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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.
- --------------------------------------------------------------------------------
(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
-----------------------------
Securities registered pursuant to Section 12(b) of the Act: None
Securities registered pursuant to Section 12(g) of the Act:
Common stock, $1 par value
--------------------------
(Title of each class)
Indicate by checkmark whether the Registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding twelve months, and (2) has been subject to such filing
requirements for the past ninety days.
Yes _X_ No ___
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of Registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [ ]
The aggregate market value of voting stock held by nonaffiliates of the
Registrant, based on the closing price of $13.00 per share as reported on the
NASDAQ National Market System on April 12, 2000 was $41,591,979.
Shares of common stock outstanding at April 12, 2000: 3,720,407.
DOCUMENTS INCORPORATED BY REFERENCE
The following table shows, except as otherwise noted, the location of
information, required in this Form 10-K, in the registrant's Annual Report to
Shareholders for the year ended January 31, 2000 and Proxy Statement for the
registrant's 2000 annual meeting, a definitive copy of which was filed on April
19, 2000. All such information set forth under the heading "Reference" below is
included herein or incorporated herein by reference. A copy of the registrant's
Annual Report to Shareholders for the year ended January 31, 2000 is included as
an exhibit to this report.
PART I. ITEM IN FORM 10-K REFERENCE
------- ----------------- ---------
Item 1. Business Business, pages 4-7, this
document; Business
Segments, page 9, and
Sales by Markets, page
13, Annual Report to
Shareholders
Item 2. Properties Properties, pages 8-9, this
document
Item 3. Pending Legal Pending Legal Proceedings,
Proceedings page 9, this document
Item 4. Submission of Matters Submission of Matters to a
to a Vote of Vote of Security
Security Holders Holders, page 9, this
document
PART II.
- --------
Item 5. Market for the Regis- Quarterly Information
trant's Common (unaudited), page 22,
Equity and Related Eleven-year Financial
Stockholder Matters Summary, pages 14-15,
and inside back cover,
Annual Report to
Shareholders
Item 6. Selected Financial Data Eleven-Year Financial
Summary, pages 14-15,
Annual Report to
Shareholders
Item 7. Management's Discussion Financial Review and
and Analysis of Analysis, pages 16-21,
Financial Condition Annual Report to Share-
and Results of holders
Operations
2
ITEM IN FORM 10-K REFERENCE
----------------- ---------
Item 8. Financial Statements and Pages 22-31, Annual Report
Supplementary Data to Shareholders.
Item 9. Changes in and Disagree- Changes in and Disagree-
ments with Account- ments with Accountants
ants on Accounting on Accounting and
and Financial Financial Disclosure,
Disclosure page 9, this document
PART III.
- ---------
Item 10. Directors of the Regis- Election of Directors and
trant Executive Compensation,
Proxy Statement
Executive Officers of Executive Officers of
the Registrant Registrant, page 9-10,
this document and Other
Matters, Proxy
Statement
Item 11. Executive Compensation Executive Compensation,
Proxy Statement
Item 12. Voting Securities and Ownership of Common Stock,
Principal Holders Proxy Statement
Thereof
Item 13. Certain Relationships Election of Directors,
and Related Proxy Statement
Transactions
PART IV.
- --------
Item 14. Exhibits, Financial Exhibits, Financial
Statement Schedule Statement Schedule
and Reports on Form and Reports on Form
8-K. 8-K, pages 10-11,
this document.
FORWARD-LOOKING STATEMENTS
Certain sections of this report contain discussions of items which may
constitute forward-looking statements within the meaning of federal securities
laws. Although Raven Industries, Inc., believes that expectations reflected in
such forward-looking statements are based on reasonable assumptions, it can give
no assurances that its expectations will be achieved. Factors that could cause
actual results to differ from expectations include general economic conditions,
weather conditions which could affect certain of the company's primary markets
such as the agricultural market or its market for outerwear or changes in
competition which could impact any of the company's product lines.
3
RAVEN INDUSTRIES, INC.
FORM 10-K
year ended January 31, 2000
Item 1. Business
General
Raven Industries, Inc., was incorporated in February 1956 under the
laws of the State of South Dakota and began operations later that same year. The
following terms - the company, Raven or the registrant - are intended to apply
to Raven Industries, Inc. and its consolidated subsidiaries listed in Exhibit 21
to this report. Raven is headquartered in Sioux Falls, South Dakota, employing
approximately 1,100 persons in six states.
The company began operations as a manufacturer of high-altitude
research balloons. It has diversified over the years to supply specialized
products for a number of markets, including industrial, recreation, agriculture,
automotive and defense. Many of these product lines are an extension of
technology and production methods developed in the original balloon business.
The automotive product line was sold in the third quarter of fiscal 2000. Page
13 of the company's Annual Report to Shareholders, incorporated herein by
reference, provides financial information regarding sales by markets.
The company has three business segments: Electronics, Plastics and Sewn
Products. Product lines have been grouped in these segments based on common
technologies, production methods and raw materials. However, more than one
business segment may serve each of the product markets identified above. Page 9
of the company's Annual Report to Shareholders, incorporated herein by
reference, provides financial information concerning the three business
segments.
Business Segments
Electronics - Historically, the company's Electronics segment provided
a variety of assemblies and controls to the U.S. Department of Defense and other
defense contractors. The company is expanding this segment's capabilities in
contract electronics assembly for commercial customers to offset a decline in
defense contracts. Assemblies manufactured by the Electronics segment include
communication, computer and other products where high quality is critical. Flow
control devices, used primarily for precision farming applications, are designed
and produced within this business segment. These devices are also used for
roadside and turf spraying. The company has developed new products for field
location control to expand the company's capabilities and support precision
farming in future years. The segment also builds and installs automated control
systems for use in feedmills.
4
Contract electronics assembly sales are made in response to competitive
bid requests by commercial customers and defense contractors. The level and
nature of competition varies with the type of product, but the company
frequently competes with a number of assembly manufacturers on any given bid
request. Home office personnel sell flow control devices directly to original
equipment manufacturers(OEMs)and distributors. Company sales representatives
sell automated systems directly to feedmills. All the product markets the
company participates in are competitive, with customers having a number of
suppliers from which to choose.
Plastics - Products in this segment include heavy-duty sheeting for
industrial and agricultural applications; fiberglass, polyethylene and
dual-laminate tanks for industrial and agricultural use; high altitude balloons
for public and commercial research. The company's Glasstite operations were sold
in October of 1999. Glasstite was a manufacturer of pickup-truck toppers which
were sold in the small truck after market. This sale was an important part of
the company's plan for repositioning its business by disposing of its
non-strategic businesses.
The company sells plastic sheeting to distributors in each of the
various markets it serves. The company extrudes a significant portion of the
film converted for its commercial products and believes it is one of the largest
sheeting converters in the U.S. A number of suppliers of sheeting compete with
Raven on both price and product availability.
Home office personnel and manufacturer's representatives sell storage
tanks to OEMs and through distributors. Competition comes not only from many
other plastic tank manufacturers, but also from manufacturers using other
materials (aluminum and steel). The company makes a number of custom fiberglass
and dual-laminate products, but polyethylene tanks tend to be commodity products
and subject to intense price competition.
The company sells research balloons directly to public agencies
(usually funded by the National Aeronautics and Space Administration) or
commercial users. Demand is small but stable. Raven is the largest balloon
supplier for high-altitude research in the United States.
Sewn Products - The Sewn Products segment of the company produces and
sells outerwear for a variety of recreational activities, including hunting and
fishing. This segment also manufactures sport balloons principally for
recreational use. Another major product is large inflatable devices, which enjoy
a number of uses, such as parade floats and advertising media.
Recreational outerwear is now entirely a contract business sold by home
office personnel to distributors and catalog retailers. The company's
proprietary skiwear line was sold at the end of the fourth quarter of fiscal
2000 to reduce inventory, lower accounts receivable levels and improve cash
return on investment. There are many outerwear manufacturers in the U.S. and
abroad, and considerable competition exists. The company competes successfully
in the medium-to-higher priced range of the market where specialty fabrics such
as Gore-Tex(R) are involved, emphasizing quality, service and manufacturing
expertise.
5
The Sewn Products segment sells balloons through a dealer network.
Raven is the originator of modern hot-air ballooning and continues to be a
leader in design and technical expertise. The company believes it has
approximately 40 percent of the U.S. hot-air balloon market, although others
are able to compete with lower-cost products. Inflatables are sold directly to
corporate customers and are subject to varying levels of competition. Generally,
the more customized the product, the greater the company's market share.
Major Customer Information
No customer accounted for more than 10 percent of consolidated sales in
fiscal 2000 or for more than 10 percent of the company's consolidated accounts
receivable at January 31, 2000. However, the company sells sewn products to
several large customers. In fiscal 2000, the top five customers in the Sewn
Products segment accounted for more than two-thirds of that segment's sales.
Although the loss of these accounts would adversely affect profitability, the
company believes that, over the long term, addition of new customers and sales
growth from existing customers would replace any lost sales.
Seasonality/Working Capital Requirements
Some seasonality in demand exists for the company's outerwear products,
many of which are produced in spring/summer for summer/fall delivery. Most of
these sales carry net thirty day terms, although some winter-dated terms were
offered in the company's proprietary skiwear line. Sales to the agricultural
market (flow controls, plastic tanks) also experience some seasonality, building
in the fall for winter/spring delivery. Certain sales to agricultural customers
offer spring dating terms for late fall and early winter shipments. The
resulting fluctuations in inventory and accounts receivable balances may
require, and have required, seasonal short-term financing.
Financial Instruments
The principal financial instruments the company maintains are in
accounts receivable, notes receivable and long-term debt. The company believes
that the interest rate, credit and market risk related to these accounts is not
significant. The company manages the risk associated with these accounts through
periodic reviews of the carrying value for non-collectability of assets and
establishment of appropriate allowances in connection with the company's
internal controls and policies. The company does not enter into hedging or
derivative instruments.
Raw Materials
The company obtains a wide variety of materials from numerous vendors.
Principal materials include numerous electronic components for the Electronics
segment, various plastic resins for the Plastics segment and fabric for the Sewn
Products segment. The company has not experienced any significant shortages or
other problems in purchasing raw materials to date, and alternative sources of
supply are generally available. However, predicting future material shortages
and the related potential impact on Raven is not possible.
6
Patents
The company owns a number of patents. However, Raven does not believe
that its business, as a whole, is materially dependent on any one patent or
related group of patents. It believes the successful manufacture and sale of its
products generally depend more upon its technical expertise and manufacturing
skills.
Research and Development
The business segments noted above conduct ongoing research and
development efforts. Most of the company's research and development expenditures
are directed toward new products in the Electronics and Plastics segments. Total
company research and development costs are disclosed in Note 1 to the
Consolidated Financial Statements located on page 27 of the Annual Report to
Shareholders, incorporated herein by reference.
Environmental Matters
Except as described below, the company believes that it is in
compliance in all material respects with applicable federal, state and local
environmental laws and regulations. Expenditures relating to compliance for
operating facilities incurred in the past have not significantly affected the
company's capital expenditures, earnings or competitive position.
In connection with the sale of substantially all of the assets of the
company's Glasstite, Inc. subsidiary, the company has agreed to assume
responsibility for the investigation and remediation of any pre-October 29, 1999
environmental contamination at the company's Glasstite pickup-truck topper
facility in Dunnell, Minnesota as required by the Minnesota Pollution Control
Agency (MPCA) or the U.S. Environmental Protection Agency (EPA). The Company and
purchaser have conducted a preliminary environmental assessment of the Company's
properties. Although this assessment is still being evaluated by the MPCA, on
the basis of the preliminary data available there is no reason to believe that
any activities which might be required as a result of the findings of the
assessment will have a material effect on the company's results of operations,
financial position or cash flow of the company. As discussed in Note 4 to the
Consolidated Financial Statements, located on pages 28 and 29 of the Annual
Report to Shareholders, incorporated herein by reference, the company had
accrued $150,000 at January 31, 2000, its best estimate of probable costs to be
incurred related to this matter.
Backlog
As of February 1, 2000, the company's backlog of firm orders totaled
$44.9 million. Comparable backlog amounts as of February 1, 1999 and 1998 were
$47.4 million and $47.2 million, respectively. Approximately $3 million of the
February 1, 2000 backlog is not scheduled for shipment by January 31, 2001.
Employees
As of January 31, 2000, the company had approximately 1100 employees,
consisting of 400 in the Electronics segment, 300 in the Plastics segment and
400 in the Sewn Products segment. Management believes its employee relations are
satisfactory.
7
Item 2. Properties
All properties, unless otherwise indicated are owned by Raven.
Square Business
Location Feet Use Segments
- -------- ---- --- --------
Sioux Falls, SD 150,000 Corporate office and All
electronics manufacturing
73,300 Storage tank Plastics
manufacturing
68,400 Sewn products warehouse Sewn Products
62,300 Plastic sheeting Plastics
manufacturing
59,000 Plastic sheeting and hot- Plastics
air balloon manufacturing Sewn Products
31,400 Storage tank Plastics
manufacturing
27,000 Offices and material Sewn Products
handling facility
25,300 Inflatable manufacturing Sewn Products
24,000 Electronics manufacturing Electronics
10,200 Machine Shop Electronics
6,200 Training/meeting center All
31,214 Warehouse Plastics
Albertville, AL 49,600 Storage tank Plastics
manufacturing
Tacoma, WA *46,650 Storage tank Plastics
manufacturing
Sulphur Springs, TX *45,400 Research balloon Plastics
manufacturing
Springfield, OH 30,000 Plastic sheeting Plastics
manufacturing
Huron, SD 24,100 Sewing plant Sewn Products
Washington Court 21,500 Storage tank Plastics
House, OH manufacturing
St. Louis, MO 21,000 Electronics manufacturing Electronics
Gordo, AL *20,000 Feedmill automation Electronics
equipment manufacturing
8
Square Business
Location Feet Use Segments
- -------- ---- --- --------
Beresford, SD 20,000 Sewing plant Sewn Products
Madison, SD 20,000 Sewing plant Sewn Products
Salem, SD 15,000 Sewing plant Sewn Products
Parkston, SD 14,000 Sewing plant Sewn Products
* Leased, short-term
Most of the company's manufacturing plants also serve as distribution centers
and contain offices for sales, engineering and manufacturing support staff. The
company believes that its properties are, in all material respects, in good
condition and are adequate to meet existing production needs. The company owns
6.95 acres of undeveloped land adjacent to the other owned property in Sioux
Falls which is available for expansion.
Item 3. Pending Legal Proceedings
The company is involved as a defendant in lawsuits, claims or disputes arising
in the normal course of business. The settlement of such claims cannot be
determined at this time. Management believes that any liability resulting from
these claims will be substantially mitigated by insurance coverage. Accordingly,
management does not believe the ultimate outcome of these matters will be
significant to its results of operations, financial position or cash flows.
Item 4. Submission of Matters to a Vote of Security Holders
There was no matter submitted during the fourth quarter to a vote of security
holders of the company.
Item 9. Changes In and Disagreements With Accountants on Accounting and
Financial Disclosure
None.
Item 10. Executive Officers of the Registrant
Name Age Position Period Served
---- --- -------- -------------
David A. Christensen 65 President and Chief April 1971 to present
Executive Officer
Gary L. Conradi 60 Vice President, January 1980 to present
Administration
Thomas Iacarella 46 Vice President, August 1998 to present
Finance, Secretary
and Treasurer
Ronald M. Moquist 54 Executive Vice January 1979 to present
President
Each of the above named individuals serves at the pleasure of the Board of
Directors on a year-to-year basis.
9
Item 10. Executive Officers of the Registrant, continued:
Mr. Christensen has been President and Chief Executive Officer of
the Company since April 1971. He is a Director of Northern States Power
Co., Minneapolis, MN, Medcomp Software, Inc., Colorado Springs, Co, and
Wells Fargo & Co., San Francisco, CA.
Mr. Conradi was named Vice President-Administration of Raven
Industries, Inc., on June 1, 1999. He served as Vice President-
Corporate Services from 1980 to 1999. From 1966 to 1980 he was the
company's Director of Personnel.
Mr. Iacarella has been Vice President-Finance, Secretary and
Treasurer of the company since 1998. He is the company's Chief
Financial Officer. He joined Raven Industries, as Corporate Controller
in 1991. Prior to joining Raven Industries, he held positions with
Tonka Corporation and Ernst & Young.
Mr. Moquist has been Executive Vice President, of Raven Industries,
Inc., since 1985. As Vice President, Raven Industries, 1979-1985 his
responsibilities encompassed both corporate and divisional management
positions. He joined Raven Industries in 1975 as Sales and Marketing
Manager.
Item 14. Exhibits, Financial Statement Schedule and Reports on Form 8-K
(a) Consolidated Financial Statements and Schedule
1. Incorporated by reference from the attached exhibit
containing the 2000 Annual Report to Shareholders:
Consolidated Balance Sheet
Consolidated Statement of Income
Consolidated Statements of Stockholders' Equity and
Comprehensive Income
Consolidated Statement of Cash Flows
Notes to Financial Statements
Report of Independent Accountants
2. Included in Part II:
Report of Independent Accountants on Financial
Statement Schedule
Schedule II - Valuation and Qualifying Accounts
The following schedules are omitted for the reason that they
are not applicable or are not required: I, III and IV.
(b) Reports on Form 8-K
An 8-K was filed November 9, 1999 concerning the October 29,
1999 sale of the assets of the company's Glasstite subsidiary.
(c) Exhibits filed
3(a) Articles of Incorporation of Raven Industries, Inc.
and all amendments thereto.*
3(b) By-Laws of Raven Industries, Inc.*
10
Item 14. Exhibits, Financial Statement Schedule and Reports on Form
8-K, continued:
Exhibit
Number Description
------ -----------
3(c) Extract of Shareholders Resolution adopted on April
7, 1962 with respect to the by-laws of Raven
Industries, Inc.*
10(a) Change in Control Agreement between Raven Industries,
Inc. and David A. Christensen dated as of March 17,
1989.*
10(b) Change in Control Agreement between Raven Industries,
Inc. and Gary L. Conradi dated as of March 17, 1989.*
10(c) Change in Control Agreement between Raven Industries,
Inc. and Ronald M. Moquist dated as of March 17,
1989.*
10(d) Change in Control Agreement between Raven Industries,
Inc. and Thomas Iacarella dated as of August 1, 1998
(incorporated by reference to Exhibit 10.1 of the
Company's Form 10-Q for the quarter ended July 31,
1998).
10(e) Employment Agreement between Raven Industries, Inc.
and David A. Christensen dated as of November 29,
1999.
10(f) Schedule identifying material details of other
Employment Agreements between Raven Industries and
other executive officers substantially identical to
the Employment Agreement filed as Exhibit 10(e).
10(g) Raven Industries, Inc. 1990 Stock Option Plan adopted
January 30, 1990 (incorporated by reference to
Exhibit A to the Company's definitive Proxy Statement
filed April 25, 1990).
10(h) Deferred Compensation Plan between Raven Industries,
Inc. and David A. Christensen dated as of February 1,
1997 (incorporated by reference to Exhibit 10(h) of
the Company's Form 10-K for the year ended January
31, 1999).
10(i) Trust Agreement between Raven Industries, Inc. and
Norwest Bank South Dakota, N.A. dated April 26,
1989.*
13 2000 Annual Report to Shareholders (only those
portions specifically incorporated herein by
reference shall be deemed filed with the Commission).
21 Subsidiaries of the Registrant.
23 Consent of Independent Accountants.
27 Financial Data Schedule.
* Incorporated by reference to corresponding Exhibit Number of the
Company's Form 10-K for the year ended January 31, 1989.
11
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.
RAVEN INDUSTRIES, INC.
(Registrant)
April 28, 2000 By: /S/ David A. Christensen
- ----------------------- ------------------------------------
Date David A. Christensen
President (Principal Executive
Officer and Director)
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.
April 28, 2000 By: /S/ David A. Christensen
- ----------------------- ------------------------------------
Date David A. Christensen
President (Principal Executive
Officer and Director)
April 28, 2000 /S/ Thomas Iacarella
- ----------------------- ------------------------------------
Date Thomas Iacarella
Vice President, Finance,
Secretary and Treasurer
(Principal Financial and
Accounting Officer)
Directors:
April 28, 2000 /S/ Conrad J. Hoigaard
- ----------------------- ------------------------------------
Date Conrad J. Hoigaard
April 28, 2000 /S/ Ronald M. Moquist
- ----------------------- ------------------------------------
Date Ronald M. Moquist
April 28, 2000 /S/ Mark E. Griffin
- ----------------------- ------------------------------------
Date Mark E. Griffin
April 28, 2000 /S/ Kevin T. Kirby
- ----------------------- ------------------------------------
Date Kevin T. Kirby
April 28, 2000 /S/ Anthony W. Bour
- ----------------------- ------------------------------------
Date Anthony W. Bour
April 28, 2000 /S/ Thomas S. Everist
- ----------------------- ------------------------------------
Date Thomas S. Everist
12
REPORT OF INDEPENDENT ACCOUNTANTS
ON FINANCIAL STATEMENT SCHEDULE
To the Board of Directors and Stockholders of Raven Industries, Inc.:
Our audits of the consolidated financial statements referred to in our
report dated March 11, 2000 appearing in the 2000 Annual Report to Stockholders
of Raven Industries, Inc. (which report and consolidated financial statements
are incorporated by reference in this Annual Report on Form 10-K) also included
an audit of the financial statement schedule listed in Item 14(a)2 of this Form
10-K. In our opinion, this financial statement schedule presents fairly, in all
material respects, the information set forth therein when read in conjunction
with the related consolidated financial statements.
PricewaterhouseCoopers LLP
Minneapolis, Minnesota
March 11, 2000
13
SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS
for the years ended January 31, 2000, 1999 and 1998
(Dollars in thousands)
--------
Column A Column B Column C Column D Column E
-------- ---------- --------------------------- ----------- --------
Additions
---------------------------
Balance at Charged to Charged to Deductions
Beginning Costs and Other From Balance at
Description of Year Expenses Accounts Reserves(1) End of Year
----------- ---------- ----------- ----------- -------- -----------
Deducted in the balance sheet
from the asset to which it
applies:
Allowance for doubtful
accounts:
Year ended January 31, 2000 $400 $362 None $362 $400
==== ==== ==== ====
Year ended January 31, 1999 $390 $135 None $125 $400
==== ==== ==== ====
Year ended January 31, 1998 $340 $193 None $143 $390
==== ==== ==== ====
Note:
- ----
(1) Represents uncollectible accounts receivable written off during the year,
net of recoveries.
14