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
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RAVEN INDUSTRIES, INC.
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(Exact name of registrant as specified in its charter)
South Dakota 46-0246171
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
205 E. 6th Street, Sioux Falls, South Dakota 57117
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(Address of principal offices)(Zip Code)
Registrant's telephone number, including area code (605) 336-2750
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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
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(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.
<PAGE>
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.
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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
<PAGE>
ITEM IN FORM 10-K REFERENCE
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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
<PAGE>
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
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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
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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
<PAGE>
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
<PAGE>
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
<PAGE>
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
<PAGE>
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
<PAGE>
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
<PAGE>
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
<PAGE>
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
<PAGE>
SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS
for the years ended January 31, 2000, 1999 and 1998
(Dollars in thousands)
--------
<TABLE>
<CAPTION>
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
----------- ---------- ----------- ----------- -------- -----------
<S> <C> <C> <C> <C> <C>
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
==== ==== ==== ====
</TABLE>
Note:
- ----
(1) Represents uncollectible accounts receivable written off during the year,
net of recoveries.
14
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.
<PAGE>
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
<PAGE>
(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
<PAGE>
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
<PAGE>
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
<PAGE>
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
<PAGE>
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:
<PAGE>
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
<PAGE>
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
<PAGE>
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.
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
EXHIBIT 13
BUSINESS SEGMENTS RAVEN 2000 ANNUAL REPORT
<TABLE>
<CAPTION>
For the years ended January 31
--------------------------------------------------------------------------
DOLLARS IN THOUSANDS 2000 1999 1998 1997(d) 1996(d) 1995(d)
--------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
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
- -------------------------------------------------------------------------------------------------------------------
</TABLE>
(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
<PAGE>
SALES BY MARKET (UNAUDITED) RAVEN 2000 ANNUAL REPORT
<TABLE>
<CAPTION>
For the years ended January 31
--------------------------------
DOLLARS IN THOUSANDS 2000 1999 1998
--------------------------------
<S> <C> <C> <C>
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
================================
- ------------------------------------------------------------------------------------------------
</TABLE>
(a) DURING THE THIRD QUARTER OF FISCAL 2000, THE COMPANY SOLD ITS GLASSTITE
BUSINESS (SEE NOTE 4).
13
<PAGE>
ELEVEN-YEAR FINANCIAL SUMMARY
<TABLE>
<CAPTION>
For the years ended January 31,
-----------------------------------------
DOLLARS IN THOUSANDS, EXCEPT PER-SHARE DATA 2000 1999 1998
-----------------------------------------
<S> <C> <C> <C>
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
- --------------------------------------------------------------------------------------------------------------
</TABLE>
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
<PAGE>
RAVEN 2000 ANNUAL REPORT
<TABLE>
<CAPTION>
For the years ended January 31,
- -------------------------------------------------------------------------------------------------------------
1997 1996 1995 1994 1993 1992 1991 1990
- -------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
$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
- -------------------------------------------------------------------------------------------------------------
</TABLE>
15
<PAGE>
FINANCIAL REVIEW AND ANALYSIS
RESULTS OF OPERATIONS: MARGIN ANALYSIS
The following table presents comparative financial performance for the past
three years:
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------------
For the years ended January 31
------------------------------------------------------------------------------------------
2000 1999 1998
------------------------------------------------------------------------------------------
% % % % % %
IN THOUSANDS, EXCEPT PER-SHARE DATA Amount Sales Change Amount Sales Change Amount Sales Change
------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
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
- -----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
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:
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------------
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
------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
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
- -----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
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
<PAGE>
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%.
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------
2000 1999 1998 1997 1996 1995
-----------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
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%
- ------------------------------------------------------------------------------------------------------------
</TABLE>
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:
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------
2000 1999 1998
- -------------------------------------------------------------------------------------------------------------
DOLLARS IN THOUSANDS amount % change amount % change amount % change
---------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
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
======== ======== ========
- -------------------------------------------------------------------------------------------------------------
<CAPTION>
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
======== ======== ========
- -------------------------------------------------------------------------------------------------------------
</TABLE>
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
<PAGE>
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
<PAGE>
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
<PAGE>
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
<PAGE>
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
<PAGE>
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)
<TABLE>
<CAPTION>
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
------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
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
============================================================================================================
- ----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
(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
<PAGE>
CONSOLIDATED BALANCE SHEET RAVEN 2000 ANNUAL REPORT
<TABLE>
<CAPTION>
As of January 31
-----------------------------
DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA 2000 1999 1998
-----------------------------
<S> <C> <C> <C>
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
=============================
- -------------------------------------------------------------------------------------------------------------
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE CONSOLIDATED FINANCIAL
STATEMENTS.
23
<PAGE>
CONSOLIDATED STATEMENT OF INCOME
<TABLE>
<CAPTION>
As of January 31
-------------------------------------
DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA 2000 1999 1998
-------------------------------------
<S> <C> <C> <C>
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
=====================================
- -----------------------------------------------------------------------------------------------------------
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE CONSOLIDATED FINANCIAL
STATEMENTS.
24
<PAGE>
CONSOLIDATED STATEMENTS OF RAVEN 2000 ANNUAL REPORT
STOCKHOLDERS' EQUITY AND
COMPREHENSIVE INCOME
<TABLE>
<CAPTION>
Common Paid-in Treasury stock Retained
DOLLARS IN THOUSANDS, EXCEPT PER-SHARE DATA Stock Capital Shares Cost Earnings Total
--------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
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
==========================================================================
- -----------------------------------------------------------------------------------------------------------------------------
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE CONSOLIDATED FINANCIAL
STATEMENTS.
25
<PAGE>
CONSOLIDATED STATEMENT OF CASH FLOWS
<TABLE>
<CAPTION>
As of January 31
----------------------------------
DOLLARS IN THOUSANDS 2000 1999 1998
----------------------------------
<S> <C> <C> <C>
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
==================================
- ----------------------------------------------------------------------------------------------------------------
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE CONSOLIDATED FINANCIAL
STATEMENTS.
26
<PAGE>
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
<PAGE>
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
<PAGE>
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
<PAGE>
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:
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------
For the years ended January 31
----------------------------------------------------------
2000 1999 1998
----------------------------------------------------------
as pro as pro as pro
reported forma reported forma reported forma
----------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
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
- -----------------------------------------------------------------------------------
</TABLE>
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:
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------
For the years ended January 31
------------------------------------------------------------------
2000 1999 1998
------------------------------------------------------------------
weighted weighted weighted
average average average
exercise exercise exercise
options price options price options price
- ----------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
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
- ----------------------------------------------------------------------------------------
</TABLE>
The following table contains information about stock options outstanding at
January 31, 2000:
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------
Remaining
Exercise Contractual Number Number
Price Life (Years) Outstanding Exercisable
- ---------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
$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
===========================
- ---------------------------------------------------------------------------------------
</TABLE>
30
<PAGE>
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
<PAGE>
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
<PAGE>
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
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.)
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
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