLP Minneapolis, Minnesota March 11, 2000 13 SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS for the years ended January 31, 2000, 1999 and 1998 (Dollars in thousands) --------
Column A Column B Column C Column D Column E -------- ---------- --------------------------- ----------- -------- Additions --------------------------- Balance at Charged to Charged to Deductions Beginning Costs and Other From Balance at Description of Year Expenses Accounts Reserves(1) End of Year ----------- ---------- ----------- ----------- -------- ----------- Deducted in the balance sheet from the asset to which it applies: Allowance for doubtful accounts: Year ended January 31, 2000 $400 $362 None $362 $400 ==== ==== ==== ==== Year ended January 31, 1999 $390 $135 None $125 $400 ==== ==== ==== ==== Year ended January 31, 1998 $340 $193 None $143 $390 ==== ==== ==== ====
Note: - ---- (1) Represents uncollectible accounts receivable written off during the year, net of recoveries. 14 EX-10.(E) 2 EMPLOYMENT AGREEMENT EXHIBIT 10(e) RAVEN INDUSTRIES, INC. EMPLOYMENT AGREEMENT AGREEMENT dated as of November 29, 1999 between RAVEN INDUSTRIES, INC., a South Dakota corporation (the "Company"), and David A. Christensen, (the "Executive"). WITNESSETH: WHEREAS, the Board of Directors of the Company (the "Board") recognizes that Executive's contribution to the growth and success of the Company and its subsidiaries has been substantial; and WHEREAS, the Board has determined that it is appropriate to memorialize in writing the terms and conditions of Executive's employment and Executive's entitlement to certain benefits upon his retirement; NOW THEREFORE, in consideration of the mutual covenants and conditions herein contained and in further consideration of services performed and to be performed by Executive for the Company, the parties agree as follows: 1. Employment. Executive shall continue in the employ of the Company in a senior executive capacity, with such duties, powers and authority as are assigned to Executive from time to time by the Board. 2. Term. This Agreement shall commence on the date first above written and, except as otherwise provided in paragraph 7, shall continue in effect until terminated by either the Company or Executive on 30 days' advance written notice, either with or without any reason. Except for such 30-day notice requirement, nothing contained in this Agreement shall affect the Company's ability to terminate Executive's employment with or without any reason notwithstanding the preceding. Termination of this Agreement shall not terminate Executive's benefits or the Executive's right to benefits under paragraph 4 or 5 if, at the date of termination, Executive has either (I) attained age 65 or (ii) the sum of Executive;'s age (as of his nearest birthday) and years of service with the company (to the nearest whole year) equal 80 or more. 3. Compensation. As full compensation for his services under this Agreement, Executive shall receive such Compensation as determined by the Board, and Executive shall be eligible for such fringe benefits as are provided generally to all senior executives of the Company. The fringe benefits provided at the date of this Agreement are listed on Schedule A, attached hereto and made a part hereof. The Company may change or terminate any fringe benefit from time to time while Executive is employed, so long as the change affects all senior executives. 4. Benefits on Termination in Certain Cases. If at the date Executive terminates employment with the Company, Executive has either (i) attained age 65 or (ii) the sum of Executive's age (as of his nearest birthday) and years of service with the Company (to the nearest whole year) equal 80 or more, Executive shall be entitled, at the Company's expense, to the following benefits in addition to any retirement benefits to which Executive may be entitled under any qualified or non-qualified retirement plan maintained by the Company: (a) Until the later to die of Executive or his spouse, continuation of coverage under the Company's group hospital, medical and dental plans ("Medical Plan") for himself, his spouse and eligible dependents ("Covered Group"); provided that if Executive and his spouse are divorced, the benefits for such spouse shall be discontinued; and further provided that if such spouse remarries after the death of Executive, such coverage shall continue for such spouse after the date of remarriage only if the spouse pays to the Company the group premium for such coverage. Prior to a member of the Covered Group becoming eligible for Medicare, the benefits to which that member of the Covered Group is entitled shall be at least equal to the benefits to which that member of the Covered Group would have been entitled under the Medical Plan at Executive's separation from service. Upon eligibility of a member of the Covered Group for Medicare, coverage provided by Medicare shall be primary and the Medical Plan shall provide additional benefits such that the total benefits (I.E., Medicare and the Medical Plan) are at least equal to the benefits that members of the Covered Group would have been entitled under the Medical Plan at Executive's separation from service. (b) Until Executive's death, group life insurance coverage in the same amount as in effect at the date of Executive's retirement; (c) Until the death of the last to die of Executive or his spouse, payment of uninsured medical expenses (including, but not limited to any deductibles and coinsurance) for Executive, his spouse and his eligible dependents up to an annual limit of 10% of Executive's highest annual compensation during any one of his last five calendar years of employment; provided that if Executive and his spouse are divorced, or if such spouse remarries after the death of Executive, such coverage shall be discontinued for such spouse. The medical expenses to be covered and the timing of payment of such medical expenses shall be based on the terms of the Raven Industries, Inc. Officers Employee Medical Reimbursement Plan as in effect at the date of Executive's separation from service. If such plan is not in effect at the date of Executive's separation from service and has not been replaced by a similar plan, medical expenses reimbursed shall be those expenses that would be deductible under Section 213 of the Internal Revenue Code of 1986 as in effect at the date of this Agreement (without regard to any provisions making such expenses deductible only to the extent they exceed a percentage of adjusted gross income and without regard to any limitation on expenses for cosmetic surgery), and all such expenses shall be paid or reimbursed within 15 days after presentation of invoices. 2 (d) Until Executive's death and thereafter until the filing of a federal estate tax return for his estate, if such a return is to be filed, payment of personal estate planning, estate tax return and probate expenses, up to an annual limit of 2% of Executive's highest annual compensation during any one of his last five calendar years of employment; provided that any amount up to such 2% limitation not paid in any calendar year may be carried forward for two succeeding years. (e) Until the last to die of Executive or his spouse, payment of premiums for long term care insurance for the remainder of Executive's and his spouse's lives; provided that if Executive and his spouse are divorced, or Executive's spouse remarries after his death, premium payments for such spouse shall be discontinued. 5. Limitation on Amendment or Termination. If for any reason after the date of Executive's retirement, Executive is not permitted to participate in any of the plans or programs referred to in paragraph 4, or if any such plans or programs are amended to provide lesser benefits or are terminated, the Company, at its sole expense, shall arrange to provide Executive with benefits substantially similar to those to which Executive would otherwise have been entitled but for such amendment or termination. 6. Tax Gross-Up. To the extent that all or any of the payments under paragraph 4 or 5 made in a calendar year are subject to federal, state, or local income tax, the Company shall pay to Executive (or his spouse if Executive is deceased or his estate if he is not survived by a spouse) a Gross-Up Amount before April 15 of the following year. The term "Gross-Up Amount" means an amount, after the payment of federal, state and local income tax on such amount, that is necessary to pay the federal, state and local income tax on the taxable payments for such calendar year. For purposes of determining the Gross-Up Amount, Executive shall be considered to pay federal, state and local income taxes at the highest marginal rate, net of the maximum reduction in federal income taxes that could be obtained from the deduction of state and local taxes. 7. Termination For Cause. Notwithstanding paragraphs 2, 4 and 5, if the Company discharges Executive "For Cause"(as defined below) the Company shall not be required to provide 30 days' advance written notice of termination and the Company may elect, in its discretion, not to pay the benefits provided under paragraphs 4 and 5. A discharge shall be considered "For Cause" if Executive is terminated from employment for willful misconduct that materially injures or causes a material loss to the Company and a material benefit to Executive or third parties, as for example, by embezzlement, appropriation of corporate opportunity, conversion of tangible or intangible corporate property or the making of agreements with third parties in which Executive or anyone related to or associated with him has a direct or indirect interest. The term "For Cause" does not include a termination occasioned by 3 ill-advised good faith judgment or negligence in connection with the Company's business. 8. Confidentiality. So long as Executive is employed and thereafter so long as Executive is entitled to and is receiving the benefits to which he is entitled under paragraphs 4 and 5, he may not either directly or indirectly, except in the course of carrying out the business of the Company or as authorized in writing on behalf of the Company, disclose or communicate to any person, individual, firm or corporation, any information of any kind concerning any matters affecting or relating to the business of the Company or any of its subsidiaries, including without limitation, any of the customers, prices, sales, manner of operation, plans, trade secrets, processes, financial or other data of the Company or any of its subsidiaries, without regard to whether any or all of such information would otherwise be deemed confidential or material. 9. Non-Competition. So long as Executive is employed and thereafter so long as Executive is entitled to and is receiving the benefits to which he is entitled under paragraphs 4 and 5, he may not engage or participate directly or indirectly, either as principal, agent, employee, employer, consultant, stockholder, director, co-partner, or any other individual or representative capacity, in the conduct or management of, or own any stock or other proprietary interest in, any business that competes with the business of the Company or any subsidiary of the Company unless he has obtained prior written consent of the Board, except that Executive shall be free without such consent to make investments in any publicly-owned company so long as he does not become a controlling party in such company. 10. Consequences of Violation of Confidentiality on Non-Compete Provision. If the Company, in good faith, determines that Executive has violated paragraph 8 or 9 of this Agreement, then in addition to any remedy the Company may be entitled at law or in equity, it may discontinue payments under paragraphs 4 and 5 upon written notice to Executive of the violation of paragraph 8 or 9. 11. No Affect on Other Contractual Rights. The provisions of this Agreement, and any payment provided for hereunder, shall not reduce any amounts otherwise payable, or in any way diminish Executive's existing rights, or rights that would accrue solely as a result of the passage of time, under any benefit plan, change in control agreement or other contract, plan or arrangement. 12. Successors to the Corporation. The Company will require any successor or assign (whether direct or indirect, by purchase, merger, consolidation or otherwise) to all or substantially all of the business and/or assets of the Company, by agreement in form and substance satisfactory to Executive, expressly, absolutely and unconditionally to assume and agree to perform this Agreement in the same manner and to the same extent that the Company would be required to perform it if no such succession or assignment had taken place. As used in this Agreement, "Company" means Raven Industries, Inc. and any subsidiary or successor or assign to its business 4 or assets that otherwise becomes bound by the terms and provisions of this Agreement by operation of law. In such event, the Company shall pay or shall cause such employer to pay any amounts owed to Executive pursuant to this Agreement. 13. Agreement Binding. This Agreement shall inure to the benefit of and be enforceable by Executive's spouse, personal and legal representatives, executors, administrators, successors, heirs, distributees, devisees and legatees. If Executive dies while any amounts are still payable to him hereunder, all such amounts, unless otherwise provided herein, shall be paid in accordance with the terms of this Agreement to Executive's spouse, devisee, legatee, or other designee or, if there is no such designee, to Executive's estate. 14. Notice. For purposes of this Agreement, notices and all other communications provided for in the Agreement shall be in writing and shall be deemed to have been duly given when delivered or when mailed by United States registered mail, return receipt requested, postage prepaid, as follows: If to the Company: Raven Industries, Inc. 205 East 6th Street P.O. Box 5107 Sioux Falls, SD Attention: President If to Executive: David A. Christensen P.O. Box 5107 Sioux Falls, SD 57117-5107 or such other address as either party may have furnished to the other in writing in accordance herewith, except that notices of change of address shall be effective only upon receipt. 15. Miscellaneous. No provisions of this Agreement may be modified, waived or discharged unless such waiver, modification or discharge is agreed to in a writing signed by Executive and such officer of the Company as may be specifically designated by the Board. No waiver by either party hereto at any time of any breach by the other party of, or compliance with, any condition or provision of this Agreement to be performed by such other party shall be deemed a waiver of similar or dissimilar provision or conditions at the same or at any prior or subsequent time. No agreements or representations, oral or otherwise, express or implied, with respect to the subject matter of this Agreement have been made by either party that are not set forth expressly in this Agreement. This Agreement shall be governed by and construed in accordance with the laws of the state of South Dakota. 5 16. Validity. The invalidity or unenforceability of any provisions of this Agreement shall not affect the validity or enforceability of any other provision of this Agreement, which shall remain in full force and effect. 17. Counterparts. This Agreement may be executed in one or more counterparts, each of which shall be deemed to be an original but all of which together will constitute one and the same instrument. 18. Fees and Expenses. The Company shall pay all fees and expenses (including reasonable attorney's fees and costs) that Executive may incur as a result of the Company's contesting the validity, enforceability or Executive's interpretation of, or determinations under, this Agreement, regardless of whether the Company is successful in such contest. IN WITNESS WHEREOF, the parties have executed this Agreement as of the date and year first above written. RAVEN INDUSTRIES, INC. By: /s/ Gary L. Conradi Vice President - Administration EXECUTIVE: /s/ David A. Christensen 6 POLICIES AND PROCEDURES SCHEDULE A NO. RS-01 DATE: 29 November 1999 Revised SUBJECT: CORPORATE OFFICER BENEFITS In addition to all of the fringe benefits provided to salaried employees, Corporate Officers will have the following additional benefits: 1. Insurance premiums will be paid in full for all individual and family health, life, disability and dental insurance coverage. 2. Supplemental health insurance benefits for the officers and his dependents up to 5% of the total current base salary and the previous year's incentive bonus. 3. Remote access to the WATS lines for personal use. 4. Officers receive the following memberships: David A. Christensen, President & C.E.O. - 100% Full Membership, Minnehaha Country Club. Ronald M. Moquist, Exec. V.P. - 100% Social Membership, Minnehaha Country Club. Thomas Iacarella, V.P.-Finance - 100% Social Membership, Westward Ho Country Club. Gary L. Conradi, V.P. - Administration - 100% Social Membership, Westward Ho Country Club & 50% of the difference between the Social and Executive Golf membership. 5. 100% reimbursement of membership in the S.D. Symphony and the Sioux Falls Community Playhouse. 6. Inclusion in the Group Life Insurance and A.D. & D. policy at $50,000 of benefits. 7. Outside of the group, individual term policies for each officer will be provided according to the following schedule: POLICIES AND PROCEDURES PAGE 2 NO. RS-01 CORPORATE OFFICER BENEFITS 29 November 1999 DAC President & CEO $750,000 RMM Executive Vice President 375,000 TI Vice President-Treasurer 300,000 GLC Vice President-Administration 300,000 The above policies are funded by the company for the period of time employed by the company. The officer will have the option to convert or continue at his expense upon termination or retirement. 8. In addition, a second-to-die life policy will be provided to each officer in the amounts listed above. Premiums on this policy will be paid by the company until the policy is fully funded (the point where dividends of the policy are sufficient to pay the entire premium) provided that the officer is employed until "normal retirement" age or qualifies for "early retirement" in accordance with Raven policies and procedures. Upon the officers retirement at the normal retirement age or if qualifying for early retirement in accordance with Raven Policies & Procedures the second-to-die life policy will be paid up by Raven at the time of the officers retirement. The premium benefit for the paid up policy will be grossed up at the end of the calendar year. If the officer terminates his employment before qualifying for either normal or early retirement he will have the option to continue the policy by paying the premiums or he may exercise one of the conversion features available in the policy. 9. Long term care insurance will be provided to the officer and officer's spouse. 10. Full pay for sick leave up to a point where disability insurance coverage begins. Disability insurance is 60% of base salary non-integrated with Social Security. Provisions of the actual policy will govern the exact amount of payments. 11. Two additional weeks of paid vacation to the regular established vacation policy. 12. Reimbursement under a formula of up to 2% of total annual POLICIES AND PROCEDURES PAGE 3 NO. RS-01 CORPORATE OFFICER BENEFITS 29 November 1999 compensation (base salary & previous year's incentive bonus) with up to a three-year accumulation of benefit dollars available for personal estate planning and personal income tax preparation fees. 13. Physical examinations provided by the company will be given on a biennial basis to age 60 on individuals who are asymptomatic, annually if symptomatic. Above age 60 examinations will be annually. 14. Officers annual base salary will be grossed up at the end of the calendar year to compensate for the additional tax burden created by the treatment of the officers benefits as additional income. 15. Officer Retirement & Benefits Full retirement benefits will be available to any officer who retires between the ages of 65 and 70, or who chooses early retirement. Early retirement is defined as the first day of any month after the officer's years of service, plus his attained age equals or exceeds the sum of 80, or any date between then and age 65. Those benefits are: (A) Continued group hospital, medical, and dental coverage for the officer, spouse and eligible dependents until the officer attains the age at which he is eligible for Medicare (presently age 65 or disabled). (B) Upon Medicare eligibility, the officer and spouse will be provided supplemental hospital and medical coverage to Medicare which would result in the same coverage that is provided to full-time active officers of the company. This coverage, as well as group dental coverage, will continue for the rest of the officer's and spouse's life. The spouse's coverage will be discontinued in the event an officer's spouse remarries after the death of an officer. However, the spouse would then be provided POLICIES AND PROCEDURES PAGE 4 NO. RS-O1 CORPORATE OFFICER BENEFITS 29 November 1999 the option of continued coverage by paying the Raven group premium for such coverage. (C) At retirement, group life insurance coverage will continue to be provided at the amount in effect at retirement ($100,000 maximum - excludes A D & D). At age 65 this amount would be reduced to 67% or $67,000, and then reduced to 67% or $45,000 at age 70. Life insurance coverage will continue for the rest of the officer's life. This reduction provision applies only to the retired officers, Kaliszewski and Winker. The life insurance coverage may be provided through a term policy outside of the Raven group plan. (D) Upon retirement, supplemental health insurance benefits for the officers and his dependents will be provided annually for the rest of the officer's and spouse's lives at an amount of up to 10% of the officer's highest total annual compensation during any one of the officer's last 5 years of employment with the company. (E) Upon retirement, personal estate planning benefits and personal income tax preparation fees will be available in an amount up to 2% of the officers highest total annual compensation during any one of the officer's last 5 years of employment with the company with up to a three year accumulation of benefit dollars available for personal estate and personal income tax preparation fees planning. The estate plan may be upgraded when conditions warrant, but with prior approval of the C.E.O. (F) Longterm care insurance will continue for the rest of the officer's and spouse's life. The spouse's coverage will be discontinued in the event an officer's spouse remarries after the death of an officer. EX-10.(F) 3 MATERIAL DETAILS OF EMPLOYMENT AGREEMENTS EXHIBIT 10(f) MATERIAL DETAILS OF EMPLOYMENT AGREEMENTS --------- Name of Executive Date of Employment Agreement - ----------------- ---------------------------- Gary L. Conradi November 29, 1999 Ronald M. Moquist November 29, 1999 Thomas Iacarella November 29, 1999 EX-13 4 2000 ANNUAL REPORT TO SHAREHOLDERS EXHIBIT 13 BUSINESS SEGMENTS RAVEN 2000 ANNUAL REPORT
For the years ended January 31 -------------------------------------------------------------------------- DOLLARS IN THOUSANDS 2000 1999 1998 1997(d) 1996(d) 1995(d) -------------------------------------------------------------------------- ELECTRONICS Sales ............................... $ 48,930 $ 46,328 $ 45,947 $ 43,861 $ 32,962 $ 31,959 Operating income .................... 2,937 4,161 5,844 4,913 4,600 2,753(a) Assets .............................. 27,224 25,972 25,599 23,251 19,204 16,912 Capital expenditures ................ 1,496 2,084 2,005 1,089 817 579 Depreciation & amortization ......... 1,548 1,446 1,345 1,298 1,099 895 PLASTICS Sales ............................... $ 70,699 $ 70,845 $ 68,325 $ 59,158 $ 55,281 $ 48,971 Operating income .................... 7,073(b) 4,429 1,998 4,187 3,267 3,470 Assets .............................. 25,934 33,674 34,583 33,879 26,092 25,817 Capital expenditures ................ 1,988 2,151 3,869 2,540 2,973 6,394 Depreciation & amortization ......... 2,923 3,160 3,248 2,682 2,418 1,849 SEWN PRODUCTS Sales ............................... $ 28,277 $ 35,625 $ 35,347 $ 36,422 $ 32,201 $ 40,790 Operating income .................... 567 1,083 2,720 2,871 1,694 2,913 Assets .............................. 11,378 14,547 14,157 14,990 13,934 16,384 Capital expenditures ................ 155 371 667 380 396 780 Depreciation & amortization ......... 413 527 544 586 725 838 CORPORATE & OTHER Assets(c) ........................... $ 9,511 $ 9,464 $ 7,727 $ 8,542 $ 8,323 $ 6,523 TOTAL COMPANY Sales ............................... $147,906 $152,798 $149,619 $139,441 $120,444 $121,720 Operating income .................... 10,577(b) 9,673 10,562 11,971 9,561 9,136(a) Assets .............................. 74,047 83,657 82,066 80,662 67,553 65,636 Capital expenditures ................ 3,639 4,606 6,541 4,009 4,186 7,753 Depreciation & amortization ......... 4,884 5,133 5,137 4,566 4,242 3,582 - -------------------------------------------------------------------------------------------------------------------
(a) INCLUDES A $1.8 MILLION PRETAX CHARGE AT THE COMPANY'S BETA RAVEN SUBSIDIARY. (b) INCLUDES A $1.2 MILLION PRETAX GAIN ON THE SALE OF THE COMPANY'S GLASSTITE'S BUSINESS (SEE NOTE 4). (c) CORPORATE & OTHER ASSETS ARE PRINCIPALLY CASH, INVESTMENTS, DEFERRED TAXES AND NOTES RECEIVABLE. (d) AMOUNTS FOR 1997, 1996 AND 1995 ARE UNAUDITED. PRODUCT LINES BY BUSINESS SEGMENT: ELECTRONICS: Contract electronics manufacturing, Flow controls precision-farming, Feedmill and bakery automation PLASTICS: Sheeting, Storage/sprayer tanks, Research balloons, Pickup-truck toppers (sold) SEWN PRODUCTS: Performance outerwear, Sport balloons, Inflatables 9 SALES BY MARKET (UNAUDITED) RAVEN 2000 ANNUAL REPORT
For the years ended January 31 -------------------------------- DOLLARS IN THOUSANDS 2000 1999 1998 -------------------------------- INDUSTRIAL Plastic sheeting ........................................... $ 12,279 $ 12,736 $ 11,647 Industrial tanks ........................................... 9,165 9,632 12,405 Electronics ................................................ 27,186 20,189 18,765 Research balloons .......................................... 5,021 3,873 3,150 Inflatables ................................................ 2,925 3,319 3,085 -------------------------------- $ 56,576 $ 49,749 $ 49,052 RECREATION Performance outerwear ...................................... $ 23,286 $ 30,202 $ 29,803 Sport balloons ............................................. 2,066 2,104 2,459 -------------------------------- $ 25,352 $ 32,306 $ 32,262 AGRICULTURE Flow controls precision-farming ............................ $ 13,520 $ 15,311 $ 16,852 Feedmill automation ........................................ 5,234 6,059 5,128 Storage/sprayer tanks ...................................... 9,055 9,740 9,869 Plastic sheeting ........................................... 1,852 1,730 1,251 -------------------------------- $ 29,661 $ 32,840 $ 33,100 CONSTRUCTION Plastic sheeting ........................................... $ 15,670 $ 13,141 $ 11,396 DEFENSE Electronics ................................................ $ 2,990 $ 4,769 $ 5,202 AUTOMOTIVE Pickup-truck toppers ....................................... $ 17,657 $ 19,993 $ 18,607 TOTAL COMPANY SALES Industrial ................................................. $ 56,576 $ 49,749 $ 49,052 Recreation ................................................. 25,352 32,306 32,262 Agriculture ................................................ 29,661 32,840 33,100 Construction ............................................... 15,670 13,141 11,396 Defense .................................................... 2,990 4,769 5,202 -------------------------------- Total sales of ongoing operations .......................... 130,249 132,805 131,012 Automotive (sold)(a) ....................................... 17,657 19,993 18,607 -------------------------------- Total ...................................................... $147,906 $152,798 $149,619 ================================ - ------------------------------------------------------------------------------------------------
(a) DURING THE THIRD QUARTER OF FISCAL 2000, THE COMPANY SOLD ITS GLASSTITE BUSINESS (SEE NOTE 4). 13 ELEVEN-YEAR FINANCIAL SUMMARY
For the years ended January 31, ----------------------------------------- DOLLARS IN THOUSANDS, EXCEPT PER-SHARE DATA 2000 1999 1998 ----------------------------------------- OPERATIONS FOR YEAR Net sales Ongoing operations .............................................. $130,249 $132,805 $131,012 Automotive operations(d) ........................................ 17,657 19,993 18,607 Total ......................................................... 147,906 152,798 149,619 Gross profit ...................................................... 24,524 24,815 24,929 Operating income Ongoing operations .............................................. 8,215 8,851 10,266 Automotive operations(d) ........................................ 2,362 822 296 Total ......................................................... 10,577(a) 9,673 10,562 Income before income taxes ........................................ 10,503(a) 9,649 12,540(b) Net income ........................................................ $ 6,762(a) $ 6,182 $ 8,062(b) Net income % of sales ............................................. 4.6% 4.0% 5.4% Net income % of beginning equity .................................. 10.9% 10.0% 14.2% Cash dividends .................................................... $ 2,895 $ 2,944 $ 2,709 FINANCIAL POSITION Current assets .................................................... $ 55,371 $ 60,279 $ 57,285 Current liabilities ............................................... 14,702 15,128 17,816 Working capital ................................................... $ 40,669 $ 45,151 $ 39,469 Current ratio ..................................................... 3.77 3.98 3.22 Property, plant and equipment ..................................... $ 15,068 $ 19,563 $ 19,817 Total assets ...................................................... 74,047 83,657 82,066 Long-term debt .................................................... 3,024 4,572 1,128 Shareholders' equity .............................................. $ 54,519 $ 62,293 $ 61,563 Long-term debt / total capitalization ............................. 5.3% 6.8% 1.8% Inventory turnover (CGS / year-end inventory) ..................... 5.0 4.9 4.8 CASH FLOWS PROVIDED BY (USED IN) Operating activities .............................................. $ 10,375 $ 8,326 $ 9,274 Investing activities .............................................. 6,323 (3,127) (4,979) Financing activities .............................................. (16,326) (2,714) (4,884) Increase (decrease) in cash ....................................... 372 2,485 (589) COMMON STOCK DATA Net income per share -- basic ..................................... $ 1.55 $ 1.30 $ 1.66 Net income per share -- diluted ................................... 1.55 1.30 1.65 Cash dividends per share .......................................... 0.66 0.62 0.56 Book value per share .............................................. 13.92 13.27 12.76 Stock price range during year High ............................................................ $ 18.25 $ 22.75 $ 25.75 Low ............................................................. $ 13.50 $ 15.25 $ 19.63 Shares outstanding, year-end (in thousands) ....................... 3,916 4,694 4,824 Number of shareholders, year-end .................................. 2,749 3,014 3,221 OTHER DATA EBITDA ............................................................ $ 15,461 $ 14,806 $ 15,699 EBITDA % of sales ................................................. 10.5% 9.7% 10.5% Average number of employees ....................................... 1,320 1,445 1,511 Sales per employee ................................................ $ 112 $ 106 $ 99 Backlog ........................................................... $ 44,935 $ 47,431 $ 47,154 - --------------------------------------------------------------------------------------------------------------
ALL PER SHARE, SHARES OUTSTANDING AND MARKET PRICE DATA REFLECT THE OCTOBER 1992 THREE-FOR-TWO AND THE JULY 1989 TWO-FOR-ONE STOCK SPLITS. ALL OTHER FIGURES ARE AS REPORTED. EBITDA IS DETERMINED AS OPERATING INCOME PLUS DEPRECIATION AND AMORTIZATION. (a) INCLUDES A $1.2 MILLION PRETAX GAIN ($764,000 NET OF TAX) ON THE SALE OF ASSETS OF THE COMPANY'S GLASSTITE SUBSIDIARY (SEE NOTE 4). (b) INCLUDES A $1.8 MILLION PRETAX GAIN($1.2 MILLION NET OF TAX) ON SALE OF AN INVESTMENT IN AN AFFILIATE (SEE NOTE 4). (c) INCLUDES A $1.8 MILLION PRETAX CHARGE ($1.2 MILLION NET OF TAX) AT THE COMPANY'S BETA RAVEN SUBSIDIARY. (d) DURING THE THIRD QUARTER OF FISCAL 2000, THE COMPANY SOLD ITS GLASSTITE BUSINESS. IN ADDITION DURING FISCAL YEAR 1996, THE COMPANY SOLD ITS ASTORIA BUSINESS. 14 RAVEN 2000 ANNUAL REPORT
For the years ended January 31, - ------------------------------------------------------------------------------------------------------------- 1997 1996 1995 1994 1993 1992 1991 1990 - ------------------------------------------------------------------------------------------------------------- $121,784 $104,654 $105,802 $108,751 $101,614 $ 93,113 $ 76,799 $ 81,291 17,657 15,790 15,918 12,717 9,600 7,496 8,703 9,682 139,441 120,444 121,720 121,468 111,214 100,609 85,502 90,973 25,287 22,660 23,968 23,574 21,048 19,109 17,685 18,177 11,330 9,523 7,953(c) 9,480 8,586 8,106 7,686 8,455 641 38 1,183 960 560 32 (375) (994) 11,971 9,561 9,136(c) 10,440 9,146 8,138 7,311 7,461 11,915 9,566 9,372(c) 10,638 9,182 8,067 7,071 6,831 $ 7,688 $ 6,197 $ 6,088(c) $ 6,954 $ 6,030 $ 5,306 $ 4,605 $ 4,235 5.5% 5.1% 5.0% 5.7% 5.4% 5.3% 5.4% 4.7% 15.6% 13.6% 14.8% 19.6% 19.7% 20.2% 20.2% 19.7% $ 2,367 $ 2,130 $ 1,843 $ 1,545 $ 1,316 $ 1,165 $ 1,014 $ 849 $ 56,696 $ 45,695 $ 43,795 $ 45,037 $ 42,476 $ 34,798 $ 33,900 $ 30,570 20,016 14,771 15,078 16,088 15,253 11,284 12,147 11,247 $ 36,680 $ 30,924 $ 28,717 $ 28,949 $ 27,223 $ 23,514 $ 21,753 $ 19,323 2.83 3.09 2.90 2.80 2.78 3.08 2.79 2.72 $ 18,142 $ 18,069 $ 18,570 $ 13,371 $ 10,457 $ 9,947 $ 8,368 $ 7,163 80,662 67,553 65,636 60,597 54,813 46,528 44,103 39,547 3,181 2,816 4,179 2,539 3,224 3,676 4,679 4,966 $ 56,729 $ 49,151 $ 45,526 $ 41,100 $ 35,530 $ 30,601 $ 26,236 $ 22,802 5.3% 5.4% 8.4% 5.8% 8.3% 10.7% 15.1% 17.5% 4.5 4.1 4.4 4.4 3.8 4.2 3.4 4.1 $ 7,088 $ 9,687 $ 7,452 $ 11,257 $ 3,475 $ 7,489 $ 5,583 $ 2,404 (5,090) (4,158) (10,000) (5,908) (3,107) (3,886) (3,113) (1,308) (2,363) (4,029) 406 (2,042) (1,659) (2,518) (2,071) (1,875) (365) 1,500 (2,142) 3,307 (1,291) 1,085 399 (779) $ 1.62 $ 1.31 $ 1.29 $ 1.48 $ 1.30 $ 1.15 $ 1.00 $ 0.90 1.61 1.30 1.27 1.45 1.27 1.13 0.98 0.87 0.50 0.45 0.39 0.33 0.28 0.25 0.22 0.18 11.73 10.42 9.62 8.76 7.60 6.63 5.77 5.01 $ 23.50 $ 20.75 $ 24.50 $ 23.50 $ 21.50 $ 15.83 $ 9.75 $ 10.00 $ 16.00 $ 15.50 $ 18.00 $ 18.00 $ 13.83 $ 8.00 $ 6.42 $ 5.33 4,836 4,716 4,735 4,694 4,676 4,629 4,559 4,554 3,011 3,190 3,031 3,173 3,147 2,775 2,526 1,898 $ 16,537 $ 13,803 $ 12,718 $ 13,337 $ 11,809 $ 10,675 $ 9,580 $ 10,238 11.9% 11.5% 10.4% 11.0% 10.6% 10.6% 11.2% 11.3% 1,387 1,368 1,414 1,435 1,316 1,252 1,141 1,234 $ 101 $ 88 $ 86 $ 85 $ 85 $ 80 $ 75 $ 74 $ 38,102 $ 32,539 $ 29,661 $ 36,403 $ 49,033 $ 48,200 $ 53,587 $ 42,078 - -------------------------------------------------------------------------------------------------------------
15 FINANCIAL REVIEW AND ANALYSIS RESULTS OF OPERATIONS: MARGIN ANALYSIS The following table presents comparative financial performance for the past three years:
- ----------------------------------------------------------------------------------------------------------------------------------- For the years ended January 31 ------------------------------------------------------------------------------------------ 2000 1999 1998 ------------------------------------------------------------------------------------------ % % % % % % IN THOUSANDS, EXCEPT PER-SHARE DATA Amount Sales Change Amount Sales Change Amount Sales Change ------------------------------------------------------------------------------------------ Net sales ........................... $147,906 100.0 -3.2 $152,798 100.0 +2.1 $149,619 100.0 +7.3 Gross profit ........................ 24,524 16.6 -1.2 24,815 16.2 -0.5 24,929 16.7 -1.4 Operating expenses .................. 15,133 10.2 -0.1 15,142 9.9 +5.4 14,367 9.6 +7.9 Gain on Glasstite sale .............. 1,186 0.8 Operating income .................... 10,577 7.2 +9.3 9,673 6.3 -8.4 10,562 7.1 -11.8 Income before income taxes .......... 10,503 7.1 +8.9 9,649 6.3 -23.1 12,540 8.4 +5.2 Income taxes ........................ 3,741 2.5 +7.9 3,467 2.3 -22.6 4,478 3.0 +5.9 Net income .......................... $ 6,762 4.6 +9.4 $ 6,182 4.0 -23.3 $ 8,062 5.4 +4.9 Net income per share --diluted ......................... $ 1.55 +19.2 $ 1.30 -21.2 $ 1.65 +2.5 Effective income tax rate ........... 35.6% -0.8 35.9% +0.6 35.7% +0.9 - -----------------------------------------------------------------------------------------------------------------------------------
The company sold its Glasstite pickup-truck operation in the third quarter of fiscal 2000. The following table presents ongoing business information excluding Glasstite results:
- ----------------------------------------------------------------------------------------------------------------------------------- For the years ended January 31 ------------------------------------------------------------------------------------------------------ 2000 1999 ------------------------------------------------------------------------------------------------------ Ongoing Businesses Ongoing Businesses -------------------------- ------------------------- As Glasstite % % As Glasstite % % IN THOUSANDS Reported Related Amount Sales Change Reported Related Amount Sales Change ------------------------------------------------------------------------------------------------------ Net sales ................ $147,906 $ 17,657 $130,249 100.0 -1.9 $152,798 $ 19,993 $132,805 100.0 +1.4 Gross profit ............. 24,524 1,921 22,603 17.4 -1.1 24,815 1,957 22,858 17.2 -3.2 Operating expenses ....... 15,133 745 14,388 11.0 +2.7 15,142 1,135 14,007 10.5 +5.0 Gain on Glasstite sale ... 1,186 1,186 Operating income ......... $ 10,577 $ 2,362 $ 8,215 6.3 -7.2 $ 9,673 $ 822 $ 8,851 6.7 -13.4 - -----------------------------------------------------------------------------------------------------------------------------------
PERFORMANCE Sales in fiscal 2000 were $147.9 million. Net income was $6.8 million or $1.55 per share on a diluted basis. Fiscal 1999 net income was $6.2 million or $1.30 per share on a diluted basis. Fiscal 2000 showed a 19% increase in earnings per share on $4.9 million fewer sales dollars. Results include a $1.2 million pretax gain on the sale of the assets of the company's Glasstite subsidiary. Excluding the sale of Glasstite and its sales and earnings as set forth above, sales totaled $130.2 million compared to adjusted fiscal 1999 sales of $132.8 million. Adjusted operating income for fiscal 2000 was $8.2 million, compared to operating income of $8.9 million in fiscal 1999. Fiscal 2000 included an $800,000 pretax inventory change related to third-quarter actions by the new managers of Raven operating units who were repositioning certain elements of the company's business. The company took two important steps toward repositioning its business during fiscal 2000. These were the disposing of a non-strategic business and reducing its underperforming assets. 16 RAVEN 2000 ANNUAL REPORT For the fourth quarter of fiscal 2000, unusually warm weather affected outerwear apparel sales while a continuing recession in agriculture and the loss of sales from Glasstite operations caused 21 percent lower sales and a 22 percent drop in net income. Earnings per diluted share for the final quarter was down 9 percent to 31 cents from 34 cents for the previous year. The company is divesting itself of assets that do not provide a strong return, and management is focusing its core businesses on improved profitability. In fiscal 2000, the company's return was 10.9 % on beginning stockholders' equity and 4.6% on sales. The company also increased its book value by 4.9 % on a per share basis, repurchased 780,604 shares of its common stock for a total cost of $11.9 million, paid record dividends, and con-tinued to invest in its ongoing business. For fiscal 2000 the company's long-term debt to total capitalization ratio was 5.3%.
- ------------------------------------------------------------------------------------------------------------ 2000 1999 1998 1997 1996 1995 ----------------------------------------------------------- Net income as % of Sales .................................... 4.6% 4.0% 5.4% 5.5% 5.1% 5.0% Average assets ........................... 8.6% 7.4% 9.9% 10.4% 9.3% 9.6% Beginning equity ......................... 10.9% 10.0% 14.2% 15.6% 13.6% 14.8% - ------------------------------------------------------------------------------------------------------------
SEGMENT ANALYSIS The following table summarizes sales and gross profits in the company's three business segments for each of the past three fiscal years:
- ------------------------------------------------------------------------------------------------------------- 2000 1999 1998 - ------------------------------------------------------------------------------------------------------------- DOLLARS IN THOUSANDS amount % change amount % change amount % change --------------------------------------------------------------------- SALES Electronics ........................ $ 48,930 +5.6 $ 46,328 +0.8 $ 45,947 +4.8 Plastics ........................... 70,699 -0.2 70,845 +3.7 68,325 +15.5 Sewn Products ...................... 28,277 -20.6 35,625 +0.8 35,347 -3.0 -------- -------- -------- Total .............................. $147,906 -3.2 $152,798 +2.1 $149,619 +7.3 ======== ======== ======== - ------------------------------------------------------------------------------------------------------------- 2000 1999 1998 - ------------------------------------------------------------------------------------------------------------- DOLLARS IN THOUSANDS amount % sales amount % sales amount % sales --------------------------------------------------------------------- GROSS PROFIT Electronics ........................ $ 7,836 16.0 $ 8,657 18.7 $ 10,083 21.9 Plastics ........................... 12,996 18.4 11,600 16.4 8,791 12.9 Sewn Products ...................... 3,692 13.1 4,558 12.8 6,055 17.1 -------- -------- -------- Total .............................. $ 24,524 16.6 $ 24,815 16.2 $ 24,929 16.7 ======== ======== ======== - -------------------------------------------------------------------------------------------------------------
ELECTRONICS SEGMENT FISCAL 2000 VERSUS FISCAL 1999 Sales for this segment were up $2.6 million when compared to fiscal 1999, reaching $48.9 million in fiscal 2000. Deliveries in contract manufacturing from the Electronic Systems Division were up $5.3 million for fiscal 2000, ending the year at $24.1 million. Fiscal 2000 sales of Beta Raven's feedmill systems and subcontract assemblies were $11.3 million, down from the $12.2 million for fiscal 1999. Sales of precision-farming control devices declined by $1.8 million to $13.5 million. The persistent poor farm economy continues to affect sales in both of these product lines. The fiscal 2000 gross margin on feedmill automation systems was about even with last year. 17 FINANCIAL REVIEW AND ANALYSIS Gross margin rates on precision farming control devices in fiscal 2000 were up from fiscal 1999. Cost-control measures worked in the face of declining sales. Contract manufacturing gross margins declined due to the number of new modules in its product mix resulting in startup costs and lower yield rates. The results also reflect the impact of a third-quarter $300,000 inventory charge described above. Operating income for the segment was $2.9 million, down from $4.2 million in fiscal 1999. FISCAL 1999 VERSUS FISCAL 1998 Sales for this segment were up slightly when compared to fiscal 1998, reaching $46.3 million in fiscal 1999. Due to increased market share, fiscal 1999 sales of Beta Raven feedmill systems and subcontract assemblies rose to $12.2 million, up from $10.1 million in fiscal 1998. Sales of precision-farming control devices declined by $1.5 million to $15.3 million. The primary agricultural markets were hard hit by a poor farm economy. Contract manufacturing deliveries ended the year at $18.8 million, down $200,000 from fiscal 1998. Customer delays in the delivery of certain contracts kept this product line from exceeding fiscal 1998 sales figures. Operating income for the segment was $4.2 million, down from $5.8 million in fiscal 1998. Gross margin rates on precision-farming control devices in fiscal 1999 were down from fiscal 1998. This resulted from lower volumes and a poor performance in the precision depth-control product line. Contract manufacturing margins were affected by delivery delays, and new contract startup costs. Feedmill automation systems generated higher gross margin rates in fiscal 1999 than in fiscal 1998, due to better utilization of resources resulting from increased sales volume. PROSPECTS Continued expansion of contract electronics manufacturing is expected to lead to sales growth of 10% or more in fiscal 2001. The agricultural market remains weak, and sales growth of precision-farming devices will depend upon improved commodity prices. A concerted effort to improve yield rates on the manufacturing processes and to lower startup costs associated with new customers is expected to lead to improved gross profit rates in the Electronics segment. ELECTRONICS SEGMENT SALES GROSS PROFITS DOLLARS IN MILLIONS DOLLARS IN MILLIONS [BAR CHART] [BAR CHART] 98 - 45.947 98 - 10.083 99 - 46.328 99 - 8.657 00 - 48.930 00 - 7.836 PLASTICS SEGMENT FISCAL 2000 VERSUS FISCAL 1999 Sales in this segment were down slightly from $70.8 million in fiscal 1999 to $70.7 million in fiscal 2000. The engineered films product line sales were $34.8 million, an increase of $3.3 million over the $31.5 million in fiscal 1999. The plastic storage tank product line sales were $18.2 million, $1.2 million below the $19.4 million generated in fiscal 1999. The continuing weak agricultural and semiconductor markets had a negative effect on the product line sales. The assets of the company's Glasstite subsidiary were sold in the third quarter. The $1.2 million gain generated from this sale is included in this segment's operating income which totaled $7.1 million. During the fourth quarter of fiscal 2000 the company revised estimates of costs to be incurred related to the sale, increasing operating income by $220,000. For fiscal 2000, excluding the sale of Glasstite and its associated sales and earnings, this segment would have had sales of $53.0 million with an operating income of $4.7 million. Making the same adjustment for fiscal 1999 would result in $50.9 million in sales and $3.6 million in operating income. The gross margin for the plastic storage tank product line was adversely affected by a third-quarter $250,000 inventory charge due to the new operating manager repositioning the business. A strong performance in the engineered films product line, through increased market share and favorable material costs, contributed to the performance of the Plastics segment. PLASTICS SEGMENT SALES GROSS PROFITS DOLLARS IN MILLIONS DOLLARS IN MILLIONS [BAR CHART] [BAR CHART] 98 - 68.325 98 - 8.791 99 - 70.845 99 - 11.600 00 - 70.699 00 - 12.996 18 RAVEN 2000 ANNUAL REPORT FISCAL 1999 VERSUS FISCAL 1998 Sales in the Plastics segment rose from $68.3 million in fiscal 1998 to $70.8 million in fiscal 1999. The engineered films product line generated a $4.0 million increase in sales over the fiscal 1998's $27.5 million. Included in fiscal 1999 sales was $2.5 million of construction film shipped to various storm-devastated areas. Plastic storage tank sales of $19.4 million were $3.1 million below fiscal 1998. The primary factor responsible for the reduction in sales was a weak semiconductor market that affected the dual-laminate tank product line. Sales in the pickup-truck topper product line increased by over 7% due primarily to higher unit deliveries. Even though sales of agricultural tanks held steady, gross margins were down due to the poor farm economy. This, in conjunction with low volume in dual-laminate tanks, accounted for lower gross margins on plastics storage tanks. Overall, the Plastics segment generated gross margins of 16.4% compared to 12.9% for fiscal 1998. This increase was due to strong performances in the company's engineered films and pickup-truck topper operations as a result of better utilization of capacity due to increased sales volume. PROSPECTS The Plastics segment sales will decrease in fiscal 2001 due to the Glasstite subsidiary sale. Of the product lines remaining, it is management's expectation that sales will increase less than 10% in fiscal 2001. Engineered films and plastic storage tank product lines are expected to show a sales increase due to an increased market share, with the majority of the increase expected in the plastic storage tank product line. Management expects lower gross margins on the engineered films product line due to higher resin prices. The plastic storage tank product line's gross margin rates are expected to increase in fiscal 2001 due to better utilization of labor and equipment in the dual-laminate product line. SEWN PRODUCTS SEGMENT FISCAL 2000 VERSUS FISCAL 1999 Sales of $28.3 million for the Sewn Products segment were down $7.3 million compared to $35.6 million for fiscal 1999. Performance outerwear sales decreased from $30.2 million in fiscal 1999 to $23.3 million in fiscal 2000, a difference of $6.9 million. The decrease in sales of performance outerwear was due primarily to the loss of sales to foreign competition. The sales for the hot-air balloon and inflatable display product lines decreased $432,000 to $5.0 million due to lower customer demand. Gross profit rates for the Sewn Products segment increased slightly due to cost controls in the performance outerwear product line. In fiscal 2000 the operating income for the Sewn Products segment was $567,000 compared to $1.1 million for fiscal 1999. This result reflects a third-quarter $250,000 inventory charge due to the new operating manager repositioning the business. SEWN PRODUCTS SEGMENT SALES GROSS PROFITS DOLLARS IN MILLIONS DOLLARS IN MILLIONS [BAR CHART] [BAR CHART] 98 - 35.347 98 - 6.055 99 - 35.625 99 - 4.558 00 - 28.277 00 - 3.692 FISCAL 1999 VERSUS FISCAL 1998 Sales were $35.6 million in the Sewn Products segment in fiscal 1999, less than 1% more than fiscal 1998. Sales of performance outerwear increased by $400,000 to end fiscal 1999 at $30.2 million. Sales of hot-air balloons and inflatable displays declined due to lower demand. The change in the Sewn Products segment's gross profit rate, from 17% in fiscal 1998 to 13% in fiscal 1999, was due primarily to increased competitive pressures in the contract sewing product line along with significant style-changeover costs. PROSPECTS Management is projecting a further sales decline of less than 10% in the Sewn Products segment for fiscal 2001. Competitive pressures in the performance outerwear product line should account for most of this decline. This 19 FINANCIAL REVIEW AND ANALYSIS pressure is evidenced by a significant portion of the performance outerwear business moving offshore in fiscal 2000. Management expects to push for higher gross margin business and improve plant utilization in fiscal 2001. The new management in performance outerwear has sold its proprietary skiwear line to reduce inventory, lower accounts receivable levels, and improve cash return on investment. The hot-air balloon and inflatable display product lines are projected to show a sales increase due to increased customer demand. EXPENSES, INCOME TAXES, AND OTHER FISCAL 2000 VERSUS FISCAL 1999 Selling expense decreased by 7% in fiscal 2000 when compared with fiscal 1999 levels, due primarily to lower sales for the product lines which pay commissions. Administration expense was up 9%, due primarily to higher bad debt expense, costs associated with restructuring and higher benefit costs. Interest expense was down from fiscal 1999 by $56,000 due to lower borrowing levels. The company's effective income tax rate was essentially unchanged in fiscal 2000. FISCAL 1999 VERSUS FISCAL 1998 Selling expenses increased by 4% in fiscal 1999 when compared with fiscal 1998 levels, basically the same rate as salary increases. Administration expense was up 7% to $6.6 million in fiscal 1999 compared to $6.2 million in fiscal 1998. Administration expense was higher due primarily to salary increases and settlement of a legal issue. Interest expense was up from 1998 by $151,000 due to higher borrowing levels. In fiscal 1999 "other income" was $450,000, which included interest income on a note related to the sale of an affiliated company in January 1998. The company's effective income tax rate did not change significantly. PROSPECTS For fiscal 2001 management has taken actions to hold operating expenses steady as a percentage of sales when compared to fiscal 2000. Interest expense should decline slightly as total borrowing is reduced. The company's effective income tax rate is not expected to materially change in fiscal 2001. ANALYSIS OF FINANCIAL POSITION, LIQUIDITY, AND CAPITAL RESOURCES The following table summarizes cash provided by (used in) the company's business activities for the past three fiscal years: - -------------------------------------------------------------------------------- DOLLARS IN THOUSANDS 2000 1999 1998 ------------------------------- Operating activities.......................... $ 10,375 $ 8,326 $ 9,274 Investing activities.......................... 6,323 (3,127) (4,979) Financing activities.......................... (16,326) (2,714) (4,884) - -------------------------------------------------------------------------------- OPERATING ACTIVITIES The company's cash flow from operations totaled $28.0 million over the past three years, compared with net income of $21.0 million over the same period. Accounts receivable levels decreased in fiscal 2000 due to lower fourth-quarter sales, particularly to the agricultural markets. Working capital requirements are projected to decline in proportion to the lower sales volume in fiscal 2001. 20 RAVEN 2000 ANNUAL REPORT INVESTING ACTIVITIES In October 1999, the company sold the assets of its Glasstite subsidiary, receiving $8.7 million of cash. In December 1999, the company received the final payment of $1.2 million from the sale of its investment in an affiliated company. Capital expenditures totaled $3.6 million in fiscal 2000, $967,000 less than the prior year. Capital expenditures in fiscal 2000 ran $1.2 million less than depreciation and amortization. Expenditures, which were in support of expected growth, were divided between the Electronics segment at $1.5 million and the Plastics segment at $2.0 million. Capital spending is expected to exceed depreciation and amortization by at least $1.0 million in fiscal 2001. This is mainly in support of expected expansion in the engineered films product line. FINANCING ACTIVITIES AND CREDIT LINES The company increased its dividend on a per share basis for the thirteenth consecutive year. Cash was also used to repurchase 780,604 shares of company stock at an average price of $15.22. As of January 31, 2000, the company could repurchase an additional 209,591 shares of its common stock under the November 1999, 500,000 share authorization from the Board of Directors. Shares were repurchased to return additional cash to the shareholders and increase the leverage of the company's balance sheet. The company may repurchase additional shares, depending on its own internal cash requirements. The Board of Directors authorized an additional 500,000 share repurchase in March 2000. The company uses its short-term line of credit to finance its seasonal borrowing needs. Maximum borrowing under the company's line of credit was $5.0 million during fiscal 2000 and the average daily borrowing was $721,000. Short-term borrowing required for fiscal 2001 should be kept at a minimum because of the company's opening cash balance and reduced seasonal working capital requirements in its Sewn Products segment. The skiwear business, now sold, required extended dating of accounts receivable for products shipped in the summer months. Management believes its existing credit facility and cash provided by operations will be sufficient to fund its requirements in the coming fiscal year. CAPITAL STRUCTURE AND LONG-TERM FINANCING The company's long-term debt to total capitalization ratio was 5.3% at January 31, 2000. Refer to Note 7 to the consolidated financial statements for the types and sources of long term debt. The company required no additional long term financing during fiscal 2000. The terms of the long-term loan secured in fiscal 1999 call for repayment over five years at $1.0 million per year ending in 2003. Interest is at a fixed 7.25%, payable quarterly, during the life of the loan. The company's solid financial condition and capacity to assume additional financing, if needed, provide the company a strategic advantage over many of its competitors. Management has the capacity to, and will, leverage the company to acquire businesses that fit its strategic direction. Additional cash for acquisition purposes could also be raised by using proceeds from a disposition. In the opinion of management, the company is well-positioned to take on new opportunities in its core businesses with emphasis on those that build on the company's strengths of customer service and manufacturing. 21 STOCK AND QUARTERLY PERFORMANCE WEEKLY CLOSING STOCK PRICE, VOLUME & P/E [PLOT POINTS CHART] CLOSING DATE PRICE VOLUME P/E 02/05/99 15 7/8 17,800 12.21 02/12/99 15 1/4 6,700 11.73 02/19/99 14 3/4 37,100 11.35 02/26/99 14 5/8 21,100 11.25 03/05/99 14 3/4 21,100 11.35 03/12/99 14 1/4 25,300 10.96 03/19/99 14 1/8 39,300 10.86 03/26/99 14 21,600 10.76 04/02/99 13 11/16 64,500 10.52 04/09/99 14 55,700 10.76 04/16/99 14 1/8 63,800 10.86 04/23/99 14 93,600 10.00 04/30/99 14 77,800 10.00 05/07/99 14 5/8 50,700 10.44 05/14/99 15 1/2 34,400 11.07 05/21/99 15 3/4 25,700 11.25 05/28/99 15 15/16 20,300 11.38 06/04/99 15 3/4 20,300 11.25 06/11/99 16 20,400 11.43 06/18/99 16 1/16 14,900 11.47 06/25/99 16 34,300 11.43 07/02/99 16 1/4 13,400 11.60 07/09/99 17 7/8 11,000 12.77 07/16/99 17 24,200 12.14 07/23/99 16 5/8 10,880 11.15 07/30/99 16 5/8 15,500 11.15 08/06/99 16 1/4 12,000 10.90 09/13/99 16 5/8 17,600 11.15 08/20/99 17 38,900 11.40 08/27/99 17 5/8 58,400 11.82 09/03/99 17 13/16 78,400 11.95 09/10/99 17 78,400 11.40 09/17/99 16 5/16 29,300 10.94 09/24/99 15 3/4 34,300 10.57 10/01/99 14 6/16 35,000 10.57 10/08/99 14 1/16 50,900 9.43 10/15/99 13 1/2 17,200 9.06 10/22/99 14 9/16 38,000 9.39 10/29/99 15 1/2 39,700 10.00 11/05/99 15 1/2 359,600 9.83 11/12/99 15 1/4 32,000 9.83 11/19/99 15 1/8 25,600 9.75 11/26/99 14 1/4 35,300 9.19 12/03/99 14 5/8 47,500 9.43 12/10/99 14 5/8 38,800 9.43 12/17/99 14 5/8 38,800 9.43 12/24/99 14 5/8 42,600 9.43 12/31/99 14 3/4 29,500 9.51 01/07/00 14 1/2 26,400 9.51 01/14/00 14 5/32 9,800 9.35 01/21/00 14 1/4 800 9.35 01/28/00 14 3/8 7,900 9.37 QUARTERLY INFORMATION (UNAUDITED)
Net income Common stock DOLLARS IN THOUSANDS, Net Gross Operating Pretax Net per-share(a) market price Dividends EXCEPT PER-SHARE DATA Sales Profit Income Income Income Basic Diluted High Low Per Share ------------------------------------------------------------------------------------------------------------ FISCAL 2000 FIRST QUARTER ..... $ 34,495 $ 6,011 $ 2,258 $ 2,252 $ 1,439 $ 0.31 $ 0.31 $ 16.50 $ 13.50 $ 0.16 SECOND QUARTER .... 36,965 6,588 2,803 2,842 1,816 0.40 0.40 18.25 13.88 0.16 THIRD QUARTER ..... 44,971 6,485 3,589(b) 3,527(b) 2,254(b) 0.52 0.52 18.00 13.50 0.17 FOURTH QUARTER .... 31,475 5,440 1,927(b) 1,882(b) 1,253(b) 0.31 0.31 16.00 13.63 0.17 ------------------------------------------------------------------------------------------------------------ TOTAL YEAR ........ $147,906 $24,524 $10,577 $10,503 $ 6,762 $ 1.55 $ 1.55 $ 18.25 $ 13.50 $ 0.66 ============================================================================================================ FISCAL 1999 First Quarter ..... $ 32,162 $ 5,420 $ 1,606 $ 1,601 $ 1,024 $ 0.21 $ 0.21 $ 22.75 $ 19.25 $ 0.15 Second Quarter .... 36,208 6,033 2,383 2,341 1,502 0.31 0.31 20.38 19.00 0.15 Third Quarter ..... 44,787 7,041 3,197 3,202 2,053 0.44 0.44 19.38 15.63 0.16 Fourth Quarter .... 39,641 6,321 2,487 2,505 1,603 0.34 0.34 18.00 15.25 0.16 ------------------------------------------------------------------------------------------------------------ Total Year ........ $152,798 $24,815 $ 9,673 $ 9,649 $ 6,182 $ 1.30 $ 1.30 $ 22.75 $ 15.25 $ 0.62 ============================================================================================================ FISCAL 1998 First Quarter ..... $ 35,666 $ 6,827 $ 3,288 $ 3,334 $ 2,134 $ 0.44 $ 0.44 $ 24.00 $ 21.75 $ 0.13 Second Quarter .... 34,075 6,075 2,407 2,476 1,602 0.33 0.33 24.50 22.38 0.13 Third Quarter ..... 41,321 6,113 2,505 2,548 1,641 0.34 0.33 25.75 22.50 0.15 Fourth Quarter .... 38,557 5,914 2,362 4,182(c) 2,685(c) 0.55 0.55 23.75 19.63 0.15 ------------------------------------------------------------------------------------------------------------ Total Year ........ $149,619 $24,929 $10,562 $12,540 $ 8,062 $ 1.66 $ 1.65 $ 25.75 $ 19.63 $ 0.56 ============================================================================================================ - ----------------------------------------------------------------------------------------------------------------------------------
(a) NET INCOME PER SHARE IS COMPUTED DISCRETELY BY QUARTER AND MAY NOT ADD TO THE FULL YEAR. (b) INCLUDES A $966,000 THIRD QUARTER PRETAX GAIN ($619,000 NET OF TAX) AND A $220,000 FOURTH QUARTER PRETAX GAIN ($142,000 NET OF TAX) ON THE SALE OF THE COMPANY'S GLASSTITE BUSINESS (SEE NOTE 4). (c) INCLUDES A $1.8 MILLION PRETAX GAIN ($1.2 MILLION NET OF TAX) ON SALE OF AN INVESTMENT IN AN AFFILIATE (SEE NOTE 4). 22 CONSOLIDATED BALANCE SHEET RAVEN 2000 ANNUAL REPORT
As of January 31 ----------------------------- DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA 2000 1999 1998 ----------------------------- ASSETS Current assets Cash and cash equivalents ................................................ $ 5,707 $ 5,335 $ 2,850 Accounts and note receivable, net ........................................ 22,717 27,399 26,973 Inventories, net ......................................................... 24,462 25,978 25,816 Deferred income taxes .................................................... 1,919 1,150 1,140 Prepaid expenses and other current assets ................................ 566 417 506 ----------------------------- Total current assets ................................................. 55,371 60,279 57,285 Property, plant and equipment, net ......................................... 15,068 19,563 19,817 Note receivable, less current portion ...................................... 1,259 Other assets, net .......................................................... 3,608 3,815 3,705 ----------------------------- Total assets ......................................................... $74,047 $83,657 $82,066 ============================= LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities Current portion of long-term debt ........................................ $ 1,044 $ 1,060 $ 1,765 Accounts payable ......................................................... 5,320 5,993 7,480 Accrued liabilities ...................................................... 7,721 7,581 7,768 Customer advances ........................................................ 617 494 803 ----------------------------- Total current liabilities ............................................ 14,702 15,128 17,816 Long-term debt, less current portion ....................................... 3,024 4,572 1,128 Other liabilities, primarily compensation and benefits ..................... 1,802 1,664 1,559 Commitments and contingencies Stockholders' equity ....................................................... 54,519 62,293 61,563 ----------------------------- Common shares, par value $1.00 Authorized--100,000,000 Outstanding--2000: 3,916,107; 1999: 4,694,086; 1998: 4,824,429 Total liabilities and stockholders' equity ........................... $74,047 $83,657 $82,066 ============================= - -------------------------------------------------------------------------------------------------------------
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE CONSOLIDATED FINANCIAL STATEMENTS. 23 CONSOLIDATED STATEMENT OF INCOME
As of January 31 ------------------------------------- DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA 2000 1999 1998 ------------------------------------- Net sales ........................................................ $ 147,906 $ 152,798 $ 149,619 Cost of goods sold ............................................... 123,382 127,983 124,690 ------------------------------------- Gross profit ................................................... 24,524 24,815 24,929 Selling expenses ................................................. 7,866 8,502 8,149 Administrative expenses .......................................... 7,267 6,640 6,218 Gain on sale of Glasstite ........................................ (1,186) ------------------------------------- Operating income ............................................... 10,577 9,673 10,562 Interest expense ................................................. (418) (474) (323) Gain on sale of investment in affiliate .......................... 1,794 Other income, net ................................................ 344 450 507 ------------------------------------- Income before income taxes ..................................... 10,503 9,649 12,540 Income taxes ..................................................... 3,741 3,467 4,478 ------------------------------------- Net income ..................................................... $ 6,762 $ 6,182 $ 8,062 ===================================== Net income per common share: -- basic ..................................... $ 1.55 $ 1.30 $ 1.66 ===================================== -- diluted ................................... $ 1.55 $ 1.30 $ 1.65 ===================================== - -----------------------------------------------------------------------------------------------------------
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE CONSOLIDATED FINANCIAL STATEMENTS. 24 CONSOLIDATED STATEMENTS OF RAVEN 2000 ANNUAL REPORT STOCKHOLDERS' EQUITY AND COMPREHENSIVE INCOME
Common Paid-in Treasury stock Retained DOLLARS IN THOUSANDS, EXCEPT PER-SHARE DATA Stock Capital Shares Cost Earnings Total -------------------------------------------------------------------------- Balance January 31, 1997 ...................... $ 5,188 $ 2,673 (352,403) $ (2,910) $ 51,778 $ 56,729 Net and comprehensive income .................. 8,062 8,062 Cash dividends ($.56 per share) ............... (2,709) (2,709) Purchase of stock ............................. (34,000) (713) (713) Purchase and retirement of stock .............. (33) (771) (804) Employees' stock options exercised ............ 56 742 798 Tax benefit from exercise of stock options .... 200 200 -------------------------------------------------------------------------- Balance January 31, 1998 ...................... 5,211 2,844 (386,403) (3,623) 57,131 61,563 Net and comprehensive income .................. 6,182 6,182 Cash dividends ($.62 per share) ............... (2,944) (2,944) Purchase of stock ............................. (135,000) (2,608) (2,608) Purchase and retirement of stock .............. (53) (982) (1,035) Employees' stock options exercised ............ 57 1,078 1,135 -------------------------------------------------------------------------- Balance January 31, 1999 ...................... 5,215 2,940 (521,403) (6,231) 60,369 62,293 Net and comprehensive income .................. 6,762 6,762 Cash dividends ($.66 per share) ............... (2,895) (2,895) Purchase of stock ............................. (780,604) (11,881) (11,881) Purchase and retirement of stock .............. (5) (65) (70) Employees' stock options exercised ............ 5 79 84 Employee stock grant .......................... 3 35 38 Stock option cash bonus forfeitures, net of tax 188 188 -------------------------------------------------------------------------- BALANCE JANUARY 31, 2000 ...................... $ 5,218 $ 3,177 (1,302,007) $(18,112) $ 64,236 $ 54,519 ========================================================================== - -----------------------------------------------------------------------------------------------------------------------------
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE CONSOLIDATED FINANCIAL STATEMENTS. 25 CONSOLIDATED STATEMENT OF CASH FLOWS
As of January 31 ---------------------------------- DOLLARS IN THOUSANDS 2000 1999 1998 ---------------------------------- Cash flows from operating activities Net income ............................................................. $ 6,762 $ 6,182 $ 8,062 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization ........................................ 4,884 5,133 5,137 Provision for losses on accounts receivable .......................... 362 135 193 Gain on sale of Glasstite ............................................ (1,186) Deferred income taxes ................................................ (1,019) (553) 166 Equity in earnings of affiliate, net of dividends .................... (204) Gain on sale of investment of affiliate .............................. (1,794) Change in operating assets and liabilities, net of effects from the sale of Glasstite .............................................. 478 (2,502) (2,264) Other operating activities, net ...................................... 94 (69) (22) ---------------------------------- Net cash provided by operating activities .............................. 10,375 8,326 9,274 Cash flows from investing activities Capital expenditures ................................................... (3,639) (4,606) (6,541) Sale of Glasstite assets, net of cash sold of $135 ..................... 8,682 Proceeds on sale of investment in affiliate ............................ 1,250 1,250 1,300 Other investing activities, net ........................................ 30 229 262 ---------------------------------- Net cash provided by (used in) investing activities .................... 6,323 (3,127) (4,979) Cash flows from financing activities Proceeds from borrowing under line of credit ........................... 6,000 4,000 2,000 Repayment on borrowing under line of credit ............................ (6,000) (4,000) (2,000) Long-term debt principal payments ...................................... (1,564) (2,262) (1,656) Proceeds from issuance of long-term debt ............................... 5,000 Net proceeds from exercise of stock options ............................ 14 100 194 Dividends paid ......................................................... (2,895) (2,944) (2,709) Purchase of treasury stock ............................................. (11,881) (2,608) (713) ---------------------------------- Net cash used in financing activities .................................. (16,326) (2,714) (4,884) ---------------------------------- Net increase (decrease) in cash and cash equivalents ..................... 372 2,485 (589) Cash and cash equivalents at beginning of year ........................... 5,335 2,850 3,439 ---------------------------------- Cash and cash equivalents at end of year ................................. $ 5,707 $ 5,335 $ 2,850 ================================== - ----------------------------------------------------------------------------------------------------------------
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE CONSOLIDATED FINANCIAL STATEMENTS. 26 NOTES TO FINANCIAL STATEMENTS RAVEN 2000 ANNUAL REPORT NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES PRINCIPLES OF CONSOLIDATION The consolidated financial statements include the accounts of Raven Industries, Inc. ("Raven") and its wholly owned subsidiaries (the "company"), Aerostar International, Inc. ("Aerostar"); Beta Raven Inc. ("Beta"); and Glasstite, Inc. (sold in October 1999)("Glasstite"). All intercompany balances and transactions have been eliminated in consolidation. USE OF ESTIMATES The preparation of the company's financial statements requires management to make certain estimates and assumptions that 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. CASH AND CASH EQUIVALENTS The company considers all highly liquid debt instruments with original maturities of three months or less to be cash equivalents. Cash and cash equivalent balances are principally concentrated in a money market fund with Norwest Bank, Minnesota, N.A. INVENTORY VALUATION Inventories are stated at the lower of cost or market, with cost determined on the first-in, first-out basis. PROPERTY, PLANT AND EQUIPMENT Property, plant and equipment are stated at cost and are depre-ciated over the estimated useful lives of the assets using accelerated methods. The estimated useful lives used for computing depreciation are as follows: Buildings and improvements...................................... 7 to 39 years Machinery and equipment......................................... 3 to 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. INTANGIBLE ASSETS Intangible assets are primarily comprised of goodwill and patents which are recorded at cost net of accumulated amortization. Amortization is computed on a straight-line basis over estimated useful lives ranging from 5 to 20 years. The company periodically assesses the recoverability of long lived and intangible assets based upon anticipated future earnings and operating cash flows. INSURANCE OBLIGATIONS The company employs large deductible insurance policies covering workers compensation, employee healthcare and general liability costs. Costs are accrued related to these policies based on claims filed and estimates for claims incurred but not reported. CONTINGENCIES The company is involved as a defendant in lawsuits, claims or disputes arising in the normal course of business. An estimated 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. The settlement 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. RESEARCH AND DEVELOPMENT Research and development expenditures of $636,000 in fiscal 2000, $608,000 in fiscal 1999 and $660,000 in fiscal 1998 were charged to cost of goods sold in the year incurred. 27 NOTES TO FINANCIAL STATEMENTS STOCK-BASED COMPENSATION The company records compensation expense related to its stock-based compensation plan using the intrinsic value method. INCOME TAXES Deferred income taxes reflect temporary differences between assets and liabilities reported on the company's balance sheet and their tax basis. These differences are measured using enacted tax laws and statutory tax rates applicable to the peri-ods when the temporary differences will impact taxable income. Deferred tax assets are reduced by a valuation allowance to reflect realizable value, when necessary. Income tax expense is the tax payable for the period and the change during the period in deferred tax assets and liabilities, adjusted for any change in deferred taxes related to the expiration of certain stock options. REVENUE RECOGNITION The company recognizes revenue only after shipment of a product. The company does not typically require collateral from its customers. RECLASSIFICATION Certain balance sheet reclassifications have been made for fiscal years 1998 and 1999 to conform to the fiscal 2000 presentation. These reclassifications had no impact on stockholders' equity or the company's results of operations. NOTE 2. SELECTED BALANCE SHEET INFORMATION Following are the components of selected balance sheet items: - ------------------------------------------------------------------------------- As of January 31 ---------------------------------- DOLLARS IN THOUSANDS 2000 1999 1998 ---------------------------------- Accounts and note receivable, net: Trade accounts .......................... $ 23,117 $ 26,336 $ 26,113 Current portion of note and interest receivable ..................... 1,463 1,250 Allowance for doubtful accounts ......... (400) (400) (390) ---------------------------------- $ 22,717 $ 27,399 $ 26,973 ================================== Inventories, net: Finished goods .......................... $ 3,205 $ 4,055 $ 4,133 In process .............................. 4,997 3,662 3,882 Materials ............................... 16,260 18,261 17,801 ---------------------------------- $ 24,462 $ 25,978 $ 25,816 ================================== Property, plant, and equipment, net: Land .................................... $ 1,150 $ 1,265 $ 1,265 Building and improvements ............... 12,526 15,429 14,742 Machinery and equipment ................. 35,273 40,582 37,798 Accumulated depreciation ................ (33,881) (37,713) (33,988) ---------------------------------- $ 15,068 $ 19,563 $ 19,817 ================================== Other assets, net: Intangible assets, primarily goodwill ... $ 4,415 $ 4,459 $ 4,441 Accumulated amortization ................ (1,594) (1,362) (994) ---------------------------------- 2,821 3,097 3,447 Deferred income taxes ................... 714 565 22 Other, net .............................. 73 153 236 ---------------------------------- $ 3,608 $ 3,815 $ 3,705 ================================== Accrued liabilities: Profit sharing and 401(k) contribution .. $ 957 $ 973 $ 1,255 Vacation ................................ 1,944 1,979 1,941 Salaries and benefits ................... 1,319 909 848 Insurance obligations ................... 2,250 1,921 2,247 Other ................................... 1,251 1,799 1,477 ---------------------------------- $ 7,721 $ 7,581 $ 7,768 ================================== - ------------------------------------------------------------------------------- NOTE 3. SUPPLEMENTAL CASH FLOW INFORMATION - ------------------------------------------------------------------------------- For the years ended January 31 ---------------------------------- DOLLARS IN THOUSANDS 2000 1999 1998 ---------------------------------- Changes in operating assets and liabilities, net of effects from the sale of Glasstite: Accounts and interest receivable ........ $ 1,070 $ (551) $ (289) Inventories ............................. (236) (162) (727) Prepaid expenses and other current assets (172) 89 (76) Accounts payable ........................ (375) (1,487) (369) Accrued and other liabilities ........... 68 (82) (1,003) Customer advances ....................... 123 (309) 200 ---------------------------------- $ 478 $ (2,502) $ (2,264) ================================== Cash paid during the year for: Interest ................................ $ 427 $ 450 $ 335 Income taxes ............................ 5,186 4,276 4,227 - ------------------------------------------------------------------------------- NOTE 4. DIVESTITURES In January 1998, the company sold its 50 percent equity investment in a corporation engaged in the manufacture of injection-molded plastic products for $3.8 million and 28 RAVEN 2000 ANNUAL REPORT recognized a pretax gain of $1.8 million. The company had accounted for this investment using the equity method. Under the sale agreement, the company received cash of $1.3 million in fiscal 1998 and an 8.5% interest-bearing note for the remaining $2.5 million. The first installment of principal only was received in December 1998 and the balance, including interest, was received in December 1999. During fiscal 2000, the company sold its Glasstite business, resulting in a pretax gain of $1.2 million. The company received approximately $8.7 million of cash and incurred direct costs related to the sale, primarily legal costs, of approximately $230,000. Assets sold primarily related to property, plant and equipment (approximately $3.5 million), accounts receivable (approximately $2.5 million), inventories (approximately $1.7 million) and cash (approximately $135,000). The purchaser assumed certain liabilities, primarily related to employee wages and benefits (approximately $200,000) and accounts payable (approximately $300,000). For certain receivables of Glasstite that were sold, the purchaser will pay the company when it collects such receivables and, as of January 31, 2000, the company had a receivable recorded of approximately $270,000 related to this matter. In addition, at January 31, 2000, the company had approximately $150,000 accrued for certain environmental clean-up costs related to the Glasstite facility, reflecting the company's best estimate of costs that it will incur until the environmental matter is resolved. NOTE 5. BUSINESS SEGMENTS AND MAJOR CUSTOMER INFORMATION The company's three reportable segments (Electronics, Plastics and Sewn Products) were defined by their common technologies, production processes and inventories. These segments are consistent with the company's management reporting structure as required by Statement of Financial Accounting Standards (SFAS) No.131, Disclosures about Segments of an Enterprise and Related Information. The company's customers (distributors or original equipment manufacturers) provide opportunities for each segment to serve various markets. Distribution methods are similar across and within segments. No customer accounted for more than 10% of consolidated sales or receivables in any fiscal year presented. Segment and market information is presented on pages 9 and 13 of the annual report. NOTE 6. QUARTERLY INFORMATION (UNAUDITED) The company's quarterly information is presented on page 22. NOTE 7. FINANCING ARRANGEMENTS Long-term debt consisted of the following: - ------------------------------------------------------------------------------- As of January 31 ---------------------------------- DOLLARS IN THOUSANDS 2000 1999 1998 ---------------------------------- Notes payable in installments through fiscal 2004 with interest at 7.25% ... $ 4,000 $ 5,500 $ 2,560 Other long term debt ................... 68 132 333 ---------------------------------- Total long-term debt ................. 4,068 5,632 2,893 Current portion ...................... (1,044) (1,060) (1,765) ---------------------------------- $ 3,024 $ 4,572 $ 1,128 ================================== - ------------------------------------------------------------------------------- Certain long-term debt is collateralized by land, buildings and equipment having an aggregate net book value at January 31, 2000, of $750,000. Norwest Bank South Dakota N.A. provides the company's uncollateralized notes payable and line of credit. One member of the company's board of directors is also on the board of directors of Wells Fargo & Co., the parent company of Norwest Bank South Dakota N.A. The company believes the fair market value of its long-term debt approximates its carrying value based on quoted market prices for similar debt. Long-term debt at January 31, 2000, will be repaid approximately $1.0 million per year through fiscal 2004. The company had a $5.0 million uncollaterlized line of credit available as of January 31, 2000; no borrowings were outstanding as of that date. This line of credit contains certain restrictive covenants that, among other things, require the company to maintain certain levels of net worth and working capital. Borrowings on this line bear interest as of January 31, 2000, 1999 and 1998 at 8.00%, 7.25%, and 8.50%, respectively. The weighted average interest rates for borrowing under short-term credit lines in fiscal 2000, 1999 and 1998 were 7.7%, 8.4% and 8.5%, respectively. 29 NOTES TO FINANCIAL STATEMENTS The company leases certain transportation, equipment and facilities under operating leases. Total rent expense under these leases were $977,000, $1,014,000 and $802,000 in fiscal 2000, 1999 and 1998, respectively. NOTE 8. STOCK OPTIONS Officers and key employees of the company have been granted options to purchase stock under the company's 1990 Stock Option Plan ("Plan"). The Plan, administered by the board of directors, allows for a fixed cash bonus when options are exercised and may grant either incentive or non-qualified options with terms not to exceed ten years. The Plan expired by its terms in January 2000, resulting in the expiration of the remaining 109,942 shares available for grant. Options are granted with exercise prices not less than market value at the date of grant. These stock options vest over a four-year period and expire after five years. Compensation expense related to the Plan's cash bonus feature was $383,000, $387,000 and $383,000 in fiscal 2000, 1999 and 1998, respectively. Options granted in 2000 do not include a fixed cash bonus. The board of directors approved, with adoption subject to shareholders' approval at the company's next Annual Meeting of Shareholders, the 2000 Stock Option and Compensation Plan ("2000 Plan"), in which 250,000 shares are reserved for grant. The 2000 Plan will allow the company to issue options under terms similar to the prior plan. During fiscal 2000, certain options containing the cash bonus feature expired. Accordingly, the company reduced its accrued liabilities and associated deferred tax asset by approximately $289,000 and $101,000, respectively, and correspondingly increased additional paid-in-capital by approximately $188,000. As allowed under the SFAS No. 123, Accounting for Stock-Based Compensation, the company has elected to continue to use the intrinsic value method to recognize compensation expense for stock-based compensation. If compensation expense had been recognized in accordance with the fair value method, the company's net income and net income per share would have been as follows:
- ----------------------------------------------------------------------------------- For the years ended January 31 ---------------------------------------------------------- 2000 1999 1998 ---------------------------------------------------------- as pro as pro as pro reported forma reported forma reported forma ---------------------------------------------------------- Net income (IN THOUSANDS) ...... $6,762 $6,744 $6,182 $6,055 $8,062 $7,904 Net income per share: -- basic ............ $ 1.55 $ 1.54 $ 1.30 $ 1.27 $ 1.66 $ 1.63 -- diluted .......... $ 1.55 $ 1.54 $ 1.30 $ 1.26 $ 1.65 $ 1.61 - -----------------------------------------------------------------------------------
The fair value of each option grant is estimated on the date of grant using the Black-Scholes option pricing model with the following assumptions: Dividend yield of 2.5-4.8%; expected volatility of 20-25%; risk-free interest rate of 4.5-6.2%; and expected lives of 4.5 years. The weighted average grant date fair value of each option granted, including the cash bonus, was $2.23, $5.29 and $7.98 in fiscal 2000, 1999 and 1998, respectively. Information regarding option activity follows:
- ---------------------------------------------------------------------------------------- For the years ended January 31 ------------------------------------------------------------------ 2000 1999 1998 ------------------------------------------------------------------ weighted weighted weighted average average average exercise exercise exercise options price options price options price - ---------------------------------------------------------------------------------------- Outstanding at beginning of year ......... 276,200 $ 18.79 298,500 $ 19.47 287,750 $ 18.35 Granted ........... 32,900 14.25 46,400 15.88 68,900 20.00 Exercised ......... (5,000) 18.25 (57,185) 19.85 (55,650) 14.32 Forfeited ......... (56,000) 18.37 (11,515) 19.64 (2,500) 19.30 ------- ------- ------ Outstanding at end of year ......... 248,100 18.29 276,200 18.79 298,500 19.47 ======= ======= ======= Options exercisable at year-end ..... 137,725 $ 19.17 138,100 $ 18.94 138,775 $ 19.14 - ----------------------------------------------------------------------------------------
The following table contains information about stock options outstanding at January 31, 2000:
- --------------------------------------------------------------------------------------- Remaining Exercise Contractual Number Number Price Life (Years) Outstanding Exercisable - --------------------------------------------------------------------------------------- $17.87 0.75 53,100 53,100 21.00 1.75 58,100 43,575 20.00 2.75 60,200 30,100 15.88 3.75 43,800 10,950 14.25 4.75 32,900 -- --------------------------- 248,100 137,725 =========================== - ---------------------------------------------------------------------------------------
30 RAVEN 2000 ANNUAL REPORT NOTE 9. EMPLOYEE RETIREMENT BENEFITS The company has a profit sharing and 401(k) plan covering substantially all employees. Profit sharing contributions, not to exceed 15% of total eligible compensation, are made by Raven and each subsidiary at the discretion of each entity's board of directors. The company's 401(k) contributions, initiated on January 1, 1999, are 3% of qualified payroll. The company's contribution expense was $889,000, $973,000 and $1,255,000 for fiscal 2000, 1999 and 1998, respectively. In addition, the company provides postretirement medical and other benefits to officers and certain employees. The company accounts for these benefits in accordance with SFAS No. 106, Accounting for Postretirement Benefits Other Than Pensions. The accumulated benefit obligation was approximately $1.6 million at January 31, 2000. Annual expense related to these benefits is approximately $400,000. NOTE 10. INCOME TAXES Significant components of the company's income tax provision are as follows: - ------------------------------------------------------------------------------- For the years ended January 31 ---------------------------------------- DOLLARS IN THOUSANDS 2000 1999 1998 ---------------------------------------- Income taxes Currently payable ............. $ 4,760 $ 4,020 $ 4,312 Deferred ...................... (1,019) 553 166 ---------------------------------------- $ 3,741 $ 3,467 $ 4,478 ======================================== - ------------------------------------------------------------------------------- Significant components of the company's deferred tax assets and liabilities are as follows: - ------------------------------------------------------------------------------- As of January 31 -------------------------------------- DOLLARS IN THOUSANDS 2000 1999 1998 -------------------------------------- Current deferred tax assets (liabilities): Accounts receivable ............. $ 56 $ 27 $ (137) Installment sale of investment in affiliate ..................... (436) (365) Inventory valuation ............. 347 395 335 Accrued vacation ................ 472 522 513 Insurance obligations ........... 783 629 779 Other accrued liabilities ....... 261 13 15 -------------------------------------- 1,919 1,150 1,140 -------------------------------------- Non-current deferred tax assets (liabilities): Accrued compensation and benefits 631 582 546 Depreciation and amortization ... 83 (17) (14) Installment sale of investment in affiliate .................. (510) -------------------------------------- 714 565 22 -------------------------------------- Net deferred tax asset ............ $ 2,633 $ 1,715 $ 1,162 ====================================== - ------------------------------------------------------------------------------- The company's effective tax rate was 35.6%, 35.9% and 35.7% in fiscal 2000, 1999 and 1998, respectively. The tax rate varies from the statutory rate of 35% due primarily to the effect of state income taxes and non-deductible expenses, partially offset by the impact of graduated income tax rates. NOTE 11. NET INCOME PER SHARE Basic net income per share is computed by dividing net income by the weighted average common shares outstanding. Common shares outstanding represent common shares issued less shares purchased and held in treasury. 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. Certain outstanding options were excluded from the diluted earnings per share calculations because their exercise prices were greater than the average market price of the company's common stock during those periods. For fiscal 2000, 212,500 options were excluded from the diluted earnings per share calculation. Details of the computation are presented below. - ------------------------------------------------------------------------------- For the years ended January 31 -------------------------------------- DOLLARS IN THOUSANDS, EXCEPT PER-SHARE DATA 2000 1999 1998 -------------------------------------- Net income ......................... $ 6,762 $ 6,182 $ 8,062 ====================================== Weighted average common shares outstanding ............... 4,371,505 4,751,367 4,842,622 Dilutive impact of stock options ... 542 5,496 48,778 -------------------------------------- Weighted average common and common equivalent shares outstanding .... 4,372,047 4,756,863 4,891,400 ====================================== Net income per common share: -- basic ......................... $ 1.55 $ 1.30 $ 1.66 ====================================== -- diluted ....................... $ 1.55 $ 1.30 $ 1.65 ====================================== - ------------------------------------------------------------------------------- 31 REPORT OF INDEPENDENT ACCOUNTANTS TO THE BOARD OF DIRECTORS AND STOCKHOLDERS OF RAVEN INDUSTRIES, INC.: In our opinion, the accompanying consolidated balance sheet and the related consolidated statements of income, of stockholders' equity and comprehensive income and of cash flows present fairly, in all material respects, the financial position of Raven Industries, Inc. as of January 31, 2000, 1999 and 1998, and the results of its operations and its cash flows for each of the three years in the period ended January 31, 2000, in conformity with accounting principles generally accepted in the United States. These financial statements are the responsibility of Raven Industries, Inc.'s management; our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits of these statements in accordance with auditing standards generally accepted in the United States which require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes 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. We believe that our audits provide a reasonable basis for the opinion expressed above. /s/ PricewaterhouseCoopers LLP Minneapolis, Minnesota March 11, 2000 32 CORPORATE & INVESTOR INFORMATION RAVEN 2000 ANNUAL REPORT DIRECTORS & OFFICERS DIRECTORS CONRAD J. HOIGAARD(2),(3) CHAIRMAN OF THE BOARD, Raven Industries, Inc.; CHAIRMAN OF THE BOARD, Hoigaard's Inc., Minneapolis, MN; Age: 63 DAVID A. CHRISTENSEN(3) PRESIDENT & CHIEF EXECUTIVE OFFICER, Raven Industries, Inc., Sioux Falls, SD; Age: 65 ANTHONY W. BOUR(1) PRESIDENT & CHIEF EXECUTIVE OFFICER, Showplace Wood Products, Inc., Harrisburg, SD; Age: 62 THOMAS S. EVERIST(1) PRESIDENT, L.G. Everist, Sioux Falls, SD; Age: 50 MARK E. GRIFFIN(2) PRESIDENT & CHIEF EXECUTIVE OFFICER, Lewis Drugs, Inc., Sioux Falls, SD; Age: 49 KEVIN T. KIRBY(1) PRESIDENT, Kirby Investment Corp., Sioux Falls, SD; Age 45 RONALD M. MOQUIST EXECUTIVE VICE PRESIDENT, Raven Industries, Inc., Sioux Falls, SD; Age: 54 (1)Audit Committee (2)Compensation Committee (3)Executive Committee OFFICERS DAVID A. CHRISTENSEN PRESIDENT & CHIEF EXECUTIVE OFFICER, Age: 65, Service 37 years GARY L. CONRADI VICE PRESIDENT, ADMINISTRATION, Age: 60, Service 33 years THOMAS IACARELLA VICE PRESIDENT, FINANCE, SECRETARY & TREASURER, Age: 46, Service 8 years RONALD M. MOQUIST EXECUTIVE VICE PRESIDENT, Age: 54, Service 24 years INVESTOR INFORMATION INDEPENDENT ACCOUNTANTS PRICEWATERHOUSECOOPERS LLP Minneapolis, MN STOCK TRANSFER AGENT & REGISTRAR NORWEST BANK, MINNESOTA N.A. 161 N. Concord Exchange P.O. Box 64854 S. St. Paul, MN 55164-0854 Phone: 1-800-468-9716 NORWEST TRUST COMPANY New York, NY FORM 10-K Upon written request, Raven Industries, Inc.'s form 10-K for the fiscal year ended January 31, 2000, which has been filed with the Securities and Exchange Commission, is available free of charge. DIRECT INQUIRES TO: RAVEN INDUSTRIES, INC. Attention: Vice President, Finance P.O. Box 5107 Sioux Falls, SD 57117-5107 STOCK QUOTATIONS Listed on the Nasdaq Stock Market--RAVN ANNUAL MEETING May 24, 2000, 9:00 a.m. Ramkota Inn Hwy 38 & I-29 Sioux Falls, SD Raven Industries, Inc. is an Equal Employment Opportunity Employer with an approved affirmative action plan. DIVIDEND REINVESTMENT PLAN Raven Industries sponsors a Dividend Reinvestment Plan whereby shareholders can purchase additional Raven common stock without the payment of any brokerage commission or fees. For more information on how you can take advantage of this plan, contact your broker, our stock transfer agent or write: Vice President, Finance; P.O. Box 5107, Sioux Falls, SD 57117-5107 EX-21 5 SUBSIDIARIES OF THE REGISTRANT EXHIBIT 21 SUBSIDIARIES OF THE REGISTRANT --------- Name of Subsidiary State of Incorporation - ------------------ ---------------------- Aerostar International, Inc. South Dakota Beta Raven, Inc. Missouri GTH, Inc. Minnesota (formerly known as Glasstite, Inc.) EX-23 6 CONSENT OF INDEPENDENT ACCOUNTANTS EXHIBIT 23 CONSENT OF INDEPENDENT ACCOUNTANTS --------- We consent to the incorporation by reference in the Registration Statement of Raven Industries, Inc. on Form S-8 (Registration No. 33-38614) of our report dated March 11, 2000 relating to the consolidated financial statements of Raven Industries, Inc. as of January 31, 2000, 1999 and 1998 and for the years then ended, which appears in the Annual Report to Stockholders, which is incorporated in this Annual Report on Form 10-K. We also consent to the incorporation by reference of our report dated March 11, 2000 relating to the financial statement schedule of Raven Industries, Inc. as of January 31, 2000, 1999 and 1998 and for the years then ended, which appears in this Form 10-K. PricewaterhouseCoopers LLP Minneapolis, Minnesota April 28, 2000 EX-27 7 ARTICLE 5 - FINANCIAL DATA SCHEDULE
5 1,000 12-MOS JAN-31-2000 JAN-31-2000 5,707 0 23,117 400 24,462 55,371 48,949 33,881 74,047 14,702 3,024 0 0 5,218 49,301 74,047 147,906 147,906 123,382 123,382 0 362 418 10,503 3,741 6,762 0 0 0 6,762 1.55 1.55
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