

þ☑						QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
~~For the quarterly period ended October 31, 2017~~

For the quarterly period ended October 31, 2019



o☐						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: 001-07982

RAVEN INDUSTRIES, INC.

(Exact name of registrant as specified in its charter)

~~South Dakota~~

46-0246171

(State or other jurisdiction of incorporation or organization)

~~46-0246171~~

(I.R.S. Employer Identification No.)

205 East 6th Street, P.O. Box 5107

Sioux Falls

57117-5107

~~205 East 6th Street, P.O. Box 5107, Sioux Falls, SD 57117-5107~~

(Address of principal executive offices)

(605) 336-2750

(Registrant’s telephone number including area code)

Not Applicable

(Former name, former address and former fiscal year, if changed since last report)

Securities registered pursuant to Section 12(b) of the Act:

Title of each class

Trading Symbol

Name of each exchange on which registered

Common Stock, $1 par value

RAVN

NASDAQ

Global Select Market

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. þ Yes o No

Indicate by check mark whether the registrant has submitted electronically ~~and posted on its corporate Website, if any,~~ every Interactive Data File required to be submitted ~~and posted~~ pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit ~~and post~~ such files). þ Yes o No

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of "large accelerated filer," "accelerated filer," ~~“smaller~~"smaller reporting ~~company”~~company" and "emerging growth company" in Rule 12b-2 of the Exchange Act.

Large accelerated filerþ

☑

Accelerated filer

o☐

Non-accelerated filero ~~(Do not check if a smaller reporting company)~~

☐

Smaller reporting company

o☐

Emerging growth companyo

☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. o☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). o☐ Yes þ No

As of November ~~17, 2017~~22, 2019, there were ~~35,755,646~~35,760,477 shares of common stock, $1 par value, of Raven Industries, Inc. outstanding. There were no other classes of stock outstanding.

RAVEN INDUSTRIES, INC.

INDEX


			PAGE

			~~PAGE~~

PART I - FINANCIAL INFORMATION

Item 1. Financial Statements:
Consolidated Balance Sheets (unaudited)			3
Consolidated Statements of Income and Comprehensive Income (unaudited)			4
Consolidated Statements of Shareholders' Equity (unaudited)			5
Consolidated Statements of Cash Flows (unaudited)			67
Notes to Consolidated Financial Statements (unaudited)			78
Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations			1922
Item 3. Quantitative and Qualitative Disclosures about Market Risks			3031
Item 4. Controls and Procedures			3031

PART II - OTHER INFORMATION

Item 1. Legal Proceedings			32
Item 1A. Risk Factors			32
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds			32
Item 3. Defaults Upon Senior Securities			33
Item 4. Mine Safety Disclosures			33
Item 5. Other Information			33
Item 6. Exhibits			3334
Signatures			3435

PART I — FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

RAVEN INDUSTRIES, INC.

CONSOLIDATED BALANCE SHEETS

(unaudited)


(dollars and shares in thousands, except per-share data)	October 31, 2019		January 31, 2019
ASSETS
Current assets
Cash and cash equivalents	$	77,094	$	65,787

Accounts receivable, net	62,057		54,472
Inventories	51,981		54,076
Other current assets	5,095		8,736
Total current assets	196,227		183,071

Property, plant and equipment, net	101,487		106,615
Goodwill	50,834		50,942
Amortizable intangible assets, net	14,933		16,293
Other assets	8,795		3,324
TOTAL ASSETS	$	372,276	$	360,245

LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities
Accounts payable	$	11,045	$	8,272
Accrued liabilities	20,906		23,478
Other current liabilities	2,177		1,303
Total current liabilities	34,128		33,053

Other liabilities	21,969		18,235

Commitments and contingencies (see Note 12)	—		—

Shareholders' equity
Common stock, $1 par value, authorized shares 100,000; issued 67,424 and 67,289, respectively	67,424		67,289
Paid-in capital	60,141		59,655
Retained earnings	303,732		285,969
Accumulated other comprehensive income (loss)	(3,936)		(3,556)
Treasury stock at cost, 31,665 and 31,332 shares, respectively	(111,183)		(100,402)
Total Raven Industries, Inc. shareholders' equity	316,178		308,955
Noncontrolling interest	1		2
Total shareholders' equity	316,179		308,957
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY	$	372,276	$	360,245

(dollars and shares in thousands, except per-share data) October 31,
2017 January 31,
2017 October 31,
2016
ASSETS
Current assets
Cash and cash equivalents $ 36,873
$ 50,648
$ 46,313
Accounts receivable, net 59,573
43,143
39,554
Inventories 53,481
42,336
42,813
Other current assets 3,910
2,689
2,747
Total current assets 153,837
138,816
131,427

Property, plant and equipment, net 105,651
106,324
108,948
Goodwill 46,752
40,649
40,703
Amortizable intangible assets, net 11,375
12,048
12,511
Other assets 2,926
3,672
3,746
TOTAL ASSETS $ 320,541
$ 301,509
$ 297,335

LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities
Accounts payable $ 13,383
$ 8,467
$ 9,377
Accrued liabilities 21,645
18,055
14,708
Customer advances 908
1,860
1,154
Total current liabilities 35,936
28,382
25,239

Other liabilities 13,456
13,696
12,134

Commitments and contingencies —
—
—

Shareholders' equity
Common stock, $1 par value, authorized shares 100,000; issued 67,088; 67,060; and 67,060, respectively 67,088
67,060
67,060
Paid-in capital 58,484
55,795
55,703
Retained earnings 249,034
230,649
230,957
Accumulated other comprehensive income (loss) (3,058 ) (3,676 ) (3,361 )
Treasury stock at cost, 31,332; 30,984; and 30,984 shares, respectively (100,402 ) (90,402 ) (90,402 )
Total Raven Industries, Inc. shareholders' equity 271,146
259,426
259,957
Noncontrolling interest 3
5
5
Total equity 271,149
259,431
259,962
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $ 320,541
$ 301,509
$ 297,335

The accompanying notes are an integral part of the unaudited consolidated financial statements.

RAVEN INDUSTRIES, INC.

CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME

(unaudited)


	Three Months Ended						Nine Months Ended
(dollars in thousands, except per-share data)	October 31, 2019		October 31, 2018		October 31, 2019		October 31, 2018
Net sales	$	100,533	$	104,833	$	296,769	$	318,646
Cost of sales	70,229		72,180		200,061		211,387
Gross profit	30,304		32,653		96,708		107,259

Research and development expenses	7,662		6,478		22,000		17,914
Selling, general, and administrative expenses	11,310		12,563		37,685		37,573


Operating income	11,332		13,612		37,023		51,772

Other income (expense), net	84		674		398		6,214
Income before income taxes	11,416		14,286		37,421		57,986

Income tax expense	1,483		1,230		5,512		9,062
Net income	9,933		13,056		31,909		48,924

Net income (loss) attributable to the noncontrolling interest	(1)		24		(1)		80

Net income attributable to Raven Industries, Inc.	$	9,934	$	13,032	$	31,910	$	48,844

Net income per common share:
─ Basic	$	0.28	$	0.36	$	0.89	$	1.36
─ Diluted	$	0.28	$	0.36	$	0.88	$	1.34



Comprehensive income (loss):
Net income	$	9,933	$	13,056	$	31,909	$	48,924

Other comprehensive income (loss):
Foreign currency translation	(40)		(325)		(343)		(1,162)
Postretirement benefits, net of income tax benefit of $4, $2, $11, and $6 respectively	(12)		(6)		(37)		(18)
Other comprehensive income (loss), net of tax	(52)		(331)		(380)		(1,180)

Comprehensive income (loss)	9,881		12,725		31,529		47,744

Comprehensive income (loss) attributable to noncontrolling interest	(1)		24		(1)		80

Comprehensive income (loss) attributable to Raven Industries, Inc.	$	9,882	$	12,701	$	31,530	$	47,664

Three Months Ended Nine Months Ended
(dollars in thousands, except per-share data) October 31,
2017 October 31,
2016 October 31,
2017 October 31,
2016
Net sales $ 101,349
$ 72,522
$ 281,494
$ 208,480
Cost of sales 68,016
52,683
189,692
149,609
Gross profit 33,333
19,839
91,802
58,871

Research and development expenses 4,083
4,151
12,319
12,475
Selling, general, and administrative expenses 11,421
8,212
31,476
24,174
Long-lived asset impairment loss —
87
259
87
Operating income 17,829
7,389
47,748
22,135

Other income (expense), net (34 ) (273 ) (327 ) (579 )
Income before income taxes 17,795
7,116
47,421
21,556

Income tax expense 5,798
1,375
14,842
5,802
Net income 11,997
5,741
32,579
15,754

Net income (loss) attributable to the noncontrolling interest (1 ) —
(2 ) 1

Net income attributable to Raven Industries, Inc. $ 11,998
$ 5,741
$ 32,581
$ 15,753

Net income per common share:
─ Basic $ 0.33
$ 0.16
$ 0.90
$ 0.43
─ Diluted $ 0.33
$ 0.16
$ 0.89
$ 0.43

Cash dividends paid per common share $ 0.13
$ 0.13
$ 0.39
$ 0.39

Comprehensive income (loss):
Net income $ 11,997
$ 5,741
$ 32,579
$ 15,754

Other comprehensive income (loss):
Foreign currency translation (185 ) (201 ) 637
146
Postretirement benefits, net of income tax benefit (expense) of $4, $2, $11 and $4, respectively (6 ) (2 ) (19 ) (6 )
Other comprehensive income (loss), net of tax (191 ) (203 ) 618
140

Comprehensive income 11,806
5,538
33,197
15,894

Comprehensive income (loss) attributable to noncontrolling interest (1 ) —
(2 ) 1

Comprehensive income attributable to Raven Industries, Inc. $ 11,807
$ 5,538
$ 33,199
$ 15,893

The accompanying notes are an integral part of the unaudited consolidated financial statements.

RAVEN INDUSTRIES, INC.

CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY

(unaudited)


	Three Months Ended October 31, 2019
	$1 Par Common Stock		Paid-in Capital		Treasury Stock					Retained Earnings		Accumulated Other Comprehensive Income (Loss)		Raven Industries, Inc. Equity		Non- controlling Interest		Total Equity
(dollars in thousands, except per-share amounts)								Shares											Cost
Balance July 31, 2019	$	67,420	$	59,127	31,496	$	(106,183)	$	298,496	$	(3,884)	$	314,976	$	2	$	314,978
Net income	—		—		—	—		9,934		—		9,934		(1)		9,933
Other comprehensive income (loss):
Cumulative foreign currency translation adjustment	—		—		—	—		—		(40)		(40)		—		(40)
Postretirement benefits reclassified from accumulated other comprehensive income (loss) after tax benefit of $4	—		—		—	—		—		(12)		(12)		—		(12)
Cash dividends ($0.13 per share)	—		50		—	—		(4,698)		—		(4,648)		—		(4,648)

Shares issued on stock options exercised, net of shares withheld for employee taxes	—		15		—	—		—		—		15		—		15
Shares issued on vesting of stock units, net of shares withheld for employee taxes	4		(42)		—	—		—		—		(38)		—		(38)

Shares repurchased	—		—		169	(5,000)		—		—		(5,000)		—		(5,000)
Share-based compensation	—		991		—	—		—		—		991		—		991
Balance October 31, 2019	$	67,424	$	60,141	31,665	$	(111,183)	$	303,732	$	(3,936)	$	316,178	$	1	$	316,179

	Nine Months Ended October 31, 2019
	$1 Par Common Stock		Paid-in Capital		Treasury Stock					Retained Earnings		Accumulated Other Comprehensive Income (Loss)		Raven Industries, Inc. Equity		Non- controlling Interest		Total Equity
(dollars in thousands, except per-share amounts)								Shares											Cost
Balance January 31, 2019	$	67,289	$	59,655	31,332	$	(100,402)	$	285,969	$	(3,556)	$	308,955	$	2	$	308,957
Net income	—		—		—	—		31,910		—		31,910		(1)		31,909
Other comprehensive income (loss):
Cumulative foreign currency translation adjustment	—		—		—	—		—		(343)		(343)		—		(343)
Postretirement benefits reclassified from accumulated other comprehensive income (loss) after tax benefit of $11	—		—		—	—		—		(37)		(37)		—		(37)
Cash dividends ($0.39 per share)	—		146		—	—		(14,147)		—		(14,001)		—		(14,001)

Shares issued on stock options exercised, net of shares withheld for employee taxes	29		(735)		—	—		—		—		(706)		—		(706)
Shares issued on vesting of stock units, net of shares withheld for employee taxes	106		(2,464)		—	—		—		—		(2,358)		—		(2,358)

Shares repurchased	—		—		333	(10,781)		—		—		(10,781)		—		(10,781)
Share-based compensation	—		3,539		—	—		—		—		3,539		—		3,539
Balance October 31, 2019	$	67,424	$	60,141	31,665	$	(111,183)	$	303,732	$	(3,936)	$	316,178	$	1	$	316,179

$1 Par Common Stock Paid-in Capital Treasury Stock Retained Earnings Accumulated Other Comprehensive Income (Loss) Raven Industries, Inc. Equity Non- controlling Interest Total Equity
(dollars in thousands, except per-share amounts) Shares Cost
Balance January 31, 2016 $ 67,006
$ 53,907
30,500
$ (82,700 ) $ 229,443
$ (3,501 ) $ 264,155
$ 74
$ 264,229
Net income —
—
—
—
15,753
—
15,753
1
15,754
Other comprehensive income (loss):
Cumulative foreign currency translation adjustment —
—
—
—
—
146
146
—
146
Postretirement benefits reclassified from accumulated other comprehensive income (loss) after tax benefit of $4 —
—
—
—
—
(6 ) (6 ) —
(6 )
Cash dividends ($0.39 per share)
—
161
—
—
(14,239 ) —
(14,078 ) —
(14,078 )
Dividends of less than wholly-owned subsidiary attributable to non-controlling interest —
—
—
—
—
—
—
(70 ) (70 )
Shares issued on vesting of stock units, net of shares withheld for employee taxes 35
(291 ) —
—
—
—
(256 ) —
(256 )
Director shares issued 19
(19 ) —
—
—
—
—
—
—
Shares repurchased —
—
484
(7,702 ) —
—
(7,702 ) —
(7,702 )
Share-based compensation —
2,291
—
—
—
—
2,291
—
2,291
Income tax impact related to share-based compensation

—
(346 ) —
—
—
—
(346 ) —
(346 )
Balance October 31, 2016 $ 67,060
$ 55,703
30,984
$ (90,402 ) $ 230,957
$ (3,361 ) $ 259,957
$ 5
$ 259,962

Balance January 31, 2017 $ 67,060
$ 55,795
30,984
$ (90,402 ) $ 230,649
$ (3,676 ) $ 259,426
$ 5
$ 259,431
Net income —
—
—
—
32,581
—
32,581
(2 ) 32,579
Other comprehensive income (loss):
Cumulative foreign currency translation adjustment —
—
—
—
—
637
637
—
637
Postretirement benefits reclassified from accumulated other comprehensive income (loss) after tax benefit of $11 —
—
—
—
—
(19 ) (19 ) —
(19 )
Cash dividends ($0.39 per share) —
164
—
—
(14,196 ) —
(14,032 ) —
(14,032 )
Shares issued on stock options exercised, net of shares withheld for employee taxes 13
(170 ) —
—
—
—
(157 ) —
(157 )
Shares issued on vesting of stock units, net of shares withheld for employee taxes 11
(162 ) —
—
—
—
(151 ) —
(151 )
Director shares issued 4
(4 ) —
—
—
—
—
—
—
Shares repurchased —
—
348
(10,000 ) —
—
(10,000 ) —
(10,000 )
Share-based compensation —
2,861
—
—
—
—
2,861
—
2,861
Balance October 31, 2017 $ 67,088
$ 58,484
31,332
$ (100,402 ) $ 249,034
$ (3,058 ) $ 271,146
$ 3
$ 271,149

The accompanying notes are an integral part of the unaudited consolidated financial statements.

RAVEN INDUSTRIES, INC.

CONSOLIDATED STATEMENTS OF ~~CASH FLOWS~~SHAREHOLDERS' EQUITY

(unaudited)


	Three Months Ended October 31, 2018
	$1 Par Common Stock		Paid-in Capital		Treasury Stock					Retained Earnings		Accumulated Other Comprehensive Income (Loss)		Raven Industries, Inc. Equity		Non- controlling Interest		Total Equity
(dollars in thousands, except per-share amounts)								Shares											Cost
Balance July 31, 2018	$	67,229	$	59,489	31,332	$	(100,402)	$	279,438	$	(3,702)	$	302,052	$	58	$	302,110
Net income	—		—		—	—		13,032		—		13,032		24		13,056
Other comprehensive income (loss):
Cumulative foreign currency translation adjustment	—		—		—	—		—		(325)		(325)		—		(325)
Postretirement benefits reclassified from accumulated other comprehensive income (loss) after tax benefit of $2	—		—		—	—		—		(6)		(6)		—		(6)
Cash dividends ($0.13 per share)	—		51		—	—		(4,725)		—		(4,674)		—		(4,674)

Shares issued on stock options exercised, net of shares withheld for employee taxes	50		(1,434)		—	—		—		—		(1,384)		—		(1,384)
Shares issued on vesting of stock units, net of shares withheld for employee taxes	6		(101)		—	—		—		—		(95)		—		(95)


Share-based compensation	—		827		—	—		—		—		827		—		827
Balance October 31, 2018	$	67,285	$	58,832	31,332	$	(100,402)	$	287,745	$	(4,033)	$	309,427	$	82	$	309,509

	Nine Months Ended October 31, 2018
	$1 Par Common Stock		Paid-in Capital		Treasury Stock					Retained Earnings		Accumulated Other Comprehensive Income (Loss)		Raven Industries, Inc. Equity		Non- controlling Interest		Total Equity
(dollars in thousands, except per-share amounts)								Shares											Cost
Balance January 31, 2018	$	67,124	$	59,143	31,332	$	(100,402)	$	252,772	$	(2,573)	$	276,064	$	2	$	276,066
Net income	—		—		—	—		48,844		—		48,844		80		48,924
Other comprehensive income (loss):
Cumulative foreign currency translation adjustment	—		—		—	—		—		(1,162)		(1,162)		—		(1,162)
Postretirement benefits reclassified from accumulated other comprehensive income (loss) after tax benefit of $6	—		—		—	—		—		(18)		(18)		—		(18)
Reclassification due to ASU 2018-02 adoption	—		—		—	—		280		(280)		—		—		—
Cash dividends ($0.39 per share)	—		151		—	—		(14,151)		—		(14,000)		—		(14,000)

Shares issued on stock options exercised, net of shares withheld for employee taxes	113		(2,748)		—	—		—		—		(2,635)		—		(2,635)
Shares issued on vesting of stock units, net of shares withheld for employee taxes	48		(822)		—	—		—		—		(774)		—		(774)


Share-based compensation	—		3,108		—	—		—		—		3,108		—		3,108
Balance October 31, 2018	$	67,285	$	58,832	31,332	$	(100,402)	$	287,745	$	(4,033)	$	309,427	$	82	$	309,509

Nine Months Ended
(dollars in thousands) October 31,
2017 October 31,
2016
OPERATING ACTIVITIES:
Net income $ 32,579
$ 15,754
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization 10,985
11,526
Change in fair value of acquisition-related contingent consideration 198
(41 )
Long-lived asset impairment loss 259
87
Loss from equity investment 247
223
Deferred income taxes (1,035 ) (290 )
Share-based compensation expense 2,861
2,291
Other operating activities, net 868
8
Change in operating assets and liabilities:
Accounts receivable (8,160 ) (1,620 )
Inventories (9,213 ) 3,048
Other assets (897 ) (135 )
Operating liabilities 2,142
7,834
Net cash provided by operating activities 30,834
38,685

INVESTING ACTIVITIES:
Capital expenditures (7,003 ) (3,901 )
Payments related to business acquisitions (12,700 ) —
Proceeds from sale or maturity of investments 250
250
Purchases of investments (255 ) (750 )
(Disbursements) proceeds from settlement of liabilities, sale of assets (333 ) 1,145
Other investing activities (36 ) (498 )
Net cash used in investing activities (20,077 ) (3,754 )

FINANCING ACTIVITIES:
Dividends paid (14,032 ) (14,148 )
Payments for common shares repurchased (10,000 ) (7,702 )
Payments of acquisition-related contingent liability (364 ) (318 )
Restricted stock units vested and issued (151 ) (256 )
Employee stock option exercises (157 ) —
Net cash used in financing activities (24,704 ) (22,424 )

Effect of exchange rate changes on cash 172
24

Net increase (decrease) in cash and cash equivalents (13,775 ) 12,531
Cash and cash equivalents at beginning of year 50,648
33,782
Cash and cash equivalents at end of period $ 36,873
$ 46,313

The accompanying notes are an integral part of the unaudited consolidated financial statements.

~~(dollars in thousands, except per-share amounts)~~

RAVEN INDUSTRIES, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(unaudited)


	Nine Months Ended
(dollars in thousands)	October 31, 2019		October 31, 2018
OPERATING ACTIVITIES:
Net income	$	31,909	$	48,924
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization	12,124		11,273
Change in fair value of acquisition-related contingent consideration	343		585
Gain from sale of equity method investment	—		(5,785)
Deferred income taxes	1,706		869
Share-based compensation expense	3,539		3,108
Other operating activities, net	(229)		(2,327)
Change in operating assets and liabilities:
Accounts receivable	(8,406)		(11,456)
Inventories	1,932		1,932
Other assets	2,592		428
Operating liabilities	1,568		4,757
Net cash provided by operating activities	47,078		52,308

INVESTING ACTIVITIES:
Capital expenditures	(6,143)		(10,421)

Proceeds from sale or maturity of investments	993		7,334
Purchases of investments	(934)		(502)
Proceeds (disbursements) from sale of assets, settlement of liabilities	3,459		832
Other investing activities	(3,208)		(2,042)
Net cash used in investing activities	(5,833)		(4,799)

FINANCING ACTIVITIES:
Dividends paid	(14,001)		(14,000)
Payments for common shares repurchased	(10,781)		—

Payments of acquisition-related contingent liability	(1,308)		(1,220)

Restricted stock unit issuances	(2,358)		(774)
Employee stock option exercises	(706)		(2,635)
Other financing activities	(716)		(151)
Net cash used in financing activities	(29,870)		(18,780)

Effect of exchange rate changes on cash	(68)		(571)

Net increase in cash and cash equivalents	11,307		28,158
Cash and cash equivalents at beginning of year	65,787		40,535
Cash and cash equivalents at end of period	$	77,094	$	68,693

The accompanying notes are an integral part of the unaudited consolidated financial statements.

RAVEN INDUSTRIES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(unaudited)

(dollars in thousands, except per-share amounts)

(1) BASIS OF PRESENTATION AND PRINCIPLES OF CONSOLIDATION

Raven Industries, Inc. ~~(the Company~~("the Company" or ~~Raven)~~"Raven") is a diversified technology company providing a variety of products to customers within the industrial, agricultural, geomembrane, construction, commercial lighter-than-air and aerospace/defense markets. The Company is comprised of ~~three~~3 unique operating units, or divisions, classified into reportable segments: Applied Technology, Engineered Films, and Aerostar.

The accompanying interim unaudited consolidated financial statements, which includes the accounts of Raven and its wholly-owned or controlled subsidiaries, net of intercompany balances and transactions, has been prepared by the Company in accordance with generally accepted accounting principles in the United States (GAAP) for interim financial information and the instructions to Form 10-Q and Article 10 of Regulation S-X of the Securities and Exchange Commission (SEC). Accordingly, these financial statements do not include all of the information and notes required by GAAP for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring adjustments) considered necessary to fairly present this financial information have been included. These financial statements should be read in conjunction with the audited consolidated financial statements and the accompanying notes included in the Company's Annual Report on Form 10-K for the fiscal year ended January 31, ~~2017.~~2019.

Financial results for the interim three- and nine-month ~~periods~~period ended October 31, ~~2017~~2019, are not necessarily indicative of the results that may be expected for the year ending January 31, ~~2018.~~2020. The January 31, ~~2017~~2019, consolidated balance sheet was derived from audited financial statements but does not include all disclosures required in an annual report on Form 10-K. Preparing financial statements in conformity with GAAP requires management to make certain estimates and assumptions. These affect the reported amounts of assets and liabilities as of the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.

Noncontrolling interests represent capital contributions, income and loss attributable to the owners of less than wholly-owned consolidated entities. The Company owns a 75% interest in an entity consolidated under the Aerostar business segment. Given the Company's ~~majority ownership~~controlling financial interest, the accounts of the business venture have been consolidated with the accounts of the Company, and a noncontrolling interest has been recorded for the noncontrolling investor interest in the net assets and operations of the business venture.

(2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

There have been no material changes to the Company's significant accounting policies as described in the Company's Annual Report on Form 10-K for the fiscal year ended January 31, ~~2017~~2019, other than described ~~below~~ in the Accounting Standards Adopted ~~section.~~

section below.

Accounting Pronouncements

Accounting Standards Adopted

In the fiscal ~~2018~~2020 first quarter, the Company ~~early~~ adopted ~~Accounting Standards Update (ASU) No. 2017-04 (issued by the~~ Financial Accounting Standards Board (FASB) in January 2017), "Intangibles - Goodwill and Other (Topic 350): Simplifying the Test for Goodwill Impairment" (ASU 2017-04) on a prospective basis . This ASU removes Step 2 of the goodwill impairment test, which requires a hypothetical purchase price allocation. Under the new guidance, a goodwill impairment will be measured as the amount by which a reporting unit’s carrying value exceeds its fair value. The amount of any impairment may not exceed the carrying amount of goodwill. The amendments should be applied on a prospective basis. As discussed in Note 7 ~~Goodwill, Long-lived Assets, and Other Intangibles~~, management performed an assessment in the fiscal 2018 first, second and third quarters and determined no triggering events had occurred for any of its three reporting units; therefore, the early adoption of this guidance did not have any impact on the consolidated financial statements or the results of operations as of and for the three- or nine-month periods ended October 31, 2017.

In the fiscal 2018 first quarter when it became effective, the Company adopted FASB ASU 2016-09 (issued in March 2016), "Compensation - Stock Compensation (Topic 718): Improvements to Employee Share-Based Payment Accounting" (ASU 2016-09). ASU 2016-09 amends the accounting for employee share-based payment transactions to require recognition of the tax effects resulting from the settlement of stock-based awards as discrete income tax expense or benefit in the income statement in the reporting period in which they occur. This guidance also requires that all tax-related cash flows resulting from share-based awards be disclosed as operating cash flows in the statement of cash flows and that cash paid to taxing authorities on the behalf of employees for withheld shares be classified as a financing activity in the statement of cash flows. Finally, this ASU allows

~~(dollars in thousands, except per-share amounts)~~

companies to make an accounting policy election to either estimate the number of awards that are expected to vest, consistent with current GAAP, or account for forfeitures when they occur. The Company accounts for forfeitures as they occur. The Company is prospectively recognizing excess tax benefits or deficits on vesting or settlement of awards, when they occur, as a discrete income tax benefit or expense instead of as additional paid-in capital as required under previous guidance. This change to the Company's accounting policies resulted in recognition of income tax expense of $2 and $571 for the three- and nine-month periods ended October 31, 2017. These tax-related cash flows are now classified within operating activities. The Company classifies tax payments made to taxing authorities on the employee's behalf for withheld shares as a financing activity on the statement of cash flows, as such the adoption of this guidance had no impact. Under the new guidance, excess tax benefits are no longer included in assumed proceeds under the treasury stock method of calculating earnings per share. The increase in incremental shares used in the weighted average diluted shares calculation was not material to the Company's diluted earnings per share calculation.

In the fiscal 2018 first quarter when it became effective, the Company adopted the FASB ASU No. 2015-11 (issued in July 2015), "Inventory (Topic 330) Simplifying the Measurement of Inventory" (ASU 2015-11) on a prospective basis. The amendments in ASU 2015-11 clarify that an entity should measure inventory within the scope of this update at the lower of cost and net realizable value. Net realizable value is the estimated selling price in the ordinary course of business, less reasonably predictable costs of completion, disposal, and transportation. Substantial and unusual losses that result from subsequent measurement of inventory should be disclosed in the financial statements. Previously the Company reported its inventory at the lower of cost or market. Market was defined as replacement cost with a ceiling of net realizable value and a floor of net realizable value less a normal profit margin. The Company evaluates its inventory in all three reporting segments quarterly to determine if cost exceeds net realizable value and records a write-down, if necessary. The adoption of this guidance did not have any impact on the consolidated financial statements or the results of operations as of and for the three- and nine-month periods ended October 31, 2017.

~~New~~ Accounting Standards ~~Not Yet Adopted~~

In May 2017, the FASB issued ASU No. 2017-09, "Compensation - Stock Compensation (Topic 718): Scope of Modification Accounting" (ASU 2017-09). The guidance amends the scope of modification accounting for share-based payment arrangements. The ASU provides guidance on the types of changes to the terms or conditions of share-based payment awards to which an entity would be required to apply modification accounting under Topic 718. Specifically, an entity would not apply modification accounting if the fair value, vesting conditions, and classification of the awards as equity instruments or a liability instruments are the same immediately before and after the modification to the award. The guidance is effective for annual periods, including interim periods, in fiscal years beginning after December 15, 2017. Early adoption is permitted and the amendments should be applied prospectively to an award modified on or after the adoption date. The Company currently has no plans to modify any of its outstanding awards. The Company will consider early adopting this guidance if modifications to its share-based compensation arrangements are likely to occur. The Company does not expect the adoption of this guidance will have a significant impact on its consolidated financial statements, results of operations, and disclosures.

In March 2017, the FASB issued ASU No. 2017-07, "Compensation - Retirement Benefits (Topic 715): Improving the Presentation of Net Periodic Postretirement Benefit Cost" (ASU 2017-07). The guidance clarifies where the cost components of the net benefit cost should be reported in the income statement and it allows only the service cost to be capitalized. Currently the Company reports all of the components of the net benefit cost in "Operating income" in the Consolidated Statement of Income and Comprehensive Income. The net benefit cost for participants that are active employees is reported in the same manner as each participant's compensation cost is classified in the Consolidated Statement of Income and Comprehensive Income. The net benefit cost attributable to retired (inactive) participants is reported in "Selling, general, and administrative expenses" in the Consolidated Statement of Income and Comprehensive Income. Under the new guidance only the service cost component of the net benefit cost will be classified the same as the participant's compensation cost. The other components of the net benefit cost are required to be reported separately as a non-operating income (expense). The guidance is effective for annual periods, including interim periods, in fiscal years beginning after December 15, 2017. Early adoption is permitted and the amendments should be applied retrospectively. The Company does not expect this guidance will have a significant impact on its consolidated financial statements, results of operations and disclosures since it primarily will only change how the net benefit cost is classified in the Company's Consolidated Statements of Income and Comprehensive Income.

~~In February 2016 the FASB issued ASU~~Update (ASU) No. 2016-02, "Leases (Topic 842)" (ASU 2016-02)., issued in February 2016 and the subsequently-issued codification improvements to Topic 842. The primary difference between previous GAAP and ASU 2016-02 is the recognition of lease assets and ~~lease~~ liabilities by lessees for ~~those~~ leases classified as operating leases under previous GAAP. The guidance requires a lessee to recognize ~~in the statement of financial position~~ a lease liability to(to make lease ~~payments (the lease liability)~~payments) and a right-of-use asset ~~representing~~(representing its right to use the underlying asset for the lease ~~term. When measuring assets~~term) on the balance sheet with terms greater than 12 months. The Company adopted ASU 2016-02 on a modified retrospective basis for all agreements existing as of February 1, 2019. Prior comparative periods have not been adjusted and ~~liabilities arising from a lease, a lessee (and a lessor) should include payments~~continue to be ~~made~~reported and disclosed under ASC Topic 840. This adoption did not have a material impact to the Company. As of February 1, 2019, the Company recognized a right-of-use asset for finance leases and operating leases of $233 and $3,807, respectively and a current and non-current lease liability of $1,446 and $2,571, respectively. As part of the adoption of ASU 2016-02, the Company elected the following practical expedient: short-term recognition exemption for all leases that qualify. Note disclosures required in ~~optional periods only if~~Topic 842 are reported in Note 11 Leases of the ~~lessee is reasonably~~Notes to the Consolidated Financial Statements in this Form 10-Q.

New Accounting Standards Not Yet Adopted

In November 2018, the FASB issued ASU No. 2018-18, "Collaborative Arrangements (Topic 808): Clarifying the Interaction between Topic 808 and Topic 606" (ASU 2018-18). The amendments in ASU 2018-18 clarify that certain to exercise an option to extend the lease or not to exercise an option to terminate the lease. Similarly, optional payments to purchase the underlying asset should be included in the measurement of lease assets and lease liabilities only if the lessee is reasonably certain to exercise that purchase option. For leases with a term of 12 months or less, a lessee is permitted to make an accounting policy election by class of underlying asset not to recognize leasetransactions between

(dollars in thousands, except per-share amounts)

~~assets~~ participants in collaborative arrangements should be accounted for as revenue under Topic 606, "Revenue from Contracts with Customers,"and ~~lease liabilities. If~~precludes certain transactions that are not with a ~~lessee makes~~customer from using Topic 606. The amendments in this ~~election, it should recognize lease expense for such leases generally on a straight-line basis over the lease term. ASU 2016-02 is~~update are effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2018. Lessees and lessors are required to recognize and measure leases at the beginning of the earliest period presented using a modified retrospective approach. The modified retrospective approach includes a number of optional practical expedients that entities may elect to apply. An entity that elects to apply the practical expedients will, in effect, continue to account for leases that commence before the effective date in accordance with previous GAAP unless the lease is modified, except that lessees are required to recognize a right-of-use asset and a lease liability for all operating leases at each reporting date based on the present value of the remaining minimum rental payments that were tracked and disclosed under previous GAAP. The Company is evaluating the impact the2019. Early adoption of this guidance ~~will have on its consolidated financial statements, results of operations, and disclosures.~~

In May 2014 the FASB issued ASU No. 2014-09, "Revenue from Contracts with Customers (Topic 606)" (ASU 2014-09). ASU 2014-09 provides a comprehensive new recognition model that requires recognition of revenue when a company transfers promised goods or services to customersis permitted in an amount that reflects the consideration to which the company expects to receive in exchange for those goods or services. This guidance supersedes the revenue recognition requirements in FASB ASC Topic 605, "Revenue Recognition," and most industry-specific guidance. ASU 2014-09 defines a five-step process to achieve this core principle and, in doing so, companies will need to use more judgment and make more estimates than under the current guidance. It also requires additional disclosure about the nature, amount, timing, and uncertainty of revenue and cash flows arising from customer contracts. In August 2015, the FASB approved a one-year deferral of the effective date (ASU 2015-14) and the standard is now effective for the Company for fiscal 2019 andany interim ~~periods therein.~~period. The ~~guidance may~~amendments should be applied ~~using either of the following transition methods: (i) a full retrospective approach reflecting the application of the standard in each prior reporting period with the option~~retrospectively to ~~elect certain practical expedients or (ii) a retrospective approach with the cumulative effect of initially adopting ASU 2014-09 recognized at~~ the date ~~of adoption (which includes additional footnote disclosures). In addition, FASB has amended~~ Topic 606 ~~prior to it becoming effective. The effective date and transition requirements for these amendments to Topic 606 are the same as ASU 2014-09.~~ was adopted. The Company is in its final stages of evaluating the impact ~~that~~ the ~~standard~~adoption of this new guidance will have on ~~revenue recognition.~~the Company's consolidated financial statements.

In August 2018, the FASB issued ASU No. 2018-13, "Fair Value Measurement (Topic 820): Disclosure Framework-Changes to the Disclosure Requirements for Fair Value Measurement" (ASU 2018-13). The ~~Company has reviewed contracts~~amendments in ASU 2018-13 remove, modify and add disclosures for companies required to make disclosures about recurring or nonrecurring fair value measurements under Topic 820. The amendments in this update are effective for all ~~material revenue streams across~~entities for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2019. Early adoption of this guidance is permitted. Certain amendments in this guidance are required to be applied prospectively, and others are to be applied retrospectively. The amendments in ASU 2018-13 are disclosure-related only and as such the Company does not expect the adoption of this guidance to have a significant impact on the balances reported in the Company's ~~three divisions, held discussions with key stakeholders,~~consolidated financial statements.

In June 2016, the FASB issued ASU 2016-13, "Financial Instruments - Credit Losses (Topic 326) Measurement of Credit Losses on Financial Instruments" (ASU 2016-13). Current GAAP generally delays recognition of the full amount of credit losses until the loss is probable of occurring. The amendments in this guidance eliminate the probable initial recognition threshold and, ~~assessed potential impacts~~instead, reflect an entity’s current estimate of all expected credit losses. Previously, when credit losses were measured under GAAP, an entity generally only considered past events and current conditions in measuring the incurred loss. The new standard is effective for annual reporting periods beginning after December 15, 2019. All entities may elect to early adopt ASU 2016-13 for annual reporting periods beginning after December 15, 2018. The adoption of ASU 2016-13 is not expected to have a significant impact on the ~~Company’s~~Company's consolidated financial statements ~~results~~or its note disclosures.

(dollars in thousands, except per-share amounts)

(3) SELECTED BALANCE SHEET INFORMATION

Following are the components of ~~operations, disclosures,~~selected items from the Consolidated Balance Sheets:


	October 31, 2019		January 31, 2019
Accounts receivable, net:
Trade accounts	$	56,894	$	53,820
Unbilled receivables	6,421		1,391
Allowance for doubtful accounts	(1,258)		(739)
	$	62,057	$	54,472
Inventories:
Finished goods	6,997		7,629
In process	1,268		1,103
Materials	43,716		45,344
	$	51,981	$	54,076
Other current assets:
Insurance policy benefit	73		336
Income tax receivable	1,624		1,045
Receivable from sale of investment	—		1,055
Prepaid expenses and other	3,398		6,300
	$	5,095	$	8,736
Property, plant and equipment, net:^(a)
Land	$	3,117	$	3,234
Buildings and improvements	79,719		81,381
Machinery and equipment	156,530		155,463
Financing lease right-of-use assets	879		—
Accumulated depreciation	(138,758)		(133,724)
	101,487		106,354
Property, plant and equipment subject to capital leases:
Machinery and equipment	—		510
Accumulated amortization for capitalized leases	—		(249)
	$	101,487	$	106,615
Other assets:
Equity investments	$	1,200	$	345
Operating lease right-of-use assets	2,782		—
Deferred income taxes	17		16
Other	4,796		2,963
	$	8,795	$	3,324
Accrued liabilities:
Salaries and related	$	4,884	$	8,244
Benefits	5,229		4,751
Insurance obligations	1,976		1,963
Warranties	1,984		890
Income taxes	352		328
Other taxes	1,474		2,434
Acquisition-related contingent consideration	813		1,796
Lease liability	2,065		—
Other	2,129		3,072
	$	20,906	$	23,478
Other liabilities:
Postretirement benefits	$	7,703	$	7,678
Acquisition-related contingent consideration	2,143		2,376
Lease liability	1,776		—
Deferred income taxes	3,357		1,659
Uncertain tax positions	2,701		2,670
Other	4,289		3,852
	$	21,969	$	18,235

^(a) The amount of assets held for sale at October 31, 2019, and internal controls over financial reporting. The Company currently recognizes a significant majority of its revenue across all three divisions at a point-in-time with some exceptions that are recognized over time. These exceptions primarily relate to certain revenue streams within the Aerostar Division and installation sales within the Engineered Films Division. Management expects that this will remain materially consistent upon adoption of the new standard, but has identified a few exceptions for which further evaluation is necessary, and for which the timing of revenue recognition could be impacted. Additionally, the Company expects to make additional disclosures related to the revenues arising from contracts with customers as required by the new standard. The Company will adopt this guidanceJanuary 31, 2019, were not material.

(dollars in ~~the first quarter of fiscal 2019 using the modified retrospective approach.~~thousands, except per-share amounts)

~~(3)~~(4) NET INCOME PER SHARE

Basic net income per share is computed by dividing net income by the weighted average common shares and fully vested stock units outstanding. Diluted net income per share is computed by dividing net income by the weighted average common and common equivalent shares outstanding, which includes the shares issuable upon exercise of employee stock options (net of shares assumed purchased with the option proceeds), stock units and restricted stock units outstanding. Performance share awards are included in the diluted calculation based upon what would be issued if the end of the most recent reporting period was the end of the term of the award. ~~Weighted average common and common equivalent shares outstanding are excluded from the diluted loss per share calculation if their inclusion would have an antidilutive effect.~~

Certain outstanding options and restricted stock units were excluded from the diluted net income ~~per-share~~per share calculations because their effect would have been anti-dilutive under the treasury stock method. The options and restricted stock units excluded from the diluted net income ~~per-share~~per share calculation were as follows:

Three Months Ended

Nine Months Ended

October 31,
2019

October 31,
2018

October 31,
2019

October 31,
2018

Anti-dilutive options and restricted stock units

101,384

—

21,444

50,699

Three Months Ended Nine Months Ended
October 31,
2017 October 31,
2016 October 31,
2017 October 31,
2016
Anti-dilutive options and restricted stock units 338,244 653,513 385,157 922,041

~~(dollars in thousands, except per-share amounts)~~

The computation of earnings per share is presented below:


	Three Months Ended						Nine Months Ended
	October 31, 2019		October 31, 2018		October 31, 2019		October 31, 2018
Numerator:
Net income attributable to Raven Industries, Inc.	$	9,934	$	13,032	$	31,910	$	48,844

Denominator:
Weighted average common shares outstanding	35,785,460		35,952,688		35,893,714		35,890,638
Weighted average fully vested stock units outstanding	128,604		104,649		120,691		98,235
Denominator for basic calculation	35,914,064		36,057,337		36,014,405		35,988,873

Weighted average common shares outstanding	35,785,460		35,952,688		35,893,714		35,890,638
Weighted average fully vested stock units outstanding	128,604		104,649		120,691		98,235
Dilutive impact of stock options and restricted stock units	176,850		414,542		236,222		450,429
Denominator for diluted calculation	36,090,914		36,471,879		36,250,627		36,439,302

Net income per share ─ basic	$	0.28	$	0.36	$	0.89	$	1.36
Net income per share ─ diluted	$	0.28	$	0.36	$	0.88	$	1.34

Three Months Ended Nine Months Ended
October 31,
2017 October 31,
2016 October 31,
2017 October 31,
2016
Numerator:
Net income attributable to Raven Industries, Inc. $ 11,998
$ 5,741
$ 32,581
$ 15,753

Denominator:
Weighted average common shares outstanding 35,829,880
36,076,259
36,002,024
36,164,468
Weighted average fully vested stock units outstanding 109,558
97,716
105,830
100,595
Denominator for basic calculation 35,939,438
36,173,975
36,107,854
36,265,063

Weighted average common shares outstanding 35,829,880
36,076,259
36,002,024
36,164,468
Weighted average fully vested stock units outstanding 109,558
97,716
105,830
100,595
Dilutive impact of stock options and restricted stock units 380,997
122,270
369,339
70,102
Denominator for diluted calculation 36,320,435
36,296,245
36,477,193
36,335,165

Net income per share ─ basic $ 0.33
$ 0.16
$ 0.90
$ 0.43
Net income per share ─ diluted $ 0.33
$ 0.16
$ 0.89
$ 0.43

(5) REVENUE

Disaggregation of Revenues

Revenue is disaggregated by major product category and geography, as we believe these categories best depict how the nature, amount, timing and uncertainty of our revenue and cash flows are affected by economic factors. The following table includes a reconciliation of the disaggregated revenue by reportable segments. Service revenues are not material and are not separately disclosed.

(dollars in thousands, except per-share amounts)


	Revenue by Product Category
	Three Months Ended October 31, 2019																		Three Months Ended October 31, 2018
	ATD		EFD		AERO		ELIM^(a)		Total		ATD		EFD		AERO		ELIM^(a)		Total
Lighter-than-Air
Domestic	$	—	$	—	$	11,071	$	—	$	11,071	$	—	$	—	$	14,152	$	—	$	14,152
International	—		—		—		—		—		—		—		298		—		298
Plastic Films & Sheeting
Domestic	—		54,673		—		(33)		54,640		—		52,841		—		(177)		52,664
International	—		1,733		—		—		1,733		—		5,398		—		—		5,398
Precision Agriculture Equipment
Domestic	22,957		—		—		(1)		22,956		23,764		—		—		—		23,764
International	5,543		—		—		—		5,543		5,976		—		—		—		5,976
Other
Domestic	—		—		4,577		—		4,577		—		—		2,578		—		2,578
International	—		—		13		—		13		—		—		3		—		3
Totals	$	28,500	$	56,406	$	15,661	$	(34)	$	100,533	$	29,740	$	58,239	$	17,031	$	(177)	$	104,833

	Nine Months Ended October 31, 2019																		Nine Months Ended October 31, 2018
	ATD		EFD		AERO		ELIM^(a)		Total		ATD		EFD		AERO		ELIM^(a)		Total
Lighter-than-Air
Domestic	$	—	$	—	$	26,230	$	—	$	26,230	$	—	$	—	$	31,899	$	—	$	31,899
International	—		—		49		—		49		—		—		834		—		834
Plastic Films & Sheeting
Domestic	—		151,278		—		(80)		151,198		—		163,059		—		(441)		162,618
International	—		6,936		—		—		6,936		—		14,047		—		—		14,047
Precision Agriculture Equipment
Domestic	72,915		—		—		(1)		72,914		76,881		—		—		—		76,881
International	24,681		—		—		—		24,681		23,651		—		—		—		23,651
Other
Domestic	—		—		14,665		—		14,665		—		—		8,698		—		8,698
International	—		—		96		—		96		—		—		18		—		18
Totals	$	97,596	$	158,214	$	41,040	$	(81)	$	296,769	$	100,532	$	177,106	$	41,449	$	(441)	$	318,646

^(a)Intersegment sales for both fiscal 2020 and 2019 were primarily sales from Engineered Films to Aerostar.

~~(4) SELECTED BALANCE SHEET INFORMATION~~

Contract Balances

~~Following~~Contract balances consist of contract assets and contract liabilities. Contract assets primarily relate to the Company’s rights to consideration for work completed but not yet billed for at the reporting date, or retainage provisions on billings that have been issued. Contract liabilities primarily relate to consideration received from customers prior to transferring goods or services to the customer. Contract assets and contract liabilities are ~~the components of selected items from~~reported in "Accounts receivable, net" and "Other current liabilities" in the Consolidated Balance ~~Sheets:~~Sheets, respectively.

October 31, 2017 January 31, 2017 October 31, 2016
Accounts receivable, net:
     Trade accounts $ 60,621
$ 43,834
$ 40,257
     Allowance for doubtful accounts (1,048 ) (691 ) (703 )
$ 59,573
$ 43,143
$ 39,554
Inventories:
Finished goods $ 7,063
$ 5,438
$ 5,686
In process 1,035
2,288
2,325
Materials 45,383
34,610
34,802

$ 53,481

$ 42,336

$ 42,813
Other current assets:
Insurance policy benefit $ 593
$ 802
$ 776
     Income tax receivable 269
604
228
Receivable from sale of business 17
28
71
     Prepaid expenses and other 3,031
1,255
1,672
$ 3,910
$ 2,689
$ 2,747
Property, plant and equipment, net:
Land $ 3,234
$ 3,054
$ 3,054
Buildings and improvements 80,009
77,817
78,674
Machinery and equipment 147,723
142,471
142,946
     Accumulated depreciation (125,315 ) (117,018 ) (115,726 )
$ 105,651
$ 106,324
$ 108,948
Other assets:
Equity method investments $ 1,884
$ 2,371
$ 2,346
Deferred income taxes 18
18
65
Other 1,024
1,283
1,335
$ 2,926
$ 3,672
$ 3,746
Accrued liabilities:
Salaries and related $ 6,464
$ 6,286
$ 3,931
Benefits 4,128
3,960
3,720
Insurance obligations 3,106
2,400
2,022
Warranties 1,217
1,547
1,852
Income taxes 1,668
498
332
Other taxes 1,446
1,540
1,230
Acquisition-related contingent consideration 815
445
396
Other 2,801
1,379
1,225
$ 21,645
$ 18,055
$ 14,708
Other liabilities:
Postretirement benefits $ 8,110
$ 8,054
$ 7,714
Acquisition-related contingent consideration 2,016
1,397
1,385
Deferred income taxes 393
1,421
257
Uncertain tax positions 2,584
2,610
2,778
Other 353
214
—
$ 13,456
$ 13,696
$ 12,134

~~(5) ASSETS HELD FOR SALE~~

The Company continually analyzes its product and service offerings to ensure we serve market segments with attractive near- and long-term growth prospects that are consistent with our core capabilities. Through this continued evaluation the Company's Aerostar segment finalized a plan ("the Plan") to actively market the sale of its client private and radar product lines, which it has determined constitutes a business. During the second quarter of fiscal 2018 the Company determined that it was probable that these product lines would be sold within one year. The Company has identified specific assets and liabilities likely to be sold, including an allocation of goodwill based on the relative fair value of the business to be sold. Currently, the Company estimates

(dollars in thousands, except per-share amounts)

During the ~~fair value of the net assets held for sale is in excess of their net book value. As such there is no impact to the Consolidated Statement of Income for the three- or nine-month periods~~nine months ended October 31, ~~2017.~~

~~Under~~2019, the ~~Plan, Aerostar will remain focused~~Company’s contract assets and liabilities increased by $4,971 and $874, respectively. The increase was primarily a result of the contract terms which include timing of customer payments, timing of invoicing, and progress made on ~~serving~~open contracts. Due to the ~~aerospace/defense market with its stratospheric balloon product~~short-term nature of the Company’s contracts, substantially all contract liabilities are recognized as revenue during the twelve months thereafter. Changes in our contract assets and ~~service offerings.~~

~~Amounts classified as held for sale are~~liabilities were as follows:


	October 31, 2019		January 31, 2019		$ Change		% Change
Contract assets	$	6,998	$	2,027	$	4,971	245.2	%

Contract liabilities	$	2,177	$	1,303	$	874	67.1	%

October 31, 2017
Assets held for sale
Inventories $ 3,000
Other current assets 79
Total current assets held for sale 3,079
Property, plant and equipment, net 227
Goodwill 102
Amortizable intangible assets, net 358
Other assets 17
Total assets held for sale $ 3,783

Liabilities held for sale

Current liabilities $ 392
Other long-term liabilities 127
Total liabilities held for sale $ 519

Remaining Performance Obligations

As of October 31, 2019, the Company has 0 remaining performance obligations related to customer contracts with an original expected duration of one year or more. Revenue recognized from performance obligations satisfied in the prior period during the three- and nine-month period ending October 31, 2019, were not material.

(6) ACQUISITIONS AND DIVESTITURES OF AND INVESTMENTS IN BUSINESSES AND TECHNOLOGIES

~~Colorado Lining International, Inc.~~Fiscal year 2020

There were 0 significant business acquisitions and divestitures or purchases of technologies in the three- and nine-month period ended October 31, 2019.

On October 31, 2019, the Company entered into an agreement to acquire a majority ownership of Dot Technology Corp., ("DOT^®"). DOT^® is located in Regina, Saskatchewan, Canada, and designs autonomous agriculture solutions and manufactures a unique U-shaped agriculture platform to autonomously handle a large variety of agriculture implements. The Company has the option to purchase the remaining noncontrolling interest of DOT^®~~September~~ in ten years following the close of the transaction. The Company deposited approximately $3,000 towards the purchase price of DOT^® in the third quarter of fiscal 2020 and the deposit is reported in "Other assets" and "Other investing activities" on the Consolidated Balance Sheet and Consolidated Statements of Cash Flows, respectively. This transaction closed on November 13, 2019.

In addition, subsequent to October 31, 2019, the Company acquired Smart Ag, Inc., ("Smart Ag^®"). Smart Ag^® is a technology company located in Ames, Iowa, that develops autonomous farming solutions for agriculture. This transaction closed on November 1, ~~2017~~2019.

Both acquisitions will align under the Company's Applied Technology Division and will complement the division's suite of precision ag products and solutions. The aggregate purchase price was approximately $62,000 and will primarily be allocated to intangible assets and goodwill. The Company anticipates completing a majority of the purchase accounting for both acquisitions in the fourth quarter of fiscal 2020.

Fiscal year 2019

,On January 1, 2019, the Company completed the acquisition of substantially all of the assets ("~~the acquisition"~~AgSync Acquisition") of ~~Colorado Lining International,~~AgSync Inc. ("AgSync"), ~~a Colorado~~an Indiana corporation, headquartered in ~~Parker, CO (“CLI”). The~~Wakarusa, Indiana. This acquisition ~~will immediately align~~is aligned under the Company’s ~~Engineered Films Division.~~Applied Technology Division and is expected to enhance its Slingshot^® platform by delivering a more seamless logistics solution for ag retailers, aerial applicators, custom applicators and enterprise farms. The acquisition enhances the Company’s geomembrane market position through extended service and product offerings with the addition of new design-build and installation service components, and will advance Engineered Films’ business model into a vertically-integrated, full-service solutions provider for the geomembrane market. The acquisitionAgSync Acquisition constitutes a business and, as such, was accounted for as a business ~~combination.~~combination; however, the business combination was not significant enough to warrant pro-forma financial information.

The purchase price was approximately ~~$15,088. This includes~~$9,700, which included potential earn-out payments with an estimated fair value of ~~$1,256 which are~~$2,052. The earn-out is contingent upon achieving certain ~~revenues and operational synergies.~~revenue milestones. The ~~acquisition includes a working capital adjustment to be settled within ninety days after acquisition.~~

~~In the initial acquisition accounting, the fair value~~purchase price of the business acquired was allocated to the assets acquired and liabilities assumed based on their estimated fair values. The excess of the purchase price over the fair value of the identifiable assets acquired and liabilities assumed is reflected as ~~goodwill. Goodwill~~goodwill, which is fully tax deductible. The Company completed the valuation and the purchase price allocation during the first quarter of fiscal 2020. This resulted in an adjustment in the fiscal 2020 first quarter that increased the purchase price and the estimated fair value of the contingent earn-out payments by approximately $300. The goodwill and identifiable intangible assets recorded as part of the purchase price allocation ~~was $5,941, all of which is tax deductible. Identifiable intangible assets acquired as part of the acquisition~~at October 31, 2019, were ~~$610, including definite-lived intangibles, such as customer relationships~~$4,526 and order backlog. The estimated fair value of the assets acquired and liabilities assumed are preliminary and may be adjusted as the Company obtains additional information, primarily related to adjustments for the true up of acquired net working capital in accordance with the asset purchase agreement. If there are adjustments made for these items, the fair value of intangible assets and goodwill could be impacted. Thus, the provisional measurements of fair value are subject to change.$5,700, respectively.

~~Ag-Eagle Aerial Systems, Inc.~~

In February 2016, the Applied Technology Division acquired an interest of approximately 5% in AgEagle Aerial Systems, Inc. (AgEagle). AgEagle is a privately held company that is a provider of unmanned aerial systems (UAS) used for agricultural applications. Contemporaneously with the execution of this agreement, AgEagle and the Company entered into a distribution agreement whereby the Company was appointed as the exclusive distributor of the existing AgEagle system as it pertains to the agriculture market. The Company’s equity ownership interest is considered a variable interest and it accounts for this investment under the equity method of accounting. The Company is not the primary beneficiary as the Company does not have the power to direct the activities that most significantly impact the VIE’s economic performance and the obligation to absorb losses or the

(dollars in thousands, except per-share amounts)

During the first quarter of fiscal 2019, Aerostar sold its client private business for $832, which resulted in an immaterial gain in the three-months ended April 30, 2018. In fiscal 2018, Aerostar actively marketed the sale of its client private business and as such, classified it as held for sale.

~~right to receive benefits~~

In the first quarter of fiscal 2019, the ~~VIE that could potentially be significant to the entity. The purchase price was allocated between the equity~~Company sold its ownership interest ~~and~~of approximately 22 percent in Site-Specific Technology Development Group, Inc. (SST) with a carrying value of $1,937. This investment was being accounted for as an ~~intangible asset~~equity method investment. Raven received $6,556 in cash at closing which was reported as "Proceeds from sale or maturity of investments" in the Consolidated Statements of Cash Flows. The Company recognized a gain on the sale of $5,785 for the ~~exclusive distribution agreement. In~~three-months ended April ~~2017,~~30, 2018. The gain was reported in "Other income (expense), net" in the ~~Company determined that~~Consolidated Statements of Income and Comprehensive Income. The gain included a fifteen percent hold-back provision held in an escrow account which was received in the ~~investment in AgEagle, was fully impaired, further described in Note 7~~ ~~Goodwill, Long-lived Assets and Other Intangibles, due to lower than expected cash flows. The Company has no commitments or guarantees related to this equity method investment.~~second quarter of fiscal 2020.

Acquisition-related Contingent Consideration

The Company has contingent liabilities related to the ~~recent~~ acquisition of ~~CLI,~~AgSync in fiscal 2019 as well as ~~the~~ prior acquisitions of Colorado Lining International, Inc. (CLI) in fiscal 2018; Raven Europe B.V. (Raven Europe), formerly named SBG Innovatie BV and its affiliate, Navtronics BVBA (collectively, SBG), in ~~May 2014~~fiscal 2015; and Aerostar Technical Solutions, Inc. (ATS), formerly named Vista Research, Inc. (Vista), completed in ~~January~~fiscal 2012. The fair value of such contingent consideration is estimated as of the acquisition date, and subsequently at the end of each reporting period, using forecasted cash flows. Projecting future cash flows requires the Company to make significant estimates and assumptions regarding future events, conditions, or revenues being achieved under the subject contingent agreement as well as the appropriate discount rate. Such valuation techniques include one or more significant inputs that are not observable (Level 3 fair value measures).

Changes in the fair value of the liability for acquisition-related contingent consideration are as follows:


	Three Months Ended						Nine Months Ended
	October 31, 2019		October 31, 2018		October 31, 2019		October 31, 2018
Beginning balance	$	3,579	$	2,950	$	4,172	$	3,046
Fair value of contingent consideration acquired	—		—		310		—
Change in fair value of the liability	100		182		343		585
Contingent consideration earn-out paid	(723)		(721)		(1,869)		(1,220)
Ending balance	$	2,956	$	2,411	$	2,956	$	2,411

Classification of liability in the consolidated balance sheet
Accrued liabilities	$	813	$	1,764	$	813	$	1,764
Other liabilities, long-term	2,143		647		2,143		647
Balance at October 31	$	2,956	$	2,411	$	2,956	$	2,411

Three Months Ended Nine Months Ended
October 31,
2017 October 31,
2016 October 31,
2017 October 31,
2016
Beginning balance $ 1,567
$ 1,901
$ 1,741
$ 2,059
Fair value of contingent consideration acquired 1,256
—
1,256
—
Change in fair value of the liability 52
(165 ) 198
(41 )
Contingent consideration earn-out paid (44 ) (36 ) (364 ) (318 )
Ending balance $ 2,831
$ 1,700
$ 2,831
$ 1,700

Classification of liability in the Consolidated balance sheet
Accrued Liabilities $ 815
$ 315
Other Liabilities, long-term 2,016
1,385
Balance at October 31, 2017 $ 2,831
$ 1,700


	October 31, 2019										January 31, 2019
			Accumulated						Accumulated
	Amount		amortization		Net		Amount		amortization		Net
Existing technology	$	9,174	$	(7,591)	$	1,583	$	9,203	$	(7,216)	$	1,987
Customer relationships	16,073		(6,529)		9,544		15,791		(5,508)		10,283
Patents and other intangibles	6,102		(2,296)		3,806		5,908		(1,885)		4,023
Total	$	31,349	$	(16,416)	$	14,933	$	30,902	$	(14,609)	$	16,293



	October 31, 2017							January 31, 2017							October 31, 2016
			Accumulated							Accumulated							Accumulated
	Amount		amortization			Net		Amount		amortization			Net		Amount		amortization			Net
Existing technology	$	7,218	$	(6,854	)	$	364	$	7,136	$	(6,553	)	$	583	$	7,157	$	(6,490	)	$	667
Customer relationships	13,220		(4,503		)	8,717		12,987		(3,680		)	9,307		13,000		(3,421		)	9,579
Patents and other intangibles	4,708		(2,414		)	2,294		4,378		(2,220		)	2,158		4,427		(2,162		)	2,265
Total	$	25,146	$	(13,771	)	$	11,375	$	24,501	$	(12,453	)	$	12,048	$	24,584	$	(12,073	)	$	12,511


	Three Months Ended						Nine Months Ended
	October 31, 2019		October 31, 2018		October 31, 2019		October 31, 2018
Beginning balance	$	1,739	$	1,137	$	890	$	1,163
Change in provision	1,184		521		3,038		1,007
Settlements made	(939)		(807)		(1,944)		(1,319)
Ending balance	$	1,984	$	851	$	1,984	$	851


	Three Months Ended		Nine Months Ended
	October 31, 2019		October 31, 2019
Lease Costs:
Finance Leases
Depreciation of right-of-use assets	$	106	$	305
Interest on lease liabilities	5		16
Total finance lease cost	$	111	$	321

Operating Leases
Operating lease cost	$	360	$	1,082
Short-term lease cost	119		325
Total operating lease cost	$	479	$	1,407
Total finance and operating lease cost	$	590	$	1,728


	October 31, 2019
Operating Leases
Operating lease right-of-use assets	$	2,782

Current lease liability	$	1,734
Non-current lease liability	1,507
Total operating lease liabilities	$	3,241

Finance Leases
Property, plant and equipment, at cost	$	879
Accumulated depreciation	(279)
Property, plant and equipment, net	$	600

Current lease liability	$	331
Non-current lease liability	269
Total finance lease liabilities	$	600



(dollars and shares in thousands, except per-share data)	October 31, 2017			January 31, 2017			October 31, 2016
ASSETS
Current assets
Cash and cash equivalents	$	36,873		$	50,648		$	46,313
Accounts receivable, net	59,573			43,143			39,554
Inventories	53,481			42,336			42,813
Other current assets	3,910			2,689			2,747
Total current assets	153,837			138,816			131,427

Property, plant and equipment, net	105,651			106,324			108,948
Goodwill	46,752			40,649			40,703
Amortizable intangible assets, net	11,375			12,048			12,511
Other assets	2,926			3,672			3,746
TOTAL ASSETS	$	320,541		$	301,509		$	297,335

LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities
Accounts payable	$	13,383		$	8,467		$	9,377
Accrued liabilities	21,645			18,055			14,708
Customer advances	908			1,860			1,154
Total current liabilities	35,936			28,382			25,239

Other liabilities	13,456			13,696			12,134

Commitments and contingencies	—			—			—

Shareholders' equity
Common stock, $1 par value, authorized shares 100,000; issued 67,088; 67,060; and 67,060, respectively	67,088			67,060			67,060
Paid-in capital	58,484			55,795			55,703
Retained earnings	249,034			230,649			230,957
Accumulated other comprehensive income (loss)	(3,058		)	(3,676		)	(3,361		)
Treasury stock at cost, 31,332; 30,984; and 30,984 shares, respectively	(100,402		)	(90,402		)	(90,402		)
Total Raven Industries, Inc. shareholders' equity	271,146			259,426			259,957
Noncontrolling interest	3			5			5
Total equity	271,149			259,431			259,962
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY	$	320,541		$	301,509		$	297,335



	October 31, 2017
Assets held for sale
Inventories	$	3,000
Other current assets	79
Total current assets held for sale	3,079
Property, plant and equipment, net	227
Goodwill	102
Amortizable intangible assets, net	358
Other assets	17
Total assets held for sale	$	3,783

Liabilities held for sale
Current liabilities	$	392
Other long-term liabilities	127
Total liabilities held for sale	$	519


	Applied Technology		Engineered Films		Aerostar		Total
Balance at January 31, 2019	$	17,076	$	33,232	$	634	$	50,942
Changes due to business combinations	(33)		—		—		(33)

Foreign currency translation adjustment	(75)		—		—		(75)
Balance at October 31, 2019	$	16,968	$	33,232	$	634	$	50,834


	October 31, 2019		January 31, 2019
Unamortized debt issuance costs^(a)	$	202	$	132



	October 31, 2019		January 31, 2019
Letters of credit outstanding^(a)	$	314	$	514


	October 31, 2019
Weighted Average Remaining Lease Term:
Operating leases	2 years
Finance leases	2 years
Weighted Average Discount Rate:
Operating leases	3.5	%
Finance leases	3.5	%


	January 31, 2019
	Operating Leases		Capital Leases
Fiscal 2020	$	2,213	$	182
Fiscal 2021	1,939		102
Fiscal 2022	728		44
Fiscal 2023	356		2
Fiscal 2024	140		—
Thereafter	—		—
Total lease payments	$	5,376	$	330
Less amount representing estimated executory costs such as taxes, license and insurance including profit thereon			(14)
Less amounts representing interest			(32)
Present value of net minimum lease payments			$	284


•	~~Gross margin.~~ Gross margin increased to 42.6% for the three months ended October 31, 2017 from 42.2% in the prior year comparative period. For the nine-month period ended October 31, 2017 gross margin increased to 44.1% from 41.5% in the fiscal 2017 comparative period. The nine-month period benefited more from higher sales volume and improved operating leverage.


•	S~~ales volume.~~ Net sales increased 23.3% from $9.0 million for the three-month period ended October 31, 2016 to $11.1 million for the three-month period ended October 31, 2017. Year-to-date sales were $30.1 million, up $4.8 million year-over-year, or 18.8%. The increase in both periods was driven principally by growth in the stratospheric balloon platform.


(dollars in thousands)	October 31, 2019			October 31, 2018
Accounts receivable, net	$	62,057		$	66,166
Plus: Inventories	51,981			53,229
Less: Accounts payable	11,045			12,149
Net working capital^(a)	$	102,993		$	107,246

Annualized net sales^(b)	402,132			419,332
Net working capital percentage^(c)	25.6		%	25.6		%
^(a) Net working capital is defined as accounts receivable, (net) plus inventories less accounts payable.
^(b) Annualized net sales is defined as the most recent quarter net sales times four for each of the fiscal periods, respectively.
^(c) Net working capital percentage is defined as net working capital divided by annualized net sales.



ITEM 3.			QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK


◦	During the second quarter of fiscal 2018, we have redesigned and enhanced our controls and procedures around timely and appropriate identification, assessment, and response to risks of material misstatement. This included formalizing and redefining the risk categorization and risk rating methodology to appropriately assess and monitor identified risks on a quarterly basis.


◦	~~During the first quarter of fiscal 2018, management completed the following remediation efforts around the design deficiency:~~


▪	~~We have redesigned our specific procedures and controls associated with the identification of the proper unit of account.~~


▪	~~We have developed an enhanced risk assessment evaluation for the reporting unit for which a goodwill impairment analysis is being conducted.~~


▪	We have redesigned our controls associated with the development of a more precise revenue forecast for use in interim and annual impairment tests. For Aerostar, this specifically includes more precise contract-based revenue assumptions.


▪	~~Internal Audit has completed a design walkthrough of redesigned controls.~~


◦	During the third quarter of fiscal 2018, we have completed the baseline testing for those system-generated reports utilized in internal control over financial reporting that are subject to change management.


◦	~~During the third quarter of fiscal 2018, we have redesigned our controls to perform an analysis to identify changes made to system-generated reports utilized in the internal controls.~~


◦	~~Management completed the following remediation efforts around the deficiency:~~


Period	Total number of shares purchased under the plan	Weighted average price paid per share (or unit)		Total amount purchased including commissions		Dollar value of shares (or units) that may be purchased under the plan
August 1 to August 31, 2019	86,674	$	28.78	$	2,494,524
September 1 to September 30, 2019	82,800	30.26		2,505,467
October 1 to October 31, 2019	—	—		—
Total as of and for the fiscal quarter ended October 31, 2019	169,474	$	29.50	$	4,999,991	$	17,178,950


Exhibit Number		Description

~~Exhibit~~ ~~Number~~10.1		~~Description~~Form of Performance Stock Unit Agreement under the Raven Industries, Inc. 2019 Equity Incentive Plan filed herewith as Exhibit 10.1. †

2.1*10.2		~~Asset Purchase~~Form of Restricted Stock Unit Award Agreement under the Raven Industries, Inc. 2019 Equity Incentive Plan filed herewith as Exhibit 10.2. †

10.3		Credit Agreement dated September 20, 2019 by and among ~~Colorado Lining International, Inc., John B. Heap, Patrick Elliott, and~~ Raven Industries, Inc. ~~dated August 22, 2017.~~
	as the Borrower, Bank of America, N.A., as Administrative Agent, Swingline Lender, and an L/C issuer and each of the other lenders party thereto (incorporated herein by reference to Exhibit 10.1 of the Company's 8-K filed September 23, 2019).
31.1		Certification of Chief Executive Officer Pursuant to Rule 13a-14(a) of the Securities Exchange Act of 1934, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

31.2		Certification of Chief Financial Officer Pursuant to Rule 13a-14(a) of the Securities Exchange Act of 1934, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

32.1		Certification of Chief Executive Officer Pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

32.2		Certification of Chief Financial Officer Pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

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